Cornell University Library T 56.S585 . The influence of indusfrlal engineer 3 1924 002 249 427 1, UL»k'JL-l.V»'^>^ Engineering Upon tlie Earnings of Capital and Labor THE LIBRARY OF THE NEW YORK STATE SCHOOL OF INDUSTRIAL AND LABOR RELATIONS AT CORNELL UNIVERSITY 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/cu31924002249427 PUBLICATIONS OF THE SOCIETY OF INDUSTRIAL ENGINEERS Vol. V No. 2 September, 1922 The Influence of Industrial Engineering Upon the Earnings of Capital and Labor COMPLETE REPORT OF THE PROCEEDINGS OF THE EIGHTH NATIONAL CONVENTION OF THE SOCIETY OF INDUSTRIAL ENGINEERS Hotel Statler, Detroit, Mich. APRIL 26, 27 and 28, 1922 THE PIONEER PUBLISHING CO. PRINTERS AND PUBLISHERS OAK PARK, ILLINOIS Contents PAGE "Measurement of Management" — Joseph W. Roe 9 "How Industrial Engineering May Serve the Chief Administrator'' — Benjamin A. Franklin ■. 15 Topic — "The Education Department of a Small Plant" — Chas. W. Lytle 37 "Practical Tests of Employees" — Henry C. Link 54 "The Influence of Industrial Engineering Upon Manufacturing Plants" — E. Karl Wennerlund 66 "How Industrial Engineering May Serve the Executive" Discussion on the above topic — Harrington Emerson — John Calder — Hugo Diemer — Yoichi Uyeno — C. E. Knoeppel 77 "Managing Executive Group Meeting" — Edward T. Miller 89 Discussion on above topic — Stanley P. Farwell — E. W. Hulet — Hugo Diemer —J. W. Scoville - 91 "How Industrial Engineering Reduces Production Cost" —P. T. Sowden 120 "Sales Management and Industrial Engineering" — Norval A. Hawkins 136 "The Need of the Hour"— Robert B. Locke ; 148 "How Industrial Engineering Can Save Labor" — Matthew Woll 155 "Our American Aviation Development and Policies" —Howard E. Coffin 167 Committee Report Elimination of Fatigue — Frank B. Gilbreth 172 "Fatigue Study in Japan" — Yoichi Uyeno 176 "Progress of the Movement for the Reduction of Noise" — Henry J. Spooner _ 180 "Fatigue in Education" — Dr. S. A; Curtis 190 PAGE "With Budget Control, What Non-Essentials Can Be Eliminated From Present Industrial Accounting?"— W. P. Hilton 199 Discussion on above topic — C. B. Williams — N. R. Crawford 203 "Experience With Employees' Representation" — E. S. Cowdrick — ^John Calder 217 "How Industrial Engineering Increases the Productivity of Each Industrial Unit at Reasonable Cost" — D. B. Gauchet _ —255 "The Conservation of Labor" — L. Moorehouse _ 280 "The Conservation of Labor" — A. S. Cunningham _ 282 "The Conservation of Material" — Anthony Fritz 293 "The Conservation of Material" — Fred M. Sawin 298 "The Conservation of Plant and Equipment" — F. H. Lowe 305 "The Conservation of Plant and Equipment" — Emil J. Schmidt 312 Convention Program 318 Convention Committee 322 Word of Appreciation 323 S. I. E. Local Chapters 325 Previous Conventions 326 President JOSEPH W. ROE Head of Department of Industrial Engineering, New York University New York City Vice President in Charge of Education DWIGHT T. FARNHAM New York Vice President in Charge of Finance E. E. ARISON Chicago Treasurer F. C. SCHWEDTMAN Vice Pres. The National City Bank of New York Vice President in Charge of Research EDWARD J. KUNZE State College, Pa. Vice President in Charge of Promotion WILLIAM S. FORD Milwaukee, Wis. Secretary W. G. SHEEHAN 3733 Beaufait Avenue Detroit Business Manager GEORGE C. DENT 327 S. La Salle St. Chicago DIRECTORS E. E. Arisen Chicago Barton T. Bean San Francisco Irving A. Berndt New York A. Russell Bond Jersey City, N. J. Harrington Emerson New York Dwight T. Farnham New York F. B. Gilbreth Montclair, N. J. Norman A. Hill Baltimore C. E. Knoeppel _ New York Edward J. Kunze State College, Pa. John F. Price Cleveland Joseph W. Roe New York E. L. Ryerson, Jr _ Chicago C. H. Scovell _ Boston W. G. Sheehan. Detroit Past President L. W. WALLACE Executive Secretary, American Engineering Council Washington, D. C. Office of the Society 327 So. La Salle St., Chicago "Measurement of Management" By JosEPJr W. Roic I'rciililtiiit, Tlir Society of tiKlintrlnl KiiKlneori, llrnri nl Drpni'tment of Induatrlal HiiglnefiliiK, Now York Unlverilty. The need of some method of measurini,' the effectiveness of iii.'inaiycini'iil is becoming more and more ;\|)|).'irent. The Report of the Committee on Eliminalion of W;istc in Industry of the Fcdcralcd Amcriciiii Engineering Societies states: " Over 50% of the responsibility for these wastes can l)e placed at the door of management, and less than 25% at the door of labor, while the amount chargeable to out- side contacts is least of all. " That report shows also wide variations in the: waste assayed against different plants in the same industry, the ratio of the best to, not the worst, but the average varying from 1 : 1 J^ to 1 : 4y2. \n one way this only indicates in a startlinfjf and authoritative manner, what we all know, that there is a tremendous variation in the quality of managements. The unique element is that it at- tempts, in ;i rough way, to actually measure the discrepancies at le;is( willi respect to one element, that of waste. There is no reason to stip[)ose th.'it the discrcj).'nicies in the other elements are not (|uile as great. Since llie major responsibility for improved industrial con- ditions rests upon management, there is gie.iler need for measur- ing the eirectiveness of management than for measuring any other element in industry. And yet, as the Waste Report says, " few units of weighing or measuring the performance of industry, or of any plant or department or section thereof have been developed by engineers in a way to be st;\ndardized, or to yield results and conclusions on a comparable basis. " You will find ruiming through the sessions of this meeting various phases of the question, " How can Industrial Engineering be of service to Industry? " The best single answer is "by de- 10 S. I. E. Eighth National Convention veloping some measure of the effectiveness of management. " This hits straight home. For IS years industrial engineers have been studying and measuring the work of others. The time has come for them to measure their own work. This is neither easy nor simple, or it would have been done long ago. The value of a reliable and widely accepted method of meas- uring the quality of managements to owners, bankers, managers and industrial engineers is so obvious, we may assume it. The ideal method would be one so general in application as to permit comparing the management of plants in different indus- tries — a millinery shop with a foundry, a toothpick factory or a brick yard. Such a standard would be of great value to the banker as a guide in the control of bank loans. It is quite pos- sible that no method as broad as this is practicable. If so, it does not have to be universally applicable to be worth while. One which would permit comparisons between plants and firms in the same industry would be of great value. Failing that, one which would show changes in the quality of the management of a single business or department would be use- ful. For the last, various means are available now but they are not standardized. In facing this general problem a fair question at once con- fronts us — Is management measurable? Pending an adequate investigation, we may safely say some phases of it unquestionably are measurable; some possibly are not. The beginnings of a study into this subject have already been made by the Manage- ment Section of the A. S. M. E. As a possible contribution to the subject the following method is suggested. It may not be practicable, but it is worth consideration. To measure is defined by the Century Dictionary as "to ascer- tain dimensions, quantity or capacity by comparisons with a stan- dard." The problem before us is a measurement of quality, rather than quantity. But in general, quality must be deter- mined by comparison of properly chosen quantities. In engineering measurement we have, or should have, three elements : Detroit, April, 1922 H First. An accepted standard, the characteristics and qualities of which we wish to reproduce or to approach. Second. Accepted units in which the characteristics or quaUties of the standard may be expressed. Third. Instruments or devices whereby impersonal com- parison with the accepted standard may be made by use of these units. Impersonality is the soul of accurate measurement. Any two competent persons using the accepted devices, standards and units should be able to duplicate results. Is it possible to apply this scientific method to this problem? Is it possible to set up an ideal standard, to establish units of measurement, and finally, to devise methods of expressing quanti- tatively the degree of approach toward this standard in terms of these units? Of these elements we have at this time no general standard. We have a few units. Possibly some of them could be used. Better ones may be developed. On the third element — measuring devices — we have made a good beginning. It is interesting and not unprofitable, in thinking of a refer- ence standard, to ask what would be a 100 per cent, or perfect, management. As the farmer said, "Thar ain't no sich animal" and there never will be. But if there were, what would it look like ? Here is an attempt : It will— 1. Purchase the right materials, of right quality, in the right amounts, at the lowest available prices. 2. Secure delivery in the shortest practicable time, at the least expense ; and always have all material on hand where, when and in the condition wanted. 3. Process 100 per cent of the material through the plant in the least possible time. 4. By the best suited processes, equipment and methods. 5. Utilize the full capacity of 100 per cent of the equipment all the time. 6. Utilize the full capacity of 100 per cent of the labor hours paid. Missing Page Missing Page 14 S. I. E. Eighth National Convention standards and units to have value must be generally recognized and accepted. The measuring devices used might conceivably vary, but in practice standardized methods for measuring each element would also be of advantage. The development of, and the general acceptance of, a method of measuring management, if possible at all, can be brought about best by the co-operation of the leading societies interested in this field. A well-chosen joint committee from the Taylor Society, A. S. M. E., and this society, might develop something of great value. If this suggestion meets with favor I hope it may be brought up for consideration at the right time and place, during this meeting. I believe if these societies will undertake to meet this need, they have before them at this time the possibility of rendering a greater service to industry than any rendered since the monumental contributions of Mr. Taylor. "How Industrial Engineering Serves the Chief Administrator" By Col. Benjamin A: Franklin Vice-President, Stratlimore Paper Company, Mittineague, Mass. Unquestionably there could be no better time than the present to consider the relation between an industrial engineer and an administrative officer as to statistical records. I imagine that in the life of most of us in business there has been no time which has shown more clearly the possible value of that relation than the year 1921, when probably the majority of businesses in the United States lost money. Probably the losses in 1921 will prove to be greater than in any year in the business experience of most of us, and certainly I believe they might have been lessened by such a relation as I am going to. discuss. As a practical example, I know of a company that did not lose money last year, and I think it is not impossible that it was due to a very intimate re- lation between industrial engineering and the administrative of- ficers. It is reasonable that I should consider such a relation almost as axiomatic, because it so happens that I was first an executive officer and then, in a modest way, I attempted to practice, inde- pendently, industrial engineering, and then again became an ex- ecutive officer, so that I think I appreciate thoroughly this rela- tion between an industrial engineer and an administrative officer. In order to get my bearings, I have attempted to work out a few definitions. What is a chief administrator? Under mod- ern industrial management, perhaps he should be divided into two classes — first, the administrator in that large business where it is absolutely essential to delegate divisional or departmental control entirely to others and possess only general and main statistical control; secondly, the administrator in that grand ma- jority of industrial units where the chief administrative officer 16 S. I. E. Eighth National Convention delegates control of departments to others, but possesses tiiiie to see the detailed statistics of operation and to know somewhat intimately about these operations. What are the responsibilities of a chief administrator? The chief administrator is responsible to the public, to capital, and to labor, for the most economical and profitable operation of his industrial unit, and for that guidance of operating policy that will maintain financial conduct on a basis of soundness of invest- ment, and foster sound growth of his industrial unit. What is industrial engineering? Industrial engineering is the science and art of developing means of most economical opera- tion and control of the whole industry, through the development of means of operation and control of every minute division of that whole. An industrial engineer is one whose instinct, expe- rience and training is to investigate industrial operations and devise means of better operation, and' institute standards and control. If administrators and industrial engineers are to come together for the advantage of industry there must be some basis of understanding and co-operation. In my humble judgment that basis is this: WHEN AN INDUSTRY IS SUCCESSFUL That an industry is most serviceably and profitably operated, not when the effort to make and sustain a profit is based funda- mentally on volume and prices, but when it is based on the most studied economical operation of each department of the unit, a knowledge of the actual cost and price based reasonably on that cost, and when a volume is obtained commensurate with a reasonably studied, normal productive possibility of the equip- ment. There follows, then, if this is the right basis, that the admin- istrative officer must be an industrial engineer or he must sur- round himself with those who have the abilities of an industrial engineer. Experience is constantly showing the value of inde- pendent industrial engineers and of their investigation and ad- vice. But it is also true that good methods once installed, though they retain their eflfectiveness for a long period, need constant Detroit, April, 1922 17 supervision and improvement. Conditions change, developments occur, and internal industrial engineering finds constant rewards for its effort. Now I have briefly outlined what I think makes a combina- tion of an industrial engineer, industrial engineering, and admin- istration of industrial engineering. I think the experience of the last year, if the fundamentals are searched out, will unques- tionably give a tremendous boom to industrial engineering. ESSENTIALS OF ADMINISTRATIVE CONTROL Having thus briefly outlined the underlying principles, it occurs to me that you must understand them already. And so I thought I might discuss some of the ftmdamentals of opera- tion between the administrative officer and the industrial engi- neer, outlining first, briefly, certain things which an administra- tive officer must have if he is going to control the business, and then I am going to illustrate my point by referring to some of the things which we do in our business. I wish to point out how the industrial engineer has assisted our administrative of- ficers in developing a control of the business. Of course, an administrative officer must first of all have his profit and loss statement by departments. I think probably no one realizes more than I do how easily that is said and how difficult sometimes it appears to bring it about. Furthermore, I am sorry to note how few concerns, relatively, in the United States, have^ anything like an actual profit and loss statement, monthly, by departments, showing what is occurring. IMPORTANCE OF DEPARTMENTAL COSTS Then the administrative officer somewhere down the line, if it is a large concern, and at the top if it is a small concern, must have constantly running costs of the units of his produc- tion and with such detail obtainable on demand as will show where variations take place, if there are variations, and partic- ularly where certain necessary parings may be made at critical periods. Not only must he have the detail of the cost of pro- duction units, but he must have the detailed cost of operation 18 S. I. E. Eighth National Convention of departments, and have the various elements of operation of departments. For example, so far as the material is concerned, he should know the unit cost and the waste ; so far as the labor is concerned, its effectiveness in production per dollar; so far as expense is concerned, its running relation to the direct labor. Those things are really so astoundingly easy to obtain that it sometimes is re- markable that administrative officers pay no attention to them. A number of years ago there was a conference where at one stage all those present in a certain line of business were asked to gather and discuss, under the guidance of an industrial en- gineer, what might be done under particular conditions, and with a particular number of operations. This was a number of years ago and possibly the situation has improved. Various operations were considered. Man after man got up and stated that certain suggested methods of control could not be instituted. Experience had shown them that numerous suggestions made by industrial engineers could not be carried out in their parti- cular business. Yet every method suggested was and had been for some time in actual operation. They concluded that indus- trial engineering was all right in its place. That is one of the great difficulties of the industrial engineer today — that the ad- ministrative officer has not discovered that the place of indus- trial engineering is in his plant and his office. EXPENSE CONTROL It is almost impossible to conceive the administrative officer working without an expense analysis, or some method of expense control. Near the end of 1920 it was proved pretty conclusively that the amount of business foresight in the United States could be measured probably by a very small standard — there were few who realized what 1921 was going to bring. Nevertheless there were some who by instinct, perhaps, felt it necessary to act quickly and drastically in reducing expenses. So they took their expense analysis and went at it, with the result that 1921 was a reasonably good expense year for them, because they got a good start on it. But an administrative officer without an ex- Detroit, April, 1922 19 pense control, without an expense analysis, without comparisons set forth in a way that gives him a grip around the neck of an expense so that he can choke it hard if necessary, is not, accord- ing to modem standards, a real administrative officer. Now, of course, everyone who knows anything about indus- trial engineering knows that the great, valuable element in busi- ness is the human element. It is really astounding to know what can be done with the human element if you go at it rightly, and there is a change coming over the industry generally in rela- tion to labor. I don't mean merely direct labor — we always think of labor as wearing overalls, but a lot of labor is dressed up in good clothes, wears a necktie and a clean collar every day. Labor in business includes everybody from the president down. But how an administrative officer can operate a plant to the best advantage without knowing precisely the labor costs all the way down the line is difficult to see, and it seems to me that an administrative officer must therefore have some means of labor control. What is control? WHAT CONTROL INVOLVES Control involves a standard, a means of keeping or bettering the standard, and a constant knowledge of actual occurrence. The opportunities to effect savings, of course, are tremendous everywhere — the late Waste Commission has pointed that out. But waste can be reduced very materially by getting people all down the line interested in it, by measuring the waste. Waste must be gathered, weighed, measured, reported and shown in percentages against standards. Inventory control. There probably will not come again with- m the next few years such an opportunity as we have just had, in the matter of inventory control, because, however intelligent business may be, we had such a scare thrown into us last year we are all on the jump right now. There never has been a time when bttsiness men generally could have saved so much money as in 1921 if they had had a close inventory control. Losses in 1921 were astounding because there was generally no active oper- ating inventory control. 20 S. I. E. Eighth National Convention IMPORTANCE OF BUDGET SYSTEM We are all very strong for the budget system in our govern- ment. We insist on it, but how many of us operate it in our own plants? It is the old story of always seeing the mote in the other fellow's eye, and yet the value of the budget system as a means of control is growing all the time. As a matter of fact, budgets can be operated in a great many ways — in repair departments, in advertising, in selling, etc. Even if you knock it galley west before you get through, the budget is a means of planning what you are going to do. It is ah important means of control for the administrative officer. But it is more than a means of control. The budget system cannot be operated at all unless it is made up in advance, based on some very definite plan. Even if you only plan the budget and don't keep to it, you are tremendously the gainer because all of us thoroughly believe we have long ago discovered that if we make a plan, then the cogs of the wheels fall in very much more readily than if we operate from month to month, or week to week, or day to day. So that outside of its means of control of the situation, the budget system forces a plan. THE ENGINEER AND SELLING Industrial engineering has not gone into the question of sell- ing as much as it has into the question of production, and yet production and selling are tremendously intimately associated. There is still a large field for industrial engineering in selling, not merely in the question of budgets, but in the study of mar- kets, in the development of this idea of service. It seems that too often people are making articles with the idea of selling them and making a profit, whereas the real important element, both in making a sale and in making a profit, is the production of some- thing that is really serviceable and the finding of a market which really needs that service. And if we stick to those principles, 1 think we shall discover many ways in which we can not only cut out losses, but increase our sales and increase our product, changing it to meet the service which we discover necessary. Detroit, April, 1922 21 Of course there are a great many statistics. These methods of statistical control which I have indicated up to date have been general. You can go on down the line as far as you please, and the administrative officers of 99 per cent of our plants gen- erally will find time to operate, observe, and use those methods of control if they see through industrial engineering methods and get to understand and use them. TECHNICAL KNOWLEDGE AND GENERAL PRINCIPLES Practicing once as an industrial engineer, I used to be much interested in the interviews I had. I remember very well the question which I believe is still asked today by administrative officers: "Well, young man, what do you know about my busi- ness?" I would confess I didn't know a darn thing about his particular business. That nullified the executives a little. He thought I was going to tell him that I knew a lot about his busi- ness. The next statement was: "I have been in this business forty years. Do you pretend to coine in here and teach me any- thing?" Then I would explain the fundamental basis of indus- trial engineering, viz., that a business, all business, consisted of two things — first, of the particular knowledge, technical knowl- edge of the article which a particular concern was manufactur- ing, but of which I pretended to have no knowledge (and, frank- ly, I discovered that often they had very little themselves) ; and secondly, the introduction of methods, the knowledge of which was gained by study of a great many different businesses, which methods, with some adaptation, would get results in almost any business. I discovered that what I have detailed above was absolutely true, but that a good many administrative officers think it is a sign of weakness to employ an industrial engineer, and so I made this note. To utilize the service of industrial engineeringr wheth- er as general experts or part of the organization, is a sign of strength and not of weakness of the administrative officer. - When administrators wake up to that fact thoroughly, in- 22 S. I. E. Eighth National Convention dustry will have settled solidly into a track which it is now more or less pioneering. Now, it occurred to me that most of the things that I would say, even if I should say them in a way which might be a little different, were things you knew pretty thoroughly yourselves, and I shall be very happy if I have made this idea at all concrete by these few general statements. It occurred to me, therefore, that possibly I might take count of the few modest things which we do in our business and very briefly discuss them to show how our administrative officers think they get control of the business. I am merely going to show how industrial engineering has attacked different phases of a business and given the administrative officer a picture of it. This is a little chart, somewhat on the Gantt line. (Speaker shows from time to time actual records). It merely shows how many hours each machine in this particular mill actually ran in the making of paper, how many hours it did not, and the rea- sons why it was not making paper. From that chart we created certain standards with bonuses attached, and show how many dollars and cents were lost by the lack of operation and whether it was the fault of the management, a holiday, or what fault. For example, we attempt to measure the whole shut-down period in dollars and cents, and give the particular reasons for the ac- tual shut-down. That report goes to our superintendent as well as to the executives. This bunch of papers gives, for example, all of the excess cost in this particular finishing room — where the excess costs take place, why they take place, and the dollars and cents value. Here we have an account of the overtime expense and why it was spent. Thousands of dollars on overtime can be saved if a concern spending knows it, and brings it up constantly. BONUS INCENTIVE EFFECTIVELY USED We operate bonuses all over our plant and always with stand- ards. If standards are exceeded, a bonus is paid. These sheets show what bonuses the gangs are making. This happens to be a very interesting little thing. We have Detroit, April, 1922 23 a miscellaneous material-handling gang, and in 1920, when money was easy and we were more worried about seeing how much stuff we could ship than we were about the cost of it, this gang grew, doing all kinds of miscellaneous things. It operates at one of our mills where we own everything in sight. We clean the streets, haul all kinds of materials between the mills, and from one mill to the station, unload cars, etc. Labor was hard to get — ^you couldn't pick up men for a gang that would do trucking, hauling and that sort of thing. When we began to get into the reduction of these costs we had difficulty in finding a unit to operate with. We studied this particular case for six months, and worked out a peculiar unit. You must remember this was miscellaneous work. What unit was there? We spent so many hours of time, we handled so many pounds of stuff — there were two units to start with. We discovered how many pounds per hour this gang, including the boss, handled. After six months we worked out what we thought was a standard and then we made rates for a low bonus and a high bonus. I think we found that 1,800 pounds was the average for six months, so we set the first bonus at 2,200, the maximum at 3,000 pounds, and paid a sliding bonus between. The first report since the bonus went into operation shows that the average pounds handled in that week was 2,640. That, I think, is probably the highest record made. Here is a complete history of each paper machine. We can tell precisely what each machine is doing every hour, what it didn't do, and the normal production and actual production. This is a complete detail of the waste on one particular ma- chine, showing grade of paper, production, waste and per cent as compared with the standard. We believe in charts, but personally, I believe that some- times charts are carried to an extreme. But over distances, charts, of course, cannot be beaten for quickness and clearness of comprehension. This is a history of different sections of our business, based upon percentages only, showing the relation, the growth or fail- 24 S. I. E. Eighth National Convention ure of growth in the different departments of our factory. This is a little chart record of the cost per pound of our paper in the different mills and the variation of that cost per pound, in material, labor and expense. I merely want to show briefly the idea of the chart system. No matter how well or poorly the executive thinks he is doing now, chart comparisons with the back periods will show him. They are of tremendous value in making an executive think. I have here the budget of our advertising department, laid out for the year, showing the amount spent in each month, in the period, and what is left to date. The budget of our sales promotion department, for example, is another. Our hospital record shows precisely what happened to our people so far as time lost, accidents, etc., are concerned. This little record gives us our complete history each week, from the first of the year, of the business which is coming in to us. We start with a normal business, which we hope to get, and which is based on the largest average weekly production we ever had. It shows the week's orders for each mill and how they stand in relation to the normal for that mill, how the aver- age stands up to date, how much we manufactured and how that averaged to date, how much we put in the loft for stock, and how that compares with a standard. Here is a record of every one of our customers, sent to the administrative officers, so we know right along what is going on. We have a monthly record also, and we can tell whether customers are dropping down or increasing their business with us. That, of course, immediately brings us into consultation with the selling end of the game. Here is the card of a particular customer showing his pur- chases on each one of the lines which he buys from us every month. Here is a complete history in dollars and cents of what we lose in making paper which is not perfect. Every mill makes a ceri^in amount of paper which it calls "seconds" and sells to people who like to buy "second" paper. We keep a record of Detroit, April, 1922 25 that on every line, showing precisely what we lose every month. That is waste, in a sense. I don't know whether the public suf- fers much from it, but we do. So that immediately starts us on a rampage through the manufacturing department. This is a comparison of expenses by departments, and as it goes up or down it starts us to study in detail departmental ex- penses. Here is a report of what it costs in the rag mill and the variation of that cost from thrasher to beater. This is a weekly report showing what each machine has ahead, so we know whether we are running into trouble by hav- ing too much for a machine to make, whether we can give rea- sonable delivery, or whether we have too little ahead of the. machine. This is an interesting record because it started in some of our departments a little scheme which is operating very well. It shows the number of lates of everybody in our organization, how much time they lost by being late, how much overtime they worked, and what their total weekly working hours were. We got up a scheme in one of our clerical departments whereby each man was marked on a percentage, based on so much ofif for being late, so much off for errors, so much off for failing to keep schedules, and so on. Within two months, I think, they averaged a betterment of twenty per cent, showing after all that it isn't the labor in the factory that needs attention solely. We all need it, from the president down. All this simply shows you what industrial engineering can do in helping to get a grip on business, and if it does not do any- thing else, it helps you to increase your profits. I have rambled considerably, but I think I have illustrated my point, i. e., the important value of industrial engineering to the administrative officer. To get back then, to the original subject: "How Industrial Engineering Serves the Chief Administrator." That relation cannot be anything but a very intimate relation, increasing as the years go on, increasing as a plant grows, spreading through all industry, and when it does, completely, we shall have ap- 26 S. I. E. Eighth National Convention preached much closer to the- standards which have been set by our honored president. QUESTIONS AND DISCUSSION MR. EIGELBERNER: What is the difference between di- rect labor and indirect labor ? Is there any way of properly com- paring the two on a percentage basis? MR. FRANKLIN: I think undoubtedly, but no standard method applies to everything. MR. EIGELBERNER: Do you make a direct comparison in your business between direct and indirect labor costs? MR. FRANKLIN : Yes and no. We have, we believe, stud- ied the indirect labor proposition considerably, and we fix in each department a standard. As a matter of fact, the general tendency, so far as our experience is concerned, is to have too much indirect labor. That is because industrial engineering, as I know it, has studied more thoroughly the direct operations, the repetitive operations. We study the man who is doing the same thing over and over again, and not the man messing around doing a little bit of everything. We have studied the latter quite a little and I think we have largely reduced it. MR. PORTER: Why is there such a thing as direct and indirect labor? Why not classify it as direct labor, not classi- fied as yet? MR. FRANKLIN : The conditions remain, I think, no mat- ter what you call it. The fact is the man who is doing over and over again a particular operation, whether a small operation or one of wider scope, offers an opportunity for study, no matter what you call him, whether you put him in the general mass or separate him. Indirect labor, which is the problem of handling the material, sweeping elevators, and a thousand and one things, does present a difficult problem, and if you class them all to- gether or call them different names, you Still have the same prob- lems. The principle is to keep the direct labor so well supplied with materials that they can concentrate on particular operations and keep moving all the time. MR. WILLIAMSON : That brings up a point. Direct and Detroit, April, 1922 27 indirect labor are both essential to the product, as one to the other. I cannot conceive of any real comparison of direct and indirect labor and I think it should be abolished. I think the sooner that distinction is abolished, the sooner we are going to get a higher rate of efficiency. MR. FRANKLIN: I am inclined to think we would be quibbling in that respect. What we want to do is to get the most out of every dollar of labor we spend in the department and it makes no difference how you classify it. But it is, of course, necessary to classify because of the method by which you figure costs. MR. EMERSON : I hear a good deal about direct and in- direct labor. What is the definition of direct and indirect labor? From the remarks I hear I do not hold the same idea at all of direct and indirect labor that some other gentlemen seem to hold. MR. FRANKLIN: Will you give us the definition, Mr. Emerson ? MR. EMERSON : I think I originated the terms of direct and indirect labor myself a number of years ago. I do not re- member hearing of, or seeing them before the time I originated them. Direct material and labor are those things that pass directly into the product that you can measure distinctly in the product as it goes out; indirect labor and materials are those things you have to apportion in some arbitrary estimated way. Those things have to be kept absolutely distinct because the one is the direct thing you can follow, and the other is the matter of judgment or the definition, and what I have always tried to secure, if I could, was some standard definition of what indirect labor was, and how it should be applied, and how it should be estimated. MR. CARMODY: Some time ago Mr. Johnson of the Endi- cott-Johnson Corporation, shoe manufacturers, had an article in "System" in which he outlined a new policy with regard to the whole labor situation, which summed up was this — that they put their institution, the whole institution from the presi- dent down, on an hourly basis. I wonder what is generally 28 S. I. E. Eighth National Convention thought of that particular thing. I ask that because I have rec- ommended it to our own institution, myself included. MR. BAUM : It is a rare coincidence that an administrator and an industrial engineer is one and the same person, as we have in Col. Fratiklin, and some of the things he told us were only possible in his organization because of that fact. He stated one thing that should be remembered — that it should be a sign of strength for an executive to engage an indus- trial engineer rather than a sign of weakness. It seems to me the two papers given this afternoon should be brought to the attention of executives, because I have found them generally in need of more education than the people farther down the line. Col. Franklin showed a number of charts and statistics which the average executive of today, generally speaking again, is not willing to prepare, for the reason he considers it too expensive. I should like to have asked how much it cost to prepare those charts, and undoubtedly he would have answered that the profits of having arrived at a complete report of organization, of re- pairs, sales, of the planning of ways, etc., that this advantage of spending money for statistics was well offset in the profits. I want particularly to bring out the necessity of educating, of directing an educational campaign toward the executives of our industries. MR. SHEPARD : The title of our second paper this after- noon, and the sub-title to the first, "The Need of Standards and Methods of Applying Them," bring me to point out a cer- tain connection between those two subjects which to me is a very interesting one, and that is that the methods of serving the chief administrator, dealt with in the second paper, require, absolutely, that the mass of records and details which may be useful here and there throughout the plant, should be boiled down for his consideration, condensed and brought to a focus so that the chief administrator will not have to be burdened with a great mass of records, but will be able in a brief document to consider and comprehend in a short time the information pertaining to his own activities. I believe the solution to that question is to Detroit, April, 1922 29 be found in the first paper — that is, the determination of stand- ards and their apphcation. It would take a long time to make a complete statement of that idea to you, but if any members of the Society wish to get the book, it has been very ably worked out in detail in Mr. Harri- son's recent book. MR. MONTGOMERY: One point made was the relation between direct and indirect labor. As plants develop into com- plexity and the use of automatic machinery, direct labor is re- duced and constantly the ratio must increase. In checking that, to show the results which come from the opposite side, I might cite the example of the Western Electric Company. At one time they had a dream of keeping a record of indirect labor and one foreman was compared with another on the basis of direct and indirect labor. A great many foremen got into the habit of simply having the machine shut down and having a man go off with a truck. MR. PORTER: I had just such a thing in mind as Mr. Montgomery pointed out. I recall one instance a number of years ago, before Mr. Emerson furnished us with better terms for direct and indirect labor, and when we called it productive and unproductive labor. Indirect laboring men resented the term "unproductive," saying they were all a part of production. And as we grow, develop and become more complex, there will be less and less of this so-called indirect work in industry. That brings up the question of how to measure indirect labor to really make it direct. It is perfectly possible to bring out a purchasing inspector or a warehouseman that can be measured. Abolish that absurd classification. MR. WILLIAMSON: In relation to what the industrial engineer can do to serve the executive, I think one of the best things he can do is to give a little more attention to the proper classification of accounts. I think you will find the engineer does, at least more so than the average accountant. This volume of statistics, which on the face of it is a costly proposition, can be produced practically and automatically through the proper classi- 30 S. I. E. Eighth National Convention fication of accounts. A base classification which will give the chief executive a general perspective of the business is neces- sary, and from there such schedules of the business can be made as will take him down to details as far as he wishes to go. I think when we begin to analyze components of the business we will have done a whole lot to serve the president. MR. FRAMPTON: Along the line of how the industrial engineer ought to find a better way to sell himself to the execu- tive. Four times in the last year I have been called into plants to interpret some of the things that were done in industrial exe- cutive work, and invariably I find that alongside of the installa- tion of some production system there has not been a single in- stance where they have educated the men who are to handle it. They sold the system to the men without that, and it is work- ing a hardship on the industrial engineer. For instance, in one large plant, an enormous sum was spent over nearly three years. The majority of the pivot and key men in that industry were against the system, because four young en- gineers came in who seemed to give the impression that they were fitting that plant to the system. The practical men in the busi- ness knew it could not be done, first because they had four dis- tinct manufacturing plants under one roof, and it had been built as many of the plants are built, with one unit now, then another, and finally a dozen big units put in, which made a plant where the very location of the different units made it conducive to mis- management. And then these men came in and were instructed that they could not change any charts or systems, but that that plant must fit that particular system. When you go in to men who have been in plants a number of years, who have worked their sys- tem, and try to fit that plant into a ready-made system, you im- mediately bump against a stone wall of the men who say you are theoretical and not practical. It was a good thing the Toledo University had classes going on. They educate men along lines which lead them out of their difficulties, but these plants had to change, and it has cost them Detroit, April, 1922 31 a lot of money. It has cost one concern over a quarter of a million dollars. So men, when you are putting in your systems, put along with it the educational system that will train to handle each unit in it, and you will sell it and the industrial world and the industrial manager will be more willing to listen to you. MR. BAUM : I was much impressed with the speech of Mr. Roe, as to whether it is possible to measure the efficiency of man- agement. I cannot conceive of anything more important today. It might interest you to know that a public utility in the middle west has for the last six years attempted to measure the efficiency of its management, of its departmental heads, and that was done in a unique way. Each department and sub-department, group and sub-group was standardized; such things as purchasing, the amotint of stock on hand and the actual construction going on, were stand- ardized. In d particular department the profits or the gains — I forgot to mention the departments operate on a gain-sharing plan ■ — were arrived at and it was possible to express the efficiency of that departn^ent on a percentage basis, commensurate with the percentage of gain obtained. An average of the various groups in the particular department was obtained, and the man- ager of that department was responsible for that gain and his efficiency measured accordingly. The average gains of the va- rious departments determined the efficiency of the general man- ager, so it was at least an attempt to direct attention toward the efficiency of the executive,, and at the same time, of course, pay attention to the efficiency of the people further down the line. I mention that case because it is in the minds of a great number of people to measure the efficiency of management, and I am glad Professor Roe showed us in his masterful way in which direction we have to go. MR. GILBRETH: I think the Society is to be congratu- lated on having its president tackle the subject of measuring managerial abiUty. It will not only be a guidance for us — it will make us all better and it will help the public, of course, to co-operate with us. 32 S. I. E. Eighth National Convention As one of the management division of the American Society of Mechanical Engineers, I want to tell you there is a sub-com- mittee on the subject of the measurement of managerial ability, and at first glance it was considered by most people to be one of those things that could not be measured. It was considered the most elusive thing that could be measured. A little study has shown that a great deal can be done. Mr. Roe today has shown you probably the best method of attack that we have seen so far. That has been done on starting the ball rolling on the subject of measuring managerial ability. The subject is very much bigger than it looks at first glance. It has ramifications that will be helpful to industrial engineers in the selection of other men who are to be managers. I will say one more thing which I would like to have you remember. I think that instead of having the 10 or 15 things that Mr. Roe has spoken of so well, after we get into this a little further we will have 115 instead of 15, and if we get this Society, the Tayloi Society and the American Society of Mechanical Engineers, we will have many more divisions on this part. And then, of course, could come grouping of these components and in the last analysis I think we would find that management must be measured on this basis — the lowness of the unit cost simultaneously with the highness of wages. MR. PORTER: We have to ask ourselves frankly before we can set up a measurement, what is the aim? Frederick W. Taylor said at one time, in his early years, that we must not forget first, last, and all the time, that the aim must be to make profits. I wonder if that is correct. Is it not to make better men and make men happy on the job| Professor Roe, have you thought about it ? How are you going to measure that other side of the thing, the intangible side? How are you going to term the rating of management in its ability to make men happy on the job and fulfill a higher social life? THE PRESIDENT : That is a question that I have thought of in this connection. It seems to me that the first obvious pur- pose of industry is to produce needed goods for profit. If it Detroit, April, 1922 33 does not do that, but makes for general happiness without that objective, it is an eleemosynary institution, it is charity; it is something else that may be useful and desirable, but it is not industry. The first objective of industry — the direct one — is to produce goods for profit. I will say over and above that, while that is the first objec- tive, it is not the greatest nor the broadest, and my only opinion is that the ultimate objective of industry, when it is as a whole functioning as it should, is to increase the sum total of happi- ness. As to the approach toward that ideal, frankly I throw up my hands — I do not know how to measure it. I will agree with you that that is the greatest thing and would be desirable to measure. Paradoxical and idealistic as that paper may seem, I have tried to keep it somewhere within the reasons of practically ascertainable and measurable elements. The de- gree with which industry increases the sum total of happiness, so far as I can see, can often not be determined for a generation. For instance, the loom and the cotton spinning machinery produced a grave effect on the industrial situation of England at the end of the last century. What was the immediate effect? First, the cheapening of fabrics and the fearful, tragic conditions of the English industrial revolution. That was not as dramatic as the French revolution, but to any student of industrial his- tory it was tragic. But the sum total and development of ma- chinery has been for the improvement of the laboring classes which suffered so terribly at first. There is an example. What can you say of the work of those early inventors ? The returns were not all in at the end of the year when they did their work. The situation is altogether too intricate and too ramified in its development to measure. Certainly at that time, and now, it is a question of whether we can measure it at all, and frankly, I did not say anything about it. I think your re- quest is perfectly proper, but I do not know how to answer it. MR. EMERSON : When I was much younger -I thought that the function of the industrial engineer was to spread him- self all over the map. He was concerned with the health of 34 S. I. E. Eighth National Convention the operators, with their education, their morals, and their happi- ness — all that was a part of the function of the industrial en- gineer. As I went along I discovered it was none of his busi- ness whatever ; that he was there to secure industrial competence, which is another form of stating what our president has stated, and also another form of stating what Mr. Gilbreth stated. In- dustrial competence is to bring down the cost of the unit and increase the return to the worker. Questions of health belong to the physician. It is his business to look after the health sub- ject, not ours, and the physicians are the people who have a right to come in and say whether this is a healthy or unhealthy thing, and whether it should be done or not. And similarly with education. It is not a part of the busi- ness of the industrial engineer to take up the subject of educa- tion. He can consult with the educator whose specialty it is. He should co-operate with him. They have an equal right with him; both are interested in the development of the worker, but the two functions are entirely different. Similarly with happiness. Happiness, of course, is a great thing for the human race, but it is not the business, as I see it, of the industrial engineer to take up the subject of happiness. Going back to this question of the measurement of manage- ment, many years ago I began to measure management and I had no difficulty whatever in doing so because we began, as Mr. Gilbreth stated, with units of the reduced cost and the increased pay. We standardized every operation on that basis, and then we measured the excellence of the foreman by the excellence of the men under him, exactly as we had measured the excellence of the man by the excellence of the different jobs that he per- formed ;. and we measured the excellence of the superintendent by the excellence of his foremen ; and we measured the excellence of the general manager by the excellence, or efficiency, if you choose to call it that, of his superintendents. And we ran right up that way to the president and we had a little formula at the top of the page, showing the aim, the standard, the actuality, and the efficiency, and that was the efficiency of the whole plant. Detroit, April, 1922 35 We found no difficulty in that way in measuring the efficiency of everyone of the managers, of the executive managers, all the way down to the workman who was an executive manager over his own job and materials. MR. RUMMLER: It seems to me, in the face of the presi- dent's paper, and Mr. Emerson's talk and other discussions, that it is rather preposterous to suggest that a president of a large institution should have his compensation measured by the amount of time he puts in during the day. I think about the best illus- tration I have heard of that would be the one that Mr. Emerson gave us at Milwaukee when he referred to the value of the time of the Kaiser in Germany if he had devoted a little time to preventing the World War instead of causing it. How could you measure the value of that man's service merely in terms of time? MR. PORTER: Management is something we have to con- tend with and we need. This Society of ours needs manage- ment, our city needs management, our nation needs management — there are all kinds of institutions that do not exist for profit, and any method of measuring management, it seems to me, is satisfactory. In the university it would necessarily be different. MR. FRAMPTON : When we established a department of industrial service in the Toledo University we made up our minds to go out into industry. We were supported by taxation, and we could go out in intensive work. When we established that department we did it to benefit industry. We laid our manage- ment out four-square. We saw it was not capital and labor at the top — it was the customer, on one side capital, on the other labor, and at the root of the proposition was management with its brains trying to take capital and labor and make something out of them that the customer could pay for. In six or seven years no attention had been paid to the fact the customer wanted something that Tie could afford to pay for. We analyzed a foreman's job, and in that job we found every single principle upon which every officer in management works. We laid it out in two ways and laid it out on a chart with nine 3,6 S. I. E. Eighth National Convention angles : He must know his equipment, work, floor space ; handle his material ; supervise certain things ; utilize power ; take care of safety and welfare; manage himself, and handle men. And when we had those nine angles laid out, we laid them out on SO more, or perhaps to 930 angles. How does he get it done ? He must know the basic principles of what habit and environment may be able to do to a man. Sometimes that man may direct and control his mind and his body and his ambitions. And we said that executive ability was the power to super- vise properly three things — a man's mind, a man's body, and mechanical things, and we knew that a manager would not meas- ure up unless he was able to supervise those things. I believe they got a standard of measurement, and I believe you have struck a mile post on it in your speech today. If we get a meas- urement at all, we will have to measure it over the fact of what a manager's attitude and teachings do in controlling three things — a man's body, a man's mind, and mechanical things. MR. CALDER : Someone asked if we could not put on out program that sentiment in some philosophical form. It occurred to me we might sum it up in this way in general terms : If a man's contribution to society is equal to his consump- tion, he has justified his existence ; if his contribution to society is less than his consumption, he is a social failure; if his con- tribution to society is greater than his consumption, he is an eco- nomic success, and if his contribution to society is greater than his consumption and the balance is devoted to production and social welfare, he has attained his highest point. ADJOURNMENT Detroit, April, 1922 37 Educational Group Meeting Wednesday evening, April 26, 1922 Topic: "THE EDUCATION DEPARTMENT OF A SMALL PLANT" Chairman, Charles W. Lytle Industrial Engineering Department, New York University THE CHAIRMAN: The original topic for this meeting was: The Education Department of a Small Plant. As my thought developed I came to the conclusion that the word "de- partment" was almost a contradiction to the rest of the topic. I have therefore substituted the word "problem," which leaves us free from this fatal restriction in scope. A small plant will often be unable to afford a separate education department, but will, nevertheless, wish to solve its educational problem. Fur- thermore, the so-called small plants constitute the majority in American industry. (See foot note I). The books in this field of education are inadequate. It is difficult to find any with more than two or three pages of con- structive matter and then only for medium sized plants. Usually the small plant is nof even mentioned. The outline of our discussion is as follows: 1. What are the various services that may be grouped prop- erly under this heading of "The Education Problem in a Small Factory" ? Suggestions — 1. Training new employees for specific jobs. 2. Americanization and citizenship training. 3. Upgrading old employees. 4. Introduc- Footnote l^io. 1— The following statistics from the United States Bureau of Census, 1914: 69 per cent of the wage-earners are in plants of under 500 men. 54 per cent of. the .wage-earners are in plants of under 250 men. 35 per cent of the wage-earners are in plants of under 100 men. 38 S. I. E. Eighth National Convention ing correct standards. 5. Apprenticeship for teaching young work- ers trades. (a) Kinds of training — 6. Drawing, mathematics, science, eco- nomics, English. 7. Foremanship training. 8. Technical and execu- tive training. (b) Creating morale, securing co-operation, explaining company policies, stimulating interest in education. 2. What are the outside resources from which co-operation can be obtained for any of the above services? Suggestions — (a) Small town — Joint arrangement between kindred factories. Correspondence schools. Y. M. C. A. Public school night classes. Smith-Hughes Federal Aid. (b) Large town — All of above. Night university courses. Day co- operation with trade schools and engineering colleges. 3. How can the management take care of the work to best advantage ? Who should be responsible for these activities ? How should he treat the demands that vary too widely to make an efficient class in any one group ? 4. Where an education department is contemplated for either a single plant or a group of plants, what kind of a man should be employed? What procedure is advisable in introduc- ing the work? We are fortunate in having with us Mr Hugo Diemer, who is most mature in his thought along these lines. He can tell us authoritatively of the LaSalle foremanship training course and of many, other things. MR. DIEMER : The small plant ought to be especially in- teresting to all of us, I think, because we must recognize that after all it is the bulwark of American industrial republicanism — I will not say "democracy," because to me the modem acceptance of the term "democracy" means somethiiig entirely different than the average. It is the exemplification of individualistic cata- clysm successfully operated, and all we can do to restrain that is an effort well spent. Therefore I believe that any taxation that is spent in public effort in the way of affording extension Detroit, April, 1922 _39 educational opportunities to this type of business is money well spent. Another advantage is this — that in the small plant, where the proper foremanship exists and where the proper authority is the management, the proprietor has to be a modern economist, a modem personnel superintendent, a modern educator, and this develops a type of man who will conduct our public affairs with a far greater degree of intelligence than the so-called great cap- tain of industry, of which there are few, after all. I think professionalism is running rampant in the matter of engineering, perhaps in personnel work, and even in corporation work. It serves as a balance. The really practical man in the small industry must be the manager, the personnel man, and he serves to draw a check-rein on the ultra-professional person- nel superintendent and educational director. I am going to say just a few words on what are our aims. Whatever the aims of the proprietor, whether altruistic or self- ish, I think he will concede — I think we will all concede — that education is a means and not an end either for the individual or the institution. We need a purpose in view as we do in any other undertaking. It is important that we know that purpose and recognize it before we start and also that we know what is the worker's viewpoint. Of course, we are very careful about the right feeling. I have had considerable experience on my own account in trying to develop foremanship training. The first and most natural method of foremanship training and bringing into those groups also production, planning, etc., is to have department heads come and address meetings of em- ployees. That is natural. The man who does that is intent on having the foreman and other productive executives learn something about the business in a comprehensive way. Most of the fellows, however, are poor talkers, and after the first year of that sort of thing, if you are a pretty good sort of a personnel man you will have a stenographer take notes and you will put into educational form that material and get it into circulation. By that time you have passed from the non-co-ordinated or non- consecutive type of lecture to the co-ordinated, sequential tj'pe of 40 S. I. E. Eighth National Convention lecture. Then we begin to realize that instead of following the educative process we have simply been pouring it in. We follow the next stage, that of the conference method, where we minimize the thought. We give an outline ; the group leader is the man who incites, stimulates, and the conference method is sequential. The group leader studies the situation with regard to the subject he is teaching; he carefully selects the speakers and asks them questions. That is the third step. The fourth step is to see that sufficient mental efifort is put forth. Carry out the Federal Board of Vocational ideas, methods of Chas. R. Allen — conference plus good hard study — which, according to my way of thinking, is the very best method of putting across any method of employee training, whether fore- man training or anything else. THE CHAIRMAN,: While we are on the foremanship end of it, Mr. Calder, author of the Business Training Corpora- tion course, will take up the discussion. MR. CALDER: In the first place, I would like to present an analysis of the census of 1920. It has rectified what we got in 1914, which was not quite accurate. What are the census facts of American industry? The facts are that about 4,500,000 men and women today are working in 286,000 plants in America of 250 employees and under, and 4,500,000 men and women are working in 6,000 plants of 250 and over. That is, one-half of the industrial people of the coimtry are in 6,000 plants of 250 and over, and the other half are in 286,000 plants of 250 and under. As near as I can figure — and I have studied it very carefully for years — about 9J^ per cent of all the men and women in industry are in some executive position, from the assistant fore- man or control foreman, division man, general superintendent, right on up. What does that mean? It means that something like 800,000 executives of all kinds between twenty-five and sixty-five yearis of age are running industry in the United States, and of that 800,000, as near. as I can figure, only 10 per cent go up the line ; chiefly young men of super-education to start with, Detroit, April, 1922 41 who enter the plant and become foremen only temporarily ; and the other 90 per cent remain in the plant often uninstructed, un- inspired and hard-boiled or discouraged. Now, in Swift & Company, with 60,000 people, with whose industrial relations I am associated, we have 5,000 executives and we found it necessary, after thirty years of doing nothing at all educationally for them, to have intensive lecture and dis- cussion and book training and problem work furnished by a competent outside instructor to energize and enlighten them. We never said a word about packing from one end to the other of the initial course. It was all economic and descriptive of sys- tems and practice in other industries and of the problems of handling people and getting on with people. It was very success- ful and was voluntarily followed by permanent study clubs. We recognized that for esprit de corps, for team work and morale, the whole body should meet regularly in one class, and that to insure individual educational progress every one of our plants should be converted into a number of small plants. So we also split up these 5,000 people into groups of ten people each, 500 groups. One man in ten taken from our own employment was selected as a competent leader and each ran his little groups as their captain, holding weekly meetings and individual tutorial work when needed. We ran our intensive meetings of the whole body of the plant executives every two weeks. As a riesult we had a thor-oughly informed and sympathetic body of management representatives ready to function when 23,000 of our employees elected to have employees' representation in nineteen of our larger plants. That is a picture of foreman training in a big industry in the United States, but it is no different in our small plants, of which we have over sixty. Because a plant is little it is not safe to infer that the con- cern is really getting near to its people in any effective educa- tional sense. Finally, it is found, almost universally, that the outsider when he speaks with authority is more successful at the start of such work in stirring up a body of foremen who have 42 S. I. E. Eighth National Convention been neglected educationally than the people inside with whom all are familiar. Later on, an awakened body of foremen will respond to almost any well-considered and well-executed con- tinuation training program whether technical, economic or indus- trial relations. THE CHAIRMAN : The crux of the problem in the small plant is the educational director. The large plant can afford to hire a trained director and assistants. The very small plant can- not afford even one man for this type of work. There are only two ways of getting at it. One is for smaller plants to group together and hire a man. That entails all the weaknesses of divided authority and less perfectly fitted courses. It is conse- quently not welcomed by the plants. I. mention it, however, because the National Association of Corporation Training, now the National Personnel Association, has actually put it into effect in some communities and I believe the time is near when competing firms will be willing to get together for many such things as that. The other way of getting at it is to pick out from one's own existing staff the executive who by his disposition and training is best fitted to design courses and to train either his assistants or the workers themselves. Allot a fraction of his time and hold him responsible for the result. I emphasize this particu- larly because any plant can do it with comparative ease and little cost. It certainly is way ahead of leaving the function without organization and assuming that the foreman is going to attend to it properly. The best man on the staff can buy the proper books, make inspection trips and from the experience of others learn quickly how to do a fairly good job, although devot- ing only a small part of his time to the work. One of the most helpful resources upon which such a man can call is the Y. M. C. A., through its industrial programs, which have come to the front rapidly during the last two or three years. Mr. Myer of New York City is with the United Y. M. C. A. Schools, and we will be glad to have him describe how he can assist the small plant. Detroit, April, 1922 43 MR. MYER: I can simply tell you what we are doing in an effort to help solve this problem under discussion. It might interest you to know that the agencies of the United Y. M. C. A. schools as such are rather far-reaching in that they make it possible for any small plant in any community, which has access to the Educational Service Department at the Y. M. C. A., to . have that service. There are 400 of these affiliated schools. There are 150,000 students at the present time, 30,000 of whom are in the corre- spondence courses. Right on that point, we have tried to corre- late the resident educational work of the Y. M. C. A. with the home study or correspondence work, particularly in industry. With that idea in mind we have devised a service which has appealed to quite a number of plants in industry, and a method of instruction which will probably be interesting to you men who are operators or industrial engineers in small plants. Instead of using the text book method of question and answer, everything is based on home assignments of study on a problem that will confront the man in his experience. We summarize by the use of a project comprehensive of four or five problems already gone over. We are offering at the present time what we call our industrial service plan, the United Y. M. C. A. furnishing a plan of instruction according to the local problem in the in- dustry or the small factory or plant. We furnish this plan plus material, such as the text material we are building now, and we have completed partially an instructor training course. This service is co-ordinated both from the standpoint of the resident and the correspondence work. By that, I mean that in connec- tion with the local pfant you might have a man in the plant who could head up under foremanship and lead the discussion. As Mr. Diemer brought out, however, that is not sufficient. We have to have more than that — we have to have some definite work for them to do.' Therefore, those men have the privilege of sending their papers for correction through the Service De- partment, and the men appointed to guide the discussion will have the benefit of our counsel and service in the form of this special course now in preparation. 44 S. I. E. Eighth National Convention The final objective of the United Y. M. C. A. educational work is fundamentally from the human standpoint. Human be- ings, we realize, are the fundamentals upon which the success of work of this kind can be built. We want to help these men advance to better themselves, to understand the fundamentals of business and industry, and to understand their relationships from the social and civic standpoint. All would fail unless we realized that fact. So far as the Y. M. C. A. is concerned, we would have no excuse to be in the field unless we considered each stu- dent as an individual and aimed to help him develop in himself loyalty to the highest ideals of Christian character in both his personal right and in his industrial or vocational life. THE CHAIRMAN: While we are bringing up the various resources I would like to have someone say something on what the public school can contribute. I think Professor Bliss will be glad to tell us something along that line. PROFESSOR BLISS : I am not connected with the pubUc schools. I have been, however, in one of the cities where they have started the continuation school plan and I know something about it because I have done some work there. The State of Wisconsin, of course, requires that an appren- tice (and this was started particularly for apprentices) spend a certain amount of their time in educational work at public schools — it is half time now, and the continuation schools are intending to do that work. They have courses in drawing, mathematics, and they are expanded to include some science, English, of course, and economics. That is offered not only to apprentices but to foremen and other workers in plants through night courses. It is working out very well except for this, that you will find in most of the public school education the capacity of the organization and plant is entirely inadequate to take care of the number of people wishing to get that education. I want to say also that the Y. M. C. A. is doing in our city splendid work along those lines. I cannot tell you much of the details of either of these plans but the people come in groups much the same as in the public school system, in regular classes, Detroit, April, 1922 45 with an instructor who is chosen primarily because of his expe- rience in a practical way and in a good many cases his technical ability is considered. I don't think the smaller plants in our city realize the extent to which they can make use of these facilities. That is particularly true of apprentices. Small plants have felt that they would let the big fellow train the apprentices and then they would hire them and only recently have come to realize that that is wrong. We have one interesting thing in the University in carrying on the co-operative system.* Our boys are going out into the industries to work. The bigger plants found they could use these technical students after they got along in the course, to help out their educational program in the right direction. It has been recently discovered that these men could be useful in smaller plants and our men are taking economics, of course, and usually a course of engineering, so there is another course of supply for helping out the educational program in the small plant, provided it is under the proper direction. THE CHAIRMAN : I think the man who should come next is Mr. Allen. He will describe the work of the Cass Technical High School. MR. ALLEN: For nearly twelve years we have been co- operating with the industries of Detroit in developing the neces- sary men to meet the requirements of the small plant, and in many cases men are picked out and told they are short in one, two or three lines of work, perhaps mathematics, economics, per- haps drawing or any of the xaAriy things that might come up, and told if they^wtmld gorfb the evening school, of which there are several, and get the evening school credit then they would be promoted to the definite job that has been named. Those are some of the best and definite results where the man comes to us to" prepare for something his employer has told him would help him in promotion. That has been carried on in several *See description of this system in the May number of Management Engineering. It is written by our President, Joseph W. Roe. He will furnish reprints on request. 46 S. I. E. Eighth National Convention plants, in the Ford plant in large numbers and in some of the smaller plants. The discussion around a table like this always seems centered around the machine trades or trades that come into larger groups. Within the last two months there have come to us insistent de- mands for the building trades and within the past few weeks we have organized courses for lathers, plasterers, steamfitters, plumbers from the Central Society of Building Trades, all of them co-operating with and through their Secretary, sending their groups to the different schools with the idea that in their own business they have a variety of work enough to put that boy through a full apprenticeship and then one man will take him for a while, then the Secretary at the Central Office will send (hat boy to another shop, so that at the time the boy's apprentice- ship is over he will have a full, rounded apprenticeship, backed by mathematics given by the school. All of the laboratory work is done on the job. We feel that this has been one of the big developments in Detroit for the smaller groups. The training for jobs in Detroit, of course, in the machine shop overbounds everything else, but now we are getting into other things. Boys who worked in the metal trades foimd them- selves on the production job, mastered the operation, and they were the first out and the last back. They didn't like that. There was no outlook for them as in the book-binding business, silver- smithing, jewelry making, etc., and we are finding that occupa- tion is making its demand upon the public schools in various groups, until some twenty-five or thirty groups of occupations are coming to the schools of Detroit, insisting on the training, and we in turn insist before we start a course we must have the systematic backing of the industry. With any group we always insist that the first move made be to upgrade every man on every job that will stand up with it, and in the process of upgrading every man on the job we work out through his requirements the course of study that will be the backbone of the course of study for the rest. MR. DIEMER: It might interest the people to know that Detroit, April, 1922 47 ten years ago, before we heard the term "job analysis" or "man specification," a statement was issued by the Cass Technical High School as to the qualifications of the different types of machine tools, of what the operator of each machine tool had to do and what he ought to do. They have gained that reputation for themselves all over the country. THE CHAIRMAN : Mr. Allen brings up an important side of the question when he refers to the upgrading. I believe William Baum has had considerable experience in that direction. MR. BAUM: The various speakers have dealt in a great many ways with what industrial engineering can do for manage- ment, and I thought the text for tonight could well be "What Can Industrial Education Do to Improve Facilities for the Engineer ?" In the small plant, generally speaking, when you talk to the employer he says, "We have no money to spend for such things ; we are happy to meet our present requirements; business is so dull we know not where we will be tomorrow." That is the general reply. There are numerous exceptions. The first thing we try to do is to show to the employer that if he is interested in education it will not only benefit his employes but will bene- fit himself as well. We try to show him, as Mr. Gilbreth said this afternoon so ably, that he can pay the highest wages with the lowest unit cost, and so after we have first done a little educational work with the employer and have got him around to our way of looking at things, we then start further down the line. Always keep in mind that the small employer actually has no money. But the Holeproof Hosiery Company, with 1,800 em- ployees, can afiford to have their educational director or employ- ment manager or any other officer or superintendent who looks after these things. And I thought the subject tonight dealt with the very small plant^ — by that I mean from 150 to 200 employees. One of the things we do is to give talks to everybody, to all the employees, telling them about general economic conditions, telling them how necessary it is to learn in order that they may forge ahead in life, and we tell them there are in every city in 48 S. I. E. Eighth National Convention this country opportunities to' learn — ^the Y. M. C. A., the con- tinuation schools — there atfe always facilities — and some of them have sufficient money sometimes to buy a course in many schools like the La Salle Extension University and others who have made a specialty of giving these people an opportunity to get ahead. One thing, however, we take upon ourselves is the training of beginners. I have particularly in mind the textile industry, where the training of beginners is an expensive proposition, and there we establish beginner schedules which show what the pro- duction and the percentage of work should be from week to week. In order to stimulate the attainment of such standards we give these learners a special incentive. But that is not suffi- cient. We have to supply, also, a teacher, a trainer, and we have arranged that one of the best operators spend a certain number of hours each day in training these beginners. That, mind you, can be done in a plant of less than 100. Where we have ISO men or 200 men we have tried to estab- lish men's club meetings in the evenings, giving them speakers who speak in their own language, and they train them in what we want them to be trained in. When a shop is larger and is located in Wisconsin we have that wonderful institution called the apprentice shop course under the auspices of the state, a three-fold contract arrange- ment — a contract between the boy and his father, the company and the state. Under that contract the boy gets a certain amount of money, which is increased every three months under the stipulation of the contract. The boy is obliged to spend so many hours in a continuation school and he gets a training by pro- fessional teachers during working hours, and with pay. Such a scheme has been developed to a high degree in the Holeproof Hosiery Company and I believe it is unique in this country. Coming back to the very small plant again,, the most im- portant thing that I want to lay stress on is first to educate the employer, to make him see that if he spends a little time and, if necessary, a little money, on the education of his work- ers he will be benefited in the end. And if you hear them say, Detroit, April, 1922 49 as I do every day, that there is not sufficient money for such purposes, you can get right back at them and say the reason there is no money is because they have sadly neglected the most important thing in industrial life — Education. THE CHAIRMAN: Will you give one paragraph more about the incentive referred to? MR. BAUM : Briefly, where the plant is large enough to make standardization possible, we introduce that standardization and install what has been called the gain-sharing plan, a modi- fication of the Halsey gain-sharing plan, taking in all the ad- vantages but not the disadvantages, a sharing with the em- ployes, including the learners, all losses and all gains over which the employes have direct control. I cannot explain it in detail but it may be sufficient to say that that system enables us to keep a weekly record of the production and the percentages, or the percentage production of each employe, which is entered upon a card. That card also indicates the training and the progress made in the training of that em- ployee. The house organ in April stated that the attention which has been given to individual workers has resulted in the fact that they have not as yet cut the wages since the war because the costs are low enough to do business. They have accomplished that rather unique result today because of educational facilities which they have given to the employees because of the strong incentives which are provided in the differential gain-sharing plans, and because it was possible to follow up every week the progress made by evefy one of 1,800 workers. I can only say again, with Mr. Gilbreth, that management can be measured by such results. THE CHAIRMAN : I wish to stress what Mr. Baum said about the value of individual records, particularly in the case of beginners, because there what we are after is progress, not quantity alone. Many foremen are bound to misunderstand and think mainly in terms of quantity of production. Will Mr. Sims describe the method installed in the Atlas 50 S. I. E. Eighth National Convention plants in 1920 to put the beginners on a merit basis as soon as possible ? MR. SIMS: In our Piqua plant we operate very largely, almost exclusively, on a piece-work schedule which, of course, is impossible for a beginner because he has no experience and con- sequently cannot have a large return, so far as earning capac- ity is concerned. Under the plan put in by Mr. Lytle a begin- ner comes in and is put on a flat hourly basis, a beginner's rate of so much per hour for the first week of service with the com- pany. In connection with the beginner's rate we have set up a classification extending over a period of ten weeks. The second week a careful tabulation of the production is made and the be- ginners are immediately put on a piece-work schedule, paying them by the piece for the quantity tui-ned out, plus a certain percentage of the same. That percentage is gradually reduced and at the end of the ten weeks, often several weeks earlier, they are up to a point where they are doing the work efficiently through careful supervision, earning an amount equal to and sometimes exceeding an old experienced operator. It is an incentive set up for the beginner to compete with others, so far as his earning capacity is concerned, and that has worked out very satisfac- torily, I am sure. It means that the inefficient operator gradually comes up to a standard that is satisfactory or he works himself out of a job, because if it is found he cannot maintain the stipulated progress which is figured as fairly as it can be, his wage auto- matically eliminates him from the payroll. That is, if his pro- duction ceases to increase he is not accomplishing what he should and the earnings automatically decline. If his earn- ings were not satisfactory to himself, his progress would not be satisfactory to us. He is given ample time and every pos- sible assistance. THE CHAIRMAN : Professor Frampton has agreed to give us some ideas on the need for instruction in economics. PROFESSOR FRAMPTON : If you could have seen the types of mind as I did in the lumber camps and mines you would Detroit, April, 1922 51 know there is a certain type of mind that gropes after things all the time. If you would live among the Germans, Norwe- gians, Swedes, and be born among the Slavs and then go among the English, you would see there is a matched mind against the quality of the mass, and then there is an indi- vidual mind. One thing we are doing in Toledo is to endeavor to make the libraries accessible to the industry. Men complain that they walk into our libraries and see a mass of books and do not know what to read. It is absolutely true. We need in every library a trained expert who can tell men when they come in from industry what they need. A survey during the war in the coal mining districts of West Virginia brought me face to face with some of the men there in the feud. I talked with one of them and asked him what his aim was in life, and he took me to a little two-room, squalid house, with dirty children about, and he said he wanted Mary and the kids to have a better life than he had. I asked the same question of a millionaire and he said he wanted his children to have a better life than he had had. I thought of those two great extremes of humanity. Both with a common desire. If that is true, there might be some track on which all men could be taught. I said, "What do men need?" I came to this conclu- sion — they need things for three parts of them — food, shelter and clothing for their body ; they need knowledge for their minds and they need peacefulness and happiness for their hearts. It is not in their mind or body either one, and if that be true, they can get food, shelter amd clothing by skill of mind and body ; they can get kntJwledge by working the mind ; they can get happiness by feeling — no other way. Sitting with six to eight thousand foremen and other men some time ago, these five great things came to me as cries com- ing out of their hearts. They said in a mass, as I correlated it : "We want to know how to think better, we want to know how to plan better, we want to know how to manage ourselves, we want to know how to handle men and we want to know how to get ahead." Five great things. And I am satisfied if the entire 52 S. I. E. Eighth National Convention educational program in America were based on those five ideals we would have solved the industrial educational problem. When shall we do this ? Every person in the world has one thing given to him by God — twenty-four hours in each day. It is the one thing every man and woman gets in equal quantities. The difference in men and women lies in the use they make of those twenty-four hours, and as our industrial situation is organized today, there is no place a man or woman gets ahead except in the five hours that belong to him between six and eleven at night. It is not humanly possible to get it any other place. There- fore, we must take into consideration that he works eleven, sleeps eight and whiles away five hours. Some men do not know of the things outside of their work. They have gone into industry and they have had four walls about them — what can they know of the outside world except you bring it to them. They must know general principles. The average man knows how to operate a machine, but he has never gone into the principles that underlie. Then, too, they must know them- selves and know other men. The great balanced man of industry is not the one who has one of those seven* types of man, but who has all of them devel- oped to the proper extent. That is what we need in industry as an educator, and it can only be done by getting down with them and knowing them. MR. FARNHAM : My experience has been that an educa- tion department in a small plant requires just as high grade a personnel as the education department in a large plant. Incom- petence, insincerity and inexperience are spotted just as quick- ly by twenty workmen as by fifty thousand. Unfortunately the small plant can't afford a John Calder, while Swift & Company can. That unfortunate fact forces the manager of the small plant to choose between directing the educational work himself and pooling the work in such a way that the expense of securing a first-grade man can be borne partly by his business and partly by other plants in the vicinity. ♦Initiative, auditory, optical, sensory, motor, machine, habit. Detroit, April, 1922 53 The first plan is excellent if the plant owner or manager is a natural-born teacher of wide education and possessed of the ability to talk interestingly. If this is not the case he will do better to emulate the manufacturers of Sherman, Tex.,* or of Alton, 111., and organize with others for education. There are recognized training courses for foremen and production man- agers. The combination of such a well-written text with trained speakers is now within the reach of most plants, however small. The future of industry and of our industrial civilization de- pends upon the education of the rank and file. Democracy gives all men equal authority in government. To realize the responsi- bility and to exercise wisely the authority granted by law, educa- tion is necessary. The way to avoid labor troubles is to educate the workman in practical economics. Such education is quite as important in the small plant as in the large. *See paper read by Mr. C. L. Pool, Volume IV., No. 5, 1921 Pub- lications of the Society of Industrial Engineers. 54 S. I. E. Eighth National Convention WEDNESDAY EVENING SESSION April 26, 1922 Chairman, Frank B. Gilbreth, Montclair, N. J. "Practical Tests of Employees" By Henry C. Link, New York Some time ago, in connection with an investigation that was being conducted with regard to the use of tests and psychological methods in industry, the question was asked, "Do you use psychology in selecting your employees? If not, what methods do you use?" One employment manager in a rather large company answered that question in this way: "No, we do not use psychology in selecting employees — all we use is common horse sense." Another employment man- ager, also in a large industry, answered the question by say- ing: "Yes, we do use psychology in selecting employees. We use it all the time." And yet, upon making a first-hand study of the methods used by both those employment managers, it was found they were using exactly the same methods, neither more nor less. Now, how can these two apparently contra- dictory statements be reconciled? The subject for my talk tonight — "Practical Tests of Em- ployees" — in its wording rather implies that psychological tests are impractical, or at least implies that although psycho- logical tests may be practical, it is necessary for us to dem- onstrate their practicability. I feel, or should feel about the wording of my subject, much as you m?ght have felt if you found in your program a subject to this effect, "Practical Engi- neering for Industrial Engineers." As a matter of fact, indus- trial engineers take it for granted that they are practical engi- neers. However, it is true that the suspicion which exists with regard to the use of psychological tests is fully justified be- Detroit, April, 1922 55 cause of the extravagant and foolish publicity which has been given them. It is justified because of the extravagant claims which some psychologists have made for the practicability of some tests. It is justified because of the lack of understanding of industrial methods and processes on the part of those who have made the claims which have. been published abroad for the value of such tests. What shall we say about the employment manager who answers the questions just referred to by saying that he uses psychological methods in his employment work all the time? There is more than a grain of truth in that remark. There are men who have never studied text book psychology or labor- atory psychology in their lives who are probably better psy- chologists than men who have made psychology their life study, particularly if they apply their ideas in the fields for which psychology has found no adequate technique. So in one sense every individual is a psychologist. But if we admit the truth of that statement, then we must also say that every man who gargles his throat is a physician, even though he has never studied medicine; every man who steps on a plank to see whether or not it will bear his weight is a mechanical or construction engineer ; every man who bites into a piece of metal to see how hard it is is a metallurgist; every man who makes out an income tax return is a mathe- matician ; and every man who mixes a pot of paint is a chemist. So, in that sense everybody is a psychologist. Indeed, every- body is a little something of everything. But, using terms in so loose a fashion deprives them of all meaning. If everybody were a psychologist or a chemist, why the science of psychology or chemistry, and what need for psychologists, chemists, etc.? In asking this question we really answer it. Men do not become chemists, metallurgists, physicists; or psychologists in the real sense of the word until they have mastered the technique and use of the measuring devices or instruments which make it possible for different individuals in the same field to arrive at the same results, or closely similar results, if they apply their methods to a given 56 S. I. E. Eighth National Convention set of facts. No two men will agree as to the substances in a compound unless they make a scientific chemical analysis, and then they have to agree more or less ; and no two men are likely to agree about the ability or make-up of a particular individual whom they do not know unless they have some method which makes it necessary for them to agree, and which makes it possible for them to arrive at a result about which there are no disputes. With regard to the employment manager who said he did not use psychological methods or tests, all he used was good horse-sense, or practical judgment, in other words. I venture to say that that employment manager would not have bought a horse without having put him: through his paces, but I am sure he would employ a stenographer without dictating to her a letter, and without having her transcribe it and checking up the results. Let us develop this subject, then, from, the practical point of view, first of all, and let us begin with a comparatively simple position such as that of a stenographer, with which you are all familiar. Is it a common sense and practical thing to do in selecting from among a number of applicants one or more stenographers to give the applicants a series of tests? Let us say a test in spelling, a test in grammar, a test in filing, in context or filling in words omitted from a letter by reference to the surrounding words. Is it not a practical thing to give applicants for stenographic positions a test in dictation and a test in transcribing? Certainly no one would deny that these are practical, common sense tests. And coming to another field, that of an employment inter- viewer considering applicants for the work of making profile gauges, would it not be a practical, common sense test to give the applicants a profile gauge, a blue print of that gauge and the necessary measuring devices, and ask the applicants to check up the dimensions of the gauge with the dimensions of the blue print and see how well they agreed? Certainly that is a practical test, and tests of that kind can be applied in a great Detroit, April, 1922 57 many fields where they are not applied today in a manner which will be productive of excellent results. What does the psychological method add to the method of practical tests which we have just discussed? In the first place, let me say that psychological tests are not a peculiar kind of test — any type of behavior, any action whatsoever of which an individual is capable may become the basis of a psychological test. The tests that I have just described as common sense or practical tests may be taken and transformed into psychological tests. You have heard a great deal said about trade tests — that trade tests are not psychological tests ; that they are practical work tests^ , So they are, but trade tests may be worked out according to psychological technique and made far more per- fect and more valuable than they were before. The army trade tests were psychological tests because they were pre- pared in this way. So, then, any type of behavior whatsoever, whatever a person can do, can be used as a basis of a psycho- logical test. What is the technique which transforms practical tests into psychological tests? In the first place, the process of stand- ardization. Let us go back to the test for stenographers. The practical thing to do is to give an applicant a letter and time her, probably roughly by the clock, scrutinize the letter when it has been transcribed, and then come to some conclusion as to whether it was done well or poorly. At some later period the same test may be given out but in a somewhat different . way, or a differenf letter may be given, and so on. As a result, what you are really doing is giving a different test every time. Your tests are not standardized. According to the psychological technique practical tests are standardized so that the same test or a similar test is given in each case to all applicants over a given period of. time. The same letter is dictated as nearly as possible in the same way — arid, what's more, every test is corrected according to a method which is the same in all cases, mistakes are checked in the same way, added up in the same way, formulated in the same way, and 58 S. I. E. Eighth National Convention the results expressed in a numerical term which is very definite. The method is such that if anybody in this room were to give that test and give it by the methods prescribed, he would ar- rive at exactly the same numerical figure, and if he didn't, his mistake could be pointed out to him as exactly as in a mathe- matical problem. That is one thing an industrial engineer should well under- stand — making a practical test a little more practical and more accurate through standardization. In the second place, the psychological method standardizes the method of giving a test. Assuming that we have a certain test, there are many methods of giving that test, and it has been found that often a change of only one word in the direc- tions of giving a test will entirely throw off the person taking the test. After trying a test out on twenty or thirty people an investigator finally arrives at a method of telling an indi- vidual what to do, which will be least frequently misunder- stood. When that method is worked out it is put down word for word, even to the exact details by which it is given, and some one else given the same test will give it in exactly the same way, using exactly the same words. In other words, you have the essence here of the scientific method — viz., something which can be transferred from one person to another with- out submitting itself to the disturbing factor of the human equation. In the third place, the psychological technique proves the validity of its tests. In giving practical tests we have to assume that they are practical, whereas the psychological tech- nique has a method for. proving whether its tests are practical or not. For example, at a certain time a tool-making shop was started to train tool specialists — that is, to train certain individuals to do nothing but work on a lathe, certain indi- viduals to specialize on the planing machine, others on a drill press, a milling machine, etc. There was no way of selecting people who would be adept at this work, and we had no test to use, but we selected the people as well as we could accord- Detroit, April, 1922 59 ing to observation, and then at the same time gave, in an ex- perimental fashion, tests. The tests were as follows : A box with ten compartments. In each compartment an unassembled mechanical device — a monkey wrench, electrical door bell, clothes clip, endless chain, and so on through the ten compartments, and the applicant was asked to assemble each one of those implements. This is the Stenquist test. Then there was another test — a cube three inches square, painted green. The cube was cut so as to make twenty-seven small cubes. Those cubes were then spread out and the applicant was asked to build the cubes together so that all the green was on the outside, and he was timed in his performance. The third test consisted of a large form board which had pieces cut out in different shapes, and the applicant was asked to place those back into their proper places. At the end of six weeks the foreman and assistant foreman were asked to rate the individuals according to their opinion, knowing nothing of the tests, and the results in the tests were compared with the rating of the foreman and assistant fore- man. One man, a soda fountain clerk, who turned out to be the best man on the planer, was also one of the men highest in the test. The, person who stood highest of all in the tests was a boy of sixteen years. Under ordinary circumstances he would not have been selected for that work at all, as we were taking men of twenty years or over, but he turned out to be the cleverest apprentice in the whole place. As a matter of fact, he did higher in the test than the foreman of that shop, and I think from the rate of progress he was making it is fair to assume that in time he will be a better mechanic than the foreman. Other instances also confirmed an agreement be- tween tests and work. The kind of an estimate I have just made may satisfy the common sense psychologist, but it does not satisfy the trained psychologist. The trained psychologist is not satisfied with taking individual cases and comparing them. What he does, is to rank every individual of a certain group according to the performance in the test, and according to his work, and then 60 S. I. E. Eighth National Convention he makes a statistical comparison which determines very defi- nitely the degree of correspondence between the work done in the tests and the work on the job. That statistical method is a method I have not yet seen used by many industrial en- gineers, although it is of extreme value to industrial engineers in making comparisons between two sets of facts, such as the quality of work with the quantity of work in a given group of workers working under the same piece rate, a comparison made in such a way as to give a definite result, one which everyone would get if he used that method. We may say that it is impossible to standardize the human element, and consequently the application of standarized tests is ridiculous. Certainly it is impossible to standardi'ze the human element, but it is imjpossible to find out just where human beings vary until you have a standard on which to base your judgment. For example, in the selection of clerical work- ers some psychologists have devised a so-called clerical test, a standard clerical test by which all clerical workers will be selected. In my work I have never found such a thing as a standardized clerk. I have found that clerks vary a great deal in the work they must do. We started with a clerical test, but when we came to apply that clerical test we had reactions like this: "How about Miss So-and-So? I thought you said she was a good clerk." "Yes, according to the test, she is." "Well, she's rotten." We would investigate and find, for example, that that clerk was required to do only arithmetical work, and in this one respect she had to be very good. Our test was composed of various parts, and we averaged the results. Con- sequently, she might have done well in all parts of the test except the arithmetical part, and her average would still be good. As a consequence, we got up job specifications to give us the specific requirements. So, beginning with a standard- ized clerical test, we soon were led to see where our standard was wrong. We were able then to make an intelligent modi- fication of that standard test by breaking it down in several different and finer standard tests. Consequently, in order to arrive at any accurate judgment as to the differences between Detroit, April, 1922 61 people, it is a valuable thing to have certain standards upon which to base the judgments you make. In another respect the standardizing of tests makes it pos- sible to make intelligent exceptions. For example, you are considering two applicants for the position of stenographer. I refer to stenographers because it is a position so generally understood. One applicant does poor work in dictation and transcribing, but it appears she has had a very good education and does well in spelling, in grammar and in context. You may find out, upon investigation, that she has just come out of school, just finished her training, and has not yet had time to acquire speed and marked ability in the taking of dictation and transcribing her work. Another stenographer does con- siderably better in dictation and transcribing, but does rather poor work in spelling, in the latter context test, we will say, and in the grammar test. Which of these two girls shall you take? We may say the second girl's total mark is higher than the first girl's. It is possible there to exercise intelligent dis- crimination. I should say, take the first girl, because, although she is not yet as good iii dictation and transcribing as the other girl, nevertheless, she has the background and she has the makings of a good stenographer. Give her a little more time. Whereas, the other, having been out of school a num- ber of years, lacks that background and has gotten as far as she is likely to for some time and is therefore not so desirable a candidate. How can you make such a discrimination unless you have some standard basis? Certainly you will have to guess at it, and in many cases your guess will be wrong. The third value of using standardized tests is in eliminat- ing differences in individual opinion. For example, you might hire someone on the basis of a test and within a month the department head Will say, upon your following up this appli- cant, -'Ob,-"his work is rotten." You say, "He did pretty well in the tests." "Is that so. Well, I'll give him another trial anyway." A month later that person may turn out to be pretty good, and that happens time and time again. Often a 62 S. I. E. Eighth National Convention reason for the departmient head's attitude toward an individual is personal rather than impersonal. Now, if you have no standards to which you can refer you can do nothing but pit your personal opinion against his personal opinion, in which case you lose; whereas with an impersonal standard, such as you have in the tests, you can show the results, and you are not so likely to lose. It will be your objective and impersonal facts against a subjective or personal opinion. Here is a point that always comes up in connection with the use of a test : "Isn't it a fact that tests make people nerv- ous so that they cannot do themselves justice when taking tests?" Certainly, that is true, but the situation in which a person applies for work is a situation which would make any- body nervous, no matter what happens. It is not a position to which people are accustomed or in which they feel at home. A practical test, I would say, is more likely to make a person nervous than a test which is given in the right way. One day I heard the interviewer in an employment office make this remark : "Come back tomorrow and I will give you the stenographic test." I asked that interviewer if he did not think he had given the girl a great deal of time to become nervous at the prospect of taking the test he spoke of. "Well, I never thought of that," he replied. Now, in giving psychological tests, we never even use the word "test," and never tell applicants anything about them. We start right in without giving them a chance to think and start out with a simple test which we call a "shock absorber," and which is so easy that it is like rolling off a log to do it, and I think you will agree that there is nothing that will put a person at ease more quickly. The tests follow in such quick order, with no intervals between, that a person has no time to think of them except to do what is required. When this method is followed the possibilities of nervousness are reduced to a minimum. True as it is that an employment situation involves a certain nervousness, the way to get around it is by recognizing it and dealing with it systematically rather than haphazardly, and that is what a trained psychologist does. Detroit, April, 1922 63 It is impracticable to apply tests to everybody. I imagine it would be possible, from a technical viewpoint, to devise a test for sweepers, by building an air-tight room, distributing on its floor a certain amount of dust, taking the dust the sweeper collectg and weighing it, and then comparing it with the dust originally in the room, the time taken by the sweeper, etc. It would be necessary to have a method of distributing the same amount of dust again for the next person. But this is a pretty complicated test for janitors, and I should hardly call it practical even though theoretically possible. On the other hand, it is even more difficult to devise tests for execu- tives, salesmen or people higher up in the scale. As a matter of fact, it is hard to tell why men in executive positions are successful. We might say that salary is a criterion of the success of executives, but I think only those getting the high salaries would admit it. I know of no way, certainly, of judg- ing the success of executives, and since it is impossible to judge the success of executives, even niinor executives, there is abso- lutely no way of telling whether any tests whatsoever are tests of executive ability. We can give tests to executives, to be sure, but we have no way of finding out whether the tests measure the abilities of the executive. In practical psychology we do not test moral qualities. I remember the application blank of a company famed for its employment technique, which asked the question : Is the ap- plicant loyal? Common sense should tell us that there is no such quality as loyalty which can be measured in any way. Loyalty, like all other moral qualities, is relative; it depends upon the situation in which a man finds himself. In one situation he will have loyalty, in another he will lack loyalty. Loyalty is something to be cultivated, not tested. A group of executive students in an executive training course I had charge of brought that out most individually. For instance, in one shop a man would display all the desirable moral qualities — industry, patience, tact, intelligence, etc. — whereas in the next shop he would display an entirely different set — he would be lazy, he would not care about the work, get 64 S. I. E. Eighth National Convention . i -—^ in wrong with the foreman, come in late, etc. Why? Because in one shop the circumstances were such as to enlist the right moral qualities ; he liked the work and consequently he worked at it. In the other shop he disliked the work, the personalities, etc., and consequently the moral qualities displayed there were of another kind. So it is only possible to measure moral qual- ities by putting a man at work and watching him while he is at work. Just a word about a subject connected with this, and that is character analysis — analysis of character by the face, hand- writing, etc. I do not want to enter into a discussion of these pursuits. In fact, I have become rather skeptical of the value of discussing these methods because I find, as a rule, that the people who believe in them are usually the people who lack the background or the knowledge which they must have in order to make it possible to prove to them these methods are wrong. Consequently, when I get up against an individual of that kind I just back off. I cannot take the time to instruct that individual in the elements of five different sciences — biology, physiology, physics, chemistry and psychology, to say nothing of statistics — and it would be necessary to give him a knowledge of those five sciences before he would be able to appreciate that character analysis and face analysis flatly con- tradict facts in each one of those sciences — facts which no one who knows about them disputes. These methods may be criticized from another point of view. Use this simple test of any one of those methods: If three, four, five or six experts in a certain method can analyze one person in such a way as to agree in every case on the results, then their methods are all right. But I think that you will find few who will submit to this test. The very essence of a scientific method is having a technique which will make it necessary for two or more people to agree in their conclusions from a particular set of facts, or in regard to a particular person. When you give a person a test in stenography it makes no difference who gives the test, if given according to the method prescribed, nor who corrects the test if according Detroit, April, 1922 65 to the method prescribed — the results will be the same. After all, there is no real distinction between practical psychology and psychology as a science. Psychology as a science is simply a refining and supplementing of the prac- tical — improving it, making it more accurate, more impersonal. vSometimes a science contradicts our common sense ideas, as, for instance, the statement that the earth was round when when common sense told us it was flat. But in the main science in any field is simply a method of refining and creating common sense. So I say, by all means use practical tests, common sense tests ; only be sure in using these tests always to use common sense with them. And if your common sense does not help you to the extent to which it should, I recommend getting some young person, some student of a school where psychol- ogy is one of the subjects majored in, a person who preferably does not know too much about psychology, a person willing to learn a great deal about industry. Take such an individual into your camp, let him digest the facts of industry and grow up among those facts, under your supervision, and then let him try to apply the knowledge he has gained in the laboratory or school to practical conditions. 66 S. I. E. Eighth National Convention "The Influence of Industrial Engineering Upon Manufacturing Plants" By E. Karl Wennerlund Industrial Engineer, General Motors Corporation, Detroit, Mich. Being with one of the large industrial concerns of this city I have had an opportunity to observe the influence of industrial engineering upon manufacturing plants. As you are probably aware, we have quite a number of plants and we had to do considerable industrial engineering. During the past ten years there has been a rapid development in the sci- ence of industrial engineering as applied to manufacturing plants. Some years prior to that time there were a few in- dustrial engineers in the field ; they secured clients from time to time and achieved some splendid results; but the whole subject was looked upon with suspicion by the large majority of factory executives. It was the custom to combine line and staff duties to a great extent. The factory executive selected his own men and set his piece rates, planned his production, and routed the work through his department. Often he was expected to de- sign his own tools and figure out the best methods ,of produc- tion in his department. Even when certain staff duties had been set aside they were often combined with details that made it difficult to exercise control and which tended to nulify the results which might otherwise have been obtained. As an example, purchasing departments frequently had to figure out and provide for the material needed for a given pro- duction program. They had to make adjustments for factory scrap and defects, and where the factory substituted material ; also for withdrawals for service requirements. They also had charge of stores, and at the wind-up of production they were expected to come out with a minimum amount of surplus stock. Those methods may have done very well for the small m,anu- Detroit, April, 1922 67 facturing plant, but for the large organization it was found that they offered too many opportunities for wastage and ex- pensive mistakes. It was the gradual realization that the old methods were inadequate that led to the development of industrial engineer- ing. The pioneers in the field were responsible for promul- gating that idea, because they showed the possibilities of large savings that could be made in any line of work to which they gave their attention. The development of industrial engineering is the develop- ment of staff organization, and staff organization means the assignment of specialists to each department of work that requires special or expert knowledge. The assignment of a specialist results, generally, in that a particular work will be much better done than under the old methods of organization. Let us trace briefly the development of industrial engineer- ing during the past few years and try to interpret its influence on industry. The first staff duties to be set aside in factories were probably those of purchasing departments, of heat, light and power, and the maintenance of buildings. Later on tool design was added. Nearly all other factory activities were closely allied to actual factory operation. Engineers began to study cutting tools, and they recommended standards for specific purposes. As soon as cutting tools had been improved it became quite evident that belting would have to be main- tained in the best condition, and that machines would have to be strengthened. There was a speeding up of line shafts, an increase of bearing areas, and a general strengthening of ma- chine design. Production commenced to be on an entirely different plane. This led to the subject of wage incentives whereby the workman would be rewarded somewhat in pro- portion to his production, because the possibilities of intensive production began to be appreciated. And it was found advan- tageous to plan production in advance, so that the workmen's efforts could be co-ordinated. After much of the purely physical work in the factories had been done it was clear that some attention should be given to 68 S. I. E. Eighth National Convention the human element. It paid to have a specialist select em- ployees with some view as to their moral, physical and voca- tional fitness, and who would investigate the causes for em- ployees leaving. This led to a general improvement in factory conditions. Surroundings were made more attractive, atten- tion was given to heat, light, and sanitary equipment ; dining rooms were installed and medical assistance provided. A tremendous amount of this work has been done during the last dozen years. Much of it has been done in plants that have had no regular industrial engineering organization ; but industrial engineers have constantly been studying the subject. They have pointed the way, item for item, and what has been done by them in one plant has been adopted in principle by other organizations. The great influence of the industrial engineer lies in the fact that he has taken one subject and thoroughly analyzed it. He has pointed out that if certain methods of procedure were used much better results could be obtained. This led to the development of that great subject of motion study which has become the basis for setting wage incentives and which has been adopted in principle by manufacturing concerns every- where. In the larger organizations it has become very evident to us that a staff organization is absolutely necessary in order to get efficient production, and that is what we are all looking for ; the ultimate end is efficiency of production. The mem- bers of this staff organization do not necessarily call them- selves industrial engineers, but they are all in effect engineers of production. With a large concern like the General Motors Corporation, where we have plants scattered throughout the country, and each manufacturing plant is a unit in itself, it is necessary to have two staffs — one a general staff and the other the local manufacturing staff. These staffs are very closely associated. The general staff will figure out the general broad plans to follow, and the local staffs will put them .into execu- tion. We have found it expedient not to make it compulsory for any factory manager to follow out the advice of the staff ; Detroit, April, 1922 69 but he is at liberty to call upon it for advice when he wishes and follow it to the extent which he sees fit. Of course, he cannot escape having staff duties whether he makes full use of the general staff or not. He is compelled by circumstances to make use of a staff in his own organization, and that has become a well recognized fact. There is no longer a question but that there should be specialists assigned to take motion studies and to supervise wage incentives. There is no longer any question but that certain men should have charge of providing material and taking care of stores. These are staff duties — they take that much worry off the minds of executives. They are absolutely necessary for factory operation, and yet executives can feel that those functions are taken care of almost automatically. The general staff has grown step by step until it has come to a point where there is an expert in charge of each impor- tant line of work. Its various activities are tied together under a chief of staff so that they can be co-ordinated and the same policies followed out. The staff duties that are being developed at the general office, and which are being supple- mented at the plants, are the following (I will not try to explain all of them, but will enumerate them and explain how a few work) : We have one of personal welfare. Also we have gone into the large subject of waste prevention, and many other things we did not think of a few years ago. It is simply astonishing to see the savings that can be made along some of these lines. We have had waste going on year after year, and we didn't realize until some specialist took hold and showed, for example, what we could save in cutting leather, or in sawing wood for automobile bodies. Then we have the specialization of by- product disposal. We also have lubrication — there is one man who does nothing but specify oils for machinery and cars. We didn't think formerly that this was very important; we be- lieved that most anybody could go around with an oil can, and that most anyone could select oil. We didn't think there was much of a field at first; but when we found that we bought 70 S. I. E. Eighth National Convention about two million dollars' worth of oils a year, and that we could save about 10 per cent of that, it became a pretty big field. Then we have the specialty of plant equipment and tools. You must bear in mind that ten years ago there weren't any of these things — they just fought it through, and nobody really knew the difference. We have metallurgical treatment — a man who specializes in treating steel. He does not do any of the actual work himself, but he tells the plants how it should be done, and each one of the plants that has to do with the heat treatment of steel has an expert in its plant. Sometimes there are complicated problems that come up. We also have a specialist on standardization of design for the pur- pose of co-ordinating designs. It was found that one plant would design a certain screw with 16 threads and another plant might design one with 11 threads, both for the same purpose; or, we might find two bolts alike with the excep- tion of one being 1/16 inch longer than the other. As soon as all these standard parts were brought together, we found there would be a large saving by getting out reference books of standards, because when the question came up they could use one bolt as well as the other. Each engineer felt he had to make the design a little different from what anybody else ever made it; and we had them of all sorts, with different kinds of threads, different diameters, etc. Although engineers might take their standards from reference books, yet at one plant they might select one standard, while at another plant some other standard would be selected for the same purpose. But if their attention were called to it, they could have one standard instead of two. So that particular item has become a big field. Then we come to the subject of material and production planning, and finally to factory standards and wage incentives. Most of these duties are so different from any other that it takes all of a man's time to specialize on them. Some of them are combined to some extent. I want to go back to say just a word about waste pre- Detroit, April, 1922 71 vention, because that has become a very important subject — one of which we did not appreciate all the possibilities. We had men cutting up leather for automobile bodies and we used to think of only one thing — that was how many jobs we could cut in a day. The more jobs the man cut, the more leather went on the floor; so the more valuable that stuff became to the junk dealer who sold it to specialty plants. We got a man on that job who had never been in an auto- mobile plant. He had been a designing tailor by trade, and he came along and told us he thought he could save us a lot of money in cutting leather. He said he had never cut leather, but he thought the saving could be made. So we gave him a three months' trial at one of our important fac- tories to see what he could do. He simply astonished us. We had an accurate record of how many feet of leather went into the average body — that was not hard to find, simply tak- ing the amount of leather we bought and the number of auto- mobiles we built. He showed us how many feet it ought to take. It was found that the problem was not to get a man to cut up a lot of jobs; but the real problem was to get all of the leather into the automobile and not on the floor. It sim- ply amounted, in the aggregate, to hundreds of thousands of dollars a year, because leather is expensive, and we happened to be cutting up jobs for several hundred cars a day. You can easily see where a single factory might waste two or three hundred dollars a day. Then the next thing was lumber. Our specialist said he had never been inside at a wood-mill, and did not know any- thing about how they went at it. But on the strength of our previous experiment, we let him tackle the wood proposition. It was found that in measuring up the net wood required for an automobile body — not after it was shaped, but after it was cut and ready for shaping — ^that 30 per cent of the lumber we bought finally went into the furnace. Thirty per cent! He showed that we should get along with a 10 per cent loss in one of our large factories where he had a letter from the manager admitting an annual loss of 30 per cent of his lumber. 72 S. I. E. Eighth National Convention We are now operating at less than 10 per cent. Of course, we cannot get down to zero — there is a certain amount of lumber that will finally go to the furnace. But our loss is now less than 10 per cent, and we are saving 20 per cent of the lumber bill. This will amount to approximately $150,- 000 a year in that one factory. This kind of waste has been going on for years. Everyone considered it was an unavoid- able part of manufacturing. The by-product disposal came up for consideration also, and it became a profitable subject to take up. We have necessary by-products, consisting of turnings from machines, those that drop from stamping machines, scraps of leather, cloth, etc. By by-products we mean the unavoidable waste; and, of course, we do have some scrap from the factory which also comes under the general class of by-products. But the factory management used to look upon by-products as an evil to be gotten rid of. They would take the sweepings from the factory and put them in a bin, and were glad to have a junk dealer come along and make a bid and take it away. We found the value of by-products was $5,000,000 a year, and that we could probably increase our revenue 10 or 15 per cent. So there was a possibility of saving over half a million dollars a year! But this had to be done by some definite method. We had to adopt a definite system of handling. Consequently, we had to get somebody on the job that knew something about the different kinds of by-products and where they finally went. We had to find the ultimate market. We thought first it would be the mill, but it wasn't, because the mill prefers to buy in large lots from a broker. They don't care to take a carload — they usually make a contract for thou- sands of tons. So it was necessary to know all about the markets and then to find out how the mills would finally want that product. They wanted aluminum, iron castings, steel turnings, etc., but they did not want them mixed to- gether. The junk dealer bought this material, sorted it ; and when he sold it it was worth a great deal more than its orig- inal price. Detroit, April, 1922 73 Now in factory operation, closely allied to the factory management, we have two important departments — one of material and production, and the other of factory standards. I call them important because they become like the right hand of the manager. Those departments not only provide the sinews, but they are constantly in touch with the opera- tions in the factory. They are a little different from some of the staff duties where, for instance, you lay out the fac- tory and make a study of arrangement of machines and then that is done and is over with; or you design tools and put them into use and that is completed; or you devise certain methods of classifying your by-products, etc., and that be- comes a matter of routine; or, you have your welfare de- partment engage employees and those things become a mat- ter of routine. But these other departments are constantly operating in the factory — they are the ones that have to get the work into the shop, provide for the material and keep track of all the scrap, all the factory operation, get a record of the work, take time studies, set the wage incentives, and constantly deal with the men and foremen. In these de- partments at each factory we have tried to build up a very efficient and practical staff. Our duties so far as the general staff is concerned, are largely the elimination of red tape. We try to do these things just as simply as possible, and along that line I think we have introduced two notable de- partures from the usual practice. One is in ordering the material. Where it had been the custom to consult stock balances, where you had to know how much you had in the stockroom, how much in process, and how much you had ordered, we introduced the plan of buy- ing from requirements through all our factories. The man who tells the purchasing department what to buy does not see a stock balance record — he does not need to. We may get releases for a bunch of cars where each car requires three or four thousand separate items to be purchased, and we can go right down the list and issue purchase requisitions for the required quantity without referring to a stock balance record. 74 S. I. E. Eighth National Convention We thought that was some achievement. It is after all very simple. It has been useful to us, because stock records will get ofif and if you consult them when buying, you may buy the wrong quantity and not find out about it until too late to rectify. The other item was the subject of wage incentives. That is a large subject in a manufacturing plant. In one plant we had 17,000 employees. In the same city we had another fac- tory with 7,200. Nearly all manufacturers find it necessary to have a wage incentive plan; at least it is very desirable. I know there are notable exceptions to that; but, generally, manufacturers agree it is desirable to have some form of wage incentive, so we find wage incentive plans in effect in nearly all factories. Some are good, some are indifferent, some bad. We found that the wage incentive plan was generally handled by a foreman setting prices, and the workman making out a ticket at the end of the day telling us how much the company owed for that day's work and if he did not claim too much he usually got it. In one case where we had some 50,000 tickets in a day it was a question of whether or not we should check them. That led us to another notable achievement, we think, in the way of factory management, and that was to eliminate job tickets entirely. That work is being extended from fac- tory to factory. It will take some years to get it all the way through. This development is known as the group bonus plan. We found that as our factories were being developed more and more there would be a manufacturing line for each im- portant part. At first we started off by having a standard time or price for each job, down the line. It occurred to us one man couldn't do any more than the other anyway — that is, the line became a unit. So we started to group the men. We started out with five or six men in the group and we simply paid them for the output at the end of the line. We use no job tickets whatever. A group is debited with the actual man hours the men work, and credited with standard _^ Detroit, April, 1922 75 hours for that particular group from the output at the end of the line. This was developed to the point where we are paying an entire assembly plant for the finished cars that go out. Back on the second floor we have girls operating sewing machines working on a wage incentive, and they are paid by the finished car. Consequently we do not do any counting of parts, and do not have any job tickets, but we have a timekeeper for about every 600 employees. That is getting the expense of factory operations down. Whether you can do that or not de- pends on one thing, and that is the factory morale. I was down at one of our plants last week where they are building about 300 cars a day, and I went out to a group of workmen handling the sheet iron p)arts — all those things that are enameled— called the enameling department. There were about twenty men in one group and those men put the parts through a washing machine to get all the grease off them, wiped them dry, and hung the parts on an automatic enameling device, and then took them off and sorted them. Those men were simply picked off the streets, nearly all for- eigners who had no trade, and most of them could not speak • the English language. You could not explain the bonus sys- tem or anything else to them, and yet I do not believe I have ever seen a group of men work so hard. I asked the foreman on the job what happened if one quit and another took his place. He said, "Well, he has to show up in about two days or he has to get out — the men won't keep him in the group unless, he is good at it." That has been the development of the group idea. In conclusion, I want to state that in my opinion, the great service industrial engineering has rendered the factory manager has been to supplement him by taking off his hands various staff duties. It used to be up to the factory man- agers and other executives to do a lot of figuring of material, wage incentives, rates of employment, and all of those vari- ous details I mentioned. Industrial engineering has made these duties easy for him, it has made it almost automatic. 76 S. I. E. Eighth National Convention In fact, if the staff is properly organized, those duties should go on automatically so far as he is concerned. If he has not that kind of an organization, it is possible to get one. At the same time, it has lowered the ultimate production cost, which is the real aim of industrial engineering. Detroit, April, 1922 77 "How Industrial Engineering May Serve the Executive" By E. W. HuLET Note — Due to the fact that the lights were turned out in order to show lantern slides, Mr. Hulet's paper was not stenographically reported. The speaker confined himself largely to explanation and discussion of charts thrown on the screen. CHAIRMAN GILBRETH: We will not have the dis- cussion from the floor. MR. EMERSON: Thirty years ago when I was Mr. Link's age I believed just exactly as he does — I thovight all this idea of reading a man's capabilities from looking at him was all nonsense. I was the skeptic of skeptics. At Battle Creek I happened to meet an old physician who said from a single tooth he could tell the sex, age, the color and hair and general disposition of the person to whom it belonged. I thought, of course, he was an infernal liar. I thought I would test him. I did test him out and I found he was able to do exactly what he said he could do. In the. last thirty years I have found that you can tell a tremendous amount about people without any psychological test at all, and that the people who know something and do not know how to express it are numerous — the race horse men and breeders of stock, and we ourselves in a certain degree, can judge in the same way. Nobody on earth would mistake a bulldog for a greyhound — you would know which was the fighter and which was the runner, and the same way with the breeders — by looking at a cow they can tell how much milk she can give. I have tried and tested out a great 78 S. I. E. Eighth IS'ational Convention many people and havie tested them out as to their ability to read character from looking at the person, or the handwriting, or the shape of the hand or the head, and I have tested them out thoroughly. I have been skeptical and I have given these tests as to people I absolutely knew in our own family. There are six of us, some of us were born in Europe, nearly all of us brought up there. We all learned to write over in Europe, and the handwriting of the six is different, and the handwriting corresponds to our different characters, although we had the same teachers, the same father and mother. The handwriting is different and it corresponds to the character of the different men and the girls, also, in the family. And so it runs all the way through. Now, it is not true that if you take a number of men who have been taught to observe the same kind of qualities, they will not read the same qualities in a man whom they observe. I have seen that tested out, and they will read the same qualities, and those qualities will be substantially cor- rect. That is what has been done and tried out. I have tried this thing out for the last twenty years, and I do not employ anybody at the present time without having that kind of an analysis made of him, and I do not care any- thing about your psychological tests. I do not care how quick a man is on the trigger, I do not care whether he can fire a gun one-tenth of a second faster than anybody else, I do not want him if he does not measure up to my analysis of him. I sent out a notice for a certain position I had vacant. We received 326 applications for the position, accompanied by photos. What would have happened if we had had to examine and look over the recommendations of those people? We would have tired at the end of the fifth and taken the sixth on general principles. But when I receive a photo of a man with a cigar stuck in the corner of his mouth, standing in this position (indicating), feet out, I do not care what qualities he has, I know he has not charm, and charm is one of the things we need in industry and leadership. So that is Detroit, April, 1922 79 the reason I have reason to protest against the remarks of my psychological friend. MR. JOHN CALDER: Mr. Emerson arose to protest against most of Dr. Link's remarks, and 1 arise to support Dr. Link. Mr. Emerson's facile generalizations are not to the point. Having said so much, I will speak entirely in ap- preciation of what Dr. Link said. We all know that amongst executives in industry, and es- pecially amongst the high officers in large industries, there is a prejudice against testing people. They claim that they do not want people who have arrived to be tested because they manifestly have gotten there, but some of the people who have arrived, remember, cannot go far enough, and in some cases they should never have been allowed to arrive at the stage of stopping where they are. The only way to prevent that is by better selection with the aid of tests, and tests applied at an early enough stage. The value of tests has been shown in Swift & Company's department of industrial relations, which. surveys 35,000 plant employees and 15,000 office employees. We were allowed to practice tests on the office boys. It was felt that if harm would be done, the harm would be less amongst them than anywhere else. We tested 100 office boys out of the 500 we have, ranging from fifteen up to seventeen years — the group of boys, who might, if they proved capable, become junior clerks in about twenty months. We gave them an Otis gen- eral intelligence test, which was close to the office system requirements. We gave them the test and showed the re- sults only to one man high up in the company, and then put them into cold storage for twenty months. In the meantime we allowed every big department head who thought he knew how to handle boys to do what he would under the ordinary circumstances, with these 100 boys. At the end of the twenty months we made out a report of what experience the men had had with the boys. We analyzed this and compared it with what we found out about, these boys twenty months 80 S. I. E. Eighth National Convention before. Without giving too many details, this is what we found : The boys divided into 33 at the top, 33 below, and 33 at the bottom. All the boys at the bottom had left and all those boys who had left were boys at the bottom of the test; all the boys in the middle had made some advance and a few had left for better jobs. Where they left our employ with that explanation we verified the fact they had gotten better op- portunities than they had with us; all of the boys at the top were the boys who had received increases in pay and had risen up to the ranks of junior clerks. In other words, we could have saved hiring the bottom 33 boys, and we could have been sure of the 33 that had advanced — twenty months before. That pointed to the fact that science combined with prac- tical common sense (and you must have both) will enable you to do some things today quickly that you do anyhow, that you make a stab at, that you make a blind guess at, and do not recognize it. These are facts. People recognize this fully only when they get a wholesale order for help, but it amounts to just the same thing in the smaller place. Science can certainly aid you in practical tests, always maintaining relativity, of course, and always using common sense. I am thoroughly in accord with Dr. Link. Although all places cannot afford to have in their sole employment such a man as Dr. Link, still the results obtained in that way can be applied. The single observational standard of charm is ridiculous, even where that is the chief environment. It means nothing at all in most industrial openings by itself. Another instance — There was a man of large salary who could not get a stenographer anywhere to please hini. What could be done about it? All the girls he could not' use were sent to other people and a test of qulaities was prepared for all the different faculties these people should be proficient in, and in degrees from the lowest to the highest, and every man who employed these rejected girls marked them up. Every- one but the original boss marked disposition "excellent" — the Detroit, April, 1922 81 latter had had each girl marked, "Disposition bad," or "un- suitable." All we did was to send to him the markings of everybody else, including himself. He looked it over and said, "I get you." You see, the bad mark was on the man, not the girls. We had no more trouble about disposition then. A word about what Mr. Wennerlund referred to. There is no doubt that a staff in a large organization is most im- portant for concentrating on the things that he has referred to; those things that the general factory manager used to conduct or was supposed to conduct, or did as much as he had time for, letting the rest go. The old jealousies about the use of the industrial engineer in the plant, or attached to headquarters, is disappearing. The manager finds he is a real aid, and his directors know it. Regarding Mr. Hulet's address, it will be my privilege at the opening of Industrial Relations session tomorrow to deal with quite a few of the things he referred to tonight. I am not altogether in accord with Mr. Hulet, but I think we owe him a debt in calling the things to our attention, so that we may think them over seriously. In my contact with 60,000 people there are some things that do not at all bear out Mr. Hulet's remarks. Industrial Relations have long embraced duties and required qualities in their skillful administration that are not to be obtained wholly by shop experience and are often lacking in our older superintendents. I am more hopeful of the situation than is Mr. Hulet and believe that he is wasting his time in keeping the industrial engineer away from the help. CHAIRMAN GILBRETH: The Chairman cannot take sides, but at the same time he would like to express a friendly feeling toward Dr. Link and what he has done. On the other hand, for any man to dare say that any old fashioned schemes the old-timers have arrived at are no good, or a thing cannot be done, I am not in sympathy with. I think you are not. One of the earliest cases of selection of the worker we had was when there were plenty of men to select from. We said ,82 S. I. E. Eighth National Convention to the foreman: "If you are going to pick out a man for strong work and don't know which one to get, pick out the fellow who looks as though he would be the hardest fellow to handle in a knock-down and drag out, and that is the surest test." So there are two sides to that story. I back up Dr. Link. MR. HUGO DIEMER: As I heard Mr. Wennerlund speak I could not see how anyone in this audience could fail to appreciate that there is a need for the real industrial engi- neer in times of depression, just as much as there is in time of great industrial activity. I think when Mr. Wennerlund told us of the accomplishments that have been made in his company we will all realize that the real industrial engineer is the man with initiative, with resourcefulness, originality, that he is not merely copying systems of people but arises to the occasion, whatever the occasion may be, and I do not think the real industrial engineer need to worry about whether he is going to keep busy as an adviser or as a salaried staflf member. Now, Dr. Link is the connecting link between psychology and business in industry. It was my good fortune to spend about a year and a half in a plant where Dr. Link had ex- perimented very successfully, and what he stated about stand- ardized tests worked out satisfactorily, as borne out by our experience, because we had various employer interviewers utilize those tests with uniform results. When it comes to further application of psychology, however, I am inclined to agree somewhat with Mr. Emerson. There is always a cer- tain amount of imagination that runs ahead of definitely es- tablished science, but even in the utilization of definitely es- tablished science I do not think the industrial engineer has gone far enough. As you all may know, a book written by Mrs. L. M. Gil- breth on the "Psychology of Management" has taken up every phase of scientific management, every step that is necessary in the installation of scientific management, and has explained in detail the natural human reactions, the instincts and ap- Detroit, April, 1922 83 peals which the industrial engineer ougJit to consider and have regard for as he takes these steps. With regard to Mr. Hulet's discussion, I do not agree with him or anybody else who looks upon the industrial engineer as a handbook to be thumbed and laid upon the shelf, to be used and discarded at will. I believe the real industrial engi- neer is going to educate himself until the allied sciences which go to successful industrial production go hand in hand. More- over, he has to be an educator. The industrial engineer, whether a consultant or staff member, has an educational work to do far more than the mere system of installation; he must train the minor executives and major executives in seeing the light as he has been led to see it. DR. LINK: Referring to Mr. Emerson's comments, if I conveyed the impression that I did not believe in intuitive impressions, I have conveyed an impression I absolutely do not believe. A man must use his thumb to measure distances before he gets the idea there is a ruler to be used. I believe it is possible to pick out people in a practical way, and I have done it. For instance, if I may mention something personal : In handling a crowd at the Yale game I had the job for three years of picking out a staff of about 1,500 men to handle the traffic, and people, on that day. I had to interview in the course of about three weeks, about 3,000 men and boys and I had to pick them out. For the automobile guards I picked the bulldogs ; for the ushers the men with charm ; and for the job as ticket takers, the honest men. So I believe that Mr. Emerson, after thirty years, still believes in using the thumb. CHAIRMAN GILBRETH: I want to say that I have just come back from Czecho-Slovakia. I found there a psy- chological laboratory with the most remarkable and complete set of instruments, and I found at one of the meetings me- chanics and foremen and their employers and the head of the engineering society, psychologists and psychiatrists, these workmen with their tools and appliances on the benches there in the room, talking science and work of science — a most re- 84 S. I. E. Eighth National Convention markable thing. As Chairman I cannot go into it tonight, but I wish to say to you that in other countries they are tak- ing psychology more seriously than in America, in spite of the fact we bow to no nation on the quality of our psycholo- gists. Now, in Japan they have made remarkable steps forward in psychology. Dr. Yoichi Uyeno, who is here with us to- night, a recent member of this Society, who is making a trip around the world visiting all of the psychological laboratories, I hope will tell us what they are doing in other countries. DR. UYENO: During the wartimes when business was flourishing as it was everywhere in the world, we had a great deal of labor dispute in our country, and our government felt it very necessary to have some establishment to conciliate labor and capital. We have no special Department of Labor, as you have in this country, but our government decided to spend $1,000,000 for that purpose, and another $3,000,000 was contributed by the industrial men. With that amount of money we established semi-govern- mental institutes for the purpose of conciliation of labor and capital. After they had some work along that line already done, they found that the prevention was better than the cure because the conciliation work of the labor disputes was just a cure and not a prevention. They began to look for infor- mation and for this purpose they wanted an institute for in- dustrial psychology. That was the chief reason that the in- stitute for industrial psychology was organized. My chief mission in this country and in Europe is to visit the various universities and see the professors who are espe- cially interested in business and industrial psychology and see what they are doing and to inspect the work which is done by industrial engineers in these countries. I have traveled now since last October in this country. During my trip in this country I found psychologists here are mainly interested in the application of mental tests for the selection of em- ployes. The industrial engineers, I have found, are much in- terested in production methods. Of course, recently they have Detroit, April, 1922 85 extended their work to salemanship and advertising. But mainly their work is confined to production efficiency meth- ods. I have noticed that the psychologist's work and that of the engineers was independent of each other. That has been one of my disappointments during my trip in this coun- try. My experience was this — that the many psychologists here would be interested in time-study or motion-study or something of that kind, but as it is in my country they are so timid they will not go into the plant and do their work over there. I have been working in Japan as a consulting psycholo- gist, installing scientific management in some of our Japanese plants. I have been much interested in the combination of psychological work with industrial engineering work. MR. KNOEPPEL: I think honest confession is good for the soul if it will bring out a point with reference to psychol- ogy and character analysis in this case. For a great many years, starting back fifteen years, my friends have been kidding me, telling me I was dignified, im- pressive, with a fine personality, etc. 1 wanted to know all about myself and started in with a reading and ended up with a handwriting proposition, including psychological tests. I had three character analyses made by this particular indi- vidual and he marked me very low on reciprocity — ^whatever that meant. I said I would like an explanation on how he figured that I was^not a believer in reciprocity. He was only reading the face — he went on to explain why and- what it meant. He said: "You are too cold-blooded." I did not be- lieve him. A little later, after I had had my chance at trying to close a contract and failed, and my good friend Mr. Berndt suc- ceeded, I wanted to know why I lost it, and the conversation related back to me was that this client, then a prospective client, said I reminded him of a fish and all that I was inter- ested in was the cold-blooded realities of industrial manage- ment; I was not at all human; I cracked no -smiles at all — was perfectly serious and cold-blooded. 86 S. I. E. Eighth National Convention I dug up this chart, this analysis, and realized there was something behind this reciprocity. Then one or two other things of an allied nature came up — I expected the other fel- low to come 70 per cent across the line before I would meet him. That has done a lot to me in the last year in cultivat- ing reciprocity. Another individual I know a great deal of — have known for ten years — is entirely honest from certain angles, but he will indulge in a certain amount of sharp practice and try to slip something over on you. Just to get an angle on him I got him to consent to a character analysis and he got a little statement at the end of the reading — a confidential reading — which said he was not religiously honest. Now, I ask you skeptics how on earth one man who had never seen another could come to a conclusion that the man was not religiousl}' honest, and if honesty is not a moral quality I do not know what it is. He picked a third man whom I knew, the most stubborn mule in existence. He wrote : "This man in his own mind is all right." I do not discount for a moment the value of psy- chological tests — I have taken some and found out wherein I have fallen down. Recently when the matter came up to me to decide where I would send my boy to school, a boy of eighteen years who had been in military college, I had a reading, a handwriting reading, a psychological test, two face readings — five readings. The uncanny thing about it is that five different sets of people saw that boy at different times and I got the reports and all through them runs a similarity- some exceptions, to be sure, but the fundamental thing is the sameness, the bigger things, and it tells me definitely what to do. Mr. Hulet has hit a fundamental I do not agree with in all respects, but there is one big thing — the distributing field. About a year ago we were called upon to take up work in a plant close to the rocks. The salvation was one of sales. They did not think they could get sales. We said they had to get them. A cold-blooded analysis of the business was Detroit, April, 1922 87 made from an external analysis. Men went around the coun- try and saw the dealers, saw the users, and came back with an analysis. In the meantime certain trends had been set and out of that a budget was set and at the end of six months the total sales exceeded the budget sales by nearly 10 per cent. So there is something from the standpoint of distri- bution and service — that is, that the industrial engineer must take hold of if we are going to take full advantage of the op- portunities before us within the next five or ten years. That does not mean that there is not a production angle. One of the most intricate manufactures that we know any- thing about, where the limits are a half-thousandth of an inch, and the artisans such that it takes ten to twenty years to train them, has been operating in the past on a functional basis; specialties of an allied nature are in one room. For six months experiments were made and that particular prod- uct has been put on a progressive and simple basis, with fig- ures showing a 30 per cent reduction in the cost of overhead and labor, and a 6 per cent ratial increase in the total time and process, so there is a big field in increasing the produc- tivity, with an enormous field in sales and the distribution and service side. MR. J. G. THOMPSON: I would not intrude at this meeting if it were not for the fact that I probably have had more experience in giving tests than anyone here. I have been engaged in educational work for the last thirty years. It seems to me the confusion arises tonight that we do not discriminate as to what we are attempting to test for. We can test for knowledge, for skill — those are the first two things to make up character; the next is power, and then wisdom, all making for character, and you have an ascending scale for office boys if you want knowledge tests, to the president. If you want knowledge, you can test for it. .You can test for knowledge and you can estimate it scientifically. You can test for skill in the stenographer. You can estimate it scientifically. When you come to test for power, which is what the man who designs the airplane has, while the man 88 S. I. E. Eighth National Convention who. runs it has skill, you get into a foggy atmosphere; when you test for all four it is most difficult. The emotions of love and hate you cannot test; life itself you cannot test. The whole universe treats protoplasm, or whatever life is, and what it is cpnnected with, in the most spendthrift way — a thousand fish eggs from a single fish, and so on. We can test knowledge, skill, power, to a great extent, and character somewhat. We can use Mr. Emerson's schemes and Dr. Link's, but when we get up into that field we have to realize where we are. Detroit, April, 1922 89 MANAGING EXECUTIVES' GROUP MEETING Managerial Red Tape Chairman, Stanley P. Farwell Vice President, Bureau of Commercial Economics, Inc., Chicago CHAIRMAN: Mr. Edward T. Miller, Executive Secre- tary of the United Typothetae of America, was not able to pre- side on account of an unexpected trip to the Pacific Coast. Mr. Dent has asked me to read Mr. Miller's introductory remarks on "Managerial Red Tape." "A few months ago when Mr. George C. Dent, the efficient business manager of the Society of Industrial Engineers, was preparing the tentative program for this convention, he came to my office with a copy of the same and asked me to look it over carefully and add any suggestions that I might think would improve it. "I gave the entire program considerable study and thought and noticed that beginning Wednesday evening he had planned informal dinner meetings of various groups such as the Education Group, Production Managers Group, Industrial Relations Group,. Accountants Group and Sales Managers Group. It occurred to me that these various group meetings afforded an opportunity for a great many of our members to get together for discussion of subjects in which they were intimately interested. Personally, I am more or less gen- erally interested- hr all these subjects, though I am more inti- mately interested in the problems which face the managing executive. Furthermore, I believe the fourth and largest division of our membership is composed almost entirely of managing executives. It occurred to me that a new group could be added to the list prepared by the program committee knov/n as the Man- aging Executives Group and that we could have a very profit- able meeting of members of this group for studying some of the problems in which we are interested. 90 S. I. E. Eighth National Convention "I am happy to say that Mr. Dent was pleased with the suggestion from the very beginning and when he took it up with the managing board they adopted the idea. As time went on the question of a subject for the discussion of this group came up and after submitting a list of subjects that might be discussed we finally agreed upon the subject "Man- agerial' Ren Tape." Mr. Stanley P. Farwell, Vice President of the Bureau of Commercial Economics of Chicago, was asked to lead the discussion. "I had the pleasure of one or two meetings with Mr. Farwell, in which we outlined the work of the meeting and agreed upon the definition of terms. We agreed that the word "managerial," at least for the purposes of the discussion at the present meeting, should be confined entirely to the work of the administrative manager or executive rather than make it broad enough to include superintendents and foremen of mechanical departments. In other words, "managerial" for the purposes of this discussion is to be applied to the work of managers and executives who are charged with outlining policies and executing them. In short, with the managers in the general or front ofHce. "Discussing just what the words "red tape" mean, we agreed that red tape is a slang expression for all devices used in adminis- trative control systems. Devices themselves may be either methods or forms or machines. It is readily seen that if we take this view of the matter, red tape does not necessarily mean something that should be eliminated. That brings us promptly to the admission that there may be good red tape and bad red tape, and further, that in the course of the evolution of business, red tape, which was at first necessary and consequently of the good variety, later on might have lost its usefulness and gradually deteriorated into what might be known as bad red tape. "In other words, administrative managers or executives in their work of carrying on the policies of a business, whether it be in finance and production or in sales and distribution, must necessarily express themselves through the media of methods, forms, office machines, statistics, graphs and all similar devices. Managers and executives cannot help but be benefited by a stud}' Detroit, April, 1922 91 of these devices; in short, by an investigation of the subject of "red tape." The experiences of those of us who have come together today, when related to the subject under discussion, can- not but be helpful to all. If each one of us may carry away from this discussion some new idea or some new inspiration that will lead him to greater efficiency by teaching him to avoid the char- acter of red tape that is useless and to employ the character of red tape that is of real value, we will have spent the time profit- ably and gained -from this discussion what has been the desire and wish of those who have been interested in the establishment of a Managing Executive Group. "I regret exceedingly that almost at the eleventh hour before this convention I was called to the Pacific Northwest on urgent business of. my association and am therefore deprived of the very great pleasure of opening this discussion and of meeting the many managing executives who have been invited to take part in this sectional meeting." CHAIRMAN: As I have been thinking of the subject assigned to me, I have realized that it is very indefinite. Before we go any further I would like to tell you that I am more or less a ringer in this managing executives' group. I am sort of a mixture of managing executive and professional industrial engineer. My work is mainly in connection with public utilities, a type of organization which, to the ordinary customer, are beauti- ful examples of red tape, so it may be that that is the reason why they picked on me. I am in the position of the managing executive in that I am director of an organization of. industrial engineers, the Bureau of Commercial Economics, Incorporated, of Chicago. I very often find myself in the position, as perhaps do managers of other industrial engineering firms, of being so busy with problems of system, red tape and other subjects for other concerns that I do not have time to devote proper consideration to the study of our own red tape. Some time I hope to have a few days off when I can devote intelligent consideration to the study of our 92 S. I. E. Eighth National Convention own organization from that standpoint. I know there are some things that could very well be straightened out. It seems to me that this discussion "might well be devoted principally to a consideration of how we, as managing executives, can eliminate red tape. The dictionary says that red tape is the tape used in public offices for tying up documents, and so forth ; hence, official formality and delay. I have been interested in the last week or so in sounding out people as to what they thought red tape meant. Some people feel that all red tape is useless. Others feel that gradually we have grown to consider that red tape may be of two kinds, useful red tape and useless red tape. I would be glad, later on, to have some of you express yourselves on that point. It seems to me that we, as managing executives and industrial engineers, have four duties to perform with reference to red tape. First, to produce the necessary red tape to insure the proper control over the particular business concerned, and to make it operate efficiently. Second, to keep this necessary red tape going so that it will not deteriorate. Third, to eliminate useless red tape. And fourth, to prevent useless red tape from springing up. Col. Franklin yesterday afternoon brought before us one of the best examples that has ever come to my attention of useful red tape. I imagine that the old line executive would feel that many of the reports that Col. Franklin presented were abso- lutely useless ; that much good time and money had been wasted in preparation of the voluminous reports that he showed to us. We who listened to him, however, could not help but feel that he did not have a report there but what he used, and that he found valuable, and that through these reports he had secured a most excellent control over his business. I think it will probably be idle for us to try to lay down this afternoon any rules to govern the preparation of necessary red tape. We all can think of items of useful red tape, such as budget systems, departmental manuals and standard practice in- Detroit, April, 1922 93 structions, systems of departmental reports, production reports, statistics of many kinds, and graphs. One of our jobs is to produce the requisite red tape. The next problem is to insure that the systems we set up do not deteriorate. My experience has been that it is necessary periodi- cally to review the systems of control within an organization. We have financial audits in which we take account of the financial condition of a business. It seems to me that it is equally neces- sary periodically to appraise the systems in use in a business to see that what we need is kept going, and that there is nothing there that should not be kept up. Much of my work deals with the elimination of useless red tape, and I think that is something that we will all be interested in this afternoon, together with methods of preventing its spring- ing up. You may recall that the daily press stated recently that Mr. Henry Ford, in one of his concerns, had eliminated a great mass of statistics which were interesting but not worth while. I think we all know of instances of such statistics. I recall one in connection with the operation of a public utility where the bookkeeping department for years had been required to separate the cash coming in according to the months in which the bills were rendered to the customers, the idea being that by this compilation the management could at any tine tell just how much was outstanding of the amount that was billed in any month. We had a force of about 150 bookkeepers, taking quite a few minutes each day fo make that distribution of cash, and very little attention was paid to it after the distribution was made. As I traced the matter down I was told that the president wanted the distributions. I went right to him and found that he did not need it at all and further, that he did not know it was being compiled for his benefit. We can each think of instances of that sort. Som6 time in the dim and distant past somebody has asked for a special report which served its purpose at the time, but no one ever took the trouble of stopping it, consequently it was rendered regularly for months or years, until somebody hap- pened to see what was going on. 94 S. I. E. Eighth National Convention Another instance that has come to my attention was in con- nection with the production reports of a large gas company. We found that those production reports were about twelve in number, of al) shapes and sizes and most of them gotten out too late to be of any practical use. Upon analyzing the proposition we found that we could reduce the number of those reports by one- half, and could set up a system whereby complete reports of the production of the gas plant would be handed to the management by 10 o'clock of the day following the actual operations, whereas under the old scheme the reports were delayed something like a week. I believe that today we might well concentrate upon how to get rid of useless red tape. Now, every man here has his own methods of accomplishing sixch a result, and if we will all make suggestions along that line we shall have accomplished something worth while. In our own practice we have various ways of getting at it. One scheme involves the collection of all the forms of the organ- ization and the obtaining of comments from everyone who knows anything about those forms as to just what they are used for, whether they are useful or not, whether they could not be bettered in any respect as to form, set-up, kind of paper, and so forth. When the data have been gathered we consider each form sepa- rately to determine whether it cannot be eliminated. If it can be, we let it go. If it can be altered to advantage we do that. If forms can be combined this is done. We do very much the same thing with reports. We require the different departments to give us samples of all the reports that they render to anybody, stating what the report is for, when it is made out, to whom it goes, what they use it for, and so forth. Another method of attacking red tape is by handing each employee a questionnaire in which he is requested to tell with respect to the papers that come to him, or which he hands out to somebody else, where the papers came from, how they get to him, whether by messenger, by tube or mail, or by passing from Detroit, April, 1922 ' 95 the hand of a previous employee, and where he sends the papers ; how often, and how he does it. With those questionnaires as a basis, we then get back to the employee and ask him to clear up any doubtful items. We then are in a position to apply an intensive analysis to the problem of cutting out useless red tape. I won't attempt to describe the methods of analysis of a problem of that kind. Each of us has his own methods of working. If we can bring out this afternoon .some of the most effective methods of going at the problem, we shall have done something. Now, I want to open the discussion to all of you. Mr. Hulet has kindly consented to come here and give us a few ideas. MR. E. HULET : The subject of red tape is a little out of my jurisdiction. We in the White Motor Company have very little so-called system. Back in 1914 we were about the average factory, with this exception, that we had few officials that had not been with us at least ten years, even in that day, and it was possible to run our factory without the use of very many records. We never, frankly, got in the habit of useless records for the simple reason that we were not organized on the basis of records, and while there were many things taken on and later thrown out, our records in the main ceased to exist when they ceased to be of use. For instance, if we wanted a record of employment we would get it. If we wanted a record in the factory of work put through, we got it, and when it was over it stopped. The greatest mistake that I see in most organizations is we start a record and then do not stop it when it has outlived its usefulness. It is strictly up to the management to crimp those things. Now, we had very few records and have today very few records that are not in use. I want to put it clearly to your minds, the difference in the running of our plant. I do not like to refer to our plant too much, but still I think we were strong in this way. We built around the personnel of the plant. We did not build around the job. Five of my best men are 70 years 96 S. I. E. Eighth National Convention old and keenly alive. They cannot stand muscular exertion but they can stand their particular kind of work. Our so-called labor question was handled in a unique way. We did not call it industrial relations. We did not keep account of it. We made a study of the situation and took the labor problem in as a problem of management, nothing else. We took our accounting in as a problem of management. When it became necessary, as it did when the stock of our company went on the New York Stock Exchange, we were required to put in certain records for the protection of our stockholders. We tried to make those same records of use in the running of the factory. Up to a year ago there was not a single record in there that was not of use. We did not attempt daily records. We did not take even monthly records. We had trends mapped out, such as the trend of wages. We had wages mapped out three months before the time was necessary to give an additional wage. We tried to put the thing in on a different plan and get the trends, finding out what should be done to meet certain conditions. In our plant we have made it a point to have very close relations with our men. The result is that we do not have to have many check records. Not having so many check records you get into the habit of shortening the records and only keeping such as are useful to carry on the business. Thus are avoided what is known as red tape records. If one did show up it was immediately discharged, because the man's job did not depend on those records. The great danger, as I see it, is in the enor- mous growth of records on which a series of men depend for their jobs. Just to show what has been done without any system at all, what you men would call system, in 1914 we were producing $4,000 per man out of the White factory. In 1920, against a raise of 145 per cent in wages, we produced $6,500 per man out of the factory. Now that, men, is all without a record of internal or external operation, but a close-knit record of groups, the reading of the meters when we wanted to see how the power was being wasted ; Detroit, April, 1922 97 a careful check, things that went right straight to the point, don't you understand, instead of long and very elaborate reports that would be a heavy burden on the organization ; men checking here and there and men to watch the check, and then when the reports get into the executive force, they can't understand them. We can go through factories today where there are records that the manager can't understand. You know it as well as I do. I am making it my business now to do research investigating, trying to get the trends. I don't believe anyone knows exactly the way you will have to run a factory in the future. Instead of dictatorship we have got to have leadership. I don't know when. I can't tell you whether it is this year, or next year, but it has got to come. That is one thing that the war proved. I think you men have an influence over these things. I do not think there is any question that we could have built right on after we had our morale established, had our good will estab- lished, and good will in men is just as important as the good will of the customer. I do not say scientific management, I simply say reasonable right management, to do the right thing the easiest way with the least exertion and get an honest return for it. When you have established correct industrial relations you do not force yourself, into a lot of records, and not having a lot of records you don't have red tape records or any other kind of records. CHAIRMAN FAR WELL: We have been very much inter- ested in what you have had to say. MR. HUGO DIEMER : I think we ought to discriminate pretty closely between red tape and analysis investigation, even with men of broad vision and common sense. Mr. Hulet in his investigations, if he is going to predict tendencies of the future, in his economical and social researches, will have to make certain records of what he finds. Won't you, Mr. Hulet? MR. E. HULET: I would make any record that is useful to me, that I am really using, but I would not make a record 98 S, I. E. Eighth National Convention , some other fellow made if I could go and copy him. I would not waste my time. MR. HUGO DIEMER: I think the same thing is true in regard to any analysis, any research and survey that we make with regard to production. I consider as examples of useless administrative red tape such matters as having a visitor who wants to go into a plant fill out a blank for a pass, then have the pass itself written out, and then a receipt for the pass written out, and then the application and the pass and the, receipt indexed by dates and by names, and cross indexed, and all that sort of thing. That is what I call red tape. And also, I consider a guard in wonderful plum-colored uniform a bit of useless red tape. There are many examples. For instance, if you undertake a scheduling department, ask the foreman what he is going to do, then you have a shop schedule, then you decide you are going to have a central schedule, then you have a central department copying all the records from what the clerks copy from, and what the foremen say they are going to do. That is useless red tape. On the other hand, investigation work in the way of seeing how near methods in which work is being done today approach to the best way in which things ought to be done are useful. Anybody who has had experience with real time-study work knows and has seen the results of that work. When I say real time-study work I do not mean attempts at time study, such as I have seen. For instance, with a view of establishing certain piece records and diminishing inventories of parts, I have had occasion to investigate how long it would take to do certain operations, how much material ought to be retained for certain parts, and I. found that certain time-study experts of high reputa- tion had simply gone back and utilized piece records that had been established twenty years ago as the real basis for their so- called time study. Let me list another example. I had occasion, when I was in the army service, to get from the Frankfort Arsenal their cost Detroit, April, 1922 99 records. There were about a thousand wonderful, numbered and indexed records of direct and indirect operation data, which we did not use, but there was certain direct data on operations from which we could predict in a fairly good way how long it would take to do certain operations. With that as a basis we estab- lished certain piece rates, with the result that the first 50,000,000 cartridges we made cost 15 per cent less than the Frankfort Arsenal cartridges. Now, no matter what you have done through good will, through the establishment of morale, there is a scientific method of investigation, and I think we ought to distinguish between real research, real knowledge, real accomplishment through the establishment of prediction, and the elimination of useless records which trail behind. MR. H. F. PORTER: In my position, representing the financial despotism, you might say, I have found myself under criticism for paying too much attention to the small economies. I have asked some of my critics, tell me where to draw the line between what they considered the big thing and the little thing. All I know is to apply certain principles whether it is a saving of $10 a month or $10,000 a month. I think this question of red tape more or less falls into the same category. Red tape does not mean very much to me. I cannot visualize exactly what it means. I have asked those who criticise, and said, oh, that is just red tape — ^what do you mean by red tape? And they cannot tell me. It seems to me that the problem in the last analysis, like all problems, resolves itself down to the moral or spiritual basis or, as the psychologists would say, the psychological basis. Everything depends upon the attitude of mind of the management. If the key mind of the management is of the Kaiser type, naturally we are going to have a system of espionage set up that involves a multiplicity of checks and forms, records, etc., and that I would class as use- less red tape. On the other hand, if the management is enlightened, fearless and humane as well as scientific, it will never agree to set up a 100 S. I. E. Eighth National Convention system of records just for the purpose of spying on the men. The records, such as they do set up, will grow naturally out of their experience, because they will have a function, a pur- pose, a use. I think we owe most of our so-called system that passes as red tape, to the predominence of the historical complex in our affairs, trying to serve the espionage type of management. I know that is true in Government service. There we have red tape galore, which ties us up hand and foot and stifles initiative. Such red tape seems to be built upon the assumption that every- thing is dishonest and crooked, and that all have to be subject to these checks in order to prevent one or two people from getting away with something they hadn't ought to have. Our whole system of law is based on the same principle. George Johnson of Eiidicott, Johnson & Company and Mr. Hulet, made the same remark and said that 90 per cent of humans are O. K. In other words, we set up and legislate systems of laws and clamp 90 per cent of our people in straight jackets just because of the lack of courage to deal with the other 10 per cent. To illustrate: The plant where I am never had very much system. While I am a system man, so-called by a good many, I have an abhorrence of useless system. I never introduce a form until I feel a compelling necessity for it. There was no time clock and no method of checking on the time of the people there except in the manufacturing departments where they have the usual International Time Clock System. But as far as the business personnel, the ofSce end of our business, which is rather large, there were people who wanted us to put everybody on the time clock. There were others wanted us to establish some sys- tem of monitors whereby we check the people in and out. I said, No, we don't want to do that. We put it right up to the depart- ment managers to talk tip these matters and create the right spirit. I asked the department managers particularly to make note of those who were particularly flagrant in their lack of promptness and other conduct and if they could not deal with him to send them in to me, and I almost never have failed by Detroit, April, 1922 101 appealing to the individual in the right way, to get him into line. I have talked with a man who was in the habit of being fifteen or twenty minutes late and asked him, "Wouldn't you rather be brought to the favorable attention of the management than to their unfavorable attention? Don't you know that the man who is habitually late is brought to its unfavorable attention ? Don't you know that hurts him every time his case comes up, whether it is an advance in pay or advance in position ?" "Yes." "Now, it is up to you to be the man who would rather be early than late. He is the one who gets ahead." That sort of appeal always works. MR. C. B. LORD: I am going to try to stick right to my knitting. Managerial Red Tape. I may wander off, but I hope not. I wish to evolve a new theory of management. Like every- body else, I have come to the conclusion that we have made three fundamental mistakes in management. The first is that we have considered system as a control, or as an end rather than merely a line of procedure between two controls, or merely a means to an end. The second mistake that we have made is that we have considered co-operation as essential, whereas it is a de- terrent, and I think the third mistake we have made is that we have mistaken arbitration for co-ordination. Now, we are not dealing with the last two, but merely with the first. We have mistaken system as an end rather than a means to an end. Now it is not possible, and I am not going to stop to say "In my opinion" all the time. Let us have that understood. It is- not possible for any system to encompass in- dustrial management because of the factors and variables in- volved, and therefore if we accept that we start out by saying that system is not of much use to us. It is not. But there are two things essential. Because we do away with system it does not mean that we do away with control, which is entirely another proposition, because system means red tape. System is merely the procedure that marks the cost of opera- tion. Just the same as our mechanical layout, or our assembly 102 S. I. E. Eighth National Convention layout marks the cost of our completed product. The amount that we are willing to spend on management is determined by the system or systems we employ. Now, to do away with the red tape two things are essential. One is that we deal only with exceptions. The only thing that we in management are interested in is the exceptions, be those exceptions good or bad. If we would adopt the budget system we are only interested if that budget is exceeded. Let us say, vitally interested. The fact that it is not exceeded is of interest only. It is not vital. If we set a certain schedule for production and that production schedule is exceeded we are not interested — I am speaking from the managerial point of view — but if it is not accomplished then we are interested. The same is true of material control. If we have sufficient material on hand we are not interested. If we have not sufficient material on hand then we are vitally interested. But we are also vitally interested if the material on hand is excessive, which is also an exception. In other words, we are interested in extremes only. I believe the reason why the exceptional system of manage- ment has not been more adopted is because we have had no way of charting or visualizing diminishing quantities. I said that two essentials were necessary. One is to deal with exceptions only and the other is to be able to visualize operations. We are struggling in every way to visualize. We recognize that pictures are more educating and more interesting and more effective than mere print. We recognize that moving pictures are more educational than static pictures. We realize that colors are more intriguing, more interesting in signs, or otherwise, than plain white or black signs. We know; that comparative charts are better than charts that are not. But what we require is what we might term kinetic visuality. I don't know whether that is plain. It may not be plain to myself, but I have got a worse one than that because the way that I characterize the theory that I have evolved-^not the theory but the practice, for I have been prac- ticing it for two years — I have to think before I can get it all — Detroit, April, 1922 103 the visualization of factors in correlative perspective. Now after you have thought over that, maybe tomorrow or next day it may be a little bit plainer, but that is the shortest way that I can express it. That is, to present everything visually in its proper perspective in relation to the facts that are either visual or remotely connected with it. Now that is not as hard as it sounds. It is easy. CHAIRMAN : Can you give us an illustration of what you mean? MR. C. B. LORD : That would involve a very long talk, I say that because I have been writing on that subject for two years, and I have not found any satisfaction myself, yet, but I told Mr. Dent that at the Fall meeting, either of the A. S. M. E. or this society, in New York — I understand they are going to be together — I would deliver a paper on that subject but it would take up entirely too much time at the present time. But the point I wish to make is that we have got to get away from com- plications and come back to simplicity. CHAIRMAN : I am very much interested in what Mr. Lord has said. I think he_has enunciated a principle which is funda- mental in connection with the design of s)istems. I have used it myself a good deal. A system should not be designed to meet any possible load that may be put upon it. We should inquire in each case whether it would not be more economical to have a very simple system and then meet the special demands by special investigations. Each one of these will cost us something. Each investigation will cost more than the act of referring to some bundle of records which we have maintained to meet such de- mands, but the net expense may be far less by so treating the exception. This, exception principle was really brought out by Mr. Hiilet here in dealing with men. Why should we throw checks and balances around ten men when nine of them are all right? We don't have to worry about them. Let us take care of the one man when he kicks over the traces, so to speak. Those who heard Col. Franklin yesterday were undoubtedly 104 S. I. E. Eighth National Convention interested in how he used the exception principle in having two reports come to him which showed the amounts by which budgets had been exceeded, for instance. I think this is a principle that really has not been played up as much as it should be. It is a principle that I have just gradually been working toward with- out really realizing how fundamental it is. MR. J. EIGELBERNER: I hoped that some more refer- ence would be made to Col. Franklin's paper yesterday because of the very complete set of records which he unfolded Of the Strathmore Paper Company. Instead of that complete set of records being constructed on the exception principle, it would look from the face of it as though they gave a control over every detail of operation. The thought has occurred to me a number of times of what value such a complete set of records would be to the concern where the management of that concern was not primarily of the industrial engineer type of mind. Col. Franklin can use it to great advantage, and in his concern it prob- ably pays, but in the average concern where the managing exec- utive is not of an analytical type of mind, a great many of those records would simply be glanced at and they would not be used. Many of them would be simply thrown aside; taken automati- cally, looked at and nothing done with them. It seems to me at a session where we are discussing managerial red tape, the question of reports that accumulate in any system of that kind should be considered, and I am wondering if I cannot start some discussion on a question like that. MR. HUGO DIEMER: Isn't Col. Franklin's case repre- sentative of a fairly uniform product with uniform operation, as contrasted, for instance, with the case which comes to my mind in the manufacture of paper pulleys, where one fellow had to bevel off the pulleys and make out a slip or ticket for each one. He spent more time filling out the time tickets than he spent taking the bevel off the corner of the pulley. I said to him, "Why don't you put that into an expense order and distribute it over the whole order?" He said he had never thought of that. Col. Franklin has got a special case where the control over Detroit, April, 1922 105 the operation is the same day in and day out. Where you get a great variety of parts you have got to have common sense and ingenuity enough to establish a less universal record. MR. H. F. PORTER : One other thought that I would like to emphasize that slipped my mind when I had the floor before. I think it is a rather important fundamental, namely, in nearly every institution, to go in and proceed to analyze from an engi- neering point of view. If it has any kind of accounting you will find it is not set up to reflect managerial efficiency. My theory of accounts is, and I think nearly every industrial engi- neer looks at it the same way, it should be set up to reflect depart- mental efficiency. If that is done it is perfectly possible to derive almost any kind of statistics that you need. If it is not done, then it is a work of great labor and time and money to get any kind of statistics. The sum and substance of the whole thing is this, that we should endeavor to have our accounts so set up that at any time when we have special need of certain classes of statistics we can easily get it. CHAIRMAN: Just in that connection I am reminded what we do in the utilities that I am working with. We have in the utility business a pretty detailed classification of accounts which is prescribed by the Public Service Commission. We have found it very useful to carry statistical records which accumulate the charges to those various accounts, month after month. We do it this way. We have a sheet which will provide for figures on a number of accounts. There are a number of columns on this sheet and one of these columns is assigned to every sub-account. We then have lines for each of the months of the year, and as a regular routine thing we transfer from our monthly financial statement the expense items to those various sheets. It is a very small job each month. We then have a very effective means of comparison between the expense items, the items of revenue, etc., for the different months. We also have those figures right there so that when we want any special information we can go right to it and in short order get most anything that we want to know about the business. 106 S. I. E. Eighth National Convention MR. WILLIAM BAUM : The thought has struck me this afternoon that in all these discussions we have been talking about managerial red tape, which probably occurs much more in very large organizations than in smaller concerns. I feel that if our people would show more initiative, and if we had a little bit more discipline in our industries we could do away, to a great extent, with red tape. I do not mean to give the impression that I want to introduce Prussian discipline as it existed before the war into our industries. Those who know me know that I am not of that opinion; quite the contrary, but I would like to see a little more discipline in our industries because we could do away with a great number of things which we have to use today. I believe Mr. Farwell hit the nail on the head when he ex- plained that a lot of our red tape is due to some historical fact, due to the wish of some executive at some time to have a certain report or to have certain statistics, and then it was continued, and will be continued unless some of us step in and begin every ques- tion with the little word, "Why?" Why do you do this, and why do you do that? I think if you thus question each item you will find that a great number of so-called red tape papers are unnecessary. I want it to go on record, to agree with Mr. Diemer that in any attempt to do away with red tape we should not sacrifice exact knowledge. We must, in our complicated industries, sub- stitute exact knowledge for guesswork, and that can only be done by common sense systems of records and statistics. And one more thing. If we have to use such statistics and records, there is only one thing that makes it pay, and that is to make proper use of them. I have run across a number of sta- tistics which were very valuable, indeed, when they came to executive offices. I have even seen the executives give orders to change certain things, but they were not carried out, and that is what I mean by discipline. In other words, if we have a control of costs every week of a certain operation, and that cost increases, it is not sufficient to investigate why it increases, but it is also necessary to take immediately the proper steps to reduce it. Detroit, April, 1922 107 MR. PAUL ARTHUR : The subject seems rather difficult to grapple with and from all I can gather it seems to me that none of us is able to define red tape. For ,my part I should choose to call everything connected with business red tape, and would then endeavor to eliminate all the imnecessary labor; unneces- sary from the viewpoint that you take of it yourself, because red tape is either great or small, depending upon your own personal point of view. About five years ago I became associated with a large organ- ization of industrial engineers, and until about a year ago I spent my time traveling about the country, and I tried very hard to eliminate red tape, basing my action on the thought I have just presented. I remember one concern in Indianapolis which I be- lieve has since died of red tape. They had 1,700 forms in this institution when I came there. It was one of the monuments to industrial engineering that was pointed out to me. It was part of my job to eliminate the red tape. I did eliniinate part of it, and in the process of eliminating a lot of unnecessary indirect labor it seemed to me that a certain amotmt of red tape is neces- sary, remembering, gentlemen, that I define red tape as every- thing disagreeable to do in business. There are certain records in business which I believe must be maintained. Among those records I would classify the daily time card. Another record is the material requisition. Another is the purchase order; an- other the material and operation analysis standard. In a jobbing shop another record may be the estimate for quotations. These records, properly filed under order number or job number, or classified under whatever system seems most logical, will form the basis for what I consider to be the finest type of red tape to maintain and manage, and that is graphic statistics. In our own plant today I prepare monthly, for lack of time, or I would be doing it weekly, graphical statistics which I place before our ..president, and from which he can see readily the trend and probabilities of his business. In all my work I endeavor to control a business with only one thought in view, that what is best for the management may not always be best for the 108 S. I. E. Eighth National Convention worker, and therefore I consult the worker. Our organization is about twenty-five years old, and some of the men have been with us from its beginning. Therefore, I find it profitable to call upon these men and to ask them what they think about this and what they know about that, because I value their opinion, and I find it pays. I find that letting them know everything that I should let them know about the business brings in dividends. I find that they feel honored. I find that they are taking pride in working with us, and I find them taking an interest in our affairs because of my interest in them. MR. J. F. CAHILL: All during the discussion we have been going on regarding red tape. There has been running through my mind a discussion, and taking exception to the dis- tinction of the difference between good and bad red tape. I would like to express an opinion that there is no good red tape. That is the popular conception of red tape. It might be defined as a fanatical adherence to a system which has become obsolete. The Chairman at one time spoke of a cumbersome system. There are many systems which have been formed to achieve a certain purpose that have outlived their usefulness and an adherence to those systems constitutes red tape which binds and clogs activity. In my opinion the term red tape as applied to business has come about because of the fact that ancient records were tied up with red tape, and being tied with red tape they are absolutely useless until the red tape has become untied. Secondly, the term red tape, as applied to managerial activities, can be described somewhat as the wrappings of a mummy. A man may become so entangled in red tape that his usefulness becomes clogged. When a system of any land ceases to be effective to produce effective work it has become red tape. There is a distinction, too, between system and effective work. Many people imagine, as was mentioned in the remark about system being the end rather than the means to an end, that the system is what actually does the work. System is merely an aid in doing work, and while system can be carried to the extent that it will actually irripede work that it was expected to assist, it is Detroit, April, 1922 109 absolutely impossible to carry on effective work without system. Consequently, I would not permit myself to accept the opinion that all system is red tape. MR. H. F. PORTER : I would like to suggest a culminating result of this conference, that we proceed»to agree upon a defini- tion of red tape. You yourself admit that all system was red tape and then proceed to differentiate between good and bad red tape. The gentleman over here has classified everything that is obnoxious as red tape, and then proceeds to tell about some very useful and convenient forms, which I do not regard as being abhorrent at all, and this man proceeds to give a definition of red tape with which I find myself in accord. CHAIRMAN : When I started this discussion off I looked for something of this sort. There are very divergent opinions as to what red tape is, and whether there can be any good red tape at all. I think that if we can get together on a definition of red tape we will have done something this afternoon. MR. G. T. TRUNDLE : If we get a casting in the shop and turn the job on a lathe, we get a lathe tool and chuck and the employee goes to the store room and takes it out and puts it in the machine and proceeds to work. We call that production, lath- ing, or machining, that casting. I think some day we are going to call system production labor. Mr. Hulet spoke a while ago about there being only 26 or 25 per cent labor in their car. He said the rest of it was material. Here is a chair (indicating). I dare say there is about three cents' worth of material in that chair. It is every bit labor. In the tree the lumber is not worth anything. The covering is cotton or wool, whatever it is. Be- fore it was sheared off the sheep, or before it was picked in the field, it had no value at all. Now you begin to put labor on it, from the raw material, and as I look at that chair I see transpor- tation and labor and very little material in everything I look at. Really, material has no value at all. Take the ore in the mines. It is not worth a thing until you put labor on it. Then you get in the transportation, and so on, 110 S. I. E. Eighth National Convention up the line. All these records that we are talking about today, that is, the red tape, not the actual production labor, must be eUminated. I told my secretary and treasurer, "From now on if there are any reports that you are making that I don't analyze ior three months you come and ask me why, and if I can't give you a good reason why, we are spending unnecessary time to keep them and we will do away with them." We have one girl whom the secre- tary and treasurer employs on reports. She is not working her full capacity, but we have every record that is needed. The larger an organization grows the more records you need. Professor Lee in a talk before the Cleveland Chapter some time ago told us about a man by the name of Holmes, down in the Waterbury Valley District, who has organized many plants and has sold them or got out of them when they employ more than 400 men. Why? Because he realized that if you get the plant too large they require too much of this thing, red tape. I don't know what it is, but it requires too much of this thing we call red tape to keep that organization going. We should not make a record but what we need it, and then the work put on it is production labor. Such a record should not be classed as red tape. MR. HUGO DIEMER: The next to the last speaker, Mr. Arthur, mentioned the advisability of securing advice from mature men in industry. That brought to mind immediately a discussion by Mr. Plumb. I think he had an article on his idea in the April, 1921, issue of System. He said they divided the industrial activity of a leader in their business into four periods, each running anywhere from six to ten years with each man. The first period is a period of learning. Second, the period of creative ability, of pet ideas, or inventions, the love for system; and the third is the executive period, when they are so busy direct- ing and doing things that they begin to lose their regard for both learning and creative ideas. This is a danger that a man in executive work falls into, and unless he does keep in touch with those things he does not pass into the more valuable period, Detroit, April, 1922 111 which is the fourth, or advisory period. I think most young men engaged in industrial engineering are still in the pet idea or hobby or love-for-system period, and they have too little appreciation of the men who have passed through that stage into the executive stage and are competent to belong in the advisory class. MR. J. W. SCOVILLE: The discussion of managerial red tape seems to become finally a sort of attack upon records. My business has been in the compilation of records for managing executives, and bringing records to them. I would like to pre- sent just a few thoughts along that line. Business has become so complex that talk about abandoning records or getting rid of records might as well be abandoned, as the greatest sin I can see for the executive is not to know the essence of what is going on, and he can only get that through some regular routine of records that have been established for him or that he has estab- lished. It seems to me that the constructive thing for us to do is not perhaps to try to define what red tape is, because I guess we all have a pretty good knowledge of what we mean by it, but to do what we can 1o make these records that are coming to the executive, the man at the top of the institution, of the greatest possible value to him. I have just listed here a few things that I think the execu- tive would like to see in those records. One of them is simplicity. I think he wants to see a simple statement of the thing. It is paralyzing to bring before a man a great, huge array of statistics and figures. A second quality that the records that go to the executive should have, is that they should be homogeneous, and that is something that they almost never are. An accountant brings to an executive a record, and he says, "We made so many thousands of dollars last month, we made so many thousands of dollars this month." Under the usual system of accounting that exec- utive is not any wiser after he receives that information than he is before. If he has really informed himself as to the thing, he must go back and find out whether or not the accountant 112 S. I. E. Eighth National Convention tampered with the reserves that had been set up against inventory, whether he tampered any with the accounts against accounts receivable, and various other reserves. In other words, the record is not homogeneous. Therefore he does not know, after he has rceived the accountant's statement, the true situation. It seems to me if I were president of a company I would say to the chief accountant, never put a reserve into any records of the business. If you want a record of the reserves, put them into a little book and bring them to me labeled "reserves." Keep them out of the records — they just complicate them, and they are only for — ^you know what they are for — but they are a hindrance to the executive who is seeking to get light on what is happening in the business. A third quality of good records seems to me is that they should be co-ordinated. Business is divided off into departments ; sales department, production department and financial department. Those departments are each subdivided and each man in those departments is a little king, a law unto himself in regard to records. If he is a man in an executive position he is often a man who has a good opinion of himself, and he feels that his knowledge of what he wants is correct, and he wants it as he wants it. There not being sufficient co-ordination, we find dupli- cation of records in almost every industrial plant. One record will be on a weekly basis, and someone else will be getting the same thing on a monthly basis, and one record will be about the same as another except that it involves one little item that the other did not have in it, so they cannot be compared, and in that way we get a lack of co-ordination. I have struggled with that problem a great deal, as to how records in an industrial con- cern can be unified and made harmonious. About the only way, perhaps, would be to have a czar there who has complete charge of all the records, and everything must go as he says. But that does not seem to be very practical, either. As far as the records that go to the executive are concerned, they should exhibit balance, or harmony. In other words, he should not have continually brought to his attention losses of, we Detroit, April, 1922 113 will say, five or six dollars, or records showing what the tele- graphic expense of some salesman was for a month in Denver, when other and larger items involving hundreds of thousands of dollars are being glossed over. So the records should care- fully differentiate between the big things and the little, and it seems to me the man on top should have only the larger things brought to his attention, and they should be annotated or ex- plained. For instance, if they are put in graphic form, every abnormality should have a little statement on it, the reason for this is so and so. It should not be: left to him to have to go to someone else to dig out the reason for that particular abnormality. I remember in a. concern I was working for, one_ of the ex- ecutives brought to my attention the possible waste from the amount of lubricating oil that was being used. He told me that I ought to go into that subject of lubricating oil and see what we could do about it; but when I threw the expenses of the company into a large rectangle and split that off into different items, the lubricating oil was just a little dot on the thing. We could have doubled lubricating expense and it would not have cut any figure. But there was another material where a variation in the cost of one per cent would make the difference probably between profit and loss. In the records that go to the chief executive differentiations should be made in the form of the records. A good many records come through sloppy in form; they are not carefully tabulated, and it is a waste of nervous energy to try and see what the thing is all about anyway. It is particularly exas- perating to find a record that is not dated, or that comes from nowhere. In regard to form, it seems to me that great progress will be made in the future in industry, and is being made now in presenting records that go to the chief executive, in graphic form. The standard method is, what happened this month and last month, or this year and last year, or this month and this same month last year. He keeps trying to get a comparison there in kind, but he usually cannot compare very conveniently more than two periods, the present and one period in the past. 114 S. I. E. Eighth National Convention If the executive has a graphic chart, on a weekly basis or monthly basis, he may have before him a continuous record shovvring the fluctuations over some 24 periods or 36 periods of time, and he gets the story. This is a development that I should like to see take place more and more in the reports which are going to the executives. The report that goes to the executive ought to show, so far as possible, some absolute standard of comparison. I don't want to go into the theory of relativity — maybe there is not any absolute basis — but what I mean is this: If we bring in a report to an executive and show what happened this month and last month, maybe last month was rotten. If so, the fact that this month was a little better than last month does not mean anything. If I were an executive I would want to know, when the chart was brought to me, not so much that, but how did the performance compare with what that performance ought to have been. That is more of an absolute standard. It took the man ten hours to do the work, but how long should it have taken; not how long it took him last week, or last month, or last year, and there, I think, is a big chance for im- provement in reports that are going to the executive. I was lining up a report yesterday for an executive, and he wanted to know the rank of our sales districts in sales, — ^which came first, second, third, fourth, and so on. Well, I said, those districts are very uneven in size ; one of them is at least three times as big as the other ; rank won't mean much for that dis- trict. That did not seem to appeal to him. He just wanted it that way. We have in the business world, in the managerial chairs, two types of executives, which I want to mention. There is the man who cares nothing for figures, nothing for records, never did and never will. You can just simply surround him with records and he will never pay any attention to them. He is apparently hopeless from the standpoint of getting records for him that will report on the running of the business. He does not run his business that way, he runs it by hmiches, and Detroit, April, 1922 US what he sees when he looks in a man's face, and what he gets by talking with somebody. He is not analytical. Then, of course, we have the analytical type of executive who is not satisfied with that superficial knowledge, but he wants to know. He wants to know the real story, and in the development of industry it seems to me that that analytical type of manager is going to find himself more and more in the managerial chairs rather than the manager who gets there through his ability to bluff and bulldoze. The graphic method of presenting records to the executive means more than pictures. The record should be drawn up in such a way that it strikes a man right between the eyes and when he reads that report the essential thing that you want to stand out gets to him. For example, suppose we want to get up a statement showing how sales are going. If we made just a cold statement showing what is going on in certain districts, and where they are going bad, paint it black, like a piece of crepe. Where it is not very good, paint it in red. Where it is real good put it in purple, maybe, and he looks at that color thing with interest. We are all more or less like children, and it appeals to him, and he per- haps gets a better story from it than he will, perhaps, from a cold array of figures. Whether the report is in graphic form or tabular form, the thing that you want to be brought out must be brought out so that it attracts the man's attention. You cannot leave it to him or he will miss the point. You must see that he cannot miss the point. I have known of a case where balance sheets were made out and taken before the Board of Directors, and where there was a mistake in a decimal point in the profit, we will say, where the profit should have been, maybe, 1.5, it was made IS per cent. That report goes to the Board of Directors, is examined by them, approved, looked at, comes back and lies around a week or two, and nobody knows the difference. Sometimes the director has one or two figures that he looks at and the rest he does not pay any attention to. If you want to find out if reports are used, 116 S. I. E. Eighth National Convention just stick two sheets of the report together before you send the report and when it comes back see if they are still stuck together. You will find in the majority of cases they are still stuck together. Now the point then is, get the record so boiled down, in such attractive form, that the executive will have to see it whether he wants to see it or not. CHAIRMAN: I think the last speaker has made a real contribution. I have paid a good deal of attention to the prepara- tion of reports for executives and I have always felt that most people who were preparing reports of this kind fall down in not explaining abnormalities, leaving it to the chief executive to find those things, even though they themselves knew them and were in shape to indicate just where the trouble was. COL. B. A. FRANKLIN : I have not heard your discussion and I don't think that I can add anything. Our business, we like to think, is pretty well systematized. We do have a lot of reports. About once a year we take some one of our statistical force and put him on trailing every report ; discover who it goes to, and have him interview the person to whom it goes, to discover whether he ever looks at the report, or if he does look at it, whether he has ever gotten anything out of the report, or whether it merely comes to him in a routine way and is in effect red tape, as far as he is concerned. There was a record I happened to run into the other day. A chap who has the forms under his charge came to me with a bunch of forms and he said, "What shall I do with these ?" I said, "What is the story of them?" "Well," he said, "nobody uses them any more. Do you think we ought to keep them?" "Why no, junk them." There are, of course, several forms of manager, or several forms of mind. I like to think of the best executive as a man who does have hunches, as a man who does have certain instincts. I don't believe that the true manager is the man who is always going to act, based on statistical records. Certainly, during the past two years the man who attempted to do that would either have gone crazy or felt that statistics did not mean anything; Detroit, April, 1922 117 and I am sorry to say that in most cases that I know about the hunches did not even work out right, much less the records. I beHeve that all industries have got to have more and more records. I am in the paper business and very glad to think that that is going to be so. When a man comes to me and says he wants a record of such and such, or I ask him how is so and so going, and what do you know about it? — and I find that he does not know mtich about it — I immediately start a record, knowing that some time in the year somebody is going to get on the trail of that record and trace it through and discover whether it is used and find out what results come out of it. Moreover, we are starting this little scheme ; we are taking all of our records, no matter what they are, and having a man chart the figures from the beginning of the record all through the course, to see if any results have come out of the record. Whether the charts are going to show in all cases that the results were due to the records, I cannot say, but we will at least know of all the operations and the. facts of our business which are being recorded and reported, whether any change has come about, and from that we may be able to trace the situation. I like to believe that a good manager is a man who knows comparisons, whether he has them in different periods or not. For instance, I am very frank to tell you that in our business I could name the figures over a considerable period of time. In other words, if a certain record of last week or last month should come to m^ I believe that in rriost cases, whether there were any comparisons on the record or not, I would know how they did fit in, with my general knowledge in following up the business. We have got to have more records. I think it is fundamental to industrial engineering that we do. It is fundamental to man- agement that we do. I can see no other outcome for it, but that in a well-managed plant some definite policy of following up the use and value of a record should be undertaken at periodical times so as to bring out, first, whether the record is any good at all, or whether it is absurd. Second, whether it is doing its work, whether it is bringing about any advantage. It is our policy 118 S. I. E. Eighth National Convention further to discover whether we are recording the facts we need. We go into more and more minute details, in some ways, and in other cases we discard our records, on discovering that the particular facts that that record covered do not seem to report the situation, and we must find some other way to show it up. I was very much interested in what the previous speaker said, but undoubtedly if the proper combination of hunches or instincts, or business ability — let us put it that way — is backed up by practical records, we can make very much greater head- way than we have. I think one of the great troubles with records, and we find this to be so, is that they are too general. Not necessarily that the important figures are not brought out, but after all, every operation has certaiti phases to it, some of which cannot be changed, and others of which can be changed, and if you merge them in the record into some grand total you do not get the effect of the change which may occur in the changeable elements; so that the great thing that we try to find out, when we go to make a record, is to pick out the unchangeable elements, or that we think are the unchange- able elements, and record particularly the changeable elements so that the records may really be a true chart of progress con- cerning those things which are liable to fluctuate and which are subject to the temperament of labor, or to the tempera- ment of the times. MR. J. EIGELBERNER: There is one point that occurs to me that I think the former speaker has in mind, but did not bring out as clearly as I would like to see it brought out, and that is the question of knowing what is back of the records that are given to the managing executive. In other words, the facts that are given have got to be accurate. For instance, some years ago, when I had charge of some indirect and direct labor, I devised a scheme whereby I could secure good results on the direct time by adding a little bit of indirect work, and in a week or two in a report that went to the accounting de- partment my indirect expenses had increased over my direct. In the proportion of them there was quite a bit of change. I was questioned by my superior about this big change in the Detroit, April, 1922 119 indirect and direct. Well, I didn't say anything, but I went back and I charged the indirect expenses to direct. My totals were all right, in fact my total expense was lower, but it did not mean anything to the managing executive because he had not known definitely what was going on or what was back of those reports. MR. J. W. SCOVILLE : Is not the words "red tape" al- ways used in a bad sense, in an obnoxious sense. It is like talking about a good sinner. CHAIRMAN : I have been interested in the last week or two in asking a number of people that very question, and I have arrived at this conclusion : that many people have grown to think, when they are speaking of red tape, of system. I was reading an article in one of the industrial magazines the other day in which the writer spoke of useless red tape. Whether he meant by that there was good red tape and useless red tape, or that all red tape was useless, I do not know. I will leave it to your judgment. But many people, from speaking in a light vein about system as red tape, have really grown to think, I believe, that system is red tape, and if system is red tape it means that there is good red tape and there is bad red tape. MR. G. T. TRUNX)iLE : Don't you think our subject would have been nvuch better chosen if we had called it "Managerial Records," rather than "Red Tape?" It seems to me we have applied the factory man's cuss word to the subject for today. I thintwe have been discussing managerial records. MR. J. F. CAHILL: While many people belieVe that all system is red tape, it is because, in my opinion, that they have not a clear conception of system. The term red tape is essen- tially a slang term in business and has been brought about be- cause of its binding qualities. If a system is flexible and effec- tive it cannot be, in my opinion, red tape, but the moment it be- comes ineffective and clogging it is red tape, because it is bound, as a mummy is wrapped, in its own wrappings. Adjournment. 120' S. I. E. Eighth National Convention How Industrial Engineering Reduces Production Costs By P. T. SowDEN, M. E. . Vice-President Rope Paper Sack Manufacturers' Association, I was particularly struck the other day by an article appear- ing in the New York Post in connection with a series of con- slrtictive trade association articles. It bore the caption, "Would Curb Ail Trade Competition," which I thought was a particu- larly daring one just now. I was most interested, however, be- cause the author was an industrial engineer-^-the head of a firm of industrial engineers. I wanted to find if the industrial engi- neer was sticking to his knitting. After pointing out the three-fold responsibiUty of the present business manager — to .the worker, to the owner and to the public — responsibiUties which were forced to the attention of the busi- ness manager by the trg-de association or trade group in each industry working out its own problem — he advances the theory that "all the facts regarding costs, capital invested and profit should be given complete pubUcity," and furthermore, "subjected to a proper audit by a properly constituted governmental au- thority." I am quoting exactly. Continuing: "Under this plan the super-efficient plant would make a super-profit and the in- efficient plant Would make a sub-profit or a loss.' The effort to secure a super-profit would preserve alll the advantages of indi- vidual initiative and would greatly lower the price so that more could be consumed. The inefficient plant would gradually be forced but of business." 'No matter whether the author of the above quotation carries conviction, it is food for thought, for this plan is only workable where .businfess is organized on a scientific basis, where the in- dustry as a whole knows its costs and its elements of cost, and, whether we agree with the author or not, the public press has Detroit, April, 1922 12][ given enough space to the ideas above expressed to assure us that the thought is one in which at least an important part of the reading public takes a lively interest at the present time. In fact, it was part of the original plan for the Federal Trade Commis- sion to publish statistics of costs in the basic industries both to the individuals of the industry and the public at large, that the latter might determine whether prices were inordinate or not. Many public men believe this would stabilize business and that stabilization would be a great boon to industry itself. Yet before we can ever consider such plan to substitute a survey of individual business for free competition, much more must be done within each industry and within our typical manu- facturing organization to make the statistics thus obtained intelli- gible, let alone valuable. Much preparation is still necessary and I take it that as the thing desired is the organization of each industry into an efficient and healthy state with an eye to the lowest production costs possible, I shall feel I have covered the subject of my paper today if I can point out to you where the industrial engineer does and can lower costs of production and is therefore worthy of his hire. When I came East for Harrington Emerson fifteen years ago the industrial engineer confined himself to industrial layouts, designs of mill buildings and equipment, some appraisal work and some engineering promotion. The term has broadened the full professional definition and I shall even claim the savings of the production engineer, the job-analyst or time-study man, the safety engineer, the personnel manager and the welfare man for industrial engineering. These last fifteen years have formed a complete business cycle, for the condition of trade in 1921-22 reflects the similar condition of 1907-8, and it was in these lean years fifteen years ago that industrial engineering found its beginnings as a dis- tinct profession — born of necessity. The first professional shingle of a production engineer appeared about that time on the door of Gunn, Richards & Co. at 43 Exchange Place, while 122 S. I. E. Eighth National Convention today industrial engineering is part of the curriculum at all our principal technical schools. That was not so very long ago, yet in 1907 we had but one aeroplane, no radio telephone, no interchangeable manufacture to speak of and Ford was making about 300 cars a year which sold for $3,000 apiece. Edison was just predicting the horse- less age, and industry, despite the great merger period of 1901- 1904, had not housed itself in immense units for quantity pro- duction as we have it today. Yet we approach the next few years with the same feeling of need for the industrial engineer- ing specialist that we did in 1908. Industry has become more complex, and while the process of centralization in industry has waned and given way to the process of decentralization, the need of specialists within the organization has grown more urgent, for this decentralization has brought specialization in all departments within the busi- ness and a further specialization as to products. We surely do realize the need for the industrial engineer with his special training in supervision, plan and execution. ILL-ADVISED ECONOMY MEASURES I am anxious that at the trough of another wave of busi- ness depression the country shall not see a redemonstration of the false economy of reducing overhead by disrupting the or- ganization and complement to do business that have been so laboriously built up during the last fifteen years. Such meas- ures are ill-advised as well as drastic and are not measures of true economy. During the last six months I have watched more than one manager make radical cuts in his cost depart- ment — some eliminating them altogether. Many industrial en- gineers have passed out with the directors' "regrets," but it is a mistake, for all employed labor must give the best that can be given if we are ever to reap the maximum benefits of the sys- tem under which we live. Even efforts to hold down and re- strict production, on the theory that the method makes more work for more men or prolongs the work of the men already employed, defeat the very purpose which they are intended to Detroit, April, 1922 123 serve. Let me quote one of the most levelheaded bankers in this country: "The element of cost in production is a fact which cannot be ignored by those who hope to enjoy the maximum result of their labor. When three men do a job that two men could do just as well, all three suffer with the community in general. The method increases costs all along the line and perhaps directly affects the income of at least two of the men. The practice also prevents the third man from finding employment in some industry in which he is needed and can be profitably employed, and therefore results in decreasing production in some other field which if worked by the useless third man would return much -in material wealth to the two men on the first job and to the entire community. "It is no answer to say that there are not enough jobs. The trouble with that theory is that the practice of forcing three men into a two- man job never gives the third man time to find his place at something else. The saving that would result from the decreased cost would be forced into investment and would create new work for the idle to do. Neither is it an answer to say that that process would take too long and that the third man would be out of employment until it was com- pleted. Putting three men into a two-man job ultimately forces all three out of a job, and then the two who would have been employed all the time are forced into idleness with the third man. There is no profit or advantage in that for anybody. "Giving less than a day's work for a day's pay has the same effect as the practice of putting more men on a job than the job needs. These practices are among the fundamental errors which we must correct be- fore we can face the future with a feeling of full confidence in our abilit}' to meet its problems." The businesses that are going to succeed and survive are those that know the path on, which they are traveling, that have a fact basis for their thinking and their acting, that know in- stead of guessing and" that have genuine management in the sense of truly intelligent guidance of the effort of all persons in^ their employ. GETTING LOWER PRODUCTION COSTS How does the engineer get lower production costs? By getting the most out of every unit of energy applied. And let me add right here that it is harder to get men to work to- gether harmoniously than it is to get them to work intelli- gently ! We must turn the time of depression into one of better morale, better workmen and better adaptation of men and equipment, conquering our depression difficulties by harness- ing them for better and more work. No one better under- 124 S. I. E. Eighth National Convention stands the psychology of the shop, and the office, and the trade, for that matter, than the properly equipped industrial engineer. He is the Haison officer between shop and office to crystallize harmony, loyalty and co-operation and to capitalize order and method into this large volume of better work. Furthermore, I think we have entered a period when we shall have to cut down to the absolute minimum the number of days or weeks from the raw material to the ultimate consumer. The margin of profit will be precarious and the buyer will control the market and require that carrying costs, as well as producing costs, be stripped to the bone. Our attitude toward business is changing, and the useful facts and formulae of business which the industrial engineer is prepared to furnish must now point the way. The plant benefits largely from a logical, uniform cost system despite the just claims for work well done in many other direc- tions. Production costs mean nothing until they are current, logical and uniform. That statement is almost axiomatic, yet it can never be over-emphasized. This is often lost sight of in our struggle to get to the buyer or past the cost department, for I am convinced that in some industries far more effort is spent in mer- chandising, trading, playing to the buyer, changing the styles, expa:nding the line, increasing the number of designs — all with- out thfe slightest appreciation of the pyramided costs, waste and depreciation. This is not because they have no cost system, but because it is their own manipulated, supine creation which divines what we want to know and gives it to them rather than a pic- ture of the stern realities, measured on an unchanging basis and in an inexorable way and standard for the industry. COST STANDARDIZATION You can easily see that a standardization of design, inter- changeability of parts and greater limitations of the line would be a boon to the furniture industry, for example. But it is not so easy to see it in my industry or yours, perhaps — or, if we do, we are content to compile our costs, as they are, without full realization of what a complete cost control would do for us under Detroit, April, 1922 125 varying conditions of manufacture from full load to one-quarter time and from a period of inventory-value appreciation to one of shrinkage. Such things are carefully measured by the industrial engineer assisted, of course, by the industry's trade association activities when it comes to setting standards for more than one plant. The first step is, of course, a standardization of cost method, beginning often with a bibliography of terms so that the manu- facturers, or their executive members who represent them, can understand each other when they discuss costs. It seems im- possible that men who were practically born and raised in an industry should really be unable to discuss detailed cost work with their competitors and get anywhere until they prepare a definition of terms, but such is often the case, even in the year 1922. The quickest and most effective path to uniform cost is the "normal cost" method now recommended by the industrial engineer, for it takes expert guidance even to get the real basis of uniform cost with the least expense in the smallest trade association or group. The great value of standardized costs in the industry and of the expert, at least in the preliminary determination of these costs, is recognized, not only for the savings from lowered individual costs, after the prevalent method has been scrutinized (for we usually scrutinize methods of manufacturing in our intense exam- ination, of cost finding method) but also for reserves to avoid bankruptcies and price wars and, in short, for a stabilized in- dustry. Within the plant this cost work is the function of the cost accountant — but the industrial engineer is the liaison ofificer be- tween the accomplishment and the compilation of the reduced cost and naturally is vitally interested in the method of compila-- tion. His peculiar mental attitude of study and experiment, plus the desire for a picture of results before spending good money on the experiment, have done a great deal to develop many late refine- 126 S. I. E. Eighth National Convention ments in cost work, such as predetermined costs, budgetary con- trol, etc. TOOLS OF COST REDUCTION As the result, many wasteful methods have been discontinued and economies substituted that, even in a rising market, make possible unit costs that are lower in percentage of increase than the increase of many factors involved in operating expense. This phenomenon has been recognized by many business men, as well as by our Secretary of Commerce ! Despite the innate complexity of the material with which the manufacturer is obliged to work and the inertia of tradition in the plant the industrial engineer reduces unit costs and measures the efficiency of any manufac- turing plan by the degree to which provisions are made for the following: (1) Research; (2) Waste reduction; (3) Co-ordina- tion and standardization. He sets about his work by first finding out how the plant is performing the function for which it was created. He wants to know why they are not doing as well as they should, and finally he uses the information which he has gathered while removing the obstacles that hampered the plant and its employees in the performance of their duties. The beginning is research — research not only of materials but of processes, men, and finally for the detached viewpoint which is as necessary to proper management as proper processing is to operation. In materials and processes the quest for the substi- tute and the synthetic goes on continuously. If you do not continue it you know that someone else will. The industrial executive knows that research in men and view- point is just as necessary. For example, there is a frequent recurrence of crane accidents in the foundry. Investigation proves that the operator in each case was of a nervous tempera- ment. A new standard is set for crane operators — they must be of the phlegmatic type — and the number of such accidents de- creases immediately. Again, the gaseous by-product of a varnish company becomes a public nuisance and the industrial engineer, with the aid of the chemist, literally transforms a liability into an Detroit, April, 1922 127 economy. The gases are washed and cleansed of theii- acrid, dis- agreeable decomposition products, which are turned into valuable by-products. The irregular quality of hand-made product is substituted for by the mechanical process, and mechanical methods are called upon to maintain the rate of production in special manufacturing just as the mechanical booster is employed to increase the rate of production in routine processing. The great change made in continuous processing by automatic weighing machinery is an example; many others will occur to you. FERTILE FIELDS FOR RESEARCH There is a lack of research in our own indvtstry — both tech- nical research and cost research. The present-day beater for paper pulp is three decades behind the times — the control for uni- form weight and strength of the paper sheet has had only a partial development from the mechanical end. In the rope paper mill the fabricating end invariably lacks development. A paper mill to save overhead 'should have long, continuous runs and continuous twenty-four hour operation. It should get it in normal times if the selling policy is right — or, provided it uses its own paper — if the fabricating plant is properly equipped and operated. The flour sack manufacturer, for example, requires a special grade of paper^ of long manila fibre, a very soft sheet that will stand a great deal of ragging, exposure to weather and rough handling without losing much of its original strength — just the characteristics sought in many industries, as when a cheaper substitute is desired for cloth, as for the best sandpaper and the best insulating paper, for the motor, the telephone cable, the garment and the protective cover. And yet, due to lack of research out in the markets of the country, and at the laboratories in the mill, the rope paper industry still competes almost exclu- sively for business in those blue-lined sacks in which you buy your pastry flour — an exceptionally keen competition, due to overproduction, and all in one channel! Meanwhile, the whole fibre container industry has been developed. 128 S. I. E. Eighth National Convention If you are familiar with this industry you can point the reason for the rapid development — standardization, and hence low unit cost of production. Standardization is to industry just what research is to chemistry — low production costs follow — (but do not forget that a prompt knowledge of the cost facts is also nec- essary) . Research must extend to cost methods ; also, standard- ization must include the cost-method. The result must be inter- pretable both in his own plant and in the industry. That necessi- tates uniform cost-method. Waste reduction is specialized research. It may start in with the shipping room on the analysis of excessive packaging costs, where, possibly, a change in the design of the package may con- siderably increase its adaptability. It may be brought about by elaborate testing and individual action, or by co-operative trade action to eliminate the return evil in customers' bags, baskets, drums, barrels and tanks, or by the user in an effort to get rid of a burdensome expensive return-bag cleaning, baling and accounting department. It may be better handling of material for the elimination of fatigue or waste of work and effort — it always requires persistent, indefatigable research. MATERIAL HANDLING AND DIVIDENDS It is only recently that industrial plants have been designed and laid out on a material-handling basis. The first comprehen- sive treatise on material handling has but recently come from the press, but the industrial engineer has struggled valiantly with the problem for the last ten years, co-operating with the mechanical engineer and the operating engineer to get a lowered cost of pro- duction. Mr. Coes in a paper before the A. S. M. E. quotes one large foundryman as handling 168 tons of materials for every ton of finished castings. Think of that as an opportunity for large dividends on proper, efficient, low-cost material-handling! It is worth special study and experiment. Study and experiment in this and similar cases have brought the industrial tractor and trailers, the locomotive crane and even the regulation railroad locomotive into private plants. Four modern continuous unloaders can unload a 10,000 ton cargo of Detroit, April, 1922 129 ore in 3j^ hours, at a cost of 4 cents a ton as against 25 cents a ton, including fixed charges and overhead, for the clamshell bucket. The same relative saving is procurable with electric tractors over wheelbarrows and we are only in the mill yard so far. Inside, much depends upon how the plant is "hooked up" to do business; the physical and financial handicaps must be con- sidered. The veiy location, buildings or sales policy may defeat the best plan, but I have yet to find a mill in our industry, with perhaps one exception, which could not profit amazingly by a searching study of the elimination of waste in handling materials. This exception is a paper mill and coating plant, located within a metropolitan area, a mill sixty years old, rehabilitated two years ago for proper material handling in all departments, with an annual saving of about 55 per cent of the cost of the new equipment, with fixed charges added. Such a plant can operate at one-third capacity and still earn its fixed charges. ELIMINATING CAPITAL WASTE There is a consciousness of the possible saving from elimina- tion of waste in the back of every executive mind, and if th^ manufacturer and engineer will get the economic viewpoint and select the right type of trained investigator, a definite elimi- nation of some capital waste can be -assured in every industry. The wastes of waits for materials, tools, blueprints, helpers,, miss- ing parts, etc., are small in the single instance, perhaps, but account for more loss than improper speeds, feeds and tools. • Take the question of helpers — 10 per. cent of their time is wasted, due either to backlash in the. plan of progression or to bad layout and general awkwardness of the shop in material handling, etc. Power losses in belt slippage, awkward transmis- sioiisj faulty steam pipe covering and defective furnace operation are surprising when studied. Did you ever put a dynamometer on your transmission?- If- you hayej and then studied the curves of -Jjower. consumed from = starting tiEn6untiL closing" time, as I have, you' will understaiM -Ivliy a present railroad president^, whiii superintendent, required that every foreman should be on the 130 S. I. E. Eighth National Con vention floor — not at his desk — but out on the floor among his men at five minutes before starting time in the morning and at noon and during the last fifteen minutes of the day. Of course, I got the story of fatigue loss and poor drive economy on the same curves and later with further readings a real power economy by regrouping. I have found a loss of two or three per cent of electrical energy in grounds, short circuits and defective wiring — "some" fire hazard, you will say, and yet an almost invisible waste. There is also a large "invisible" waste of air, steam and water pressure, heat and power around any plant, unless a special plan of maintenance is followed. In the paper mill, the chemist and engineer give special atten- tion to pulp waste and waste of liquors (tars and resinous mat- ter), but there are many other wastes — of operation, organiza- tion, deportment, shop conditions and preventable trade con- ditions — which, when eliminated, sharply affect the cost of pro- duction. We go into an enameling plant and study the waste of furnace heat with elaborate pyrometric equipment, but we must not overlook the girl who wastes the enamel drip from the bottom of each vessel — the little things in most plants give the "big" opportunities for saving at present. SAVING TIME AND EFFORT So much for material wastes; then there is the elimination of waste in the workers' time and effort, which means more work per man. Again, from the constructive side, it means keeping employees happy and productive. The right man must be picked for the job, then trained and educated, then rendered enthusiastic — a booster for his company and an enthusiastic booster for economy. The postwar days have wrought a revolution in men's ideas of the relation between capital, management and labor. The. industrial engineer has dealt with labor turnover, unrest, inefficiency, indifference, low productivity, lack of incentive and many other human faults, but today he must also study the men higher up with the same earnestness, for the worker requires that his leadership be right. Detroit, April, 1922 131 The problem of economical operation is one of practical co- operation between the man and his boss. Gannt once said, "Making better foremen is, therefore, not only commendable but necessary." Your shop leaders must have leadership, and with- out business knowledge and business training they lack the power for good which they might have. Increase the enthusiasm of your workman by first disarming his suspicions and placating his fears. Then stimulate his interest and insight into the methods of sound manufacturing (in your business) and your shop will tend to- ward lower costs as directly as through proper design or adequate tool equipment. Thorough workmanship is training pkis enthu- siasm. Your best worker always loves to "talk shop" — he lives it. To promote team work is only the first duty of the foreman — he must study the characteristics of each worker and strengthen his weak spots ; he must see that each man knows, undertakes and discharges the duties assigned him. He must stimulate friendly rivalry and develop skill — but he must keep both eyes to quality at all times. He must watch production in process, maintain the spirit of good inspection, and co-operate with management, and in so doing he must understand thoroughly the production policies of the management in order that he may reach the final goal — lowered costs. He must analyze the arrangement of equip- ment, the selection of workers and working conditions and, last but not least, he must know something about costs — about your costs. SHOULD THE FOREMAN KNOW COSTS? I know there is an aversion to displaying costs in the shop, even to the foreman, but how can he ever fully grasp your view- point of management unless he, too, has some vital statistics? You will probably have to build your cost system from the shop up instead of from the ofifice down before you can get it past the foreman — ^but often there are wastes to be eliminated in, the cost system as well as in the production system. Even diverting records from the cost department through the operating department may be recommended, for it gives the fore- man and the workman an interest in progress to know the value 132 S. I. E. Eighth National Convention of his economies, and any departure from normal practice should be promptly traced. It also adds a general confidence in the work and figures of the cost department. Just enough segregated information as to operating costs should be in the hands of the operators promptly. All repairs and maintenance charges, too, should go to the head of each operating department before even being entered on the cost records. Currency is everything. The whole argument above leads to the final topic — co-ordi- nation and standardization. As previously remarked, we have had our period of construction, combination and centralization ; the profits of the next ten years will come from standardization and co-ordination of method within the plant. Standardization alone produces and eliminates waste. The fear of a German economic invasion so vividly pictured in our tariff lobbies rests on the knowledge of what the Germans are doing to co-ordinate their industries, standardize and reduce the number of designs in various articles of manufacture, standardize and improve the best method of manufacture and to standardize and emphasize the most suitable material and composition. The industrial engineer takes a leaf from the book of experience of our research cheniists, that we may keep ahead of our overseas competitors. POSSIBILITIES OF STANDARDIZATION Standards of service and plant and equipment maintenance are also necessary to the best cost of production. There are innumerable angles to this throtighout the shop. Let me just mention one — a standardized tool crib service. In the machine shop, boiler erecting floor, manufacturing floor, in fact anywhere that processing requires a variety of hand tools, not regularly a part of the workman's kit, an opportunity for increasing service and economy by decreasing wastes lies in standardizing the tool crib. The tool crib naturally must be handy, well designed, well equipped, manned by those entirely familiar with tools and trade names and operated always accord- ing to plan. The amount and character of record-keeping must be kept down— but protection must not be sacrificed. Slow tool- Detroit, April, 1922 133 room service is an abomination and its cost astounding; but no one quite measures the real value of good tool- room method and service until it has been completely developed — it is a tonic for the v^rork of the whole floor. Standardized cost finding is another example. Something has been said previously of the need of a cost system in modern manufacturing that will reveal true costs in time to control them and to prevent them from becoming excessive. The policy of ruthlessly cutting away all other "features" until this has been accomplished must go on until the cost work measures up to mod- ern manufacturing methods. There is a possibility of divergent opinions on expediency and application but none on the funda- mental principles of cost work. CO-ORDINATING COST ELEMENTS It is the business of the industrial engineer to analyze and co-ordinate the component elements of cost and standardize the practice of cost finding upon its fundamental principles. I need not enumerate these five elemental principles, which cover every phase of cost engineering, but it is sometimes necessary to re- iterate that these principles are the foundation stones of an ex- act science and whenever the cost system violates these funda- mental principles, whether that system is made for a single or- ganization or a group of manufacturers, it will be erroneous and misleading — not to say wasteful and harmful — and whenever it conforms, it will be useful and valuable. Personal opinions of distribution of expense and what the cost factors should be cannot change the facts of cost. But such lack of co-ordination in cost finding does lead to confusion and loss — very definite and progressive. On the other hand, with the foundation laid and never obscured, co-ordination pays a later dividend in further refinements, such as graphic control, predetermined and budgetary costs — that is, methods which meas- ure up to the stress thrown upon the factory accounting by mod- ern manufacturing methods and at a minimum of expense of compilation. 134 S. I. E. Eighth National Convention The keynote of co-ordination within the shop is analysis. Complicated cases must be divided into their elements. It makes little difference whether we are considering a problem of proc- essing interference or cost-finding. Analysis — sober, frank, on- the-spot analysis — foreshadows a profitable solution. Encourage suggestions from anyone and everyone in the shop. Encourage them ; then reward them. But the reward alone should not be the stimulant. The industrial engineer understands the psychol- ogy of this; the workman, at his daily operation, is in position to develop many small improvements but is affected by many conflicting motives. Stir up his pride in personal achievement, give credit where credit is due and teach your department execu- tive that all the information and knowledge necessary to run his department does not and need not repose in him if he will but organize the stray creative energies of his men. BUILDING ON SOUND HUMAN TIMBERS The building up of an efficient force in office and factory — co-ordinating personnel — is never better done than in a time like the present. Right now is not only the time to rid the business sea of derelicts but also the individual hives of drones and mis- fits, and to build for the future by scientific selection of men in a practical and efficient manner. The successful executive intuitively has this power of selection. "He is a good judge of human nature," we say, but often his precious minutes are em- ployed on other problems and it falls to the engineer to. empha- size to the sub-executives that the morale and efficiency of the force depends primarily upon the proper placing (after the selec- ting) of the human units of the organization. Even in the small plant it is possible, and profitable, to stan- dardize personnel methods. There is still a lack of system in hiring and firing. The greatest raw material of all industry, its human material, is often the most .carelessly chosen. Even the rule of thumb methods of selection of material have gone by the board, for they would make any efforts toward standard mate- rial quality of output futile. We must give the capabihty, per- sonality and reliability of the applicant some standardized selec- Detroit, April, 1922 135 tion treatment to protect the final quality of our product and we must not rely on snap judgment and hurried selection without method. SCIENTIFIC SELLING AND PURCHASING There must also be a study of normal demand, of sales re- quirements and purchasing. Purchasing activities must be co- ordinated and attuned to selling — and selling and sales oppor- tunities must be studied and co-ordinated with production. Much has been accomplished in some industries with which I have an intimate acquaintance by the determination of a scientific "quota" for each product in each territory and by co-ordinating this "normal" of demand with the production plan. An unusual economy in the use of factory labor was accomplished by rout- ing in harmony with this quota and the ability of the sales de- partment to secure it. This work was done under the guidance of the industrial engineer, with the collaboration of the sales managers. A modern factory where the best ideas of operation for your business have been wrought and where modern engineers have added their knowledge of layout and design, permits operating economies that will always pay dividends as long as the plant is in operation, but the dividends of good design and modern equipment are bvit a part of the dividends of operation where scientific planning and complete co-operation between the hands and the brains of the business unite with thorough workmanship to make it possible to take full advantage of all conditions in , the industry and in the market, as they appear. I hold no brief for over-organization in industry, but that, as yet, is at the top ; the industrial engineer can justify his existence within the shop itself, even in the most highly organized, on straight returns from lowered production costs. He will need no exposition as long as this to prove his value when in action there. 1'35 S. I. E. Eighth National Convention Sales Management and Industrial Engineering By NtoRVAL A. Hawkins Director of Sales, Advertising, Service, Advisory Staff, General Motors Corporation, Detroit, Mich. You have discussed how industrial engineering serves the public, how it serves capital and labor, how it serves industry as a whole, and how it also serves specifically the chief adminis- trator, the executive, the factory manager and the financier. I was especially pleased to note the frequency with which the word "serves" appeared in your program. It is my con- viction that "service" is the magic word in the formula of busi- ness success. In sales management we have adopted that word as our motto. When I was tendered the appointment to the po- sition of director of sales on the advisory staff of the General Motors Corporation, I immediately asked that my work also in- clude the closely related subject of service. Sales and service are so closely linked that the first cannot succeed without the second. I say to all our salesmen, "You must be service men every minute that you are selling." And I say to our service men, "You have an opportunity to be the very best salesmen in our entire organization." If I correctly interpret your program, it signifies your recog- nition of the primary obligation of the industrial engineer to serve the needs of business for the most efficient methods, means and men. The subject originally assigned to me was, "How Industrial Engineering Serves the Sales Manager." But I wanted to turn it around because I thought it would be good for the convention if I talked on "How Sales Management Serves the Industrial Engineer." Of course, industrial engineering does serve the sales man- ager. It betters the product, lowers the cost, stabilizes output, Detroit, April, 1922 137 assures deliveries. The industrial engineer makes it possible for the sales manager to figure his quotas accurately and plan with assurance that the quota of goods will be manufactured; thus the sales manager is able to use the spur of quantity production to keep the sales force on its toes to market all the goods made. Industrial enginering serves the sales management with count- less factors of human interest that assist in the sale of the fin- ished article. When the salesman has an interesting story to tell about the efficient manner in which the product is made it helps wonderfully and many a sale has been closed through an industrial engineering idea properly translated into a sales pro- posal. And the sales manager, if he is the right sort of sales man- ager, is keenly appreciative of this service. If he is up to date he takes full advantage of the co-operation and ideas of the industrial engineer. Now let us talk on the subject of "How Sales Management and Salesmanship Can Be Made to Serve the Industrial Engi- neer." WHY INDUSTRIAL ENGINEERS NEED TO BE SALESMEN Some years ago an eminent member of your profession vis- ited me to discuss a factory efficiency plan. The plan was in- tensely interesting, but when he had finished I rather impolitely expressed my opinion that he could not make his theories work in practice. I told him why I was skeptical. "You are talking about men in the same terms that you use when you speak of a machine," I objected. "Men are not cogs in an industrial mechanism. You have given no consideration to the great va- riable factor of the problem — namely, human nature. In order to make your ideas successful you must sell them to the people who will be affected by the changes you propose. You have not said one word about how you expect to get everybody to co- operate with you on this plan. Take my advice and make a study of salesmanship before you tackle the job. You cannot get the plan across unless you sell the idea and sell it the right 138 S. I. E. Eighth National Convention way, and you cannot sell it the right way unless you know how to sell." The engineer in question had experience and initiative in di- recting material affairs. He knew the laws of mechanics. He knew the rules of mathematics. But mechanical and mathe- matical ingenuity would not help him much without a knowledge and an understanding of the men who were to carry his direc- tions into effect. New ideas to become effective must be sold. You cannot cram them into people's heads as you might force raw material into a machine. Forced feeding cannot be made successful in the case of the human machine. Industrial engineers have ac- complished wonderful things in developing scientific principles, but have you made a shining success in selling them to the em- ployes? Have you accomplished all you should in selling your ideas to the employers? SELLING YOURSELF TO MAN AND MANAGEMENT I recognize the fact that you have within the past few years discovered the value of making work interesting to workmen. You have introduced variety. You have educated workmen about the things they do, but do you carry the idea far enough? Do you confine your points of interest too closely to the shop ? Have you overlooked the "man" element in its broader sense? The ordinary workman swears at you as his worst enemy, and the average business man looks upon you as a theoretical "nut." Many mistakes have been made by industrial en^neers, and all of them have been exaggerated to your detriment. "Here comes one of those damn time study guys," swears the man in overalls, when you start analyzing a plant. "This business isn't interested in new-fangled theories," declares the employer whom you approach with your proposals. Now, just where is the trouble? Who is at fault? It is not that labor is short-sighted, nor that capital is narrow- minded or tight-fisted. I believe a large share of the fault is your own. You don't sell your ideas. A good many of you do not even know that you must be first-class salesmen before you Detroit, April, 1922 139 can become first-class industrial engineers. You are confident, and so am I, that your principles are right, that your ideas will increase efficiency, if they are adopted, and you are surprised and exasperated that employers and employes are such old fogies and fools as not to accept them. The average industrial engineer has been too much the sci- entist, too much the teacher, too much the disciplinarian, and not enough of the salesman. In my opinion it is just as impor- tant to work out a systematic plan for getting your ideas across to the other fellow as it is to develop the ideas themselves. Im- mediately after you decide on a principle or its application, and before you attempt to promulgate that principle, you will be wise to decide on the most effective method of selling it to those who are to use it. WHAT IS EFFICIENCY? Your work, of course, has to do with increasing efficiency. If I were to ask just what you mean by efficiency you would with one accord define it as being "the ratio between energy expended and useful work done," and that is where I think you are wrong. Applied to locomotives, engines and drill presses — yes ! But to man, with his hopes, his ideals, his heart and his soul — ^never ! Efficiency is a human problem — always human — for without man, with his wants and his aspirations, all our machines of wealth and power fall into heaps of rust and ruin. Efficiency as an element in human progress is always measurable in the spirit and power of ideals. Human efficiency is the ratio between what I am and what I can and ought to be — between what I do and what I can and ought to do. As advocates of scientific management and devotees of industrial efficiency you might do well to revise your definition. In dealing with a mathematical equation you are quick to rec- ognize the unknown factors. They receive proper considera- tion. The solving of the whole equation hinges around their values. Man is the "unknown quantity" in the equation of industrial 140 S. I. E. Eighth National Convention management. He, after all, is the x y 2 oi industry because he has within himself the power of changing. You cannot com- pare man with the inanimate. ENGINEERING FOR MACHINES ; SALESMANSHIP FOR MEN Parts made of steel, iron, brass, nickel, wood and leather can be assembled by a man into an automobile. The combination always stays an automobile until it is changed from without. The automobile cannot make itself into a typewriter or a machine gun. A chair leg, once it has been turned out by a workman, remains a chair leg unless it is altered by some power outside itself. "Things" are that way. They have no inherent capability for altering themselves in even the slightest degree. Hence, they are easily handled. Once placed they "stay put." The automatic machine continues to turn out bolts ; there is no possibility that it may change its mind and produce nuts instead. A man dictates a business letter and the stenographer types it. After the words are impressed on the paper they cannot shift themselves about. "Words" are like that. They are wholly in- capable of self-alteration. Therefore they are constant factors in business and managing them is not a difficult problem. But man — how different ! He has the power of continual and unlimited change. Told to do one thing, he may do any of fifty other things instead. He cannot be depended upon until he has been proven thoroughly, and even then he is apt to make mistakes. He does not always function like a cog in the business machine; at any moment he may turn into a "monkey wrench" and mix up the organization gears. A single workman can disrupt the efficiency of a hun- dred of his fellows in a shop. No matter how completely a man has been instructed, or how ably he is directed, his efficiency depends upon the variable factor — his initiative power for change. The man can ignore his in- structions, and disobey or alter his directions. This difficult problem of management is tremendously complicated by the Detroit, April, 1922 141 number of men to be managed. A thousand men in an organiza- tion may make a hundred thousand changes in one working day without regard to efficiency or instructions. Man cannot be compared to the inanimate. He cannot be reduced to mathematics. He is not a mere tool. You can pick up a slide-rule any time without giving it a smile, and it will do its little job for you quickly, unquestioningly, and without a grumble. Then you can throw it down and pay no more attention to it. You need show no special interest in its performance. You do not need to help it with encourage- ment or advice, and when its work does not bring the result you wanted you can show all the temper you please. Above all, you never need to tell your slide-rule the reason why. It will work just as well for a bully, or a grouch, or a snob, as for a real man — ^but men won't. A slide-rule will do its best for you whether it knows your purpose and is interested in your efforts or not. Men won't. They are handicapped with all sorts of human touchiness and personal ambition. I am not attempting to say whether human nature is right or whether it is wrong — I am merely stating the conditions. As a salesman, I attempt to meet these conditions as I find them. As industrial engineers how do you meet them? MEETING THE MAN PROBLEM IN INDUSTRIAL ENGINEERING WORK When you are assigned the job of industrial engineering in a particular business, how do you set about it at the start ? All the industrial engineers I ever worked with commenced by talking science and putting on the sharpest looks of keen im- personal analysis. And in my own experience I have never known a corps of engineers that included a sales manager as an important member of their force. Every industrial engineer- ing staff should have a corking good sa[les manager— not to talk over selling matters with the sales manager- or purchasing agents but properly to "market" the industrial engineers' ideas in 142 S. I. E. Eighth National Convention all of the departments which are to be made more efficient by their introduction. All the profits in business must come from the sales closed. We all know this — it is axiomatic — but we seem to forget it every once in a while. As industrial engineers you should con- sider it a part of your job to see that the sales organization is efficient. No matter how well you may reorganize a factory or how greatly you may increase output or decrease costs, the busi- ness will fizzle like an election promise unless the sales depart- ment is correspondingly efficient. You guard against such a failure by analyzing the sales department thoroughly, as part of your efficiency plan. It always has seemed strange to me that you should realize the vital importance of salesmanship to the business you reorganize, but fail to realize that salesmanship is just as necessary within your own profession to get your ideas across to the employers. WHEN SALESMANSHIP WAS LACKING An acquaintance of mine whose business was in a rut engaged an industrial engineer to reorganize it. He was a good engi- neer, thoroughly versed in mathematics, time studies, cost sys- tems and factory layouts; he knew how to engineer everything except human nature. He was a poor salesman. He showed by his remarks and general attitude that he was contemptuous of the methods that had been followed. The owner of the business was stung to dislike and before the survey was half completed the engineer was called into the office, paid in full and bluntly told to "beat it !" Unfortunately he was not a good salesman. Many industrial engineers are like him, although there are exceptions to the rule. The business manager of your society, Mr. Dent, is such an exception. He is a salesman — he knows the art of compliment. He wrote to me, inviting me to speak at this convention, saying that "a great many of you had gone to the Springfield conven- tion last October just to hear me talk." I fell for his compli- ment, and here I am to pay tribute. Seriously, you need sales managers to complete your very Detroit, April, 1922 143 efficient engineering organizations. I have not been paid to do any advertising here for the "Grinnell" organization, but I want to refer to their marketing activity just to emphasize my point. You have all read "Grinnell" advertisements. Do you realize what a tremendous prestige their printed salesmanship has given to the name "Grinnell?" Are the "Grinnell" men any better engineers than the rest of you? You admit they are not, but the pubUc does not admit it. "Grinnell" engineers are not only industrial engineers, but engi- neers of human nature — they used salesmanship to get their engineering ideas across to their prospective clients, and, to my way of thinking, they did a darned good job, without violating business or professional ethics. It strikes me that in addition to furthering their own cause they have raised the profession of engineering to a higher level of public understanding and appreciation. They have blazed the way for other industrial engineers successfully to market their ideas. If I did not have a fairly good-sized job on my hands I would be tempted to tackle you for a chance to work out some of the problems of selling the ideas of industrial engineering more effec- tively. Your sales managers should be specialists, trained in your profession. They should know the goods you have to sell. Therefore, it seems to me that you will have to develop your own sales organizations and let them develop their sales man- agers from the best brains and energies that can be enlisted in the work. THE SALESMANSHIP OF SERVICE Not only do you need sales managers but you need salesmen. Every man connected with your respective organizations should be a salesman. Since joining the General Motors Corporation I have been emphasizing to everybody with whom I have contact that they all are salesmen. Mr. Pierre duPont is our salesman president, Mr. C. S. Mott is our salesman chief of staff, Mr. C. F. Ketter- ing is our salesman chief engineer, and so on down the line even 144 S. I. E. Eighth National Convention to the porter who cleans the halls of the General Motors Build- ing. I am talking salesmanship in its broadest sense — I am talk- ing the salesmanship of service. The true salesman is the man who injects real human interest into his job of serving his fellow men. I believe the best sales- man we have is the workman who takes pride in his task and who builds that pride into our products. The salesmen who meet the public and get the orders are not nearly so important to the success of our business as the salesmen in overalls who really love their work of making General Motors products good products. As a sales manager, give me 100 per cent salesman- ship in the factory and my job in the field will be easy, for the best sales manager in the world cannot make a permanent suc- cess of marketing a product indifferently manufactured by em- ployees who have no pride in their work. MAKING SALESMEN FOR INDUSTRIAL ENGINEERS When you tackle a job of industrial engineering you should think of the workmen in the plant as your salesmen and use sales management ideas to get them to pull with you in team- work. Open their eyes and make them see beyond their ma- chines, outside the factory to the customers who will use what they make. Get them interested in the people who will buy the product. It is human nature to do a better job when the man you are doing it for is standing at your elbow. You should make the workman feel the presence of the buyer right in the shop when the goods are being made. There is no better cure for inefficiency and indifference than arousing real heart interest in the work. Extend the workman's interest and broaden his perspective so that he will visualize the product in use and make him feel that' his work is a part of the actual service to the user. Teach him to think of the customer as "his boss" — the man who ac- tually meets the- pay roll. Personalize the things that are being made. Inject a touch of human interest by telling the workman that he is the company's best salesman. Let him challenge "your proofs and then change his viewpoint by getting him to sefe'things Detroit, April, 1922 145 through a salesman's eyes. If you succeed in accomplishing this, the rest of your problem will be easy. SELLING THE WORKMAN ON YOUR HELPING HIM The ordinary workman is antagonistic to industrial engineer- ing simply because he thinks you are making him work harder and thus earn more profits for his employer. As long as the workman regards you in that light he will oppose your eiforts to improve his efficiency. You can compel him to obey but unless he is sold on the idea, your plan will not prove permanently efficient. Show him the direct relation between the sales of the com- pany and his steady job. Point out that his only competitor is a similar employee in a competing shop. Point out to him how he can help himself to the retention of his job by helping to sell the product through the care with which he makes it. Then and then only will he be stimulated by the enthusiasm of the real salesman. There is no employee who works so hard for his employer as the true salesman. He is never a clock- watcher. He is tireless and will fight for his concern as whole- heartedly as he would battle for himself. The ordinary workman is not like that. It is not a matter of the money the two employees make. Plenty of workmen get as big pay checks as do the salesmen. The difference is in their viewpoint. GETTING MEN TO SAY "WE" INSTEAD OF "THEY" The salesman says "we" when he refers to the company. The ordinary workman says "they," so as industrial engineers, it should be your duty to change the defiant "they" into a co-opera- tive "we." Similarly you need to change the language the employer uses. He must get the habit of thinking and saying "we" instead of "they." It will take a lot of sales management to get that idea across to the average boss nowadays. You must train both 146 S. I. E. Eighth National Convention Directorship and Production* in salesmanship principles if your engineering job is to be of continuing benefit. Sales management is the answer. I do not suggest sales management as a substitute for indus- trial engineering, but as a supplemental and necessary team-mate. Such a combination will enable you to do your work most effec- tively and permanently. Sales management will serve you well. It will help to broaden your outlook. Professional men are apt to get into ruts. The salesman who succeeds is never narrow. Generally speaking, the more broad-minded the salesman, the more successful he is. As industrial engineers your efficiency and progress will be large- ly determined by the breadth of your vision. There are no problems of life involving relations between man and man that salesmanship cannot aid in solving, and sales- manship is made more effective by sales management. So I em- phasize your need of knowing how to sell and the correlated need for sales management in all your work. We are entering upon a wonderful era. Conditions are rapid- ly changing. I quote the following editorial from the current issue of Collier's: "The wisest, most farsighted corporations are spending mil- lions in their laboratories ; machinery which has hardly outworn fhe first stiffness of its bearings is junked because a new machine or process has been found to perform the service better. And in every industry have come, or are coming, amazing changes in men. "Now is the best time in your life to keep your mind open. The only benefit of a great cycle of prosperity and depression is that it jars men out of ruts. It brings dead brain cells to life. Settled convictions are excellent assets when applied to funda- mentals like faith and work. They are liabilities of bitter im- port when they relate to processes or stand across the path of new ideas." *Note: The terms Directorship and Production are preferred by Mr. Hawkins to the more common terms, Management and Labor. Detroit, April, 1922 147 Your motto then is "Service to Industry." Salesmanship and sales management are both dedicated to service. You and I are brothers in purpose. We should not be merely distant relatives any longer, but should cultivate a feeling of sympathy, and get together in understanding and pull together for the common good of all the world. 148 S. I. E. Eighth National Convention Banquet THURSDAY EVENING April 27, 1922 Toastmaster— JOSEPH W. ROE, President S. I. E. The Need of the Hour By Robert B. Locke Director and Manager, Federal Reserve Bank, Detroit, Mich. Upon receipt of my acceptance of the invitation to speak briefly here tonight your secretary was kind enough to send me a copy of your official bulletin. In reading an address by your president I came across a statement which I think is worthy of the consideration of all business men. I refer to that portion of the address wherein he states that "The one permanent ele- ment through all this welter of change is the element of human nature. All men, everywhere, demand recognition of the ele- ments of personality, physical health, love of family, ambition, association, and a sense of justice." I am going to assume that all of these elements are being well cared for with perhaps the single exception of the last — a sense of justice; The need of the hour is primarily an appreciation of the sense of justice on the part of the workingman and the employer alike. But you cannot expect an appreciation of the sense of justice until the workingman has some conception of the fundamental economic principles underlying all business relations. If and when he has been educated to that point, then and only then will we have upon his part an appreciation of the sense of justice. The World War and its resulting disturbances have left large parts of the world unbalanced. Empires have been de- stroyed and new governments established. New leaders are tak- ing the places of old rulers. New thought is replacing the thought of the past. What you and I ought most to be concerned about Detroit, April, 19 22 149 and what the world ought most to be concerned about, is that this new thought be right thought ; that this thought rest on those immutable laws which govern all of us. First and foremost in the minds of those who are responsible for public opinion should be the thought that peoples must not be arrayed against peoples and that class must not be arrayed against class. We are living in an age of propaganda. Many of us are hardly aware of its tendencies or of its magnitude. A great deal of this propaganda is founded on false economic fallacy. Most of it is intended to arouse group against group. Most of it will benefit the people much as the Non-Partisan League did North Dakota, or as Bolshevism did Russia. Time was when it was considered a far cry to make a comparison between conditions in Russia and conditions in this country. Although Russia is far removed from our sphere of activity, the Russian situation, if we take into consideration the facts of the case and the in- telligence of the inhabitants of that country, is not a far cry from the situation which we have in North Dakota, if likewise we take into consideration the superior intelligence of the people of North Dakota. Both are based on unsound economics, and though in process of correcting themselves both have brought much suffering and both might have been prevented had the people of Russia and the people of North Dakota been better able to determine. what were sound economics. Furthermore, it is not such a far cry from this country to Russia when you consider that in the city of New York, with a foreign-born population of 1,991,000 people, 479,000 are native born Russians. A summary of the United States shows that the foreign born and those of foreign or mixed parentage together constitute more than one-third of the total population of this country. The aggregate for the two classes is 36,398,000. These two classes also form 58% of the total population of cities having 100,000 or more inhabitants. It is, therefore, important that business men should have an active interest in the character of the prop- 150 S. I. E. Eighth National Convention aganda and the new thought which is now occupying the atten- tion of all classes of people. SOME RESULTS OF IGNORANCE OF ECONOMIC LAWS Looking at the North Dakota situation from a financial point of view, before the Non-Partisan League obtained control (only four short years ago). North Dakota had a state debt of approxi- mately $^1 00,000 and enough money in the State Treasury to more than pay that amount. Four short years of misery have brought North Dakota no benefits and have saddled her with a debt of over $7,000,000, the annual interest charge on which is greater than was the total debt before the coming of the Non- Partisan League and its leaders. Why was it possible to hoodwink these successful farmers? How were they blinded into electing men who brought them so much disaster? How was it possible to make them believe in the economically unsound ? They must have been promised some things which they should have known were economically impos- sible. Had there been in North Dakota a general understanding of the elementary principles of economics, I do not believe the rule of the Non-Partisan League would have been possible. In the April 22nd issue of the Commercial & Financial Chron- icle there is an editorial headed "Ignorance of Economic Law a Source of Industrial Unrest." This editorial states that most, if not all the disputes in the industrial world could doubtless be avoided if there was a better understanding of economic facts and law on the part of labor. There are some things in this edi- torial to which I take exception but I think they have hit the nail upon the head when they state that the most drastic statutes will not avail to cure the strike disease completely. Widespread instruction in economics is the only permanent remedy and this is an essential feature of any policy that aims to abolish destruc- tive and disastrous industrial warfare. I suggest the possibility of the opening of schools under labor union auspices to teach economics and other things to in- dividuals who aspire to leadership in the union. There are great and far-reaching possibilities in such educational organizations, Detroit, April, 1922 151 but they should and doubtless would be conducted along lines which would insure a teaching that wovild be scientific and fair and not designed simply to supply special and specious argu- ments for militant union aims and practices. The president of the University of Washington has well stated that the human race is peculiar in its psychology, particularly when it operates under large grants of freedom without large amounts of intelligence. In America we have economic freedom and we have political freedom. To the man who is willing to work with hand and brain, there is ample opportunity for advancement. To stem the tide of discontent in this country there is necessary a cam- paign of education which will show the rising generation that America has gained everything that revolution can bring; that there are immutable laws of economics which no radical upheaval can alter. If we begin this education early enough so that the children in the .schools will be inculcated with the doctrines of truth and the lessons of history, we shall be able to meet with- out fear the apostles who are preaching to ignorant masses false doctrines of a millennium. In all times the bulwark of a sound government and of a sound and sane economic organization has rested upon a large and contented middle class. Neither the idle rich nor the shift- less poor can make secure the future of any state. Progress must come from those who work intelligently and who receive therefrom character-building development. It is this class which gives to democracy the best guarantees of safety and this class must not be oppressed either from above or below. AN ARGUMENT FOR ECONOMIC EDUCATION The misunderstanding between capital and labor, where both sides are frequently partly in the wrong, is a powerful argu- ment for better economic education. An appreciation of the rights of both labor and capital can be hoped for only as the result of a more general economic education. Labor requires capital and capital requires labor. The antagonism now so fre- quent will disappear when this truth becomes sufficiently under- 152 S. I. E. Eighth National Convention stood to result in fair dealing on the part of each, in a greater understanding of the dependence of one on the other, in a knowl- edge of the plain duty of one to the other — in fact, when both have a true sense of justice. You say the pictiire is too idealistic, the child of a vivid imagination, and I reply the ideal has become real. The banker, more than any other business man, is interested in the success of people generally. He has among his customers the merchant, the farmer, the manufacturer, the laboring man, the student, and here and there perhaps a small savings account from an industrial engineer. For this reason he is naturally opposed to the success of one group at the expense of another or other groups. His interests are in harmony with the general welfare of his community, his state and his country, and his leadership^ if exerted at all, should be exerted on behalf of the general wel- fare. I have said that the ideal has become real. The credit for the success of the undertaking I am about to tell you of belongs to Mr. John H. Puelicher, president of the Marshall & Ilsey Bank of Milwaukee, and first vice-president of the American Bankers Association. During the war Mr. Puelicher was active in Liberty Bond sales campaigns. Just outside of Milwaukee there was a small community made up practically 100% of German population. The Liberty Loan salesman had had great difficulty in getting any subscriptions from this community — they had called a mass meeting at which hardly half a dozen people attended. Finally someone suggested that they go to the public schools and talk to the children upon Americanism and the duties resting upon American citizens in our emergency. After a few short weeks they called a meeting similar to the first and much to their sur- prise the liall was filled to overflowing with parents and children. How did that come about ? Simply this — that the simple truths of patriotism and Americanism were taken home to the parents by the children and they were sold, so to speak, and they had no further trouble in obtaining Liberty Loan subscrip- tions in that community. Detroit, April, 1922 153 Two years ago at a meeting of the executive council of the American Bankers Association Mr. PueUcher called a few bank- ers together and made the proposal that it was time the bank- ers stood up and did their duty toward educating the public in general economic and banking subjects. The question was how to go about it. The result was that the American Institute of Banking, which is the educational section of the American Bank- ers Association, composed of 52,000 members, threw their whole force into this work, and as a result today we have 3,000 mem- bers who are qualified speakers, delivering at regular intervals in the public schools talks on such subjects as banking and the simpler elementary economics. The effect of that is going to be far-reaching. Somebody made the suggestion that we start with the high schools — ^that we were starting in too low a grade. We said, "No, there are too many young men and women who never reach the high school," and so we went into the lower grades and toned our talks down to make them more elementary so that the chil- dren could understand. We have 3,000 men doing that work and next year there will be many more. You men of the Society of Industrial Engineers ought to be interested in that work and you ought to be in a position to appreciate, perhaps, what that work is going to mean directly to you in your business. The parents of these children are per- haps workers in your factories and plants and you are going to see a difference as this work goes on, and we are going to continue it indefinitely. I hope you may be able to see some- thing in our plan that will enable you to do something on your own behalf in supporting it. In closing I simply want to say this American Institute of Banking, of which I speak, and of which I now have the honor of being President, might be called the most unique labor or- ganization the world has ever known. It has for its creed a part of a resolution adopted in New Orleans in 1918, at a time when the banker was perhaps working under as adverse condi- tions as he had ever been called upon to work under, and at a 154 S. I. E. Eighth National Convention time when perhaps his remuneration was less in proportion to his living expense than that of any other class of labor. At that time the organization adopted this resolution: "We believe in the equitable co-operation of employer and employee. We are opposed to all attempts to limit individual initiative and, in so far as our profession is concerned, we are unalterably opposed to any plan purporting to improve our mate- rial welfare, individually or collectively, upon any other basis than that of efficiency, loyalty and unadulterated Americanism." Detroit, April, 1922 155 How Industrial Engineering Can Save Labor By Matthew Woll Vice-President American Federation of Labor, President International Photo- Engravers' Union Industrial engineers can serve labor in many ways. One of the ways has been indicated by the previous speaker — that of teaching economics. But the teaching should not be confined alone to the labor class or to the wage earners of our country. Fortunately or unfortunately, we use terms indiscriminately and not carefully, because if I listened aright to the previous speaker he mentioned that he represented a labor group, a banking in- stitution, and if it be true that labor needs education, then I take it the institution he represents likewise is in need of education. The question in industry — the great problem that presents itself as affecting all interest in society — is "What is the purpose of industry?" Some of us believe that the purpose of industry should be alone to serve the interests of the consumer; others believe that industry should serve only the purpose of profit, and there are those that believe that industry should always serve the interest of the wage earner. The American Federation of Labor believes that industry should be of service to all of the people, primarily those directly concerned in industry, and through that service benefit society as a whole. Much depends upon what interpretation we accept as the accurate one — whether industry shall serve one class or all classes alike, and having determined that principle, I think many of our questions will have been solved. And then again we must determine in what particular society we seek to apply that interpretation. If we apply that to poor Russia we find there it must serve the purpose of redeeming a nation that has been thrown into degradation and starvation by the ills of the past ; if applied to Germany, we find the pur- 156 S. I. E. Eighth National Convention pose of industry must be to redeem it from the ills of the past; and when we apply it to France we find there that industry must serve for the purpose of rebuilding the great human waste and economic destruction that took place during the Great War, and so with England. And thus, in seeking to apply our purpose to particular localities, we must take into consideration the con- dition of the people, for after all, that is the great human pur- pose to serve. THE PURPOSE OF INDUSTRY Perhaps we here in America at the present time are in a better condition to determine accurately and perhaps for all time the true purpose of industry as to whom we shall serve and how we shall serve. Here in Detroit we have a great manufacturing financier and industrial engineer. I speak of Henry Ford. What is his purpose of industry? If we read his thoughts on the subject we find that he states it to be his ambition to employ still more men, to spread the benefits of this great industrial system to the greatest number possible, to help men build up their lives and their homes. In doing that he is putting the greater share of his profits back into the business. That is the purpose as con- ceived by Henry Ford in the conduct of his great industrial enterprise. But we find that all associated with indvtstry do not sub- scribe to that purpose of industry. Many believe that the pur- pose of industry is to serve themselves selfishly and profitably, for we find that some are going into the courts as representa- tives of share owners of the coinpany, claiming the purpose of industry is not what Henry Ford believes it should be. And so we find the Supreme Court of the State of Michigan giving its interpretation of the purpose of industry. And it is quite differ- ent from that of improving the lives and homes of the wage earners. We find the Supreme Court of the State of Michigan saying there should be no confusion of the duties which' Mr. Ford conceives that he and the stockholders owe to the general Detroit, April, 1922 157 public, and that a business corporation is organized primarily for the profit of the stockholders. But why read further of the interpretation of the court as to what the purpose of industry shall be? Unfortunately, the viewpoint of the Supreme Court of Michigan which holds that our business organizations today are instituted for the profits of the share holders, and them alone, is not only the legal and the business viewpoint but is held throughout our entire indus- trial system. And that is the great difficulty with which we are confronted, and it is because of that legal and economic pur- pose that there is this great social and industrial unrest prevail- ing even in our country with all its abundance of wealth. If the interpretation by our courts as to the economic philoso- phy underlying our industrial system — ^that industry is to serve the interests of stockholders and them alone and is not for the building up of the lives, to improve the homes, and the giving of profitable employment to all our citizens — if that is not then the purpose of our industrial system, pray then, why do we hear so much about labor failing to regard public interest? Why should they alone be asked to contribute service? Their human life and blood grinds out profits for business institutions and the purpose is not to improve general civilization for the better relation of mankind- as a whole. It is because of that funda- mental difference that we have the great unrest and the friction arising between business institutions and labor organizations. On the other hand, if your society and men of your training and in your position in industry assist in correcting wrong im- pressions so that the management of industrial enterprises will truly distinguish the true purpose of industry, and find the true purpose of industry to serve all mankind, to make a better world to live in and to improve civilization, they will have served not only the wage earners but all civilization to come. And that is one of the great ways in which your organization can be helpful to the wage earning class. The American Federation of Labor has given considerable thought and attention to this matter and we have been compelled 158 S. I. E. Eighth National Convention time and time again to give deep and careful study to all these social and industrial economic problems which confront our peo- ple, because there is no human relationship that does not bear upon the lives of the workers directly or indirectly. In this great industrial development with our constant growth of or- ganization, confronting on every hand people with no occupa- tion, no trade, no profession, no manifestation without collec- tive representation, the wage earners indeed find more need for collective action and co-operation today than ever before. UNADULTERATED AMERICANISM Just to bring out one point. We speak of unadulterated Americanism. Yes, we loo, pray for unadulterated Americanism. We speak of individual initiative and of opposing anything that may not improve our material welfare, individually or collec- tively. We too are in accordance with those principles and with those ideals, but what is unadulterated Americanism? Is it in- tended to promote and promulgate the idea of open shop as we have come to know it ? Is it, denying the wage earners the right to organize, to have representation and collective action? If that is Americanism, then I say we have departed from the original conception of Americanism, and it would be well first to turn back to the true principles of Americanism — life, liberty and equal opportunity in the pursuit of happiness. And so we find in our industrial world today on the one hand large corporate entities, bodies endowed with powers that God in His wisdom has not given you or me individually. We find in these corporate entities a life longer than the natural life; we find a brain not possessed by an individual, but a col- lection of brains — ^the best that money can buy, and we find power and influence so great that the individual can no longer hope to contest that great power. With this large institution, em- bracing hundreds of thousands, the wealth of thousands of peo- ple and the brains of any number, directed to one purpose and for one purpose only, is it reasonable to believe that the individ- ual can have a just and fair play? Is it reasonable to assume that the individual wage earner, in dealing with the large busi- Detroit, April, 1922 159 ness corporation, can enter into an employment contract that bears mutuality in its terms and provisions? Then let us look to our factories and to our business institu- tions and see how much discretion or opportunity the individual has of determining under what conditions he shall enter into a contract with these large business institutions. The wage earner in the main is the less educated in our society, so having placed him against these corporate entities who may employ the best of brains, the highest intellect, can you ask him then to enter into a fair and mutual contract which will dispense jus- tice and equity to all concerned? Apply it in the steel corporations — the men, too often not even familiar with the English language, are asked to enter into a contract with this company and then can you say that that contract is one of mutuality ? PURPOSE OF TRADE UNIONISM The trade union movement seeks to bring the original con- ception of Americanism into this doctrine of freedom of con- tract by the right of a wage earner in any particular trade or industry to exercise the original conception that prevailed when this nation was born — when irfen dealt with men and not cor- porate enterprises with individuals. The trade union movement seeks to bring a:bout this unadulterated Americanism so that we may strengthen the influence of the wage earners, so that they may command the intelligence that the corporation possesses and likewise the opportunities, so that they may promote their in- terest and thus re-establish a mutuality of contract. The labor movement is an American movement, unadulterated, seeking to promote the ideals with which our nation was born, that the higher moral organizations and the church, whatever creed it may be, would have us have were we in possession of that power. Having determined the purpose of industry, and assuming that we are agreeing on that purpose, how can the end best be attained? Assuming that industry should be organized solely for the purpose of serving the people as a whole, how then can we best bring about that purpose? Surely the interpretation 160 S. I. E. Eighth National Convention of the Supreme Court is not intended to bring us toward that end. We have that school of economics which would have us believe that the only way to serve the interests of all the people is to have the state become the owner and controller of all our means of production, and that having that control and owner- ship, industry would be enabled to serve the needs and require- ments of all the people alike. That is practically the school of Socialism. There are other movements that differ from that school of economics, because it believes that the concept of private prop- erty does not mean the benefiting of mankind. The wage earners do not believe that to take away the liberty of a people and place the power in the hands of the government, in which the great mass of people become merely slaves to the state, tends to promote the welfare of mankind; the other school believes that industry should be regulated, and that form of regulation is expressing itself today in such a way that we find a group who, failing to arrive at a satisfactory understanding with labor, and finding the labor board of their concern withdrawn, feel that the public interest and welfare is in danger and would therefore force the worker to remain at his task. STATE REGULATION OF INDUSTRY In some states they say, "We will adjust the terms and con- ditions of employment." We have that form of organization in a small degree in Kansas, and in a less degree in the state of Colorado, and a tendency in another state to enact legislation of a similar character. Whether or not that method of direct- ing our industrial activities will meet the need in such manner as to make for the greatest degree of happiness and contentment of the American people is a subject in which the industrial engineer should be greatly interested. In analyzing that system, pray consider not only the interest of capital, but also consider the interests and aspirations and hopes of the wage earners, and realize that in dealing with the one you are dealing with the ma- terialistic conception, and with the other, the human conception of life. Detroit, April, 1922 161 If that system of regulating industrial relationship is Ameri- canism, then our doctrine of freedom of contract and our con- ception of liberty has all been at fault, and all these years we have been disciples of an Americanism that is not true, for in Kansas the individual employee may contract for his services as he will and may give up his employment whenever he pleases. But if two or more combine to exercise that right in that state, then lo and behold, it becomes a crime ! Thus men are; prohibited to combine for the purpose of self-improvement. That destroys the liberty and freedom for which our forefathers gave their blood and which had been denied to them. However, since the law has been in operation, the business man finds that it also restricts him. He finds that what labor contended for a year ago is equally true with him — that you can- not deny the freedom of contract on the part of the wage earner without at the same time restricting and limiting the freedom of contract on the part of the employer. And so we find in the State of Kansas that the problem of regulating the wages of men by the hours of work and by the conditions of men does not end there: it must take into consideration all the elements of production — the amount of production, the character of pro- duction, the material forces of life, as well as ultimately the price question, and so we find that system of regulation slowly vanishing. Then come others with methods by which to cure all of these industrial evils, under the cloak of protecting the public interest. After all, what is this public, and who does it consist of? Is not the great wage earning class a part of the public? Is not that class that we call the salaried class, which is nothing more nor less than a wage earning class, also a part of the public? The fact that a man is engaged in labor less difficult or trying than that of a wage earner does not alter conditions, and he labors nevertheless. The wearing of the good clothes and a white col- lar does not put him in any different class from that wearing shabby clothes and soft collars. All who work for a salary are wage earners more or less, and so are we not of the same class ? 162 S. I. E. Eighth National Convention We know by statistics that we have over 40,000,000 people engaged in gainful occupation. These, with those who are de- pendent upon them, include practically the whole population of these United States, so that when we speak of the public we speak of both wage earners and salary earners. And then when one group of wage earners seeks an improvement in its work- ing conditions, or seeks to secure a more equitable division of the profits in that industry, inconvenience may arise for a mo- ment and the public may suffer slightly, but what we aim to attain is public improvement and public health. Much of the improvement in working conditions today is the result of these protests, or strikes. INDUSTRIAL IMPROVEiVlENTS DUE TO WAGE EARNER If you will take time to consider, you will find that by de- grees the public mind and conscience has been aroused by the intolerable conditions forced upon the wage earner. All im- provements have come through the wage earners themselves. We are now in a great mine struggle. It required a long strike of the coal miners to arouse the public mind, to arouse the con- science of the nation and the men in control of our mining prop- erties, to give fair consideration to those who are doing the ac- tual work in the mines. And so in the steel industry — in fact, in every industry the weapon that would now be taken away from the wage earners has been the instrument by which the public has been awakened to the unfair conditions of employ- ment. While immediately inconvenienced, the public has ulti- mately been benefited by a better, more improved, enlightened wage earning class. Yes, I agree with the staternent that a democracy, to prove efficient, must not have a small minority of intellect but must have a democratic intellect. No one is more conscious of that need of intelligence than the wage earners themselves, for they first put up the cry for a public school system so that the child of the wage earner might have equal opportunities with the child of a millionaire, to give him development of mind in order that Detroit, April, 1922 163 he might be better fitted physically, mentally, morally and spir- itually to carry on in the future. And so we are engaged today in establishing labor colleges, and throughout our movement and al our meetings is the discussion of all these problems — the school of the worker, the school too many have been unable to attend even with the opportunities of free public school education. The workers, while interested primarily in the immediate problems of life that confront them, are also interested in im- proving wage conditions in order that physical standards may be improved, so that greater opportunity may be given for in- tellectual development for social welfare, so that a man may be afforded a better opportunity to spend a few moments each day with those he is bringing into the world and who are to take up the work of human toil in the future. While engaged in those problems, we must not lose sight of the greater interest and need for industrial life, realizing that in our industrial exis- tence there is much waste, much inefificiency, and realizing there is great room for improvement and development. The wage earners are not opposed to a scientific survey of our industrial life, and its relationship not only as to the human factors involved but to all factors, human as well as mechan- ical ; but we are opposed to that system of scientific research or system of industrial engineering which would consider but one element in our industrial life, the system which sees the machine only as an instrument of production and studies its various movements to the end that that machine may be at work as long as its life will permit and to bring out the greatest material re- sults possible of that mechanical contrivance, giving no thought to the human element in the operation of the machine. It is that sort of industrial engineering, or scientific research, or sci- entific management, to which we wage earners object. We de- sire that industry shall serve humankind and that its first appli- cation shall be upon those directly employed, and that scientific research and industrial engineering shall see that the human is given the greatest opportunity to develop, the greatest degree of liberty and the greatest degree of contentment and happiness, us- 164 S. I. E. Eighth National Convention ing the mechanical device or contrivance as an aid, and not as a means of repression. ORGANIZED LABOR AND THE INDUSTRIAL ENGINEER Organized labor desires the co-operation of all who are engaged in studying the scientific problems of industry and who will, as so ably explained by Abraham Lincoln, consider the human element before capital and before the mechanical element. The American wage earner will be with you heart and soul in furthering that sort of an industrial relationship. Yes, we favor the greatest degree of production possible. Organized labor, while here and there having rules restricting the output of production, does not compare even in their rules with a great many rules of non-production or production that the employers have made. And after all it is not alone the question of production — there is something more required. Are we not in danger of over-production many times more than we are of under-production? Do we not find today industry oper- ated in many trades and occupations so that a maximum of production will be obtained for a few months of the year and then stopped for the remainder, the law of supply and demand being disregarded so that all supply shall be so manipulated and controlled to bring greater profits? And so when we study the problem of production let us also apply our studies to religion and let us condemn with equal candor and frankness all in our industrial society who seek to limit production without regard for the interest of humankind as a whole. But even with a restriction and limitation of production of some of our trade unions, was it not the engineering societies who within the past twelve or fourteen months caused the inves- tigation of industrial waste to be made at the suggestion of the then president of the Federated American Engineering Societies, now Secretary of Commerce, Mr. Hoover? And this group of engineers, with whom you are all acquainted, carried on this investigation. Isn't it a strong indictment of our iridustrial sys- tem to find that over 50 per cent of the industrial waste and Detroit, April, 1922 165 inefficiency is attributable to management, and less than 25 per cent to the tradei unions? ' Oh, we do not seek to justify our limi- tation even at less than 25 per cent, but our greater restriction and inefficiency is attributable to management ! I say to you that careful analysis and investigation even upon those trade union restrictions will find that those restrictions have been made necessary not by the gfreat majority of employers in any par- ticular group or trade, but usually a minority that has no regard for the welfare of its employees. We do not require the criminal code to see that we exercise a proper conduct in relation to our fellow citizens in so far as respecting the lives and property of others is concerned. It is for the minority that we write those laws into our penal code, and so in the trade unions it has been found necessary to restrain a minority who would constantly seek to repress the wage earners. Consideration of these things in the abstract might not appeal to our sense of righteousness, but when applied in the actual and daily affairs of life you would just as readily agree as to their essentiality. May I say in conclusion that the wage earners are firmly convinced of this, and I believe that every intelligent individual will subscribe to it — that we are today living in an age of organi- zation, in a period when the principles of unrestricted, unlimited competition no longer are the life of trade, but too often are the death of trade; we are living today in a period when justice and righteousness can only be obtained and where all evils in our industrial life can only be entirely corrected by conceding to every group or class equal rights and equal opportunities, recog- nizing that this is a period of collective action and thus by collective action seek to solve the problems so needful of solu- tion, at this time. HOW UNIONS CAN SERVE GOVERNMENT And I, as a representative of the American Federation of Labor to the first industrial conference called by the then Presi- dent, Mr. Wilson, held that in our industrial life there should be not only no repression of trade unionism, but that every trade 166 S. I. E. Eighth National Convention should be encouraged to organize into a similar trade organiza- tion, and that the two fundamental elements in industry, through a conference board, should be able to discuss the problems of industry and apply them to the needs of society as a whole. Such an organization in each craft or industry would eliminate the necessity for the government being hampered by men of polit- ical minds and political minds only, men of legal training but not of actual industrial and business training, when it became necessary to deal with industrial problems. Let those representa- tives then be called in an industrial congress to aid and help those in political control of our nation to formulate policies and rules of conduct for the guidance of industry, and let that be the extent of governmental interference with industrial enterprises. With industry so organized, a fairness will prevail because of faith in humankind, and that, after all, is the thing upon which all busi- ness is founded. And when so organized the industrial engineer may then study our industries from a truly scientific standpoint. Investigations and the application of studies and convictions need not be based upon the isolated plant here or the isolated plant there, but may then embrace industry as a whole. We will then be able to have rules of conduct, principles of government, and attitude of mind and heart that will bring to all the greatest degree of satisfaction and reduce economic and social waste to the lowest possible minimum, producing the largest degree of happiness, contentment and equal opportunity in the great pursuit of life and happiness. Detroit, April, 1922 167 Our American Aviation Development and Policies By Howard E. Coffin Vice-President, Hudson Motor Co., Detroit When I was asked a few weeks ago to address you upon some subject related to industrial engineering, I had some inkling of what your program here in Detroit was going to be. 1 had a sort of idea that after you had put in two or three strenuous days here in settling the industrial affairs of the na- tion, or perhaps we may say of the world, that you would per- haps welcome somewhat of a variation in the program. I have some pictures here that I know you will be interested in see- ing, because to a great extent they represent the new work of the navy, particularly work which has been brought about by the experiments of last year and by the influences developing at the conference for the Limitation of Armaments at Wash- ington. Before going on with this, I would like to ask your permis- sion to tell a little bit of what is now ancient history. In Sep- tember, 1915, the first civilian body having to do with our war activities was created in Washington. That body, as you re- member, was known as the Naval Consulting Board, and at its first meeting on October 7, 1915 — a two-day meeting in Wash- ington, it was developed that so far as our war-making ma- chinery in our government was concerned there were certain very great needs. A little later, in December, 1915, at a meeting in New York of the presidents of all the so-called founder en- gineering societies in this country the proposition was put up that the engineers of the country had a great work ahead of them in preparing this country for entry into the war. It was felt by most of us who were studying the subject closely at that time that there was no other body of men in the United 168 S. I. E. Eighth Nationa l Convention States who could so well perform the national service which we knew to be required. The net result of that series of meetings in December, 191 5, extending over to January, 1916, was the institution of the campaign which you remember earned the name of the indus- trial inventory of the manufacturing arid production facilities of the country, which was taken under the auspices of the Naval Consulting Board. I won't go into the history of that particular movement, only so far as to say this led directly to the passage of a law in August, 1916, creating the Council of National Defense, which was charged, among a great many other things, with such a co-ordination of the resources of the nation as would make them most effective in the event of war. COUNCIL OF NATIONAL DEFENSE The first meeting of this body was held in December, 1916, and the meetings were held at frequent intervals thereafter until the spring of 1917. As you know, on the twenty-ninth of January, 1917, we began operations and formally entered the war on the sixth of April of that same year. As soon as the Council of National Defense began to function in Washington, the members of the Advisory Commission, seven civilians connected with that body, realized that the greatest task in all, in connection with their participation in the war, was the in- dustrial organization of the resources of the United States for the making of such forces as we might say were the frontier posts by land and by sea. I wish I had time to paint to you and give you examples of the industrial conditions as we found them in these early spring months of 1917. There was a will to do everywhere in the country, with an absolute ignorance of the manner in which to do it. In fact, few, if any, of us in this country, perhaps, had a very clear glimpse at that time of what the participation in the war really meant to us. We were assailed, during those months just preparatory to our entry into the conflict, with 'offers of assistance from every corner of the United States. We had plants ofifered us: Detroit, April, 1922 169 we had organizations in the United States sending delegations to Washington asking us what they could do, each delegation, of course, desiring to establish such contact with the govern- mental agencies as would give them some direct part in the preparation for entering the conflict. In all of this there soon arose the necessity for analyzing these offers, and that was the time we invited in the industrial engineers. I remember — just to give you an example of the services offered— one concern which wanted to build something stated its qualifications something like this : "We have a dredge, a clam-shell bucket ; we own the sawmill, and we want to build aeroplanes or guns, or whatever it was." Naturally, such an offer as that might bear some analysis of an industrial engineer before we awarded a contract for Springfield rifles, for example. That is an extreme case, but nevertheless it illustrates that we had some necessity for reporting on all of these institutions. That really led to the organization of The Society of Industrial Engineers, because several of your well- known members who were then interested in this line of work were called in and asked to organize the industrial engineers in the service of the government. You can imagine we had some task of organization on our hands in those days when I tell you the Council of National Defense in the spring of 1918 had under its jurisdiction 134,000 distinct organizations through- out the United States. I do not need to say anything to you as to the value of the work of this organization. It was one of necessity and you, of course, did your part toward the winning of the war. I don't want to take time handing compliments to you — all I need say was you did the work put up to you and did it faithfully and had a great part in the great issue. Suppose we get on immediately to the topic of the evening which I suggested myself to your Committee because I felt that in a government of this kind it was particularly apt that I should say something to you along the line of the new development and the new art which is just before us. 170 S. I. E. Eighth National Convention DEVELOPMENTS IN AVIATION All of you have seen within the last few months the wonder- ful hold which radio has taken upon the country. This matter of radio development has become very timely, in a way, from the standpoint of air development, because the question of radio will be one of the determining factors in the progress in our develop- ment in the air. I do not think it is necessary to take you back over the early days of aviation, as you all know that following the experiments of the Wright Brothers until we entered the war we had to improvise every effort at hand to make up for lost time. You know the value of aircraft during the war when the Germans were moving toward France ; you all know, too, of the little things we called aeroplanes during the war with 75 or 80 horsepower, and before the end of the war we had come to the point of 2,000 horsepower, with weights up to 30,000 pounds, as illustrating the size and rapidity of the development. But there. are not so many of us, perhaps, who know of the develop- ments which have come since the war, because those develop- ments have been more important from the standpoint of aviation, of national defense, than were all the elements during the war. I believe you will agree with me in that point after you have seen the pictures. I might in advance call your attention to a few particular points in the pictures. Take, for instance, the question of the records which are now in existence in the development of air- craft, the record also of our mail aircraft. The endurance test, you remember, was broken only a short time ago on Long Island with a record of 26 hours in the air, a record sure to be broken in France in January, and probably sure to be broken here in Detroit again in September. Take the altitude record, held by an American also, an altitude of nearly 40,000 feet — ^nearly eight miles, a record which will probably also be broken in September here, when an attempt will undoubtedly be made of 50,000 feet altitude. Take the distance displays — the time between San Francisco and New York, 25 hours 10 minutes ; the time between America and Europe has been reduced to 16 hours, and I think Detroit, April, 1922 171 there are no more thrilling words in the English language and no words more indicative of the wonderful development of this age in which we are living, whether in radio or anything else, than the words of Alcott after he had landed on the other conti- nent and had been taken to a little town and began to make his remarks with these words, "Yesterday, when I was in America." Now, if you can just think of what that means you can apply the certainties of the next few years. Even now the Germans are in this country projecting the lighter-than-air lines — the Zeppelin, we might say, between New York and this city, and later on to San Francisco. The time of our fastest express train will easily be cut in half. It is not the purpose to begin carrying passengers in this initial service — the service will be purely United States mail and express, and the ships which are pro- posed to be put into this service have a carrying capacity of about 160,000 pounds, so you can see something about the trend and direction in which we are going. These things are not dreams — they are realities. One thing which does seem to be certain both in radio and in air development is that no matter how wild a dream you may have today, some fellow comes along with a greater realization tomorrow. Mr. Coffin explained his slides and motion pictures. Adjournment. 172 S. I. E. Eighth National Convention Committee for the Elimination of Unnecessary Fatigue Chairman, Frank B. Gilbreth, Montclair, N. J. PROGRESS REPORT THE CHAIRMAN: In the six months that have elapsed since the last report of your Committee we have made distinct progress, though we have by no means progressed at as rapid a rate as we desire. We have, however, developed along lines that have directly to do with waste elimination, the subject of the meeting today and the underlying theme of our work. The most important development has been along the lines of closer co-operation with other bodies interested in allied lines of work. The Eyesight Conservation Council of America, of which the eminent past president of The Society of Industrial Engineers, Mr. L. W. Wallace, is president, realizing the close affiliation between their work and ours, invited your chairman in February to deliver a paper on "Eye Conservation in the Industries." This paper dealt with the subject of Fatigue, and as a mark of appreciation of the importance of Fatigue investigation, the Council is now reprinting the paper as a separate pamphlet in order to arouse interest among their members in the subject of fatigue as it directly concerns the eyes. The National Safety Council is issuing a book on "Practical Methods for Reducing Fatigue" and has asked for our co-opera- tion in this work. Your Chairman and the Business Manager of The Society of Industrial Engineers have had much pleasure in forwarding such material as we have available to those in charge of this work. Each member of the Committee has been asked to send in material, and every member of the Society and all those interested in fatigue work are urged to co-operate in this undertaking and to send the material direct to Mr. J. M. Detroit, April, 1922 173 Sandel, National Safety Council, 168 North Michigan Avenue, Chicago, who is a member of our Committee. The American Posture League continues to co-operate most fully, having representatives of the League on our Committee and including representatives of our Committee upon their Advisory Committee. In this way, duplication of effort is pre- vented and closer co-operation assured. NEW MEMBERS We have several new members on the Committee to report, notably Dr. Louis Harris of the Department of Health of the City of New York, and Dr. [Tech:] Petr Ruzek, of the Psycho- technic Institute of Masaryks Academie of Labor, and Dr. [Ing :] Stan Spacek of the Czechoslovakia Legation at Washington, all of whom are deeply interested in the subject and can wield an enormous interest in the fields of Fatigue Elimination. We should state also that we believe the general emphasis on the Elimination of Fatigfue to be seen in advertising everywhere is largely the result of our fatigue elimination campaign. As for recommendations for future development, they focus interest on two points — first, the necessity for increasing the number of members on the Committee and thus broadening the field of influence. As has been before indicated, we should have a representative in every university and college in the country, in every sister society, in every field of industry. Recommenda- tions for such representatives should come immediately, not only from members of the Committee but from the Society at large. We are most happy to announce that the American Society of Mechanicail Engineers has appointed Professor George H. Shephard of Purdue University chairman of a sub-committee of the Management Division of that Society to represent it on the Fatigue Committee of this Society. He has appointed the members of his Committee to co-operate with us. We want a representative of every college and every society interested in the comfort of the worker and in waste elimination to become a member of our Committee. 174 S. I. E. Eighth National Convention EUROPE INTERESTED IN FATIGUE STUDIES The second important point, and this is vital at this time, is that Fatigue Elimination should be seriously considered in all efforts toward standardization now going on throughout the world. Your Chairman has during the last months visited Eng- land, Holland, Germany and Czechoslovakia and has been in touch with those at the head of standardization work in other European countries and also in our own country. At the request of Mr. Spacek, technical adviser to Mr. Stepanek, minister of Czechoslovakia, your Chairman last month visited Prague, in Czechoslovakia, and as a result we are pleased to state that Dr. Ruzek, the eminent director of the Institute of Labor, is now a member of our Fatigue Committee^ Your Chair- man had the honor of explaining the purposes of your Fatigue Elimination Committee to Dr. T. G. Masaryk, President of the Republic, who is vitally interested in all undertakings for the improvement of conditions that make for more comfort and greater efficiency of the workers. Your Chairman also conferred not only with President Klir but with representative members of the Institute Masaryk, that most remarkable co-operative undertaking, where all those interested in industry from every standpoint confer on industrial problems and outline solutions which must prove adequate because they have the approval and enlist the co-operation of all. Progress everywhere in all countries along lines of stand- ardization of materials and equipment and along publication and acceptance of specifications is most satisfactory. It is, however, to be noted both abroad and in this country that there is a great lack of standardization of practice. Perhaps this may be looked for in the work of the new Division of Simplified Practice of the Department of Commerce just outlining and undertaking its work. NEED FOR STANDARDS If waste elimination in the field of Fatigue is to make great- est progress, it is essential that those engaged in all this work become acquainted with and interested in our work and in- Detroit, April, 1922 175 elude Fatigue Elimination standards among the other stand- ards to be set down. In our report of October 7, 1921, we urged the establishment of such Fatigue Elimination standards. This is a natural work for this committee of ours to undertake. However, if we wish best to co-operate with others engaged in standardization, we must bring the subject of Fatigue Elimina- tion immediately to their attention, in order to insure that all research bodies have this in mind in making their investiga- tions, and that the forthcoming standards of practice, which are essential to development and imperative at this time, may- cover the subject of fatigue. It is with much pride and pleasure that we present to you the program of today's meeting. Our speakers will outline not only past progress in Fatigue Elimination but plans for future development. We know that you will greet with espe- cial pleasure our first committee member in Asia, Dr. Yoichi Uyeno of Tokyo, who has made the long trip to this country to investigate first hand what we are doing and to bring a mes- sage of co-operation and an inspiration. Your committee proposes to bring to the attention of the entire world the unnecessary discomfort, discontent, ill-health, inefficiency, loss of production and all other kinds of wastes that result from unnecessary fatigue. The loss in productivity alone is more than 20 cents per day per worker. The correct- ness. clL this sum is admitted by all students of economics and industrial engineering. When multiplied by 300 days per annum and 40,000,000 workers, the loss competes in amount with the financial debt of our allies to us, and will, incidentally, be much easier to collect. 176 S. I. E. Eighth National Convention Fatigue Study in Japan By Dr. Yoichi Uyeno Director, Institute of Industrial Psychology, Tokyo, Japan Fatigue study in Japan may be looked at from two points of view: one, its psychological study, and the other, the practical work of fatigue elimination done in the industrial plants. As for the first, we can enumerate some of them as follows : Dr. K. Chiwa has made an elaborate study of the relation which exists between the improvement of skill and its accompanying fatigue. The results were published in a book entitled "Fatigue and Training in Mental Work" in 1919. Dr. G. Kuroda, who is specializing in the conditioned reflex method used by Dr. Pawlow, has made an experiment on the recovery-effect of the adrenalin on the fatigued muscle. His article appeared in "Psychological Research," edited by me. Dr. K. Tanaka has made a research on the relation which would exist between the progress of fatigue and that of recovery, using the Mosso's ergograph and Smedley's dynamometer. The chief result was that while fatigue increases in arithmetical progression, it re- covers by geometrical progression. As to the practical work done in industries, I would like to refer to my scientific management work in two plants in Japan. The first was the tooth-paste factory of Tokyo, the largest in our country. Before the installment of the new method, I made a thorough survey of the progress of fatigue during the work- ing hours by recording their output every fifteen minutes. At that time they had two spells with thirty minute recess for lunch at noon. For the purpose of controlling the experiment, a group of workers was selected and two fifteen-minute re- cesses were given both in forenoon and in afternoon, just at the time when the production curve began to drop on account of supposed fatigue. Thus the working hours have been lessened Detroit, April, 1922 177 by 30 minutes, i. e., by 6 per cent, yet the decrease in produc- tion being only 1 per cent. These preliminary experiments show the great importance of studying the diurnal fatigue curve and of the proper distribution of rest periods during the day. After thorough research, I introduced the following im- provements in this plant : 1 — Adoption of the 8 hour system. Under the old system the working day was 8 hours and 45 minutes. 2 — Introduction of a IS minute rest period in the forenoon and in the afternoon and a prolongation of noon recess from 30 to 45 minutes. 3 — Complete reorganization of the process of packing prod- ucts by welding the separate steps of packing into one contin- uous job, which process I named "chain method." We all have a natural rhythmical speed of motion. Working too fast or too slow makes us tired. ' When we work at our natural rhythmical speed, our fatigue will be minimum and our efficiency maximum. Accordingly, after I made the time study of all the workers, I arranged them in several groups that they might work after their own rhythm. This is the most important feature in my system. 4 — ^Utilization of the instinct of rivalry, by installing "the group system." 5 — Installing of functional foremanship in each group. The chief results of the new system were as follows : 1 — Decrease in working hours. 2 — Increase of the daily output by 35 per cent. 3 — Greater dexterity even in those workers whose service had been longer than three years, a fact which shows the de- velopment of skill beyond the plateau stage through th€ new method. 4 — Increase of wages by 7 per cent. 5 — Greater interest of workers in their jobs. Their wages were paid by the day, not by the hour, and I felt very sorry that I could not proceed to install the new method of payment. 178 S. I. E. Eighth National Convention My next experience was found in the largest toilet prepara- tions plant in Osaka. This time I succeeded more than in Tokyo, and made many improvements in tools from the vievsr- point of elimination of unnecessary fatigue. To my regret, the pictures and the exact figures describing my work there did not arrive here on time. For the first time I installed the new system of paying the workers the one-third of the gain above the daily standard production which was determined by the time study. Though I do not know the exact result of the new system, because I left Japan just after putting the new system of payment in practice, I do know from recent letters from the president that the result was so good that it became en- tirely unnecessary to speed them up, as they used to do before the new system was installed. You may know that there are few labor saving machines, but many workers in Japanese plants, a situation which sharply contrasts with the American conditions. Although the wages of laborers when compared with those of pre-war times in- creases threefold,, it is still much cheaper -to employ laborers than to adopt labor saving machines. So there is a greater necessity and much more room to do work of eliminating un- necessary fatigue than is commonly supposed. Furthermore, it interests me very much that the Depart- ment of Labor of the State of New York took up such a prob- lem as the "Industrial Posture and Seating," because I am es- pecially interested in various sitting postures in different coun- tries and in studying the varying efficiency of each. The Jap- anese custom of sitting on the floor with bent knees might ap- pear to you very uncomfortable and inefficient, but I found that it is not the case. When we are very tired after having stood or worked for a long time, we are accustomed to rest ourselves by sitting in Japanese manner. If we could learn to sit in the right way, we could continue in the same posture for several hours, which would be entirely impossible in the case of sitting on the chair, and it would promote our blood circulation and remove fatigue. From these considerations I know that be- sides the adoption of American methods of doing things we Detroit, April, 1922 179 must make a special study of management methods to adapt them to our own demands. There lies the big field of our future study. i80 S. I. E. Eighth National Convention Progress of the Movement for the Reduction of Noise By Professor Henry J. Spooner Director of Polytechnic School of Engineering, London At the spring convention of the Society of Industrial Engi- neers at Milwaukee, April 29, 1921, I was privileged to submit to the industrial fatigue section a paper entitled "Fatigue Due to Noise, and Methods of Elimination," believing that the time had arrived when we could no longer afford to ignore the in- jurious effects of the noise that affects us at every turn in our daily life and activities, noise that has so gradually increased with the developments of industrialism and transport during the past 100 years that each increase has occurred without arresting attention or apparently calling for remark, although it must have been, and is, the insidious cause of immeasurable misery ..and ill- health, sowing the seeds of nervous complaints and of disease of the organ of hearing. This is all the more strange, having regard to the wonderful progress that has been made in practical hygiene since about 1832, when Chadwick commenced to energize so beneficently in the cause of public health. Well, some months after the Mil- waukee convention, I consented to deliver a Chadwick public lec- ture in Blackburn on November 21, and availed myself of this opportunity to state the case for noise reduction in my own country, and entitled my lecture "Problems of Noise and Fatigue" — with particular reference to noise in factories. The lecture certainly interested a representative audience, and was widely reported and commented upon by the general and technical press of the country. ABSTRACTS FROM ARTICLES ON NOISE IN THE TECHNICAL PRESS Long notable articles on the subject appeared in the "Lancet" Detroit, April, 1922 181 and "The Engineer." In the former — December 3, 1921 — the editor remarked, "It is not only the naturally hypersensitive Carlyles who suffer, for few long-distance travelers by rail are altogether exempt from fatigue, which is probably due as much to the incessant bombardment of the brain by massive auditory stimuli as to any other factor. Over and above the effect of noise upon the general nervous system, there is the deleterious influence exerted directly upon the hearing-organ of workers in noisy occu- pations; and the list of occupations causing noise deafness at the present day is a long and increasing one." The article in "The Engineer" appeared on December 9, 1921, and the editor pertinently remarked, "If to future generations records descend of the noises of our streets, houses, workshops, trains, motor cars, public orators and New York, surely men of those days will marvel at the hardiness of a people that could tolerate such a pandemonium, and be astonished at the small ca- pacity of our lunatic asylums and aural clinics. . . Very, very slowly people are beginning to understand that noise has an effect upon the human system comparable with that of impure air, that it causes lassitude and irritability and decreases the rapidity and quality of work. This recognition is the first step towards reform." Judging by the number of letters I have received since the Chadwick lecture, and the number of press interviews, the sub- ject of noise is at last receiving widespread attention, and articles dealing with it frequently appear in the press. A recent one from the pen of the medical correspondent of "The Times," entitled "The Curse of Noise" appeared in that journal on Feb- ruary 28 in which the writer said: "Some recent studies have shown that there are few more active robbers of our energy and strength than noise. It was supposed that people got accustomed to noises which they heard frequently and that thereafter they did not notice them. "This idea will have to be modified. What we call 'getting accustomed' appears on closer study to be a state of active resist- ance. We are refusing to hear, so to speak, and experiding 182 S. I. E. EIGHTH National Convention energy in the process. . . . The total amount spent by Lon- doners must be enormous, when the noises of the streets and offices are taken into account. That it is far greater than is gen- erally supposed is made clear as soon as illness comes. Then the stock of energy available for all purposes is reduced, and "not hearing" cannot be practised. The noise of the w^orld we live in becomes unbearable. There is now a demand by many employers of labor, who recognize for how much waste noise is responsible, for noise-reduction in factory life. The same need exists in office life, indeed, in home life. At the present moment we live more noisily than any of our ancestors and unless we look to it we shall pay the penalty of our carelessness. "Pure air, sunlight and silence is a trinity of great healers. But it seems now that silence is greater than either of the other two." This valuable contribution was followed by a long, most in- formative editorial leading article, which appeared in "The Times" of March 3. On March 7 a long article appeared in "The Evening News" on "The Noises of London" from the pen of a distinguished ear specialist — writing under the nom de plume of Hippocrates — in which he remarked that "The clang of machinery is so loud that one has to shout to be heard at all; the roar of the wheels at such a pitch that one has to strain every nerve to hear what is said; these cause that industrial fatigue which is the start of so much illness among the workers, and every engineer who invents a silencer or simplifies machinery to diminish this clang is the true doctor in preventing disease." FATIGUE ELIMINATION DAY At the end of November, 1921, I distributed among my stu- dents a sheet explaining the meaning of "Fatigue Elimination Day" and what it stands for, and infoi-med them that it had been arranged to devote attention on the coming day to the most neglected aspect of fatigue, namely, "Noise," and on December S — the first Monday — I commenced the day by delivering an address to my students on the subject, inviting them to concen- Detroit, April, 1922 183 trate their thoughts during the day as much as possible on the elimination of any noise that may have particularly arrested their attention, and I suggested that they could give me a good deal of pleasure by writing a short essay on the subject. I reminded them that this was the fifth occasion on which we had observed "Fatigue Day." The suggestion Vas most favorably received, and some of the essays sent in were most creditable and interest- ing, indeed, I am venturing to give below some typical extracts from them to show how the engineering colleges may usefully co-operate in forwarding the great movement. EXTRACTS FROM STUDENTS' ESSAYS ON NOISE 1. "The word 'noise' is, in all probability, derived from the Latin noxa — hurt, nocere to hurt. Whoever introduced the word noise into our language must certainly have had a sounder knowledge of acoustics than many business men and engineers of today. It is a great loss to the industry of this country that so few of our manufacturers — judging from recent visits to works — fully grasp the fact that noise affects and, within limits, hurts any workers within appreciable range of its occurrence." 2. "The effects of noises on the health of the average per- son vary according to the type of noise. Persistent hammering, such as occurs in a boiler shop, will in time produce partial deaf- ness, as will also the continvtous roar of the traffic in a big city. Intermittent knocking if kept up long enough will produce a state of nervous tension bordering on collapse. The distinction between continuous and intermittent noise is seen in the case of a designer or calculator who can work next to a machine shop and get so used to the whirl of machinery as to become practically oblivious to it, but if the same man were, for example, trans- ferred to a room where a lot of talking and whistling was going On, his plight would be pitiable. In the latter case the effort required for him to concentrate on his work very quickly pro- duces a state of great mental fatigue, or reduces him to a state of great irritabiUty." 3. "The chief causes of noise in aircraft are : (a) Engines, (b) propeller, and (c) external wires. , 184 S. I. E. Eighth National Convention (a) Engines. To eliminate the noise from these, I suggest that they be enclosed in a soundproof department, the proofing being interlined with some fire-resisting substance. In the bigger types the exhausts might be used to generate heat for the com- fort of pilot and passengers at high altitudes. (b) Propellers. I suggest for these a highly efficient low- speed high-pitched propeller coupled to a geared-down engine, and a coned center to prevent whistling of securing bolts. (c) External Bracing Wires. Eliminate the cause, i. e., use no wires but small drawn-steel tubes, or better, use cantilever wings. For under carriages, center sections, etc., use steel tubes with stream lined fairings." 4. "Although most noises are detrimental to efficiency there are occasions on which noise serves an extremely useful pur- pose. A past acquaintance of mine, previous to the war, was an engineer in charge of a power house, which provided power for a small township in British Columbia. As the finances of the concern only permitted the services of one man, he frequently had to sleep in the engine room. In time he became so inured to the sound of his machinery that he could sleep quite comfort- ably in the engine room, but if the slightest irregularity in the noise occurred, it aroused him instantly and he was easily able to remedy any defect which he was able to locate by means of an unusual sound." INSTRUMENTS FOR RECORDING NOISE AND VIBRATIONS (a) Noise Waves Photographed and Recorded by Low's Audiometer In concluding my Chadwick lecture in November last year, I ventured to suggest that there should be a standard limit of per- missible noise, beyond which it should be considered a public nuisance. My critics were not slow in pointing out that — obviously — before this could be practicable, we must have an in- strument available for measuring noise. I never doubted the possibility of producing such an. instrument, and I am more than Detroit, April, 1922 185 pleased to find that Professor A. M. Low, D.Sc, has so improved his audiometer that apparently it goes a long way in the direction of solving the problem. The following is a brief description of it from some particulars kindly supplied to me by Professor Low: The instrument itself consists in the main of four diffei-ent components : 1. A Sound Horn. 2. A Diaphragm. 3. A Mirror. 4. A Photographic Recording Chart. 5. An Electric Damping Device. The mirror is connected to the diaphragm in such a manner that the smallest vibration of the diaphragm produces a corre- sponding deflection of the mirror, which in its turn causes a spot of light, the source of which is a powerful electric bulb, to be moved to a lesser or a greater extent upon a piece of sensitive photographic paper. This paper is, in its turn, simultaneously moving in the direction at right angles to the direction of the oscillation of light, and the result when the paper is developed is an undulating curve traced by the spot of light, and varying according to the nature and intensity of the sound which it is desired to register. In the case of an apparatus fitted with the photographic attachment the paper is automatically developed in the tank under the machine. In the case of an instrument not fitted with the attachment, a ground glass screen enables the spot of light to be watched by the eye, a scale upon the screen demonstrating clearly the maximum deflection of the spot. By means of a rotating mirror part of the wave can be ex- amined before the record is taken photographically. The appa- ratus is so arranged that the development of the negatives takes place automatically and the sensitized paper is drawn from the instrument carrying the record without any skill being necessary. A particularly important part of the scheme is that the apparatus can be fitted with a synchronously operating valve for use in re- 186 S. I. E. Eighth National Convention search work, in order to expose the diaphragm for a predeter- mined period ; any particular note being recurrently produced. The importance of such an instrument for use in the scien- tific production of any form of machinery that is to be silent running is obvious, as it is absolutely essential that the various sounds produced should be recorded and analyzed. They form practically tiie only means available for detecting the cause of the trouble, the detection of which at present is more or less a matter of guess work. THE NEW LOW VIBROMETER This important instrument has been devised principally for the purpose of effecting comparison between good and bad springing of motor vehicles and of the vibrations caused by the machinery. The new form of the instrument is extremely simple, and it enables the operator to obtain an exact comparison, not only between the comfort of two different cars, but also between the amount of vibration produced by different crankshafts or by reciprocating parts. The vibrometer consists mainly of a drum operated by an ordinary clockwork governed motor. Against this drum rests a small glass stylus fed from an inkwell and attached to the end of a spring, which is weighted to a different periodicity. The contact of the pen against the paper is regulated by a roller three-sixteenths qf an inch in diameter, and the period of the spring can also be varied by altering this to the effective length. This is arranged by sliding the point of support, all the operations being controlled by means of suitably arranged thumb screws. The whole apparatus is enclosed in a glass case, which can be lifted off for replacing the paper on the drum in a few moments. In use, a datum line is made by allowing the drum to re- volve before the apparatus is put on the vibrating engine bed, or side car, as the case may be, and the drum is then set to make one complete revolution. The pen can be traversed Detroit, April, 1922 187 across the chart if necessary in order to increase the length of the trial. By means of the vibrometer, not only can the displacement of a car body or railway coach be measured, but the rate of acceleration vertically produced by the bump can be worked out without any complicated gyroscopic apparatus. For very sensitive work a photographic and damped ap- paratus of this type is essential, as also for the study of high speed vibration, as it can be conveniently used in conjunction with a synchronous cinematograph, but for ordinary compari- sons between the comfort of cars and the amount of engine vi- bration produced, the vibrometer in its most simple form is sufficiently accurate. NOISE AND THE LAW I do not know how a public or common nuisance is de- fined in American law, but in English law it is such that it appears to hardly embrace noise. On the other hand, in Eng- lish law, a private nuisance is "an act or omission which causes inconvenience or damage to a private person." So we may assume that anyone annoyed or inconvenienced by ob- jectionable noise could call upon the local medical officer of health to take action to get him relief. Probably the laws relating to public or common nuisances in both countries will have to be modified unmistakably to em- brace noise before any sensible relief from its damaging and wasteful effects can be hoped for. CONCLUDING REMARKS The fact that the ordinary healthy public finds that a cer- tain amount of noise has a stimulating effect probably explains why our noisy road and rail traffic has been allowed to become such a great nuisance in all our large towns and cities, but after all our engineers concerned are to blame, as noise caused di- rectly or indirectly by machinery denotes bad engineering, and wicked waste, as it is now an established fact that all noises mean loss of energy in some form, and until this is more gen- erally recognized we are not likely to get much relief from the 188 S. I. E. Eighth National Convention intolerable and injurious nuisance. Indeed it can safely be submitted that the appalling noise of the machinery of our electric trains and trams in particular is a disgrace to a great profession, and should not be allowed to continue. These remarks also apply to a large proportion of the motor vehicles — particularly the com^mercial ones — running on our roads and loudly calling for the attention of the engineer- ing pathologist. Trouble is usually due to some form of unbalanced move- ment, and this is sure to cause noise at high speeds. Faulty gears and worn bearings are also sure to be noisy. But every chief designer worth his salt can devise machinery for almost any purpose that will be practically silent, if he pays attention to such matters, and makes the best use of the advances that have been made in workshop practice and processes in recent years, particularly in the production of perfectly accurate gears, helical gears and spiral bevel gears, etc., which, if mounted on shafts of sufficient stiffness, are silent running. So, in modern practice, the watchwords should be: (1) Scientific design from the standpoint of noise, substi- tuting pressure for impact wherever practicable, remembering that the hall-mark of good design is silent running. (2) Accurate construction and efficient lubrication. (3) Observant efficient maintenance, on the principle that "a stitch in time saves nine." In bringing this paper to a close, and in looking back upon the gradual evolution of things that matter, I venture to be- lieve that good, if slow, progress has been made in the great cause of waste reduction — in this, perhaps, its most important aspect— since the spring convention in Milwaukee of April, 1921, and I am full of hope for future developments. But let us not forget that just because improvement is always and ever within the grasp of human effort at all points, progress is the greatest reality in the world; and if we become resolutely progressive and adopt modern methods of making the lot of our fellow citizens more endurable and efficient, and of amel- iorating the conditions tinder which they live and work, there Detroit, April, 1922 189 is none of us who could seriously prefer to have lived in any other age but our own. The splendid spirit is that which travels gladly with the future and welcomes the ceaseless wonders of human achievement revealed in the enrolling of time. In conclusion, may I say that the little I have been able to do in forwarding the great movement for the improvement of human conditions in all our activities has been due to the in- spiration and encouragement I have received from my good friends, the Gilbreths, and this has been to me an unspeakable felicity. 190 S. I. E. Eighth National Convention Fatigue in Education By Dr. S. A. Curtis Director of Instruction, Teacher Training and Research of Detroit Public Schools (Illustrated with Stereopticon Slides) My contribution to this evening's program will appeal to you, if at all, more from tlTe point of view of interest and suggestions than from its practical value in your work. The scientific study of the educational process is too new and is proceeding too slowly under the usuar handicaps of lack of money and lack of public understanding to permit of great achievements. Nevertheless, progress is being made, methods of teaching are being changed, waste is being eliminated and the stage is being set for a new education which seems destined to bring about as profound a change in our social order as our industrial development has brought about. Frankly, the movement needs support and I am exceedingly grateful to your chairman for the opportxmity to bring it to your attention. The instruments of measurement in education are known as standard tests and scales. In their essential nature they are very simple examinations dealing ordinarily with a single ability and composed of material which has been carefully evaluated as to difficulty. -Such tests when given and scored under standard conditions yield results which are both objective and impersonal. That is, they are true educational measurements and different observers performing the same experiment under the same conditions get consistent results. The test used for illustration is used to measure a very sim- ple type of ability, to multiply. We have similar tests for addi- tion, subtraction, division and copying figures, the elements of arithmetical computation. By giving all of these to one indi- vidual we can explore his relative development in these different abilities. Fig. 2 shows the record of a certain mature individual Detroit, April, 1922 191 taking the five tests five times in succession. If you read the record correctly you will see that she wrote 65 answers per min- ute in addition, 45 in subtraction, 63 in multiplication, 50 in di- vision and 105 in copying figures. In repeating such tests five times, variations in score occur. These are caused partly by the effect of practice, partly by fa- tigue and partly by other factors. The score made is a resultant of many forces. The curves representing the various trials are numbered 1, 2, 3, 4, 5. Note the large practice effect in addition and the evidence of fatigue in the other tests. Note also that in general the practice effects are most evident in the abilities in which the individual does well and the fatigue effects most marked in those abilities in which the individual is least devel- oped. In education, therefore, as in other forms of human ac- tivity, the fundamental problems center around the control of those factors which aid and those which hinder achievement. In the lower diagram in the figure, the highest and the low- est score made in each ability has been shown by the light lines. Note that the individual adds better than she subtracts, multi- plies better than she divides. In this case she was retested two years later by a different examiner, using a different edition of the same tests. Her score is shown by the heavy lines. Note that the inequalities in her development have persisted through the two year period. If now we examine the records of an entire family, father, mother and children, we find that some of the children's curves resemble those of one parent so markedly as to suggest that in- dividuals are highly specialized by heredity, and that what the school ordinarily does is merely to provide a uniform training to which each individual responds according to his peculiar nature. In order to secure a given type of product, therefore, school training must be adjusted to each individual's needs. If we test one individual every fifteen minutes from early morning until late at night and on different days and for different abilities, we get variable results. For this individual there is in addition first a "warming up" 192 S. I. E. Eighth National Convention period, so that his scores do not reach a maximum until about ten o'clock in the morning. This maximum is followed by a long decline to a minimum at about two o'clock in the afternoon. Then a period of increase sets in, leading to a second maximum at about ten o'clock at night. These fluctuations are not of the .same character for multiplication as for addition and vary from one day to another. It is evident that such variations are caused by factors other than mere fatigue, although fatigue is one of the factors oper- ating. However, when we try to measure the fatigue factor apart from effort, practice, etc., the results seem to indicate that the thing we ordinarily call fatigue is not exactly what we sometimes suppose it to be. That is, no matter how fatigued a person may think he is, a slight change in the total situation will sometimes call out from him responses which equal or exceed those made under more favorable conditions. Mental activity proves upon investigation to be, not simple, but exceedingly complex. Consider, for instance, the different ways in which an indi- vidual may respond to an, addition test. The curve is based upon more than twenty tests of one individual's ability to add. When he works slowly he does every example correctly. But as his speed increases the accuracy of his work declines until at a time limit of about 1 3 seconds per example he is work- ing so rapidly he does not get a single example right. For this individual, scores of 17 examples tried, 17 right; 18 tried, 16 right ; 24 tried, 12 right ; 48 tried, right, are expressions of ex- actly the same ability. After making a score of 24 tried, 12 right, the individual may make a score of 17 tried, 17 right, on the next test by simply changing his methods of work. In com- paring scores made by different individuals, therefore, it is neces- sary to compare rates at standard accuracy or accuracy at stand- ard rates. This tremendously complicates the problem of determining fatigue in adding, for as the work of adding progresses the in- dividual changes the balance between rate and accuracy. Usually Detroit, April, 1922 193 under practice he tends to work more rapidly and less accurately. When fatigue sets in he often slows up in speed with a corre- sponding increase in accuracy. When these changes are reduced to changes in rate of uniform accuracy and corrected for prac- tice effect, evidences of mental fatigue tend to disappear. You will readily understand that the results shown in this figure have an important bearing on educational training and possibly on training for skilled operations in the industries. Every worker should probably be trained to work slightly below the maximum rate at which he can produce with optimum quality of output. For addition, this quality is 100 per cent accuracy. As each individual has his own "one test rate," training must aim to make him conscious of that rate and to teach him how to control tendencies to vary from it. Not only may an individual vary the balance between rate and accuracy at will, but he may put forth varying degrees of effort. That is, he may compensate for fatigue by increasing his effort. Just what the mental mechanism is by which effort is controlled is not known, but it is easy to secure evidence of the effect of effort. In this figure, for instance, the curve represents the per- formance of an individual adding under conditions where the time limit per example is gradually decreased. At first the time limit is so long that the individual works leisurely. Note that if he works too slowly he makes mistakes. As the time decreases his rate of work increases and the subject will fell you that he is putting forth more effort. As a result he maintains his accuracy. There comes a time, however, when the individual is so fatigued by his efforts he can no longer maintain his effort and control. In this case the subject dropped in both rate and accuracy, but after a moment. or two pulled himself together for a supreme effort. You will observe that he worked his example correctly at the maximum rate shown in the figure, while a few moments later he let down so in his effort that his work was'inaccurate even at the lowest rate shown in the figure. 194 S. I. E. Eighth National Convention This graph may seem to contradict the one previously shown, but there is no real contradiction. The differences are caused by the operation of different factors. ■From these results it should be clear that the performances of children in school need a great deal of skillful interpretation. In general a child's response to the stimulus of a test is deter- itiined by his heredity, maturity and training, but in passing from one test to another his score is affected by any changes in effort by the practice effect, by the way he distributes his emphasis between rate and accuracy, by changes in difficulty of the test material and by fatigue. A gross score, therefore, is not a measure of ability. It is merely a record of what the individual did with the test material under the test conditions. What it means can be told only by a skillful diagnostician after much experience and experimenta- tion. This diagnosis should help make clear to you why the conventional teacher's examination is utterly inadequate and futile as a means of determining ability. The effect of the factor of effort is easily shown in another way. Here, for instance, is a series of tests identical in con- tent but vaiying in spacing. Tests 1, 3 and 5 are addition tests. The subject must add to get the answers. He must also write the answer on the paper. Tests 2, 4 and 6 are identical with Tests 1, 3 and 5, except that the answers are given and need only be copies. In other words, the activity is the same for the two tests except for the addition element. Under these conditions a simple formula enables us to eliminate the writing activity and compare the results in terms of adding ability alone. I am presenting this as an illustration of our methods of educational analysis. One would suppose that if the space between examples were increased, the number of answers per minute would be decreased, for the hand must be moved a greater distance in Test 3 than in Test 1. For some individuals, however, the increased spac- ing has precisely the opposite effect. It increases instead of decreasing the score. Detroit, April, 1922 195 Here, for instance, is the actual record of a boy. You will note that his score increased from 12 answers per minute in Test 1 to 14. S per minute in Test 3. When these scores are corrected by the formula, however, the scores for adding ability are constant. That is, the boy did not add any more rapidly in the third test than the first ; his score was larger because he re- sponded to the stimulus of the increase in space by moving his hands more rapidly and writing more figures per minute. I cannot bring this discussion to a close without attempting to prove to you that such detailed, scientific study of the educa- tional process pays dividends of practical value in the class room. The purpose of our research studies is to improve the efficiency of instruction in reading, writing and arithmetic, and it is in these fields that most of our experimental work is done. The information gained is put to immediate use in helping children who fail and in devising better methods of teaching. For instance, consider this series of examples. Note that they form a graded series of column additions. At the right is a test constructed wholly of examples of the second type. We have similar tests for each type of example. Please keep these tests in mind in looking at the next figure. In Fig. 9 give your attention to the first two diagrams. The first is ray own record in the series of tests. I aidd at approxi- mately the same rate whether the column is two figures long or 12 figures long. The seconireeord is that of a sixth grade girl. Observe that she also adds at a constant rate for examples 1, 2, 3 and 4 fig- ures long, but if two more figures are added to the column her rate drops to about one-half her previous rates. The explanation is simple. Attention cannot be maintained continuously. It fluctuates from minute to minute. Every in- dividual has a limited attention span and must learn to bridge the gap from one span to the next. This girl has not mastered this important technique. Consequently when the column is made longer than her attention span, she loses herself near the top of the column and has to begin again. The record tells an 196 S. I. E. Eighth National Convention adequately trained teacher exactly what is going on and enables her to help the girl by proper explanations at the precise point where the girl needs help. Under such expert teaching, every child is trained at once in the "one best way" and not left to blunder into it by chance, if at all. Educational measurement is destined to eliminate the chance element in education and will ultimately enable the schools to deliver a certified guaranteed product. My second illustration is more closely related to my subject. The record of a girl in one of our practice tests is shown in Fig. 10. The score indicative of standard ability for the grade was 17. The girl's initial score was 9. Under the stimulus of the teacher's encouragement and the pupil's study, her scores rose to 14, but held there and after a few days began to decline. You may wonder how a child's score can decline under study and effort, but that frequently happens when the type of study is not suited to the individual's nature. In this case, however, the explanation turned out to be something quite different. The child had all the ability in addition needed. She added the first three of each four examples at a rapid rate, but remained on the fourth as long as on the other three together. She was suf- fering from one form of fatigue. In some persons the muscle tension resulting from the concentration on addition increases until it completely blocks the mental activity. The remedy is obvious, momentary relaxation. The teacher explains to the girl that ^s soon as she feels herself having difficulty and becoming confused she must stop adding, look away, take a long breath, relax, then go at the adding again. As a result of ten minutes instruction from the teacher, not on adding at all, the girl com- pleted the test with time to spare. What is more, if the teacher succeeds in getting the girl to generalize from this situation, the pupil will be delivered from all fear of "exams" for life and will acquire mastery over what otherwise would .constitute a handicap of "nervousness" in critical situations. I wish there were time to tell you in detail of the changes Detroit, April, 1922 197 that are being made in education as a result of the increase in our knowledge. If educational products had an immediate money value our achievements would be heralded from one end of the country to the other. For instance, one of our supervisors of reading, Miss Nila Smith, has devised a method of teaching children to read which produces results in one semester which, in the average conven- tional class, are not achieved in a year and a half. To save a year in the education of every first grade child is an accomplish- ment of the very greatest value. I shall close my talk with one more illustration. I have chosen this picture to try to express the real mean- ing of the changes that are taking place in education. As our knowledge of child nature increases, as we build methods upon a foundation of nature's laws, not only is teaching made more efficient, but the whole spirit and character of education is changed. We know today that education is not primarily learn- ing but developing in children the power to form worthy pur- poses and to achieve these purposes efficiently. We are putting joy into education. We are decreasing the wear and tear on children, teachers and parents. We are decreasing the human wastage, and I venture to prophesy that the time will come when we shall build character and happiness in the schools with the same certainty and efficiency with which we now build auto- mobiles. Before that day, however, the public must be "sold" on research, oa edtrcation, on the need for greater training for the teachers who handle the children in the elementary grades where life habits are being formed. More skillful teaching can be had, but like most other things, costs more money. In the last analysis it all comes down to a matter of money. We shall have the type of education in America we are willing to pay for, but the general public does not understand that science in edu- cation can perform the same miracles it has already performed in industry. It seems to me, ladies and gentlemen, that in this convention this group has a distinct responsibility to society. You know the meaning and value of research. You deal with men 198 S. I. E. Eighth National Convention of affairs, men of wealth. Is it too much to ask that in every city and in all your activities, you give your active and intel- ligent support to a movement which has the possibilities at least of making America as supreme in life, liberty and the pursuit of happiness, as she is in industrial efficiency. Detroit, April, 1922 199 With Budget Control, What Non-Essentials Can Be Eliminated From Present Industrial Accounting? Chairman — W. P. Hilton, Willys-Overland, Inc., Toledo, Ohio. THE CHAIRMAN : We often hear the expression that such and such a profession is an exact science; it can equally well be said that every profession is an exact science so long as it adheres to determined standards or basic principles. It is, how- ever, possible that in an endeavor strictly to adhere to such prin- ciples, opportunities for real accomplishment reihain unseen for the reason that in quibbling over negligible matters, which may be in accord with set rules, greater things which should have serious and prompt attention are entirely overlooked. I once heard the statement made that a butterfly could see only the opening into which it wishes to enter, but could not see the glass in the window which barred its progress. It is not necessary to look very far to find this thought as applying to nearly every activity of life, neither is it necessary to look very far to find men who have made wonderful successes in a busi- ness and professional way for the reason that, while not digress- ing from established principles to the danger point, yet they found that even standards could safely be varied with far reach- ing benefit. Some time ago it was my privilege to "sit-in" on an impromptu discussion of engineering principles as related to the autotnotive industry during which the thought was advanced that such prin- ciples were almost consistently ignored. The statement was made in reply that practically all such standards were set up during periods when construction of all kinds was massive in its na- ture, as there was no great necessity for economy in material, time or cost, certainly not to the extent which is required today ; 200 S. I. E. Eighth Na tional Convention gradually, thereafter, new materials came into use and new meth- ods of construction, and so today we find the automotive indus- try working on almost a new set of standards. The other extreme can be illustrated by the collapse on two occasions of the center span of the immense Quebec bridge, for which it was necessary to change construction standards in order to meet requirements never before attempted. Present day business conditions, and the desire of all aggres- sive men and concerns to hold their own during a period of depression, have brought out forcefully the necessity of economy wherever economy was possible. It was nothing un- natural that pressure was immediately started to reduce overhead and indirect expenses of all kinds and to dispense with all rou- tines which could be spared without injury, and most important of all — ^to institute such control of direct and indirect expenses as would keep both within reasonable parallel, dependent on the volume of business done. This situation is directly responsible for the careful thought and attention now being given to the budget system of expense control. The idea of budget control is old in itself, but practically new and recent as to application in commercial and industrial enterprises. Its greatest use heretofore has probably been in the control of state or municipal expenditure. However, any such system for political government would be altogether too slow for business control. Therefore means must be adopted which will establish a control subject to quick adaptation under varying con- ditions, and then measure its application and accomplishment by accounting methods which enable the management of a business to keep abreast with the results — rather than having such results stated in concise accounting form from thirty to forty-five days after the operating period is closed. In passing, we must not overlook the point that the urgent need of budget, or other control of operations, arises chiefly from the desire to keep expenses within prescribed limits in keeping with sales or production volume. If 100 per cent standards are maintained, as spoken of yesterday in our president's address, Detroit, April, 1922 201_ inefficiency can be detected and eliminated, but the greater the variation from standard the greater the need for a practical control which shall immediately test the limits established. This will require of accounting two drastic changes to meet the issue properly. First. All unnecessary accounting documents and bookkeep- ing must be eliminated (and necessary information condensed or combined) down to the last point of safety as the introduction of a budget when set on a proper economical operating basis, will certainly reduce the allotment for clerical work in the accounting department to an extent comparable with economies in other departments. Second. The accounting must forget the use of exact book- keeping ih order to render immediate reports of results as soon as a working period closes, which preferably should be weekly if production is irregular in quantity or unbalanced. Reason- ably accurate figures will accomplish more towards controlling unnecessary functions and expenses, if provided at a time when the information is pertment and the operations of the particular period are fresh in mind, than all the exact statements when issued even thirty days after the closing. It has been observed that the accounting department should be a service department ; it is this and more, it is the signal tower to other departments but its work must be so well done that other departments hold their confidence in its signals even if now and then the derail switch has to be thrown. After all is said and done, all activities of any business, whether commercial or industrial, must eventually be measured by the yardstick of financial result and therefore accounting is the logical function to gather first operating results and then quickly analyze and get back to operating units the essential information which will aid those units to perform consistently. A rifleman at target practice fires, the shot is called, and he immediately adjusts his sight for windage or other conditions, and shoots again. Whether he does, or does not hit the target, he certainly has learned to shoot, which would not be the case if 202 S. I. E. Eighth National Convention he made one shot and then waited a week before getting a report, especially if, in the meantime, all conditions have changed. This illustrates, in a way, the necessity for industrial account- ing so to organize that the report of operating results can be immediate and changing conditions controlled, regardless of whether or not a budget is used. Such control should so close that Monday's results are known Tuesday, so as to stop the unnecessary expense by Wednesday. Accounting, either as a profession or as a part of a concern's employed organization, has an opportunity, already arrived, to merit real recognition as a positive factor in business control and management ; in fact, the new order of things has made it neces- sary for other departments to ask accounting to meet the issue which in turn compels accounting to look beyond the ordinary 1 plus 1 equals 2, or whether an amount should be listed under liabilities or deducted from some asset item. Accounting must get out of the confinement of mere bookkeeping, see the sun- rise of a new day which requires an intimate knowledge of the plans of all other departments and then step in and help those departments solve their difficulties. Management, sales, purchas- ing, production and all others are eager and willing to have such assistance; if accounting fails to meet the issue, then such cen- tralized control must be conceded. as ineffective and must then be turned over to each department to build its own records, which would be lamentable. The day has passed which allows any department of a con- cern to be sufficient unto itself if that concern is to be successful ; the fences and walls of separate operation must be leveled and the interests of one become the interests of all. Accounting, speaking in a general way, has considerable leveling and house- cleaning before it must get away from the rules of tradition which hinder progress and efficiency. Such tactics will not do if the aim of business toward a sound, firm condition is to be realized. It remains for us to lend our strength and ability in every way possible to the end that Detroit, April, 1922 203 through efficiency we have better and healthier business, with prosperity and happiness as the reward. MR. C. B. WILLIAMS : I do not know any reason for con- ducting a business other than to contribute something to the earnings of capital and labor, and of course the wages of manage- ment. In order that our minds may meet in discussing this question I am going to attempt a brief definition with which I hope you can agree, and that is by budget control we mean to predetermine expenditures according to the various divisions and classifica- tions, and according to a co-ordinated manufacturing and finan- cial program. Of course, this means that' the budget constitutes what the business can do and what it expects to do for the period under review. When we speak of what non-essentials can be eliminated we must determine what things are non-essential, because surely all of us will want to eliminate non-essentials wherever we find them. I wonder if that does not bring us down to a different statement of the question, "What items are found in industrial accounting which become non-essential when a budget control is established?" I am going to make some statements which will serve as a basis for your discussion. Frankly, I am not enthusiastic about the possibilities of eliminating any great amount of detail when a budget control is established. There is considerable question in my mind as to whether any information that has been essential beforfe will become non-essential when budget control is estab- lished. There is ho question in my mind but that much clerical work has been done which has resulted merely in figures, and not in information. Certainly such work should be eliminated as non-essential whether or not we have budget control. Prob- ably many of you have had the experience, after establishing budgets, of finding that you were making a great many figures that were serving no good purpose, and you have eliminated these figures. I venture the opinion that in many cases these same figures were serving no useful purpose even before the budget control was established?" 204 S. I. E. Eighth National Convention ESTABLISHING THE BASIS OF BUDGET CONTROL In the days before I gave much consideration to budgets we collected detail figures and arranged them in comparative form and gradually built up what we then called standards. The first set of figures collected was the starting point. The second set was compared with the first and the best accomplishment of each was made the basis with which to compare the third set. If this third set of figures showed results that were better than the first and second, these results were used in establishing a new basis with which to compare the fourth set; and so on. When we set about making a budget we had collected a lot of very valuable information, and preparing a budget was not difficult. We found, however, that we still wanted to collect the same information as before. We used more scientific methods of setting standards, but we still wanted to compare our actual results with our budget. Suppose we try to agree on what we mean by essentials and non-essentials. Perhaps I could suggest a definition for essen- tials, after which we may easily classify as non-essentials those things which do not come within the scope of our definition. "Essential items in industrial accounting are those items which are essential to the management in the intelligent review of busi- ness operations, with the idea of bettering conditions and formu- lating future policies, thus increasing the earnings of capital and labor." Without a budget control we work from day to day, possibly with a definite objective, but certainly without a clear-cut pro- gram. Under this condition w© have been accustomed to classify and tabulate the expenditures in order that we might know what was being accomplished at stated intervals, or as the work pro- gressed. If we now establish a budget control what items in the former accounting will become non-essential ? We must keep in mind that to have a definite program is important, but it is more important to live up to the program than it is to have it. I am led to make this comment because of Detroit, April; 1922 205 claims that have been made to the eifect that with a budget control detailed accounting is unnecessary. Having prepared a budget something must be done to deter- mine whether or not it is being lived up to. One way to do this would be to classify the expenditures according to the items of the budget. Surely it would not be sufficient to say that a certain sum of money, say $100,000, has been appropriated for a certain department for a given period of time and then merely to collect the expenditures made for that department in total. Our budget to be of any value will show this $100,000 divided into a good many items. Naturally, then, we must collect the expenditures in these same classifications. If against an allowance of $100,000 expenditures in total were $110,000, it would be important to know the particular items and operations that had caused this excess. Only yesterday I reviewed a budget for $367,000 against which the actual expenditures were only $341,000, or $26,000 less than the amount appropriated, and yet sixteen items in the budget were exceeded to the amount of $37,000. The expendi- tures in total were less than the appropriation because two large items of raw material had! not been ordered. Without an analysis by items we would not have known that certain items had been quite largely exceeded. CHECKING BUDGET AGAINST EXPENDITURES Suppose we assume a budget for a given purpose which starts with the amount to be expended for raw materials and then follows with factory supplies, the allowance for direct and indi- rect labor, repairs and maintenance, power plant, purchased elec- tric power, water, gas and similar items. Control of the amount allowed for purchases should be taken not from invoices that are received but from purchase orders issued. As soon as the amount called for by the purchase orders for any item equals the allotment then our expenditures for that part of the budget have been contracted for and the purchasing department should 206 S. I. E. Eighth National Convention not place further orders for that item without specific authority to exceed the budget. It is apparent that it will be essential to collect, under proper divisions, the amount expended for raw materials, and if this has been done in detail from purchase orders it would not be essential to record the same information in detail from invoices, totals would be sufficient. But it must be collected from some source, according to the various divisions of raw material, for two purposes : First. To show what materials were purchased in excess of amounts required, and Second. To show errors in the budget. If the material is of such nature that the only possibility of loss is through manufacturing operations, and the ratio of losses has been fairly established, you could discontinue detailed reports of material used without losing any particularly valuable in- formation. Next let us consider the item of factory supplies. In making up this division of the budget it is likely that the more important items of factory supplies were calculated separately and then an allowance was made under the head of miscellaneous for the items of lesser importance. If the budget is to serve its real purpose, it will be necessary to know when the allowance for each of these important items of supplies has been reached and this can only be done by accumulating the disbursements for these items. In respect to items like factory supplies, the expenditures in excess of the amounts provided for in the budget may be assumed to, represent needless use of these supplies, and certainly it is our desire to have a check on expenditures of this kind and to have information that will enable those in authority to take necessary steps for economies. There are two ways of getting this informa- tion. The more usual way is to collect the amounts expended for these items from the invoices and stores requisitions. Where there is a thoroughly organized storeroom and where the budget has been prepared according to definite quantities of Detroit, April, 1922 207 materials, the storeroom could accumulate disbursements, in quantities only, for such items as were specifically mentioned in the budget, and could note the use of these items in relation to the passing of time or the quantities of production, and could thus be able to notify the departments when they were drawing faster than was anticipated in the budget. This would make it unnecessary to accumulate disbursements of these materials in values, from the requisitions, according to the subdivisions. However, in cases where stock records are maintained in both quantities and valiies, it will be necessary to determine the value of the materials used, for credit to the stock ledger accounts, and where this is done, very little additional labor will be incurred by accumulating the same values according to expense classifications. It is not to be assumed that when the factory requires a certain supply it is to be informed that it has already used its quota of this particular supply and cannot have more. Cer- tainly if it needs it, it must be provided whether or not the past supply has been wasted. The thing to determine is where the waste occurred, and this you cannot determine unless you have collected information that will inform you as to where and how this material has been used. This information can be col- lected in either of the two ways I have mentioned, but should not be collected in both ways. BUDGETING DIRECT LABOR In determining the amount to be allowed in the budget for direct labor the calculations have undoubtedly been made accord- ing to specific operations. Please keep in mind that our topic says : "Effective Budget Control." There are many budgets estab- lished which are merely a series of guesses as to amoimts that ought to be required and direct labor might appear in such a budget one item, say for $50,000; but if a budget is to be lived ■ up to it must anticipate, in an intelligent manner, the exact fac- tory procedures and the expenditures that will be necessary to meet them. This means that the item of direct labor will be determined by an analysis of the work into its operations and by 208 S. I. E. Eighth National Convention a proper determination of the cost of each operation. Probably this is one point at which the greatest control can be exercised. An effective budget will have predetermined the proper cost of the various operations, therefore any cost exceeding these costs should be brought to the attention of the management quickly in order that corrective measures may be applied. It would seem to be essential, therefore, that the direct labor be accumulated according to specific operations and that a constant comparison be maintained between the budget and the actual labor costs. In many cases it would be just as satisfactory to collect this information in hours only, and save the work of extending and tabulating the values. A considerable saving might be effected in this way in cases where workers employed by the day have a number of different jobs during the day. If the budget pro- vided a certain amount for a department and this was supported by proper detail it would only be necessary to collect labor for the department, in total. Comparison with the budget or analysis by operations need be had in hours only. BUDGETING INDIRECT LABOR Next let us consider the item of indirect labor. Here again our budget will make allowances according to certain classifica- tions but these will not be as definite and fixed as those of the direct labor. In many cases it will be possible, in connection with preparing the budget, to indicate the number of employees and the rates of wages which are to be allowed for certain classes of indirect labor. If this is done the several departments could be furnished with this information and could be required to obtain special permission to exceed this allowance, either in the number of employees or in the rates paid. Under such conditions it would not be essential to collect the indirect labor according to the classifications that were used in preparing the budget. This suggests that in cases where the control of the factory activities can be as definitely determined as to state the number of em- ployees and the ra,tes of wages that are to be paid, it would not be essential to carry any subdivisions in • the accounting records. Detroit, April, 1922 209 The -power plant might be used as a definite illustration of this idea. We might have in our budget only one item for power house labor but this would have been determined by stating the number of engineers, firemen, coal and ash wheelers and any other regularly, employed labor, and the rates of wages to be paid to each, thus arriving at the total labor allowance for the power house. It would not seem to be essential in such a case that power house labor be accumulated in the accounting records in more than a single item. Our protection in this case could be in requiring the one immediately in charge of this department to secure special per- mission for putting on additional employees or increasing the rates of wages, and, naturally, this same individual would report any reduction in the number of employees or in the rates of wages. Other specific illustrations will occur to you. As a general proposition I believe that, if non-essentials have been eliminated from the industrial accounting before a budget is established, there will be little additional elimination to be made when the budget control is established, but that the informa- tion therefore available will become more valuable to the execu- tive than it was before. THE CHAIRMAN : Mr. Williams spoke in his paper on the elimination of money values in comparison between budgets and performances. That is being used in a good many instances. It is possible, if your budget is stated in both values, when you state the budget you would have to state the hours, the allowable hours and the average rate for that department as well as the amount of money vaktes. I understand that the steel companies, Bethlehem in particular, settle all of their allowances on a per- centage of the finished tonnage out of each department. All work is based on final tonnage out, not on the particular operation of one man. MR. C. D. ROCKWOOD (Hamilton Manufacturing Com- pany, Two Rivers, Wis.) : I would like to ask this question: "How can you control rates that are paid when the current market dictates differently. I can understand how you can budget 210 S. I. E. Eighth National Convention the hours, and producing hours, but not the rates. Mr. Williams spoke of that particularly in the power plants. During 1920, when our firemen were paid something like $80 to $85 a month by the month, the rate of pay in other industries in the town for firemen increased to $100 or $125, and wie had to pay that regardless of what we wanted to pay. We control the number of men we use in the power plant, but not the rates. MR. WILLIAMS : I would say it cannot be done. How- ever, I would make my comparison in connection with the budget on the hour basis or the day basis and not on the money basis, and I would still require the men in charge of that department to obtain permission from headquarters before he increased any salaries or wage rates in his department. I have never seen a budget which was lived up to. But, it is a guide, something to shoot at, and something to tie the department foremen and various heads down to ; but I never expect to live up to budgets that I have a hand in setting, because there are too many conditions happening. THE CHAIRMAN : One large concern starts out first with a man power control. The number of men in any department swings on the amount of production in that department, and that has all been charted out in hours, so that on a certain schedule through any department are the necessary productive hours. From that basis they determine the necessary non-productive hours for each operation. If the production in that department goes down, the foreman is responsible if he fails to cut his non- production to parallel his production. That really is the purpose of all budget control. If we had nothing to deal with but pro- ductive labor and material there would never be a great need for a budget, but the loss in any business is in the labor more largely than it is in any other factor and we have got to start with production as a control of our burden and out of that work our analysis. MR. PUTMAN (Milwaukee) : Not in my own concern, but in another very large concern they start in October and work out a budget for the following year. They start first with Detroit, April, 1922 211 what they expect to sell, and with that as a basis they attack first their sales budget, alloting their different quotas to the vari- ous district organizations, then that is broken down into a pur- chasing budget, which is necessary for procuring the amount of supplies and materials necessary for manufacture to com- plete their sales program. They then take an estimate of labor costs based upon the past experience, and on forecast as to what the labor market possibly will be in the coming year, and taking into consideration economic conditions, and that gives them their estimated direct cost. They then take their overhead expense and break that down in the same way. After they have this broken down in this way they then allocate to production centers — ^you can call them departments or whatever you wish in their manufacture — set this up on a monthly program basis in which is submitted a quota for that particular department and the actual expendi- tures reported against that department. The efficiency of that department in comparison with how they have used their over- head and how their production compares with the actual quota set up, determines, in a way the bonus which is granted to that particular department. Now, in most cases they have been able to forecast for a year in advance within a very small percentage of what their actual expenditures and costs are going to be. Of course, their budget is subject to change depending upon conditions, and that would necessarily be the case when raw materials fluctuate. They con- tract for purchase for a two or three months' supply of ordinary materials, so they have on hand a sufficient amount always to insure them a sufficient supply to put their manufacturing pro- gram through on 100 per cent. Now, they have been able to work this out to a very fine point. They feel that improvements can still be made, but they have made a very marked advance. They believed as a result of their budget program that during the time of depression, because they had planned in advance their entire program, they were operating 100 per cent when their three largest competitors in the United States, one at SO per cent 212 S. I. E. Eighth Nation al Convention and one at 30 per cent, and the other one was closed down com- pletely for the first three months' period. They attributed the fact they were operating at full capacity to the fact they had their budget worked out to this fine point. They estimate what their production is; they translate their production into unit costs, and they manufacture against this unit cost, but they do not set labor rates or things like that from their budget. With such control it is possible more or less to determine their selling price ; they do not necessarily follow the same prin- ciple in spreading their overhead charge on all their different products; they do not use the same percentage system. They let the traffic on k particular article that can bear the heaviest load, bear the heaviest load, and if they wanted to develop a new article and put it on the market at a price that can compete they shove down the overhead and put that on some other article which is already established and which can bear the overhead; but they do this all of the time by watching very carefully their budget, and seeing that this thing fits in their entire manufactur- ing program. It shows, and conclusively proves, to my mind> that any concern that wants to take a budget program seriously and go into the thing and adopt it can make a great success out of the proposition. MR. R. E. HURLEY (Detroit Vapor Stove Company, De- troit) : We have had in our plant for the past three years a successful budget control covering the accounts on our budgets, material, direct and indirect labor, and all expense accounts of whatever nature. Last year we set our budget for a year ahead, from July 1 to June 30. Last year the estimated budget allot- ments to expense, to the actual expense, ran within two and three per cent we found after the books were closed at the end of the year. The first subject we take into consideration in the setting of our budget is the sales to be obtained for the coming year. This is determined by the sales in the executive department and the quotas are set weekly. In setting our quotas for the new year we follow statistics for a five-year period which are collected by Detroit, April, 1922 213 themselves, that is, each account on a large cai'd which carries statistics for five years back. Of course we sell direct to dealers. We have no jobbers and it may be that our sales may be easier to estimate than some other lines. This is the first step, after which the direct selling cost and advertising are taken into consid- eration. Of the advertising appropriation set July 1, 1921, cover- ing this present year, for the first nine months ending March 31 the only difference between the budget appropriation and the amount expended in that period was $634, and the appropriation was something over $75,000. MR. N. R. CRAWFORD (Industrial Works, Bay City, Mich.) : Perhaps you would like to hear about this proposition from a little different angle. I am not an accountant; I am a statistician. Getting back to fundamentals, your question is "in the establishment of effective budget control, what non-essentials can be eliminated?" The red tape is non-essential. To illus- trate that point as to what is essential, late in 1920 and early in 1921 we determined to establish a budget control in every proper sense. I was going on my vacation, so I turned that over to the accountant and told him what we wanted. I came back in two weeks and he had a very elaborate . system of percentage control. We have perhaps 50 departments in our plant. In our indirect expense analysis each department probably has 10 or 15 items, tool dressing, indirect labor, depre- ciation, insurance, taates, equipment, and some items of building, and so forth, sa that meant probably 500 accounts. He had taken each account a standard year and for the first nine months of 1920 worked out the percentage of each of those accounts to direct labor. If you are going to have a factory control you could not get any better one in my mind than against direct labor, tempering it with the changes and fluctuations in rates. This accountant had this elaborate system of percentages. He said we should spend at tool dressing, for example, .004 and for other labor in the foundry a certain other percentage, and so on throughout the entire thing. I took one look at it and put it 214 S. I. E. Eighth National Convention in the permanent file, which is the waste basket, because it could not be applied. That is red tape as we looked at it. Oui*; business is not seasonal as the term is generally accepted: We sell stuff in a large production proposition, wrecking cranes for the railroads when they want them. When the railroads loosen up and decide they want a 160-ton wrecker we build it for them ; that takes probably a month ; we do not do anything for another month; we cannot predetermine. We wanted a system which could be changed over night to meet conditions. We did this. We said to the production man- ager, give us a standard crew, the standard number of men; direct and indirect it will take us to get 100 per cent product in this plant; give us the same line-up for 75 per cent, and the same for SO, 40 and 25, and convert that into tonnage, and tell us how many men in hours, how many payroll hours time we need on direct and indirect labor to get out a given tonnage of crane out- put. We get an order for a 160-ton crane, and set up a schedule of how many payroll hours of direct labor we need to produce that. We authorize each department to put on that many men to use that number of hours. We authorize the pattern shop, the carpenter shop, the paint shop, and all those indirect shop men as to the crew that they shall place. There is the control on the major items of your expense, the labor, the payroll. The purchasing department came next, how much they want to pay out for ma- terial to purchase this tonnage based on 160-ton crane ; what it is going to cost us to build that when we have certain quantities of material in stock. Others we have to go out into the market and buy. The control on purchase is another itemized expense. The other expenses are indirect, maintenance of plant, equipment, maintenance of machinery and plant equipment. We average that. We say if business comes, and we get an order for a 160-ton crane, we will open a tool room account on that. If we get the order we will require certain tool dressing. We expect in that way for every pound of output we. will carry so much plant repair. There is our control. In other items of expense certain things are constant, the managers of sales, the purchasing agent. Detroit, April, 1922 215 the sales staff, those things we knew in advance for a long period, longer than over night, what they are going to be. In that way we get a rough control. The problem is to know how to make your cash income and cash outgo balance. We have it all boiled down into a single sheet by the manager and we keep that posted every day, depend- ing on business conditions. Orders come in; repair orders. We know exactly what the purchasing agent is. allowed to buy for the next 30 days. We know what the superintendent is authorized' to pay out on labor, direct and indirect. We know how much the production manager is allowed to spend, for tool dressing, repairs to machinery. Wd know how much the power plant engineer can spend in bringing his machinery up to proper condition. It is all control in a very major, broad, bird's-eye view. As to the main subject here, what red tape and non-essentials can be eliminated in cost accounting? I do not think any of the major things should be eliminated in cost accounting. Every- thing they are doing should be taken into consideration, and often they ought to do more. We did find, however, they were not going quite far enough; they stopped when they had accounted for dollars and cents, which was not far enough for executive control. We wanted to know' how many dollars were spent and what was accomplished with those dollars; that is where my department sprang up. I took the department where the account- ing department left it and showed the results to the management. There are three major things coming from the accounting department. The items of expense of the departments is valu- able; it shows exactly where the money is going. In a major way that carries with it a control over minor detail, segregated items of expense. - For instance, we tell the tool room they can spend only so much in labor, in material, repairing machinery around the plant. That controls how much his shop is going to spend for that item. That is a control right at that time, since we do not wait until the time the supplies get to the various depart- ments, we stop it at the source. 216 S. I. E. Eighth National Convention The second item is analysis of payroll hours, on direct or indirect labor. By budgeting your payroll hours, the accounting department comes in to show you what was done against that budget bill. If you can do it daily it is fine. We were not able to do it daily; we do it every two weeks, following the pay period. The third item is cost accounting. We are having trouble getting costs when we want them. We should know within a reasonable length of time after a $60,000 crane is shipped how much that cost us by units of assembly and by departments. We do know them, but they are more or less remote and we must spend time bringing them up to date, and the accountant should really help us, as that is his field. Those three reports — ^those three major analyses coming from the accountant are, from the standpoint of management, most important and vital. Perhaps the accountants will say that my outline here is more or less guesswork ; it is not refined. We find that constantly the manager has to warn accountants that they must account for every penny turned over into the business. Nevertheless, for the purpose of control this must be perhaps overlooked occa- sionally in order to get more prompt reports. Now, it is needless to state it would be ridiculous to hold books open in computing the cost of a given crane until a traveler's expense account was in. We would rather cut that a little bit, and put it in the next month. I do not suppose anybody would really go that far, but we have experienced some things which are almost as petty as that. Do not hold up the books for a penny or two when the manage- ment is probably losing dollars by not getting enough for its products. Detroit, April, 1922 217 Experiences With Employees' Representation Plans During Periods of Business Depression Chairman, E. S. Cowdrick, Colorado Fuel and Iron Co., Denver. CHAIRMAN COWDRICK: You all know Mr. John Calder. Mr. Calder needs little introduction from myself or anyone else. Most of you present know of his long experience as manager and production man. He has recently specialized in industrial relations work and has done some very remark- able things for Swift & Company. Mr. Calder is to lead the discussion on the operation of industrial representation through the period of business depression. EXPERIENCES OF SWIFT & COMPANY By John Calder Manager of Industrial Relations, Swift & Company, Chicago This is the first account of the operation of employees' repre- sentative assemblies at nineteen of our larger plants. At sixteen of these our experience has been wholly during the present period of enforced deflation in costs and prices of manufactures. In this process, prices to the packer for his product got down much faster than operating costs did and presented an important prob- lem to all of our assemblies before the sixteen most recent ones had been many months in operation. Employees' representation is a topic in which the background is as important as the scenery in front, sometimes more so. The kind of plant and the quality of management in which a plan is adopted is usually of more consequence than the plan itself, pro- vided the latter is essentially democratic and appeals to the worker. We all know that the organization by the government, and by employers, of numerous labor boards and popular representative 218 S. I. E. Eighth National Convention bodies in several hundred individual plants for systematically distributing war-time privileges and incentives to labor, taught us little regarding the merits and possibilities of employees' repre- sentation when the economic trend was reversed and the economic urge restored to industry, as it now is. The. plan of this .paper is to give a brief review of the organization known as Swift & Company, of the philosophy of employees' representation, and of the prior history of its industrial relations, so far as wages and hours are concerned, particularly the period immediately pre- ceding the adoption of a plan. Some account with statistics is then given of the past twelve months' operation of the plan in nineteen plants with a detailed description of the way in which employees and their representatives handled a major wage issue and responded to the needs of the business during strikes called in all of the plants by national imion officers as a result of the assemblies' decisions. The paper concludes with opinions based upon experience as to what is on the worker's mind, how he acts, and on what information and motives, and what the way out seems to be for the public, capital and labor. I.— CONDITIONS PRECEDING AND LEADING UP TO EMPLOYEES' REPRESENTATION Nature of the Business. The nation-wide organization known as Swift & Company comprises more than SO.OCXD employees of all grades, distributed over the United States and Canada in 400 branch houses and 116 plants ; twenty-nine of the plants are pack- ing houses (ranging from 7,000 to a few hundred employees each), and the remainder are chiefly smaller produce and fer- tilizer plants. The company is owned by 45,000 stockholders, 21,000 of whom, not counting the thirty-one memberS^ of the Swift family, are employees owning $24,000,000 value of the com- pany's stock. From a family concern with very small beginnings, operated by the founder, Gustavus Franklin Swift, Sr., and aft- erward by his six sons, who still direct it. Swift & Company has grown to a business sometimes exceeding $1,000,000,000 a year in sales. It takes over 900 of the largest stockholders to control the company, and 17,000 of the stockholders are women. Detroit, April, 1922 219 The large volume of business in the packing industry is, how- ever, not a guarantee of profit, for the price in the open market of the raw materials furnished by the farmer constitutes on the average about 85 per cent of the price obtained by Swift & Com- pany for the meat products of our industry and the selling price was so low in 1920 and 1921 that large losses were incurred. The only offset for this is extreme vigilance about manufacturing waste, very economical operation, and the strict conservation of any surplus, from good years. Due to the value added by manufacture in our industry being so small relatively to the cost of the materials used, processing is very rapid for the bulk of the product. Hence, there is an unusually quick turn-over of inventory, about eight times a year, and the resulting small work- ing margin on which we must operate as providers of service rather than as large transmuters of value, needs constant vigi- lance to prevent the huge losses through insufficient margin which may be incurred iti a very brief interval of time. For instance, after paying out in a single year over $700,000,- 000 to $1,000,000,000 in daily cash transactions for live stock, the other expenses of every kind, and any dividends and surplus must be derived from an average margin of only 15 cents out of each dollar of meat sales. Two-thirds of these expenses consist of the payroll, which amounts to $75,000,000 a year and upward. Under these conditions, with an inventory of product on hand of from $100,000,000 to $200,000,000 which daily fluctuates in value, accounting is right on the heels of expenditures and sales, and wage adjustments and all relations with employees must be made with strict reference to the facts and economics of the situa- tion. PREVIOUS WORKING CONDITIONS In trying to meet the needs we have outlined in an industry notably dependent for its daily operation on primary conditions not within the control of management or employees. Swift & Company has, for more than a decade, been studying intensively the problems of industrial relations. It was the first in recog- nizing, in 1912, the great desirability of a steady job in an in^ 220 S. I. E. Eighth National Conventio n dustry whose supply of raw material constantly fluctuated; it then introduced the minimum earnings of 40 hours to all on the payroll in any week, regardless of whether that number of hours had been worked or not. In January, 1916, it raised this guar- antee to forty-five hours and this continued tmtil 1918, when the federal administrator for war purposes reduced it to forty hours to accord with the reduced standard week of forty-eight hours. The administrator, it may be stated, confined his work to sixty- nine packing plants only out of the 335 packing plants doing an inter-state business at the time of his appointment and his rulings applied only to the former, the remainder operating competitively without obligations of that kind. There had been a progressive increase also in the amount of wages. A short time before the war the pay level of the pack- ing industry, which had been low, was raised several times by the company and from 1918 to 1921, and during the term of the federal administrator of our labor affairs for war purposes, wages were raised repeatedly by him. They reached the high peak at the end of 1920, were reduced at the beginning of 1921 from 53 to 45 cents an hour as a minimum for common labor and remained at the latter figure — which was well above the local level — at all our plants until December 5, 1921. In March of 1921 the federal administrator's term of office was fixed by the government to end six months later with the understanding that permanent arrangements would be established for direct handling at each plant of the labor interests of our employees as a whole. This had been the basis of all of the administrator's work, though for lack of any representative plan at the plants — because such would have been inconsistent vwth the administrator's ex- clusive powers — labor appearances before him for about four years (1918 to 1921 inclusive) were wholly those of national union officials of a minority of, our employees. The spirit of Swift & Company's labor administration is that of a genuine open shop policy with no discrimination whatever as to what any employee's position is in relation to organized labor. Some of the organized men have been amongst the best employees and have also acted as elected representatives in the assembly, where they expressed Detroit, April, 1922 221 themselves with entire freedom and acquired much information. The procedure and policy of some of the unions in our industry has been factional and has caused frequent dissatisfaction amongst the members. Organized workers have never constituted a majority of our help, and are probably less than IS per cent at present. But there is nothing to prevent an increase in their numbers if more of our employees should decide that they can get a better deal thereby, or that union affiliation is a useful thing to fall back upon. It is no part of our policy to dictate how our employees shall approach the company, but in the meantime they elect to do so freely and willingly under the plan, and they can dispense with it whenever it is no longer desired. II.— PHILOSOPHY OF EMPLOYEES' REPRESENTA- TION AND ITS INTRODUCTION Many forward-looking employers and managers not only desire to see a coming together of capital and labor in mutual respect and confidence, but are deliberately working to that end, particularly in big business. Such owners have not put indus- trial relations upon the shelf though their hiring situation is quite easy, for hiring, so urgent an issue in the war period, is normally but a single function of many constituting a true labor depart- ment. Such an attitude toward labor relations is both good morals and good business, and sufficient attention has not been paid to the rising standard of capital's ideals. Certainly to those long in the field of industrial relations and making numerous contacts with high officers, the change is very noticeable. The practical problem in our numerous plants is to secure labor better- ment with sustained productive efficiency and with the consent of the governed in an industry whose operating margin, as we have shown, is perhaps the very smallest and most variable in the industrial field, whose volume of business is unusually large, and whose financial risks are therefore very great. It surely implies sincerity and a desire for a square deal to make the reward of labor and all of its conditions a matter of common council with employees at a period when events are enforcing new levels of operating and living expense upon everybody. 222 S. I. E. Eighth National Convention Experience has shown that quite apart from labor's wider interests and natural solidarity justifying organization external to the plants, all employees need and should have adequate and speedy recourse when dissatisfied, in the first instance, in the plant itself about all of their working conditions there. This where the plant is large is necessarily of a representative char- acter; where the plant is relatively small, say 300 people and under, and we have a score or two of such plants, it is possible for the executives to handle the employees in regard to conditions practically as a committee of the whole and animated by the spirit indicated. One way or another, there should be democratic recourse provided in every plant for all employee interests not handled satisfactorily in the first instance by the ordinary plant authorities. It will be remembered that the President's second industrial commission, of which former Labor Secretary Wilson was chair- man, and Mr. Hoover vice-chairman, reported that the right rela- tionship between employer and employee can best be promoted by the deliberate organisation of that relationship and that such organization should begin with the plant itself. They said : "Industrial problems vary not only with each industry, but in each establishment. Therefore, the strategic place to begin battle with misunderstanding is within the industrial plant itself. Pri- marily the settlement must come from the bottom, not from the top." And Mr. Taft declared, regarding a declaration of war from national union officials on this principle, as applied to railroad companies : "To deny to the company the right in the first instance to deal with its own men is the very antithesis of collective bargaining. Such a view is only advanced in the interest of the rigid tyranny of the national management of labor unions. It is for the purpose of standardizing nationally all wages and all working conditions, although local conditions usually and justly require substantial dif- ferences in both." Nevertheless, if it is the intention of any employer to evade dealing with the opinion of any organized labor in his plant by adopting employees' representation, he is wasting his time, for he will have to reckon with it in any event. Even if, as in most cases, organized labor is in a small minority in a plant, it is a Detroit, April, 1922 223 distinct gain and no drawback whatever to have the outspoken, convinced union man fully represented in the assembly of his own plant and afforded a genuine democratic opportunity to present his views and to get acquainted with many things which he very much needs to know and which are not at all likely to come to his attention through external meetings composed wholly of unionized people with no keen interest, as a whole, in any par- ticular plant. One of the hopeful features of assemblies of joint representa- tives is the progressive educational effect in such bodies; the sobering result of putting all the cards on the table, including the vital operating statistics of the business. In so doing, there is no pretense or expectation on either side that the assembly is running the business. It is simply running its own business, and it needs this information to do it well. The educational influence referred to was lacking in the past when no provision was made by the employer for intimate contacts with employees in our in dustry and when there was lack of interest on the part of labof — organized and unorganized alike — and sheer misrepresentation sometimes of the facts of the business. An efficient and harmonious labor force is not necessarily obtained when the employer is satisfied that it has been justly handled. The employees must feel that justice has been done and that fair treatment has been received. This feeling depends not only upon the actual details of the treatment, but also upon the extent, to which the employee himself has participated in arrang- ing these details. INTRODUCTION OF EMPLOYEES' REPRESENTATION The occasion of the termination of federal administration, which lasted for nearly four years, presented Swift & Company with a renewed responsibility and with an opportunity for which it had to wait during that time. The Swift representation plan is very simple; namely, joint conference with power tO' effect binding decisions by a two-thirds vote, of equal numbers of appointed management representatives and elected employee representatives and joint committee work 224 S. I. E. Eighth National Convention on all details with power to effect decisions where the committees are unanimous. Every employee interest and condition, both indi- vidual and collective, is open for discussion in the assembly, which is constituted by the two sets of representatives at each plant. The plan itself may be changed by the vote of the assembly at any plant, all of its by-laws are framed by the joint representa- tives, and as we have stated, it functions only as long as it is mu- tually desired. On any single issue where, after a decision, a minority on either side is dissatisfied, or where the assembly is deadlocked, a condition which has not yet occurred, all inherent rights of the parties are resumed, they having been merely sus- pended while seeking to arrive at an agreement under the plan. The fact that the elements of any controversial matter have been thrashed out initially in the way provided will certainly help — not hinder any possible settlement by other means. Employees' representation, though new in the packing industry as a whole, is not wholly new with Swift & Company. It was installed sev- eral years ago at three Swift & Company packing plants which were not under the temporary administrator, namely, at Jersey City in 1918, and at Toronto and Winnipeg in 1919. These were naturally followed in May, 1921, six months preparatory to the withdrawal of the federal administrator, by the installation of a similar plan in the main plant and two others at Chicago, and in eleven plants at St. Paul, Minn. ; Sioux City, la. ; South Omaha, Neb. ; Denver, Colo. ; Fort Worth, Texas ; St. Joseph, Mo. ; Kansas City, Kan. ; East St. Louis, 111. ; St. Louis, Mo. ; Mil- waukee, Wis., and Cleveland, Ohio. Early this year the New York employees of the company unanimously petitioned for the extension of employees' representation to two plants, so that there are now nineteen Swift packing plants in all located in the United States and in two Canadian provinces at which all em- ployee interests and differences, not settled through the regular executive channels, are handled through the assemblies and their committees by the employee members, nominated and elected by secret ballot, sitting jointly with an equal number of management representatives on such questions. Committee decisions, we Detroit, April, 1922 225 repeat, must be unanimous, thereby insuring a full ventilation of any grievance, otherwise the matter goes to the joint assembly whose two-thirds vote, with one reconsideration allowed, , effects a decision. When the plan was adopted, employees at the plants entered heartily into the elections which were conducted by secret ballot under their supervision, and nearly 85 per cent took part in the voting. During the past year elections have taken place at all of these plants for the renewal of the retiring half of the em- ployee representatives and the sustained interest of the voters was manifested by a 100 per cent vote in many divisions, and a very careful consideration by employees of the merits of the rival candidates. III.— PRACTICAL WORKING OF EMPLOYEES' REPRE- SENTATION In the year which has elapsed since the first elections for employee representatives were held in the fourteen plants, which have been named, over 320 cases have been raised in these and in five other plants and disposed of, approximately 70 per cent of the decisions being in favor of the employees. The following are the combined statistics for the year ending April 20, 1922: 1. Accommodations for Employes 31 2. Wage Adjustments 60, 3. Working Hours Adjustments 12 4. Safety , , 19 5. Sanitation and Working Conditions 48 6. Plant Equipment 17 7. Dressing Rooms 25 8. Disputed Rulings of Foreman 1 47 9. Restaurant 2 10.. Recreation ., 4 11. Suggestions for Improvement 11 12. Disputed Plant Rulings 4S Cases Pending Further Investigation 1 Cases Withdrawn by Representatives 1 323 Handled by Joiiit Representatives in Voting Divisions....l86 Handled by Committee on Rules, Procedure and Elec tions 8 226 S. I. E. Eighth National Convention Handled by Committee on Interpretations and Disputed Plant Rulings , 24 Handled by Committee on Changes in Working Condi- tions _ 26 Handled by Full Assembly 74 Withdrawn 1 319 In Favor of Employees 224 In Favor of Management _ 93 Unsettled 2 Withdrawn 1 320 THE ISSUE OF A WAGE REDUCTION These assembly and committee decisions, and many others settled in the first instance by the good offices of the paired repre- sentatives, were effected without economic friction and to the satisfaction of all concerned with one exception. In December, 1921, after a proposed wage reduction, necessitated by the high rate of 45 cents an hour for common labor then existing, had been submitted and everywhere discussed and approved in assemblies, a general strike was called by the national union officers of an organized minority of our employees which was not without representation in the assemblies — ^in fact, union men were more numerous there than in the plants. The strike was nominally against any reduction, but later it was admitted that a reduction was inevitable and that the strike was really directed against the practice of any body of plant employees — forming a considerable majority — making any wage agreement directly with their employers, however democratic the process and how- ever fair the settlement; in other words, not collective bargain- ing, but collective bargaining in the plant was the real issue. To the challenge the employees who had expressed themselves defi- nitely through their assemblies gave an emphatic answer. As quickly as their personal liberties were assured by the authorities, every one of the plants was working at normal capacity and in less than three weeks this was attained at all places. No plant ceased operating. Several plants ran 100 per cent right along. All had the support of the assembly representatives, and no inter- Detroit, April, 1922 227 ruption occurred in the shipment of food necessities by the Swift organization. HOW THE WAGE ISSUE WAS PUT UP TO ASSEMBLIES As this is a body of practical plant advisors and adminis- trators, the detailed working of the plan on this one general issue may be of especial interest. Take the Chicago assembly for in- stance, which represents over 6,000 hourly and piecework em- ployees. It consists of 60 members, 30 elected employees — 28 men and two women — and 30 appointed management representa- tives. All are American citizens and the birthplaces of the em- ployee members were: American, 22; Germany, three; Austria, two ; Scotland, two ; and Sweden, one. The average service with the company of the representatives chosen by the employees by secret ballot is seven years, though one year of service qualifies a representative, and any person on the payroll may vote. These received in the month of November a letter from the president of the company, asking them to consider the relation of the Swift wage scale, which was still well up to the war peak, to the state of business, the losses of the company for two years in succes- sion, and the much lower level of common labor in their various districts. A memorandum of facts of our business bearing on wages accompanied the letter. This request was referred by the assembly in accordance with their by-laws and constitution, for consideration and report to committee No. 3 on changes in working conditions. This com- mittee appointed by the assembly consisted of ten of its ablest members, four men and one woman, representing the employees and five the employer. At the first meeting of this committee on the subject of the president's letter, they called for and received full particulars on all aspects of it. Each member was furnished with the following eleven documents and these were also avail- able to all members of the assembly : 1. Wages paid by Swift & Company compared to other lead- ing industries. 2. Changes in the purchasing power of the proceeds from 228 S. I. E. Eighth National Convention the farmers' livestock and the earnings of packing house em- ployees. 3. Trend of prices, wages, labor costs and profits. 4. Trends of labor efficiency compared to wages and labor costs. 5. Changes in the hourly wage rate of common labor in Swift & Company, compared to the steel industry. 6. Relative changes in the economic factors in Swift & Com- pany's business. 7. Comparative increase in the cost of living and wages paid to unskilled labor by Swift & Company. 8. Copies of surveys of wage rates in various industries throughout the United States. 9. Chart showing relative wholesale prices of beef compared to food, cloths and clothing and house furnishing goods. 10. Chart showing relative wholesale prices of raw materials by groups. 11. Chart showing relative changes in wages, prices and cost of living. HOW CHICAGO ASSEMBLY HANDLED WAGE ISSUE The employee members of committee No. 3 of the assembly before studying the facts submitted, were unanimous in serious doubt as to the possibility of convincing them or the other em- ployee members of the assembly that any wage reduction should be made. This indicates their frame of mind before tackling the problem. They were, however, as their inquiries proceeded, very attentive and inquisitive in reviewing the array of facts and figures, bearing not only on the condition of their own company, but on conditions of industry, employment and wages generally in the Chicago district and throughout the country, and tliey con- firmed these by inquiries of their own. After ten days of daily review and study of the matter in which they showed the keenest concern for their voters* interests, the employee members of the committee expressed themselves as being' thoroughly convinced that the business if iW require a reduc- Detroit, April, 1922 229 tion in plant wage expenses and they were satisfied that the com- pany had reduced expenses in every other way possible before it had approached the assembly on the subject of a wage reduc- tion. The employee members of the committee then asked for an expression from the company as to what amount of reduction was needed in order to meet the situation, and such a request was duly met. In this committee the employer representatives were also active in informing themselves on aspects of the situa- tion brought out by the employee members and communicated these with their endorsement of the employees' opinions on a number of matters to the company. Upon receipt of the com- pany's suggestion and consideration of its terms, the committee on working conditions brolight in a unanimous report to the assembly expressing the opinion that the proposed reduction was necessary and fair and suggesting that the actual handling of it be left to the management. This report, after consideration by the full assembly, was unanimously adopted and in addition, the assembly passed a unanimous vote of confidence in the fair deal- ing and frankness of the company in the whole procedure. The other twelve assemblies went through the same procedure, independently, and there were variations in their method of ex- pressing their approval of the reduction. All of them, however, after full inquiry, either voted definitely in favor of the specified wage reduction, or else passed resolutions leaving action on the matter to the management on a known basis; a measure of timidity in this respect was to be expected on the first occasion. The particular wage reduction in question concerned only 13 plants out of nineteen having assemblies. The other six assemblies in the eastern plants adjusted their wage schedules satisfactorily to themselves at a different time. Seven of these thirteen western assemblies voted definitely by more than the required two-thirds majority in favor of a specific wage reduction. The other six left the matter to the manage- ment on a known basis with a vpte of confidence. Entirely aside from the votes of ■ the management representatives in. the 230 S. I. E, Eighth National Convention assemblies, 75 per cent of all the employee representatives in the thirteen plant assemblies voted favorably. IV.— WHAT HAS BEEN LEARNED It is frequently asked, what has been learned from the expe- riences with employees' representation on an extended scale throughout the country, which have just been described. The following are answers to some of the questions raised : 1. The most important thing which has been learned is Educate! Educate! Educate! This cannot be empahsized too much. Until an attempt is made to sound the depths of the truth labor does not know and should know about our social sys- tem, and the falsehoods labor believes and should not believe, and the things the employer should know and does not know, will come home the folly of the stand-pat policy of resting easy because the management is sure of its integrity and the fairness of its actions, and the economic situation gives labor occasion to pause. Needless to say, nothing helpful can come out of the still greater folly of reactionary and repressive measures labeled American by their originators, and arising out of unpleasant experiences of capital and labor with each other. In that direc- tion there is no solution of the labor problem, but unfortunately it is the one taken by some influential employers, with a host of semi-indifFerent ones trailing along. 2. The second thing learned is the amount of distrust exist- ing amongst workers because of the lack of knowledge of the facts of the particular business which provides them with a liv- ing. For that lack the employer is responsible. We find labor is taught by its professed friends to have a foolish distrust of economics ; to regard economics as merely arbitrary rules devised by capital which constantly operate against labor; whereas it is only the contemporary explanation of how our social system works and its rules are not immutable. Some of them will change as we change and elevate our motives. None of them will change merely because we choose to alter the form of our system. That will effect no miracle, as Russia has amply proved. Detroit, A pril, 1922 231 Nevertheless, our social system must, in the end, justify itself to the majority of our people or it will go under, and it can justify itself. Undesirable conditions in the packing industry dis- appeared years ago and the descriptions of them were always exaggerated. They are still the stock-in-trade of people who make it their business in life to point out the vulnerable joints in our social armor. This is a useful service to society and the only regret is that some of those engaged in it help but little because they learn nothing and forget nothing. Swift & Company before touching employees' representation on a large scale, spent nearly two years and over $100,000 in educating its four thousand foremen and executives in modern production methods and in better ways of handling the human factors. It took no chances in having to pair in the assemblies any "hard-boiled" management people with inquiring and inde- pendent elected employees facing a new experience and a grave responsibility. A great deal of credit for our happy labor rela- tions belongs to our tactful, energized, enlightened and sympa- thetic forernen and executives who are the company for all prac- tical purposes in the eyes of the ordinary worker. 3. The third question answered is : "Will a Body of Workers Vote Itself a Reduction of Wages ?" This was the scornful challenge of skeptical official labor, and its answer was "Never" ! But our experience is that it will usually do so wherever it has confidence in the management and due cause is shown. In the process of doing it our labor was sad, but not sore; relvtctant, but not unconvinced. What more could be asked? Is not such a result where it is absolutely fair in the eyes of both parties, a real collective adjustment? Is it not better than trading labor's interests on terms which are not based on any adequate recognition of the facts and on which the workers immediately concerned have actually no determining voice? Is it not better than making every adjustment necessarily a fight; sometimes a purely factional fight between rival unions, sometimes between rival leaders of the same union; a fight in which, if labor loses, it is nearly always claimed that it has been 232 S. I. E. Eighth National Convention robbed, and if it gains it claims that it did not receive justice? 4. Will not successful Employees' Representation destroy unionism and should it not be opposed everywhere on that ground ? It is not likely to destroy unionism. In our industry we have been confronted by a condition, not a theory. The minority of organized labor which existed in the industry never showed much desire to co-operate with the employer before representation of the whole body of the employees was provided. But all recent elections for positions as employees' representatives have been keenly contested and 100 per cent voting has been the rule in the election division of the plants. Our plan, however, does not pre- scribe or anticipate the ultimate form which labor relations may take in our evolving industrial process. A labor leader said to the writer after he had satisfied him- self as to the genuine democratic and educative nature and work- ing of our employees' representative assemblies: "If this thing spreads my job is gone," but he was wrong, nevertheless. His job, if he were fully equal to it, would not be gone. It would simply change to something more constructive. We can even imagine, him appearing before a representative plant assembly on its cordial invitation to contribute any evidence or argument in labor's interests on some important issue in which any of the employee representatives considered him to be an authority. He would appear, however, before a very different and more in- formed body of employees than is usual in the ordinary meager union hall rally of today. Yet he would have a real opportunity for making his point — an opportunity far superior to the heated interchanges, exaggerations and threats that too often constitute the process by which plant executives and union ofiEcials "recog- nize" each other at considerable intervals. The representative of organized labor, despite the existence of a democratic body in each concern settling plant matters, if pos- sible, through joint conference and joint agreement, would also have a real job in reconciling labor's wider interests with legis- lation and in promoting its external solidarity in many other Detroit, April, 1922 233 ways. If such an individual was of the caliber to command the confidence of a considerable majority of the employees in a plant and of their elected representatives in an assembly, then the latter would be the union for all practical purposes in that plant and the union would be in the assembly, and would be dealing with a more representative group on the employer's side than it ever does at present. In other respects a plant assembly would be needed, even with an ascendancy of organized employees, be- cause such assembUes take note of and decide wisely on a host of things in which workmen are personally interested and to which the ordinary labor leader, touching only the high spots of economic friction, often will not pay any attention. Assemblies of the joint-conference character also educate the employer very effectively. It was not wholly the fault of the unions formerly that there was no co-operation in the plant itself, but if the union fails to rise to its opportunity now and co-operate constructively, even where it is in a minority, it will fail and it will deserve to fail. 5. Will labor, if it is convinced that it is getting a real square deal and is given every chance to have a voice in what that deal will be, begin to take a constructive interest in the day's work? If, by good management and with the consent of the governed there is restored some joy to the job, we think labor will co- operate with management in "making goods plentiful and men dear." 6. What should characterize good employees' representa- tion? (a) Any proposed plan of employees' representation that does not include man-to-man discussion regarding every employee interest, without exception, and definite powers of decision, is not democratic in spirit, and will not be acceptable to labor. (b) Joint representation is necessary if there is to be a mutual and berieficial educative effect upon employees and man- agement. Both need it and the day of two hostile camps should be left behind. 234 S. I. E., Eighth National Convention (c) Any plan of representation within a plant which, as a condition of its existence, excludes from employment organized men or forbids or inhibits directly or indirectly, the free expres- sion of opinion by such employees, or by any dissentients, whether majorities or minorities, will fail to attain success. (d) No plan of employees' representation will command the confidence of either organized or unorganized employees, if it is essentially or chiefly a union-fighting or union-destroying instrument. The sincere employer will find that a genuine dem- ocratic assembly is a far more enlightening and educative body than the average union of today, which has little interest in the truth about any one plant situation. He will also find that any injustice or repression will only saddle him in the end with an external fight for which he has furnished the ammunition and greater intelligence for securing his defeat than would otherwise be available. 7. What about arbitration? Compulsoiy arbitration in industrial differences, the writer believes, will not serve the interests of society or of the parties at issue. Intervention by the government in a real public emer- gency is another matter, but it should not become so frequent as to constitute the rule rather than the exception; for when this is the case, all means calculated to bring about a direct settlement between the disputants are weakened and are often regarded as of no ultimate importance. The tendency to rely upon the government and law to secure for individuals and groups by judicial or semi- judicial procedure a bigger share of this world's goods than economic considerations and their deserts would justify, has caused the public, capital and labor alike to fight shy of the dilatory procedure of such tribunals whose ultimate decisions are apt to be out of keeping with the necessities and merits of the case and whose machinery is cumbrous and is not adaptable to the needs of industry densely congregated in our industrial districts. A quick, intelligent deci- sion is what the public,- labor and management need and desire. Speed is of the essence of this service and it is likeliest to come Detroit, April, 1922 235 where knowledge of the facts and of each other is already con- siderable. The Swift plan of employees' representation leaves the matter entirely open for any subsequent or separate action whenever an agreement by a two-thirds majority of the assembly is not arrived at under the plan. The parties are then free to compromise, arbitrate, separate or fight, as they choose, but the plan as such is not discarded; it is only dispensed with on that issue. 8. Can capital and labor satisfy the public and each other? The public desires five things in industry: 1, stability; 2, goods and services ; 3, leadership ; 4, some control in emergencies ; 5, progress. Capital desires the same five things in terms of — 1, security of investment; 2, ample production; 3, good management; 4, sufficient control of conditions affecting the risk ; 5, expansion. Labor's desires, expressed in terms of "What the Workman Wants" rather than in the rhetoric of labor politics, are almost identical, viz. — 1, a steady job ; 2, adequate real wages ; 3, a good foreman; 4, individual and collective voice about conditions; 5, a chance to rise. The writer believes that a large measure of the reconcile- ment of the three interests outlined will be attained through see- ing that the worker obtains in a satisfactory measure the five things just mentioned, and that he does so through democratic processes. It is not believed that these ends are inconsistent with those of the public and of capital, for the latter at its best is just enlightened management and its industrial engineers must answer satisfactorily this question, viz. : "How are the masses of men and women, both without and with capital, to be taught to labor with their hands and brains willingly and efficiently so as to secure out of the products of their toil and thought what they feel to be, and what will be, in fact, a fair return ?" To remove the nightmare of unemployment from the work- man's pillow ; to carry any necessary surplus labor of an industry at that industry's expense ; to pay the highest possible wages ; to improve the economic machine to that end ; to lead, not drive men 236 S. I. E. Eighth National Convention by adequately trained and sympathetic executives who will com- mand their respect and esteem; to provide for self-expression on all the worker's interests, and to keep the way wide open for his education and advancement, are measures both just and neces- sary and are the basis of all Swift & Company's industrial relations. 9. Is the worker asking for profit-sharing and management- sharing ? We find the worker little interested as yet in profit-sharing or management-sharing or in any kind of stake in the business which involves responsibility or risk, or in any incentive which implies a long-deferred reward. Labor may come and we hope will come to the stage where it will go out with its accumula- tions and hire capital intelligently at the good wages which capital will always command in a wealthy country like the United States ; that, however, is in the future and demands years of discipline and preparation, a saving margin from earnings, and considerable extension of the habit of thrift. Revolution and confiscation, meanwhile, hold ho blessings for the workman. The average worker today is far from holding the extreme opinions often assigned to him by those who furnish the theoreti- cal underpinning for new social views or by those who make a living out of his discontent. 10. Where do we go from here? is the last question. It is inevitable on the lips of the forward-looking people in industry. American capitalism at large is not reactionary, though some capitalists are. It is honestly seeking a way out and that way is necessarily different from the course likely to be followed in other countries. Take England, for instance. There, because of social and political cleavages centuries old, labor controversy starts and ends today with a solid body of unionism functioning nationally within a small area under leaders of high intelligence and long experience. Unfortunately, English unionism is pessi- mistic. It is little concerned about production and deeply engaged in dividing up "all-there-is." It hopes for little and gets it. It aims at making men dear without making goods plentiful. Detroit, April, 1922 1Z7 In America, however, where all hope to rise, nothing but good can come to labor — union and non-union alike — by undis- criminating home rule in each plant for all of the people in that plant and all of their affairs, preserving at the same time the in- herent rights of employer and employee to take any other action they see fit if agreement is not possible. That is employees' representation at best, and it ought to be a powerful instrument for industrial peace at the sources of trouble instead of a new bone of contention, as unionism would like to make it. SUMMARY Summing up, the great bulk of human industrial effort must continue to be outside of the immediate control of the govern- ment. Yet industry can only progress in a democracy with the consent of the governed, and it is the negative attitude about this on the part of a few prominent capitalists that retards progress in industrial relations. Capitalism holds the field beyond any doubt; It is the only system which has made good and there is no other in sight which can carry on. Though we live in a society admittedly acquisitive, one in which the economic motive is dominant, we do not claim that this motive is socially sufficient. The things that we individually strive for are increasingly those which promote the general welfare rather than mere accumula- tions of wealth. The public and the individual conscience is increasingly tender about the quality of the society which our economic system is producing, and, being a democratic society, the justice of the distribution of the necessities and good things of life is always open to discussion and the method of it to amendment. Yet no one who makes daily contact with the sane but strictly self-regarding attitude of the workrnan can consider radical reconstruction as immediately necessary or as practicable on the basis of the present meagre fund of altruism. Personal selfishness can today no more be assumed as eliminated from the performance of any social function than physical force from the "practices of governrrient. Of that we have had recently abundant proof. The' joy in personal achievement, which we like 238 S. I. E. Eighth National Convention to see greatly increased, is yet too limited to be a universal in- centive. The economic urge must still be relied upon to motivate the majority, and on the whole it has not proved a detrimental impulse in human development. Unionism in the past has rendered invaluable services to labor in raising the status of the worker in the face of indifferent ownership. It will render more and will always be on the heels of the illiberal employer. However, as it has only reached a mere fraction — about one in eight of the 41,030,000 people gain- fully employed in the United States, it is foolish to insist that in any industry unionism must rule or ruin ; for, like capitalism, it can only commend itself in the end by good works. Indeed, every custom in our day must have pragmatic sanction. We see many programs of what we might be if we were better than we are, but we are also learning much that is useful as to what we can be even as we are. In closing, we desire to emphasize that, though the perfecting of the technique of industry through the scientific method is socially desirable and is under way, it will not of itself bring in a new industrial day or greatly reduce economic friction as was once predicted. The intangibles in industrial relations are truly sensed only by those who are touched to fine issues, and happily that com- pany is on the increase^ We commend to all two motives which sum up our experience — namely, Education and Service. They are embodied in these words of wisdom, an old Persian proverb, "The wise man can understand the foolish because he has been foolish, but the foolish cannot understand the wise because he has never been wise," and an injunction of Dean Inge, "Don't get up from the feast of life without paying for your share of it." CHAIRMAN COWDRICK: The meeting is now open for a discussion of Mr. Calder's paper or the general topic of the operation of employee representation during periods of business depression. MR. PERRY : I notice that all the discussion is based on either a very large or a very small basis. What difference Detroit, April, 1922 239 would there be, say, for a medium business of 600 to 1,500 employees? MR. CALDER: There would be no difiference. These nineteen assemblies go down to 300 employees. We have for smaller plants a committee of the whole which meets under one roof. The plan is no different — it is simply the scale of assembly. The ratio of voters to one representative, of course, is a smaller number in the smaller plant. A plant with 400 people would have one representative to about 40 voters; a plant of 6,000 would have one representative for 220 voters, and so on. MR. ATKINS: What method did you use for educating your employees to form this organization? And furthermore, was the forming of this organization fostered by Swift & Co. as a means to an end to relieve the situation that had arisen during the war conditions? MR. CALDER: For three and one-half years the federal administrator had settled everything in 65 packing plants in this country out of 1,230 in our industry. Sixty-five employers had selected to have their war labor affairs regulated by the government — the rest went free. And for three and one- half years the government said what wages we were to pay and what hours we were to work. In consequence, the hours were reduced and the wages repeatedly increased in these 65 plants — all the rest were free of the administrators' decrees. Within six months of the termination of the war labor control on September 15, 1921, the government said, "What are you going to do? Will you voluntarily give your em- ployees representation in each plant?" "Yes," we said, "we will be glad to do it, but we haven't been able to move in the matter hitherto because the arbitrator's word is law." We couldn't discuss wages or any employment issue for almost four years. Of course, we didn't know that six months after assemblies were created, a major and general wage issue would come up ; but it did. The assembly plan was not adopted because any 240 S. I. E. Eighth National Convention wage issue was up or in sight. It was six months later when we had to face such an issue. Our inventories of stocks in Europe and stocks here slumped greatly in value and we ended the year last year with a $20,000,000 inventory loss. For three years after the Armistice we were making no money with the administration handing out war wages. We very much hoped there would be no need for an early modification of wages, but when it came to the first of December, 1921, they had to be revised downward. We waited until our annual figures were out and everything was known. I want to assure you that representation plan was gone into with the greatest care and with the knowledge of the government. We hope we had learned enough and had foremen wise enough to permit setting up home rule in every one of our plants and among our own people. That was the origin of our representation plan and not any desire on our part to create a machine to get the wage cut through. MR. ATKINS: How did you form an organization of your shop committees? MR. CALDER: After President Harding invited us to go to Washington in March, 1921, and when it was agreed that the administrator would cease his office six months later, we brought the matter before our employees, and by talks and educational work, we found that they highly desired to have soine method, right in each plant, of employee representa- tion. I was one who had to get up the plan in draft and to sell the plan to 50,000 employees, the foremen, the directors and everybody concerned. That was some job. We printed ft in English, Polish and Lithuanian, and also a catechism of the kind of questions and answers about it which the em- ployees might be likely to ask. And about the kind of redress they might want. The plan went to their homes in our plant magazines and we outlined just what it was so that when the primary and other elections came, the people would know exactly where they stood and would nominate the candidate they wished to vote for, or have nothing to do with it if that Detroit, April, 1922 241 was their wish. There was no rushing the thing through. It was wholly a volitional affair. At first 85 per cent of all our people actually voted and 100 per cent are now voting in most plants after a year's experience with the plan. It is essentially an educational proposition — they don't grasp it all at once, they grasp it only by seeing it at work. Even though they answer the questions about it perfectly in their minds, at first they do not have a clear idea of its work. They are not fully educated yet, but the representatives are, and the chief job of the representative is to educate the people who elected him. It is just a big continuation school in essence, with the pupils intensely interested in the lessons because of their direct bearing on their personal affairs. We recently got out a booklet to take into the homes, telling the people what the representative should do, how he should serve them and what they should do to get him to to act. If you approach these people in their own languages they are highly intelligent, inquisitive and acute; if you approach them in English only, when only a feeble hold of the English language exists, they are in doubt. MR. ADLER: If apparently you have a satisfied group of employees after a recent wage revision downward, would you think it advisable to start propaganda, introducing a method of representation of this sort? MR. CALDER: That entirely depends on who you are and what your previous character and condition has been. If you have not been fair to your employees or if they merely think you are not or if you have a good many unsolved issues besides wages you have to settle those somehow. You can- not enter a larger generosity with those unsettled difficulties in the way. But granted things are normal, then bring your people together and say, "Do you want anything like that? Do you want to have a recourse from a foreman's decision or are you just going to let it go? Do you want a body of people to stand up for you, to talk of anything they want, and prove it 242 S. I. E. Eighth National Convention if they can, without discrimination? And if they want it let them have it. If not, don't let them. Unless the people wish it, the creation itself is nothing. I believe the wish is formed in every workman's mind today, but he can hardly believe it possible when you offer it to him. MR. THOMPSON : For two years our company has been investigating a plan of employee representation. Last sum- mer for about a month I was asked to look into places where employee representation plans had failed, particularly finding those places where the management had been sold and where they had been generous in attempting to give the employees an opportunity. I don't know that you are equipped to answer the question or whether you will answer it. It concerns a company in Chicago, a large steel company, and the report to me from the man who has had charge of the work was that from their experience they thought the success of any company was rather in spite of the plan than on account of it. They had given their employees representation, had agreed to abide by the decisions of the representatives and it worked so badly in reducing the morale of the help that they could employ they were obliged to cancel it. MR. CALDER: I am always inclined to be skeptical as to why other companies' plans do not work unless I know all about them. You would be surprised at the things that upset the working of a plan. Let me show you. In our St. Louis plant a man was re- ported as having stolen a ham. You can understand how certain of our products are tempting to people who haven't a clear understanding or idea of honesty and other people's property, and they put things under their coats and take them out. This man was unjustly accused, but it was rumored all around he had stolen the ham and he went out in the eyes of two thousand people as a thief, practically convicted in their minds. He was so cowed by it that he went home and stayed home for three days and finally his wife got after him and said, "Have you done anything about it?" Detroit, April, 1922 243 "Nothing; I can't face them." "What about this plan I have been reading about (this was in Polish) ? Have you been before your comjnitt'ee? Have you been to your representative?" "No." "Well, you just put on your hat and go right to him." And he brought up his case before his representative and he got justice and his own foreman begged his pardon and took him back again and said he would never act hastily again. That means that in the homes of these workers the wives believe in the plan. That woman insisted that her husband use all his privileges instead of sitting in his own house like a whipped cur, afraid to face the people. Unless you have made clear what your plan is, unless your people are with you in spirit, unless you have intro- duced some education, you need not expect to use a plan amongst foreigners and Americans in one language and ex- pect it to work; it won't. But if you can get the education home and it is a good plan, a democratic plan, and it conveys some real power, workmen, in my experience, will use it, and they will use their power most conservatively. They are not in the least radical in that respect. Our employee com- mittees have been far harder on men who brought up false complaints than the employer ever would care to be. We have had recommendations to our managers from Committee No. 1, for instance, or from Committee No. 3 and other commit- tees, asking us to fire Mr. So and So; "he is a nuisance in the plant." That was a decision of the committee. We didn't do it, but my experience is that they are very conservative, and if any company had trouble with a plan I would be like a doctor and go around and take temperatures before I gave my opinion-. MR. LINK: Will you give a statement that the plan of employee representation is not a panacea, that the success of that plan anywhere depends upon the leadership which exists in that organization? Any group of executives or any 244 S. I. E. Eighth National Convention company can put in a plan and have a failure if they don't handle that plan or furnish the leadership necessary to make that plan a success. The plan by itself will not succeed un- less the leadership is there, and with the proper leadership almost any plan will succeed. The plan itself really provides a better tool, in the hands of the proper kind of management, to bring about a better relationship. MR. CALDER: I wouldn't say that almost any plan would succeed if the leadership was there, because if you try any kind of plan you find that you must have a plan with decisive powers. You must have real decisive powers. What you can give depends upon the amount of social contact you have made. The plan itself should follow, not precede the winning of the confidence of your people. And yet that is not altogether correct, because you cannot completely win the confidence of your people until they have been offered a chance to do you harm and have refused to do it. QUESTION : Is it in order to get Mr. Cowdrick to tell us something about the Colorado Fuel & Iron Company and then have the discussion center around both plans? CHAIRMAN COWDRICK : I shall be glad to tell briefly what happened in connection with our industrial representa- tion plan during the period of depression which hit us in our part of the country about the beginning of 1921. Before the end of 1920 it had become evident to the man- agement of the Colorado Fuel & Iron Company that decided reductions in costs would have to be made if we were going to stay in the steel business and compete with other corpora- tions. The president of the company held a meeting early in 1921, just after the first of January to be exact, with the representatives of the employees at the M i n n e q u a Steel Works, the one steel plant which we operate. At this meet- ing the management laid all of the facts of the business be- fore the representatives in the same way Mr. Calder has de- scribed they did at Swift & Company. The president took cost sheets and other accounts and Detroit, April, 1922 245 spread them out and let the men look at them and explained any points they were in doubt about. They were told that the company had been putting into effect such other econo- mies as possible and that in the judgment of the management it would be necessary to make a 20 per cent reduction in wages. The representatives asked for time to consider the. propo- sition and take it up with other workers. Two days later they met again with the president and said they realized that a reduction in wages would have to be made. They §aid, how- ever, that they wished that this could be made 15 per cent instead of 20 per cent, and that if the company would accept that counter proposition they would agree on behalf of them- selves and the other workmen to make up the additional five per cent in increased efficiency and reduction of waste. This counter proposition was accepted and things ran on for several months on that basis, apparently to the satisfaction of every- one. About the middle of the year, however, conditions in the steel business had grown steadily worse and the wage rates paid by companies which the Colorado Fuel & Iron Company came in competition with, had been further decreased. In August, therefore, somewhat the same procedure was gone through with and another 15 per cent reduction was made by agreement. Then in the fall of 1921 our company went through a very serious period of partial shut-down of the steel works and when we were in a position to begin opening up on a larger scale again about the first of this year, a further 10 per cent reduction in wages was made by agreement with the em- ployees, bringing those wages to the basis which is now being paid. In the meantime it had become evident during the earlier part of the year that a reduction in fuel costs would have to be made also. The prices of coal, made necessary by the high costs, were keeping the buyers out of the markets. Farmers 246 S. I. E. Eighth National Convention in the western part of the country, who had lost much money during the last year or two, were simply unable to pay the prices asked for fuel. Railroads and other industries were buying as little as they could and at our own steel works we found ourselves in a disadvantageous position on account of the high fuel costs which we were obliged to pay. These facts were explained to the representatives of the employees at the coal mines and at first these men, like the employees of Swift & Company, about whom Mr. Calder has told us, couldn't see any kind of reduction of wages at all. In fact, the proposition was not put flatly to them; they de- cided against it without really having it put up to them. Later in the year, however, when it became evident that the condi- tion of the fuel market was reducing the operations of our coal mines, when some of the mines had been shut down alto- gether and others were working only part time, employees and their representatives took the lead in bringing this subject up again. The outcome of this was that the employees, or their representatives, took the initiative in circulating peti- tions among the miners in which they offered to accept the wage rates in effect between November, 1917, and November, 1919. These wages, I might say in passing, represented a war time wage. The increases which had been made follow- ing November, 1919, were increases above the wage scale paid during the war. These petitions to which 1 have referred were signed by a majority of the employees at all of our operating mines in our largest district and by a majority of the employees at "ome of the mines in our second largest district. After the representatives had verified the signatures, the company an- nounced the reduction to the 1917-1919 wage scale, making it effective only at the mines where the majority of the men had agreed to it. At this stage the United Mine Workers of America, with which organization many of our employees are affiliated, altho it is not recognized by the company, got into the game and Detroit, April, 1922 247 complained to the state industrial commission that we had violated the law. At the same time they called a strike, which was effective at some of our mines. The industrial commis- sion held a hearing and went into the case very thoroughly and handed down a decision in which it sustained the company in every particular, endorsed our method of collective bargain- ing, and held that we had not violated the law by agreeing with our employes on the readjustment of wages. Acting under the authority of the industrial commission's findings, the company again put into effect the reduced wage scale, again making it effective only at the mines where it had been agreed to by a majority of the employees. The mine workers again instigated a strike, which again was partially effective. However, our operations were not seriously inter- fered with. At all times we had plenty of coal for every pur- pose and those mines which were temporarily closed as a re- sult of the strike gradually reopened. That was the situation up to about the beginning of the present year, with everyone apparently satisfied, and with our men getting at least a fair amount of work, an amount which was constantly increasing as business picked up and as buyers came back into the market. I need only add that the nation-wide strike of coal miners called April 1 was almost wholly non-effective at our proper- ties. On the first day of the strike, including two strongly unionized mines which went out as a body, we lost only 25 per cent of our men, and any of you who are familiar with the coal miners' psychology will agree with me that that was a rather remarkably favorable record. Most of those 25 per cent came back almost immediately. In fact, from the first day of the strike all but two of our mines, and those, as I have said, in a strongly unionized district, have worked con- tinuously. We have secured ample supplies of coal for every purpose. That, as briefly as I am able to relate, has been our ex- perience during the depression which began about the first of 1921. The management of the company was wholly satisfied 248 S. I. E. Eighth National Convention with the functioning of the industrial representation plan dur- ing that period, and I am convinced the vast majority of our employees are entirely contented to work under the arrange- ments provided by that plan. MR. PERRY: In your cost sheet which you gave your employees, how much did you subdivide the rather intangible things like insurance, depreciation, overhead, etc? How was that reserved for management? CHAIRMAN COWDRICK : I am not an accountant, but my impression is that our costs start with the operating reve- nue and expenses, reaching a figure that shows the operating profit or loss, and that then account is taken of the so-called fixed charges and the expense of management. MR. PERRY : We have often felt that that would entail a great deal of discussion in a group of men of that sort. CHAIRMAN COWDRICK : I remember well at the meet- ing to which I referred there was considerable discussion and questions which were asked by the men were explained, in most cases, by the president of the company. I think those matters were made quite clear to them at the meeting. MR. CALDER : In our company we gave these lists that I spoke about, but the committee on working conditions in a Chicago plant, one of five men and one woman and six em- ployer representatives, could get anything they wanted from the company. We put certain things before the people as typical of the conditions and we invited the committee to ask any questions they wanted to. There was no limit. Of course, everything that was in our accounting system could not go in, even indirectly; it was too bulky, but they were able to giet anything they wanted and they were intelligent in their requests. MR. SHEPHARD : Does the question ever arise in these assemblies of workmen as to the accuracy of the financial statements placed before them, and if so, how are they satis- fied? That is necessarily a question of good faith, but such Detroit, April, 1922 249 a question might arise as to whether large expenditures dur- ing the year should be charged to some capital account or operating account. MR. CALDER: In our case the situation was plain. We were losing money ; we had got a little surplus from past years which we needed because we are one of the biggest borrowers in the country. We borrow all the time. Our stock capital is now all in things and we do our business on borrowed cap- ital. The workmen know that. Every bank has our paper, especially the small country banks. The workmen know that. That money has a value — they, themselves, would not allow their savings in the bank to be used unless they got a cer- tain wage for it, and if we lost money and they had any doubt whatever as to where the money was, everything was open. Swift & Company's accounts are the most public in the coun- try. Our year book gives the certified account of an inde- pendent accounting firm. As to whether things should be charged here or there, our employees have not yet arrived at the stage where they are finicky about details. They may do so, and the road is open for it, but there never has been any suggestion that Swift & Company's accounts were not the best practice to be found in the country. There has never been any question. It may come, and if it does, there is noth- ing whatever to conceal. The management, of course, is still running the business, still saying how the accounts should be kept, still saying how the accounting and detailing shall be done, and will continue to do so, as trustees for 45,000 stock- holders, 21,000 of whom are employees. But if anything we are doing turns out to be misleading or questionable from the workman's standpoint, it will receive very careful attention. CHAIRMAN COWDRICK: In answering Mr. Shephard's question, while Mr. Calder was speaking I tried to recall that point as to the faith of the employees in the accuracy of com- pany records, and whether it had ever arisen in any of our committee meetings or conferences. I cannot recall a time when it did. It has happened occasionally that on the out- 250 S. I. E. Eighth National Convention side charges have been made of that kind. I refer particu- larly to the situation last summer and fall when the wage reductions at our coal mines were being considered. At that time men connected with the United Mine Workers organ- ization very freely charged that the company officers were lying to the men; that we had plenty of business; that we simply were telling them that business was bad in order to get the wages down so that we could add to our already un- holy profits. Some of our men believed that, but there was no way to prevent those stories from being told on the outside. MR. BLISS : Do the men insist on the management taking a proportionate cut in wages at the time the adjustment is made? MR. CALDER: The question was raised as to what the management got. The federal administrator raised the sal- aries of the workers all during the war — they got five in- creases and the salaried people got nothing. They knew that. The workers got all the benefit and the surplus we executives might have gotten something of all went to pay the dividends and the workers the high wages after the boom was over. The salaried people didn't get it. MR. PARKS: Has your concern taken any steps toward providing security in the minds of employees for their posi- tions during periods of. depression or unemployment? Next to the man's home and family probably the dearest thing to him is the security of his own position, and I am looking for- ward to the time when advance steps might be taken in that direction. MR. CALDER: The fact of the matter is that Swift & Company are pioneers in that. Away back in 1912 Swift & Company decided that if there should be a blizzard and if there should be a switching strike, or the farmer should not feel like sending his stock into the yards, that though we had nothing to do at the plants and all our overhead to pay, we couldn't expect to have regular, satisfied employees if their earnings were a gamble. We then decided to pay everybody Detroit, April, 1922 251 on the roll Monday morning 44 hours' pay whether they did get that time or not. Every employee gets such a minimum wage if he only works 19 hours. The federal administrator cut that guarantee down to 40 hours because it was too close to the shorter work day he was fixing for the worker. We now work a 48-hour week and 40 hours, even if the man only works ten or twelve, is paid if that man is on the payroll at the beginning of the week. We are now carrying our workers on the books as if everybody was insured against unemploy- ment. We are figuring on what each man would get on the basis of a scheme we have in our minds. For the next year we are going to be running an unemployment insurance on paper; that won't pay out any money, but we will know ex- actly what it would cost if the scheme is installed. In the course of eighteen months or two years we will have an ac- curate experience to show us what the maximum demand on the payroll would be. It looks as if we could have an unem- ployment insurance around three and one-half per cent of the payroll, but we must get our experience first to be certain, and of course the demand upon such a fund is greatly affected by the efficiency of your hiring, firing and industrial relations practice. QUESTION : Did you have to reduce the working force after the federal administrator left? MR. CALDER : Yes ; as efficiency came up we got back to 16 per cent more output per man than in 1914 and correspond- ingly fewer plant and office employees. We reduced our gen- eral office staff from 3,000 down to 2,000. Some went into the plant. You very well can understand the government re- quiring so many clerks to check and over-check. Some were unnecessary; there were more clerical people around check- ing others than we could use. We were not on a cost-plus system, but we had to employ checkers and counter-checkers and keep extra records. It was cut down in all offices as soon as the necessity for the red tape, for the system we didn't need, was dispensed with. 252 S. I. E. Eighth National Convention There is a seasonal fluctuation of about 10 per cent in our employees by reason of the fact that you can raise cattle once in three years, hogs twice a year and finish them in ac- cordance with grass and corn seasons. There is a 10 per cent fluctuation in our employees by reason of natural condi- tions. There is always a desire to run our business with as few people as we can and never have them without a week's pay, but there is no guaranteed employment because we can- not do it. A man gets his forty hours if he only works twenty during the week, if he is there at the beginning of the week. MR. SHEPHARD: The National Industrial Conference Board makes recommendations that employee representatives should be guaranteed against any discrimination on account of any action of employee representatives taken in good faith. That also occurred to me as one of the most difficult things to carry conviction in the minds of the workers in the case of a concern whose record in a deal was not particularly per- fect. It has also seemed to me that the proposition was per- haps rather useless, because in the case of a concern which did have a reputation, it would not be necessary, and in the other case it would not be worth the paper it was written on. I would like to hear something from the chairman and the leader on that subject. MR. CALDER: We have that anti-discrimination clause in our plan and it is very necessary. The workman can hardly believe you mean it at first. We had in one or two of our assemblies a most red-hot, ignorant, prejudiced union man or two, who had just happened to be fancied by the electors and other organized men. I can show you where an employee representative got up and declared the plan was "bunk." It looked so good that they thought we must have some joker in it; it was too good to be true. This man couldn't find any- thing wrong with it, but he figured there must be something- wrong with it and he made constant insinuations of bad faith. The assemblage said, "Why don't you throw him out? Fire that man. We are tired of listening to him." And what they Detroit, April, 1922 2^3 actually did was to hold an election under the rules and they recalled him. You can "get the hook" in our assemblies from the voters if you don't watch out ! They were ashamed to be represented by a man that acted like that. That non- discrimination clause is very essential and so is the thing itself. It saved this man for a while and made a great im- pression all around. MR. SHEPHARD : In questions as to the validity of the clause. In your case it was not the fact you had the clause there, but the man in that case was to be fired. MR. CALDER : If you are going to be democratic, you have to be completely democratic. The company cannot do anything to a representative because they don't like him, but the voters can. No superintendent can go into an assembly unless he is invited and if there is anything wrong with the company you can be assured it will come out in the assembly. Don't have that form of employee representation if you have anything to conceal. CHAIRMAN COWDRICK: With our industrial plan we also have a clause guaranteeing the employee representatives against undesirable results following their actions on behalf of the employees, and while our experience has not been quite as extreme as that of Mr. Calder's, in principle it has worked the same. Answering a little further Mr. Shephard's question, I think that printing that> clause in the plan, while it might not change the policy of the higher-up management in any way, is im- portant for its eflect upon the workmen themselves. Having that printed and putting it down in black and white has a good psychological effect not only upon the workman, but in some cases upon the foremen who might show a disposi- tion to take out spite upon a representative who has been active. MR. CALDER: One point I didn't mention was that whenever we had an employe representation scheme adopted at any plant the unions had a great deal to say about it and they always said it was "all bunk." It is important to have 254 S. I. E. Eighth National Convention the assurance of consistent conduct in the plant because the negative side of representation is always presented to your people by people who do not want it to succeed. QUESTION : Have any of your plans or policies adopted during the war been changed? Has the change in the indus- trial situation made it advisable to discontinue the policies or practices which were worth while then? For instance, if a house organ was worth while during the war to inform the employees in the proper spirit, has the time come now where it is no longer worth while — not especially the house organ, but anything in personnel work? MR. CALDER: I want to say I was not with Swift & Company during the war. I was in France before the war and then I made seaplanes during the war and I came to Swift & Company shortly after the armistice. Swift & Company had no house organ for their plants; they had no industrial relations department; they had a com- mittee on welfare at headquarters, but they had no organized proposition, although they had service agencies at different plants, unco-ordinated, that they hoped to co-ordinate. Judge Alschuler, a very fair man with a desire to be fair to the men, before the times of depression boosted the wages four or five times, gave bonuses, etc., but he also laid down certain rules as to seniority, dismissal and things that we came to like in many, but not all, respects. Quite recently we took up in each of our assemblies every one of Judge Alschuler's rulings and practically made a constitution of them in our plants. The only thing we did not adopt was this : He had a kind of a theory that if a man worked in a certain place, say as a wool-puller, and went out elsewhere as a wool-sorter because times were slack, the next time you had a wool- puller's opening that man could come 100 miles and take that place. The judge had an idea that that would work, but it couldn't. We modified one or two things like that that were unpractical, but we practically signed, sealed and delivered to the employees these rules only a couple of weeks ago. Detroit, April, 1922 255 How Industrial Engineering Increases the Productivity of Each Industrial Unit at Reasonable Cost By D. B. Gauchet General Works Manager, Edison Electric Appliance Co., Chicago To the mind of the average laymen, industrial engineering would seem to be a profusion of filing cards, charts, forms and various systems; but the actual essence of industrial en- gineering tends toward the elimination of these devices, ex- cept where it can be proven that they produce increased out- put, lower costs, or better control, or perhaps all three. There are several ways in which industrial engineering can increase not only the productivity, but general efficiency of a unit plant. However, what I may say on this subject will, of necessity, have to be based on my personal experience in dealing wath manufacturing industries. The great need of industry is plant morale, defined as "mental state as regards spirit and confidence, especially of a body of men." There should be unity of purpose between employers and employees, with loyalty and confidence dominating both man- agement and men. With this spirit, the result is conquest m the performance of every daily task and the development of real plant patriotism. This, to my mind, is one of the vital points to be improved upon and created by industrial engi- neers, in order to increase production and general efficiency. The plant of the slave driver, the shirker, the politician, or the professional agitator cannot be efficient or survive. In connection with this, another vital matter is the sim- plification of methods so that the ordinary human being can thoroughly understand and appreciate them. Intelligent en- gineering strives for simplicity rather than complications, and many industries have "gone on the rocks" because of inex- 256 S. L E. Eighth National Convention..... . _ perienced and inefficient engineers, who have mistaken sys- tem (so-called) for the thing which system is designed to accomplish. There is no wiser proverb than: "System is a good servant — but a poor master." Industrial engineers should investigate all methods, such as planning production, routing of work, simplification and standardization of product, reducing costs, tying together fac- tory costs with production control, more thorough and ac- curate method of ordering and receiving material, planning a budget system of expenses, simplified plans for securing the most production per dollar spent, reducing the ratio of indi- rect to direct workers down to the fine point and still retain proper supervision — and the minimizing of waste of all kinds. It seems to have fallen to my lot during the last few years, to be placed in positions where reorganization and revamp- ing of industrial units were needed, which required the g^^^ sistance of industrial engineers whom I found invaluable in aiding management to find the leakages and loose ends in order that proper remedies could be applied. Many organiza- tions, through lack of experience and definite knowledge, are allowed to run on for several years before the climax. Whenever it is necessary to resort to make-shift methods there is something wrong with management. In a large per- centage of cases there has not been proper planning or fore- sight. If there had been, these "rush" matters which cause a department to railroad through a lot of work which should have been thought out thirty days before would, in a large measure, be avoided. The great need for industrial engineers is generally ac- knowledged, I believe, by all modern management. Their task, largely, is to guide and manage industry, with ingenuity and tact; getting at real facts, so that the executives may take intelligent and proper action — assisting in building up new organizations, reorganizing or improving old organiza- tions — which leads to definite and conclusive production re- sults, as well as economies; both of which can be measured by a record of previous performances. Detroit, April, 1922 257 One of the great functions of industrial engineers, which seems to be omitted at times, is the handling of human be- ings, which requires a high order of ability, and a knowledge of human nature. In my experience, I have seen men who were technically, and from a strictly engineering and manu- facturing standpoint, high-grade industrial engineers, but who lacked the faculty of being the high-grade human engineers so necessary to create a real go-getting organization. After all, a proper organization is so much greater than any one man, or one man's ideas, that there can be no com- parison; so the real job in industry is not only to create simple and effective methods, but the ability to pick men and assign them definite and undivided responsibility, with the necessary authority to carry on their duties. Thoroughly humanizing industry leads to increased productivity. Many managers do not fully recognize the resourcefulness of foremen. The day is not far distant, in my opinion, when both management and foremen will fully realize this situa- tion and endeavor to meet it. In the old days incompetent foremen were fired and new ones, just as inefficient, hired to take their place, instead of using patience to train them or placing them at work for which they were better fitted. It has been my policy to pro- mote from the ranks just as far as it has been possible to do so. This has a good effect on morale. Modern management feels it is good business to train and educate foremen. Educated foremen mean industrial prog- ress, increased productivity, individual betterment. An old quotation is : "As is foreman, so are the works." CO-ORDINATING ALL DEPARTMENTS With poor methods and high-grade personnel, an industry may prosper to a fair degree ; whereas, with the best methods and poor personnel, not properly set in an organization, the tendency will be toward failure. The co-ordination of all de- partments in a plant, from the designing engineers^ to the shipping department, including the sales department, is abso- 258 S. I. E. Eighth National Convention lutely necessary. If one department is weak and not func- tioning properly it retards the whole industry. The slowest unit sets the pace for the whole. When my subject was first assigned me it dealt with in- creased productivity only. At my suggestion was added "At reasonable cost"; that is, "How Industrial Engineering Can Increase the Productivity of Each Industrial Unit at Proper or Reasonable Cost." High production, at excessive cost, might bankrupt a concern. Let's assume that we are to organize a new industry. We must consider the size of the plant required for an estimated given output (as indicated by the commercial and sales or- ganization), living conditions — particularly labor conditions — and then the management and industrial engineers get to- gether and figure out the cost of the plant and its equipment and the laying out of this equipment so that work will pass through the factory in proper sequence. Obviously the general idea is to begin with the receiving department and have all the operations performed in a steady flow through the various sections of the shop until they reach the shipping department. Planning of a new shop is a prob- lem in itself, and one that needs a great deal of thought and study from a financial, engineering and managing viewpoint, to secure high output and low costs. I think this discussion would be more instructive by tak- ing a going plant — a plant that is not on a paying basis ; prob- ably running at a loss — ^but a plant well equipped, which has its sales force and executive offices all set but, because of disjointed production, high costs, and divisions of responsi- bility, is a failure ; or, in brief, a mismanaged plant. What has management and industrial engineering to do to get this plant on a paying basis? We must do exactly the same as the physician who is called to the sick-bed ; but who naturally cannot help the patient until he knows exactly what the trouble is. He must make a complete diagnosis, after which remedies may be intelligently applied. Detroit, April, 1922 259 ANALYZING AND PLACING PERSONNEL It is well, therefore, to start with a thorough and syste- matic inventory of the personnel in the various positions. It must be granted that in all plants there are many valuable men, some of whom are not being used to the best advantage. I have always found this to be the case, and in taking charge of a plant have tried to find out, first, who are the valuable men in the plant and what are their abilities, and then place them in their proper positions and put more and more re- sponsibility on them, under proper systems and methods. Then analyze the various departments on the basis of pro- ductive and non-productive labor — study the nature of the work, and determine whether their overhead is, or is not, too high. If too high, definitely inform the head of that de- partment tliat he must make a decided reduction in his over- head. To get at this systematically and orderly, I have used a form similar to the one shown on the chart. (Speaker uses lantern slides from time to time). This report definitely points out the exact and relative cost of labor. Supervision, inspection, etc., and enables you to get your ratio of indirect to direct down to where it should be, according to the business — by eliminations, changes in help, etc. This is a matter of good, common "horse sense" after you get the facts. It is surprising what a showing will be made when the heads of departments actually know what their indirect to direct is. The department head, knowing that the manage- ment knows these figures, will start operations for reductions immediately, should the figures show poor management or excessive overhead. In dealing with such organizations as the Lynn works of the General Electric Company for many years, and the Rem- ington Arms- at Bridgeport during the war, the methods I pursued, which had the approval of the executive officers of both companies, were along decentralized lines. Placing direct responsibility on a particular department 260 S. I. E. Eighth National Convention results in departmental concentration such as one would get in the small shop. The superintendents of the various divi- sions were practically supreme over the functions of their respective departments; each having his own engineering, drawing ofKce, his tool service section, and his production, stock and cost men. In other words, we surrounded depart- ment managers with the organization mechanism so that they could take full responsibility for high output at proper cost and general efficiency. Under such an organization general policies are supervised in the broadest way by chief centralized heads; such as a general production manager, having charge of all production work, and a chief engineer on all drawings, designs, etc., but the men in the departments must satisfy their superintendents, and if they do not the superintendents appeal to centralized department heads. All the operating reports (production, overhead and cost) are filed in the general office, so that the management at all times knows the results accomplished, and extracts from these departmental operating reports are sent to each department head so that he also knows results from period to period. FUNCTIONS OF PRODUCTION DEPARTMENT Broadly, the production control department should control all time and quantity of not only what might be termed "straight" production, but materials (which are the starting point of all production), tools (whether new tools or repairs to tools), patterns, etc., and also hold the engineering department responsible, as far as time is concerned, for designs and draw- ings. In other words, the production department should have responsibility and control of a manufacturing order or cus- tomer's order from the time it is received until it is shipped. All matters of production should start with a definite manufacturing order (Ex. B), and no material should be pur- chased in excess of this definite manufacturing order. This provides for a debit and credit covering all production units and material required for such units. Detroit, April, 1922 261 With the above work well planned, it is quite an easy matter without a flock of chasers or tracers, to keep schedules and make promises of delivery, and the shop that keeps less than 95 per cent of its promises I would not consider efficient. There might be a lesser or greater percentage on some manu- facturing with which I am not familiar which might be con- sidered good. The making and keeping of estimates of de- livery is vital to the success of any concern. All proniises must be made to the production department, in writing, by the head of the department responsible for delivery. No verbal promises should be accepted. I have known of several shops where promises were being made for three or four months, where the actual work ahead of them was a year, and in reality, in some cases, the manage- ment or production department did not have any definite knowledge of the amount of work ahead of it, and would make and break promises to such an extent that it was a joke. For instance, it is very necessary for the production depart- ment and management to know the amount of tool work in man hours ahead of them ; or, the amount of man hours ahead of them in the machine shop; in fact, in all departments, so that intelligent estimates of delivery can be made, having in mind the capacity of the plant. In order to have production control properly handled, we must have exact statistics. A production report similar to the one shown on the chart is used for details (Ex. C) where voltages, different combinations, different classes, etc., are carried out so that we know what our average orders are, our unfilled orders, surplus stocks, etc., on all finished devices. From information given in this production report, the sales department estimate probable requirements from quarter to quarter, obviously anticipating increase or decrease as com- pared with past volume of orders. Estimates being made, manufacturing order is placed in the middle of the current quarter for the next quarter. In other words, in February we have our schedules made out to start April 1, which means that we have a pretty even flow of production from quarter 262 S. I. E. Eighth National Convention to quarter. In the case of larger apparatus, this same prin- ciple is applied covering a longer period. If there is any one article in a line, or any number of aritcles that are seasonable goods, we anticipate this produc- tion by the preceding year's business (sometimes several years) or the last six -months' business, as the case may de- mand, and from that project our production on an even flow to take care of the peak. In other words, we anticipate this seasonable business by producing at periods when orders coming in do not represent the average demand for the total fifty-two weeks of the year; but, on a steady going business this production report as indicated gives us all production statistics necessary to carry on the business, with as uniform and steady a flow of production as is humanly possible. Should any of the lines develop a sudden falling off or sudden increase in orders, a change notice is put through on regular form to increase or decrease production, as the case may warrant. This report (Ex. D) is what we term a digest production report, which gives a general lineup of orders, production, stocks, etc., and can be easily read without going into all the details. This report is prepared mainly for the chief execu- tives, as it gives them, we believe, all the "high spots" of the general trend of the business from an order, production and stock standpoint. RESULT OF IMPROPERLY PLANNED PRODUCTION Most manufacturers honestly believe that they plan their production. A very small percentage actually do. The ma- jority "muscle'' the goods through the plant by means of stock chasers, who many times do not go after an order until a desperate need of it actually arises. Under the "muscling" scheme, all of the parts which go into the finished product are started at once, or more often "as soon as possible." The time needed to complete each part is not considered ; very often not even known. Some parts are finished before others and clutter up the shop waiting for the later ones toi come through. Detroit, April, 1922 263 Under properly planned production, each part is started at such a time that all the components to be assembled will be delivered at the same time, being anticipated and scheduled beforehand to move in and out of the various departments at a certain time. This work can be done just as accurately as a train can be scheduled from station to station. I have walked through many a shop where I imagined I could see the real causes of the seeming rush of business. The shop seemed full of work and this was right — the plant was. full of work, but not much of its product was being shipped. Truckloads of goods in process (which are usually taken to indicate a busy shop), were standing still or moving about "hit or miss." Truckloads of stuff which could not be assembled because the finished parts, or part No. 44-A, valued at 5 cents each, were not started until they actually found out the need of them. Someone forgot to order 362 feet of brass. Hence, there are thousands of dollars in the aisles, and every- thing cluttered up ; to say nothing of the cost of idle machines on top of all this. All of this affects the morale of the shop and means low production at high cost. EFFECT OF POOR PLANNING ON INDUSTRIAL RELATIONS Let's assume the men should earn 75 cents an hour on piecework or bonus plan, but, because of not having an even flow, the operators are out of work a large percentage of the time on account of delays in preceding departments, and the men have demanded a straight day rate; Many of our labor troubles can be accounted for by poor earnings because of improperly planned material and production. The sales department is affected; they are catching it from the customer whose goods were not shipped as promised. Excuses range from "vague hints of labor trouble" to "diffi- culty in getting raw material"; but, if the sales department knew the real facts, it not only would hesitate to tell the cus- tomer, but would begin to realize how badly the factory was managed as to schedules and promises. 264 S. I. E. Eighth National CoNVENTigN_ _ This shop is totally "at sea." Every order that comes in is a rush or emergency and demands immediate attention. Every kick from the customer is an immediate emergency and his order is dug out. Thus you go on "back wratering" and "jamming" ahead — everyone. All interest is practically lost and is succeeded by excitement caused by this unplanned, uncontrolled and costly production. Properly planned material and production not only in- creases output, but also saves extra costs and is a big factor for cost reduction. Can you imagine a business man who never .seriously tried to foresee his money needs? Such a concern would sell to anyone without specifying terms of payment. The treasurer would have no idea what money was coming in nor when it would be due. Materials would be purchased and no record kept of the Amount of bills payable nor when they would have to be met. No thought would be given to the payroll until pay day morning and then likely as not would find there was not nearly enough money in the bank to meet it. Under such mismanagement every payment of money would be a desperate emergency. There would be nothing to do when a bill or payroll had to be met but borrow at the last minute from a bank, if a bank could be found that would lend money under such conditions. Yet this is the way many so-called production departments are handled, although production can be planned to the last detail in any concern, no matter how large, or small, or "different." -I very seldom seriously consider assembly, testing or ship- ping departments except in a broad way. In my experience I have found that if we get all sets of parts coming through and being delivered to the assembly, the rest of the work will generally take care of itself. The trouble in many. concerns is that they commence to build the house at the top instead of starting at the cellar. What I am particularly interested in is that the foundries, punch press and the contributing depart- ments generally are building according to schedule to meet requirements, which requirements are put before them so Detroit, April, 1922 265 clearly that there can be no mistake. I have no sympathy with any factory where departments have to question what they should produce. How many times you meet foremen who say they did not know what production was required on certain parts. This could never be in any well-planned shop. The idea is to plan and lay it before the foremen and production men in that de- partment so that they may know just what is required of them, and place definite responsibility where it belongs. In case the equipment or number of employees will not meet the condition, then it becomes a matter for executive action at the beginning rather than at the eleventh hour. To conclude — careful and exact planning of parts leads to economical and massive production under proper control ; sur- rounded, of course, by proper mechanical and inspection skill to see that the product is made according to standards of drawings and specifications. CHECKING UP ON WASTE Obviously, excessive waste not only retards productivity, but increases costs. We generally look upon waste as labor and material lost. This is an important factor and one which needs daily and constant attention (Waste Ticket, Ex. G). No waste can be sent to the salvage department unless this ticket accompanies it. This ticket must be signed and definite responsibility assigned before such waste can be disposed of. Waste tickets are all serially numbered for proper checking. This form of waste ticket has been a house cleaner in many departments where we have installed it, as it resulted in foremen and responsible people getting up on their toes and taking notice. It is very far-reaching and effective. (This was studied and gotten up with the help and able assistance of competent industrial engineers.) At the end of a period, complete record of waste in each department is given to the supervisor of that department, also the percentage of waste to his total output, and, in case this waste is considered excessive, we issue a daily rework report 266 S. I. E. Eighth National Convention for the department, comparing the percentage of waste to the total direct labor, with the causes, as per form (Ex. H). Where we have excessive waste, this daily report is given to that particular department and has a clarifying and minimizing effect on waste. There are many angles to waste which I cannot take the time to dwell upon — unnecessary documents are waste; un- necessary system is waste; unnecessary overhead; too many laborers; too many receivers; too many shippers; too many stockmen; too much inspection; too much supervision (briefly, too many managers). From the schedule of production, which is made up four times a year, the production department issues material requirements on what we call a material control sheet (Ex. I). There are no card records- of standard material in our stock- room — in any plant I have been connected with during the last fifteen years. My experience has been that the stock cards could not be depended upon and were costing a lot of money without getting an answer that was reliable. My experience leads me to believe we can go into any stockroom where the old card records are in use and find a large percentage of them in error. With this material control method, we first start to get our house in order, and all our stocks are handled along the same lines that stock would be handled in a hardware store. The bin, or location of the stock, is indicated in some way — the amount of stock that that particulair bin or box, as the case may be, can hold, etc. — and by going to the bins we can get a quick count of stock, actual or estimated, as the case may demand. ' Our weekly requirements are bought, based on sales esti- mates and debits and credits of our finished parts on hand and in process, and from that we project our requirements for the next ten weeks or the next twenty weeks, according to the time required to secure materials, but never exceeding author- ized manufacturing. We secure our debits and credits by in- ventories, and we find these very accurate, much cheaper, and Detroit, April, 1922 267 more dependable than card records, and in case of error it is much easier to detect the error by inventories than by cards. Some of you gentlemen might ask, how do you keep track of your income and outgo? Is it necessary? I have never found it so. On a standard product, such as sugar and flour in a grocery store, how does the grocer keep track of stocks? This is largely answered by saying that we accurately order, and accurately receive per order. It is surprising to find how many industrial concerns order material by what I would call a "guess;" not having exact statistics and, at times, not having definite specifica- tions, so that goods are not ordered or received according to specifications. I have seen shops that have lost thou- sands of dollars on this one point and have even paid bills which should never have been paid, before the goods were inspected. The remedy is so simple that it is absurd to let a condition like this exist: as the engineering department must give specifications, and goods must be received accordingly. This material control has been the means of reducing stock remarkably, and automatically and systematically balancing stock in many factories that I have been associated with. Get- ting your material under proper control leads to the complete control of manufactured parts (as indicated by production rate sheets), without disjointed or excessive stocks of raw material. This material control sheet constantly points out to the purchasing department not only the amount of material to be ordered, but the time of delivery, automatically. The rtiany different forms of factory costing may be due to particular training, but my own personal ideas are that anything less than "up-to-the-minute" costs on units, with direct labor, material and overhead, segregated against units, is not satisfactory. Costs made up and compiled and filed away (practically buried), giving us history, are scarcely of any use to management, or for correction at the proper time. Impractical designs have oftentimes been very costly in industry. I have found it advisable not only to have our sales and engineering department agree on a design from a sales 268 S. I. E. Eighth National Convention and engineering standpoint, but also to have a factory me- chanical committee who will inspect such designs to see if they are practical from a manufacturing standpoint before they are finally accepted for production. This, to my mind, has saved many dollars, as it avoids in a large measure the accumulation of questionable parts and the necessity for change in designs. The name "bonus plan" or "bonus system" has been used to designate so many different kinds of output and wage incen- tive plans that the term in itself is meaningless. Were I to describe in detail the plan in mind, you would doubtless call it by many different names, depending on the mind picture made by each of you. The plan I refer to, in brief, has not been heretofore used in exactly the same manner, to my knowledge, but has in this case proved to be highly profitable both to company and to the employee. It has some points in common with various other bonus and gang-rate plans. We have tried to select some of the best points from several plans and embody them in this plan. Its essence is the setting of the standards of output and standard of man hours, or money, which we are willing to allow for this output. Any percentage by which a group of employees reduces the labor input is applied to their wages, that is to say, if a task is done in 10 per cent less time than allowed, then each employee in the group has 10 per cent added to his pay. Allowances are made by classification of parts or appliances and the bonus is paid at the end of the month, based on average results, taking the ratio of total allowed time for all work turned out to the actual time used, properly planned to suit a department. We believe it is a decided improvement over piecework, eliminating largely discontent and giving higher output and lower costs per man hour paid. I believe that the industrial engineers are studying and should continue to study the best forms of bonus plan, as I know of nothing that gives a greater incentive for increased Detroit, April, 1922 269 productivity, as it deals largely with the human side of an organization and has a tendency to eliminate disagreeable situations that arise under some piecework systems. Personnel work connected with turnover and hiring of help has, in my opinion, been overdone during the war period in the sense of patronizing employees. My experience leads me to believe that we should always give employees what they desire, as far as business ethics will allow, but not attempt to force on them what the management might think a good thing. Careful selecting of employees is one of the important functions of personnel work, and to see that they are happily placed in the organization. This leads to increased productivity. I would refer you to an article by John A. Ritchie, presi- dent of the Fifth Avenue Coach Company, published in Forbes Magazine, issue of March 18, which deals with labor turn- over and employees' committees. In closing, I desire to leave impressed on your minds the following points, which in my opinion are well for your pro- fession to consider as paramount. Be a human engineer, above all else — understand men and women — never forget their limitations. When making any plans or decisions, you must have the ability to assign the right man to the job. Adopt the very simplest system that will get the essential result. Make certain that system can be operated by men and women of average ability. Do not allow system to be the "master," but always use it as a "good and faithful servant." Definitely define and allocate responsibility and authority. Tolerate no possibilities of doubt in this matter. Use the brains of the entire organization. Decentralize control to the extent that each man from the clerk to the presi- dent can truly "run his job." Beware of broad theories of centralization or decentralization. If you give employees the chance you will find that they have more brains than you may have given them credit for. 270 S. I. E. Eighth National Convention See that one department (call it planning, or production, or what you will) has full authority or control of the time and quantity elements; that is, schedules and promises. Make the sales department responsible for required produc- tion; no other department can anticipate requirements as well. Never get behind on repair parts orders. Do not allow excessive overhead or waste, both of which enter into costs. Watch labor turnover every week. Insist on simple, definite statistics. Do not bury reports in the files of the chief executives ; let every department head have all statistics on matters he controls. Statistics are your check on department heads. Always stimulate and encourage all , heads of departments for new .methods — improved tools — changed designs to facili- tate production— inventions, etc. — ^to reduce cost and increase production. Let your costs, primarily, be practical and show the actual cost elements; not merely theoretical, with a view to balance accounts. Use budgets for all expenditures. Adopt a system of wage payment that offers incentive to all employees. Build up a spirit of co-operation. This is always up to the head of the business ; no one else can do it for him. As the boss is broad and fair, so is the organization; if small and narrow, so is the organization. COSTS All manufacturers today are confronted by a very serious problem : How much do my products actually cost to manu- facture? Accurate, dependable, representative manufacturing costs reflecting the reasonable performance of a well balanced factory organization and with a pre-determined sales policy, insure a smooth running production. The antiquated accounting methods used in many fac- tories for cost compilation are practically valueless to the "up-toMhe-minute" executive. He cannot properly take the time, neither is he interested, to investigate the happenings of Detroit, April, 1922 271 three or six months gone by but he must, of necessity, know the happenings of today and must have at first hand the infor- mation showing increased or decreased costs, particularly labor (both direct and indirect), so that in the event of in- creased cost the proper remedy can be applied to prevent seri- ous losses. A review of your present methods should be made to see if they fully serve the purpose for which they are intended. Bear in mind that the compilation of costs is not merely a sub- division of the accounting function, but serves a much more important purpose in pointing out deficiencies and inefifi- ciencies promptly and in time for corrective and preventive action. Proper costing will help save time and money, instead of simply accounting for and analyzing after it has been spent. The allocation or distribution of overhead expenses must be made in a manner which wiH,<'a.Sinearly as possible, charge these expenses to the cost of the product through the proper channels, in a fair and equitable manner. Incorrectly applied overhead upon a percentage basis works an absolute injustice not only to the employee, but to the concern employing such a method. Cost ^sterns designed to absorb in the cost of production within a given period, all the operating expenses for that period (regardless of the radical increases or decreases in the number of operators) are absolutely incorrect. The cost of maintaining idle equipment should not be applied to the cost of the product produced at a time when the plant is operating at less than normal rate. Fluctuations in cost, caused by methods of accounting, should be entirely eliminated and such conditions as may affect a concern, but which are not directly identified with the production functions, should not affect the cost. Losses accruing to a concern through lack of sufificient work to maintain a plant at normal capacity are chargeable to the administrative departments and should be shown up as losses and not charged into costs, thus handicapping sales. 272 S. I. E. Eighth National Convention Under methods where all operating expenses, regardless of the volume of production; are absorbed into cost of production, you will find that in slack periods the inventory value of partly finished and finished products is improperly inflated because the operating charges have been capitalized and included with these inventory values, and when sale is actually made of these products at some subsequent time a slight profit or actual loss is shown. This loss does not in reality occur at the time of sale but actually accrued, and should have been shown up at the time the article was produced. The fact that such losses are not generally shown up in cost methods is in itself a serious defect and deserves the best thought and attention of all executives. The function of costing is not purely statistical or his- torical. Costs should not be compiled and subsequently filed, and to all practical intents buried. Their purpose is not alone for use in arriving at selling prices or to fix piecework or pre- mium rates for wage payment, but that through a proper analysis standard costs for each product or process can be determined, the time element investigated, production hour cost for each work-place within the factory easily and accu- rately anticipated, and any deviations from this standard cost in actual production of the unit become losses or gains, charge- able to the manufacturing departments. When a foreman uses a high grade man in a capacity where he is not required, or when he uses an inferior grade man in a capacity where he proves incompetent, the result- ant loss or gain should be immediately brought to the atten- tion of the proper executive and be the means of saving the concern a great many dollars which otherwise would be bxxried under the common methods of cost accounting. The distribution of indirect expense should not be based upon the wage rate of the various operators. The items com- prising these indirect expenses are in no way related to, nor are they contingent upon the rates of wages paid to employees. Through the analysis of expense accounts of previous years, together with investigation into the accounting methods em- Detroit, April, 1922 273 ployed, an expense budget can be analyzed a,s to accounts and departments. Fixed charges and all other expense items are included and a detailed schedule of operating expense charges established. From an analysis of the plant capacity, taking into consid- eration anticipated sales, a budget of direct hours can be created and this in turn analyzed as to departments and operat- ing units. By this method the productive hour cost is established. By the establishing of budgets of direct hours and opei-at- ing expenses, wc have a method of accurately costing each product and any variation in cost during subsequent period immediately indicates actual losses or savings in the manner in which the article is produced. Having established expense budgets for each productive unit, a monthly comparison between budget or average normal expense as against the actual expense should be made. Each department head is given, limits within which his department should be operated. Such limits serve as an effective check upon all expenditures. Losses or gains that accrue due to the operation of the various departments, either within or in excess of the, budget, should be divorced from the manufactur- ing costs and likewise segregated from selling profits or losses. Through the establishment of direct labor and operating expense budgets, the accounting records are able to reflect another condition which is commonly buried; the loss or gain chargeable to either lack or abundance of business. It is well for industrial engineers to keep this subject constantly alive, for better and more accurate up-to-date costs. ADDENDUM In the treatment and control of labor, it has seemed to me, large corporations have been governed almost entirely by cold logic to the exclusion of sentiment. Industrial life cannot run smoothly without sentiment any more than can political, social or home life. Men are creatures of sentiment — or why are there sweethearts, wives, homes? And if this be correct, 274 S. I. E. Eighth National Convention then the sooner we exert our efforts towards humanizing industry, the better for all of us. The trouble dates back to the days when large organiza- tions sprang up over night. There wasn't time to work out all details. The one measuring rod of ability and ef35ciency was the net corporate income. Since the labor element could not be segregated and allocated in dollars and cents in the monthly income account and balance sheet, its importance to ultimate success was at first not fully appreciated and consequently it was overlooked in the scheme of organization. It is impossible even to hazard a guess as to what the lack of adequate provi- sion for the proper consideration of labor has cost us in industrial efificiency. That many of the dangers of the various "isms" in industry and politics may, in part at least, be attributed to this neglect of the human equation, none will deny. I believe that the contentment and satisfaction of labor — and, therefore, its efificiency — is more in need of thoughtful and scientific treatment than is the determinationof structural and mechanical life of materials for which we find specialists everywhere. At great expense and patience we keep elaborate statistics of the causes of material failures of every sort. If this is good business practice, then why shouldn't the same principle apply to labor, which is much the more valuable asset of the two? What is needed at the head of every large organization is a human engineer, or vice-president, in charge of labor. He should be a psychologist, preferably one who has graduated from the school of hard knocks, just as have the men who now make up the personnel of labor union staffs. He should at- tempt to establish a relationship between employer and em- ployee such as existed in the days when industries were small and the president or manager knew every man in the plant by his first name. He should avail himself of the best thought of the organization and then formulate its policy toward labor in accordance with his specialized study and observation. This is not offered as a "cure-all." The trouble is too deep- Detroit, April, 1922 275 rooted in things economic and political. But I do feel that it offers one means of improving the relations between employer and employee. The duties of this employment man may also include super- vision of welfare work. By welfare work, however, I do not mean anything that leans toward charity and paternalism. The average worker resents charity ; it injures his pride. Like- wise he resents any interference in his home life ; he looks upon that as a blow at his personal liberty. On the other hand, such features of welfare work as company restaurants where good food is served at reasonable cost, and recreation rooms with facilities for reading and amusements, are accepted at their full value. The company doctor and visiting nurse who call in time of trouble and in a diplomatic way proffer help and assistance are also welcome. Why cannot the labor spe- cialist, in man-to-man fashion, carry the same general idea into the shops, right down to the bench of the individual work- man? Monotony of work is often an element of disturbance and dissatisfaction. Tools may not be considered all they should be. Imaginary grievances often creep in. Toward such things the average workman is apt to display scant sympathy. And yet, we must all admit, they are matters of utmost importance in maintaining the morale of an organization. We must also admit that in the hands of a labor specialist many of these things should be susceptible to such improvement as would eliminate much friction and many misunderstandings. As a further suggestion, this chief engineer of labor should keep a bureau of vital statistics covering all phases of employ- ment. Within a comparatively short time, it should be pos- sible to work up a monthly statement on labor conditions, reflecting general conditions in any organization with the same accuracy as the monthly income account. MR. G. C. FRAMPTON : There are three things that stand out in industrial engineering in the last two or three years that I might mention. In 1919 I happened to be doing industrial 276 S. I. E. Eighth National Convention engineering in four plants, two handling hot metal, one building bridges and cranes, another filing cabinets and safes. My opinion of waste has always been that maintenance ought to be reduced to a standard of inspection so far as possible, in- stead of a lot of fussing after a breakdown. For that reason in these two plants handling hot metal, we often had a crane go down. The consequence was we had an enormous loss in metals getting cold. We took a crane and charted on paper the three parts of that crane and the trolley so that anyone could inspect the vulnerable points where those cranes could go down. It would surprise you to know the saving made in metal in that way. In the plant making the filing cabinets. and safes we had $800,000 worth of dies, tools, jigs, fixtures, etc., in three fire- proof vaults and in the 17 months I was there, I never saw a single man go up to that crib to get a die, tool or fixture that was not in first-class shape. The secret was that the manage- ment of the concern had charted and catalogued how many times each piece had gone down over a period of nine years, knew the number of operations on that tool and how many times it had gone down on that work, and therefore had an average. On machine tools we made another chart. We knew that there were only four big main angles where that tool could go down, either it would be in the tool itself or in the machine or in the power or the lubrication. We simply took a chart and split it up into four parts and ran it out into the vulnerable points of each. We reduced our maintenance to a matter of inspec- tion instead of fussing after the thing went down. MR. W. R. WILLIAMSON: Mr. Schmidt mentioned the necessity of records in connection with the maintenance system. I would like to explain a very good use that can be made with a chart in connection with periodical inspection and maintenance. Take a Gantt chart, made out by months or weeks, and in- dicate the times at which individual components of the plant equipment should be subjected to inspection. From that make up inspector reports and file them in a tickler file under the Detroit, April, 1922 277 date to be inspected. Then as these tickets come up, they are sent through the maintenance department, which makes the in- spection and if there are any repairs involving more than an open charge they make the necessary reports. The report of this in- spection is written on it and it comes back to the planning de- partment. In ruiming up your maintenance schedule in that way you can see by the chart whether or not you are covered by inspec- tion in your entire plant ; where you leave it to your maintenance department alone, oftentimes they miss as much as they take care of unless there is close supervision. MR. A. C. GAYLORD: The point brought out from the floor I think is important. In my experience in four different cases I had shafts stuck in bearings on account of not being properly oiled when first started. The point made by Mr. Low regarding the placing of sight-feed oilers, especially upon new machinery where the bearings are closely fitted, is a very im- portant one. I make it a practice of requiring that every new machine be operated idly with a watchman on the job to see that oil flows through every bearing. When the machine is put into operation permanently I require that one man be responsible for all the bearings in that machine until it is demonstrated that oil is flowing freely through them. One instance in which we failed, although the ordinary pre- caution had been taken, was in the operation of a hot shear in a rolling mill. The machine became so hot that even the oil on the shears smoked. In that case we fell down on the job because we did not have enough oil, and immediately when I found that it heated and cut out the bearings, I made a hew ruling that on every machine that it was possible to do so I would install sight-feed oilers. MR. D. T. FARNHAM : While I was in France, one of the large plants that I went through there I found followed the prac- tice to take any new machine that came into the plant and put it in the laboratory,' as they called it. There the machine was thoroughly tried out in every way and a manual covering the 278 S. I. E. Eighth National Convention operation of that machine was prepared, showing the output, the speeds and feeds and all the information with regard to the use and productivity of that machine. That manual was available whenever a point came up with regard to the use of the machine. Of course the machine was also tested. I am wondering if any- body in this country is doing that sort of thing. THE CHAIRMAN : I think the General Electric Company does that with a new type of machine. It would seem to be really essential. Our great trouble in this country has been that we have not paid sufficient attention to details. We lack in analysis. We have been willing to run at 80 or 85 per cent effi- ciency because we have not had to run at a higher rate. At a plant with which I was associated, at a conference be- tween the president and myself, the question under discussion was whether we should run the plant at a high degree of per- fection and be satisfied with a small amount of business at good profit, or whether we should run with a less degree of efficiency and depend for our profits on a large volume of business. We decided, as might be expected, that we would rather run it on the basis of a large volume of business with less profit, which, put differently, means more waste, and that is the general ten- dency today. We would all of us be surprised to go into a large works and hear an automobile coming down through with its bells clanging and "With all the accompaniments of a fire engine, but still in some cases that is the way repairs should be made — emergency repairs. Of course, the better way is to see that things don't break down — things don't break down on warships, oh ocean liners, and very seldom on locomotives, because they are looked after beforehand, and the cost of pre-repair is only one per cent of post-repair, but we simply haven't got to it yet. MR. ROTHWELL: What method do you use for making your pre-analysis of productive capacity? THE CHAIRMAN : I don't want to claim we do— we don't. That is one of the things we have let slip, but we are going to get around to it when we have time. We are going to do it Detroit, April, 1922 279 by inspection at set periods and classification of machines. There are certain machines that when they break down you have others to take their places — lathes or drill presses, but if it is a large mill or a grinder, it wants to be inspected regularly and if an emergency does happen it wants to be attended to like a fire. 280 S. I. E. Eighth National Convention The Conservation of Labor By L. Moorehouse, Detroit Pressed Steel Co., Detroit, Michigan As I understand it, you wish to get the workman's view- point on how to eliminate the waste of and get the most benefit from labor as it is applied in the shop. First of all, workmen must have leaders. It is a mighty good thing for the shop if the executive force, including the foremen, are the leaders, for if they are not leaders and can- not lead the workmen, the workmen will find a leader and often will select one who will lead them along lines that will be a detriment to the management, thereby causing a waste of effort on the part of the whole organization. I do not believe there is any given rule or formula that would be applicable to all shops to eliminate the waste of labor except the rule that work begets work; that is, that you cannot expect a lazy foreman to get good results from his workmen nor a lazy manager to get good results from his foremen. A good , example goes a long ways with the workmen. These men must not only be able to give good counsel and be of a character that the workmen will be glad to look up to as leaders, but must be workers as well, constantly studying the conditions as they are in the shop, so they can master as nearly as possible any situation that might arise. I do not believe there is anything that has better effect on the work- men than when they go to their superiors with their diffi- culties to find them the complete masters of the baffling sit- uations. Another thing to consider in cutting down the waste in labor is keeping the workmen satisfied; one satisfied work- man is better than a half dozen dissatisfied men. First you must pay him enough for him and his family to live com- Detroit, April, 1922 281 fortably; next treat him like a man and deal with him hon- estly; and, last but not least, keep him busy. It is a proven fact that the best satisfied men in the shops today are the busiest men. I believe that the greatest direct cause of waste of both labor and materials is due to too little attention being paid to jobs at their starting point; if a job is started right more than half the battle is over. Suppose a mistake occurs in the engi- neering department and the blueprint goes out into the shop in that condition. Ten to one a good part of it will be run before the mistake is discovered, thereby wasting both labor and material on that part of the run. Too often engineers and executives presume too much; it is perfectly clear to them; why doesn't the other fellow understand it? If you know what is wanted it is always a safe bet to make it plain enough so that you are sure that the other fellow will know also ; you cannot get too much information on prints and drawings. I do not believe in treating workmen as children, but I do believe that they should be instructed until you are reasonably sure that they know what is wanted. I believe that a great deal of labor is wasted by the prac- tice of doing things on Sunday that could just as well be done through the week. I have never seen a man yet that on an average Would do half as much on Sunday as he would any other day in the week. Then the workmen expect to be dealt with honestly. A man might go to work and be satisfied at 35 cents per if you were honest and told him that was all you could afford to pay,' but if you had led him to believe that' he could make SO cents per hour and then paid him off at 45 cents he would have a right to be dissatisfied; the extra money would not offset the disappointment. So the truth is the best story you can tell to the workman. 282 S. I. E. Eighth National Convention The Conservation of Labor By a. S. Cunningham, Hadiield-Penfield Steel Co., Bucyrus, Ohio Without a doubt the greatest problem industry has to face today is the problem of the elimination of waste; the greatest waste in industry is due to the dissatisfaction of the work- men. There is no question in my mind that if industry can find some way of eliminating our strikes and other wasteful in- -^dustrial methods, cut down our labor turnover and increase our individual efficiency in production — all of which can be accomplished only by a satisfied, contented and enthusiastic workman in our work shops — we will have very few other questions to settle or problems to solve. I believe it is up to the industrial engineer and production manager to face these problems in a businesslike manner and settle them for industry. There are a great many things being done now and a great many more things that can be done by us as industrial engineers and production men to improve our present methods in dealing with what we commonly call "labor." I am going to relate just one or two things we have accomplished in our plant, methods very simple in character, which have proved profitable and practical and which I believe you can make use of. One thing we are doing in my department is the carry- ing on a system that might be called "a system of apprecia- tion or recognition of achievement of departments and work- men." We are apt to find fault with each other when things go wrong and forget to show any appreciation when things go right; we expect things to go right, and it is only when they go wrong that our systems, schedules and tempers are disturbed. Detroit, April, 1922 283 Some few years ago when we were busily engaged in war contracts I received a letter from the manager in charge of a certain branch of this work containing a copy of a letter received from a government department complimenting our company on the way we were making our shipments on schedule. This letter was interesting and encouraging. The letter from the manager praised our department highly and stated that our good showing was due largely to the efforts on the part of the production department. I liked this com- pliment so much that I decided to send a copy of both letters to each shop department that had any interest in this work and watch for results. Due to the results obtained from this simple act, I decided to watch for similar occurrences and to establish some kind of a system of record so that they would be called to my attention at the proper time and would enable me to get the appreciation of the workman or department who was entitled to receive it. We make memorandums or records of matters of this kind and go over these every week or two and select the ones that I think can be used to good advantage. I try and find not less than two or three a month. Some of these affect just one foreman and his department and others are of inter- est to all departments- or the plant as a whole. While we issue production and cost information showing the progress and records of departments, these are often not fully under- stood and too often not carefully read. I find a word of praise or a letter of appreciation more effective. I have three sample letters recently sent to the factory, with copies to the workmen or departments affected. Please understand we do not take care of all these cases by letter; I carry a memorandum' book with me at all times in going through the shop, and almost every day I call some foreman's attention to something that he or his department has accom- plished that is worthy of mention. I am not afraid that his men will not hear of these things, as he is just as anxious to pass them on to the men as I am to tell him about them. Some cases are handled better by personal interview and 284 S. I. E. Eighth National Conventioic some better by letter, but the most important ones can, I think, be handled best by letter on account of the foreman or workman knowing that the superintendent and other offi- cials have received a copy. The three letters are as follows: General Superintendent, Main Plant. Dear Sir: Some few weeks ago Mr. McNutt, foreman of Department 101, called the writer's attention to the fact that we could no doubt pur- chase the 9/16 in. x 15/16 in. bearing pins used on all makes of Dryer Cars cheaper than it was costing us to make them. We re- ferred this matter to the Purchasing Department and received a report to the effect that these pins could be purchased at about one-half cent less than what they were costing us to manufacture. At the time of receiving this report we had a requisition with the Purchasing Department for sufficient steel to make 44,000 pins, or enough for 1,000 Dryer Cars. I have instructed the Purchasing De- partment to cancel this order for the steel and place the order for the pins instead. By figuring this out you will find that this action on our part, based on the suggestion of McNutt, will mean a saving of about $225 on these 1,000 cars, which we expect to build within the next 60 days. Yours truly, PRODUCTION DEPT., per A. S. C. Copy to Dept. 101. Copy to Works Manager. Mr. Schucklen, In Charge of Storeroom: A few days ago the writer had occasion to check up some rush cards with Mr. Fowler, and in doing so I could not help but notice the efficient manner in which he is taking care of this stock control system. The cards are as neat as any set of books 1 have ever seen, and the records are kept in such a way that it did not take but ? minute or two for me to get the information I was after. I am mentioning this as I do not know of anything that is of more importance to the company than our stock and stock control records, and it certainly is very gratifying and encouraging to me to find these cards and records in the shape I found them the other day in your department. Yours truly, PRODUCTION DEPT., per A. S. C. Copy to Supt. Main Plant. Copy to Cost Department. Sam Virtue, Prod. Dept., Foundry, Dear Sir: You will recall our conversation a few days ago in regard to the importance of getting the 320 and 321 Cutter castings made without delay, as these castings were required in a special rush in order not to delay the large machinery order S00S3. Detroit, April, 1922 285 Mr. Spangler advised me Saturday that he had delivered the last of the castings to Dept. 3, and it was really surprising to me to know that you had been able to get these out in such a short length of time and so far ahead of schedule. By so doing we will be able to make shipment of this entire order the last of the present week, which I am sure will please the Sales Dept. We have also received the bottom plates, which I called to your attention a few days ago, and this will enable us to ship the large order to California during the present week. You will recall that these plates are for the No. 62 Cutter and that Ream had some trouble in getting the patterns straightened out. We are very glad to get these castings, too, as we were afraid this pattern trouble would delay ship- ment of this order. Please pass this letter on to McGuire and Ream. Yours truly, PRODUCTION DEPT., per A. S. C. Copy to Fdy. Supt. Copy to Works Mgr. This will give you a good idea of what I mean by a system of appreciation, and I have no doubt but what some of you, or perhaps all of you, have some kind of a method or system similar. If any of you have not, I can highly recommend something of this sort. A regular system or method of keeping a record of these matters is necessary, as they are so easily forgotten, and if you do not make memorandums or records and file them properly as they are called to your attention the chances are that a large percentage of them will be overlooked. Some such a system will help to eliminate waste in in- dustry for the reason that it will encourage men to put forth their very best eflfort; it will teach them to respect more the orders they receive and to take more interest in their work and in industr}'^ in general, and will have a tendency to lower our transient labor turnover rate. We all like to be praised for something we have accomplished; you do, and I do, the workmen in the shop do, so does the stenographer and the draftsmen, and as industrial engineers and production men I think we can help industry a great deal in solving its many ills by encouraging more of this. The average executive or manager in industry reminds me of the story of the farmer whose wife was about to die. Upon being informed of the serious condition of his wife the 286 S. I. E. Eighth National Convention old farmer went to her bedside and tried to cheer her by tell- ing her that she had been a good and faithful companion through all of these years. Upon hearing this the poor old woman replied that she was glad to hear him say that, as she had been waiting almost fifty years to hear it. Too often we in business wait until a man is ready to leave our employ or, like the old farmer, we wait until it is too late. In speaking before the Cleveland Chapter the other eve- ning I emphasized the point that men engaged in industry must become more loyal and more patriotic to industry as an institution, and I know no better way to accomplish this than to recognize the individual merit and to appreciate the good things accomplished by men engaged in industry. We need to encourage more the fraternalship idea in industry. I am of the opinion that there is too much discouragement and dissatisfaction and too little co-operation and encouragement. I honestly believe that a word of praise or appreciation given at the right time will go a long way toward getting what we want and are entitled to our of industry. THE CHAIRMAN : In my younger and more positive days I could never see why we should decorate a soldier for bravery, or for leading his soldiers successfully, when the government had spent many thousands of dollars in educating him for that purpose; I could see no reason why we should pay a bonus to a foreman for doing what we had hired him to do ; but as time went on I found the men who could lead armies successfully and the men who could accomplish the tasks laid out for them were exceedingly rare, and therefore those that did succeed were en- titled to more than they received, and if they didn't get it where they were, it was easy for them to go where they could get it. So I believe thoroughly in a policy of appreciation. I worked a great many years for a man who never expressed one single sentence of appreciation, but that man was justified, for neither did he express a single sentence of censure. MR. H. C. DIEMER: I couldn't help but draw a parallel or analogy in my mind between these papers — one on the con- Detroit, April, 1922 287 servation of machinery and the other on the conservation of labor. With our machinery we see that we have proper lubrication. Even though there is an abundance of machinery to be had at the present time, we do not say because there are a lot of ma- chines to be had let us use emery for lubricant; we don't say because there is an abundance of machinery and material to be had let's use lead for bearing metal; we don't say to a purchasing agent let's forget about specifications, get anything you can, it is easy to replace it if it is of no account. And then from time to time, as Mr. Williamson suggested, we have a Gantt chart to show whether we have actually made an inspection of the performance of the proper upkeep of machinery. But on the other hand, we hear from all sides: "Oh, we are not paying any attention to labor turnover now — we don't have any use for a personnel man; we dropped our educational methods, dropped our house organ. We don't find it necessary to use job analysis or specifications any more." I would be very much disappointed in this topic of the conservation of labor and whether it plays any part in our industrial program if it were because we had an abundance of labor we dropped all ques- tions of labor rrlaintenance. In the matter of tenure of employment, are we going to abol- ish the idea that an old employee is worth more than a man picked up from the streets. If it is profitable for one company to give in the open market a $100 share of stock as a recognition of ten years' faithful service, is it not a good plan for many others to adopt a similar procedure? I would like to see that subject discussed. Is it worth while today to carry on the conservation of labor similar with those things we have discussed in the conservation of machinery? MR. J. J. MARTINDALE: I don't know whether or not Mr. Diemer is familiar with tlie conditions in Detroit, but we do not have in this town at the present time a great market of labor and our factories here are seriously considering all ways to conserve labor, going back and doing some of the things we did once before. 288 S. I. E. Eighth National Convention I wondered whether Mr. Cunningham adopted any definite measure of performance for management in the plant to compli- ment the workers, based upon those factors under their definite control. I think that is something which is most important and which is coming to the front very fast — a determination of meas- urement of foremen and superintendents being complimented, based upon the factors of management such as waste, inefficiency, useless expense, materials, etc., things which are really all under their own control, which measurement can be coupled with those factors month by month. MR. A. S. CUNNINGHAM : We have, of course, like most plants, a system whereby we keep track of the progress made in all departments by individual workmen and department heads. The point I wish to emphasize is that in addition to that the letters I just read were of things just a little bit out of the ordinary. In other words, our reports and charts were supposed to take care of certain things that were laid out that they were expected to do in production, but departments often accomplish more than you ask them to accomplish. Why no one in our plant ever thought of that before I do not know. It is probable we should be ashamed of it, but we hadn't the facilities or the system of records that ever brought those particular items to our attention. Understand that this method or system I spoke of, like all methods or systems, can be overdone. I don't mean to leave the impression that every day we send out half a dozen or so letters to the men in the plant. We do try to keep track of certain things in each department, either of some individual in the department or the department as a whole, and we try not to overlook the accomplishments. We try to see that the de- partment gets the information some way and knows we have recognized that department in doing that certain thing, and all of those things are in addition to the reports, progress charts, one thing or other that go out from the plant into the pro- duction and cost department. Detroit, April, 1922 289 MR. J. F. CAHILL : Mr. Martindale's remarks on the meas- ure of performance of management seem to be obvious because we measure the performance of the worker by the quantity of work he turns out and we measure the performance of the me- chine by the quantity of work it turns out; the foreman above the man is measured by the quantity turned out by the number of units under his charge, and in order to be sure of whether or not the amount of work turned out is anywhere near capacity necessarily requires a pre-knowledge of the possibilities. There is a theoretical 100 per cent possibility and there is a practical possibility. In many cases the theoretical 100 per cent is evolved by time studies and observations of a man or machine for a few days or a few weeks, and a theoretical stand- ard of 100 per cent is set; the practical 100 per cent standard is the 100 per cent standard that a machine, man, group of men or group of machines, can turn out day in and day out under the best possible conditions, and in order to determine whether or not the capacity is being maintained necessarily re- quires a pre-knowledge of these possibilities on the basic 100 per cent standard, the common sense standard. Time study is carried in many cases to an extent that I depre- cate personally, particularly where it is carried forward for the purpose of rate-setting alone. I know of one institution, one of the oldest automobile institutions in the country, that main- tained a time-study department which took time-studies for the purpose of rate-setting on jobs that were perfectly obvious to me were not anywhere near to capacity. The mere fact of tak- ing time-studies and setting a rate on those jobs would neces- sarily decrease their productive capacity. A pre-knowledge of the production capacity of men and machines, determined on the common sense basis, always brings us to the possibility of conservation of both labor and equipment because in order to maintain that we must be sure that the men and equipment are always in a condition to keep up to the ordi- nary standard which, I think, to a certain extent leads to the idea of the measurement of management. 290 S. I. E. Eighth National Convention MEMBER: It seems to me there is one point we overlook and that is in the proper classification of waste material. I am in the printing and binding business. If we classify all the waste that comes from our books to be trimmed, in one or two grad- ings, it results in a much less price for our waste and means more work for the stockkeeper to sort that than would be the case if we made more classifications. It remained for the stock dealer to show us how to classify our waste. He showed us where in the past we had been grad- ing our paper into three different grades, but by grading it into several more we received a great deal more for it as this saved him labor and made it easier for him to handle the product as he received it because there was no classifying for him to do at his plant. MR. E. J. SCHMIDT: Mr. Diemer touched on the ques- tion of stock ownership by employees. Some people contend it is not good practice to give anybody such a thing as a share of stock, that they never fully appreciate it until they buy it. Of course, the company should make it easy to buy it, but it is thought the men should fully pay for it and then they will feel as though they are part owners of the business. What is the opinion of the gentlemen here this afternoon? THE CHAIRMAN: I think Mr. Diemer has in mind the old employees, and the question to be determined was whether you were giving it to them or paying them for service. MR. H. C. DIEMER: I have been familiar for a number of years with the method used by the Stetson Company, who have practiced for nearly twenty years the giving of stock as an em- ployment bonus, until over 25 per cent of their employees are now owners of stock, and I know that their officials believe in it most thoroughly. I know in our own organization, the LaSalle Extension University, we have a reward of some kind, a recog- nition to our first ten-year employees, and I know the employees are far more proud of that stock than they would be of any- thing else they could have been given, and I know they are far more interested in the business. Detroit, April, 1922 291 How Can Industrial Engineering Increase the Profits and Insure the Stabihty of Both Capital and Labor? Chairman Chester B. Lord, Works Manager, Advance-Rumley Co., Battle Creek, Mich. PRESIDENT ROE : I have a resolution to present, and move that we pass the following : That the Society of Industrial Engineers, assembled at its na- tional meeting at Detroit, indorse Senate Bill 3076, and hereby urge its passage. The motion was seconded by Mr. W. W. Nichols. Carried. MR. KNOEPPEL: I also have a resolution to present. Naturally, as you have either read or discussed the Hoover waste report, it must have been apparent that the committee struggled with a number of difficult problems. In the first place, it was to be a quantitative survey to be made in a few short months. The most serious problem confronting the en- gineers that Mr. Hoover appointed is best expressed in the report at page 4: It is a fact that no accepted management and labor terminology exists, and, further, few units of weighing or measuring the perform- ance of industry, or of any plant or department or section thereof, have been developed by engineers in a way to be standardized or to yield results or conclusions on a comparable basis. I might say that as we went into the various plants and attempted to make the survey, based on the questionnaires and valuation sheets, it developed that it was almost impos- sible to get comparable information. One plant would have idle-time reports, another might have rejection reports, an- other might have waste and inefficiency reports, others very good cost records, etc., but in no one plant were all the ele- ments that enter into the complex formula of determining the efficiency of results of management. I would therefore like to put this resolution before this body : 292 S. I. E. Eighth National Convkntion Whereas, The Hoover Waste Committee in its report said: "... few units of weighing or measuring the performance of industry of any plant or department or section thereof have been developed by engineers in a way to be standardized, or to yield results or conclusions on a comparable basis, and Whereas, Our President in his admirable paper, "The Measure- ment of Management," pointed out the need of standards and methods of applying them, and suggested a course of action, THEREFORE, Be It Resolved, by the Society of Industrial Engineers, in convention assembled, that the President be empowered to appoint a committee to co-operate with similar committees in existence, or to be appointed by the Taylor Society, Management Section of the American Society of Mechanical Engineers, and the National Association of Cost Accountants, with the end in view of developing ways and means to weigh and measure the results and performance of management in industry. The motion was seconded by E. J. Schmidt. Carried. Detroit, April, 1922 293 The Conservation of Material By Anthony Fritz, Penberthy Injector Co., l^etroit A few months ago Mr. Shafer approached me with regard to speaking to you on the subject of conservation of material. Naturally, this subject is of more vital interest to the electro- plater foreman than to any other foreman in factory manage- ment. Conservation of material means to save material, and how can we save material better than by protecting it against corrosion? We find in many plants that steel, iron or other materials subject to corrosion are, bought in car loads and stored in basements or sheds, subject to the weather or bad sewage conditions. This same material will go through the machin- ing process and later come to the polishing or finishing depart- ment, all covered with rust. This rust, in many cases, has penetrated through the surface and will cause extra labor. Of course, most of you have the idea of cheap help in the plating room and will say, "Oh, let it go, they can take care of it in the plating department," not knowing how much damage you really have done. You put it up to the plater to remove the rust and produce an A-1 job. It has been told to me time and time again that the pol- ishing and plating department must cover up the defects from all other departments. While I am glad to be able in my capacity to save much material through polishing and buffing these defects, and will co-operate with other depart- ments, nevertheless, we would save much more if we were more careful in our first handling of this material and if every foreman and also the engineering department would co-oper- ate with the plating room in the making of any design or article which will pass through the factory. 294 S. I. E. Eighth National Convention Now, how can we protect this metal as it comes into the plant? First we must see to it that this material is properly stored in a well-heated, dry place. We should also see to it, if the material is going to be stored any length of time before manufacture, that it is well greased. Through the course of manufacture we should be careful that we do not allow it to rust, especially where steel parts are soldered. The flux from soldering should be removed immediately, as this is one of the hardest and most fast-eating rusts that we contend with. There are cases where patterns have been made to cast various articles, and in their layout slag allowed to get into the castings. This slag, however, invisible to the naked eye, when polished over, leaves a very clean surface. Upon placing these castings, however, in a short time rust will appear. This rust is caused by a galvanic action which takes place between two dissimilar metals. Upon cutting these casting in half you will find that this slag has embedded itself just below the surface and caused this damage. All impurities increase the rate of corrosion with a certain limitation which I will take up in a moment; so in your search for the cause of trouble, the question of impurities must be carefully analyzed for the simple reason that impurities bring about a condition of potential difference which will cause cor- rosion. Slag is a very common source of corrosion, not speaking of alloys, which are another cause. Today there exist many alloys, but they are all impure metal, and we must be careful in their manufacture and finishing that the essential element for the electro-chemical corrosion is not there. The alloys rust very easily for the reason that a definite mixture is not always formed. For instance, in coating copper with tin we have on the surface a pure tin coating. Over the copper we have a mixture of copper and tin. That mixture gets more rich in copper as the alloy of the tin covering approaches the base metal. Government officials in Washington were called upon some time ago to explain why a certain portion of the tin Detroit, April, 1922 295 copper dome of the capitol building was corroding. It should not corrode, theoretically. Tin copper is supposed to be an ideal covering for roofs, that is, providing the tin copper is not scratched through. The moment this happens, moisture is admitted. Oxygen brings about a very rapid deterioration and the copper sheet corrodes by a process known as pitting, which after it reaches a certain state deteriorates very rapidly. These few illustrations will prove to you that the electro- plater and the metal finisher must co-operate, and the latter should know what is going on before he gets his part to be finished. Recently an article was sent to me to be bright- tipped, and I could not get a finish on it until I inquired of the foundry foreman what the composition of this metal was, and he explained that aluminum was put in this yellow brass to make it a better running metal. Immediately upon know- ing this my bright-dipping acid was changed so that a bright color was produced upon this yellow brass metal. It is also essential for the plater to know what his parts are going to be used for and how they are going to be treated, because if any- thing happens to that part, if it becomes corroded, he will be blamed, and he may be absolutely blameless. In heat treating we also must be careful that we do not get hard and soft spots, for associated with hard and soft spots we have stress and strain. It does not necessarily follow that a hard spot is at z, higher strain or stress, but a difference in the strain uffder which metal is subject as a result of the manufacturing process will set up a corrosion. The part of the metal that is at a higher stress or under a strain is pos- itive, and a lower strain is negative, and that means, from a practical standpoint, that the metal must be properly heat treated. The best method to protect your manufactured ar- ticles against corrosion and the abuse of the consumer is to give steel or iron a protective zinc coating. Zinc is electro positive to iron. The zinc decomposes upon the iron. Zinc is the best protector against rust. There is a process on the market called the Utilite process, which is a deposit of cadmium. Cadmium, being electro neg- 296 S. I. E. Eighth National Convention ative to iron, means that it has not the protective coating that zinc could produce. This process, however, has brought out new improvements. The method is a deposit of cadmium for a certain length of time, and then treatment in an oven with 400 degrees of heat. This cadmium, amalgamated with steel, is about the best protective coating we can give. A fellow member of the American Electro-Plater Society had experimented with the Utilite process and condemned it because the cadmium was electro negative, but he gave the zinc deposits a treatment in the oven and he protected his articles much more than by simply electro-plating, which would prove that amalgamation of zinc and steel was essen- tial for the protection of steel against the atmosphere. Some years ago in experimenting to determine the best method for testing protective coatings we considered the salt spray, but it has later developed that aerated water is the most severe test we can give. I ask you to do all in your power to conserve steel and iron from corrosion, as we find that 5,000,000 tons of steel were used in 1916 to replace that which was lost by corrosion or rust. One million tons of metal of all kinds have been lost by the U. S. Bureau of Mines yearly on account of corrosion. The sad part of it is that not only is the material lost, but everything that went into the manufacture of that material. When we lose a ton of steel we lose four tons of coal — Amer- ica's greatest asset — and, greater than all that, we lose man- power — wasted man effort. The war is over, but a greater war now stands before us — a war of competition. Manufactured products with Germany's money market so low can be placed in our country cheaper than we can even think of producing them here. Now, how can we compete with this sort of thing? There is only one way out, and that is for every one of us to increase our produc- tion. If we want to live right, as we Americans should live, we must speed up production, and one way to speed up pro- duction is to cut down the waste. By eliminating our waste without any further effort on our part, without extra labor, Detroit, April, 1922 297 without extra capital, we automatically increase production. The department of industry that can do most to eliminate waste is that of the metal finisher, and the sooner manage- ment realizes that their finishing department is a very im- portant element, not a tooth in the gear of production, but a gear, a whole gear wheel, the sooner you will see far less cost. The only source of wealth is through raw materials and labor, and we have the opportunity of saving both with little or no effort. It is only through knowledge, eliminating all guess work and analyzing our problems, that we are going to solve the question of wastefulness. There is but one way for us to conserve material, and that is by thinking and educating our fellow men to think. There was a time, centuries ago, when one was not al- lowed to think, but today we are blessed with the right to think, and it is our duty to do so and get our fellow men think- ing in the right direction — ^that of conserving material. CHAIRMAN LORD: Some one has said that human activity cannot be encompassed within a structure of purely logical thought. I think it is just as true that the industrial and mechanical industry cannot be encompassed by any log- ical rules of procedure. The reason for that is not only be- cause of the number of factors involved but because of the variations involved in those factors, and in listening to Mr. Fritz's paper we have heard just one variation of the hundred that enter into manufacture. It shows how difficult it is to estimate and to lay out production schedules without know- ing first the condition in which the materials may be on which you expect to perform operations. As I stated, that is only one of the thousands of variations, and is possibly the reason why no definite measurements of management have so far been possible. 298 S. I. E. Eighth National Convention Conservation of Material By Fred M. Sawin, Federal Rubber Co., Cudahy, Wis. In the rubber industry the question of the conservation of material is of extreme importance. In the manufacture of one of its chief products, that of automobile tires, the cost of material amounts approximately to 80 per cent of the total cost. For this reason it has been necessary to give the use of materials careful consideration and thought. That this has been done is shown by the fact that while the quality of the product has been considerably improved within the past few years, yet the price to the consumer is lower today than it has ever been in the history of the industry, and this is true in spite of the fact that we are still paying a wage amounting practically to 10 per cent over that of 1914. To conserve material within any organization there are several factors which should be considered, the most impor- tant of which are: 1. A definite knowledge of what is required and what forms of material are best suited to the produce to be manu- factured. 2. Adequate stores facilities and records should be pro- vided. 3. Careful departmental supervision for the elimination of waste should be provided for and maintained. 4. Plans should be devised to educate the employees to the need of waste prevention and to provide means of obtain- ing their co-operation in this respect. 5. The maintenance of a well organized salvage depart- ment to dispose of all waste or unused material to the best advantage. Detroit, April, 1922 299 After the work of engineering and design has been per- formed, any conservation of material plan begins with the purchasing department, which, with the assistance and the ad- vice of the laboratory and specification division, purchases the necessary raw materials in the most economical quantities. In order that the purchasing and stores departments func- tion together to the best advantage, we have placed all stores supervision directly under the purchasing department, the head of this department being responsible for the storage and distribution of all materials used throughout the plant. A carefully worked up budget is made up at the beginning of each year, which serves as a guide for the purchase of raw materials and supplies of all kinds necessary for that year's production. It hardly seems necessary to dwell on the need of proper storeroom facilities, but these should include some suit- able form of perpetual inventory record showing the maximum and minimum quantities to be carried at all times. THE BONUS PLAN The elimination of as much waste material as possible is of vital importance with us, and as we believe that the best place that this can be done is "out on the job," a bonus plan has been worked up, whereby each general foreman, depart- mental and assistant foreman receives, in addition to his reg- ular salary, a bonus for each three months' period, based on the following factors : Percentage of seconds and rejections. Cost of repairs to products. Percentage of waste. Departmental unit cost of product. Materials consumed based on production. Amount of power used. Direct overhead cost. These sets of figures are set up for each of these items, making what are called first, second and third tasks, each of the items being graded on a percentage basis according to their relative importance, and the amount of bonus which is 300 S. I. E. Eighth National Convention to be paid for the attainment of the task, shown for each. That this plan has given good results may be shown by the fact that for the first year after it was put into efifect the saving over the previous year for the items covered by it amounted to over $400,000, with a cost for bonus payment of $5,280. Here again the budget is used, the question of what are the proper amounts which should be spent for such items, for example as small tools and supplies of all kinds being shown on a budget sheet for each department by months for a six months' period. These amounts are, of course, based on the corresponding production budget, and are arrived at by a conferen^ce of the factory manager, superintendent and the foreman of the department in question. With the produc- tion budget or schedule available and the records of past costs of the items which enter into it, the making up of this budget is comparatively simple. The amount spent by each department is checked each month with the corresponding amounts as shown by the budget, and it is interesting to observe the keenness and co- operation which the foremen display in trying to keep within the amounts set up. Budgets, or what we call labor specifica- tions, are also made up for all necessary labor on each individ- ual product manufactured, and thus far, for the three months of this year, the percentages have averaged 0.8 of 1 per cent under the budget figure. With the kinds of materials used by us a careless workman can easily scrap many dollars' worth of material each month. This can be considerably decreased by educating him to the importance of keeping this waste down to the minimum. The relation of the foreman's bonus to the item of waste naturally results in his keeping a close supervision on all materials used in his department, and this is reflected to the men working under him. All trimmings and waste materials are placed in separate containers at each work place, and the amounts are weighed and recorded each day. A record of production is posted in Detroit, April, 1922 3m each department showing the percentage of seconds and rejec- tions and the percentage of waste for the current and previous periods as a comparison. HOW SCRAP IS USED All scrap and waste materials pass through what we term our scrap clearing department, where they are inspected and sorted by various grades, the reason for scrappage noted and the department at fault charged with the proper amount of cost. Certain forms of this scrap are returned to the milling departments to be again worked up into usable material, and those which cannot be made use of by us are sent to the salvage department, which disposes of them to the various reclaiming companies throughout the country, which make a specialty of this kind of work. The reclaiming of rubber is a process of treating used rubber articles so that the rubber material in these goods can be made use of in other rubber compositions. When the price of rubber is very low, as it has been in the last year, the amounts of reclaimed rubber used in the trade decrease con- siderably. However, even when crude rubber is bought cheaply there is still a field for reclaimed rubber and probably always will be. So-called reclaimed rubber is not in the same condition, physically, as the virgin rubber started with, since reclaimed rubber contains sulphur vulcanized with it, which to date has never been removed by any reclaiming process. This gives a firmness and stability to it which is lacked by a virgin rubber mixture. Reclaimed rubber is valuable in the rubber industry, not for the purpose of cheapening the product but in order to give proper stability to the article, as, for example, in the manufacture of rubber heels. A rubber hteel made of all rub- ber and sulphur without any reclaimed rubber is usually too "springy" and "squash j^," the addition of some reclaimed rub- ber being preferable for the service and comfort of the wearer. 302 S. I. E. Eighth National Convention In our plant we do not do so-called devulcanizing by sep- arating the rubber from the fabric from old tires and similar articles. This is a specialized process carried on by large reclaiming companies who grind these up and, by the action of acids or alkalies eat out the fabric contained in them, leav- ing the rubber practically free from fabric. This rubber is then mixed with certain oils or softeners and placed in large heaters, where it is treated for from 12 to 24 hours with live steam at from 100 to ISO pounds pressure per square inches. This softens the previously vulcanized rubber, the oils pen- etrating into the material so that on removal from the devul- canizer, the continued milling on heavy rubber mills and re- finers sheets the stock out into a semi-plastic material. This material can then be mixed with sulphur and other ingredients and used again to make new rubber articles, a considerable amount of virgin rubber usually being added to bring about the desired quality of the article in question. It is an interesting fact that in this devulcanizing of rub- ber with high steam pressure certain vegetable and petroleum oils can be used, which again makes it available for rubber compounding without in any way deteriorating the quality of the rubber. This is a very different condition from having oil smeared on the surface of rubber goods in use. Under these circumstances the oil on the surface softens the rubber, and the oxygen of the air starts a decomposing action rapidly destroying the quality of the article. In our own plant we make use of considerable amounts of scrap from our manufacturing departinents which does not contain fabric and from the treads of used tires by devul- canizing with oils as previously described. In the last ten years the percentage of fabric waste alone has been reduced from 28 ounces per tire to 3.9 ounces per tire, and yet last year the amount of scrap salvaged by us was approximately 2,000,000 pounds, having a market value of about $45,000. In summing up what has been accomplished in the last few years by considering the question of the conservation of material the following stands out : Detroit, April, 1922 303 In addition to the actual money-saving, any time spent in the study of conservation accomplishes much more than may at first be thought, as it also stimulates improvements in all the other factors which go to make up efficient production; new processes and methods are developed, and unnecessary operations are eliminated. These are manifested by a much better product at a lowered cost, with more employment for labor and a reduced selling price to the consuming public. CHAIRMAN LORD: Mr. Sawin's paper draws a dif- ferential. The waste described by Mr. Fritz is that which cannot be reclaimed; that described by Mr. Sawin is waste which can be reclaimed, and therefore there is a question of whether it is really waste or not. Where, we have an option of using the material or not using it, and base that option upon a mathematical compilation and price comparison, it is a ques- tion of whether or not it is a real waste, but when it is a chemical process whereby material which can and should be used, deteriorates, it is an entirely different question and one on which there is no argument. MR. FARNHAM: After hearing the two papers I am convinced that by going to the workman — the man who is actually handling the material — a wonderful storehouse of knowledge can be had which, if it can be organized, should result in solving a great many of the problems of competi- tion which tkis country is now facing. MR. SHEPHARD: I have found work being done by men on time rates, and the prime cost of such jobs has been at least 66^ per cent direct material and 33 J^ per cent direct labor, varying from that up to 90 per cent direct material and 10 per cent direct labor, and even in the case where the direct material was 90 per cent of the cost, I found men on that work being paid piece rates. Along the line of the last speak- er there is one thing where an immediate saving can be af- fected — by going to the workers themselves and gaining that storehouse of knowledge. 304 S. I. E. Eighth National Convention CHAIRMAN LORD: Commenting on what Mr. Farn- ham has said, management, in my estimation, lies in the last 10 per cent, and the last 10 per cent is usually waste or con- servation of waste. It only takes two or three cents on the dollar one way or the other to determine whether we are going to pay a dividend or ask the banks for money, and that is covered by waste in every industry. I have come to the conclusion that the reason why we as individual engineers fail sometimes to get home our ideas is that we cannot demonstrate them or that other people can- not visualize them. If we are going to conserve waste, we must visualize that waste. MR. WILLIAMSON : There are two departments in an organization that deserve more consideration than they ordi- narily get — the scrap clearing house and salvage department. I have seen thousands of dollars' worth of machinery scrapped directly from the floor to the scrap pile. If more attention was given to the organization of the scrap clearing house, regardless of whether in a machine shop, tire shop or whatnot, the saving would be enormous in many instances. Detroit, April, 1922 305 Conservation of Plant and Equipment By F. H. Low, Ford Motor Company, Detroit, Mich. The subject, conservation, is well divided under three head- ings — material, labor and equipment — but in actual practice these separate conservations are so closely interwoven that it is hard to attempt a saving in one without an appreciable effect on one or both of the others. Thus, if a fixture is designed to perform several operations on one machine, it has been my experience that this fixture saves equipment by releasing the other machines and tools. It saves the labor of removing and re-posi- tioning the piece and prevents scrap due to relocating the work. If one has the advantage of designing a building to house a known industry, with an estimated increase, he may effect a considerable saving in plant and equipment by proper design. A careful study of the production per machine and the relation of one operation to another should first be made. With this data an ideal layout of the scheme of manufacture may be drawn up. Here again all three divisions of conserva- tion are affected. With a proper layout the equipment is in- stalled in the least possible space, saving on plants, trucking is reduced to a minimum, saving labor and equipment, while, with a definite plan of routing over- the shortest paths, mate- rial will be less likely to become lost or damaged in transportation. The most marked change in shops since I filed burrs on my first day of practical experience is the layout of machinery. One piece I remember well. It was a small forging which when finished hajd two shaft holes and a pin hole. After the forging had been delivered to the -drill press department it moved three different times, a total of some fifty feet. Each time it was raised from the floor to the machine, then back to the floor. Today this part moves about seven feet and is 306 S. I. E. Eighth Nat ional Convention not handled between operations. This does away with all tote boxes and effects a considerable saving in line shafting and machines, as the time spent by the operators in shoveling the parts onto the machines is now turned into productive machine time. When the ideal layout is made, certain advantages will probably have to be set aside to adapt the layout to building conditions. Whatever changes are made, the layout should have the benefit of any doubt. We, at the Ford Motor Com- pany, are working on an ideal layout for any future branches, and, while our present branches are from one to twelve stories, our future branch buildings will be as flat as a pan- cake, as such a building best houses our ideal layout for assembly. An important consideration is the type of floors which will best stand up. This, of course, will vary with the product manufactured. We have standardized on concrete floors for machine shops, with creosote blocks set on edge for aisles which carry the heavy trucking. When the building is completed an adequate fire protec- tion system should be installed. This may vary from the well-known water sprinkler system to the more elaborate Firefoam sprinkler system used on special hazards. When the building has been turned over to the works superintendent he must consider every installation to see that it is made in such a way as to damage the permanence of the building as little as possible. Holes should not be cut through reinforced concrete floors; all steel work should be protected by paint at all times; repairs should be made immediately; bumpers should be provided where traffic would have a ten- dency to become intimate with the corners or edges of the buildings. CONSERVATION OF MACHmERY Let us now consider the machines. At the Ford Motor Company no machine is put on production before the super- intendent of machine repair has inspected the oiling system. Strangely enough, most machine tool manufacturers consider Detroit, April, 1922 307 the oiling system of minor importance. We have received numerous machines equipped with small spring cap oilers which would not hold sufficient oil to keep the machine from running hot for ten minutes. The sight feed oil cups of large capacity on remote parts, or on small machines, are most satisfactory. On large machines a central oil tank with individual lines running to each of the several parts, each line having a sight feed, such as the motorcycle feed, is the proper equipment. These oil systems often run into money, but are well worth their cost. Do not make the mistake of putting one sight feed between the tank and header and none on the individual lines, as this will end in disaster to the ma- chine. At the Ford Motor Company the oiling of the mar chines is not left to the operators, but is taken care of by a man who does nothing else. However, the operator is also responsible for the machine and shuts down, or notifies the oiler, when he believes it necessary. The machines should be protected by guards to prevent damage by placing stock on the ways. Lead blocks should be provided where it is necessary to strike a part or tool to clear it of chips. This is one of the greatest troubles with which we have to contend, as the operators do not seem to realize that their machine may be used on some other opera- tion which will require that part which they are damaging. Small repairs should be attended to immediately to pre- vent excessive wear, .and, of course, the machines should never be overloaded. This last item is generally overlooked imder the stress of production' in practically every department. This is particularly true where stellite is used on machines designed only for strains to be. expected from use of high- speed steel, or even in many cases high-carbon steel tools. STANDARDIZATION OF TOOLS The first rule on conservation of small equipment and tools is standardizatioi}')^ ^While; this' is essentially a function of the designing departrrjent, ;the men in the shop, particularly in the stock rooms, lend invaluable assistance, as these men^ 308 S. I. E. Eighth National Convention who handle tools and equipment going into the entire plant, will notice similarities which would be overlooked in the drafting room. Our tool design has a system of numbers which lends itself readily to standardization. Each tool bears a letter "Z" prefixed by a number which classifies it, thus: 16-Z fixtures, 24-Z gages, 3-Z conveyors, S-Z drifts. Standard parts, such as bushings, screws, legs and punches, also have a prefix. Drawing a fixture then is really an assembly process. While the fixture bears a 16-Z number, it is composed of several other "Z" numbers. Conveyors which are to be duplicates of one already installed have their individual "Z" number, but draw parts from the original drawing. It is important to choose the material which will last the longest under the work it is to do, and all wearing parts should be reduced to the simplest form to make replacing them an easy matter. Stellite, which has been known for some time as a cutting tool used in the bar form, is equally valuable to production when made into forging cutters, spot facers and milling cutter blades. It may also be used in swedging dies, gages and other tools. We find that stellite snap gages will hold up three times as long as the best steel gages. Finally, all tools should be made on the highest limit of tolerance so as to take advantage of the wear. Care should be exercised that standardization is not car- ried beyond the point of good practice. Special tools are often advantageous beyond any advantage which might be gained through maintaining the standard. I believe the sweetest revenge for the workman would be to see the man who standardizes tools working with them. Another mistake is to use misfit standard parts. In one case we found that using a standard bushing in a fixture was costing us half an inch on each drill. To overcome these difficulties, as far as possible, the fore- man is consulted and puts his approval on the drawing be- fore the tool is ordered. This has a psychological effect as Detroit, April, 1922 309 well, for, right or wrong, once he has approved it the foreman backs his decision, and the tool works. The grinding of cutting tools, excepting tool bits, should be done in a grinding room under a competent foreman, and it is generally advisable to have the job setter grind the tool bits to a templet, this templet being made from a sample tool which is found, by practice, to give the best results with the longest life. PREVENTING DUPLICATION In a large organization, such as the Ford Motor Company, it is necessary to take precautions against duplication of orders. For this reason all complete fixtures are ordered through the drafting room. Details and standard small tools are ordered by stock. All such drawings are marked "stock" to avoid any possibility of error. An essential department in a large organization is the available stock. Here all parts of machines hot needed on production are placed immediately the machine is delivered to its location. A complete file is kept of all such parts so that they may- be easily located when required, either on the original or some other machine. When a machine becomes available it, too, is delivered to his department. At times it becomes necessary to go through this department, selecting such machines- and parts as are not moving rapidly. These are sold either "as is" or as scrap, depending on their market value. This department is augmented by an office through which larger pieces of equipment are traced. If a 5-ton crane is to be ordered this office is first consulted to see if one is available at any of the numerous plants. Small tools avail- able at branches are listed by the Branch Equipment Depart- ment upon receipt of information from the branches. They are either returned to the general stock or routed directly to other branches, as best suits the case. Each piece of worn or discarded equipment is given a final chance for life in the salvage department. Drills which are too short for one operation are routed by salvage to other departments, where they can be used. Undersized drills, 310 S. I. E. Eighth National Convention broaches, cutters, and so forth, are reworked to new tools for other operations. Tanks, castings, tables, stands and the like are given a number and listed for ready reference so that the order department will know of their . availability. The men in salvage are mechanics well informed on the shop condi- tions and notify anyone who might be interested when a piece of equipment becomes available. A department of some 60 men is maintained to repair small tools, such as Yankee screw drivers, shears, boots, foundry shoes, acid aprons, gloves, etc. As far as possible salvaged parts are used, but it is often necessary to purchase additional parts. When an operation has been discontinued the tools are sent to salvage and are held for a period of time before being reworked. This is done because it often becomes necessary to reinstate the operation, either for service or due to some other change in the part. ECONOMIES, OF CONVEYORS I believe the conveyor may now be placed under the head- ing of machines which conserve equipment. When I first entered the employ of the Ford Motor Company in 1913 six labor hours was considered a fair cost for assembling a motor. It is now assembled with a labor, cost of 2 hours and 10 minutes. This saving in time is due in a large measure to the progressive conveyor system, and while their cost is no small item, it is easily made up in the saving of small tools, floor space, trucks and bench equipment. Last year we completed a conveyor which brings castings and forgings to the machine shop from the foundry and heat treat. This conveyor does away with 150 trucks which were much more costly to maintain than is the conveyor. ■ CHAIRMAN LORD : Unfortunately most of us are not able to take advantage of the momentum of mass such as the Ford Motor people do. We are more interested in saving in a small way. Without any real evidence, it is my belief Detroit, April, 1922 311 that in at least 75 per cent of the places where we use high- speed steel or stellite it is not profitable and that ordinary carbon steel would serve our purposes as well or. better. Stel- lite cuts better really when it is red hot than when it is cold. The same virtue is inherent in high-speed steel, but not to- such a degree. Carbon steel is harder than high-speed steel, but whether it is harder than is stellite I do not know, al- though I have used many hundreds of pounds. Personally, I incline more to the cast-iron gage. I do not want gages to last too long ; I do not want gages too strong — I want them to break. When a man brings his foot-stock up and jams his gage between it and the machine, I want that gage to break; if he drops a gage on the floor hard enough to have sprung it had it been steel I want it to break. As regards the salvage of tools, we have a method at our plant that so far as I know is original with us. We make a man turn in a check for a broken tool, similar in every way to his ordinary tool checks, except it is nickel-plated, and at the end of the month they are given back to him. But, first of all, if they represent tools of a certain value or a number of smaller tools, they must go to the superintendent, and the man consequently hates very much to turn in a nickel-plated check for a tool. 312 S. I. E. Eighth National Convention The Conservation of Plant and Equipment By Emil J. Schmidt Industrial Engineer, Sewell-Clapp Envelopes, Chicago A smooth running plant is no accident. Wherever we find a clean, orderly plant, with little confusion, we can be sure there is good management behind it, and where we find such a condition we know that the manager is intelligent enough to make sure his plant and equipment are kept up in the very best condition. The process of attaining a high degree of conservation con- sists of these steps: 1 Analysis of the problem, 2 Setting standards, 3 (a) Fixing standards of stabilization, (b) Raising the standards set, 4 Executive control. In other words, good management knows what to do, how to do it, and sees to it that it is done correctly and consistently. What is our problem? Suppose we state it thus: To main- tain the plant and all its equipment on a high level of mechanical efficiency; making it possible to secure maximum production at minimum machinery hour cost, and to secure steady improve- ment. Having stated our problem we skip the vital points of analysis of product, selection of processes, selection of machines and layout of machines, assuming that these have been properly settled. This forms our point of departure for — analysis. The! first object of our analysis is the actual equipment. What does the plant consist of? What machines are there? What tools and auxiliary equipment? A plant audit is what we want, and a thorough appraisal is a mighty good starting point. How is maintenance handled? Is there a separate depart- ment for it ? How is it controlled ? What equipment, in partic- ular, has the maintenance department for doing its own work? We need all the available figures on machine production, speeds and other machine data, costs per hour and per unit of produc- tion. Detroit, April, 1922 313 Get the facts ! All the facts ! Analyze the facts ! The man- agement is then in a position for setting standards, based on defi- nite policies. These had better be written, to be clear and concise. Standards would include performance, maintenance expense and also standards of supervision. Setting these standards makes stabilization possible, under which we include everything that is done to maintain the stand- ards set. The management will organize the work of mainte- nance, making sure that responsibiUty is definitely fixed, special- ization of maintenance functions are clearly recognized, and ade- quate equipment is provided. To make stabilization effective, schedules or written instruc- tions can then be provided for : (a) Daily routine duties of functions in maintenance work. (b) Periodic inspection of machines and equipment. (c) Periodic overhauling of machines and equipment. (d) Procedure to be followed when any piece of equipment is scrapped or placed on the obsolete list. Regular reports based on such schedules are a great aid to executive control. Some kind of tickler or follow-up system is required in this connection. These reports, which should be simple but clear, compare the condition of the machines, their output, cost of maintenance, with the standards as incorporated in the general budget. They are best understood when they take the form of graphs and are comparative and cumulative. Publicity of such records is a very effective incentive to the men who are responsible for the results. If, as some people be- lieve, a monetary incentive for the maintenance department is also required, it probably should be basedj on the principle of the shar- ing of gains made. Definite acknowledgments of and reward for suggestions for improvements in mechanical devices will also prove effective incentives. However, the best system, the most alert executive, will not succeed fully without co-operation. This is particularly true of maintenance work. The engineering department, superintendents. 314 S. I. E. Eighth National Convention foremen, all must co-operate fully in order that the maintenance department can really do all that the executive expects. The first class executive (and it is this kind only that we are discussing) knows this, and he will see to it that co-operation is secured. Personal supervision is needed to make a success of anything, and this is true also of executive control over maintenance. The works manager (or whoever is finally responsible) should pains- takingl)', everlastingly follow up maintenance conditions. Unless he does so, reports will not be regular and the mechanical equip- ment will slump in efficiency. In all of this, if it is to be thor- oughly analyzed and handled, need we say that the industrial engineer, or someone who has his viewpoint and uses his technique, is absolutely indispensable? We have seen, then, that successful conservation of plant and equipment can be controlled, if standards resulting from research and analysis are the basis. It is not spectacular, it is not acci- dental, but it is necessary, and is accomplished through everlast- ing vigilance, which we find only in the best-managed industries. Now, as time permits, we shall hurriedly touch on the more important divisions of plant and equipment — that is to say, the objects of the aforesaid managerial activity. We can make an arbitrary division into five groups : (a) The plant, building, grounds ; (b) The power plant and transmission of power; (c) Productive machines; (d) Trans- portation equipment ; (e) Other equipment. We shall pass over the building, grounds, fences, etc., without making obvious comments on the virtues of frequent coats of paint, white paint, and plenty of it. About the power plant great improvements can be made by the simple device of keeping records of such matters as coal con- sumption, etc. The increasing use of flue gas indicators and other instruments is very beneficial to better maintenance. Mr. Pola- kov's work in this connection deserves careful study by all. The increased use of fuel oil will simplify maintenance conditions, I think. Going through the line of power from the power plant, we pass along to shafts, with their hangers and the inevitable belts. Detroit, April, 1922 315 The increasing use of individual motor drive is decreasing shaft- ing problems and the substitution of roller bearings for worn plain bearings is also an aid to maintenance. On the subject of belts, that has been thoroughly covered, notably by Carl Barth. His data, together with the Taylor belt bench, which provides measurement of belt tension, makes belting maintenance an exact science. The Clipper belt lacer helps. When we come to motors and control apparatus, we note the continually increasing application of electricity. Standardization of motors and controllers, data cards for the electrician, instru- ments for measuring current and power voltage, all contribute toward stable electrical maintenance. Lubrication of machinery is of the utmost importance. Yet how often neglected! The tendency in design to make it auto- matic by running gears, cams, etc., in baths of oil will help to overcome carelessness in living up to oiling schedules, but in many industries there is still vast room for improvement in this connection. PRODUCTIVE MACHINERY Productive machines, if in separate units, should be standard- ized to the utmost degree. The best design should be adopted as standard, and all the machines doing the same kind of work be made the same in every particular. Of course, this is not al- ways feasible, but in very many cases standardization has proven a wonderful economy, particularly for maintenance. A small stock of standard interchangeable parts will serve to make the repairs necessary with a minimum loss of time. This is true also of the tools, fixtures, etc., that go with the machines, which makes for great savings in tool room space and expense. Let us bear in mind that standardization does not mean stop- ping all progress. By no means ! It merely means the best that has been achieved so far. When a real improvement is discov- ered, it is adopted as the new standard and all machines are changed to conform to the new standard as soon as possible. The maintenance department is in a position to be of exceptional 316 S. I. E. Eighth National Convention service in suggesting and working with improvements. Do not overlook their experience. The practice of having reserve machines always ready to start up is absolutely necessary to provide for : (a) Breakdowns, (b) Periodic overhauling. As to tools, jigs, fixtures and other appliances these should be kept in tool rooms, where they can be carefully inspected, sharpened and kept in reserve. Where a number of changeable parts are taken from a machine, boxes with compartments for each part, and exact lists of parts are necessary to keep up to 100 per cent preparedness. TRANSPORTATION DEVICES Equipment and devices for plant transportation are in a sep- arate class, although of course tied up with productive machin- ery. It is unfortunately too often that this equipment is neglected, which is as bad as the railroads neglecting to keep their rolling stock in repair. Maintenance must include keeping of safety de- vices in first-class shape. There are far too few such devices, even now, and the maintenance department should help to sug- gest and devise new protective devices for workmen. The use of machinery in offices for inter-communicating, etc., is constantly increasing, but here usually ""service" goes with the machine. However, sound principles as outlined above can be applied with profit to this class of equipment. Also if all equip- ment were kept to standard as religiously as sprinkler pumps and apparatus, there would not be much of a maintenance problem. What results can we expect from a real attack of the mainte- nance problem? How do we know that plant and equipment are efficiently conserved? All that is necessary is J;o go through a plant and if we find few machines broken down and an absence of noise, dirt and confusion, we may be sure that the correct principles of plant maintenance are being applied. Dirt is a cause and noise a proof of undue wear. The surest test, however, is cost. With a properly designed and functioning cost system, we have quick, comprehensible, com- Detroit, April, 1922 317 parative costs of machine maintenance, charted with the stand- ard budget figures and that, in the end, tells the story. This is the "Machine Age." We are more and more dependent on science and mechanical devices. Those who remember Mr. Floyd Parson's stimulating paper of the Springfield convention will never forget the fascinating peep into the future which he gave us, nor will they fail to -appreciate the vast importance of machinery. This means not only that we shall not worry much about communism, that we shall certainly have the six, the five, even the four hour work day, but also that in order to succeed industrially in a Machine Age we must solve the problem of ma- chine maintenance, or conservation of plant and equipment. The Convention Program WEDNESDAY, APRIL 26, 1922 8:30 A. M. — Registration Bureau Opened. 10 :00 A. M.— Plant Inspection Trips Detroit Steel Castings Company Ford Motor Company Hiram Walker & Sons, Ltd. 1 :00 P. M.~"Get Acquainted" Luncheon at Hotel Statler 3 :00 P. M. — Opening Session Chairman — ^Joseph W. Roe President, The Society ol Industrial Engineers 1. Invocation. — Rev. Morton C. Pearson, D. D. Executive Secretary, Detroit Council of Churches 2. Address of Welcome. — George A. Walters Deputy Police Commissioner, Detroit 3. Reply.— The President of the S. I. E. 4. "The Measurement of Management" — (The need of Standards and Methods of Applying Them). — ^JosEPg: W. Roe Head Dept. of Industrial Engineering, New York University 5. "How Industrial Engineering Serves the Chief Adminis- trator." — Col. Benjamin A. Franklin Vice Fres. Strathmore Paper Co., Mittineague, Mass. 6 :00 p. M. — Informal Dinner Meetings a — Education Group. Topic — ^"The Education Department in a Small Plant" Chairman — Chas. W. Lytle Industrial Engineering Dept., New York University Discussion Leader — Hugo Diemer Director Industrial Management Department, La Salle Extension University, Chicago b^-Production Managers' Group. Topic — ^"Managements' Re- sponsibility for the Elimination of Waste in Industry" Chairman — John M. Carmody The H. Black Company, Cleveland c — Chapter Delegates Chairman — ^William S. Ford, Milwaukee Vice President in charge of Promotion 8 :00 P. M. — Evening Session Chairman — Frank B. Gilbreth, Montclair, N. J. 1. "Practical Tests of Employees." — Henry C. Link, New- York Author of "Employment Psychology" "A Practical Study in Industrial Fatigue," etc. 2. "The Influence of Industrial Engineering Upon Manufac- turing Plants." — E. Karl Wennerlund Industrial Engineer, General Motors Corporation, Detroit 3. "How Industrial Engineering May Serve the Executive" — (Illustrated with lantern slide charts). — E. W. Hulet Vice Pres. The White Company, Cleveland THURSDAY, APRIL 27 8 :30 A. M. — Registration Bureau Opened 9 :00 A. M.— Plant Inspection Trips Cadillac Motor Car Company Central Forge Company Detroit Pressed Steel Company Detroit Vapor Stove Company 9 :30 A. M. — Meeting of Board of Directors 12 :30 P. M. — Luncheon Meeting of Research Committee Chairman — Edward J. Kunze Head of Industrial Engineering Dept., Penn State College 2:30 — Four Sectional Meetings a — Industrial Relations Group. Topic — "Experience With Em- ployees' Representation Plans During the Periods of Business Depression." Chairman — E. S. Cowdrick Colorado Fuel and Iron Co., Denver Leader of Discussion — John Calder Director Industrial Relations Dept., Swift & Co., Chicago b — Managing Executives Group. Topic — "Managerial Red Tape" Chairman — Edward T. Miller Executive Secretary, United Typothetae of America (The International Association of Master Printers) Leader of Discussion — Stanley P. Farwell Vice Pres. Bureau of Commercial Economics, Chicago c — Accountants' Group. Topic — "With the Establishment of an Effective Budget Control, What Non-essentials Can Be Eliminated From Present Industrial Accounting?" Chairman — W. P. Hilton The Willys-Overland Co., Toledo, Ohio d — Sales Managers Group. Topic — "Educating the Distrib- utor" Chairman — W. W. Gilgis Ass't. to the Director of Sales and Advertising, The Palmolive, Co., Milwaukee 6 :30 P. M.— Banquet (Informal) Toastmaster JOSEPH W. ROE President, S. I. E. 1. "The Need of the Hour."^ — Robert B. Locke Director and Manager, Federal Reserve Bank, Detroit 2. "How Industrial Engineering Can Serve Labor." — Matthew Wouu Vice Pres. American Federation of Labor Pres. International Photo-Engravers' Union 3. "Our American Aviation Development and Policies" (Illus- trated with motion pictures and lantern slides).- — Howard E. Coffin Vice Pres. Hudson Motor Co., Detroit (formerly chairman, Advisory Committee of the Council of National Defense) Detroit Chapter presented some special entertainment features during the banquet. FRIDAY, APRIL 28 8 :30 A. M. — Registration Bureau Opened 9 :00 A. M.— Plant Inspection Trips Burroughs Adding Machine Company Cams Steel Wing Company Hudson Motor Car Company Michigan Stove Company 9 :30 A. M. — Meeting of Executive Committee 2 :00 P. M.— Chairman — Chester B. Lord Works Manager, Advance-Rumley Co., Battle Creek, Mich. Subject — "How Can Industrial Engineering Increase the Profits and Insure the Stability of Both Capital and Labor." (IS Minute Talks by Workmen and Production Managers) 2 :00 P. M. — "The Conservation of Material." — Anthony Fritz Penberthy Injector Co., Detroit — Fred M. Sawin Federal Rubber Co., Cudahy, Wis. Thirty minutes for general discussion 3 :00 P. M.— "The Conservation of Plant and Equipment."— F. H. Low Ford Motor Company, Detroit — E. J. Schmidt Sewell-Clapp Envelopes, Chicago Thirty minutes for general discussion 4 :00 P. M. — "The Conservation of Labor." — h. Moorehouse Detroit Pressed Steel Co. — A. S. Cunningham Hadfield-Penfield Steel Co., Bucyrus, Ohio Thirty minutes for general discussion 6 :00 P. M. — Dinner Meeting, Large Banquet Hall Committee for Elimination of Fatigue Chairman — Frank B. Gilbreth Montclair, N. J. Topic — "'Developments in Waste Elimination in the Field of Fatigue" Discussion Leaders — S. A. Courtis Director of Instruction, Teacher Training and Research of Detroit Public Schools YoicHi Uyeno Institute of Industrial Psychology, Tokyo, Japan Report on the Progress of the Movement for the Reduction of Noise during year April, 1921 — April, 1922, submitted by Professor Henry J. Spooner, Director of the Polytechnic School of Engineering, London, England. Closing Session Chairman — Joseph W. Roe President, S. I. E. 1. "Sales Management and Industrial Engineering." — Norval A. Hawkins Detroit 2. "How Industrial Engineering Increases the Productivity of Each Industrial Unit at Reasonable Cost."— Daniel B. Gauchet General Works Manager, Edison Electric Appliance Co., Chicago 3. "How Industrial Engineering Reduces Production Costs."— Parkin T. Sowden Vice Pres. Rope Sack Manufacturers* Asso., Canajoharie, N. Y. CONVENTION COMMITTEES Reception Chairman — Gordon Stoner, Detroit William Baum _ Milwaukee, Wis. Lawrence Cornelius Grand Rapids, Mich. Allen B. Crow Detroit, Mich. Harry Esch _. Detroit, Mich. Harry Hereford Ottawa, Ont. Thos. W. Howard Chicago J. J. Martindale _ Detroit, Mich. W. W. Nichols Detroit, Mich. Abbott L. Norris Charlotte, Mich. Harry F. Porter Cleveland, Ohio Carl H. Seehoffer Detroit, Mich. Alvin G. Sherman Detroit, Mich. Henry I. Stimson Grand Rapids, Mich. Registration Chairman — A. F. Trever, Chicago Richard H. Alden Detroit, Mich. Paul Arthur Elkhom, Wis. Chas. E. Bassett. Fort Wayne, Ind. A. C. Gaylord. New Castle, Ind. Stuart S. Lowe. Middletown, Ohio Jas. E. Morrison. Detroit, Mich. C. S. McClure. Detroit, Mich. A. J. Sarre. Grand Rapids, Mich. F. C. Shafeh Detroit, Mich. L. M. Stowell Detroit, Mich. Wm. a. Ullrich Dayton, Ohio RoYCE E. Wright. Milwaukee, Wis. Halls and Dinner Meetings Chairman — ^J. Eigelberner, Chicago J. Frank Holt. Springfield, Mass. E. J. LowMAN. Montour Falls, N. Y. P. H. Myers Chicago F. E. Schuchman Pittsburgh, Pa. W. R. Williamson Chicago A WORD OF APPRECIATION The S. I. E. desires to express to the manufacturers of Detroit and vicinity its deep appreciation of the im- portant part they played in making the convention a success. The plant inspection trips made possible by their hospitality and willingness to co-operate were one of the most interesting and valuable features of the con- vention. We wish especially to thank the — BURROUGHS ADDING MACHINE COMPANY CADILLAC MOTOR CAR COMPANY CARNS STEEL WING COMPANY CENTRAL FORGE COMPANY DETROIT PRESSED STEEL COMPANY DETROIT STEEL CASTINGS COMPANY DETROIT VAPOR STOVE COMPANY FORD MOTOR COMPANY HUDSON MOTOR CAR COMPANY MICHIGAN STOVE COMPANY HIRAM WALKER & SONS, LTD. EDITING COMMITTEE Convention Proceedings Paul E. Behrens 100% Management Howard Campbell American Machinist Frank E. Gooding Industrial Engineer Leon I. Thomas Factory The Society of Industrial Engineers LOCAL CHAPTERS CHICAGO CLEVELAND NEW YORK DETROIT MILWAUKEE SHERMAN, TEXAS PHILADELPHIA MINNEAPOLIS CINCINNATI PITTSBURGH SPRINGFIELD, MASS. Reports of chapter activities are published in the S. I. E. Monthly Bulletin PREVIOUS CONVENTIONS 1917. Organization Meeting Chicago 1918. First National Convention Chicago 1919. Spring Convention New York City Faix Convention Cleveland, O. 1920. Spring Convention Philadelphia, Pa. Fall Convention Pittsburgh, Pa. 1921. Spring Convention Milwaukee, Wis. Fall Convention Springfield, Mass. 1922. Spring Convention Detroit, Mich. Fall Convention New York City THE OBJECTS OF THE SOCIETY OF INDUSTRIAL ENGINEERS I — To furnish a medium for bringing out original contributions to the science of management. II — To provide an organization through which persons who are applying scientific methods to the so- lution of the problems of production and distribution may exchange views and co-ordinate their efforts. Ill — To co-operate with other societies. lY — ^To codify and standardize professional prin- ciples and practice. V — ^I'o develop the professional standards of the Industrial Engineer. VI — To promote efficient energy-conserving managemerit. VII — To enhance the efficiency and prosperity of American Industry. Cornell University Library T S6.S585 The influence of Industrial engineer 3 1924 002 249 427