CORNELL UNIVERSITY LIBRARY NEW YORK STATE SCHOOL OF INDUSTRIAL AND LABOR RELATIONS THE GIFT OF State College of Agriculture Litrary Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924054516996 COMPANION VOLUMES: THE WAY TO GREATER PRODUCTION THE MANAGEMENT AND THE WORKER WORKING CONDITIONS. WAGES. AND PROFITS V "All work and no play makes Jack a dull boy" — and under similar conditions, Jill is likely to do work not so good as she is capable of doing. That has been the experience of employers who provide recre- ational facilities for the men and women workers on their payrolls. WORKING CONDITIONS WAGES AND PROFITS By C. W. PRICB^ ORVAL SIMPSON, DALE WOLF. CHARLES WOODWARD, F. J. MOSS. W. R. BASSET, AND OTHERS A. W. SHAW COMPANY CHCAGO NEW YORK LONDON COPYRIGHT 1920, BY A. W. SHAW COMPANY' PBINTED IN TBS UlflTKD STATES OP AHEBICA, THIS volume was prepared under the direction of the Bureau of Business Standards of the Shaw Publica- tions. The material was drawn from the following sources: National Safety Council, Industrial Association of Cleveland, the Miller Lock Company, American Sash and Door Company, Miller, Franklin, Basset and Com- pany, Jewell Electrical Instrument Company, and the American Optical Company. Contributors include: C. W. Price, Charles Woodward, Dale Wolf, F. J. Moss, W. R. Basset Orval Simpson, E. H. Bickley, L. E. Ashley, of the above companies, and others. Advisors were drawn from the Editorial Advisory Board of Factoey, the Magazine of Management, and include: F. F. Beall, G. L. Avery, R. A. Feiss, W. J. Kilpatrick, Henry S. Dennison, A. Kauffmann, W. E. Clow, F. D. Pitt, and George M. Verity. PREFACE NO management question is more intimate than how far the employer ought to go in providing for the physical, social, and intellectual well-being of employees; no question of any sort is the source of more conflicts between employers and employees than wages; and the measxirement of the efficiency of labor in cost terms is the final test that the managers of a company can apply to a labor poUcy. These three angles of the labor problem are presented in the two companion volimaes. As in these companion volmnes, the approach to these questions of prime importance is practical, not theoretical. Nobody can know as much about the real character of a business problem as the men who are called upon daily, and perhaps even hourly, to say "yes" or "no" when cases are up for decision. Theory alone is inevitably subject to the danger that some of the important factors may be overlooked. There- fore, without any ready-made conclusions about what kind of methods ought to be used, or what policies adopted, those responsible for the preparation of this volume went direct to concerns and managers, includ- ing employers of both many and few workers, and investigated what is being done successfully. In the course of the investigation, concerns were found where policies that looked good on paper had proved un- satisfactory in practise, or merely served to irritate the always delicate relationships that exist between employers and employees. As far as possible, reasons for these failures were analyzed. The results of this PREFACE inclusive investigation are incorporated in the present volvune — in a number of cases in the words of man- agers who have had distinguished success with their methods. In encouraging cordial and congenial as well as effective relations within the personnel of an organ- ization, methods are innumerable and range from the natural "knack" of some to the physical and pyscho- logical analysis by the expert who often carries the scientific to a point of super-refinement. With such extremes this volume is not concerned. Theory has been sacrificed for the practical, and only such plans as have worked out successfully under everyday activi- ties, and which may readily be applied to conditions in most any organization, are included. Taken with the two companion volumes, which is necessary if the reader desires to gain the complete presentation of the problem, it is probable that no- where else has there been brought together material at once so comprehensive and practical as that pre- sented here. CONTENTS PART I— THE WELL-BEING OF EMPLOYEES CHAPTER I Providing Proper Working Conditions .... What is the relation between working conditions and profits? A common-sense approach to these problems. Physical conditions which must be considered. How three concerns ascertained the dollars-and-cents loss caused by defective ventilation. The one satisfactory means of mak- ing working conditions right. The effect of temperature and humidity upon workers. Experiments on workers engaged under varying conditions of temperature and humidity. What are the best working conditions for different tj^es of work? Fifteen valuable deductions from various experiments in ventilation. Good lighting is another factor of importance. How can the loss sus- tained from bad lighting be estimated? The require- ments of hygienic and effective light. The Pennsylvania Department of Labor and Industry's lighting recommenda- tions. When light becomes an asset rather than merely a necessary and annoying expense. Sanitation as a fourth important factor in physical working condi- tions. The employer's responsibility for occupational disease. The fundamental causes behind the agitation for shorter hours. What the actual results of shortening hours have been in typical instances. Finding the most desirable arrangement of hours-of-work schedules. Con- veniences which circumstances necessitate. Employees' lunchrooms. Six types which have proved satisfactory. Financing the lunchroom. What makes the lunchroom an all-around success? Restrooms for workers. Deter- mining the type to be installed. Good lockers also help. The necessity for providing proper toliet, washing, and bathing facilities. What are the net results secured by providing proper working conditions? CONTENTS CHAPTER II Fatigue — An Epficienoy Factor 25 The necessity for reducing fatigue to a minimum. The effects of the degree of fatigue upon the quantity and quality of production. Experiments conducted by one concern. The interesting theory which resulted and how it worked out in actual practise. Some facts about the way men work. How the effects of fatigue are manifested. The true test of fatigue. Rest periods have proved a satisfactory means of reducing fatigue in many concerns. Valuable conclusions brought out by the report of the Women-in-Industry Committee of the National Council of Defense. Can working hours be shortened without curtailing output? The necessity for intelligent study of this problem as a point in good management. CHAPTER III Methods of Accident Prevention 38 The four most significant facts in the history of the safety movement. The experience of two representative industries in accident prevention. How the annual loss from accidents in one concern dropped from $35,000 to S4,500. Another concern reduced accidents 90% in two years. The Allegheny County Local Council of the National Safety Council holds an intensive educa- tional campaign. What is the most successful battle formation in the safety war? Five points which sum up the experience of 10 years in effectively reaching the workers. What the man at the top of an organization must do to make the safety campaign a success. Making one man in the plant responsible for safety work. How a plant committee helps. The importance of the foreman's attitude. Bulletins as one of the most effective means of reaching the men. The secret of a live bulletin board. CHAPTER IV Putting a Doctok on the Payroll 47 How and why medical supervision was introduced into industry. Why a doctor's salary for full or part time is profitable from a doUars-and-cents standpoint. The practical value resulting from physical examination of CONTENTS applicants for employment. The two methods in use at present. Authoritative figures on the average num- ber of daya lost per worker per year. How working conditions affect absenteeism. The reduction of time lost through the proper care of injuries a means by which medical supervision saves money for the employer. A third tangible money-saver. How premiums on work- men's compensation insurance are reduced. What is the cost of an industrial medical department? A summary of the less tangible savings. The chief reason behind the extensive adoption of health supervision in industry today. CHAPTER V When Does Welfare Work Pay? 58 The two sides to the welfare question. The difficulties and dangers which attend welfare work. What do employees actually think of it? Welfare work falls into two classes. What each consists of. Mutual-interest work, as one employer sees it. Health supervision and safeguards for workers. Recreational and social activities. How these affairs are managed most' successfully. Social clubs for employees help to solve the problem in many concerns. How far should the management go in promoting social activities? EnUsting the aid of athletics. Can the employer assist in improving standards of living? What one employer says on the subject. Tactful sug- gestions which may turn the trick. Getting the worker interested in home gardening. What steps can the employer take to protect his people from poverty and debt? Mutual-benefit associations, their purpose and organization. Getting the support of employees the big problem. ' How benefits for disabiUty are determined. Group life insurance. Establishing agencies which sell insurance at a low cost to workers. The fundamental aim of pension plans. The two tjrpes of plans in use and how they compare. Employees' cooperative stores another type of industrial service. How the most successful stores are operated. Savings and loan associations. Ten simple policies which underlie their satisfactory opera^ tions. The need for a community approach in addition to those employer-conducted activities. One employer sums up his ideas on welfare work. Other plans that have proved successful under every-day conditions. CONTENTS CHAPTER VI Encouraging Employees to Save ....... 77 How a thrifty lot of workers helps to avoid undesirable situations. The reaction of thrift on the individual's work. Why many employees do not save. How paternalism may be avoided. What is thrift and what part does it play in industry? Spreading the doctrine of thrift. How can it be accomplished? The National Thrift Bond Corpora- tion and its program. How the plan works out in practise. Solicitation of savings of industrial life insurance and its results. The advantage of an independent savings ihsti- tution both to employer and employee. How the thrift bond program builds up thrift independence. The inevi- table result of such independence on industrial relations. CHAPTER VII Plans fob Housing Employees 87 Practical ways to provide living accommodations that assure employees decent home surroundings. Why good housing is now regarded as an econonaic enterprise which more than pays for itself. Housing as a means of re- ducing labor turnover. The effects of good living condi- tions on one concern's employees. Various plans which are followed in financing a housing project. Shall the houses be rented or sold to employees? The Lockport plan. Thirteen advantages which employers set down as gained from housing operations. One disadvantage which sometimes develops. An instance of intelligent handling of the housing problem. Cooperative housing plans have been used effectively. The details of these plans. Various tjrpes of dwellings which have proved satisfactory and their building costs. Housing seasonal workers. Determining accurately what the conditions demand before investment. An effective housing plan worked out by the Goodyear Tire and Rubber Company which is readily adaptable to the needs of smaller concerns. CHAPTER VIII Four Social-Interest PlijlNS 103 Common-sense methods used in four concerns to make workers feel at ease and happy socially. The importance CONTENTS of giving the new employee bright and correct first impres- sions. How this is assured in one concern. The results of introducing the new man to his foreman and fellow- workers. How these methods have reduced labor turn- over. "Key" men offer a go-between for employers and employees. An association which goes far in bridging the gap between management and men. How the associa- tion's membership is made up. The effects of association activities on foremen and department heads. Bringing the home and shop together as a means of industrial betterment. Shop visitation and its surprising results in one organization. The "open forum" of the W. H. McElwain Company. How the industrial forum idea was developed. The practical results attained from the forum meetings. PART II— PAYING EMPLOYEES CHAPTER IX The Economic Basis of Wages 127 Striking the bargain between employer and employees. The seesaw of the "more-goods-more-pay" demands. The broad and narrow definitions of wages. The diffi- culty of determining the precise share of each worker in the final product and its proceeds. Producers and preda- tory workers. How group production has equalized production in many concerns. The three general funds into which industry's proceeds are divided. The man- ner of distribution of these three divisions is the source of all industrial wage disputes. The clash of interests between the dividend and salary funds. Apportion- ing the wages and salary funds among individual producers. How shall the money return for the various jobs be determined? Striking a fair-wage bargain. The law of compensation in industry and its inevitable reaction. A striking case of ignorance of fundamental principles. The three methods of increasing the wage and salary fund, and thus increasing wages. The paramount neces- sity of increasing production per individual. How the interests of employer and employee are fundamentally identical in this respect. Provisions of these interests which are antagonistic. CONTENTS CHAPTER X Methods of Wage Payment 140 A discussion of methods of wage payment commonly in use. The one reason for paying wages at all. The two fundamental methods of wage payment. Why the day wage is so much in use. When the piece rate is more desirable. Objections which have been raised against piece-rate plans. Changing the rate. Some practical applications of various wage-payment plans. One concern operating under fixed piece rates is governed by six definite rules. Establishing a rate department to superintend the setting of the rates. Where group piece-work meets the requirements satisfactorily. Bonuses, a variation of the two fundamental wage-payment plans. Evolving a bonus plan to fit individual circumstances and needs. Pajdng a bonus for service. One concern's "guaranteed standard" plan. A "tenure of service" bonus plan. Conditions under which bonus forms of payment serve their purpose most effectively. How various premium plans work. The Halsey plan. How the Rowan plan differs from it. The guaranteed premium system sponsored by Harrington Emerson. The task and bonus plan devised by H. L. Gantt. The Taylor differential piece-rate system. An interesting summary of these plans in comparative form. What the results of premium plans have been both to employer and employee. When they fail. The two fundamental aims of the wage plan. CHAPTER XI Advantages and Disadvantages op Profit Sharing . 155 Profit sharing not a new form of payment. The earliest plans and their results. The four purposes for which profit sharing is introduced, Profit sharing an important factor in increasing personal efficiency. How it assists in the stabilization of the working force. The three gen- eral types of profit sharing. What is meant by "general profit sharing." A typical example. "Unit profit shar- ing." How individual "profit sharing" works out. The limitations of profit-sharing plans. Getting workers to see the distinction between production and profitable production. What a worker must do to share in the profits of the business. How the amount of each individual's CONTENTS share is determined. The other side of profit sharing. Some disadvantages which have been encountered. When it fails and when it succeeds. Boyd Fisher's comparative summary of representative profit-sharing plans. CHAPTER XII A Successful Profit-Sharing Plan 172 A description of the profit-sharing plan of the American Sash and Door Company by its president. A scientific basis of distribution of profits. An illustration of how the distribution is made. The way in which the plan was introduced to the men. Reasons why the plan has met with success. Definite steps taken to secure workers' good will and cooperation. The company's open-door policy. How its one strike in 30 years came about. The advisability of sharing business information unreservedly with workers. CHAPTER XIII A Wage Plan that Increased Production 40% . 181 A description of the Priestman scheme of cooperative production and its results. The fundameittal principle of the policy. How the workmen were induced to accept the plan. The basis on which the standard average out- put is ascertained. The system of calculating by "man- hours." The standard rate of weekly wages for six skilled trades. How a fair standard is assured. Increased payment varies in direct ratio to the increase in output. Why the plan succeeds where many piece-rate systems fail. Three questions which were asked the men to test their opinions of the plan. What the individual replies indicated. CHAPTER XIV Paying a Bonus for Quality 192 A practical plan developed to insure high-quality produc- tion. The diflSculties encountered in finding a system suitable to the peculiar nature of the produdt. How a defi- nite quality inspection was devised. Determining the foreman's quality bonus. The operator's bonus is depen- dent upon both quality and quantity. The reaction of the CONTENTS plan on the standard of inspection. Graphic charts which show the actual results of the quality bonus on productions. How the repairmen share in the bonus. Can it be used sat- isfactorily in other plants? The management's views in this connection. CHAPTER XV A Group Bonus Plan 202 What to do when piece rates fail to get adequate results. Workers to whom added earnings make no particular appeal. The psychological effect of the group economy bonus. The three kinds of savings on which the bonus was based. Determining a basis for sharing the savings made. Why the group economy bonus is sometimes unsatisfactory. The method of setting the bonus in both productive and contributory departments. How the plan was introduced. The workers' reaction the real proof of the plan. A 26% increase in production a result of the plan. CHAPTER XVI A Bonus that Doubled Production 209 A bonus plan as an effective remedy at a critical time. Another plan that has no strings to it. Taking the workers into complete confidence. The immediate result was a 40% increase in output in one month. The details of the bonus plan as the management worked it out. Why the lump bonus was adopted. The production chart's curve shows what the actual results have been. PART III— LABOR TURNOVER AND COSTS CHAPTER XVII How to Figure Labor Turnover 217 What labor turnover means to a business. Why do the doors of employment often swing outward as easily as they swing in? What does labor turnover cost? The average cost per individual is estimated. The possible social cost. The importance to employers of taldng every possible step to minimize labor turnover. A standard method of CONTENTS figuring turnover. An example of how a careful analysis of turnover helped to locate bad management practises. The chief fault laid at the door of most employment and turnover statistics. Getting executives actively interested in the turnover problem. The simplest and most effec- tive plan for finding the solution. CHAPTER XVIII Labob Costs 223 The part of labor costs in the general cost system. An ex- ample of mismanagement caused by faulty figuring of labor costs. The two classes of labor costs. How the cost sys- tem usually directs executive attention to labor problems calling for remedy. The importance of the proper setting of rates. Charging off direct labor costs. Records which help to provide accurate cost figures. A cost system which revolves around a production unit. How to figure labor costs. When the machine-hour basis is used. How shall non-productive labor costs be distributed? Getting the fullest possible value from labor records. Some of the possibiUties involved. The percentage which productive labor bears to the total payroll as a barometer of the whole plant. Two employers' views on labor cost-keeping. A detailed analysis of labor cost per unit of product. How comparison of these analyses enables the employer to put an unerring figure on weak spots. A characteristic which most labor costs share with costs of all types. How one employer sidestepped this unwelcome feature. His help- ful plans for keeping the cobwebs out of labor cost figures and making them real management assistants. CHAPTER XIX Accounting for Non-Peoductive Labor .... 239 One concern's practical method for standardizing non- productive labor. The fixed relation existing between pro- ductive and non-productive labor. How to determine this relation. What records are essential. Establishing the relation. A diagram which indicates whether condi- tions are right or wrong. Unsatisfactory conditions which must be guarded against. How the diagram makes it possible to compute the foreman's or department head's eflSciency. The three general groups under which non- CONTENTS productive labor is classed. Proving the primary assump- tion upon which the plan is built. CHAPTER XX A Measure of Labor Efficiency 244 The problem of determining the efficiency of individual employees and its solution. The three variables upon which the solution depends. Installing and keeping up individual output and time records. How a standard cost for each measurable activity is obtained. Finding a sim- ple and accurate method for arriving at the value of the output recbrds. How relative efficiency is obtained. Determining the individual's actual efficiency. The third step in the solution. The weekly cost and efficiency sum- mary. Summarizing 'the information from the various divisions. The weekly efficiency report. What are the advantages of correct individual efficiency records? PART I THE WELL-BEING OF EMPLOYEES CHAPTER I PROVIDING PROPER WORKING CONDITIONS To a certain extent, the surroundings in which emploi/ees vxyrk govern their output. This chapter summarizes the experience of numerous employers as to the directions in which it is necessary or desirable to attempt to improve conditions, and how far to go, CERTAIN questions arise in the management of employees that can never be separated from the warp and woof of the complete problem except by a disastrous operation; yet for purposes of treatment in this and companion volumes they must be so separated. Bear in mind, therefore, in reading this chapter and the following chapters, that the subjects treated are integral and in no sense set apart as some- thing to be handled gingerly or after so-called "im- portant" things are attended to. Working condi- tions affect profits. Provisions for safety are mere common sense. Decent housing is essential if work- ers are to be had in sufficient numbers and of the right caUber. "Welfare work" of certain kinds and man- aged in the right spirit may also be conducive to profits. The worker's health must be attended to, or dollars shp into the "loss" column. Fatigue, if it becomes over-fatigue, is dangerous to the quality and quantity of work. These are the problems treated in Part I of this volume, and the only sure way for the business man to approach each and all of them is from a business standpoint, and with no sloppy sentimentalism, no feeling that in the effective handling of these problems he is "doing something for the men." If the right 2 THE WELL-BEING OF EMPLOYEES measures are undertaken, and in the right way, the inevitable result is better business. The importance of good working conditions is obvious. There is a steady exodus of the most capa- ble workers from concerns where working conditions are bad to those where they are good; and bad working conditions are at least a contributing cause in almost every strike. An employer may be somewhat dis- mayed by the apparently countless details which con- tinually present themselves for alteration or improve- ment. But the detail aspects resolve into a compara- tively few fundamentals; as: 1. Physical conditions; 2. Production surroundings and hours of work; 3. Odd-and-end conveniences. Under physical conditions are grouped cleanliness, light, heat, ventilation, and appurtenances making for the health and comfort of workers. Formerly, heat- ing almost alone was considered of importance by employers; but later ventilation came in for attention, and finally air conditioning, including the control of humidity, the removal of dust, air cooUng in simimer, and due regard to sufficient air movement in all occupied rooms. Consider ventilation. A mercantile concern in the East compiled statistics to learn the approximate loss through colds contracted by employees. Taking into accoimt the actual losses due to absences, and the less easily computable losses due to lessened efficiency, this loss was set at $24 a cold. And colds are usually caused by faulty ventilation. Another and perhaps even more authoritative estimate of the losses occasioned through colds and ailments attributable to bad ventilation and heating comes from a Baltimore concern. Its new building was regarded as a model, but during the first two win- BETTER WORKING CONDITIONS 3 ters of its use, sickness attacked workers to the extent of 27.5% of the entire force. An investigation re- vealed defects in the ventilation and heating system. With these corrected, worker sickness fell to 7%. A third bit of evidence as to the value of proper ventilation is given by a New York employer who states that by providing correct atmospheric condi- tions for his employees to work in he increased their output about 10%. That ventilation and heating have a direct effect upon workers cannot be questioned. To what extent this effect can be expressed in terms of dollars and cents, as in the instances cited, is problematical. For example, an office that employs 50 clerks and stenographers, whose weekly pay aggregates $1,000, is obviously losing $100 a week if the capacity of its staff is lessened 10% as the result of improper venti- lation and heating conditions. But who can really judge the actual extent of wastage of this type? Is it 10% or is it 20%? The only satisfactory way to remedy the evil is to make working conditions right beyond all question of doubt. OTHER IMPORTANT FACTORS WHICH REACT OX THE WORKER'S HEALTH AND OUTPUT Temperature and humidity — fairly easily controlled factors usually — ^have a direct and immediate bear- ing upon workers, even more important in effect on their well-being and capacity for effort than the chemical purity of the air that workers breathe. One expert states that "carbon dioxide, encountered in working practise, is not the harmful agent of major importance in expired air or air otherwise contami- nated." Another expert declares that "stagnant air, while objectionable, as demonstrated by a lessened desire for food, otherwise shows no debilitating effect on the mental processes on the individual, or on the 4 THE WELL-BEING OF EMPLOYEES various physiological reactions which have been studied in various experiments." Experiments on workers engaged under varying conditions of temperature and humidity are of great interest. Generally speaking, 68° Fahrenheit is found to be the proper maximum temperature for a room artificially heated. But not only the relative degree of humidity but also the type of work done have a bearing upon this figure, which in itself is merely one of the three elements that enter into the problem. For example, with the humidity remaining constant at 50%, it is found that a temperature of 75° is favor- able for tasks involving concentration; whereas a temperature of 68° is, speaking generally, more de- sirable for tasks which require a combination of men- tal and motor effort, as typewrithig, for example; while a still lower temperature may be maintained to best ad- vantage in a room where the work is largely physical. How profoundly the temperature affects physical labor is indicated by the fact that a group of men on whom tests were being made did 36% more of precisely the same work at 68° than they did under exactly similar conditions when the temperature was 86°. On heavier physical work the effect of tempera- ture was even more marked. That production-decreasing overheating is common in industrial plants is made clear by investigation. One investigation extending over several years, and taking into account the temperature in 215 work- rooms, printing shops, clothing shops, bakeries, pearl- button factories, cigar shops, and laundries, developed that 156 of these workrooms, or 73%, had a constant temperature of 73° or over, and 63, or 29%, had a constant temperature of 80° or over. It must be remembered that indoor temperatures over 68° may be more detrimental than the same temperature outdoors, on account of the compara- BETTER WORKING CONDITIONS 5 tive absence of air movement. The actual effect of the atmosphere upon the body depends on the rate of heat loss from its surface, and this in turn depends on the humidity and movement of the air, as well as on its temperature. That the general health of the worker is affected by heat is shown by the fact that a rise in the tempera- ture of the air is followed by a slight rise in the tem- perature of the body; that the respiration is not altered; that the pulse rate tends to decrease in a cooler room, and the blood pressure does not decrease so fast as in the warmer room; and that the comfort of the workers is greatly increased by the use of electric fans in a warm atmosphere. Here is a curious tendency of interest to employers. A warm room — a room at 89.5° Fahrenheit— does not tend to affect a man's judgment unfavorably, it is found. On the contrary, a high temperature, especially if it be accompanied with a fresh air supply, tends to improve his judgment, experiments show. Another pertinent fact brought out by experiment, is that the inclination to work is greater at a fresh air temperature of 68° than at 75° in the proportion that 117 bears to 106. Tests made at the same tem- perature, but with stagnant instead of fresh air, showed a difference in favor of 68° over 75° in the proportion that 119 bears to 100. Fifty per cent humidity generally is regarded as most beneficial. Summarized, various experiments in ventilation seem to prove that: 1. Carbon dioxide, as encountered in working practise, is not the harmful agent of major impor- tance in expired air, or air otherwise contaminated. 2. A temperature of 68° Fahrenheit with a proper relative humidity, is the proper maximum tempera- ture for hving rooms artificially heated. 6 THE WELL-BEING OF EMPLOYEES 3. The principle of ventilation by air" current is preferable to that of ventilation by air dilution. 4. For adequate ventilation, smaller volume? of air suffice when introduced by currents than when introduced by dilution. 5. Ventilation which utilizes the principle of con- vection in producing currents is more effective and economical than that which neglects this principle. 6. Upward ventilation currents in crowded rooms are desirable, provided the sources of air supply are free from contamination. 7. In making use of upward ventilation currents, attention should be given to the counteracting of wall and window chill. 8. In those processes of manufacture where consid- erable carbon dioxide is liberated, the carbon dioxide content is not a proper index of air pollution. 9. For the removal of kitchen odors, body odors, stable odors, and other odors associated with heat production, upward ventilation is more efficient than downward ventilation. 10. The deUvery of a certain volume of air per unit of time, per occupant, into a given space does not necessarily constitute ventilation. 11. Air which is introduced into an occupied room in such a way that it strikes the occupants should be not lower in temperature than 60° Fahrenheit. 12. Heating and ventilating are two distinct prob- lems and, therefore, the installation of heating and ventilating systems, whether separate or combined, should be such that neither system shall interfere with the effectiveness of the other. 13. From the standpoint of health, relative humidity is one of the important factors in ventilation. 14. The use of effective air cleaning devices are desirable in all ventilating installations where the air BETTER WORKING CONDITIONS 7 supply is liable to be contaminated by dust or other objectionable matter. 15. The bacterial content of the air is an important factor in all ventilation, and bears a direct relation to the source and quantity of the air supply. Good lighting is another factor of obvious impor- tance in effective working conditions. There is no disagreement as to the fact, but there is sometimes a misunderstanding of what good lighting is; or a mere neglect to undertake its provision, when imderstood. Take a hypothetical case. Suppose a workroom has been inadequately lighted with clusters of the old- style carbon filament lamps placed near the ceiling. Due to the inadequate artificial light, on cloudy days or at night, or even on sunshiny days, if the windows need washing, the typical employee is not able to work consistently to the best advantage. Even though a lamp cluster happens to be near him, the surrounding space is poorly lighted. HOW MUCH LOST TIME IS CAUSED BY BAD LIGHTING? It Is beyond reason to suppose any accurate deter- mination of the amount of time lost under these cir- cumstances is possible. But in an eight-hoiu" day with its 480 minutes, it might readily be imagined that a worker, losing a minute here and another there because of poor light, would in a daj^'s work total five minutes lost from this cause alone — ^roughly, a 1% loss in time. If a. new type of lamp giving the same inadequate light as formerly is installed, but with a saving of 50% in the energy consumed by the lamps, this means 50 cents saved on each $1 expended for hght. But the wage and production loss continues and may amount to $30, more or less, during the interval covered by an 8 THE WELL-BEING, OF EMPLOYEES expenditure of $1 for light. Thus, to forget the light bill, and to install more light in order to save the pro- duction loss, obviously is of vastly greater consequence. Understand, these figures are but approximations. But their general meaning is sufficiently accurate. And isn't it absurd for an employer to hesitate to choose between an inferior hghting system that may save a few Ught-bill pennies, and a better system that may result in vastly more important savings in pro- duction? A typical plant bay of, say, 640 square feet floor area, may have an annual lighting cost of $50, while the wages and overhead for the workers in this bay may be $7,000 annually. Here, 1% of the light bill is 50 cents per annum per bay, while 1% of the wage charge is $70 per annum per bay. Which 1% is it desirable to save? From 60% to 70% of a workmg-day, however, usually need not depend upon artificial illumination. Far too Httle attention is commonly paid to natural illumination. But modern factory construction is rapidly tending in the direction of the window-walled building, and the saw-tooth roof. From the standpoint of accident prevention alone, proper illumination is important. Dark passageways are particularly dangerous. A worker who stumbles, say, while carrjdng a ladle of molten metal may incur serious injury. A strong dazzling light over a plat- form or over the landing at the top of a flight of stairs may prove blinding and be the cause of injuries. A large number of accidents occur in the winter months, especially in the afternoons, when artificial illumination is necessary. Uncleanliness also results from faulty lighting. A well-Ughted shop is pretty sure to be clean, bright, and cheerful. An illumination expert states: "The requirements of a hygienic and effective Ught are that its color shall BETTER WORKING CONDITIONS 9 be as near as possible that of sunlight, sufficiently diffused so as not to dazzle the eyes and impose a distinct strain; that there shall be no flickering or un- steadiness; that it shall be properly screened to remove the glare and direct the light downward on the work and not into the eyes of the workers; that the place- ment of the lamps shall be such as to avoid shadows; and that it shall not vitiate the atmosphere nor pro- duce sufficient heat to create discomfort." The advantages of effective illumination may be summarized as (a) increased production for the same labor cost; (b) greater accuracy in workmanship; (c) reduced accident hazard; (d) avoidance or at least reduction in eye strain; (e) surroundings made more cheerful; (f) work performed with less fatigue; (g) order, neatness, and sanitation promoted; (h) supervision made more effective. The Pennsylvania Department of Labor and In- dustry, following extensive investigation, has set forth maximum and minimum illumination intensi- ties under varying conditions in the following table: Acceptable Practise — Minimum Foot Foot Candles Candles at The Work Roadways and yard thoroughfares 0.05 0.05 to 0.25 Stairways, passageways, aisles, storage spaces..0.25 0.25 to 0.50 Rough manufacturing operations, such as foundry work, rough machining, rough as- sembling, rough bench work 1.25 1.25 to 2.50 Fine manufacturing operations, such as fine lathe woyk, pattern and tool making, light colored textiles, tobacco manufacture. (This amount of illumination, or at least that of the next division, should also be suitable for salesrooms and office work) 3.50 3.50 to 6.00 Special cases of fine work, such as watch mak- ing, engraving, drafting, dark colored textiles 5.00 10.00 to 15.00 10 THE WELL-BEING OF EMPLOYEES Building construction has much to do with good working conditions. One concern reduced its work- ing-day from 10 to 9 hours shortly after moving into a new building, but got out the same production as before. The old building had more wall than window area, and was dark inside. The new building has walls constructed almost entirely of glass on steel framing, a saw-tooth roof, and is painted inside. It is far better lighted all day than the old building. To sum up, the light best suited to given conditions must be judged not nearly so much on first cost and operating cost, as on production advantages. Con- sidered on this basis, hght may become an operating asset rather than merely a necessary and annoying expense. The question is — ^how much light, and no more, is needed to provide the best working conditions? THESE FACyrORY MANAGERS AGREE THAT PROPER SANITATION IS A GOOD INVESTMENT Sanitation is a fourth important factor in physical working conditions. A building ideally constructed, properly lighted, heated and ventilated, but not kept healthfully neat and clean, may diffuse the efforts of employees wastefully. "Our workrooms, storerooms, and offices," says one manager, "are scrubbed every week, and more often if necessary. All windows are thoroughly washed and all platforms kept free of debris. The driveways leading to the city streets are also kept in good condition — ^free from all refuse. At regular intervals we sprinkle the floors with dis- infectants. We are confident that the expense in- volved is more than repaid." Another employer says: "We must thank our em- ployees almost wholly for our clean workrooms. Each man paints his own machine and helps out all around in keeping clean the place or sectioii in which he works. The benefits from this plan are mutual. BETTER WORKING CONDITIONS 11 "Our sanitation movement did not originate spon- taneously, but iiere and there a man would get a 'cleanup' idea and we immediately let the man next to him or around his place begin to see what his neigh- bor had accomplished. Sooner or later, we found, rather than to be outdone, he would do likewise, and so on until the friendly sanitation rivalry extended to entire departments. "We provide the paint." Sanitation is only common sense; though nobody objects to a bit of (hrt if it doesn't get so bad and con- tinue so long that disease germs have a chance to breed, or unless it really is detrimental to work in some way. Food-making establishments quite prop- erly go to extremes in the matter of cleanliness. A fruit syrup company in the East white-enameled the walls and floors and dressed all the people in white. That was a splendid innovation, with considerable hygienic and advertising value; but the management lapsed a little from common sense when the enthusi- asm for spotlessness was carried into the boiler and engine rooms, and the souls of engineers and firemen were harrowed by an order making white duck trou- sers and coats the order of the day. The test of all these activities, construed broad- mindedly and with due consideration for all the fac- tors, is always: what is the profit value? light, heat, ventilation, sanitation — all have a clear bearing on occupational disease, a subject which has been intensively studied and investigated for a number of years. On employers the responsibility has been definitely placed to make conditions such that the hazards through dust, poisons, infections, dampness, fear, devitalized air, and high temperature, are minimized. One authority on the subject states that more than 4,000,000 workers are subject to serious dust hazards; and that many poisons menace the health 12 THE WELL-BEING OF EMPLOYEES and the very existence of workers. Fully half of the buildings occupied by business concerns, he asserts, are not properly ventilated; and large numbers of men are subjected to excessive heat in their work, and an unknown number are needlessly subjected to ex- posure to weather and other conditions inimical to their health. Death rates vary enormously in different occupa- tions, and certain industries are extremely dangerous to the worker unless great precautions are taken. In his report on occupational diseases in Ohio, Dr. E. R. Hayhurst says: "A most important feature in the relationship be- tween work and disease is the problem of the worker himself. Some workers are very much more suscep- tible to health hazards than others, so much so that, hygienic as certain industries and processes can possi- bly be made, still there are some types of workers who should not engage in them. Thds is exemplified by many instances of natural selection; for instance, delicate and sickly disposed persons usually do not follow fatiguing or heat-exposing trades. Unfortu- nately, voluntary selection of work does not apply so closely to older workers who have been following the more hazardous rmdertakings for years, and who, although weakened from various causes, still endeavor to remain at their chosen vocations, irrespective of the damaging effects upon the body. ' Here the only remedy is for the employer to take steps to check the practise, and arbitrarily to fit the worker into less health-hazardous work." In general the causes of disease are distributed among conditions found in the individual, the industry, the community, and the home. An exhaustive inves- tigation by the United States Public Health Service shows this clearly with tuberculosis. Among a large number of workers suffering from tuberculosis, Indus- BETTER WORKING CONDITIONS 13 try is charged with 18.1%; poverty and bad housing, 9.7%; personal vice, 10.8%; heredity, 32.4%; other diseases, 8.4%; and indeterminate, 20.6%. Even if the employer has no control over working conditions outside of his own concern, he still has nearly 20% of disease marked up for his attention as fundamentally "occupational." So much for physical conditions. Next, what about production and hours of work? If the whole truth were known, it is probable that the basis of a good deal of the agitation for shorter hours is merely a symptom of lack of interest in the work on the part of the employees. Thomas Edison knows no hours. The man who is thoroughly bound up in his work does not particularly concern himself about starting and stopping times. He keeps at work for the joy he finds in carrjdng it through. That interest in the work can be cultivated in men even in industry as it is today organized is satisfactorily dem- onstrated by the experience of Robert B. Wolf, de- scribed in a companion volume. Looked at with this in mind, the agitation for shorter hours would seem to be a severe indictment of management, on the grounds of not making work interesting. LACK OF INTEREST IS NOT THE ONLY CAUSE FOR UNREST. HERE ARE OTHERS There are, of course, other reasons for the agitation. One is the fallacious idea not uncommonly found in the ranks of labor, that the less each individual does, the more work there will be to go around. This idea has been proved economically groundless time after time, and we know that production breeds demand and demand in turn breeds further production as relentlessly as the daily rising and setting of the sun. But an error once circulated and generally accepted, is as powerful an incentive to action as truth. 14 THE WELL-BEING OF EMPLOYEES A far sounder argument for a shorter working-day is in the dulling effect on men's minds and bodies when work is continued beyond a reasonable point. This effect has been demonstrated beyond doubt in many cases, and where the effect appears it is not more to the interest of the employee than of the employer to see that a working-day of proper length is put in force. Excessive working-hours are no longer very common. And the number of working-hours varies in different industries. In wool manufacturing, for instance, 90% of the concerns investigated work on a weekly schedule of from 54 to 56 hours, while in many other industries a schedule of 48 to 50 hours a week is fol- lowed. Office and clerical forces as a rule are found to work from 44 to 48 hours a week. An employer who had formerly been on a 10-hour basis changed to a 9-hour basis. He was satisfied that one of the hours in a 10-hour day was a "tired hour," and that this hour was the tenth one. So he lopped it off. At the end of the year his costs showed a 4% reduction, and he actually got greater output. Wages, needless to say, were not cut. This is not a universal experience. But in the main it appears that far-sighted employers are declaring their independence of tradition, and shortening hours of work to the point where they have reason to believe they are getting the best results. An Ohio manufacturer says of his experience: "It is our aim always to be ahead of the law and the de- mands of labor. Our hours now are less than the maximum prescribed by the state law, and we intend shortly to reduce them still further. Why? Because ' we watch our people very closely and if we detect signs of over-exertion, we investigate the cause. Our organization is keyed up to the top pitch and we would not be able to maintain this level if we toler- ated for a moment any condition that detracted from BETTER WORKING CONDITIONS 15 effectiveness. So, if we find our people can't hold the pace throughout a certain period, we shorten it to the point where they get along better. "At the present time the number of hours worked weekly in this plant is 50, as against a prescribed maximum of 54 for women. We contemplate low- ering the hours to 48." The experience of one middle western concern — a steel enameUng plant, is interesting. The operation of enameling must be practically continuous, and in Europe and very generally in this country until re- cently, the customary work division of the 24 hours was in two equal parts. But in this particular plant the two 12-hour shift plan long has been supplanted by one of three 8-hour shifts. Wages have not decreased; on the contrary, general efficiency has increased, and wages steadily have risen, until now it is possible for the workers to earn consid- erably more than before. Output, too, has gone up. For example, with bath tubs, where formerly 8 to 10 tubs in 12 hours, for two men working together, was normal production, they are enameled at the rate of 2 an hour, or 16 in 8 hours. Similarly, another employer reports that he found that shorter hours not only make for greater content- merit of the working force, but result in greater out- put as well. In studying his requirements of con- tinuous production he became convinced that 12-hour shifts were too long. He changed the two long shifts to three of eight hours each, the pay of the workers and the amount of production to remain the same. In a very short time production actually began to increase, until after a thorough trial the shift output had increased nearly 50%. One of the big advantages of shorter hours of work, shown by the investigation of British experts, is the decrease in wasted time. Their report in part reads: 16 THE WELL-BEING OF EMPLOYEES "A part of the improvement observed in output was due to the workers starting work more promptly when on shorter hours. At one period women in one concern lost on the average 37 minutes daily by start- ing work after, and stopping before, the nominal time. Nine months later, on a shorter schedule, tiieir hourly output was 25% better, and they lost only 26.5 min- utes daily in these ways." A NEGATIVE REACTION SOMETIMES OCCURS, AS EVIDENCED BY THIS REPORT On the other hand, with some concerns the adop- tion of shorter work-hours has resulted in decreased output. A report issued by the National Industrial Conference Board is authoritative in this connection. The report deals with the cotton manufacturing in- dustry, and is based upon reports from 166 establish- ments employing 116,000 workers. It says in part: "Reduction in hours of work in northern cotton nulls from 58 or 56 or 54 hours has in a great majority of concerns resulted in decrease in output. In some concerns a part of the loss was promptly made up by increased effectiveness of workers, but this experience was not general. "Eventually, improvements in equipment, in meth- ods of management, and in other respects, with some concerns brought total output per employee up to that previously attained under a longer week. This, however, necessitated a material increase in invest- ment. Data available for southern cotton mills indi- cate that hours in excess of 60 per week do not neces- sarily yield a materially larger output than 60 hours. Reductions below a 60-hour schedule, however, usu- ally resulted in substantial decreases in output." Changes in output are not, of course, the sole jus- tification or condemnation of a shorter hours-of-work schedule. Probably in this matter of hours the pref- BETTER WORKING CONDITIONS 17 erences of the individual employer cannot be allowed to govern, but ahead of his preferences may have to be put the welfare of society. One authority says in this connection: "In reaching final conclusions on the most desirable arrangement of homs-of-work schedules, there must be taken into account not merely production, but also the question as to what schedule of hours will, in the long run, best maintain the productive period of the worker's life, help his self-development, promote the welfare of the community, and generally raise the standard of citizenship among industrial workers." Below a reasonable point, hours cannot profitably be reduced. But down to a certain point, conclusive experience demonstrates, they can. What is reason- able for each case depends, of course, upon the char- acter of the work, the employees, and other conditions. Now we come to a third division of the subject of working conditions — those odd-and-end conveniences which circumstances necessitate, such as lunchrooms, restrooms, lockers, and the like. Employer-conducted lunchrooms have been installed by many concerns They have proved not only a con- venience to workers but also a direct means of safe- guarding their health, and thus of increasing their productivity. A British report on employee lunch- rooms (industrial canteens, the British call them) reads in part: "The problem is to supply suitable food at as low a price as possible, for large numbers of workers at specified times. By far the most hopeful enterprise has been the establishment by employers of industrial canteens, in or near the concern itself. This prac- tise has abundantly justified itself from a business and commercial point of view, as well as a worker health standpoint. 18 THE WELL-BEING OF EMPLOYEES "Generally, it is found that the accommodation provided accords with one or other of the foUo^sdng types: (a) an available room for the workers to eat their home-prepared food; (b) a room furnished with a 'hot plate' or 'warming cupboard'; or provided with hot water; (c) a refreshment wagon to go through the workshops at appointed hours (particularly useful for light refreshments during long spells or night shifts); (d) a fixed refreshment bar or buffet; (e) a dining room suppljdng cheap hot and cold dinners; and (f) such a dining room associated with an institute or club, with facilities for rest and recreation. Some of these types may be suitably combined, but, although arrange- ments indicated in (c) and (d) may prove sufficient and satisfactory under certain circumstances, the pro- vision of proper meals seems obtainable only in the types (e) and (f). "Warming cupboards, mentioned in (b), usually are installed in or near the messroom and heated by steam. The cabinet may be constructed of sheet iron (finished off with asbestos and wood covering), with shelves of perforated sheet iron. Employees de- posit their food in basins or dishes when they come to work, the cupboard is closed, and steam is applied. At the dinner hour the employees call at the cupboard for their food. "It is recognized that the necessity for, and type of, an industrial canteen is dependent upon the need and its degree, in each concern, but it is plain that in the highest interests of both employer and worker proper facilities for adequate feeding arrangements should be available in or near, and should form an integral part of the equipment of, all modem concerns." This report from which quotation is made also sug- gests dietaries which are adopted to restore expended energy. Emphasis is laid upon the value of workers eating fresh fruit, as apples, oranges, and bananas, BETTER WORKING CONDITIONS 19 and of avoiding highly stimulating foods and refrain- ing from eating between meals or at frequent intervals. It is pointed out that about 15% of the energy ex- pended by workers is derived from protein, and about 80% from fats and carbohydrate combined. It is also brought out that the energy normally required by a man engaged in fairly light work is about 3,500 calories a day. Investigation indicates that between 36% and 37% of all workers have digestion impairment in some degree. In many instances workers who produced far below the average were found to be coming to work without breakfast. In one concern a change of hours more favorable to a proper allowance for taking break- fast increased output 12.4%. Employees' lunchrooms seldom "break even," it is found. Some employers do not expect them to. Others try to make expenses and fail. Generally, so long as the loss does not exceed a predetermined figure, nobody worries much, provided the restaurant is giving good, clean, substantial food to workers at right prices. The cost is made up in other ways. WHAT MAKES AN EMPLOYEES' LUNCHROOM A SUCCESS? In most instances where employees' lunchrooms are successful, it is because the management sees to it that properly balanced rations are served promptly, in a clean, convenient place. Also, it generally is the management which best appreciates the fact that too many sweets may get into dinner pails to profit men for the afternoon's work; that too many cold lunches are eaten; and that too often when a worker reaches for his dinner pail it is about all the noonday exercise he takes. These facts all point to the need of employer-operated lunchrooms, when adequate fa- ciUties are not otherwise obtainable. 20 THE WELL-BEING OF EMPLOYEES Inducing employees to patronize the lunchrooms provided is another problem. Some employers figure that the need for a substantial hot lunch is so important that they furnish the lunches to employees absolutely free of cost to them. Many concerns assume part of the cost of workers' lunches. One company serves meals free of charge to all women employees and office men, and others who are on a per-hour scale of wages pay 50% of the cost of their meals. About half of the employees of this company receive free meals under this arrange- ment, and about 95% of all employees of this concern use the lunch facilities offered. One employer has a successful plan for keeping his lunchroom deficit down to a reasonable figure. It in- volves what is known as a basic meal. This consists of bread, meat, and a vegetable, and sells at less than cost. Salads, ice cream, and other luxuries, however, provide sufficient profit to offset the loss. Practically no instances were found where rent, light, and heat were counted in the cost to employees of maintaining lunchrooms. These items are cheerfully paid by the company, and where deficits are incurred, they are over and above any charges for these elements. Cafeterias (self-service lunchrooms) have done much to solve the problem of low-cost quick service, at the same time allowing a choice of menu. Serving-tables on wheels work out well for concerns which must serve at tables a large number of employees in a short time. Where food does not have to be taken to tables, similar service wagons, called in one plant "cafemobiles," are effective as distributing centers from which workers get hot lunches. Frequently where restaurants are provided employees are forbidden to eat in the workrooms. In such in- stances, however, space is provided in the lunchrooms BETTER WORKING CONDITIONS 21 for those who prefer to bring their ovm lunches. Gen- erally such rulings are not to enforce a greater patron- age of the company restaurant by employees, but for sanitary reasons. Since employers generally lack an accurate measur- ing stick to apply to their lunchroom operation, it may be worth while, for comparative purposes, to con- sider the percentage of attendance at lunchrooms where no compulsory rule holds. Of the dozens of employees' lunchrooms covered by investigation, the attendance ranged from as low as 10% in one concern to 90% in another. About 60% is the average at- tendance for factory employees, it is found, while a considerably higher percentage holds for office workers. The average purchase per company-lunchroom patron also may be interesting. For one eastern con- cern operating a lunchroom on the cafeteria plan, the figure is between 10 and 11 cents, and represents three items of food. Some concerns report average pur- chases as low as 7 cents per worker and some as high as 30 cents. About 20 cents seems to be the popular price for company table d'hote luncheons, however. Even the small plant can provide a gas plate oven or a coffee urn. Restrooms, especially in concerns where a number of women are employed, are commonly a necessity. The question nowadays with most employers is, "What sort of restroom shall we have?" The answer to this question is, of course, largely determined by conditions. If designed to accommo- date large numbers of workers, one or more large rooms with an attendant in charge usually are provided. Where the workers are few, a small, simply furnished room may meet all requirements. The furnishings need be little more than pleasing, comfortable, and sanitary, with good Ughting, easy chairs, and possibly plenty of well-selected reading matter. When a con- 22 THE WELL-BEING OF EMPLOYEES cem has no first-aid room or emergency hospital, the restroom should usually be provided with a first-aid cabinet. Comfortable couches may also be provided, and at least one room kept quiet. A department store has gone so far as to install a "silence room" where employees who are ill or "out of sorts" may find rest and quiet. It is difficult to measure the value of a restroom in dollars and cents, and perhaps no such measure is necessary or desirable. Most of the advantages must be taken for granted. CARE IN SEEMINGLY UNIMPORTANT DETAILS SUCH AS THIS ONE PAYS A GOOD DIVIDEND Good lockers, a detail, may help a little to make workers like their working conditions. One expert says on this subject: "Upon entering the shop or office, the employee's first need in the shape of sani- tary equipment is a place to dispose of his or her outer garments. It is my experience that the individual locker system is more satisfactory to tl;ie employees, thus giving them clean, safe places to deposit their outer garments, and even making it possible for them to make a complete change. By using a sensible locking system they are able to control the safety of their property. "Lockers should be substantially constructed, and connected in units to the best advantage for the space available. Great care needs to be taken in selecting the type of locker. Some of the points to consider are that it have sufficient depth to allow the use of a coat hanger in order that the garments of the employee may be spread out, for on some occasions they will be damp. By spreading them out they will dry much quicker and have a more presentable appearance. "It is well to see that the lockers have sufficient width to allow the hanging up of the hat, and any BETTER WORKING CONDITIONS 23 other garments if the employee should desire to make a complete change. A height of about 54 inches is sufficient to take care of the average needs. "A slanting locker top largely eliminates the col- lection of dust and prevents its being made a catch- all for material which might fall off and injure em- ployees, or cause a disorderly appearance. A good plan is to have the bottom of the locker sit up not less than eight inches from the floor, for ventilation and cleaning, with an opening in the bottom to allow of attaching a ventilating system. "One of the important points is the selection of the latch and lock. The latch should be a type which is operated by the handle pulling outward or upward; no matter how little strain you put on it, the door comes open. The type of lock should be that which locks in some way the latch, along the padlock order, rather than the cabinet type. "On the distribution of lockers in offices or factories, I believe the ideal condition is to have locker rooms connected with both lavatory and shower-bath rooms, and as near the entrance of the building as possible. If the installation is made in old buildings, conditions may exist to cause the equipment to be placed at points other than the entrance, but these always should ' be consistent with the object in view; that is, to pro- vide a safe and clean place for the clothing of employees. Under such conditions employees take considerable pride in their personal appearance, their surroundings, and their employment." The provision of convenient toilet, washing, and bathing facilities for workers is also necessary. Too often, however, when washing facilities are provided sufficient attention is not paid to the details of con- struction, with the result that lavatories quickly get out of repair. This can be avoided if installations are simple in construction and arrangement; strong 24 THE WELL-BEING OF EMPLOYEES and durable; sufficient and suitable in accommoda- tion, so that many workers can wash together in a short time; economical in space; so constructed that they can be easily cleaned; provided with ample sup- ply of cold and hot water; and so situated in the con- cern as to be easily available. In addition to ordinary washing accommodations, bathing facilities in many industries are necessary, especially in those industries in which workers are exposed to great heat and excessive dust, or are brought into contact with poisonous material. The number of these baths should be sufficient to enable workers to have a bath at any time without appreciable delay; privacy should be insured; construction should be carried out to facilitate the maintenance of abso- lute cleanliness; pure water at a temperature of about 100° Fahrenheit should be used; soap in the form of a cake sufficient for one bath should be provided; and where necessary there should be provision for drying the clothes of workers. Employers who provide the best working conditions get proportionate returns — other things being equal. The results include healthier employees, and sometimes noticeably increased output. As one authority puts it, "If workers at their work are set bad examples of unsanitary conditions and faulty hygiene for 10 or 12 hours a day, we cannot expect them to do other than to reflect their working conditions." CHAPTER II FATIGUE— AN EFFICIENCY FACTOR That there is a relation bettceen the degree of fatigue and the rate and quality of production is obvious to everybody in all kinds of voork. Just how important a factor this relation is from the management standpoint, however, is not always understood. Some studies and conclusions are presented here. THE length of the working-day, touched on in the previous chapter, bears a direct relation to fatigue. Fatigue, in turn has a bearing on the efficiency of employees. It is probable that undue fatigue has been one of the biggest sources of waste in industry, though this is now probably on the mend. Experiments conducted with his business by William J. Crawford, president of William J. Crawford and Company, have a direct interest in this connection, because they bring out the relation that exists between the amount of work well done, and the time spent daily on the job. He put his plant on a 73^-hour working-day, as the result of experiments extending over some 15 years. Mr. Crawford's business is granite cutting. He is a practical granite cutter him- self. And he relates an experience that has influenced his thinking on this subject. "One time, years ago," he says, "I was out of town with several men on a job. It was the day before Christmas and I had promised my little daughter that nothing would keep me from being home for Christ- mas. As the day wore along I was straining every 25 26 THE WELL-BEING OF EMPLOYEES nerve to finish up. There wasn't much more to do, but when the time came that we had to stop work, I judged from the progress we were making that it would take us at least three hours more to finish the job. The day after Christmas we went back and finished it in one hour. "What was the reason? Simply that when we went back to work the second time we were fresh, and a fresh man can do twice as much work and better work than a tired man. I do not know whether this is true of other lines, but it certainly is true of granite cutting." Crawford's company has a cost system which goes back over 40 years — to 1880, to be exact. In January of that year they commenced to keep a record of each man, and the exact cost of each piece of work, and this record has been kept up ever since. It includes a card for every granite cutter, each piece of work he takes up, the day and hour commenced, and the day and hour finished, the exact working time, wages paid, quarry charges, loss and gain. From this complete record, wages were fixed in excess of the minimum amoimt which was set by the union. This cost system extends back to the time when the working-day was 10 hours. It shows that the same men accompUshed more when the working-time was reduced to 9 hoiu-s; and, again, when the time was reduced to 8 hours the same men accomplished more than they did in a 9-hour day, and considerably more than when working 10 hoius. Since the working- day was reduced to 73^ hours, in February, the aver- age production for each man had increased approxi- mately 8%. "My observation of the conditions, and I am with my men all the time they are working," said Craw- ford, "is that as men work today in the granite- cutting trade an 8-hour day is too long, and I believe any good granite cutter — the man who works with REDUCING FATIGUE 27 his brains as well as his hands — could do just as much in 7 hours, or even 63^ hours, as he does in 8. In fact, I have found that he can do more. This majr sound radical, but from close study I have found that 16 hours for "rest and refreshment' is not sufficient for a granite cutter to make him approach his work in the morning in a perfectly rested condition. "To illustrate what I mean, take the baseball pitcher. You would think the manager crazy who' put one of his star men in the box for two consecutive days of about two hours each. Now what granite cutter does not put as much of his brain into his work in a day as these stars? The wise manager knows he can get the best results from a man whose braiu and muscles are not fatigued. We employers of gran- ite cutters can learn a lesson from them. Once in a while there is an Edison who can work long hours profitably, but they are few. The short Ufe of granite- cutters is not due to the dust alone, but also to the hard work the trade requires." THIS IS HOW CRAWFORD TESTED HIS THEORY FOR "BLOW-HOLES" It was in 1913 that Crawford began to turn his; theory regarding short hours into action. He decided to make an actual test which would show whether he was right or wrong. In order that this test might be absolutely fair he allowed the granite cutters' union to select one of his employees on whom the experiment should be tried. They selected a man named Frank Bullock. Bullock was told that the company had a record of his work for a considerable time past on the 8-hour basis, and that he was to work on a 7-hour basis for 6 weeks and a record would be kept of his production, and compared with his 8-hour work. The experiment showed that he did more work on the 7-hour schedule 28 THE WELL-BEING OF EMPLOYEES than on the 8-hour schedule, not only on one class of work, but on all classes of work. This experiment was checked with others, using different workmen, and the results were always the same. Crawford's 73^-hour day at present in force is arranged as follows: The men start work at, 8 a. m. At 10 o'clock they have a rest period of 15 minutes. They stop work at 12 o'clock and start again at 1 o'clock. There is another rest period at 3 o'clock and they stop at 5 o'clock. Here are some facts which Mr. Crawford has found out about the way men work: Their efficiency is either increasing or constant from 8 o'clock in the morning up to 10 o'clock. After that the curve drops abruptly until noon. After the noon-hour rest, their efficiency seems to be as good as at 8 o'clock in the morning, but they tire sooner, reaching the diminishing point somewhat before 3 o'clock. Without rest, their efficiency has fallen off materially before 4 o'clock, and the last hour's work is of very little value. The higher the intellectual standard of the work- man, the more quickly his efficiency drops after it has reached its peak. Men work better after even a short vacation, and the beneficial effects are not confined to the first few days following their return. The question of finding some means whereby his men can have vacations has given Crawford some concern. In the first place, his rush time is during the sunamer months of the year, and the slack season is in the winter. But workmen do not want vacations in the winter, and where they take them, the good effects are not so pronounced as in the summer when they can be out- of-doors breathing in fresh air and sunshine. REDUCING FATIGUE 29 For this reason he has decided that each man is to have a summer vacation if only a short one, no matter if it does apparently hamper production at the busiest time. He believes a few days' rest enables the men to do more work after they get back, and the increased efficiency makes up the loss. He has not yet found a plan whereby he can give all of his produc- tive labor an extended vacation with pay, but as a beginning he has adopted the following plan: Each man is allowed to leave his work on a Thurs- day night and stay away until the following Monday morning. This means a day and a half lost time, for which they receive full pay. If they wish to extend their vacations for a week or longer they may do so at their own expense. The effects of fatigue are manifest in a diminished capacity for doing work. Says an expert on the sub- ject: "It ordinarily is associated with familiar bodily sensations, and these sensations are often taken to be its measure, but it is of vital importance to employers to recognize, not only that bodily sensations often are a fallacious guide to the true state of fatigue which may be present, and a wholly inadequate measure of it, but also that fatigue in its true meaning advances progressively, and is marked at any stage by a diminished capacity for work, before its signs appear plainly, or at all, in any bodily sensations. "The happy and really adequate performance of physical work depends on the activities of parts of the body which are best considered under these three groups: "1. The complex nervous mechanism of the brain and spinal cord, which are concerned in the initiation and distribution of impulses to action. "2. The nerves which conduct the impulses to muscles. 30 THE WELL-BEING OF EMPLOYEES "3. The muscles, which by contracting finally perform external work. "Fatigue depends not upon the simple using up — 'exhaustion' — of the substances supplying the chemi- cal energy which is liberated during work, but upon the accumulation of 'waste' in the products of the chemical changes involved. That is to say, it is not to be compared with the failure of fuel as in a steam engine, or with the nmning down of a clock spring, but rather with the clogging of the wheels of a machine by dirt. "The chemical 'waste' accumulations in nervous and muscular activities are removed by the blood, in part directly by irrigation, and in part indirectly by chemical changes in the tissue itself, induced by constituents of the blood. It follows, therefore, that rest after activity is .not passive, but an active process, leading to a restoration of normal capacity for work. Time is required for this process and the time will be in proportion to the amount of restoration needed. If activity is repeated too quickly for the completion of the restoration process, fatigue will of course become progressively more intense as the debit bal- ance accumulates. , THESE TESTS SHOWED THAT FATIGUE IS NOT ALWAYS MERELY PHYSICAL "In the physically tired man the symptoms of fa- tigue are attributed to the muscles; they ache, or 'give way,' under him, but in reality the most severe bodily activity fails to produce even a close approach to complete fatigue of the muscles. The fatigue is fatigue of the nervous system, though in sensation its effects may be attributed to the muscles themselves. It is well known that a man apparently ' run to a standstill ' in a race, may with the addition of some new excite- REDUCING FATIGUE 31 ment or urging, run freshly again, under augmented stimulus from the nervous system. "The problems, then, of industrial fatigue are pri- marily and almost wholly problems of fatigue in the nervous system and of its direct and indirect effects. Fatigue following muscular employment is primarily nervous fatigue, and where severe muscular effort is required it has been proved that the maximum output and the best conditions for the workers will be secluded by giving short spells of strenuous activity, broken by longer periods of rest, than for the employments in which nervous activity is more prominent or more complicated. Here is an example of how this works out: "Just before the armistice was signed two officers at the front, for a friendly wager competed in making equal lengths of a certain trench, each with an equal squad of men. One let his men work as they pleased, but as hard as possible. The other divided his men into three sets, to wcirk in rotation, each set digging their hardest for five minutes and then resting for ten, till their spell of labor came again. This team won easily. The problem here gives another obvious opening for scientific organization based on the results of experiment. "The special problems of industrial fatigue come under the head of nervous and mental fatigue. This may spring from the maintained use of intelligence and observation, with varying degrees of muscular activity, or from steady attention maintained upon one skilled task, or of distributed attention, as when several machines are to be attended. Or again, it may depend upon the continued use of special sense and sense organs in discrimination by touch or sight. "Fatigue under this head will be greatly affected according to whether the worker has opportunity for obeying his natural work rythms, or whether unnat- 32 THE WELL-BEING OF EMPLOYEES ural rythm and strain is imposed by the pace of the machines or of his fellow workmen. Fatigue will be more rapid if the work is of a 'worrying' or 'fussy' kind — that is, with a multiplicity of irregular rythms. "The true test of fatigue is diminished capacity and the measurement of output in work will give the most direct test of it. The output should be measured imder the ordinary conditions of work, and where the output is not automatically measured, it must be measured by methods which do not make the work- ers aware of the test being made, or errors due to special effort put forth from interest or emulation will creep in. These measure records of output to be useful must extend over long periods, to show the onset of fatigue over the whole day, the whole week, and under particular seasonal or other conditions, in order to detect and measure the results of accu- mulating fatigue. "Whilte measurement of output must obviously be recorded at so much for each unit group, it is important to observe the output of particular individuals. It will usually be found that there is a surprising varia- tion of individual output, independent of personal willingness and industjy, and generally quite unsus- pected. This good individual output often is the re- sult of escape from fatigue by conscious or unconscious adoption of particular habits of manipulation or rhythm and its discovery allows the propagation of the same good method among others. "It has been found that where wrong conditions of work prevail, especially that of excessive overtime, a deUberate 'loafing' of the workers actually gives an improvement in the amoxmt of output over a period of some length, by-sparing fatigue, just as the 'nursing' of a boat crew over part of a course improves their performance. REDUCING FATIGUE 33 "An important and early sign of fatigue in the ner- vous centers is a want of coordination and failure in the power of concentration. This results in an in- creased frequency of accidents, and accidents are costly. They are due to momentary loss of attention, and re- sult in personal injury to the worker, which may be either trifling or serious, breakage of tools or materials, or the spoiling of work. In well-managed concerns ac- cidents are recorded for unit periods during the day. A careful analysis of these various indications after taking into consideration other factors as rate and speed of the work or other variables, often serves as a secondary index to fatigue. This may suggest a remedy, possibly by 'spelling' the worker before fatigue causes him to fall below the safety point." HOW CAN THESE BAD EFFECTS OF FATIGUE BE PREVENTED? Rest periods have proved a satisfactory means of reducing fatigue in many concerns. Mr. Crawford's methods have already been described. From 5 to 15 minutes recess, when such periods are used, are usually given both in the middle of the morning and afternoon. Sometimes this time is devoted to calisthenics. In one concern, where a 5-minute rest period is given em- ployees each morning and afternoon, two main aisles and two cross-aisles are used as a running track. To offset a decUne in effectiveness in stenographers during the latter part of the morning, one employer conducted a series of rest tests, and found that more and better work was turned out if the workers were given a 10-minute rest in the middle of the morning, and served with hot boulUon. The time and expense involved in the plan were more than offset by results. In justice to the whole problem, however, it is necessary to state the experience of an employer of thousands, who.tried.rest^periods and had to give them 34 THE WELL-BEING OF EMPLOYEES up. It developed that these periods, so to speak, "broke the stride," and seriously interfered with the ' 3. Emergency treatment of minor illnesses occurring during work; prompt recognition of communicable diseases; appropriate disposition of cases of serious illness developed during working hours. - 4. Sanitary inspection of toilet rooms, washing facilities, dining rooms, lockers, and general factory working conditions. 5. Visiting-nurse service. 6. Health publicity. Let us consider the practical value resulting from the physical examination of applicants for employment. Two methods are used at present. One utilizes the physical examination to determine those who are phys- ically and mentally fit to perform any work what- soever, recommending those for employment and rejecting the group that fails to come up to standard. Ordinarily this means that about 10% of those apply- ing for work are not employed because of physical de- fects. This was the method in common use before the war. During the war, because of the stringency of tne labor market, this was replaced by the second method. This consists of excluding two classes of applicants only: those with communicable disease and those whose physical condition is such that they should not be working at all. Under this plan about 98% of all appUca-nts are employable, provided a careful check on all transfers is maintained in order to see that defective employees are kept at suitable work. After the war, when industrial conditions showed a tendency to become normal again and the labor supply became in excess of the demand, the first method PROPERTY OF LIBRARY NEW YORK STATE SCHOOL 13204 _AT!0NS ITY ■50 THE WELL-BEING OF EMPLOYEES of conducting examinations was largely resumed. For our purpose, then, this method may be fairly used as a basis for estimating the saving resulting from the physical examination of applicants. In this study a manufacturing concern of 1,000 ■employees will be taken as a type. Under normal conditions the labor turnover would necessitate the -hiring of 409 new employees per year to maintain this quota (according to the experience of certain representative industries). In order to be fair, the floating element should be eliminated from this con- sideration. Most of the shifters in the organization will have left in six months and all of them certainly by one year's time, so that by the end of a year those who remain on the payroll may be considered as reasonably permanent employees. HOW MUCH TIME WILL THE PHYSICALLY EXAMINED WORKERS LOSE? Experience has shown that 50% of those hired are still in the employ of the company at the end of the year, so that of the 409 hu:ed, 204 would still be on the payroll at the end of the year. The question now is, how much less time will these selected employees lose per year on account of lessened illness than would have been the case if the system of physical examinations had not been in force? It is quite obvious that absenteeism on account of sickness will be less in this selected group for the reason that the principal causes of absence have been elimi- nated. The defective group commonly consists of those who are crippled, those physically below par because of malnutrition, cases of chronic disease such as heart trouble, tuberculosis, high blood pressure, and rupture, and those with diseases of a communicable nature. These are the time-losers, and if they are not employed to begin with, the result will be that A FACTORY PHYSICIAN 51 the physical standard of the working force is bound to rise to a distinctly higher level. It is not possible to say exactly how much less time is lost by a group of employees selected on this basis, but certain facts help in forming a reasonable estimate of this lost time, such as the following: Each industrial worker in the United States loses on an average of 9 days per year because of sickness. This statement is based upon an investigation of the United States Commission on Industrial Relations and covers 1,000,000 cases. It happens to coincide with English and German figures based on an analy- sis of 26,000,000 cases. To obtain further information on the subject, a questionnaire was prepared and addressed to 17 rep- resentative surgeons, industrial physicians, and po- litical economists. The questionnaire asked for infor- mation as follows: "I would very much appreciate an expression of opinion from you as to what would be the percentage of increased physical efficiency of a selected group of employees where this group represented 90% only of all appUcants for employment? "By the elimination of 10% of those grossly defec- tive physically, such as cases of organic heart disease, incipient pulmonary tuberculosis, anemia, high-grade visual defects, unsanitary mouth conditions, venereal disease, elevated blood pressure, severe varicose veins, rupture, and so forth, the physical efficiency of those employed is obviously much increased. Fur- ther, it is reasonable to assume that this group will, in consequence of their better physical condition, lose less time from work because of sickness than those not so selected. "Figures of the United States Govenmient show that each of the 30,000,000 industrial workers of this country loses on an average of 9 days per year because 52 THE WELL-BEING OF EMPLOYEES of sickness. The question is, how much of a reduc- tion from this figure expressed in days lost per year would be present in a selected group of workers as indicated above?" Some thought that in such groups only one-half of the usual time would be lost (43^ days), while others felt that the saving in lost time would amount to 2]/i days. The average of these 17 opinions is 3J^ days, or, expressed differently, the loss of 53^ days per year instead of nine. Working conditions in different factories vary greatly. Some factories operate on a higher wage scale and shorter hours than others as well as under modern sanitary conditions. This means better food and better housing and more time for recreation, all of which tends to reduce the average amount of time lost per year on account of sickness. This fact should in all fairness be taken into consideration, so that it is reasonable to assume that workers in this class lose l]/2 days a year because of illness instead of nine. Soldiers of the United States Army in time of peace lose 2.85 days per year, but there are good reasons for this. The examination for entrance into the army is extremely rigid; further, the life of a soldier is spent for the most part in the open and his habits of eating and sleeping are regular. One would naturally expect the morbidity rate to be very low. We are now in a position to draw a conclusion. There is a difference of two days between the amount of time lost by the group of workers operating under a system of physical examination with 10% rejections and the estimated amount of time lost by people working under conditions somewhat above the aver- age. If we multiply 204 (the number of relatively permanent employees) by two, we have 408, which is the number of days saved in our typical industry of 1,000 employees. A FACTORY PHYSICIAN 53 The next question to determine is the value of the average employee to the concern employing him, over and above the wages that he is paid. Obviously, he earns more than he is paid or the concern could not continue to operate profitably. Probably the simplest way to obtain this figure is to divide the company's annual net earnings by the total number of "employee days" (1,000 x 300). Of course, the organization of a company is made up, generally speaking, of two parts: the directing element and the operating element. The directing element while great- ly in the minority is, nevertheless, indispensable as is also the operating element. It would seem fair in spite of the disparity in numbers to consider these elements as being equally necessary and valuable, as one cannot operate without the other. While, of course, the figure will vary greatly, it will be found that in a concern that is well managed and making money, the average worker is worth about $2 a day to his company over and above what he is paid; therefore, if we multiply 408 x 2 we have $816, which represents the saving to the company in a year's time as a result of the physical examination of applicants for employment. THIS PLAN CALCULATED THE EFFECT ON THE WORKERS' RELATIVE EFFICIENCY There is another angle to the question of physical examination of employees and the distribution of health literature. The Postal Life Insurance Com- pany of New York over a period of five years reduced the mortality of those taking the examination by 50%. They assumed that an influence that would produce a 50% saving in mortality would also produce an improvement of at least 10% in the physical and mental efficiency of their employees. While a 10% improvement in efficiency does not necessarily imply 54 THE WELL-BEING OF EMPLOYEES a corresponding reduction in the loss of time, it is certainly reasonable to estimate this saving at 50%. The following calculation is then possible: 1000 Number of employees 5}4 Days lost per employee 5500 Total annual lost time expressed in days .05 Saving 275.00 Number of days saved $2 00 Value of employee's time per day to employer $550.00 Total value time saved The average of this figure and $816 arrived at by the other method is a saving of $683, which seems to be a very fair and conservative estimate. But this is only one of the smaller savings. Still another thought, but one which would have to to be worked out for each individual concern, is the following: In a factory where the majority of employees are on piece-work, estimate the annual payroll per 1,000 employees. If, shortly after the institution of physical examinations, this figure begins to rise, it is fair to assume that other things being equal, the increase is due to a greater earning capacity on the part of the employees, providing, of course, that their occupations are such that physical and mental vigor can effect the quantity and quality of the work turned out. The changed conditions may very, well be in- terpreted in terms of increased efficiency brought about by physical examination. The second principal means by which medical supervision saves money for industry is" in the amount of time saved as a result of the elimination of infection when injuries and accidents are promptly and properly cared for. The average industry engaged in the ordi- nary operations which are considered only moderately hazardous will produce about 836 surgical cases per 1,000 employees per year, 90% of which are probably A FACTORY PHYSICIAN 55 infectable. By "infectable" is meant cases that are capable of developing "blood poison" when improp- erly treated. In order that our result shall not be too glowing and so as to err on the side of moderation, suppose we say that only 50% are infectable. This means that there would be 418 cases in the course of a year's time that are capable of infection. If 8% of this number of cases become infected with average care, it means that there are 33 cases of this sort to consider. The records of the New York State Workmen's Com- pensation Commission over a period of several years show that in actual practise 16%, or double this num- ber, become infected with average, not poor, care. It now becomes a question of how much time is lost by the average worker when a cut, abrasion, or other injury becomes infected. In an effort to determine this a questionnaire was sent to leading surgeons and physicians both in private practise and in the industrial field and the records of various State industrial com- missions were also incorporated in this analysis. The results, based on actual experience, show that an average of 75 days are lost to industry when a worker sustains an infected wound. Following our attitude, of conservatism, let us divide this by two. In multi^ plying 33 cases by 37 days we obtain 1,221, the num- ber of days lost per year in a concern of 1,000 em- ployees. Multiplsdng this by $2 per day we have $2,442 which represents the net saving to the com- pany as a result of the elimination of infection. A third and very definite, tangible money saver is the reduction in the premimns on workmen's compen- sation insurance effected by the establishment of an industrial medical department. For instance, if the average earnings of the workers in the plant taken as a type are $25 a week, the annual payroll would amount to $1,300,000. A 50-cent rate, or 0.05%, would be a 56 THE WELL-BEING OF EMPLOYEES very conservative estimate for even a non-hazardous industry. The annual premium in such a case would amount to $6,500. Seventeen per cent of this is $1,105, which is the actual allowance made when a concern provides its own medical services. As work- men's compensation laws are operative in most of the states and as the majority of manufacturing establish- ments insure with some carrier, the significance of these figures is apparent. The sum of $1,105, and the two figures previously obtained, $2,442 and $683, represent a total saving from these three items alone of $4,230. This figure might in all fairness be run up considerably, but the method which has been employed here should carry with it more conviction than if the figures were used to obtain the largest possible results. It is evident that the other activities of an indus- trial medical department also effect a saving. If illness is prevented by the dissemination of health information, or is cut short by prompt treatment, there is no question but that a good deal of time will be saved in the course of a year. It is impractical, however, to estimate this saving as was done in the case of the first three items. This also holds true in the case of the various other phases of industrial medical work. There remains but one other point to complete this discussion and that is the cost of an industrial medical department. If a department serving 1,000 employees should cost $5,000 or even $10,000 a year, it would still seem that the money were well invested. There are so many intangible advantages and returns from a department of this sort where, in addition to the actual saving in money, there is an increase in good will on the part of the workers toward the company and where, also, much good results in a humanitarian way from such supervision. A FACTORY PHYSICIAN 57 However, service of this sort does not cost $10,000 or even S5,000, but in this case $2,210 per year, or $2.21 per employee. This figure is based on an analy- sis of the cost of medical supervision in 95 diversified American industries employing 479,634 persons. The compilation was made for the Conference Board of Physicians in Industrial Practise, by Magnus W. Alexander, in August, 1917. The 95 industrial plants were located over 15 states. The number of employees in each plant ranged from 141 to 36,107, the average number per plant being 5,005, while the character of the work embraced all operations including the most hazardous. This study showed an average annual per capita cost of $2.21. Comparing this cost of operation, $2,210, with $4,320, the partial earnings of our typical medical department, it will be seen, therefore, that instead of being an added expense to a concern, industrial medical supervision is a money saver in addition to paying its own way, and all this quite aside from any consideration of its value from the humanitarian standpoint. There is little question of the business value of the less tangible savings from medical supervision. The better physical condition — ^the higher the "tone" of the workman — alone means bigger production, because there will be fewer of those days when a cold or a run- down condition causes his work to lag. Fair trials have shown that health supervision not only pays, but pays "big"; and undoubtedly it is the subconscious feeling that this is true that accounts in so large a measure for its extensive adoption by indus- try at the present time. CHAPTER V WHEN DOES WELFARE WORK SUCCEED? This is a subject with two sides to it. Some employers insist on sidestepping welfare work altogether; others go a long way with it. This chapter presents the principal difficulties and dangers, and also methods that have been used successfully. NOTHING in the employment relationship as such gives the employer the privilege of exer- cising a moral censorship over the private lives of his employees. If he undertakes the obliga- tion, he does so as a man rather than as an employer, and the risks of the undertaking in any case are on his own head. "WeKare work," so-called, is not uncommonly considered by the employee as an un- warranted interference with his private affairs on the part of the employer. And work of this sort is attend- ed with a high degree of uncertainty as to results unless the employer is an exceptional individual. There is no denying that what the employee does out-of-hours has an effect on his capacity and abihty while he is at work. And there is no denying, further- more, that some employers intimately interest them- selves in these out-of-hours activities of employees with great success. Neither can it be denied that other employers have tried the same thing and had th^ir employees snarl their instant displeasure. With these thoughts in mind, and without hoping for too much or expecting too little, let us examine some types of welfare work, and try to arrive at conclusions re- garding their merit. 58 BOTH SIDES OF WELFARE WORK 59 Broadly speaJdng, welfare work falls into two classes, though in individual cases one class merges iuto the other so imperceptibly that it is difficult to make any distinction. The first class is that which unoffi- ciously presents opportunities for employees and their families to have a good time; the second prescribes a mode of hving and a mode of amusement ia accor- dance with what the employer or those entrusted with carrying out his policies happen to believe is right and desirable. It is a fact that in one famous company the high executives not only must neither drink nor smoke, but they must also give up coffee and tea; and if they wish to stand particularly well in the favor of the chief, they announce themselves convinced vegetarians! Now even this is not beyond excuse if the men occup3ring these positions have a full imder- standing of the conditions, and enter into the bar- gain willingly. The results from the standpoint of profits may be either good or bad, but these happen to be the conditions of employment in this organization. Another employer, who is able to boast a record of 20 years without a strike or serious labor disturbance of any sort, attributes much of his success in this direction to what is termed, in his plant, personal- relations work or mutual-interest work. He says: "Our workers, I know, do not like to be patron- ized, uplifted, or 'welfared,' any more than I do. They are independent and resent any interference with their habits of life by the employer. Many men feel, too, when a company does more for them than pay their wages, that there is a 'joker' somewhere. Often they beheve that the money spent for welfare work sooner or later comes out of their pay envelops. But after a man has been with us for a while he knows better. "Our mutual-interest work consists of practical poUcies and methods of helping the worker — Whelping 60 THE WELL-BEING OF EMPLOYEES him, not out of charity, but because he deserves it — to raise his effectiveness in his work, to better his standard of living, and thus increase his happiness and our progress at the same time. "A man cannot do his best work if he is ill, or wor- ried, or discontented, all will agree, and the company's profits are decreased accordingly. Therefore, I say it is up to the employer to see that none of these con- ditions exist. Moreover, if we can go a step further and arouse the worker's interest and loyalty, profits will be increased, and the worker will be better off mentally and financially. "Service of this sort is truly mutual-interest work, as we see it. The worker is told what he is to get and what he must give, how he benefits and how the com- pany benefits; in fact, throughout, the policy of 'fifty-fifty,' get and give, is emphasized." The methods of this employer, and of most of those who take an active concern in welfare work — or mutual- interest work, personnel improvement, industrial ser- vice, or betterment, as the same thing is variously termed — ^fall roughly into four classes, namely: 1. Health safeguards. 2. Recreational and social activities. 3. Improved standards of Uving. 4. Protection from poverty and debt. Health supervision and safeguards have already been considered as applied within the plant and these methods need not detain us further, since when the same ideas are applied beyond the immediate working environment similar methods, in general, are used. Recreational and social activities, however, are some- thing different. Nobody doubts that the right sort of recreation is indispensable. Jack must mix play with work, or get to be a dull boy. The only question that arises is BOTH SIDES OF WELFARE WORK 61 as to what share the employer ought to have in direct- ing or providing for such activities. In many con- cerns they are carried on by means of employees' clubs, evening parties, meetings during the noon hours, athletics and outings. Our company has helped to organize a Booster Club, a social organization which meets once a month. The club is about half self-supporting, each member being assessed 25 cents a month. The offi- cers of the club are all rank-and-file employees. The first part of each meeting is devoted to business, where the company's poUcies are discussed, and suggestions and complaints are made. The business meeting is followed by a dinner or dance or both. The presi- dent of ttds concern says that the club is of equal benefit to employees and management. WHAT THE "SHOP SOCIAL CLUB- MEANS TO THESE WORKERS "We have worked out the social side of our busi- ness," says another employer, "by organizing what we call the 'Shop Social Club.' Every shop man likes pleasure and amusement of some sort, and wants a place to spend his money. Too often he gets into wrong places. The 'Shop Social Club' has been launched, with beneficial results all around, to get him into the right kind of place. "Baseball, bowling, and other healthy sports are open to the members. Outings and social gatherings are carried out at moderate cost; the breaking-up hour at all affairs is reasonable. Executives attend the 'affairs' occasionally, and a unified factory spirit has been promoted, which goes a long way toward discoimtenancing the feeUng expressed: 'I'm only a laborer and don't count'." In still another concern a Get-Together Club was organized for the managers and assistant managers 62 THE WELL-BEING OF EMPLOYEES of the company. The club's object was to promote good-fellowship, to aid its members to speak logically and forcefully in public, and to develop interest in problems of the day. "At the outset," says the president of the company, who was the club's founder, "the membership was very small, comprising only a group of officers and managers. "As the idea grew, however, the first assistants of department heads were admitted, and today the mem- bership consists of heads of departments, first assis- tants, traveling representatives, and office em- ployees, who, upon written recommendations of their department heads, are accepted by the board of club governors on a ballot vote of not less than 75% of the members of this board. The board of governors con- sists of eight, including two officers of the club. Three of its members hold office for two years, in order to continue the policies and ideals of one administration into the next. "Early in its career the club adopted the slogan, 'Not in time, place or circumstance, but in the man, lies success.' No expense is imposed upon members, the company bearing the entire burden. The club holds regular meetings on the second Tuesday evening of every month. The company provides supper. Programs are varied and interesting. No discrimina- tion is shown in choosing participants. Each officer and member is expected to do his share when called on, because the main object of the club is self-better- ment and self-development. It is assumed that if a man shows a tendency to shirk his program assign- ments, he is not in sympathy with the objects of the organization. "Program subjects do not include problems of im- mediate concern to the company, but are on national or civic subjects. The idea of the members is to de- velop along the broadest possible lines. BOTH SIDES OF WELFARE WORK 63 "This was the original plan. At present the policy has changed somewhat, and one of the latest and most important developments of the Get-Together Club has been its entrance into educational and social ser- vice work. The company now looks to the Gret- Together Club to discuss and recommend certain things along these Unes. "When a new plan for company educational work or an employment problem arises, the club often asks an authority on the subject to address its meeting. An open discussion follows, and the company often takes some action as a result." The cooperation of employees along this line is said to more than repay the company for the expense involved. Attendance at Get-Together meetings is, of course, not compulsory. But through the years there has been a constantly increasing attendance percentage. The attendance of a typical meeting was 86.2% of the club membership. Allowing for sickness and members who were out of the city or traveling, this was very high. The attendance seldom drops as low as 50%. When it was found that this organization did not properly embrace the factory men, although some were members of the club, a Foremen's Club was organ- ized. This is a separate organization, but built on the same lines, and there are often joint meetings. These clubs are heavily credited for much of the enthu- siasm shown by employees. Another employer throws open the service rooms of the factory on Wednesday evenings for workers' parties. Initiative in this always is taken by the employees. Any department or departments wish- ing to stay any Wednesday evening for supper and entertainment afterwards, may do so by booking a date in the ofl&ce of the welfare or service superin- tendent. Committees consisting of nine members 64 THE WELL-BEING OF EMPLOYEES each are then appointed by the foreman or foremen. These committees are always three in number — a committee on arrangements, a refreshment committee, and an entertainment committee. The affair is en- tirely in their hands, although the welfare head stands ready to help if asked. Friends and relatives are welcome at these evening gatherings. There are music and recitations, and workers of the different nationalities dance their folk dances. Frequently, the evening's fun is increased by a pantomime, an exhibition of "fortune telling," or some other "stunt" by the workers. Managers, superintendents, foremen, and their wives, are present on these various occasions and better acquaintanceship is thus made possible, as well as an increase of general friendliness and good will. These informal parties usually last until 9 o'clock. THIS FIRM GOES A STEP FARTHER IN PROMOTINGESOCIAL ACTIVITIES Cheney Brothers provide a large brick building — Cheney Hall, it is called — ^for the free use of employees. The hall is in use by them almost every night during winter months. A large recreation building also has recently been completed by this company and contains a complete gymnasium, a swimming pool, bathrooms, a small hall for dances and amateur theatricals, lounging and writing rooms, lunchrooms, and kitchens, all for the use of employees of both sexes. The company also maintains a free library of 10,000 volumes for the use of workers and their families. The library has a read- ing room well stocked with papers and magazines, and a children's department under the care of a trained attendant. These efforts give an idea of how far along this line of activity some companies have found it practical to go. BOTH SIDES OF WELFARE WORK 65 Noon-hour meetings seem also to produce good social and recreational results in many instances. In one concern "movies" selected by an employees' committee are provided at such meetings. At another, informal talks are given by department managers, with an occasional outside speaker. In many con- cerns where women are employed, part of the noon- hour frequently is devoted to dancing, with all faciU- ties furnished by the employer. Athletic sports are also a most popular form for recreational activities to take. Few concerns of any size do not promote employee athletic contests of some sort, as baseball, basketball, volley ball, tennis, bowling, swimming, and so on. Where a concern does not have its own gymnasium, the use of a Y. M. C. A. or high-school gymnasium usually is easily arranged. One St. Louis concern provides its girl workers with a swimming pool, where many of them come every noon. An expert swimmer is the attendant in charge. Company outings are also popular with many con- cerns, usually taking the form of picnics, field days, and the like. None of these activities, it is obvious, tread on such intimate personal ground as when the employer under- takes some improvement of the employees' standard of Uving. The dangers of interfering in an unwar- ranted way have already been suggested. In spite of the dangers, however, some employers — and it must be admitted they follow up their policy with at least a measure of success — ^insist that it is very clearly their business duty to know all about how their workers live, and to take action thereon, since home conditions can help or hinder production to a high degree. Here is what one employer of this persuasion says: "The physical conditions of a concern may be the best that it is possible to obtain; sanitation and ven- 66 THE WELL-BEING OF EMPLOYEES tilation may be as nearly perfect as experts can devise; restrooms, liinchrooms, recreational facilities, shower- baths, and other comforts and luxuries may be provided by an employer who aims to look after the general welfare of his people. Hours may be reasonably short, and wages may be high. And yet, the employer who is intelligently attempting to reduce his labor turnover and to improve the personnel of his organi- zation knows that these steps alone, while essential, may not entirely suffice. He recognizes that the health and well-being of his people are fully as depen- dent upon conditions outside the concern as upon those within it. He recognizes, too, that outside conditions constitute fully as important factors in workers' steadiness and efficiency as the company conditions. "As for the 'right' of the management to interest itself in the outside lives of workers, I believe it is not only a 'right' when it affects the worker in his work, but it is actually a duty which is a natural outgrowth of executive responsibility. For example, interest in the health of the worker cannot truly be effective unless it attaches itself to the worker at all times. Unfortunately, most workers are as ignorant of health laws as babes in arms. It is ideal that we all should manage our own lives. But all will admit that before we can manage our own affairs we must be taught how. I know that by reducing the causes of inefficiency I help to make better citizens and a more stable and steadily prosperous body of employees, and I consider it my duty to use every honest means to secure such a desirable end." Tactful suggestions from a visiting nurse, welfare superintendent, or company doctor; the ownership of a home; the cultivation of a garden — these are some of the directions in which employers' interest in these out-of-doors activities turn. To encourage BOTH SIDES OF WELFARE WORK 67 employees to raise gardens, one concern awards prizes for the best results obtained. Flower gardens are in- cluded in the contest as well as vegetable gardens. Inspection trips are made by company representa- tives at regular intervals. The prizes usually offered are house furnishings, silverware, dishes, aluminum ware, porch furniture, and so on. "By arousing workers' interest in home gardens," says the head of this concern, "we help them become more contented with their surroimdings. There is a moral influence at work vastly more important than the gratification of the senses. The gardens are a source of quiet and pleasure, and do much to repress the wearying excitements of daQy hfe. In these days of busy life we often work until we become irritable and morbid, and we need calming influence." HERE A GARDENER'S ASSOCIATION ACCOMPLISHES THE DESIRED RESULTS In another concern every year a gai'deners' associa- tion is organized. Everything in connection with the plan is conducted on a business basis. At the begin- ning of the season the services of an expert agricul- turist are secured. He acts in an advisory capacity. Seeds and implements are bought through the pur- chasing department of the company. To make sure that nobody is working on the wrong track, members of a company garden inspection committee make peri- odical examinations of the gardens and offer construc- tive criticism. At the end of the season the garden association holds a prize contest. Cash prizes of $3, $2, and $1 are given for the best vegetables grown. While the prizes in themselves do not amount to a great deal, they are an incentive. The mental and moral atmosphere of the worker's home has an untold influence, of course, on the effec- 68 THE WELL-BEING OF EMPLOYEES tiveness of the individual. Here, too, the employer usually treads dynamite if he attempts remedies. But even so, if suggestions are tactfully made by someone in whom the worker has full confidence, offense may not be taken; and a great good may even be done. A healthy worker, a moral worker, a worker with adequate opportunity for sane social and recreational activity, is obviously, other things being equal, a better worker than he who is or- has none of these. So, too, with the worker who is free from debt and perpetual financial worry. Many companies take steps to protect workers and their famihes from pov- erty and debt, and thus to relieve them from worry. These steps usually materialize in the form of (a) mutual benefit societies; (b) insurance provisions; (c) pension plans; (d) cooperative stores; (e) savings and loan associations. Most mutual benefit associations, it appears, are similarly organized, the purpose being to provide a definite income for employees who suffer illness or disability not coming under the provisions of work- men's compensation laws. The regulations of the mutual benefit association in one concern explain the purpose in these words: "By the terms of the state compensation act, com- panies will provide doctors and hospital service, and compensation will be paid for total disability, accidental death, loss of fingers, toes, eyes, hands, feet, and so on, in accordance with the scale of bene- fits listed by the act. "Benefits are paid for all ordinary disability result- ing from accidents incurred on duty, at the rate of 65% of wages, but dating from the eighth day of disability. If the disability lasts four weeks or more, the first week of disability will also be paid for at the same rate — 65% of wages. BOTH SIDES OF WELFARE WORK 69 "It should be remembered, however, that nearly one-half of our accidents cause less than seven days of disability. Therefore, only about one out of every twenty injured workers would receive under the compensation law daily benefits for the first week of disability. "The Mutual Benefit Association under all circum- stances will pay full benefits for the first week. There- fore, the advisabihty of membership in it is manifest." Usually the company pays the overhead expense of the benefit association, consisting chiefly of provid- ing offices and furniture, and perhaps one salaried official, usually a secretary. In addition, most com- panies contribute a certain amount to the association fund. One concern contributes a dollar a member on the average membership for the year. Other employers are of the opinion that the best results are had when the company offers bonuses to the association for accomplishing certain definite tasks. One employer who advocates this plan says: "We made our campaign for new members a game where each member became a salesman watching for an opportunity to 'sell' the association to a new employee. As a result of this plan, our membership doubled in the month following its adoption." These mutual benefit associations may be managed either by the management or the employees alone, or by the management and employees together. Figures from approximately 500 worker mutual bene- fit associations indicate that where the association is operated by the management without the coopera- tion of employees, the percentage of members to the total number of employees averages 75%; with the employees entirely operating the association, the per- centage varies from 2% upward, with an average of 30% of total employees; and with joint employee and employer management, the average is 60%. 70 THE WELL-BEING OF EMPLOYEES The first plan appears to be most successful numer- ically but in explanation of the figures it must be remembered that under management operation membership may be practically conipulsory, whereas with either of the other arrangements membership usually is purely voluntary. One association pays sickness or death benefits to its members, aside from what the company does under the state plan in accident cases. So, between the association, the state insurance plan, and the com- pany's own plan for Hfe insurance, worries on these scores of possible sickness or injury are largely re- moved from employees. HOW CAN THE ACTIVE INTEREST OF THE WORKERS BE SECURED? Getting the support of employees is, of course, the big problem of mutual benefit associations. Volun- tary membership is most desirable, and in many in- stances where membership in the association is com- pulsory, real employee interest is found to be wholly lacking. When members come to look upon member- ship in the association as a burden" which they must carry in order to hold their jobs, the association's value to the concern is practically lost; and whatever value it may have for the members is minimized be- cause they do not recognize that value. In one association, dividends proved to be a big membership stimulant. The cash reserve here was increasing very rapidly and it was felt that it was unfair to the members to retain this money when it was not needed by the association; and so it appeared right and proper to declare a dividend equivalent to two weeks' dues. To save bookkeeping, this dividend was paid in cash. Each member received an envelop containing his divi- dend and a message stating that the association was BOTH SIDES OF WELFARE WORK 71 prosperous, hence the dividend. As a result, member- ship went up about 50% in the next six months and the initiation fees from this influx of new members put into the treasury more money than the dividend had taken out. Most associations do not pay benefits for disabili- ties of less than three days, because the number of workers who cannot stand without inconvenience the financial loss of three days' illness is few. Much dif- ference of opinion exists as to the question of the total time of disability for which the benefit association should pay. The most common period is 13 weeks, although some associations pay for 26 weeks. Assum- ing that the uniform dues are 10 cents a week, with 3 days' waiting time, it is possible to pay benefits of $1 a day for 13 weeks. If the waiting time is increased to 7 days, the benefits can be increased to 19 weeks without any change in dues. If the waiting time were made 13 days, as in most compensation laws, the bene- fits could be paid for 26 weeks. Many benefit associations provide what have been called "step-down" benefits; that is, $1 a day for the first 13 weeks; 75 cents a day for the second 13 weeks; 50 cents for the third 13 weeks; and 25 cents a day for the balance of the year. Others pay small bene- fits as long as the member continues disabled. A "step-down" plan usually requires dues of about 14 cents a week from each member. If it is desired to extend these benefits as long as disability continues, it is necessary to add at least 2 cents a week to the dues. These rates are based on a factor of safety of one third. Many employers prefer "step-down" benefits, but experience indicates that it is usually diEcult to make employees see the advantage of providing for long-time sickness. Regular dues must be sufficient to take care of fluc- tuations in benefits. In this way the association 72 THE WELL-BEING OF EMPLOYEES treasury is kept intact and there is no need for assess- ments. Ordinary fluctuations are not extreme, and with a fair-sized treasury fund, an association usually is able to operate successfully with dues only slightly in excess of its average requirements. Association funds are collected either by assess- ment or by regular dues. The second method appears far more satisfactory in every way, since each member knows in advance just how much his dues are to be and when they are to be collected. Group life insurance — that is, insuring all of a com- pany's employees under one policy — ^is being taken out by many concerns to remove employee worry about family security. In some instances the entire cost of the insurance is absorbed by the employer, while in others collections are made through employees' pay envelops for part or all of the premiums. The amount paid at death varies. Sometimes it is based upon the employee's salary. For instance, in one concern the company policies provide for the payment of an amount equal to one year's salary of the deceased, but not to exceed $1,500. Other concerns have poli- cies providing for the payment of the same sum for each employee; or varying sums, depending on the length of service. In some instances, life insurance is sold through savings banks at the lowest possible cost to wage- earners. This movement has developed through the cooperation of business men who have established agencies in their concerns so their employees may have the advantages which this form of insurance affords. At the present time there are nearly 300 such agencies. Among companies maintaining agencies are the United Shoe Machinery Company, Dennison Manufacturing Company, New England Confection- ery Company, George E. Keith Company, and the Eaton, Crane and Pike Company. BOTH SIDES OF WELFARE WORK 73 Several governments have adopted plans for com- pulsory insurance to protect against sickness of employees. Statisticians estimate that sickness costs the workers of this coimtry at least $800,000,000 a year. Some laws proposed on this point call for workers to contribute 50% of the cost of the insurance, employers 40%, and the state 10%. Under these various laws a definite schediile of benefits is provided, including medical and surgical attendance, a cash payment during incapacity for not more than six months in any one year, and a maternity benefit for working, mothers. European experience indicates that 2% of the total wage-bill expense is the cost to the employer of sick- ness. Some American employers who oppose the plan claim that the cost will run to 3%. The idea is, of course, still in an experimental stage. THE FUNDAMENTAL AIM BEmND ALL PENSION PLANS Pensions are in operation in many concerns and many employers have found them well worth wl^ile all aroimd. One fundamental aim of pension plans, of course, is to build up a permanent staff of em- ployees. There are two principal types — contributory and non-contributory. The former is supported in part by the company and in part by optional or compulsory contribution from employees. The non- contributory plan, imder which the employer pro- vides the entire pension fund, is the more common. Another type of industrial service work is the opera- tion of employees' cooperative stores, designed to help employees reduce hving costs. Goods sold include fuel, staple groceries, and working clothing at the head of the list, with a tendency away from perishable items or such as are not in general demand. One company's clothing fist includes overalls, jump- 74 THE WELL-BEING OF EMPLOYEES ers, shirts, caps, sweaters, handkerchiefs, socks, gloves, rubber boots, and rubbers. The buying for employees at wholesale is sometimes handled by the company, and sometimes by the workers themselves. The company usually aids at least to the extent of providing space for the store, and light and heat. Where the company runs the store, it may be operated at cost or with a very small profit. At the White Motor Company, where the store is entirely operated by the benefit association, the profit amounts to about $500 a month. Of this amount 70% goes to the benefit fund and 30% to the band, to ath- letics, and other worker activities. This profit is reahzed by selling goods at cost plus 50%. Candy, cigars, and tobacco, however, are sold at regular retail prices. The association pays one attendant's salary, and the company donates fight, rent, and heat. A glance over the shelves at this store reveals the following articles : rice, canned goods, staple packaged groceries, hams, bacon, tobacco, candy, pipes, matches, electric lamp bulbs, gloves, overalls, caps, eye-shields, automobile tires, and tools. Another way of handling purchases for employees is through a cooperative association organized ex- pressly for the purpose. Such an association was organized by one concern to sell groceries and provi- sions to workers. Its store is operated about as any grocery store is, buying supplies from wholesalers and jobbers and retailing them to the shareholders. It is a part of the plan of this association to apply the net profits, after making allowance for deprecia- tion on stock and fixtures, toward a 5% dividend. After doing this, a reserve fund of 23^% is set aside. The remainder is distributed to the members accord- ing to the amount of their purchases during the pre- ceding six months. BOTH SIDES OF WELFARE WORK 7S Savings associations among employees are nowadajrs. common and it is imnecessary to go into detailed description of them. A few simple policies, it appears, underlie their successful operation; such as — 1. An employee must be able to join at any time.^ 2. Any amount may be deposited. 3. Money can be placed, in the individual's name, in any bank of his choice. 4. The amount regularly deposited may be can- celed or changed by the depositor at any time if due written notice is given. 5. The bank shall pay the regular rate of interest direct to the depositor, and not the club. 6. Money may be withdrawn in part or in whole without reference to any officer of the association or company. 7. On each payday the company cashier hands ta the association representative a check for each bank, covering all the deposits to be made in each bank, together with a list of the depositors and their respec- tive amounts. 8. Deposits actually are made in the designated bank by the association representative. 9. Periodic meetings of the association are held to stimulate ambition to save and to discuss insurance, real estate, building and loan, and other investments. 10. The association may develop loan or other features as desired. It must constantly keep in mind that the scheme is not an end in itself simply, but a means to a larger end — thrift in all senses of the word. It is self-evident that all the plans herein described- are of little avail if the worker's home life is shiftless. Hence the need for a community approach also, through the church, school, Y. M. C. A., Y. W. C. A., associated charities, social settlements, foreign socie- ties, and other social agencies, as well as mimicipal 76 THE WELL-BEING OF EMPLOYEES health and other departments. Whether the em- ployer should take an active interest in bringing these things to the employee, is at best doubtful. The work may be far more effective if backed by the employer merely as a citizen. One employer sums up his ideas on welfare work as follows: "We look upon our industrial service, or welfare department, as a production department — a department working for the best production of next year and of five and ten years from now, instead of for the production of today and tomorrow, as does the planning department. Our motives are not phil- anthropic. Everything we do in this department is promoted fundamentally to increase production. If the worker is comfortable and contented, our production and our profits are increased. And when, in accompHshing this pxu-pose, we bring more sun- shine and happiness into the lives of our co-workers, and thus help to make this world a better place to live in, we feel that our efforts have been exceedingly well spent." And this will probably serve as about the best pos- sible expression of the point of view of those em- ployers who believe it is their business duty to pro- vide welfare work. Not all employers agree that it is part of the function of the management. Whether it is, and if so, what the welfare work shall embrace, is a decision resting with each employer. CHAPTER VI ENCOURAGING EMPLOYEES TO SAVE Many undesirable situations may he avoided in ike plant that has a thrifty lot of workers. This chapter describes a type of employer-encouraged thrift that gels away from many of the dan- gers of paternalism. A SK any manager whether saving money helps a /A man to do better and more conscientious work and he will say "Yes." We take it for granted that a man who owns his own house will not be swept away by every current of unrest but will, on the contrary, regard the company for which he works as an aid to his personal prosperity and not as a natural enemy. There is a certain fellowship in the business of making money. Samuel L. YauclaJn, the president of the Baldwin Locomotive Works, will not raise a salary imless a man has first demonstrated that he can save money on the salary he is then getting. The advantages of saving money are so numerous and obvious that the odd part is that so few save. The average man does not save because it is com- monly represented to him that the process of saving is purely one of self-denial; he fails to have driven into him that saving is not negative but surely positive, or that it has any other than the immediate effect of accumulating a nest-egg. That is reason niunber one. The second reason why men do not save is that only the man of strong determination can save, for the 77 78 THE WELL-BEING OF EMPLOYEES means of saving that are now afforded to the average worker are so cleverly awkward and inconvenient that only the hardy saver will continuously overcome them. The savings bank does not help a man save — it is an institution for husbanding money that has already been saved. The only general saving is that which becomes automatic the moment that the resolution to save is made. It is not to be expected, and experience conclusively shows, that the urge to save is not normally con- tinuous and that unless the single initial impulse to save may be advantaged, continuous savings will not take place. The saving has to be automatic and thus has to take place before the saver gets his hands on the money — for otherwise the exercise of the will to save must precede each deposit. This makes it necessary to deduct an amount from the pay envelop on the stand- ing order of the wage-earner — which is a nuisance. Few employers care to undertake the management of a savings |fund — and for several good reasons. The first is that they are manufacturers and not bankers. The second objection the executive makes is that there is a degree of paternalism in withholding money "for the man's good." This is objectionable to most employers and to nearly all workmen. A large number of employers were canvassed on this point and they, with very few exceptions, declared strongly against any such paternaUsm. In fact, any plan in which the employer "takes charge of the sav- ings" may do more to discourage than to encourage true thrift. The point is to have the worker arrive at the decision to save by his own mental processes and through the exercise of his own free will, and then for the employer to provide some facility which may have all the advantages of collection at the source and none of the disadvantages of paternalism. CULTIVATING THRIFT 79 One cannot teach thrift without knowing what thrift is and the part it plays in industry. Thrift is not merely the antipodal condition to extravagance. Thrift is the source of all capital — it is the individual margin between income and outgo. Only by the exercise of thrift may the worker become a capitalist, and we all agree that when society is composed of worker-capitaUsts the idea of the class war will fall because there will be no classes for it to Uve upon. But there is even a bigger reason for saving and one that industry will soon have to consider most seriously. It is this: The worker's wage is increasing and the amount of free money for investment is decreasing. It does not take a long view ahead to see the day when pro- ductive capital will be hard to obtain unless the worker has by that time become a capitaUst and returns a part of his wage to the promotion of industry. That is a fact to be reckoned with. THESE PLANS GO FAR IN HELPING THE WORKERS TO SAVE Spreading the doctrine of thi'ift among the wage- earners is nearly the biggest job ahead of forward- looking managers. Practically, how can it be done? Almost any worker will agree without argument that saving is a good thing. The next step is not much more difficult — to get him to agree to save a stipulated amount each week. The good resolution is easily formed — the pledge easily signed. But putting it into effect is not easy. The wage- earner goes to the savings bank once, or twice, or three times. The next payday it rains. He does not go. The new habit is broken and that man will not easily renew his good resolution. For good resolu- tions at the best are fragile, and not easily mended once they are broken. 80 THE WELL-BEING OF EMPLOYEES It was with the thought of preserving the resolution to save that the thrift program of the National Thrift Bond Corporation was formed. Agents are appointed among the workers to solicit the resolution to save. The convert signs a pledge to save and this pledge constitutes an order on the employer to insert in the pay envelop, as a part of the wage, "thrift receipts" to the amount of the determined weekly saving. Experience has taught that a man getting from $12 to $16 a week can save $1 ; from $16 to $25 a week he can save $2; and if he earns more than $25 a week $5 will be a minimum. The delivery of a thrift receipt with the pay has all the advantage of payroll deduction systems without the great disadvantage — the objection of the wage- earner to having any deduction from his wage. The working man thinks mainly with his hands and his eyes. He has been taught the use of .machines that depend on keenness of vision and certainty of touch. His habit of thought is not concerned with written things. It is no discredit to his intelhgence that figxires mean Uttle to him. What more natural, therefore, than that he should count his pay by what he finds within the envelop rather than by what is written on the outside of it? The thrift dollar which he finds within the envelop counts as a part of his pay exactly as the spending dollar counts as a part of his pay. He knows he can always turn it into money at need. Many workers give their thrift receipts immediately to their wives; women appreciate savings more than men. When he has received $10 in thrift receipts, the wage- earner exchanges them for a thrift bond which bears interest at 3%. This exchange is made with an agent of the National Thrift Bond Corporation at the plant. The agent performs a much more important function than that of exchanging thrift receipts for thrift bonds. He explains to the wage-earner what a bond is, shows # Nationn! Tiirifi lionfl C(,>iponitiun the piin-hasc nt i'.iiiii Kmpie.ye. l>ate of Kiist mh>«i;-.:;f.iii Amouiil of wetkly }i:i\ int Has ajipiican; ap j'litil for Reason fur rrlcni! Rocommcnil.T.ion <■,' .A^cn icluiu; oi cash iniiaSliiiiiit ■ Thrift Bond Sa\ings Svstcm i hcrc-bv request that you p\!ri:liasf tor mc, Iroiii my wages, Tlirifl Bonds to the irxrciu ot - _. per week and aulhor- i/L- v-iii to diL-!i\cr to mc Thrift Keccipts to thij amount witti my pay- I understand that the^e Rfctipts arc good onlv tor e\- ,«~ tangeinto Thrit'i Bonds or U. S. Govern- ^ kiu Liberty Bonds or War Savings Stamps, ^5 1 accordance with the 1 hritt Bond Savings - kstem, printed on the back of this lortn, jl which I have received a copy. i Figure 5 : During the war workers learned how to save. They grew accustomed to deductions from their pay, and the words "bonds," "coupons," and "interest" acquired a new meaning. Here the thrift dollars in his pay envelop tell the worker he actually gets all he earns. 81 Number of Days Lost Per £mployee Per Year In IndustriaJ Work Because of Illness 0.1 2 3 4 5 67 8 9 10 9.0 Average Number, based on American, English, and German experience 7.5 Estimated Days lost by group working under exceptionally good conditions 1 physical examination") 5.5 Days lost by selected group (after elimination of physically unfit) 2 DAYS SAVED u 2.85 in time of peace P jr Employee per year Physical Examination Days lost by Soldier in U. S. Army 1 1 Figure 6: Weeding out and properly classifying the physically deficient adds two days a week to every worker's productive time. Certainly such a saving is worth while. Chapter IV is devoted to this subject. Figure 7: The value of a physical examination of prospective employ- ees is being more fully recognized by employers every day. It is estimated that 10% of all applicants are disqualified under the test. 82 CULTIVATING THRIFT 83 him the interest coupons and tells him how they should be cut off as they fall due. The worker thus receives an elementary education in investment as distiaguished from speculation. The thrift bond is an engraved document, not liter- ally a bond, but a certificate of ownership in a fund of Federal, State, and City bonds, very strictly limited as to safety, and held by a trustee. The face of the thrift bond reads for $10 and it bears three 10-cent coupons for every year of its life, the maturity cor- responding with the maturity of the obUgations in the trust. The whole machinery of bond ownership becomes plain to the wage-earner by precisely the same mental process as that by which he has learned other things — by- operation. He comes to know the value of interest coupons by cutting off and cashing them, anr". interest, in many instances, for the first time appeals to him, not as a theory but as a fact. Ahnost invariably conducting his affairs on a cash basis, those forms of credit which serve to caxry the family over emergencies are not available to him. His savings must be in a form in which they may be promptly converted into cash. It is equally iqaportant that this conversion into cash should not involve a stoppage or even interruption of the regular weekly saving, nor should the saver be made to feel that in the use of his savings he is in any way backsHding from his resolution to save. It is equally as important, on the other hand, that he should not find it so easy to convert his savings into cash as to encourage him to casual expenditure. If a dollar thrift receipt could be instantly turned into money or spent at the nearest shop as a dollar bill can be spent, little would be accomplished. For this reason the thrift agent at the plant does not cash thrift receipts or buy back thrift bonds on 84 THE WELL-BEING OF EMPLOYEES demand. He asks the saver to apply in advance for the sum he is likely to need. This application is payable one week after date. If an actual emergency, such as accident or sudden illness, causes instant need, the immediate payment or refund applications may be made. These immedi- ate refunds are governed by rules laid down definitely in each institution after study of local conditions, and in conference with the employer. Usually the o. k. of the foreman, head of department, or employ- ment manager is the only requirement. The thrift agent in the plant performs many other iiseful services for the employees, as, for example, lending them at 6% such money as they need on liberty Bonds, and allowing them to pay off the loan by additional subscriptions at $1 a week or more to the thrift-bond savings system. He becomes a friend of the men. HOW MANY OF YOUR WORKERS HAVE ACTIVE SAVINGS ACCOUNTS? Figures on the number of bank accounts in the coimtry as compared with the number of individuals are extremely deceptive, but it is doubtful if one wage- earner in 10 has an active savings account. Every extension of banking faciUties in the direction of the wage-earner has succeeded far beyond expectation. Even without solicitation, the mere offering of savings- bank facilities in industrial establishments, in states where this is permitted under the banking law, has been found to be successful. On the other hand, solicitation of savings of indus- trial Ufe insurance, which is a form of thrift, has produced invariably important results. There is no better example of the force of solicitation than the success of the industrial life insurance companies in Massachusetts as against the unsolicited industrial CULTIVATING THRIFT 85 life insurance offered through the savings bank under the protection of an especially favorable state law at a rate about a third lower than the commercial rate. In 1917, the State of Massachusetts put in force 1,250 new industrial poUcies, while in the same period the new business written by the industrial life insurance companies amounted to 124,000 policies — roughly 100 for one. This great force of solicitation of thrift is constantly at work in the plant through the thrift agent. The subject is kept alive and interesting. Its benefits are constantly brought forward. One of the very important facts developed during the last two years has been the advantage both to the employer and the employee of the operation in the plant of an independent savings institution as opposed to the operation of a savings system as a part of the employer's own business. Whether or not his feeling is justified, the employee resents rather than appreciates any effort on the part of the employer to induce him to leave a portion of his wage in the employer's hands, as savings. He does not wish his employer to know how much he has saved. He objects to being obliged to go to the employer or to a fellow employee when he wishes to withdraw a part of his savings. He appre- ciates the employer's A\dllingness to accept his instruc- tions to include with his pay thrift receipts to a stated amoimt, but once he has his pay envelop, he wants to feel that the transaction is closed and that the employer recognizes the employee's absolute ownership of all of his wage, whether or not a part of this wage be in the form of money saved. The really important feature of the whole thrift- bond program is that it gets away from paternalism — therefore thrift independence. No forward-looking plant owner today cares to assume an attitude of pater- nahsm. He wants the people in the plant to do their 86 THE WELL-BEING OF EMPLOYEES work for the same reason that he does his work and not out of gratitude for the support they receive. When one can attain this measure of independence among his people — an independence based on knowl- edge and not on ignorance — there is then no difficulty about getting on a basis of fair dealing in which each side gives and takes. For, inevitably, the possession of money will teach a certain amount of economics to the worker, and it is in the direction of mutual economic understanding between employer and em- ployee that the road to better industrial' relations lies. CHAPTER Vn PLANS FOR HOUSING EMPLOYEES Some practical ways to provide living accommodations in suffi- cient quantity and of a quality that assures employees decent home surroundings. A S early as 1830, many 'of the factories in England /A and some in the United States were meeting the industrial housing situation by building workmen's homes themselves. The problem seemed simple in those days. Labor was abmidant, and it was not necessary to offer work- men good houses — ^just houses were quite sufficient. A factory that could supply any kind of living quarters could get all the help it wanted. The possibility of increasing efficiency and profits by seeing that em- ployees were housed well, disturbed no one. It was hardly even thought of in those days. All the requirements were met by the cheapest kinds of construction, and as a consequence the tjT)ical industrial housing of the period was ugly, crowded, and imsanitary. A few employers did try to do better by their people. And as early as 1845 there was a movement, backed by many widely known men and women, for better homes for workingmen. But all the effort in that direction, whether it came from factory owners or others, was prompted by altruistic motives. Good housing was seen as a humanitarian proposition rather than as an economic enterprise which would more than 87 88 THE WELL-BEING OF EMPLOYEES pay for itself in the bigger returns which comfortably housed workmen would give. In recent years, the humanitarian and economic points of view have tended strongly to coincide and the movement has taken on the importance that movements always take on when the economic motive is uppermost. Employers have more and more been looldng upon good housing as a straight business proposition. During the war, the bare announcement by the Government of plans to build homes near certain war industries was enough to reduce their labor turnover materially, and the progress of construction work was accompanied by still further, reductions. These men had been getting the highest war-time wages, and they worked short hours. Yet the turnover among them had been in some instances upwards of 300%. What the best of working conditions had failed to do, good homes — even the hope of getting good homes — did. "The effect of good housing is instantaneous," one manufacturer who has built a village adjoining his plant, says in this connection. "It's the environment, the psychology of the thing, " he adds. "In these homes, the workmen and their wives and children feel that they are somebody. They attain self-respect and pride and ambition. They dress better, Uve better, are happier, and take pride in saving money instead of frivoling it away. Their cultural wants are stirred and Ukewise their ambition to gratify them. "And our employees work better! — ^they make better wages on piece-work. Workmen who live in these homes soon become from 20 to 30% more effi- cient in their work." The attractive homes for workers in this village rent for approximately the same amount workingmen in BETTER HOMES FOR WORKERS 89 the vicinity ordinarily pay for the poorest accommo- dations, and yet the enterprise has been entirely self- supporting. Hardly any two housing projects have been financed in the same way. Sometimes the manufacturing cor- poration does the work with its own funds. Some- times it organizes a subsidiary company to carry on this work. Again, a corporation may establish a revolving fund from which attractive loans are made to employees for building purposes. Or, the whole industrial community may buy stock in a housing corporation which has a revolving fimd. SHALL TH£ HOUSES BE RENTED OR SOLD TO WORKERS? The manufacturer just quoted organized a separate corporation in which not only he and his associates but other local people who were interested in the prog- ress of the community took stock. This corporation builds the houses and rents them to the manufacturing company, which in turn subrents them to its employees. The rents are on the basis of 10% of the cost of the house, which allows the construction company a fair return on its money. The manufacturing com- pany takes no profit on the enterprise. In excep- tional conditions, as when there has been some misfortune, it takes small losses. Some manufacturers prefer to rent the houses they b\iild and others to sell them. Certain classes of labor, especially unskilled, as a rule would rather rent, because in this way they feel less tied to the locality in which they are working. On the other hand, if the company has a reputation for fair dealing with employees, the opportunity to buy a good home may be all that is needed to make the workman settle down. 90 THE WELL-BEING OF EMPLOYEES In several cities a number of manufacturers have joined in a common housing corporation, in which bankers and other outside local interests have also taken stock. And in other places, the entire housing problem has been taken over and handled by chambers of commerce. Lockport, New York, was one of the first of the cities in which the entire problem was handled by the Association of Commerce, and several other cities have taken their cue from it. The principal indus- tries of Lockport expanded rapidly in 1916-17 until the housing problem became acute. The heads of the industries, as a result of the increased business, natu- rally had more than usual to do strictly on the manu- facturing side, and the directors of the Board of Com- merce therefore agreed to look after the housing. At first it was beUeved that the real estate men and builders would do practically all that was necessary on their own resources, but this did not prove to be the case. The directors consequently appointed a committee, and this committee worked out a compre- hensive plan, under which these steps were taken: 1. A corporation was organized with an authorized stock of $100,000. 2. Stock to the amount of $70,000 was sold to 111 manufacturers, merchants, and professional men. 3. In all, 88 houses were built or purchased ready to be set up. 4. The company owns 114 lots in seven groups located in three different sections of the city, thus distributing the houses so they are accessible to the different factories. 6. Fifteen different styles of houses have been built, so that the usual factory rows have been avoided. The architecture is attractive, and the houses are built on large lots. Figure 8: Men earning S6 and 58 a day are to live in these attractive houses, which form a part of Firestone Park. With homes like these, employees naturally become better workers, say their employers. Figure 9: The floor plan most popular with the Firestone Company's employees is reproduced here. When a number of house s such as this can be built at the same time, the building costs are comparatively low. 91 Figure 10: A tenement house used to mean a delapidated structure with disease lurking in every corner. What a contrasting picture this Bridgeport tenement presents! It houses a dozen different nationalities. Figure 1 1 : This plan shows the excellent use of available ground space in one Bridgeport housing project. It is interesting to note the amount of space allotted to parks and trees around the workers' homes. 93 BETTER HOMES FOR WORKERS 93 6. Houses are either rented or sold on pajonents, which, after a modest first payment, may be as small as the rents. How extensively have the employers undertaken housing operations? In 1916 a list of 700 who had done so was compiled and it was conservatively esti- mated by Government investigators that there were at least 1,000. Since then, many others have under- taken projects. A number of manufacturers who were asked what advantages they had gained from housing operations gave the following: A better class of workmen Greater stability in labor Smaller number of "floaters" Better living conditions Greater loyalty from employees More contented workmen • More efficient workmen Better control of labor situation Attraction for married men Greater regularity of employment Profit to employer from rentals Facilitation of part-time employment Advertising for the company and keeping it before the public favofably. Against these advantages a few employers have mentioned a disadvantage in the fact that their hous- ing operations were not directly self-supporting. The industrial conditions which have given the modem impetus to housing are higher wages, shortages of workers, and the special importance of reducing labor turnover and keeping up efficiency. An idea between the difference of handling the hous- ing problem intelligently and otherwise may be gained 94 THE WELL-BEING OF EMPLOYEES from the experience of the American Rolling Mill Company, for one, and an IlUnois community for another. Immediately after a new man is hired at the American Rolling Mill Company, the employ- ment manager asks him if he is a newcomer to Middle- town, where the company is located. If the workman is unacquainted with the town, a well-informed clerk helps him to find living accommodations that meet his housing needs. This clerk's sole duty is to run what is in effect a rental office. He has lists of desirable single rooms at various prices, as well as apartments and houses to meet the needs of family men of any earning capacity. WHY VALUABLE WORKMEN OFTEN TURN DOWN A GOOD JOB The new man as a rule can be located and settled in a few hours in quarters which are sanitary, convenient -to the plant, and reasonable in price. The company thus reUeves him of what to most men is a disagreeable and discouraging job — Chouse hunting. If he is a family man he is ready to go to work with an easy mind, knowing that his family is safely cared for. That is one picture. Contrast with it the other and unfortunately more common one. A skilled me- chanic, his wife, and two children, unload three tele- scopes and a lunch basket on the station platform of an industrial town. Leaving the family and the baggage at the railroad station he applies for work at the employment office of the town's largest manu- facturing plant. Men are scarce and he is hired on the spot. But he can't go to work at once, for he still has to make the rounds of the real estate offices to find the five-room furnished flat he needs. After half a 'day he is still looking, but he is then willing" to take two rooms. At 6 o'clock he reports to his wife that he has f oimd only two places, both smaller Figure 12: Almost any worker would feel happy and contented in a home such as this. Better results are obtained, say employers with experience in this work, when the houses are individual in appearance. Figure 13: Concerns which provide comfortable living conditions, as well as working conditions, find that their workers usually think twice before quitting their j obs. Other types of dwellings are shown here. 95 Figure 14: This dormitory for one concern's colored workmen provides better quarters than many of them could find outside. Where floor space is at a premium double-decked beds help to solve the problem. Figure 15: Lumber camps, as a rule, find it hard to provide their men with little more than makeshift quarters. One concern has solved the problem by housing its men in trains. Here you see the "diner." 96 BETTER HOMES FOR WORKERS 97 than they consider desirable. One, on the outskirts of town, would make him spend nearly two hours a day going to and from work; the other is in a district to which he would not consider taking his family. That night, he and his family journey on to another town, and a valuable and industrious workman and his family are lost to a town that needs them. This instance is not exaggerated. Something like it happens daily in more than one city. Cooperative housing plans have been used effec- tively in Bridgeport, Connecticut, and in Kenosha, Wisconsin, among other cities. In each city the indus- trial concerns formed a corporation to build and handle the houses. In Kenosha the houses cost from $1,700 to $1,900 each, the lot $300, and the usual improve- ments $200. With profit and all expenses added, the houses are sold to a workman for from $2,500 ta $2,700. He pays at least $100 down and $18 a month, which includes interest. Some of these houses are single, others double. They may be had with either five or six rooms and bath. It is expected that ultimately it will be possible to sell houses of this sort at about $2,000. In Bridgeport, attractive houses and apartments have been built, but the intention is to rent them, rather than to sell. With large-scale housing the greatest economy ap- parently comes when either frame or concrete con- struction is used, although at Bridgeport practically nothing but brick has been erected, and the relative permanence is believed to render this construction economical. Concrete houses have been made effec- tive at Gary, Indiana, by pouring them in sections and then assembling. It is said that houses of this type have been put up for $1,000 each, about $300 less, it is estimated, than a similar house of wood could be buHt for. PLAN 1 Community Companies PLAN 2 Community Companies PLAN 3 Community Companies Capital- ization peroral itoek sain. S0% Of Financing Company lro>ii atock subscriptions of com- inerclal and Industrial Inter- ests. S0% Immediately: bal- ance at periodic Intervals Capital raised as In Iflan 1. Stock In approved Building smf Uan Assn. pundiaaad with capital First Mortgage Pliced by hoini mlier with advising and utlttTni. Morl- oaievalue-tO% of cost. In- cluding Improvadlst Assumed by Financing Compa- ny at prevailing interest rats. Not less than 60% total cost. Including Improved loL Homo seeker places Ural mortgage with Building and —not less than 6lk%of total funds required Second IVIortgage ny. Not over 30% total In- clusive coat Assumed by FInancIn Compa- ny at prevailing rate. Not In case Bunding and Loan Assn, cannot assume total risk the Fl- Building and l^nn Assli. stock of building and Loan Asilh. to amount of difference Initial Payment Home seeker to pay 10% total Inclualve cost to Financing Company at time of loan Not leas than 10% of total inclusive cost. To Financing Company at time of loan To Building and Loan As^. Not less than 10% of Inclusive cost Liquidation Not less than 1% of total coat Company to meet Interest and principal on first mortgage;lhen second mortgage. Not less than 1% of total ad- Paymente of not leas than1% of Loan Assn. Revolving Fund Financing Company funds re- leased by second mortgage payments available for ro- Sale of trust notea to Inves- Collateral mortgages against stock of Financing Company Income of Invested capital Esttmated net Income— 4 or 6% of invested capital Depends lamely on rapldKy ot re-investmente. Estimated at 6% Inveated capital Gross Income of FlnanolngCPm- pany— Interest rate by Building andLoan Aash. on paid up capital Insurance Benefit No No No Figure 16: So well developed is the housing movement today that the employer who wants to undertake a home-building project iinds many ready-made helps at hand. The six plans for financing such an undertaking, shown here and on the opposite page, may be shuffled up, 98 PLAN 4 Community Companies PLAN 5 Industrial Compam'es PLAN S Industrial Companies Gmeral aubscrlrMon to capital atock. 10%|ilua|»rMI^% " 4 to 5 years 2% " 5 to 6 years 2^% " 6 to 7 years 3% " 7to8years 3K% " 8 to 9 years 4% " 9 to 10 years 43^% " 10 years and above 6% " A certain amount is distributed among foremen, on the basis of their salary and length of service. Another sum is distributed among supervisors of groups of departments and still another among the factory manager's assistants and superintendents. A "tenure of service" bonus is the plan of another company. Under this arrangement the wages of em- ployees are increased 3% after they have been at work one month, then 1% monthly up to a maximum of 12%. This bonus plan has worked out fairly well, and it has resulted in holding several valuable depart- ment heads who otherwise woiild have been tempted away by outside offers. While this plan appealed to the higher-priced men, it did not find so much favor with the rank and file, apparently because it took so long for the sum to become really appreciable. An Indianapohs company has an arrangement which assumes that the salary of an employee is equivalent to that amount of stock in the company, and at the end of the year he is entitled to a dividend upon that stock, the same as though he were a stockholder. For instance, with a capitalization of $400,000 and a payroll of $100,000, the earnings are divided among $500,000 worth of stock. This bonus is paid only to employees who have been with the concern for one year and who are still on the pas^oll at the dividend- paying period. This extra payment plan has reduced the labor turnover materially. 148 PAYING WORKERS Another concern pays employees 10% of a year's salary in quarterly payments, in all positions earning $1,500 a year or less. A bonus given by this firm to employees receiving a salary of $3,000 a year or less is the anniversary or service bonus. They receive on their fifth anniversary a check for 5% of the year's salary and a service pin, on the sixth anniversary a check for 6% of a year's salary, and so on. Pins are given once for every five years' service. THE IDENTITY OF THE BONUS AS A SPECIAL REWARD MUST BE MAINTAINED It must be obvious from these examples that the bonus is a modification of the piece rate, but is usually not based directly on measurable production, and is often paid for something that the employer considers is desirable in his organization and does not know how to make sure of getting otherwise — length of service, cooperation, prompt and regular attendance, and so on. The tendency of bonuses is nearly invariably to dwindle in incentive value, unless a continuous and very obvious relationship is maintained between the amounts paid and the reasons for the payment. If an employee comes to accept the bonus as merely part of his wages, anticipates the money, and perhaps spends it in advance, there is no logical reason for preserving the payment as a bonus — ^it adds to the cost of bookkeeping, and will serve every purpose equally well if it is included in the regular wage. Where the result desired is kept clearly before em- ployees, however, and no bonus is paid unless the employee does what is expected of him, bonus forms of payment seem to serve their purpose effectively. It is impossible in the space here allotted to indicate all types of bonus in use. There are, in fact, about as many as there are employers. Those already cited indicate the form taken in representative cases. THE INCENTIVE TO PRODUCE 149 Closely linked up with bonuses are premium plans of various sorts. Let us see briefly how some of these plans work. About the first premium plan, historically, was Halsey's. In this a standard is set based on past performance. As the workman improves his output, he receives as his reward over-time compensation equal to from one-third to one-half of the time saved. Thus, if the ultimate or high standard is 100 pieces in a day of 10 hours, and the approximate, or low standard (on which the premium is based) is 50% of this amoimt, and his day rate is $2, the results would be as follows: Pieces a Day Premium Day Rate Labor Cost ] 20 .... $2 $0.10 30 .... 2 0.087 40 .... 2 0.05 50 (Relative) 2 0.04 60 (Standard) $0.20 2 0.037 70 0.40 2 0.034 80 0.60 2 0.032 90 0.80 2 0.031 100 (High standard) 1.00 2 0.03 A variation of this idea is that of Rowan. His plan, so far as standards are concerned, is identical with Halsey's. It differs radically, however, in that the percentage of incentive is greatest at the start, gradually falling off as production increases, and ap- proximating zero as a limit. It works out that a man can never earn more than twice his standard day rate (the logic of this is questionable.) The premium is figiu-ed as the same percentage of the day-wage rate, as the time saved is of the stand- ard time. Thus, for a saving of one hour on the time allowed, the premium is 1-10, or 10%, while for saving all of the time, or doing 10 hours work in no time at all (zero hours) the premium is 10-10 or 100%. 150 PAYING WORKERS Assuming the same conditions as before, this plan works out as follows: Pieces a Day Premiums Total Labor Cost Each 20 • > • ■ $2.00 $0.10 30 > > • • 2.00 0.067 40 • • > > 2.00 0.05 50 (Relative) .... 2.00 0.04 60 (Standard) $0.32 2.32 0.038 70 0.57 2.57 0.037 80 0.75 2.75 0.034 90 0.88 2.88 0.032 100 1.00 3.00 0.03 InJSnite 2.00 4.00 Zero Following Rowan's plan in point of time is the grad- uated premiums system sponsored by Harrington Emerson. As in the two previous plans, the day rate is guaranteed as a minimum. At 66 2-3% efficiency, premium payment begins. At first the increases are quite small, but they are cumulative and at 100% efficiency the worker's premium amounts to 20% above 100%, and the increase becomes 1% for each 1% of gain in efficiency. Thus, for an efficiency of 130%, the man's premium would be 50%. As Emerson sets his standards basing them partly on time study and partly on past performances, 130% efficiency approximately equals the high standard. The comparative earnings of the worker and cost per piece, hence, would be shown as follows: Piece a Day Efficiency Premium Total Labor Cost Each 20 28% . • • ■ $2.00 $0.10 30 39 .... 2.00 0.087 40 51 .... 2.00 0.05 50 65 2.00 0.04 60 78 $0.25 2.05 0.034 70 91 0.21 2.21 0.032 80 104 0.48 2.48 0.031 90 117 0.74 2.74 0.0304 100 130 1.00 3.00 0.03 THE INCENTIVE TO PRODUCE 151 In the task and bonus plan devised by H. L. Gantt, a bonus of 33 1-3% to 50% is paid for attaining the standard. For perfonnances under the standard nothing extra is paid; above, an increase equivalent to a straight piece rate based on the cost at standard. Comparative earnings under this plan are: Pieces a Day Bonus Bonus Total Earnings Total Cost Each 20 $2.00 $0.10 30 2.00 0.087 40 2.00 0.05 50 2.00 0.04 60 2.00 0.033 70 2.00 0.029 80 2.00 0.025 90 2.00 0.025 00 (Stand.) 50% $1.00 3.00 0.03 10 85 1.30 3.30 0.03 As in the other plans, the man never earns less than his day rate. Closely allied in principle to the above is the Taylor differential piece-rate system. For standard (high) performance and above, the man receives one piece price; for performance short of the standard he re- ceives another and much lower price. Assuming the same set of facts as with the other wage-payment systems and a low rate, approximately two-thirds of the high, the results will be as below: Keces a Day Piece Price Daily Earnin 20 $0.02 $0.40 30 0.02 0.60 40 0.02 0.80 50 0.02 0.90 60 0.02 1.20 70 0.02 1.40 80 0.02 1.60 90 0.02 1.80 100(Standard 0.03 3.00 110 0.03 3.30 152 PAYING WORKERS The day rate is generally not guaranteed to the employee under this plan. Still another payment plan along this line was worked out by a group of Michigan executives. It is similar to the Emerson plan in that it pays a gradually increasing percentage of reward as efficiency increases up to 100%. In common with nearly all premium plans it guarantees the day rate as a minimum. UnUke the Emerson plan, however, the differential begins at 50%, increases up to 100% efficiency at approxunately, but not absolutely, a uniformly accel- erated rate, the increase at that point being 50%, making the total pay 150% of the base rate. Above 100% the increase, as in the Gantt plan, is equivalent to straight piece rate. Piece rate or premiiun, however, do not enter into the explanation to the man. To him it is a question of increasing hourly rates of pay for increased pro- duction. The individual earnings and the unit labor costs for the same set of conditions as assumed before work out thus: % Unit Increase Total Hourly Labor Piece a Day in Pay Amount Pay Rate Cost 20 $2.00 $0.20 $0.10 30 2.00 0.20 0.05 30 2.00 0.20 0.057 40 2.00 0.20 0.05 50 (bonus) 2.00 0.20 0.04 60 payment 1.8% $0,036 2.036 0.2036 0.34 70 begins) 5.3 0.106 2.106 0.2108 0.03 80 12. 0.24 2.24 0.224 0.028 90 25. 0.50 2.50 0.25 0.028 100 (Standard) 50. 1.00 3.00 0.30 0.03 110 65. 1.30 3.30 0.33 0.03 Summarizing the six plans just described in com- parative form we have the following interesting figures: THE INCENTIVE TO PRODUCE 153 (1) (2) (3) (4) (5) (6) Pieces a ] Day Halsey Rowan Emerson Gantt Taylor Detroit 20 $0.10 $0.10 $0.10 $0.10 $0,020 $0.10 30 0.067 0.067 0.067 0.67 0.02 0.067 40 0.05 0.05 0.05 0.05 0.02 0.05 50 0.04 0.04 0.04 0.04 0.02 0.04 60 0.037 0.038 0.034 0.033 0.02 0.034 70 0.034 0.037 0.032 0.038 0.02 0.03 80 0.032 0.034 0.031 0.025 0.02 0.028 90 0.031 0.032 0.0304 0.022 0.02 0.028 *100 0.03 0.03 0.03 0.03 0.03 0.03 Of the various plans, the Gantt and the Taylor are, perhaps, the most sharply stimulative; the Rowan plan is the easiest to get started; next is the Halsey plan which, in one respect at least, is the simplest of all premium plans in that the workman can so easily compute his extra earnings. The Emerson plan takes hold well, is moderately stimulative, but is commonly difficult for the workmen to \mderstand; the Gantt plan is probably somewhat more easily imderstood, but is perhaps objectionable in the long run because it grants no reward for increases in efficiency imder the standard. The Detroit plan is less stimulative than the Gantt and Taylor plans, perhaps, but more stimu- lative than the others, while it compares favorably with the Emerson plan in its imifonn fairness at all points on the scale. Above 100% efficiency, the Gantt and Taylor plans are identical. It is in working up to that point that they differ. These premimn payment plans usually mean in- creased wages to the employee and a lower labor cost per unit to thfe employer, and have in many instances been very satisfactory. The instances in which they have failed are usually those where the employer has fixed rates imwisely and has later cut them. The very complexity of some plans is their worst enemy. If *A reasonable znaximum under thoroughly standardised conditiona. 154 PAYING WORKERS there is one thing every employee likes it is to know what ought to be coming to him in his pay envelop, and if there is another thing that causes his dander to rise, it is the idea that the management may be going through some shenanigans which he cannot understand in the figuring of his wages. Employees are prone to be about as suspicious as the rest of humanity in regard to anything that concerns their priv^.te inter- ests. If the premium plan can be demonstrated to the men, if they can be made to understand it, and if its advantages for them can be proved, most any pre- mium plan with a high incentive value will get results. If these cannot be made for the plan, it carries the seeds of its own failure. The whole aim of the wage plan, of course, should be, first, fairness; second, an effective stimulus to pro- duction; and thirdly, what cannot be obtained with- out the other two, the banishing of all uncertainty and suspicion in the employees' minds. These are fundamental. CHAPTER XI ADVANTAGES AND DISADVANTAGES OF PROFIT SHARING There are limitations to ■profit sharing: what some of these are, and methods that have proved successful in spite of them, are described here. PROFIT sharing is not new. The earliest plan was probably the "Metayer System," or "Farm- ing on Shares," in England in the 13th century. In 1775 Turgot introduced a plan for his workmen in France. Shortly after this (1794) Albert Gallatin instituted the first plan in the United States in his glass works at New Greneva, Pennsylvania. These didn't last long. In the 19th century, in England, Lord Wallscoiut established profit sharing among his workmen in 1832, which lasted tiU his death in 1849. Later, in 1879, there was formed the French Profit-Sharing Society which issued regular bulletins. The schemes of Maison LeClaire and Bon Marche, started in the '40's, are still successful. During 1889 profit sharing was so important in Europe that it was carefully defined by the Interna- tional Congress of Paris as "an agreement, freely entered into, by which the employee receives a share, fixed in advance, of the profits." In this same year, according to N. P. Oilman's volume "Profit Sharing between Employer and Employee," there were 32 schemes for profit sharing in the United States. 155 156 PAYING WORKERS From 1889 to 1900 the idea lost ground, for during that time the number of firms operating profit-sharing plans declined greatly. Since 1900, however, business has recognized its possibilities and by 1917 there were some 60 firms working under a profit-sharing system. Of these, some 50% of the plans have been established since 1911. Profit sharing is introduced for different purposes. They may be grouped as follows: 1, To stimulate the elimination of waste and foster economy. 2. To increase efficiency. 3. To stabilize the working force. 4. To improve relations between the management and its employees. In increasing personal efficiency, profi'fc~sharing is an important factor. But this appUes in the main only to managers and salaried executives who can see the direct results of greater effort and understand changing conditions. In this case a valuable sense of cooperation is developed which guarantees good management. The stabilizing of the working force is aided by profit- sharing, in conjunction with other methods. Profit sharing will not prevent strikes. It is a fact of general knowledge that one company had the big- gest strike in its history two weeks after declaring a profit-sharing plan. However, profit sharing may help to bring employer and employee together on a right footing. There are three general types: (1) "General profit sharing," which simply means that the employees share in the total profits of the business. A good example of this plan is that of the Cleveland Twist Drill Company, of Cleveland, Ohio. Here wage dividends are actually a share in the total profits of the company's business and are larger when the company makes more money and smaller when it makes less. FOR AND AGAINST PROFIT SHARING 157 (2) "Unit profit sharing," where profits are shared m particular departments. This plan is used by such companies as the Procter and Gamble Company, where in some departments it is impossible to measure the individual's output, or where special savings can be made, or where the department is vital to the business. (3) "Individual profit sharing." Under this plan the laborer shares in the result of the profits from his own labors. This applies mostly to employees filling positions of some responsibility. Such a plan has been in operation in the Dennison Manufacturing Company of Framingham, Massachusetts. There are many things that profit sharing will not do. For one thing, it is not a panacea. It will not of itself make a poorly managed business successful. It cannot make up for lack of technical trade knowl- edge, business sense and executive ability. Again, profit sharing will not substitute for person- ality in management. Profit sharing may give the workers added interest and zeal, but the men at the head must possess enthusiasm and leadership. Some men think that widely-adopted profit sharing will do away with the existing economic order and usher in a better era. These men think profit sharing is socialistic, but it is not. For it takes for granted that the wage system is the permanent way of paying for work done in business and industry. Having accepted that, all that profit sharing can do is to add to that regular wage a payment in some form or other representing a share in the profits. Most plans have been begun from the motive of self-interest. But many employers have adopted plans from humanitarian motives to benefit the workers, and increase their well-being. These feel it is only social justice. Indeed, one company in its rule book 158 PAYING WORKERS says, "a business organization should be conceived as a real standing together of a company of brothers to take care of each other and enjoy a portion of their lives together." Let us consider in some detail two typical profit- sharing plans, prefacing the discussion with an under- standing that real profit sharing is nothing more nor less than the name imphes — a dividing up of a portion of net profits among employees, the same as other portions are divided up among stockholders; and fur- thermore, the percentage shared may vary from as little as 5% of the net profits to as much as 50%. The Hydraulic Pressed Steel Company of Cleveland has a plan which the president, Mr. Foster, describes: "The first question we encountered was: Shall profit sharing include every employee, or shall we draw a line between those who share profits and those who do not? And if we do draw such a line, where shall it be drawn? "Our answer was: There shall be a line. Profit sharing shall be extended to the managers and oper- ators, but not to all employees. To understand our reasoning as applied to our organization, you must fully understand our worker classification plan. "This classification of all workers in the company is: "1. Owners: the stockholders who own our pre- ferred and common stock. "2. Managers: the heads of our various depart- ments. These managers are the members of what we call the senior organization. "3. Operators: in this division are the department heads, foremen, and unit bosses. And all of the oper- ators are members of what we call the junior organi- zation. "4. Employees: those who work under the direc- tion of the operators. FOR AND AGAINST PROFIT SHARING 159 "If you look closely, you will see that the above is more than a classification. In fact, it is a promotion ladder. That's what we use it for, too. The em- ployee in class 4, we point out, has the opportunity and should have the ambition to become a unit boss and thus become a member of the junior organization. The operators, again, have the opportunity and should have the ambition to become managers and members of the senior organization. And everybody — em- ployees, operators, and managers — should in turn be ambitious to become owners and holders of stock. IN DECIDING ON A FAIR DIVISION OF PROFITS, THE FOLLOWING FACTORS WERE CONSIDERED "The executives and their assistants are the 'man- agers' of the business and they are members of the senior organization. The number of these men is of course small in proportion to that Of the junior organ- ization. In a way, too, it was easier to arrive at a fair division with them. I think it is sufficient merely to say that they get a share of profits depending upon OMF general success, and also upon their individual efficiency. But sharing profits with our junior organi- zation called for the most careful planning in order to be fair to all concerned. "The department heads, foremen, responsible clerks, and unit bosses are the 'operators,' you will remember. The line is drawn under the unit boss. He shares profits, but the employee under him is not a profit- sharer. The latter is recompensed directly for what he does by hourly wages and by a premium system. He is* confined to direct payment for what he does, which includes extra pay for extra effort. And he has the opportimity and should have the ambition to move up into a imit boss position. The clerks and assistants who have not attained the responsibility which entitles them to membership in the junior 160 PAYING WORKERS organization also have the opportunity to gain that membership. "An employee becomes a unit boss, or operator, when he has earned and been given authority over a unit of the shop and controls those factors within his unit which affect profits. He shares in profits because he helps make them. That is, among other points: "1. He is careful of his machinery and does not have expensive delays and repairs. "2. He is careful of the use of oil, small tools, and supplies of all types. "3. He prevents material being spoiled. "4. He is determined that the material which leaves his unit shall be correct, and that his carelessness shall not cause a loss in some other unit. "5. He keeps his unit clean and in order, and will not admit either that he likes dirt and disorder or that he cannot control it. "6. He suggests to his foreman ideas for changes in his unit that will increase its production or decrease its cost. "In brief, he thinks as well as acts; he knows what factors cause loss or make profit; and he does every- thing in his power to save loss and increase profit. "This brings out the distinction that we often make with our men between production and profitable pro- duction. Production merely deals with volume, and is paid for in exact rates — by wages, piecework, or premiums. Profitable production deals not only with volume, but with quality, with economy. It involves thinking, carefulness. It is paid for by wages and by a share in the profits earned because of ^thought and care. "At the beginning of each year the board of directors determines what percentage of the profits shall be set aside at the end of that year to create the junior pool. FOR AND AGAINST PROFIT SHARING 161 The rate of dividend usually is from 18% to 20%; but in a recent year, after deducting 7% earnings for the preferred stock and 8% for the common, I asked the board of directors for 30% of the remaining earnings for distribution among the executives, managers, and operators. I also asked for a block of the company's stock to be sold to the men. They told me they wanted to share in the ownership, and so we went ahead on this line. "To make our plan concrete and easily comprehend- ed, we tell the men: 'You are entitled each year to a certificate equal to 10% of your wages for the year. On the wages of the current year and on the certifi- cates of the preceding years of continuous service you will receive a dividend based on the company's profits for the current year.' And here's an example we sometimes use to make the plan clear: Let us assume that L. M. Stover started to work for the company on January 1, 1915. Now, we take into consideration all the wages that have been paid to him since that time, provided he has worked for us continuously. "Assume that the wages for the various years were: 1915— $900; 1916— $1,000; 1917— $1,100; 1918— $1,200. Then 10%, the certificate amount, is $90 for the first year; $100 for the second year; $110 for the third year; and $120 for the fourth year; or a total for the four years of $420. "Assume that Stover's wages for 1919 were $1,500. Then, the amount on which the 1919 dividend will be paid is $420, plus $1,500, or $1,920. Let us say that the dividend rate decided on for 1919 is 18%. Now 18% of $1,920 is $345.60, which is the dividend that Stover would receive for the year 1919; if the rate is 20%, he would receive $384. "There are, of course, a few governing rules which are very important and the reasons for which, I be- lieve, can easily be seen. They are: 162 PAYING WORKERS "1. Only 10% of the wages of preceding years of continuous service share in the dividend. "2. Whoever leaves our employ forfeits his certifi- cates and when hired later he rates the same as a new man. "3. The size of the pool depends on the management. "4. If there are no profits, there is no pool." The profit-sharing plan of the American Rolling Mill Company is described as follows by George M. Verity, the president: "Every man whose salary is more than $100 a month, automatically becomes a partner in the com- pany. But to share in the net profits of the business he must be more than a good individual worker — ^he must also help the business as a whole to earn the profits in which he shares. "He may do this in several ways. He must, first of all, show a real spirit and a partner's interest in the business. Through mutual interest activities he may help to make other men better workers. He perhaps gives the advertising department new ideas. The sales department may obtain an order through a "lead" he uncovers. He can be a good citizen and help in all things that make for stability in both indus- trial and community life. "In short, the share of the profits he receives — on the day before Thanksgiving — ^is to pay him for the work he does in the company's interest, but without guarantee of extra reward unless it is earned through the good work of all. This dividend comes as a reward for the extra effort he has made for his company and his fellow workers, over and above his regular job. "In deciding on the amount of his bonus, we try to make the money a fair measure of that extra effort, as related to the general result obtained. The total amount set aside for distribution as a dividend, or FOR AND AGAINST PROFIT SHARING 163 for special compensation to special partners, is pro- vided each year by resolutions of our board of direc- tors. The total depends on the net profits of the company for the current fiscal year, and the prospects for profits the next year. While it varies from year to year, it always represents a fixed percentage of the net surplus of the current year, and it is always just as liberal as we can possibly afford to make it. "Only those who have been with the company for 18 months preceding the end of the fiscal year are entitled to participate. Each man's share is decided from an analysis of the type of work he does; the re- sponsibility of his position; the sort of service he has rendered in that position; the cooperation given to other special partners and to the company ; the loyalty to all company activities; and the company spirit he has shown. While it is owe custom to give special compensation in this way no man knows whether there will be a distribution this year, or next, or the year after. I want to emphasize particularly that we do not hold up a reward, and, say, as it were: 'Here it is! Work for it!' We want every man to feel, rather: 'If I do my top best, and help along where I can, there will be extra profits to divide, and my re- ward will be adequate.' " THESE AUTHORITIES TRIED PROFIT SHARING AND SAY IT HAS SHORTCOMINGS The history of profit sharing is not an unblemished record of successes. In fact, there have been frequent failures,' and some managers consider profit sharing an irritant rather than an aid in management. WiUiam R. Basset, president of Miller, Franklin, Basset and Company, cites the experience of Hugo Hirst, chair- man and managing director of the General Electric Company in England, who says in this connection : 164 PAYING WORKERS "I have personally, as far back as 20 years ago, made my first attempt. My intention was to try it in a modest way and if successful to extend it. I failed. In our articles of association as they then existed, I provided that 10% of all profits after an interest on debenture and preference share capital had been paid, should be given as a bonus to members of the staff. For three or four years this plan worked successfully, but it must be borne in mind that dur- ing those four years the company showed progressive results. "About 1904, through no fault of the management, staff, or work people, a period of depression set in for the electrical industry. The net results of the company receded with the result that those entitled to bonuses received less. With scarcely any exception, I met with dissatisfaction and grumbling. Every man pro- tested he worked quite as hard, even harder; each one assured me that the less favorable results of the company were not due to him; and each made a point that his mode of living, his expenditure, and his hope of saving, were calculated on the amount of the bonus for that year not being smaller than that of the pre- vious year. "The dissatisfaction and unrest created by the reduced bonus became so apparent that there was only one thing for me to do. , I compounded the maxi- mum bonus of each man with his salary and stopped further bonuses to all members who were in receipt of a salary of less than £400 a year. The man receiv- ing £400 per annum I continued to give bonuses, but at no fixed percentage. The bonus was an amount given at the discretion of the directors in accordance with the result of the particular department in which the employee was working, levelled up or down more or less generously, according to the results of the year as a whole." FOR AND AGAINST PROFIT SHARING 165 Mr. Basset also cites the following statement by J. W. Sullivan, of the International Typographical Union: "Uncertainty is a disturbing factor in profit sharing — ^uncertainty as to whether there ought to be profits from year to year, uncertainty as to what the profits actually may be in any one year, imcertainty on the part of the employees as to the employer revealing his true profits, uncertainty as to the proprietorship of the establishment. In' these uncertainties it is seen that the interests and expectations of a force of labor- ers are constant — the highest obtainable level in wages, hours, and working conditions — -while the purposes of coming and going employers are variable, including seUing out at a sacrifice or at a boom profit. "In this unsettled profit sharing there usually can be no hand-in-hand partnership of labor and capital. The two interests work strictly apart, each in its accustomed sphere. Capital sees an . opportunity, undertakes an enterprise, buys site and plant, decides upon the scale of production, manages the workshops, watches the markets, pushes sales, enlarges or dimin- ishes the works, runs the risks — ^in all respects making the mistakes or supplying the strokes of talent that count in management. The industrial wage-working employee, while supplying the essential factor of more or less skilled manipulation of matter resulting in concrete production, projects no effort into the field of plan, production, purchase, and distribution." And Mr. Basset, with a wide experience as an indus- trial consultant and student of business concludes: "My own observation of profit sharing exactly coincides in practise with the experience of Mr. Hirst and my theory with Mr. Sullivan's. I have yet to discover any plan which did not fail when the profits ceased to exist, or even when they diminished, and those plans which have operated through many years 166 PAYING WORKERS — ai^d there are such — will commonly be found to depend upon the continuous success of some specialty business or upon the personality of the owner. "And profit sharing cannot be a panacea because only 20% of commercial adventures show a profit. Before one can depend upon profit sharing to adjust labor trouble one must be assured of a profit. How many concerns then will tie themselves to a plan in which they are bound to guarantee a profit forever and a day?" "Profit sharing" is an alluring phrase, and the idea is attractive. It must be frankly admitted that it has been a stimulus to productive effort in some organi- zations, and an irritant in others. In general, it is safe to conclude that it is not a panacea; it will not serve as a substitute for adequate wages, but must be paid in addition to them; and finally, the great danger in the plan appears when profits decline or disappear. In some cases the clear benefits derived so far out- weigh these potential disadvantages, that the plan is eminently successful. Boyd Fisher, supervisor of personnel of the Aluminum Castings Company of Detroit, has selected five profit-sharing plans which he believes are the best and listed their principal features under ten headings. The features which he personally prefers are printed in italics at the beginning of each subdivision. 1. HOW MUCH WILL WE SET ASIDE AS A TOTAL? BAKEH MANUFACTUBINa COMPANY AU dhaoe 5% to preferred or common stock, together tvith sinking fund and stock purchase fund, divided according to wages and divi- dends. All above an amount equal to wages and dividends, however, to go to stock purchase fund. BOSTON CONSOLIDATED GAS COMPANY 1907: 7% on wages; 1908: 8% on wages; 1909: 9% on wages; 1910: 9% on wages; average total for 3}4 years, $238. FOR AND AGAINST PROFIT SHARING 167 THE DENNISON MANUFACTUKINQ COMPANT After 8% on first preferred stock, 4% or more (as determined by by-laws) on second preferred stock, and 5% toward purchase of first preferred stock — after paying all that— one-half of|remain- ing may be paid as dividends on Industrial Partnership Stock. NEW HAVEN GASUGHT COMPANT Every quarter 8% on wages of previous quarter, which is same dividend as capital gets. PBOCTEB & GAMBLE COMPANT 16% on first issue; 20% on second; 24% on third. Trust receipt dividends in addition to stock dividends above percentage on wages. 2. HOW OFTEN WILL WE CALCULATE PROFITS? PBOCTEB & GAMBLE COMPANT Send-annuaUy. BOSTON CONSOLIDATED GAS COMPANT At end of fiscal year. NEW HAVEN GASUGHT COMPANT Quarterly. BAKEB MANUPACTUBING COMPANT Annually. Inventory includes as liabilities, stock purchasing fund, sinMng fund, and face value of stock outstanding. Assets exclude accrued interest. Excess of assets used. 1. To replace 5% annual preferred stock dividends from sinking fund. 2. To pay 5% annual dividend on conmion stock. 3. To pay into stock purchasing fund $5 for every share on deposit January 1 subject to purchasing contract. 4. Ten per cent of amount yet remaining to sinking fund. 5. All the rest paid to preferred stockholders and to employees in proportion to dividends and wages. 3. WHAT FORM WILL WE GIVE THE PROFITS? BOSTON CONSOUDATED GAS COMPANT Premiums apply to the purchase oj one or more preferred shares of (he Masscu^usetts Gas Company (the holding Company) at the then market price. Any balance remaining stands to the credit of em- ployees, carrying 4% interest. BAKEB MANUFACTDBINQ COMPANT Nine-tenths in stock (common), one-tenth cash. 168 PAYING WORKERS FBOCTEOt & QHSBhB COMFANT (a) All dividends on common stock purchased for emplojree applied to purchase of same. (b) Dividends (guaranteed 16%) on the contract itself (called Trust Receipt) applied to purchase of stock. (c) After shares are paid up, cash for both dividends and "Paid- up Trust Receipt." (d) Before actually giving stock, company may elect to give ■cash to the amount of the stock's market value. Paid-up Trust Receipt, which itself draws interest in addition to the dividend on stock, holds off demand for possession of stock. NEW HAVEN GASLIGHT COMPANY (a) Credit for profits appUed to stock at market value. Balance ■carried forward next quarter. (b) Or, one-half of amount credited, may be taken in form of cash, at any quarter period, at employee's volition. (c) Or, if discharged, paid in cash, in full (unless discharged for bad discipline, when he forfeits balance). (d) Voluntarily leaving, draws half of credit; unless woman marrjrtng, when she draws fuU amount. THE DENNISON MANUFACTURING COMFANT Stock. (See No. 1.) 4. HOW WILL WE DISTRIBUTE THE SHARERS' PROFITS PROCTER & GAMBLE COMPANY (o) Amount of stock may equal employees' annual wages and Trust Receipt dividends on that 16%. (b) May subscribe 2S% additional stock after being a shareholder 6 years and get Trust Receipt dividends of 20%. (c) May subscribe to 1B% of his wages if 10 years a stockholder and get Trust Receipt dividends of 24%. BOSTON CONSOLIDATED GAS COMPANY Premiums calculated on salaries or wages for the fiscal year, not deducting any for sickness save after two months. 5. WITH WHOM SHALL WE SHARE i* BAKER MANUFACTURING COMPANY Any person who has been continuously in the employ of the com- pany for 4^00 hours at the factory and has contracted to place on deposit with the company subjed to purchase contract aU stock he may receive aa remaining wages shaU become an "Honorary em- ployee." FOR AND AGAINST PROFIT SHARING 169 BOSTON CONSOLIDATED GAS COUFANT (a) To be eligible to share in the profits of the company, an employee must be in the employ of the company one full year before the fiscal year in which profits are shared. This equals a two years' qualification. (b) Of these, only those selected by heads of departments, for merit. Claim this prevents its appearing wage increase. "Endeavor to make a list of profit sharers a roll of honor." A recommendation to employees leaving. (c) No employee voluntarily withdrawing or dismissed during 12 months preceding distribution shall receive any premium for that year, but shall receive any balance due on previous year. ■ NEW HAVEN GASUGHT COMPANY (a) All but executive officers may share. (b) Provided they have been continuously employed by the company for one year. (c) Only those who wish, and who sign agreement embodying terms set forth. THE DENNISON MANOFACTtTBINQ COMPANY Principal employees including salaried officers. Seven years with company and earning $1,200. Six years with company and earning $1,500. Five years with company and earning $1,800. When apportionment is made, provided they sign contract for extra remuneration. PROCTER & GAMBLE COMPANY Any employee (except salesmen) earning not over $1,500 a year. When advanced beyond $1,500 can get no further Trust Receipt dividends, but must accept certificates of stock. 6. WILL WE ASK THE EMPLOYEES TO CONTRIBUTE? BOSTON CONSOLn>ATED GAS COMPANY May help buy stock faster than premiums buy it for them; pay- ments draw 4% interest from company. PROCTER & GAMBLE COMPANY Employee pajrs in cash, upon approval of his application, not less than 2J^% of market price of stock. Every year thereafter till stock is paid for, must pay in cash, not less than 4% of the total amount of his subscription. Annual 3% interest on impaid bal- ance by employee. BAKER MANUFACTURING COMPANY No. 170 PAYING WORKERS 7. WHAT WILL WE ASK THE PARTICIPANTS TO GUARANTEE? NEW HAVEN GASLIGHT COMPANY Company may cancel agreement on week's notice if employee is wastefvl. BAKEH MANTJFACTUHING COMPANY If they quit for week mthovt permission, they lose employment from point of view of profit sharing. BOSTON CONSOUDATED GAS COMPANY Company has sliding scale with public, and to share profits must help company take advantage of sliding scale. THE DENNISON MANUFACTURING COMPANY Penalty is loss of voting power. 8. WILL WE GIVE THE SHARERS A HAND IN THE MANAGEMENT? BOSTON CONSOLIDATED GAS COMPANY Profit sharers nominate a representative of own selection to serve as director for coming year. PEOCTEB & GAMBLE COMPANY (a) May be appointed, by directors, to the board of three trustees who hold stock for employees till paid for. (b) Not being true stockholders, have no voting power. THE DENNISON MANUFACTUBING COMPANY After $1,000,000 issue of Industrial Partnership Stock all voting power vested in this stock, unless for a year dividends on 1st pre- ferred are less than 4% or unless dividends for 2 years on 1st pre- ferred are less than 6%, or unless dividends for 3 years on 1st pre- ferred are less than 7%, when temporarily this stock assumes voting power. May be discharged like other employees. 9. WILL WE ALLOW NON-SHARERS? PEOCTEK & GAMBLE COMPANY Employee may make application for withdrawal from plan, hut if during semi-annual period draws no profit far any portion of that period. May withdraw at any time by giving notice in wiling, and tviU receive money or stock due him, by surrendering pass book. If he withdraws before two years' participation in the plan, he shall have refunded to him only amount paid by him in cash, as cmtribu- tion to purchase of stock. Profit sharing is intended only for per- manent employees. FOR AND AGAINST PROFIT SHARING 171 BOSTON CONSOLIDATED GAS COMPANY "We occasionally drop a profit-sharer from the roll, for cause, as a disciplinary measure. NEW HAVEN GASLIGHT COMPANY Agreement may be canceled on one week's notice. Officers empowered to stop the profit sharing with any employee at their discretion. BAEEB MANTrFACTURINQ COMPANY If employee sells any of his stock or draws it out of deposit he ceases to be an honorary employee and is not entitled to remaining profits for that year unless reinstated by vote of directors. 10. WHAT WILL WE DO WHEN EMPLOYMENT CEASES? BAEEB MANXTFACTURINQ COMPANY Cannot become an "Honorary Employee" and receive stock wUhovt signing a contract to place on deposit and sell to company aU such stock 19 • ts Apnl : • 9 • 16 ■ 23 ■ » 14 21 2S tCoflverted. 786! 801 7411 10071 10431 10291 4245) 6557 S634) 53 65 48 13 2 18 2 2 2 10 18 10 «IS!81 11641 75M «6n 4081 fS6) 3081* 116411 10811 1133» 905) 608) 1164) 2)33261 16621 7041 678 662 688) 48941' 16621 1 1077 10361 10751 1075 2)27321 1366) 4268* 13661t Grand ToUl 16437 167 14 3 10 Figure 17: The Piiestman Scheme is based on a standard output calculated at the beginning of the month. An excess over this amount brings added wages to every employee, prbportional to the excess. HOW WAGES HAVE KEPT PACE WITH RISING PRODUCTION 'TnA. Weekly Rale per Man. Plus Initial 10% OHerad by Firm. Total Amounts Payable, Including Wages and tlie Percentages for Excess Outputs. 11 Output Exceeds Standard by 10<-r 20% 30% 40% 50% 60% t % % { i S i $ 'Laborer^ Machine Men Turners & Fitters Pattern Makers Moldera 7.80 9.24 11.18 11.90 12.14 10.14 12.28 13.12 13.3S 9.56 10.93 13.51 14.42 14.70 10.45 12.14 14.70 15.73 16.03 11.30 13.18 15.91 17.08 17.3S 12.14 14.21 17.20 18.40 18.70 13.00 15.19 ia40 19.69 20.03 13.88 16.25 19.65 20.99 21.33 Actual Advances on Day Wagea 10% 21% 32% 43% 54% 65% 76% The oresent War Bonuses are paid in addition to the above. | Figure 18: This table shows how wages rise as production increases. Since these increased earnings depend on the total and not individual output, active cooperation among the workers is practically assured. 183 184 PAYING WORKERS trades. The figures do not include the present war bonuses, which are paid in addition to the figures shown in the table. From these figures, then, a molder, normally in receipt of $12.14 per week, gets the 10% increase, which brings his wages to $13.36. Further, if the out- put for the month exceeded the standard by 40%, then that molder would get an increase of 40% of $13.36, or $5.34; so he would get $18.70 per week for four weeks, plus war bonus. Amounts have been converted into American units to aid the reader. It is, naturally, extremely important that a standard be fixed which is fair to both employer and employee. In the Priestman works this is insured in the f bllowing manner. The Works Committee, which is repre- sentative of the six trade unions shown on the wage schedule, meets the management once a month. At this meeting the previous output figures are discussed. THESE VARIATIONS OF THE PLAN ARE SUCCESSFUL IN OTHER TYPES OF PLANTS In another type of factory the way to determine the istandard would be this. If, up to the formation and introduction of the scheme, work has been done on the day-rate basis, then the output should be examined for a period sufficient to ascertain the average pro- duction of the different classes of machinery, and also what man-hours it took to execute the same. In shops employing piece-work the standard may be arrived at in a similar manner, the output under piece rate forming the standard. Complete machines or machine parts broughit into the works were provided for at the initiation of the scheme, and are includ^d in the total output as though they had been manufactured by the firm. In the case of repairs executed in the works, the ~wages paid for these repairs are converted into a A PRODUCTIVE INCENTIVE 185 figure representing weight as follows: The average cost per ton in wages paid is estimated on the deliv- eries of machinery made that month. The total wages paid for repairs are converted into tons at this rate. This figure, in weight, is added to that of the total of machinery executed, so as to arrive at the excess over the standard. At the works of Priestman Bros, the deliveries of machinery are fairly constant. Thus the arrange- ment for calculating the output for periods of four weeks works satisfactorily. In the case of another works, where the deUveries are less constant, the use of longer periods than four weeks for estimating the output would be desirable. Improvements in the method of manufacture, or other considerations affecting the output, and con- sequently the whole scheme, are provided for, as the standard may be altered by mutual consent. By fixing the standard in such a manner, the employer is not tempted to cut the piece rates. Further, there is no time when the arrangement becomes uneconomi- cal to the firm as the result of increased reward to labor. Under this scheme, the increased pajrment varies in direct ratio to the increase in output. This results in a diminishing of cost per ton with a conse- quent wider distribution of overhead charges. As mentioned before, when the production goes up, so do the wages of every single individual in the fac- tory. This is only fair, because, if men in the shops are producing more, then this increase in output will naturally entail heavier work for the staff. Should there be a time when a suflficient amount of work cannot be obtained to keep the works running at its full capacity, and the output has to be reduced accordingly, then the standard average weight is reduced, depending on the number of men and hours then worked. 186 PAYING WORKERS It is essential in any scheme of this nature, that a standard rate of output be fixed which is fair both to the firm and to the employees. The Works Committee, which represents the nine unions employed at Priest- man Bros., meets the management. Then, supposing, 60,000-men hours have been worked during the past four weeks, it is a simple matter to calculate the stand- ard, once the weight of completed machinery is known. The book showing the daily weight of machinery deUvered is called for and inspected by the men's representatives. Everything is open to these men, no figures being concealed from them. The output is then discussed, and a standard for the ensuing four weeks is fixed. A notice of this is posted in the works. TRADE Laborers Machine Men Turners d Fittore Makers Percentage of Excess Output atMve Standard 10 20 30 40 10 20 3D 40 10 20 30 40 10 20 30 40 10 20 30 40 20 19 Scale of 18 Weekly 17 Wages '« in '^ Dollars " 12 11 Flat Rain plus " initial 10% 9 VJeMy Flat Rate..? / > rt A J / I I 4 «if 1 it 1 1 A 4 4 i '"f i 1 r[ . ll i 11 liili 1! iiiilllt li / A 11 i II 1 /! H I ! V 1 - ^ ID I 11 ,■• ■ M ^ _j L^ L_ r- . 1 Figure 19: This chart shows graphically the relation between produc- tion and wages as shown in Figure 18. In addition to these output bonuses, additional bonuses help meet abnormally increased living costs. Supposing the standard is fixed at 100, then if the total output at the end of the four weeks is 130, every- body, from the manager to the machinist, receives a 30% increase on his salary for the next four paydays. The firm's apprentices come off very well in the scheme. They receive double the percentage. So A PRODUCTIVE INCENTIVE 187 that, if the output is exceeded by 30%, the appren- tices receive 60%. Apprentices do not get a very high rate, so the double percentage provided by the firm makes a little extra pocket money for them. Thus an apprentice whose flat rate is, say, $4.87 per week, will, if the standard is exceeded by 40%, get 80% on his rate — that is, he will be paid at the rate of $8.76 for the succeeding four paydays. This alone is an incentive to labor. At the outset of the scheme, the men objected to the treatment of the firm's staff. The staff had been in receipt of a uniform bonus of 50% of their wages. The men suggested, at a meeting, that the staff should receive the same percentage increase as they did, varying with the output figures. The inclusion of the staff was deemed a wise mea- siu^e as, though it is non-productive, the cooperation of the whole staff in securing orders, typing, estimating, and in other functions, contiibutes materially to the team-work in the factory. It was recognized by Priestman Bros, that no scheme of payment by results will stand the acid test of criti- cism, if, while offering advantages to the workmen, means are not taken to secure the wholehearted assis- tance of the staff, seeing that the successful working of the scheme is dependent on the individual efforts of everybody, from the managing director and the general manager down to the lowest-paid errand boy. As a result of this scheme, 450 employees last year were paid additional wages to the extent of $116,880, or an average of $258 per employee. This scheme succeeds where many piece-rate sys- tems fail, because the bonus is paid, not on the com- ponent parts, but on the finished product. Thus all departments contribute to this end^ If one depart- ment slackens, the whole works suffer; so that all de- partments naturally take particular care that they 188 PAYING WORKERS themselves are up to the mark for their own and their fellow workers' good. In this respect the scheme is essentially coopera- tive, and the workmen would, in a bad trade period, far rather undergo an all-round reduction than that some of them should be laid off. I Besides the general rise in wages, another very desirable feature of the scheme is that the results are not attained by increased individual effort, but are wholly due to the spirit of cooperation and team-work between man and man, and between department and department. The men are, naturally, desirous of preventing any loss of time due to delay in the trans- ference of work from department to department. I The scheme also promotes the desire in the men to help a fellow worker out of a difficulty, besides stimu- lating their interest in the production curve. ANOTHER ANGLE WHICH ADDS FAVOR TO THE PLAN Under the Priestman scheme, every employee rec- 'ognizes the fact that his wage is dependent on everyone else in the firm. That is to say, Jones, who is a black- smith, is a good worker and possibly rates at 100% efficiency, recognizes the fact that his bonus is also dependent on the efforts of Robinson, a fellow black- smith, who is probably working at 70% efficiency. ) Now, tmder a piece-rate, Jones wouldn't worry about Robinson, so long as he gets his own bonus. Under the Priestman scheme, he is interested in Robinson's work. I If Robinson is slack, Jones gets behind him. If he is merely incapable, Jones shows him "how." I The result of this is, that during Robinson's period of instruction at the hands of Jones, Jones's efficiency may fall to 90%; but Robinson's will jump to 80%. This, so far, makes no difference to their sum total efficiency, which is 170. Then the total increases. A PRODUCTIVE INCENTIVE 189 Origmally, the finn's blacksmiths did not come under the scheme, as they were employed on piece- work, but after watching the progress of the scheme, they asked to be included, and have benefited con- siderably by their decision. Recently, to' test the feelings of their employees on the scheme, the firm addressed three questions to the men, with a request that the replies should be in writing. These questions were: (a) Does our scheme create confidence and good will between employer and employed? (&) Apart from the increase in wages, does it help to raise the tone in the works, and assist in increasing the men's and youths' interests in their work, thus making the days pass more pleasantly than when they are paid on the day-rate system? (c) Generally speaking, what is the opinion through- out the works of the system, and is it one that our employees can recommend to other firms as a means of allaying labor unrest? In answer to these inquiries, the foreman of the fitters and erectors said: "Previous to the scheme I had diflSculty in getting one man to pick up another man's job. For instance, if a man stopped off work, they expected the job to stand tmtil he came back. Now things are quite different; if I give a man half-a-dozen jobs during the day it is all in order, and, of coiurse, it makes it easier for myself." The foreman of the machine department appre- ciated the manner in which the firm's books were laid before the men. "The opinion of the men throughout the works, and outside," he says, "is that the scheme is the best they have ever heard of, and they would very much like to see it introduced into other works. For myself 190 PAYING WORKERS I think it a fine scheme, because we feel we are work- ing for the firm and ourselves at the same time." The blacksmiths' foreman said: "The scheme puts a feeling into the workmen that the employer and the employee are working for one end — to benefit themselves, also each other. There- fore, it creates a good feeling between them. Having had experience with platers and riveters on piece-work, and smiths, drillers, and others, on the scheme, I can safely say the men on the scheme are far happier. There is the spirit of helping each other, but in indi- vidual piece-work there is jealousy, which causes bad feeling towards one another." The foreman of the molders also mentioned the improved relationship between the firm and the men. "We have now had experience with this scheme, and never, I am sure, in the history of labor, have employer and employee worked so amicably together under any scheme. We have now a combination of interest instead of an individual outlook, and nothing tends to make work a greater pleasure than to think each of us is helping one another." The men's replies were very much in the same vein. The representative of the engineers says: "My personal opinion is quite in accordance with the rest. I find, as a representative of the men, that your scheme seems to satisfy to such an extent that they almost forget to ask the old question: 'When is the next advance due?' I think that, providing employers have a really honest desire to allay labor unrest, the scheme, or one on similar lines, would go far towards reaching that goal." The molders' representative said: "The men were delighted with it. The days pass more brightly than they did under the old system; both men and youths seem to take more interest and pleasure in their work." A PRODUCTIVE INCENTIVE 191 The representative of the blacksmiths says: "The scheme certainly raises the tone of the workSj, as everyone is working towards a common end. In the old days of piece-work there was always more or less discordance in the smithy, and sometimes the ill- feeling went beyond discord. Now there is a more general feeling of good-fellowship; dissension is a rarity, and the men are far more ready to help each other. The opinion in the smithy is that the scheme is the very one required to bridge over the difficulties that may arise between employer and employee. As the interest of the employer merges with and becomes the interest of the employee, differences must dis- appear and confidence be established." The firm of Priestman Bros, sums up the advantages of the scheme, from its point of view, as follows: (a) Since April, 1917, capital and labor have been united; friendship and confidence have been estab- lished to a degree unlooked for at the time when the scheme was adopted. (6) It creates a better morale throughout the works. Men assist the foremen in keeping their companions up to the mark. (c) It overcomes imdesirable elements which are inseparable from piece-work systems. (d) Skilled and unskilled workmen cooperate in doing what is possible to expedite deliveries. (e) It gives a considerable increase in wages to the employees, without it being necessary to increase the selling price to the purchaser. (/) The scheme successfully achieves the object which all systems of piece-work are intended to secure, but which they often fail to do. It provides that the standard, which has to be exceeded before the work- men get any excess payment, shall be in machinery finished and dispatched, and not in details only. CHAPTER XIV PAYING A BONUS FOR QUALITY // guatUUy production alone is encouraged by the managemeiU's imge plan, quality may suffer. Here is the novel plan developed in a concern making a variety of products, in all of which guality is essential and hard to obtain. A LARGE manufacturing firm in New England found that, due perhaps both to disturbance in the labor market and to an especial unevenness in raw material, its product threatened to fall in quality below the high standard required by the company. In one room the tendency went so far that complaints began to come in from customers who had noticed the falling off. When a few returned goods came in, the managers looked ahead and took it as an advance sign of alarm. In this situation the managers discussed the feasi- bility of using bonuses for improving quality. Some frankly stated that such a system was impracticable. The impossibility of a definite standard of inspection was thought to presage sure failure. It was conceded that if the material were steel, which could be tested for hardness to a tenth of a unit with a sclerometer and gaged for dimension to a ten- thousandth, there might be some prospect of success. A steel standard can be reproduced exactly in different rooms and different months for comparison, it was argued. Paper can be tested for bursting and breaking strength, for folding, for chemical make-up. But this 192 PREMIUMS FOR QUALITY 193 company's product is typical of the great number of products for which a test by mechanical contrivance is not sufficient. The particular room-product which showed the most dangerous decline in quality, as just stated, was also one of the most indefinite to test. Sheer "finish" was the thing desired. Inspection could only be by eye- judgment. Yet every piece of product always has minute imper- fections, some of which simply must be passed if the product is to be manufactured on a commercial scale at all. In the difficulty of determining by eye alone which pieces should and which should not be passed, lay the supposed obstacle to a definite measure of quality and therefore of bonus. A study was made of the imperfections, therefore, and the kinds classified. Though each imperfection was very minute and would be xmdiscoverable by the ordinary eye alone, it was found that a number of them on the same piece had a cumulative effect on the appearance of the surface. Therefore the inspectors were now required to count the number of each kind of imperfection on each piece, set each number down, and add up the total mmiber of small flaws on the piece. Then the various numbers were compared with pieces which were ad- mittedly good, passable, or bad. From this, standards were set by picking out certain crucial totals. Now if the total of small flaws on a piece falls within a certain mim'TnnTn , the piece is designated as of No. 1 quality. In the market this product com- mands special high prices. If the minute imperfec- tions aggregate more than this minimum but less than a limit maximum, the piece is called No. 2 quality. This is marketable. Any piece having more than the upper limit of imperfections is No. 3, that is to say, out of bounds of the company's marketing standard. 194 PAYING WORKERS A checking inspector at intervals makes assay tests on the aheady inspected goods, and compares with the first inspector's coimt-slip. It was found that the inspections agreed closely. ^ Each piece, as fast as manufactured, is therefore examined not vaguely any longer, but mathemati- cally, by the inspectors who set down with pencil and paper the number and kind of counts against the piece. So while it was perfectly true that inspec- tion must always rely upon the eye, the formerly vague "judgment" is now eliminated, or at least it is no longer vague, since it is guided to a mathematical standard by definite knowledge. Of course any one big imperfection is in itself enough to throw that par- ticular piece into class No. 3. THE FOREMAN'S BONUS IS FIGURED ON THE THREE QUALITIES The total amount of each class of quality turned out in the room is found and recorded, and on the high quality part of this total for all machines the foreman is given a bonus. His bonus for quality is figured on the three classes as follows: If he should produce all his goods of No. 1 quality, he would be allowed a bonus of one-half of his salary. This is only an ideal, seldom quite realized. For a fractional output of No. 1 quality he gets a corre- sponding part of the possible bonus. That is, if 90% of his goods should be No. 1 quality and all the rest No. 2, he would collect 90% of his maximum half- pay bonus. If the goods were all No. 2, he would collect no bonus. No. 2 goods (medium quality) have little or no effect on the bonus. If the quality line for No. 2 is drawn so low that its production must be discouraged, a slight penalty may be attached to it also with regard to the foreman's bonus, but not nearly so great a penalty as that on No. 3. PREMIUMS FOR QUALITY 195 For every percentage of No. 3 the foreman has a certain percentage subtracted from his possible bonus. The penalties are so proportioned to the number of pieces produced weekly that the foreman will always have some bonus left. In this way his maximum half -pay bonus is not impossible of ever being attained; to do so would discourage his incentive to improve the quality and cut out spoiled work. Since every piece of No. 3 thus nullifies some of his hard work higher up, he makes an especial effort to eliminate absolutely all unmarketable product. The saving resulting in this alone repays the company its invest- ment in foremen's bonus. But since his bonus depends on the amoimt of No. 1 produced, he is also constaiitly pushing the whole scale of quality, top and bottom and therefore middle, upward as far as possible. For it is worth his while to keep going up. Many foremen make now from 90% to 95% of their possible half-pay bonus, which to a typical foreman getting $40 a week regular salary amoimts to a total of $58 or $59. These figures are also an indication of the degree of success attained in the quality improvement. Of course th^ foreman could not achieve the greatest success unless the operatives also have an interest in quality. The operatives' connection with the quality standard in this particular factory is through a parallel bonus, not for quality directly, but for quantity of No. 1 and No. 2. There is no bonus on No. 3. As each varying prescription of material for a new jqJi„Comes into the room, time-studies are made on it at some one of the machines by one man assigned from a time-study stafif which is attached to the build- ing as a whole. This staff has the operations stand- ardized so that by a little observation allowance can be made for the variations due to different machines, weather, variations in raw material, and so on. 196 PAYING WORKERS From the observation, a corrected task is set which will remain standard as long as that particular order is in process of manufacture. This is not very long, but the time taken to set the task pays, just as book- keeping pays in an office. If the operative produces in excess of this standard task, he gets at the end of the day a white ticket ap- prising him that he has a certain proportional amount of bonus coming to him for that working day. If, however, it is meanwhile discovered by the inspector's records that some of his product turned out during the day was of No. 3 quality, and further- more that the amount of No. 3 equaled or exceeded his amount of No. 1 super-quality the same day, he gets another ticket, a blue one, canceling his quantity bonus for the day. This quality cancelation on his bonus is on the same basis as the purely quality bonus to the foreman — that is, the production of all No. 2 quality by a given operative on a given day, without any No. 1 on the one hand or No. 3 on the other, would have no cancelation effect on his quantity bonus, since No. 2 quality is itself marketable. No. 1 also has no direct positive effect on the operatives' bonus for quantity, except that it gives him a margin of safety for the accidental production of No. 3. Cancelation does not take place if the amount of No. 3 is less than the amount of No. 1. This is found to give the operar- tive enough precautionary interest in the productian of No. 1 to secure a constantly increasing proportion of the highest quality. . • Meanwhile the machine operative is looking out for production at the source. For his bonus, after quality is passed, is measured only by the amount produced. The foreman, however, does not participate in the quantity bonus. He gets a bonus for quality alone. So he keeps his eye constantly on quality. PREMIUMS FOR QUALITY 197 It was feared at first that making quality the prime condition of everybody's bonus would in sympathy cause the standard of inspection to go down — ^that where the standard of inspection was after all only visual, it would become the openhearted or careless custom of the inspectors not to see many of the minute faults. On the contrary, the standard has risen. After some months a complaint came in from the operatives of one room that the inspection had become increasingly rigid beyond all limits. Former inspec- tors, old-timers, were sent to give their opinion, and their unanimous verdict, together with a reinspection of goods manufactured and classified some months earlier, showed the standard all through the rooms to have been tightened. WHY THE STANDARD OF INSPECTION THROUGH- OUT THE PLANT HAS RISEN It was determined that this was due to education of the inspectors in exact observation of flaws in order to set them down arithmetically. They thus acquired, unknown to themselves, perhaps in some cases in spite of themselves, an educated standard by which they could not help measuring the goods. Every imper- fection now looked as big as a house. With anyone else who could not see them, they were simply impa- tient. As they went on, they had the inevitable tend- ency of the connoisseur to boost his standards up. As a result of the installation of this bonus for quality, the room with which the greatest trouble had been experienced began at once to improve the quality of its output, at first somewhat slowly, then rapidly. The curve of improvement was then steady, and soon the product was put higher in the market than it had been before the difficulty which caused the introduc- tion of the bonus. Other rooms where the system is in use show the same uniform tendency in quality. 198 PAYING WORKERS One of the quality graphs taken from an actual room is reproduced in Figure 20. It is laid out on the basis of percentages of Nos. 1, 2, and 3 product classi- fied according to the number of minute imperfections as previously explained. It will be noticed that the proportion of No. 1 or extra-priced goods has gone steadily upward, and the proportion of No. 3 or un- marketable goods has gone steadily downward, in spite of the fact that the quaUty standard has mean- while risen. The foreman's quality bonus in this room is half of his pay if the product were all No. 1. For every percentage of No. 2 he has 3% subtracted from his 100% maximum, and for every percentage of No. 3 he has 10% subtracted. For iastance, during one week the room turned out 180 "pieces," of which 17, or 9.4%, were No. 2, and 6, or 3.3%, were No. 3. Therefore 9.4 x 3% or 28.2%, plus 3.3 x 10%, or 33%, amounting in all to 61.2% of the foreman's possible bonus, are lost to him. This is only a typical room. Graphs from all other rooms where the bonus has been working are similar. Of course the quality bonus could be applied without the parallel quantity bonus. In that case some other precaution would have to be taken that constant pre- occupation with quaUty did not cut down the quantity produced. In this factory it is recognized that self-profit from either quantity or quality gives the operatives a special interest in certain auxiliary individuals — for instance the machine repairmen. A disordered machine is a bar to both quantity and quaUty, But it is essential to secure the repainnan's cooperation in the good work, to offer him an inducement which shall also compensate him in some degree for the supposed demoniac fun he has in hearing himself cussed and pleaded with by operatives who need their machines PREMIUMS FOR QUALITY 199 complete to make money with. So the repairman is also paid a bonus if the machines under his care make a bonus. If all the machines in his stand succeed on a given day in making a bonus, the repairman gets, in one room selected at random as a representative sample, a "high bonus" of so much per machine day — ^amount- ing, say, to $1.75 over and above his day wage. If, however, one of his many machines fails to earn a bonus, the repairman automatically falls to a "low bonus" rate even on the other successful machines. *"""*•*"" *3-.^ -/v. ■^->. / /"^ "^ ■5=p:^^yi'u /" "^ ^ U^^I^ ^t n\_^^^i\r A^ U Jj^ V- ^ ^ ftmiiap # Mil t QdM ^ -N ^ ^ "^ i::^^^^:::^ ^ -^ ^ ^ ^ I I 4 • I ■ W tl Figure 20: Giving the workers a bonus for quality production re- sulted in a satisfying reduction of "seconds," as shown here. Note the upward trend of the top curve, and the descent of the other two. The low bonus rate is arranged to gi-^ him, imder the new multiplication, $1.20. T^ is' ft direct fall of 55 cents that day due to one maehitie. He, th«e- f ore, strives to keep all his machine timed up to con- cert pitch. This arrangement has created a, new Sjiefcies of repairman who would not be recognised as such by an 200 PAYING WORKERS old-timer visiting the factory. Repairmen now actu- ally go looking for work, instead of having to be sought in back of the boilers or out behind the storehouse. Here the traditional fight between the operatives and the repairman is over. The villain no longer works off any personal grudges by letting his enemy's machine stand maliciously idle. On the other hand no operative, however fanciful and fretful, has any reason to elect himself to the imaginary position of victim, for it is plain that the repairman in failing to reach him would only be cutting off his own nose. So a great many quarrels are eliminated. Repair- man and operatives are now allies, team mates, as all ought to be who are inside the same factory room, engaged in production of the same article. The old legend "Machine down for repairs" has almost disappeared. Following the same principle, the schedule clerk who plans jobs for the machines gets a cent a machine a day high bonus if every machine on his despatch sheet makes a bonus. Any one machine which misses its bonus puts the schedule clerk back on a low bonus factor which totals a good deal less, and a certain number of defaulting machines cancel his bonus for the day altogether. No cancelation of a bonus, or failure to attain a standard task, brings a man's compensation for the day belqw his standard day's pay. The man ^ts that anyway if he is present in the mill. Also» i no matter how fdp a man falls under his bonus todfay, it does not of CQlirse affect his bonus for yesterday. Bonus once made, and countersigned for quality, is secure. Ail thes0 bonuses are therefore figured on individual I day's. Each day is an era to itself. A working day runs from noon to noon. This is not only the best f6r bookkeeping and prompt inspec- tion reports, complete before nightfall, but it steadies PREMIUMS FOR QUALITY 201 attendance. Even an operative who feels a triile indisposed will, if he has a bonus day weU started this afternoon, come to work tomorrow morning if he can, to complete his day. Then the odds are that he will remain for the afternoon, which links him to the follow- ing day, and so on. The application of the bonus for quality to this factory has, besides increasing quality, increased production in all rooms. Figures show a corresponding decrease in unit cost, even in a time when wages have universally gone up. As a means of raising or maintaining quality, the quality bonus seems to the managers of this factory to have proved itself absolutely as a method that would inevitably have the same results in any fac- tory. The best way of securing quality with help turning over at a dizzy rate is to make the standard of quality in some way mathematical. If a definite standard, or even a rising standard, can be secured with this product, the same psychology of education in exact minute inspection will secure it with other materials and products. CHAPTER XV GROUP BONUS PLAN If piece rates alone fail to get adequate results, appeal may per- haps be made to other incentives. That was done in this case, vrith &ccellent residts — some of which are described by W. R. Basset and W. T. Fitzpalriek, of Miller, Franklin, Basset and Company. THEORETICALLY, a worker on piece rates which are fairly set has every incentive to get maximum output. But every manufacturer knows that it doesn't work out that way. I don't pretend to have found an unfailing specific for soldiering, but I do know that frequently the group economy bonus will get production when piece rates won't. A knitting mill I have in mind is a good exam- ple of what can be done by this means. Our first step in this plant was to do everything possible to speed production by planning the work, and by supplying the most modern machines and meth- ods that were available. It then remained to stimulate the working force to extra effort. That the possibiUty of increase from that source existed had been determiued by time studies, which showed that few of the operators worked at anything near their actual capacity. It was necessary, therefore, to find an incentive to get them to do more. As all of them were on piece-work, it might seem at first thought that sufficient incentive already esisted — that they would at least try to earn the maximum that 202 AN ECONOMY BONUS 203 could be had without undue efifort. It is right here that economics falls down when it assumes that all men are acquisitive and thrifty. Although on the surface men and women appear to be acquisitive, most of them have set a certain weekly earning as their goal and when that sum is reached, they prefer leisure to extra money. There are exceptions, almost as rare as are misers, but I believe this is the experience most employers have had during the years of rising wages. In most industries where wages have increased greatly, it is the same — a worker lays off after having earned in four or five days the sum he used to earn in six. Although this attitude is hard to account for with men workers, who more often than not have famiUes to support, it is easier to vinderstand — and harder to combat — ^with women who as a rule work solely for their own support. And most of the hands in this plant are women. Except for occasional middle-aged women, many female employees look upon factory jobs in a way as fill-ins until they marry. They seldom want more than enough to cover running expenses. Saving for the future makes no great appeal; their future husbands will provide the future fimds. With this condition to face — ^that added earnings easily attainable were not attractive enough to call forth extra effort — ^it may seem that no bonus plan would be effective. But a bit of psychology apparently gets in its subtle work here. The group economy bonus is paid to everyone in a department. Its amount depends upon the efficiency of the department as a whole. Therefore, if any one worker is slack, the others in that department suffer. So, though the individual may not care for extra earn- ings, there are few whose consciences or whose fear of others' tongues will let them deprive their fellows of earnings they may want or need. For instance, 204 PAYING WORKERS in one department employing women, enforced idleness with consequent decreased earnings resulted as the flow of garments from the cutting room, the preceding department, fell off. When, therefore, a cutter de- cided to take a day off, he brought upon himself such a tongue-lashing from those in the succeeding depart- ment, that he decided thenceforth to stay on the job. The group economy bonuses were based on savings of three kinds: 1. Reduction of unit overhead expense through increased production, 2. Savings in expense material such as needles, waste, oil, and so on, and 3. Savings in direct material. In order to set bonuses it was first necessary to install a system of cost accounting which would give accurate departmental costs, not only as to direct material and labor, but as to overhead expense. Then, for three months, normal costs were collected to furnish a basis for figuring future savings. These normal costs were those that obtained after the man- agement had exhausted its ingenuity in attaining efficient operation. WHAT SHARES OF THE SAVINGS MADE SHOULD THE WORKERS RECEIVE? It then remained to determine a basis for sharing the savings made by the workers between them and the company. Although the management was pri- marily after increased production and would have been willing to give the workers all of the saving in order to get it, it was found that this was not neces- sary. We obtained not only more output as a result of the bonus, but in most departments a substantial money saving as well. At the outset, it was understood that the bonus would be a definite measurable part of the saving and not a sop thrown to the workers at the discretion of the directors. That may work for awhile, but being AN ECONOMY BONUS 205 charity, and usually dishonest m intent, cannot con- tinue long. What was not wanted was an economy bonus like that once observed in a plant where a disastrous strike had occurred a few months after the plan was put on. The bonus had been introduced with much pomp and sanctimonious talk of "the square deal," "the right of the worker to share in the savings" and other pap of a similar, familiar sort. Then at the end of the month, whether there had been a saving or not, the directors of the misguided concern said in effect, "Oh, well, they'll be satisfied with so much," and proceeded to pass it out with more platitudes. There was no predetermined basis of division, and it did not take the workmen long to find that out. They discovered too, that they got a bonus whether they effected economies or not. Before long, the men struck for more wages. Knowing that the bonus pajmaent depended principally upon the unre- liable digestions of the directors, they wanted to make sure it would be forthcoming, and they cannily felt that the best way to assure it was to get it added to their wages. While the group economy bonus is no new thing, it is rare to find it strictly on the square; so square that the management is willing to explain just how it works, so that the men can see for themselves that there is a definite way of dividing the saving. We started with the idea that no bonus less than 10% of the worker's wage would be an effective spur. The sky was to be the top limit. This was, therefore, the basis on which the work was carried on, and was, incidentally, the only part of the whole proceeding which was not mentioned to the workers. With this as a starting point, the basis of division for every department, productive and contributory, was worked out — and most of them were different. 206 PAYING WORKERS Ten per cent above the wages, was set as the bonus to be paid for savings in overhead expense made by increasing production — ^any saving of material was to be given as an extra incentive. To show just what was done, it will suffice to describe the method of setting the bonus in two departments, one productive and the other contributory. In the productive department, the overhead expense, exclusive of supplies, was roughly $10,000 a month and the payroll to productive operators, all of whom were on piece-work, was also on an average of $10,000. We therefore wanted to give a minimum bonus of $1,000 for increased production. Time studies showed that it would easily be, possible for the oper- ators to increase their production 25% without in- creased fatigue. As the $10,000 overhead should not increase materially for a 25% increase in production, this increase would result in a saving in overhead of eight cents a garment. On a basis of the old production of 25,000 garments a month, this meant a saving of $2,000 — twice what was considered necessary to give as a bonus. Therefore the workers in this department were told that they would get 50% of the savings in overhead, and it was explained to them in detail what overhead expense is and just how increasing production de- creases the amount of overhead that each garment they turn out must bear. Two things were noticeable; first, that these mill hands, mostly women, grasped the idea quickly; and second, that they seemed glad to be taken into the confidence of the management. In some departments where the fiixed overhead charges were in a low ratio to the productive payroll, it was necessary to give the entire saving in overhead expense as a bon\is, which the management was willing to do to get the increase in production. This was true in the packing and shipping department, for instance. AN ECONOMY BONUS 207 On top of this bonus was given throughout the inill a flat half of the saving in material whether it was direct material like cloth, or indirect, like needles. When the bonus plan was announced, the exact basis on which the plan was figured was explained to each department. The workers were told that if they wanted to see the records, any department could elect a committee of two which could examine all of the records for that department. The workers were also told the whole story back of the bonus; that the management had done all it could to boost production, even to hiring outside engineers to come in and better the plant in its methods; that further improvements were undoubtedly possible but that they could only come from the increased efforts of the workers themselves. They were further assured that the present basis of bonus would not affect their piece rates and that it would remain in force for six months. It was explained thao outside influences, such as the price of material, fluctuated and that aggregate change in price might work an injustice either upon them or upon the company vmless the basis of division was changed from time to time to conform to these out- side changes. They accepted this idea as fair. It was guaranteed that the basic operation expense upon which the bonus is figured would not be changed because of economies they might effect. In this respect, incidentally, this plan differs from most others of the sort. It is obviously not fair when a worker improves his methods to make the new standard the normal on which his future bonuses shall be based. The best that the management has been able to attain must remain the normal. After all, however delectable a method of this kind may sound, the real proof of its value is in the reaction of the workers to it. 208 PAYING WORKERS Possibly the most interesting incident following the introduction of the bonus was one in which the general manager, dye boss, millwright, and foreman were all involved. It was the general manager's contention that the dye house could be operated on 80 pounds of steam as well as on the customary 110 pounds. The dye boss objected, saying that his production would be seriously curtailed. Deeming it unwise to cross the boss, the idea was dropped. One day, however, the foreman and the millwright dropped in on the general manager with the suggestion that on the next Sunday, unknown to the dye boss, they put a reducing valve on the steam line to the dye house and let it operate on 80 pounds and note the result. The general manager agreed, the valve was installed and the figures show that the dye house production has steadily increased. The foreman and millwright are now sharing $8 a week, as about 600 pounds of coal a day is saved directly as a result of their interest. The management does not sit back, however, and trust to the ingenuity of the workers to show the way to savings. It frequently gets out printed slips show- ing what savings have been made and suggesting other possible savings. While as a rule, the workers themselves, being closer to the work, see the oppor- tunities first, the management nevertheless knows many places where economies might be practised but has had no way to achieve them heretofore. But after all, the saving of material in this case was of secondary importance. Our aim was to increase production and while the management welcomes savings that reduce costs, it looks upon the saving of material chiefly as a way to let the workers increase their bonuses. The first month's operation under the economy bonus showed notable increases in production through- out the plant. Today the plant is, as a whole, turning out 26% more garments than before — ^as a result. CHAPTER XVI A BONUS THAT DOUBLED PRODUCTION At a critical time, when the Jetodl Electric(d Instrument Com- pany VX13 losing money because of low oi4put, the plan described here by Orval Simpton, president of the company, served as an eJFectite remedy. A SERIOUS problem confronted us. Production had fallen off rapidly. A vague feeling of dis- satisfaction was going about the shop, and there seemed to be a possibility that we would lose some of our workers — ^trained workers that we would find it almost impossible to replace. A careful analysis of the books showed that for several months we had actually been losing money. It was certainly time to do something. We had to take a step that would make or break us. We worked out a bonus scheme, put our problem fairly before the men, and they responded. Our pro- duction doubled what it had been during the seven preceding months. Here is how the situation arose. During 1918 we were working on government contracts because we couldn't get the raw materials to carry on our usual business. Patriotism and the stress of war conditions kept the employees' interest at a high pitch and pro- duction at a high figure. When the armistice was signed, our war contracts were canceled, and we were left temporarily without our usual business. Of course, we got out after orders,, 209 210 PAYING WORKERS and soon were back to normal so far as work ahead was concerned. But for a time there wasn't much work to do in the shop, and what there was didn't get done in the usual quick time. Interest slumped, and so did production. Right here another problem entered. Our shop isn't a big one. But a majority of our employees are care- fully trained to do the delicate and specialized work that we turn out. It takes a long time to teach a worker how to do his job right. There are no com- petitive shops within a wide range, so our field for employment is limited to the workers we train our- selves. To have any considerable portion of these leave at one time would have been disastrous. Then our books, which showed a deficit each month, couldn't be dodged. We were face to face with a problem that had to be met squarely and quickly. Now, you can go into the shop and talk to the men about speeding up. You can urge them to turn out more work a day. But such a plan won't get big results. So we turned our efforts to a bonus scheme. We worked out a plan that had no strings to it. It wasn't based on increased production. It had no conditions whatever. We simply arranged to pay each month to one-twelfth of the total number of workers 8% of their earnings. • Just how the details were arranged I'll tell you in a moment. Then we went to the workers, told them frankly that we were losing money, and that the business was in a critical condition. We told them just what our problem was. Then we told them about the bonus plan we had worked out. We didn't ask anything in return. Instead, we said to the workers that they might wonder how, with the business already a losing proposition, we could afford to pay them more than they were then getting if we weren't to get anything in return. Monthly Output % W,000 45,000 ResuKs of our Bonus Plan, which was not based on added production, but simply on good will This was our war-time productiorivrHere is the siump wa had to fiQht^ llllAnif our tranus plan did this .May June July Aug. Sept Oct .Nov. ISec Jan. Fell. Mar. Apr. May June July Aug. Sept. Oct. Nov. Oac. < I9ia M 1919 — ► Figure 21 : When this company's production dropped so low, during the armistice period, that it was losing money, it had to come back with a jump or not at all. This chart shows what the bonus plan did. Group 1: Amount of Bonus >8% of amount earned durino the number of months indicated 12 3 4 5 G 7 8 9 )0 11 12 12 12 Shaded portion indicates the nutnber of montha for which wforlcers of the group are paid a bonus on the dale indicated Figure 22: I3uiing the first year, the employees received only a part of a year's bonus. For example. Group 5 received five months' bonus on December 1 . After the first year, each group gets a fuU year's bonus. ■211 212 PAYING WORKERS We couldn't afford to do it, we told them, but we proposed the plan to them in the hope that they would see and appreciate our difficulties, and meet us half way. But we put no conditions on the bonus. The workers would receive that anyway, we guaranteed. That was on July 12. The bonus plan was dated back to become effective July 1. With the proposition laid before the employees, we left them to their own conclusions. Immediately we found that our confi- dence was justified. Production output which had been hovering about the $25,000 mark — monthly — for seven months, jimaped to $35,000 in July. And it continued to go up, until the October, November, and December out- put figures were just twice the average monthly output of the first six months of the year. This all took place with only a slight addition to the working force that had been putting out half the amount during the early part of the year. Not only that, but unrest and dis- satisfaction among the workers disappeared. [HERE, PERHAPS, IS AN ANSWER TO ONE OF YOUR PROBLEMS Here is the bonus plan as we worked it out. It may not apply to every shop and we do not claim anything unusual for it. But it solved our problem in a way far better than we had hoped. The usual lump bonus has its disadvantages. Sup- pose our weekly payroll were $3,500 — which is an assumed figure. Multiply that by 52, and take 8% of the total. That's nearly $15,000 — too much to pay out in bonuses at one time for a shop of our size. Then, too, a bonus based on production involved an exact, accurate check on costs. If 10 men are added to the working force, too much computation is involved in determining an equitable bonus based on production. An element of uncertainty for both A BONUS WITH A RECORD 213 the management and the workers is always involved in a production-basis bonus. Then there's another point against the Iimip bonus. There might be in the shop a group of workers who for some reason or other are dissatisfied. This group might comprise all those on a certain kind of work. Just after the lump bonus is paid this group might make heavy demands which we would find diflficiilt or impossible to meet. In our business we couldn't afford to have such a group walk out on us, because it would take weeks, and even months, to train workers to fill their places. So for our bonus plan we divided our employees into 12 groups. These groups were not equal numerically, but the salary totals of the groups were about equal. For the first group we picked men who had been with the company a year or more. Each group con- tained workers from all parts of the plant. For example, there would be workers from the office, from the toolroom, from the assembly benches, from the drill-press department, and so on. This method of selection was chosen for two reasons. First, no one set of workers from the same depart- ment could combine to present unusual demands at the same time their bonus was due, because their bonuses would be due — as I will explain — ^at 12 dif- ferent times during the year. Then, too, we saw a value in having the entire shop reminded once a month that the bonus plan was in effect and being carried out as we had promised. The bonus check is deUvered in a large envelop bearing in bold red letters "Bonus Check." The envelops are delivered on the first day of the month ^— or on the second, if a regular payday comes on the first — ^by one of the office force who goes through the shop and lays each envelop on the bench or machine of the worker to whom it belongs. When a worker 214 PAYING WORKERS on the assembly bench, for example, receives this dis- tinctive envelop, all the workers on either side are reminded that within the next few months they have similar envelops and checks coming to them. All the bonuses of one group are paid each month. Our plan provided that on August 1 all the workers in Group 1 received one month's bonus, on September 1 the workers of Group 2 received two months' bonus, and so on until August 1 of this year, when Group 1 will receive a full 12 months' bonus, and thereafter each group will receive its year's bonus on the first of the month corresponding to the original schedule. From the workmen's point of view there might be an objection that we were planning this bonus from the management point of view without any regard to the worker's interest. This is not so. We have not made this plan to harm the worker, but to help him. The way our employees have responded ought to be sufficient evidence that the scheme had pleased them. Of course we planned to protect as far as possible our interests, but that is the first essential of every manage- ment plan, and in protecting our interests, the interests of the employees are also protected. How the plan has worked out has already been indicated. The production curve which is shown on page 211 tells better than words what the results have been. The figures — also slightly changed, but all in exact proportion to the real figures — indicate how it has increased, since our bonus plan went into effect, to a figure nearly 50% higher than that which we were getting even during the war. The bonus plan treats everyone alike. And because it does this it has brought a harmony among workers, which had never been known before in the plant. PART III LABOR TURNOVER AND COSTS CHAPTER XVII HOW TO FIGURE LABOR TURNOVER What labor turnover means to a business, whai U may cost, and a standard method of figuring it. TAKE the "temperature" of a business in terms of labor turnover, and you have a fairly accurate index of the state of health of that business, in so far as its labor management is concerned. Why does this test so often indicate an advanced case of labor mis-management? Why should a plant normally employing 1,000 people have to hire 3,000 or 4,000 in the course of a year to keep the force up to normal, as so often happens? Why do the doors of emplo3maent in many concerns siraig outward as easily as they swing in?' Are the vast masses of workers naturally imstable? Do they find a keen enjoyment in perpetually chasing new jobs? There are natural causes for a portion of labor turn- over. Death, health, age, sudden opportunity account for some changes in personnel, and such causes are unavoidable. But these causes are far in the minority, when the total turnover in business is summed up. This is a vast, perplexing problem, aggregating eco- nomic wastes to individual businesses and to the nation that cannot be measured accurately, and must be merely guessed at. Judging from a variety of experiences, the total loss must be immense. It is a condition that eats into production, disturbs organ- ization, and threatens net profits. 217 218 LABOR TURNOVER AND COSTS And what is the reason for it? There obviously is no one reason; there may indeed be dozens or hundreds. Some condition exists, or some situation arises, which leads a worker to believe that he is mistreated or is most unhappy in his present job. He would rather quit the job than stay on. So he quits. Or he is fired for perhaps some equally insubstantial reason. That's all there is to it! But who is to blame? The man himself? Sometimes: — ^he may be utterly un- suited to work in the surroundings in which he finds himself, even though the conditions appear ideal to 99 out of 100 of his fellows. That, however, is not the typical case. Mostly, the blame goes direct to the door of management. The employer fails to keep up a place which men find so very congenial that it takes something more than an ordinarily disgruntling incident to make them quit. Run through the chapter headings of this and the companion volumes, and in each you will find a reason for or against a high labor turnover — for, when the wrong methods are used in handling that problem; against, when the right methods are used. When the turnover is excessive, either the whole attitude of the management toward the men is wrong, or if it is right there are lapses in administration — foremen do not carry out the company policy; complaints are not heard and corrected; the community lacks adequate housing; good men are put at the wrong kind of work; there are misunderstandings about wages; fellow- workers prove uncongenial; working conditions are unpleasant or unsafe; the hours are too long; and so on, through the whole list. Such mistakes occur occasionally in the best-managed plants — they cannot be avoided. When the workers have confidence in the management, the mistakes tend in most cases to take care of themselves without serious results. But when the air is charged, with suspicion, the most WHAT LABOR TURNOVER MEANS 219 picayunish annoyance may send men on silent strike, through calling for their time. Thereupon the costs of labor turnover begin to appear. Advertisements have to be run, perhaps. There is the clerical, executive, and overhead cost of hiring. Somebody has to train the new man. There is unusual wear and tear on machinery and tools during the training period. The loss of production during the period is a most important factor. Spoiled work and mistakes may trail their consequences through a long chain of multiplying costs. The new man is more likely to get mixed up in an accident than the old. And then there is the investment, with interest charges, in extra equipment that must be kept on hand to take care of decreased production resulting from a high labor turnover. One employer who counts in all of these itemfe, figures conservatively that it costs him on the average $59.75 to set a new man to work. Another employer, by one method of computation, figured the cost of a single replacement at $334; and by another method at $444! Definite costs are hard to get, owing to the multiplicity of factors requiring consideration. But it is obvious that the average cost per individual is appreciable; and when, as in a Pittsburgh concern steadily employing 16,000 men, it was necessary to hire and fit 30,000 men in one year to maintain the normal force, the doUars-and-cents total begins to be appreciable — even appalling. All this does not take into account, either, the pos- sible social cost — the fact that many men become chronic floaters, unstable in their habits, permanent minimimi-producers, and sometimes feeders of the criminal classes. "With these facts clearly in mind, it becomes apparent how important it is for employers, merely as a matter of self-interest, to do whatever lies in their power to 220 LABOR TURNOVER AND COSTS minimize labor turnover, in so far as it is unnecessary or undesirable. This chapter is not the place to dis- cuss methods. All that has gone before in this and the companion volumes is directed more or less to reducing turnover. Everything that effects betterment in management is conducive, other things being equal, to a lower labor turnover. Here we need consider only methods of computing turnover, and methods of find- ing out what the turnover really is. It is clearly desirable to have a standard method of figuring, in order that different concerns may compare results. The following is the plan submitted and approved at the Rochester meeting of the National Association of Employment Managers : First, find the total separations for the period considered and divide by the average of the number actually working each day throughout the period. Then multiply by the proper factor to reduce to a yearly basis. The following example shows the method of computing the percentage for one week. Total number of separations during week 300 Daily force reports (workers actually on the job): Monday 1020 Tuesday 1065 Wednesday 1070 Thursday 1035 Friday 1040 Saturday 990 Average for week 1037 Percentage labor turnover 300 x 52 = 1504% 1037 The method of computing the percentage of labor turnover for one year, assuming that records of daily attendance are averaged for each month, is as follows: Total number of separations during the year 5020 Average number working each month as determined from the force reports on daily attendance records; WHAT LABOR TURNOVER MEANS 221 May 2040 June 2100 July 2000 August 1980 September 2200 October 2220 November 2280 December 2240 January 2250 February 2170 March 2230 April 2400 Average for year 2176 Percentage labor turnover 5020 = 231% 2176 Some complications arise ia figuring turnover, as when the force is on the increase or decrease; but the above formula stands the test for typical cases. There is, indeed, some doubt whether the average number should be figured from those actually in attendance — ^as is done above — or from those on the payroll. The careful analysis of turnover, not only for the business as a whole, but also by departments, is important, because it may help to locate bad manage- ment practises which can be corrected without diffi- culty. To illustrate: A concern learned that there was a high labor turnover in its power department. Detailed analysis of the situation developed the fact that the turnover was confined almost entirely to the coal handlers. Inquiry showed that these men were receiving 50 cents a week less than the coal handlers at the local railroad station. The wage was raised 50 cents, the turnover ceased, and the management was relieved of its worry about demurrage charges. Not only is analysis by departments desirable, but also, sometimes, by sex, nationality, age, foremen, roomSj heaviness of work, amount of illumination or ventilation of work, place, dirtiness of job, method of 222 LABOR TURNOVER AND COSTS pay, amount of accident risk, anxiety, amount of other fatigue factors, distance of workers' homes, and so on. Here is a case: A manufacturing concern had approximately 250 employees on its payroll each week for a year, but during the year employed 850 new men. About 200 employees stayed the year through. It is evident that in this case the turnover occurred among about 50 employees, or only 20% of the force. In other words, 80% worked through the year, whereas 850 were employed to keep 50 men in certain parts of the business. There was a turnover of 340% for the whole enterprise but of 1,700% for certain phases of the business. This is one of the things that a study of turnover develops in most businesses. There are frequently one or two departments where turnover is much worse than in others and any efforts to reduce turnover can thus be started in the one or two worst places and results thereby accomplished quickly. One big fault with most employment and turnover statistics is that they are too general and too vague. There is also a tendency on the part of some to go to the other extreme, and become so detailed that execu- tives cannot give them the proper time or considera- tion. The employment department, without the active, cooperation of the chief executives, cannot accomplish much in reducing the labor turnover. One of the best methods of interesting executives, is to give them live, vital facts concerning the labor turnover; find out the weak spots, and concentrate on them; then by constant effort remedy them, one by one. If proper attention is given to the turnover in the worst departments or the worst jobs, the plant turnover takes care of itself. It is like everything else. . It must be done, bit by bit, each step in its proper place. CHAPTER XVni LABOR COSTS The part of labor costs in the general cost system, and ways to get labor costs and apportion them accurately to the products. As he looked over his daily sales reports one J-\ November, the owner of a concern manufactur- ing a variety of articles mentally stood in front of a mirror and congratulated himself. Day after day the sales continued to pile up. It looked like the biggest month in the concern's history. And it was the biggest by a wide margin in point of sales volume. Then came the monthly check-up audit — ^and when it was completed the manufactm-er stopped shaking hands with himself. For when the report of the audit was laid on his desk, it showed that the business had suffered a net loss of $5,000 over the same month of the previous year — ^a month in which gross sales had been 50% less. There was much pushing of buzzers and hasty simamoning of department heads to conference, to- gether with a rigid rechecking of the audit. But the $5,000 net loss would not be talked out of the record! After the first shock of disagreeable surprise, the owner and his bookkeepers began a still hunt for the profit leak. And the big leak finally discovered was one that had been letting more or less profit slip away practically ever since the concern started in business. It arose, as you may already have suspected, in the lazy and faulty figuring of labor costs. In fact, it 223 224 LABOR TURNOVER AND COSTS might be said that the costs were hardly figured at all: they were achieved by prestidigitation. Such leaks do occur in business. To understand just how the condition transpired in this business, it is necessary to detail some facts in the concern's history. The owner commenced business in a shoe box. In the early days the president and the office boy shared the light of the same window. For a starter, only three articles were manufactured. Labor costs — all workers were paid by the day — were figured by lumping and then apportioning them in equal amounts to the three articles manufactured. Now this happened to be a pretty good method, because the three articles took just about the same amount of labor to produce. The selling price arrived at turned out to be fairly profitable. The business grew and most of the methods improved — ^but not so the cost system. It merely expanded. The labor costs were allocated in the same old way. The addition of a new product virtually meant nothing more than the addition of one more number to the labor cost divisor. With the inevitable disclosure of the facts, the strangest thing of all appeared to be that it had not happened years before. But there was a reason for the disclosure in this particular November. The reason was the concern's newest product, which was a mischief-maker and a profit-destroyer. On this article the big sales record that had caused the owner to become self-congratulatory had been hung up. And its price had been fixed on the old plan, under which it carried a labor charge of only about 60 cents. When the facts were chased down, it became evident that the product should have shouldered a labor charge three times as great, or about $1.80. The bigger the sales, the bigger the loss! Now you may suspect that this case is overdrawn. That is not so, for it is an exact experience; but it DETERMINING LABOR COSTS 225^ may be true to say it is not entirely typical. It is, however, surprising what a number of concerns figure- their labor costs by the simple and bankrupting rule of guess-and-pray. The cost angles of labor have been pretty well threshed out. The common plan is to divide the costs- into two classes: (1) direct or productive labor cost; and (2) indirect or non-productive labor cost. Direct labor is a charge against the job; indirect labor goes to the departmental overhead. The constant aim of the competent cost accountant is to regulate th& indirect labor, so that it may be put upon the kinds of jobs that ought to carry it, instead of being roughly averaged, as in the instance first cited. UNLOOKED-FOR DEVELOPMENTS USUALLY FOLLOW THE ADOPTION OF A COST SYSTEM Getting the best out of labor is not a primary func- tion of cost accounting, but it so happens that the comparisons which inevitably flow from the adoption of a cost system always direct executive attention to labor problems calling for remedy, if such there be. And almost without exception, cost installations are found to result eventually in putting workers on some basis that acts as an incentive to better production: that is, a basis where extra effort, either in the way of care, or of increased production, or both, is rewarded by additional payment, to the mutual advantage of the employer and the employee. A common arrangement is to have an incentive plan of pajnnent — piece-work or some modification thereof — ^for productive labor, and to charge the non-produc- tive labor at hour or day rates. There is, however, no universally best plan, and it is altogether likely that even in the same concern different methods of allo- cating the labor costs will have to be used in different departments. 226 LABOR TURNOVER AND COSTS The setting of rates is of prime importance. Piece- Tvork, as has already been suggested in the chapter on wage-payment plans, is considerably worse than useless if the rates are not carefully and equitably set. If the unit pay is too low, employees become dis- satisfied; if it is too high, employees quickly know all about it, and instead of exerting themselves to gain the highest possible wages, they may devote inordi- nate effort to "getting away" with the high rate. Whatever basis of pajmaent is adopted, the direct labor charge goes to the operation. If piece-work is the plan, the amount to charge for labor is auto- matically fixed by the rate. Otherwise the time must actually be entered. In any case, the figuring of labor costs begins at the job. A time card which has given good results is reproduced in Figure 23. Each card covers a single job, and the form is designed for concerns in which the work comes in lots of fair size, so that not more than one or two cards are needed during a day. Of course, it is entirely possible to make divisions so that several lots may be covered by the same card. The form is immaterial, however, so long as it meets the conditions. The most valuable portion of the card is the division into hours and tenths of hours. When a workman starts he puts an "X" on the starting time, and when he finishes he puts an "0" in the proper square. If the workman or the timekeeper actually write in the starting and the finish- ing times themselves, accurate timekeeping will be difficult. One job does not always instantly follow another. There may be some waiting time between, and unless this waiting time, which is part of the operating overhead and should be so charged, appears in the records, the labor cost will not be exact. The next job will probably appear unduly costly, and wasted time will be concealed. The blank squares between the finish of one job and the start of the "X"W««T "O'-riNtSH 1 7« 712 n. 7» 720 736 742 748 7S4 lllTlfllFlllUE, am 8K SIS 624 836 836 842 846 854 Dire 9n 912 918 92« 930 936 942 946 814 ORDER m. 10« 1012 10" 1024 1030 1036 1042 1046 1064 1106 1112 1118 1124 1130 1136 1142 1148 1164 12 nPFUTIIIH K 106 112 116 124 130 138 142 148 1S4 OUINTITV STinTFD 206 212 216 224 230 236 242 248 2S4 306 312 316 324 330 338 342 348 354 OUHNTITY iniUD «o« 412 418 424 430 438 442 448 484 S06 612 610 524 530 538 642 548 5S4 606 612 618 624 630 636 642 648 654 7 TIME ■AH WUE O.K. r06EM ■tor ^ W*«i CotI 0^ Howty Cim- Donn Hour % H IM -•»|,», 1 OPM- Ow«tlq«. UnliAvtnsH 1 ■" r~ - 1 TnUPlrt _ UborCMl Figure 25: By comparing actual time consumed on production, as shown by this record, with the standard for that operation, one em- ployer is able to know the relative efficiency of all his operatives. MACHINE OPERATION RECORD (Ulnnth nf 1Q1 Machine Number Machine Number Machine Nunober Machine Number operator Helpers Operator Helpers p Operator Helpers Payroll Oporator Helpers Hrs. AmL Hrs. Ami Payro Hrs. AmL Hrs. AmL ayro Hrs. AmL Hrs. Ami Hrs. AmL Hrs. Amt No. No. No. No. — - ^ No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. No. fin. No. No. No.. No. No. No. No. Total Total Labor Power Fixed Charget Repairs . 1 J — L 1 L J J 1 — L 1 1 L_ 1 T . — Share of Oenartnunl simI General Expense Total Actual Machine Cost Actual Co«l per Hour Share or Denrtmcnt and General Exponse (Aver.) Total Average Machine Cost Average Cost per Hour Figure 26: This concern, you will note, groups ail labor and machine charges, and thus provides final production costs. The average indi- cated at the foot of the column makes valuable comparisons possible. 22S DETERMINING LABOR COSTS 229 next represent the idle hours consumed, and are posted to an idle-hour card. In many concerns mechanical timekeepers, discussed in an earlier chapter, may be used to advantage. The labor cards, however made up, go through the departments to the payroll clerk, who checks them up with the time clock and makes the necessary records for the payroll. Then the cards pass to the cost department, are entered on the proper cost sheets, and are filed as subsidiary records. Convenient for translating men's time into dollars are the tables shown in Figure 24. The tables are of celluloid or other transparent material, one being proAdded for each rate, and are arranged on the principle of the slide rule to quicken calculations and to minimize error. A useful check. on the efficiency of the labor is the operation cost record shown in Figure 25. The actual time for each operation is here entered by the cost clerk, and the actual operating performance is compared with the standard times. The standard times, of course, are set by time studies expertly made. The relation of the actual and the standard times gives the efficiency percentages, and if these per- centages are low, an investigation is in order. A low percentage of effectiveness may mean that the labor is at fault. At any rate, it usually reveals some cause for any discrepancy. The foregoing labor records are part of a concern's cost system which revolves around a production unit or a labor dollar. But if, as in many plants, the machine hour basis is used, then it is the time of the machines which is important — the labor is incidental to the operation of these machines. Figure 26 groups the labor and machines and also provides for the final machine costs, spaces being provided for apportioning the fixed charges — ^power and other ex- 230 LABOR TURNOVER AND COSTS pense items — which the machine in question absorbs. The average of the machine performance, made up at the foot of the column, affords valuable comparisons. The operations of all machines go to a simimary (Figure 27) in which the actual hours used are com- pared with the available hours, and the percentages thus derived. The percentage of actual hours to available hours often is most surprising. Employers may be at a loss to decide whether they have been supporting the machines or the machines have been supporting them! Non-productive labor, not being chargeable to a specific job, involves a record of only the starting and finishing times — usually the beginning and the close of the working day — and the charge to the proper department. If employees work continuously for one department, a card is scarcely necessary; if, however, they spend part of the day on overhead work for department X and the remainder of the day on over- head tasks chargeable to department Y, then a card should be made out in order that both departments X and Y may get the proper share of overhead. Though indirect labor is not charged directly to a job, that is no reason why adequate wage incentives cannot be used on this class of work; they can, in fact, often be used to great advantage. Who knows, for example, just what he is getting out of his cleaners and shippers and truckers? In many concerns this type of labor is from 10% to 33% of the whole. One shipping and receiving gang, for example, did work so complex that it had not been considered possible to devise a wage incentive. The difficulty arose from the numerous sizes of packages and cases in which the finished product was shipped, the number and location of the finished stock warerooms and shipping platforms, and the variable distances which had to be covered by the truckers. There were approximately lUCMNE OPEilATI0N:SUMMARY Psrfod EndlngL Figure 27: Many employers have found on investigation that ma- chines could be used much more profitably by eliminating idle time. This form tells how the "available" and "active" hours compare. FOREMAN J^kson yFAR 191T MONTH September WnRK Assem. 4-cyl Motors DEpT Motor Rooa Date Total Hours Units Delivered Hours per Unit 1 2 3 4 5 225 542% 21 37.9 546K 18 34.4 ^27 14 35.3 29 30 262K 34.3 This Month 12005 350 34.3 Previously Repo Tn Date rtert 55467X 1198 46.2 67472X 1548 43.5 St^nfiiO'd 37.5 Figure 28: Employers are realizing more and more every day the necessity of watching the seemingly unimportant details of production. This form provides one executive with pertinent cost data for each day. 231 532 LABOR TURNOVER AND COSTS 100 different sorts of packages to be handled between seven store rooms and nine shipping points. Some of the storage rooms were up four floors. As any of the finished articles might be stored in any of the ware- rooms and might have to be delivered to any of the shipping platforms, there were theoretically 6,300 possible combinations for which accurate rates must be set. Practically, however, it was found that the "variations in the loading and unloading times were small. A very simple table of rates was devised to provide for the different distances of travel and the few variations in handling time. Virtually no addi- tional effort was needed to keep the record of this group's work for payroll purposes and the net result of the new method was a reduction in the shipping labor cost of 30%. THE NEW PLAN RESULTED IN A 86,000 SAVING ON ONE ITEM ALONE The number of men required after the gang was put on piece-work was approximately one-half that necessary under the day-wage plan, and those retained in the crew were figured to earn an average of 223^ cents an hour on the piece basis as against 18 cents before the change was introduced — an increase of 25% in the average earnings per man. The company saved about $6,000 a year on its shipping and receiving alone. Some way usually may be found to pay men better wages for better work, no matter what the task. Labor cost figures preach no end of sermons to the man who understands them. The total pajToU means little. A departmental payroll means more, but it also can be improved upon. Here is a hint of possibilities. Assume a departmental payroll sum- mary in this form (the wage amounts are not intended to represent any actual condition, but merely indicate a, method) : DETERMINING LABOR COSTS 233 Department Amount Workers 1 S 251.25 20 2 701.02 36 3 387.29 30 4 1,521.14 138 5 . 527.82 56 Total $3,388.52 280 Average wages $12.10 To give further necessary information, the payroll summary and analysis might be along these Unes: Depart- Total Direct Indirect Average ment Pay Labor Labor Hours Rate 1 $ 251.25 $ 200.79 $ 50.46 1,005.0 $0.25 2 701.02 690.12 10.90 2,002.9 .35 3 387.29 362.41 24.88 1,683.8 .23 4 1,521.14 1,318.77 202.37 7,605.7 .20 5 527.82 527.82 3,104.8 .17 Total $3,388.52 $3,099.91 $288.61 15,402.2 $0.24 It is simple enough, after setting up the payroll smnmary, to give it lively significance by adopting it as a means of controlling labor costs in connection with production. Every cost department receives production reports from the various departments, but often they are used only to determine monthly output. By gathering the figures from these reports weekly, it is comparatively easy to set up a weekly pro- duction record similar to this one: Unit lbs. lbs. yards dozen dozen If the payroU summary is then compared with the production report, the labor cost per unit in each department is had. Oomparing each week with the Department Quantity 1 20,000 2 10,000 3 13,750 4 2,050 5 2,225 234 LABOR TURNOVER AND COSTS preceding week or other desirable periods, immediately locates any tendency in the labor cost per unit to depart from the normal. This method is of course possible only where a unit can be provided. If no unit of output can be arranged, then an eflBciency percentage of the labor may instead be used. Effi- ciency ratings, as previously stated, are based on standard times found through time study. WHAT THE RATIO OF PRODUCTIVE LABOR TO THE TOTAL PAYROLL MEANS The percentage which productive labor bears to the total payroll is a barometer, thermometer, and fire alarm to the whole works. It tells when plant effi- ciency is improving or going to the bad; also when more is being spent on maintenance, experiments and the like, than the plant will stand. Where any considerable part of productive labor is day-work, the manufacturer faces a real difficulty, not insxirpiountable but requiring special treatment and special expense. The real remedy is often to eliminate the day-work as far as possible. The employees then receive higher wages, the incentive to do more is present, and as a consequence the work costs less. "Accountants," says one employer, "often make the error of summariziag and presenting totals of various classes of manufacturing expense, including non-productive labor, without showing the non- productive labor separately. This may be correct enough accounting, but it is poor operating. Distri- bution provides a way to trace leaks straight back to their source and before even a week's time is lost, and it is an absolute necessity for good operating con- trol as well as for cost purposes." Another employer says emphatically: "No man can afford to do business imless he has some formula that will give him the results of labor. It is a founda- DETERMINING LABOR COSTS 235 tion principle — to know labor cost down to its finest detail — ^because this enters most largely in the cost of most production. In our own business the materials used, such as iron, for instance, do not vary much, and if iron advances M a ton, it is only one-fifth of a cent a pound, and the item is small compared to a 5% or 6% increase ia the cost of labor." The extent to which the labor cost is subdivided must depend, of course, on common sense and the amount that the time and money thus spent will bring bdck in the way of results. The figures of themselves are of no account. They must have executive attention and action after they are prepared. The following monthly detailed analysis of labor cost per unit of product, is the type of report made up for the owner of a small blast furnace. With the labor cost thus finely subdivided, it is easy to see how comparison of the analyses from month to month en- ables the owner of the business not only to know whether his labor cost is too high, but also to put an unerring finger on weak spots — Occupation Amount Carpenter $0.0171 Carpenter's helper 0063 Machinist '. 0254 Machinist's helper 0128 Blacksmith 0132 Blacksmith's helper .0079 Oilman 0071 Foreman 0751 Engineers (blowing) 0212 Engineers (locomotive) 0202 Switchman 0171 Water tenders 0199 Fireman 0172 Storemaa 0200 Keepers 0224 Helpers, first 0199 Helpers, second 0384 236 LABOR TURNOVER AND COSTS Occupation Amount Iron carriers , 0992 Scrappers 0178 Laborers (C. H.) 0403 Top fillers 0199 Top fiUers' helpers 0192 Scaleman 0192 FiUers 1069 Boss (S. H.) 0101 Ore breakers 0171 Laborers (S. H.) 0243 Cinderman 0171 Trackmen ^ 0229 Laborers (C. Y.) 0256 Iron loaders 0464 Laborers d.Y.) .' 0092 Boss unloader 0092 Coke unloaders 0413 Coal unloaders 0046 Ore unloaders 0096 Stone and marble unloaders 0004 Crusherman 0402 Horse hire 0211 Horse hire helper 0.066 Moulder 0108 Moving chills 0202 Loading chills 0025 Oiling coal 0071 Repairing cars 0040 Digging loam 0070 Cleaning up .0119 Cleaning boilers 0021 Total .SI. 0492 One characteristic which labor costs share with costs of all types is that, when they become ancient history, they are valuable mementos of other days, but scarcely helpful as guides to management. A Cleveland em- ployer, to secure his labor costs in time, has banished red tape. He puts his plan as follows: "It's mighty hard to make a strong point with a foreman on cost figures a week or two old. I have DETERMINING LABOR COSTS 237 decided on a few simple facts that I need to know. I get those regularly, and let all the other facts that are not of instant importance come through when the cost department gets roimd to them in regular order. Take a simple record I have" (Figure 28) "of which I give one copy each month to the man in charge of the job, and another copy to the cost man. "Now let me show with an example how my plan works. Assume that one of the jobs I wish to watch is the assembly of a motor. I instruct the foreman to place each day the total nmnber of hours worked by all the men in the department in the column headed 'total hours.' In the column marked 'units delivered' he is to place the number of completely finished motors. The cost man calls on the foreman daily and copies the record upon the duplicate sheet. Dividing the first column by the second column gives the hours per unit. I get the result. "In computation, each day's hours and units pro- duced are totaled to the preceding days, so that a running total and a nmning average are obtained. When the end of the month is reached, new sheets are issued and a new average is started. "Thus I have for every day in the month the actual number of hours per unit from the first day of the month to date. "Here is how the plan works out in detail. We furnish 10, 20, or 50 of these sheets to the various foremen. The cost clerk makes the round of the plant once a day, at a specified time when the foremen have been instructed to have the figures ready for him. "He carries a little loose-leaf book with the duplicate sheets. He copies the data. In a half-hour he is back at his desk. In another half-hour he has per- formed his elementary arithmetic and obtained his averages. A slide rule here is helpful. He places his little volume on my desk at 8 o'clock every morning 238 LABOR TURNOVER AND COSTS and then checks his records with the time cards. I open the book and have the drop on the 50 or so most important operations in my plant." There are plenty of other plans similar to this in purpose, that keep the cobwebs out of labor cost figures, and mate them real management assistants. Unless they are at least that, they are useless. The business man who does not have accurate labor costs, but mud- dles along in a maze of faulty figures, usually is tread- ing on the thinnest ice. CHAPTER XIX ACCOUNTING FOR NON-PRODUCTIVE LABOR This %3 a method used to standardize non-producHve labor, and keep the cost as low as possible — used at the American Optical Company by E. B. Bickley, who describes it here. IT is difficult to find a simple method of standard- izing non-productive labor. The controlling factors are vague and not amenable to analysis. The plan I am going to tell about here does not set forth an added theory or a new consideration of the subject, but is a practical method which has been standardized for certain conditions and which I have actually used advantageously in my work. The control of departments having productive work done on piece-work, task, bonus, or lot system, resolves itself into a proper consideration of the rates under which the production is accomplished, and the cost of the supervision or non-productive labor. Just what this latter cost should be, what it is, and how it should be controlled, is the subject here. The ideal control should be simple in information required, easy to handle, and flexible. The rates and method of pajrment of productive workers depend upon conditions and operations, and the determination of these factors should be the duty of an operation-study and rate-setting department, but the non-productive labor problem in an organization can be handled with more uniformity, with little additional work, by this method. 239 240 LABOR TURNOVER AND COSTS The value of this system is based upon the assump- tion: "In every department or factory a fixed relation exists between the required non-productive labor and the productive labor hours, or production." Just what this relation is and how it may be used is the first consideration. The truth of the above assump- tion and how closely it may be relied upon is the second consideration. Assimiing there is a fixed relation between non- productive labor and productive labor for a particular case, to find this relation, we must have recourse to records of production in productive units or productive hours, and non-productive labor in dollars and cents simultaneously over consecutive periods. The pro- duction should be figured in production units if possible, the value of the parts in production units being assigned with regard to the number of non-productive hours required in its completion rather than the productive hours or value of the part. This is an important point, the oversight of which might lead the figures astray. Where only one style of part is manufactured, the "productive hours" may be used; but where many styles are produced the problem becomes more com- plex, and the required inspection, trucking, repairs, supervision, receipt, shipment, packing, tools, difficulty of working, and so forth, must be considered in assign- ing the value, in production units to the part. Having the required record (Figure 29) it is necessary next to establish the relation. From consideration or trial of the particular case it is decided whether "pro- duction units " or " productive hours ' ' will make the best basis. The relation between the "production units" or "productive hours" and "non-productive labor" is plotted on cross-section paper, using "non-productive labor" oii the vertical axis, and "production units" or "productive hours" on the horizontal axis, numbering the points consecutively as they are entered. From a CHARGING NON-PRODUCTIVE LABOR 241 study of the pajToll the "zero production" figure is determiaed in the following manner: Assiune that the plant is shut down, to start again in one month; then to build up production gradually, what could the non-productive figure be cut to? This Tnim'Tiniinfi figure forms the lowest point on the diagram. Draw- ing a line through this point and the best records, gives the characteristic line of the department. The pro- ductive capacity is checked against this line weekly. ■- - ■ ■ ■ ■ - 1 1200 1100 1000 Non- mo Productiva Piyroll 500 Dollars ^ per Month eoo soo 4W 300( 300 100 '» n ^, ^ POOH r^ '? P^ ^ ^ ^ ^ > fl ^ ^ >; ^000 1 ^ i< ^ ^ r ^ ^ :^ ^ ^ r ^ ^ ^ ^ ^ ^ ^ ^ Vk >^ u _ _ ^ ^ 5 Y KEY POINT DATE 1 January 1917 5 June 1917 12 January 19IS ^ PFH DUC ION — — 10 20 30 40 SO 60 70 60 90 100 tlO 120 130 HO 150 160 170 180 190 PRODUCTION UNITS M UNITS PER MONTH F^ure 29: With this chart, the relative part which non-productive labor plays is readily seen. In fact, the chart may be used to indicate the ability of the department manager, as explained in this chapter. and the point marked in as shown. If the point lies above the line, an unsatisfactory condition is indicated; if below, a new record is made, and a new line may^ be drawn. Unsatisfactory conditions occur largely thus: 1. Increased inspection 2. Wrong assignment of duties ■M2 LABOR TURNOVER AND COSTS 3. Too much clerical work 4. Too much supervision 5. Poor tool work 6. Misdirected efforts 7. Increases of pay 8. Interruptions of work 9. Temporary loss of production. It is possible through rearrangement of duties, and a study of the above actual conditions, to keep the non-productive labor charge at all time near the line and occasionally below. By ruling arbitrary lines similar to the lighter lines on the chart (starting with the poorest record as O) the efficiency of the foreman or manager of the department may be computed. The average percentage for the year may be a factor in determining successful management. Now that we have considered the relation between non-productive labor and productive labor hours, or production units, it remains to consider the truth of our primary assumption. Non-productive labor •can be classed under the following groups: Group A 1. Building repairs, renewals, maintenance 2. Development of ideas, experimental 3. Approval of operations 4. General supervision, labor and equipment 5. Material control 6. Investigation of new equipment 7. Planning work Group B 1. Care of material in process 2. Quality, testing, approval of materials 3. Material records 4. Elrection, location and revision of equipment 5. Spares, and care of equipment 6. linployment and discharging labor '7. Department costs, welfare, and safety first CHARGING NON-PRODUCTIVE LABOR 243 8. Timekeeping and records of work 9. Make ready for operators 10. Instruction of operators Group G 1. Pactdng, shipping, delivery of materials 2. Trucking transportation 3. Assignment of work 4. Wage payment Group A is practically independent of production. Group B is neither directly proportional to production nor a fixed charge, but composed of two elements, a fixed charge plus a proportional charge. Group G is proportional to production entirely. The fixed portion of Group B may be added to Group A, and the variable portion to Group C. Or the total non-productive labor charges may be resolved into a fixed charge and a proportional charge. The fixed charge is determined by the "zero" production figure mentioned above, and the proportional charge is indicated by the slanting line. We find thus that our primary assumption is correct. Conditions have been standardized and a scale of measurement for these conditions laid down. CHAPTER XX A MEASURE OF LABOR EFFICIENCY This chapter — by E. L. Ashley, of the Business Service Corpora- tion of America — describes a method by which jobs involving different tasks, different wage rates, and different outptdfoT each group, can be compared. THE solution of the problem of determining the individual efficiency of employees depends upon the following variables: 1. The amount of wages received 2. The assigned task 3. The amount of unit production or output. If each employee in any organization were to receive the same hourly wages, produce the same quantity per hour, and was assigned the same task, it would be a comparatively simple matter to arrive at their relative efficiencies. In such a case, the matter of wages and task would be eliminated, leaving the unit production or output as the relative index of the effi- ciency attained by each employee. This, of course, is never the case in any organization. The condition that applies is more nearly as follows: A receives $12'^per week B receives $15 per week A's assigned task is 200 per hour B's assigned task is 75 per hour A's output is 244.8 per hour B's output is 57.8 per hour 244 STANDARDIZING EFFICIENCY 24& A's work consists in pricing individual items upon receipt of an order, B's work consists of packing orders containing half a dozen items*, such as small tools, implements, repair parts, and so forth. The efficiency of A and B in absolute percentages, taking into account the three variables referred to in the first paragraph of this chapter, is the information which the superintendent of a division requires, and a summary of this information as applied to all divi- sions is essential for the general superintendent. In the first case the superintendent can tell which employees in his division are holding down the average efficiency, while the general superintendent can just as easily tell which of his division superintendents are holding down the general average. This is not a small problem for a concern with over 30 divisions and having a large number of employees. In the solution of tnis problem, the first step consists in installing and keeping up individual output and time records. These are carefully analyzed, methods are studied, and in many cases time studies are made in order to determine the unit task varying with the wages; or, a standard cost is obtained for each measur- able activity. The second step consists in determining some simple and accurate method for arriving at the value of these output records, as they reflect the increase and^ decrease of the efficiency of the individual employee^ Take the above case of A and B : A produced 22.4% more than the requirements. B produced 23% less than the requirements. The cost of A's output ($12 per week of 44 hours) is $0,114 per 100. The cost of B's output ($15 per week of 44 hours) is $0,590 per 100. If A's output task is 100 units or one unit for every two items, the output will be 122.4 imits. The per- 246 LABOR TURNOVER AND COSTS centage of increased output will still be the same, that is, 22.4%. If B's output task is 100 units or 1 unit for every ^ items, the output will be 77 units. The percentage of decreased output will still »be the saine, that is, 23%. In each and any case, actual output can be compared if this output is multiplied byfa-f actor derived by divid- iag 100 by the task, or 100-^ T= factor. Any base amount may be used, of coiu-se, but in the particular <3ase under consideration 100 was the number taken. The percentage of the respective outputs on this basis •does not change. As will be self-evident from the above, the actual unit cost does not show comparatively, nor does it ■express the percentage of individual efficiency. From the above cost figures of $0,114 and $0,590 per 100, A's efficiency is not 5.18 times that of B. However, on the basis of the number of units pro- duced, remembering that A produced 122.4 units and B produced 77 units, the relative cost per 100 unit will be: A =$0,223. B = $0,443. These figures are comparable and it is seen that A is about twice as eflicient as B. By means of the relative cost, relative efficiency can be obtained. Actual efficiency will next be determined. If the tasks have been properly fixed, we can deter- mine a relative cost which will represent 100% effi- ciency. This is a matter for judgment in the plant where this plan is used. It is evident that the output task is not 100% efiicient; since that, like the "prob- able error," is as likely to be exceeded as not, and we know from experience that employees do not, even for 50% of the time, exceed 100% efficiency. Based upon the best judgment available, and com- paring with a few highly efficient employees, a relative cost of 10 cents per 100 was set as that relative *cost which represented 100% efficie»cy. WEEKLY EFFICIENCY REPORT WEEK EHDINC Jane It Ritalin Sundlng DI¥ISIOi Nuirtw of Nuinbir Receiving JZS Numbel' Avenge Output EFFICIENCY Thll Week LariWeek Tills Week UsIYear LmiitoyeM Bofiui If BmiB Deficient Deficiency III Task 1 15» SB 34 »4.M 2 1 .07 186.0 70.0 73.2 63.6 I 107 62 42 2-S9 U 1,03 173.0 68.6 66.8 31 .« J}J El 17 4.38 1 .86 133.0 51.6 63.8 44.7 * SI 21 f.«7 \0 • 38 142.0 47.2 80 .3 41,8 i 64 47 3,47 a 1.47 140.7 46 .8 78.6 47.8 • 113 2? IS 3.S« s .62 137.9 46.3 /■O.O 121 T2 1 B» 2.31 10 1.36 128.7 42.1 30.8 * 131 «a IS 2.18 IS 1.68 116,6 39.7 33,4 39 13 4.98 109,7 37.4 46.7 29.3 12» e> • 3.33 2 .64 100.0 34.1 29.4 28,8 — Jl— i» 93.8 30.3 30^ .25.7- E Av«ng« 1 ■n» BfUMity flpira !■ Ow % of tlM Avhih MMtn Cm pw 100 to tO.10 pw lOa TM 10.10 ■■ 100 *™^" Figure 30: This report gives the general superintendent a good indi- cation of what the different divisions are doing. If a division head, needs the asdstance of his chief, this chart is pretty likely to indicate it. WEEKLY COST AND EFFICIENCY SUMMARY ^ WEEK END MR Jwia 14 ■ Hum Activity Siri>- Dhr. HO. No. Houra Wortcsd Per Hour 1 Outpat Tuk Per Hour 2 Aetuil Output Per Hour 3 ActuilCoti PerlOO ^ % o( Output to Tukg RetatJva Coat Per 100 8 Mom Frlesr 10 45.0 .256 i 35 63.3 • .404 181.0 1.141 70.6 10 S4.7S .30£ 150 206.1 139.0 STok 12 43.0 .329 200 265.1 .122 133. C .244 ;:^ 43.0 ISO 108.0 ,279 72 .C .430 Cfti4 15 «.« .280 35 55.6 .502 160 .C .175 57.8 venoar 0. »> 12 43.0 ,8fe0 w '« 92.6 .303 125.C .223 41.5 .380 y 85 150,0 .166 181.0 .154 27.5 .S60 t-- 74 115.0 .343 156.0 .179 *.ll 43.0 .302 r ** 41.4 ,739 *lnKrk 10 44.0 .366 i «* l.oeo 55.0 DonaU 10 lft.67 .326 ^ 60 35.7 .910 71.3 .456 '•K 35.5 4'. 5 .660 Ball ^•B 43.0 .302 ISO 104.3 .290 ] '■5 15 43.0 ,302 HO - 99 .8 .303 90.6 .333 "Bcbnto 19 43.0 .302 110 161.4 .167 147.0 .205 3«.B .280 100 72.4 .387 .585 VMppW 36.5 .380 ' 40 49.5 .565 K«ln 14 44.0 .341 ■ SO ei.o .657 IS 43.0 .303 - 65 37.3 .813. 57.3 .627 *SoiwU "4 13 25.33 .329 36.0 .603 51.4 «633 • t 36.5 .302 80.0 .604 . h 45.0 .260 n .g:J .637 41.5 .260 90 .321 .188 Cktbey ir> 14.0 .341 56 .613 76.1 .443 MUeu 10* 40.0 .335 .848 u 44.0 .302 45 23.8 1.270 .573 13 16.0 .306 31.1 1.400 Saportw Irwin 6.0 .280 .446 IS e.o .341 63 63.8 .525 kmm 100,0 34.1 Bwnrin; IffielflDOT !• ^-t^ batter tbu lut .v ~ Tta* four eqilorea* with •taro oppoalt. BOk. a ttaalr aaai a have tiec m taken o ff tbaoe M blTltl«a. sua aboiiU help rfttlkig for next w*«k M tbay •!] have rat n^a leaa than SOK. Figure 31; A careful study of costs and results for each division is afforded by this record. Weak spots inevitably show up, and having, been located, their elimination is then a comparatively simple task.. 247 '248 LABOR TURNOVER AND COSTS On the basis of using 10 cents per 100 as 100% efficiency, from the above, the efficiencies of A and B are: A =44.8%, B=22.5%. The relation still exists, showing that A is twice as efficient as B, and the relation as expressed shows that the individual effi- ciency varies inversely as the relative cost. The third step is the design of the forms necessary for the compilation of these figures for the benefit of the division and general superintendents. On page 247, the form "Weekly Cost and Efficiency Summary," made up by the department of efficiency, shows the efficiency of every employee on record, and the average efficiency for the entire division. I It will be noted that beside representing the number of units produced by A and B, these same figures — 122.4 for A and 77 for B — also represent the "Per- centage of Output to Task." They are accordingly shown under this heading as being of more value than merely as "Number of Units Produced." Two copies of this report are made each week for ■each division. One is kept in the office of the depart- ment of efficiency, the other being sent to the division superintendent of the division to which it applies. Under "Remarks" and on the opposite side of the sheet will be shown the causes for fluctuation in efficiency from week to week, as the department of efficiency is able to ascertain. These remarks allow for the introduction of excellent constructive advice to the superintendent, which may save him being "called on the carpet" by the general superintendent. Since each division having measurable activities can be put on the same basis, it is only a matter of summarizing the information from the different divi- sions, as shown in Figure 31, and combining the same on a form such as the one shown in Figure 30. "Week- ly Efficiency Report." This is a report to be sent to the office of the general superintendent showing him STANDARDIZING EFFICIENCY 249 the percentage of efficiency of each division; or may serve as a report giving him control over the operating functions in each of his departments. As a means for determining the efficiency of em- ployees working on the same activities, and as an average for the entire division, the executives, through this plan, have a means for control which is not only accurate, but effective. Correct individual efficiency records have another important advantage. Through them, the nmnagement is enabled to follow the most satisfactory method in the division of a portion of the profits to their employees based upon the individual efforts of such employees in contributing to production. As a principle, employees do not look with favor upon the plan of setting aside a lump sum to be distributed equally among the employees or to be