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The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: Parkhurst, Frederic Augustus Title: The science of management Place: [Cleveland] Date: [1918] qQ-<;^;^\a(^-i\ MASTER NEGATIVE * COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED • EXISTING BIBLIOGRAPHIC RECORD r 230 P22 1 Parkhurst, Frederic Augustus, 1877- The scionco of management, by Frederic A. Parkhurst . . . (Cleveland, Printed by the Exline co., ^1918] ix, 203 p. 23i" Lcm "A course of lectures given at Case school of applied science, Cleve- land, Ohio, 1917-1918." Bibliography: p. 10-20. 1. KfTicicnvy, Industrial. Library of Congress • Copy 2. Copyright A ^79917 2. Factory management. T58.P2S I. Title. 18-2042 RESTRICTIONS ON USE: TECHNICAL MICROFORM DATA FILM SIZE: S M. 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'^. 4^^*>. ^ «%' ■ &' "If*? ^ ^:•■-^:•:=>!.^'^•^>;^•:^v•- %:>;>•; :-'% ^*•"^^:v.^-^>x•^^y..••>:•••*,4 ;>_>'".'>v*.*-*>f.;>yV>y.''.f.-' •>>"•>>>/>>>.' '.• .•>".;y -v'^-i,?". ■■.•>".•*. ■'.■.•>■.%• IE^^imWI^ ^w I^mM / THE SCIENCE OF MANAGEMENT BY FREDERIC A. PARKHURST, M. E. Organizing Engineer i A Course of Lectures Given at Case School of Applied Science cleveland, ohio 1917-1918 ) &0 T*^ F '/.^ -S/^^ve referred to, Mr. Tay- lor had associated with him, Mr. H. L. Gantt, one of the best scientific managers, and Mr. Carl G. Barth, also a noted scientific manager and one of our greatest mathema- ticians. Mr. Barth was able to design a slide rule which could be readilv modified to suit each different machine and on which he was able to bring under control the twelve variables above mentioned. The result of adapting all these mathematical laws to the slide rule made it i)ossible for any man after a few minutes of instruction and endowed with M I % FREDERIC A. PARK HURST / only a very ordinary education, to quickly solve the three questions listed above; namely, what tool, speed and feed should be used for a given piece of work. Too much emphasis cannot be laid on the importance of not considering any one of the elements of Scientific Man- agement as of paramount importance, or of parauiount necessity. To quote Mr. Taylor's final closing remarks after the discussion of his paper, 'The Art of Cutting Met- als," at the A. S. M. E. Convention in 1906, "In conclusion, I can but express a certain surprise and regret that our paper *On the Art of Cutting Metals,' has attracted so much more attention than has been given to our various papers on shop management, which, after all, is the real vital subject in which we are most interested, and of which the art of cutting metals constitutes, on the whole, merely one of the important elements." The fact remains that all of the elements of Scientific Management are of importance and must be co-ordinated before the final completion of this scheme of management and before the full effects of same can be realized both by the Company and the Company's employees. In the course of lectures to be given this year, all of the various elements will be discussed and treated as completely as the time will permit, so as to make clear to you all, the importance of the organization scheme in its entirety as opposed to the random installation of certain elements. The chief elements of Scientific Management as stated by Dr. Taylor himself are: A. Science, not rule of thumb. B. Harmony, not discord. C. Co-operation, not individualism. D. Maximum output in place of restricted output. E. Development of each man to his greatest ^^ ciency and prosperity. Each of these elements will be discussed more completely at a later lecture. h'- 8 HISTORY In connection with the development of his work. Dr. Tay- lor had associated with him among others, H. L. Gantt, Carl G. Barth and Sanford E. Thompson. As time went on, he was more closely associated with other men as the scope of his work broadened and more engineers began to study and follow closely, Taylor's methods. Among the other early pioneers of this work may be named Gilbreth, Dodge & Day, Emerson and myself. I was fortunate in being closely associated with the above men to the extent of being able to clearly study particularly the work of Taylor, Gantt and Barth. I was in position to profit by their mistakes and I profited by criticisms of their methods of handling this kind of work. Although never directly associated with any of them except Harrington Emerson, with whom I was connected when he started his first management work, I have, as above stated, been closely allied with their methods. I have been able to develop my own methods to get in my judgment, the best results by the application of the Taylor principles. In section i-B of this lecture I give a rather complete bibliography of the literature on the subject. This litera- ture is not very extensive and the majority of the books listed treat of generalities rather than all phases of the Science of Management. The leading books listed in the bibliography above men- tioned can be read to advantage. It is desirable that every student cover the field sufficiently to be able to understand the entire subject from a broad viewpoint. There are statistics from about one hundred thirteen (113) plants in the country that have adopted wholly or in part the principles of Scientific Management. These plants represent over eighty (80) industries. Of the num- ber above mentioned, fifty-nine (59) are reported as being complete successes, twenty (20) as partial successes, and thirty- four (34) failures. There are twenty-eight (28) cases now^ in process, of which it is expected that twenty- two (22) will be wholly successful. i FREDERIC A. PARKHURST Q Failures are due chiefly to two causes : ( i ) The inability of the so-called expert to successfully handle the proposi- tion; (2) Faulty management. The responsibility for the failures is practically equally divided between the expert and the management. Incompetency on the part of the management, dissension, and in one or two cases, unfavor- able conditions of business are responsible for the manage- ment failures. With one possible exception, there have been no failures due to difficulty with w'orkmen. The only exception that might be mentioned is the case of the Watertown Arsenal, but this was due more to the fault of the local management than on account of the methods being installed. In this case the labor difficulty was only of short duration, and Gen. Crozier shows conclusively the great saving and ad- vantages that accrued as the result of the installation of the Taylor system of management. Any installation that is self-sustaining and continues to run efficiently long after the engineer has left the work, may be considered as being a wholly successful proposition. A great many of the companies prefer to have the engineer retained on a part time basis so as to supervise at intervals the current work of the organization. This is a most de- sirable way of handling an installation of this kind. Unfortunately, a good many accountants or so-called sys- tematizers have attempted to put in forms and give the name ''Scientific Management" to ordinary routine installa- tion pertaining chiefly to records. Scientific Management, as I will show during the ensuing lectures, is a rather com- l)lex and scientifically worked out scheme of operation and control which varies to some extent in detail with each dif- ferent installation. Scientific analysis and research must be the basis of every installation, some of the research being of a most extensive and thorough order. There are elements involved in every-day operation of the manufacturing industries which the layman rarely stops to H: lO HISTORY consider. In a very large percentage of cases these elements are not by any means under control nor has there been any great attempt made to bring them under control. It is the object of Scientific Management, as I have briefly indicated above, to analyze the various problems into their elements and bring these elements under control, all based on scien- tific investigation and fact. The remaining lectures of this course will treat on the subject as completely as the time allotted will permit. The lectures cover the entire field, however, to such an extent that the student will be able to have a rather complete idea by the end of the year as to just what is involved. He will be well fitted to take up further study of this subject, or to co-operate with any organization of the type under con- sideration. The psychological element is of great importance, as in connection with the management problem we have to handle the great human variable. Psychology is one of the big con- trolling factors. 1-B. Bibliography. This bibliography is quoted almost entirely from "The Taylor System of Scientific Management" by C. Bertrand Thompson, 1917. The Taylor and Other Systems of Shop Management. Hearings before Special Committee of the House of Representatives to investigate. Washington, Govern- ment Printing Ofiice, 1912. 1-801, 803-1264, 1265- 1935- Free. Testimony of "Taylor System" and other man- agement engineers, labor leaders, workmen and War Department officials, regarding the meaning and actual operation of the Taylor system. One of the best sources. FREDERIC A. PARKHURST II -^ ^> Brandeis, Louis Dembitz Scientific Management and Railroads, New York, En- gineering Magazine Co., 191 1, vii, 1-92, $1.00. A severely concise and logical presentation of principles, backed by the testimony of witnesses in the famous Eastern Rate Case hearings before the Interstate Commerce Commission of 1910. This testimony and Mr. Brandeis' argument made scientific management famous. Child, Georgie Boynton The Efficient Kitchen, New York, McBride, Nast Co., 1914, xiii, 1-242, $1.25. Based on work of the Housekeeping Experiment Station. Stamford. Conn. Excellent discussion of methods and equipment. Hard reading but practical. Church, Alexander Hamilton Science and Practice of Management, New York. En- gineering Magazine Co., 1914, xviii, 1-535. $2.00. A keen analysis and synthesis of the factors in- volved in industrial management. Somewhat critical of the Taylor system, but obviously in- fluenced by it. A substantial contribution to the literature of scientific management. Cooke, Morris Llewellyn Academic and Industrial Efficiency, New York. Car- negie Foundation for the Advancement of Teaching, 19 10. Bulletin Number Five vii, 2-134. Free. A highly interesting study of the efficiency of management of a number of well-known univer- sities and colleges, as judged from the point of view of an industrial engineer. Stimulated a wide discussion. \ 12 HISTORY m ;, V.n Day, Charles Industrial Plants, New York, Engineering Magazine Co., 191 1, 1-294. Amplified from articles appearing originally in the Engineering Magazine. $3.00. An illustration of the application of some of the principles of scientific management to the design and construction of industrial plants. Illustrated with diagrams and photographs. Drury, Horace Brookwalter Scientific Management, a History and Criticism. New York, Columbia University, 1915, 7-222. $175. A doctoral thesis, especially good for its discussion of the origins of the movement and its relation to the problems of labor and wages. Betrays a lack of practical acquaintance with current methods and status. Emerson, Harrington Efiiciency, New York, Engineering Magazine Co., ist ed. 1909, 4th ed. 1914, xii, 1-254. $2.00. A strikingly written exhortation to "efficiency,'* stimulating, and most useful when it leads the reader to serious study of the authorities on the subject, such as Taylor and Gantt. Emerson, Harrington The Twelve Principles of Efficiency, New York, En- gineering Magazine Co., 1912, xviii, 1-423. $2.00. An interesting and popular analysis of some of the more obvious principles underlying scientific management. Well written and suggestive in a general way. For practical application of prin- ciples see Knoeppel, "Installing Efficiency Meth- ods." FREDERIC A. PARKHURST 13 \ Evans, Holder A. Cost Keeping and Scientific Management, New York, McGraw-Hill Book Co., 1911, ix, 1-252. $3.00. A practical machine shop treatise, showing the author's methods as applied at the Mare Island Navy Yard, and illustrating what may be done by way of approach to the Taylor system by a competent manager without the aid of experts. Fairly well illustrated. Gantt, Henry Lawrence Work, Wages and Profits, New York, Engineering Magazine Co., 1910, 2nd ed. 1913, 1-212. $2.00. The meat of the author's numerous papers and discussions on the more "human" side of scien- tific management. Illustrated with charts and forms. A classic, and indispensable. Gilbreth, Frank Bunker Motion Study, New York, D. Van Nostrand Co., 191 1, xxiii, 1-116. $2.00. A meaty study of the variables involved in the performance of manual labor. Illustrated with photographs and tables showing the author's meth- ods and results in the bricklaying trade. Gilbreth, Frank Bunker Primer of Scientific Management, New York, D. Van Nostrand Co., 1912, 2nd ed. 1914, viii, 1-108. $1.00. An elementary, popularly written catechetical presentation of the fundamentals of scientific man- agement. Explains some of the characteristic de- tails of the Tavlor svstem and discusses certain current criticisms. Kent, William Investigating an Industry, New York, John Wiley & Sons, Inc., 1914, xi, 1-26. $1.00. A highly suggestive diagnosis of a hypothetical plant, with special attention to the departments of sales and financing usually neglected in works on scientific management. Foreword by H. L. Gantt. 14 HISTORY Knoeppel, Charles Edward Installing Efficiency Methods, New York, Engineering Magazine Co., 191 5, viii, 1-258. $3.00. The best presentation of the Emerson system in its best form. Interesting and stimulating. Fully illustrated with forms, charts, photographs and detailed instructions. Parkhurst, Frederic Augustus Applied Methods of Scientific Management, New York, John Wiley & Sons, 191 2, xii, 1-325, 2nd ed. 1917. 1-337- $2.00. A detailed description of the methods of the Fer- racute Machine Company, including the "standing orders" for the performance of various functions, and many forms and photographs. Is a close ap- proximation to the Taylor system as now prac- ticed by its leading exponents. Parkhurst, Frederic Augustus Scientific Management in the Foundry, 1-133. Read before the American Institute of Metals, Chicago Meet- ing, Sept., 19 1 4, and Published complete in Transac- tions of American Foundrymen's Association, Vol. XXIII. A detailed description in condensed form of the application of the author's methods of scientific management throughout the eight plants of The Aluminum Castings Co., which plants involve not only the sand molding trades for aluminum and brass, but highly technically developed melting practices and technical control of metals, large brass finishing shop doing the highest class of fin- ished work in both brass and aluminum, and the operation of two secret process plants. FREDERIC A. PARKHURST 15 I Parkhurst^ Frederic Augustus Predetermination of Prices, New York, John Wiley & Sons, 1916, viii, 1-96. $1.25. A discussion of a rather advanced practice in con- nection with the co-relation of costs and the pre- sentation of vital facts in condensed form includ- ing a description of a scientific method of deter- mining burden rates and the distribution of gen- eral expense as applied in connection with the author's methods. Parkhurst, Frederic Augustus Symbols, New York, John Wiley & Sons, 191 7, vi, 1-165. $2.00. A discussion of the symbol system. This book includes a rather complete detailed list of the dif- ferent group symbols that have been standardized to date, which standardization can in general be quite universally adopted. Probably the only book devoted entirely to symbols. Parkhurst, Frederic Augustus Scientific Time Study and Differential Bonus. About 450 pages, in course of preparation. This book will contain about 25 chapters and will discuss the various standardizations that have been developed by the author in connection with standard elemental operation times as well as a general time study work. The charts and dia- grams show performance in a wide range of in- dustries employing representative trades through- out, with detailed instructions as to time study data, etc. Various systems of wage payments will be discussed and will include all of the author's job classifications, bonus classes, and a wide range of application of his differential bonus to direct and indirect labor, departmental and plant eflfi- ciencies, the application of bonus to clerical opera- tions, technical work, etc. The last chapter will i6 HISTORY FREDERIC A. PARKHURST 17 include a statement as to the individual and cor- porate results obtained through the author's meth- ods of scientific management. Pattison, Mary Principles of Domestic Engineering, New York, 191 5, 1-3 10. $2.00. Experiments at Colonia, for N. J. Women^s Clubs. Deals not so much with details of methods and equipment as with fundamental principles of home building and management. Shaw, A. W., Company In magazines (System and Factory) and works (including The Library of Factory Management) published by this house there has appeared from time to time material having to do with the Taylor system of scientific management. This is also true of other periodicals and sets not mentioned here, but in most cases taken into consideration in pre- paring Scientific Management (see below). Taylor, Frederick Winslow On the Art of Cutting Metals, New York American Society of Mechanical Engineers, 1907, 3-248, and folders 1-24. $3.50. One of the most notable contributions to practical science. Illustrates by example the fundamental methods and aims of scientific management. Preface reproduced in C. B. Thompson's Scientific Management. Taylor, Frederick Winslow The Principles of Scientific Management, New York, Harper & Bros., 191 1, 5-144. Also published by Amer- ican Society of Mechanical Engineers. $1.50. A popular restatement of the principles as matured by the author after retirement from active prac- tice. More readable than **Shop Management" and equally authoritative, though in a more gen- eral way. Taylor, Frederick Winslow Shop Management, New York, Harper & Bros., 19 11, 5-203. Foreword by Henry R. Towne. Also in Trans- actions American Society of Mechanical Engineers, No. 1003, New York, 1903, $1.50. The fundamental classic of Scientific Manage- ment. Incorporates the best of the author's for- mer writings and experience, and is the basis of the later developments. Indispensable. Taylor, Frederick Winslow, and Thompson, Sanford Eleazar Concrete Costs, New York, John Wiley & Sons, 19 12, xii, 1-709. $5.00. Illustrates in detail the application of the time- studv and standardization methods of scientific management to concrete structural work. Illus- trated fully with charts, sketches, tables of ele- mentary times, etc. Thompson, Clarence Bertrand Scientific Management, a collection of the more sig- nificant articles describing the Taylor System of Man- agement, Cambridge, Mass., Harvard University Press, 1 914, xii, 3-88, $4.00. Includes the cream of the literature on the sub- ject (outside of the standard works of Taylor and Gantt) selected and edited from periodicals and books, many of which are now out of print or otherwise difficult of access. See below for con- tents. CONTENTS OF SCIENTIFIC MANAGEMENT (The book listed just above) Barth, Carl G. Slide Rules in the Machine Shop as a Part of the Taylor System of Management. i8 HISTORY Cardi LLO, Forest E. Industrial Administration and Scientific Manage- ment. Carlton, F. Tracy Scientific Management and the Wage-Earner. Clark, Sue Ainslee and Wyatt, Edith Franklin Scientific Management as Applied to Women's Work, from "Making Both Ends Meet." Crozier, Gen. Wm. The Taylor System of Shop Management at the \A^atertown Arsenal. Cunningham, Wm. J. Scientific Management in the Operation of Rail- roads. Day, Charles Management Principles and the Consulting En- gineer. Dodge, James Ma pes A History of the Introduction of a System of Shop Management. The Spirit in which Scientific Management should be approached. Gantt, Henry L. A Graphical Daily Balance in Manufacture. Hathaway, H. K. Elementary Time Study as a Part of the Taylor System of Scientific Management. The Planning Department, Its Organization and Function. Prerequisites to the Introduction of Scientific Management. FREDERIC A. PARKHURST 19 Kendall, Henry P. Unsystematized, Systematized, and Scientific Management. Kent, Robt. Thurston The Foreman's Place in Scientific Management. The Tool Room under Scientific Management. Scientific Management as viewed from the Work- man's Standpoint. Kimball, Dexter S. Another Side of Efficiency Engineering. Le Chatelier, Henri Preface to the French Edition of "The Principles of Scientific Management." Lewis, Wilfred An object Lesson in Efficiency. Myers, Lieut. C. J., U. S. N. The Science of Management. Shaw, Arch Wilkinson Scientific Management in Business. Smith, Oberlin Nomenclature of Machine Details Sterling, Lieut. Frank W., U. S. N. The Successful Operation of a System of Scien- tific Management. Stimpson, H. F. The Application of Scientific Management to a Railway Shop. Sub-Committee on Administration of the American Society of Mechanical Engineers, 19 12 The present State of the Art of Industrial Man- agement. The Railways and Scientific Management. \\ 20 HISTORY Anon — The Mistakes of the Efficiency Men. Taylor, Frederick W. On the Art of Cutting Metals (Preface and Se- lections from the ensuing discussion). A Piece-Rate System : Being a Step Toward a Partial Solution of the Labor Problem. Thompson, C. B. Bibliography of Scientific Management. Qassification and Symbolization. The Literature of Scientific Management. The Relation of Scientific Management to the Wage Problem. Scientific Management in Retailing. Tuck School Conference Addresses and Discussions at the Conference on Scientific Management. Hanover, N. H., Amos Tuck School, 191 2, xi, 1-388. $2.50. Papers by F. W. Taylor, H. L. Gantt, C. H. Jones. H. P. Kendall, J. M. Dodge, H. Emerson and others, and discussions led by H. K. Hathaway, E. Szepesi, C. H. Jones, M. L. Cooke, E. F. Gay, F. A. Cleveland, and others. The best of these are reprinted in C. B. Thompson's "Scientific Man- agement. >> ' LECTURE II fundamentals; practice versus theory in the science of management It is not the author's intention to imply by the title of this article that practice and theory do not each l^ear a most im- I)()rtant part in the science of management. These two words are symbolic of two chief factions, one for and one against our new science of management. To the layman, scientific management is a theory, pure and simple. To the manufac- turer, who has put his plant under this form of manage- ment, it stands for prosperity to the firm and all its em- ployees, a new era of industrial peace and contentment, low costs and high wages. It is not at all remarkable that there should be such a wide difference of opinion on this subject. It would indeed be remarkable if it were not so. History repeats itself. What is now true of scientific management has been in the past true of all great steps or changes, tending to the advance ment of the human race. The march of progress in all things would cease were there no obstacles to surmount. Columbus, Watt, Ericson, Morse, Marconi, Langley, Edi- son, Brush, Chanute and the Wright Brothers, as well as many others, were each and every one at first considered theorists or cranks. Their dreams of the possibilities of their chosen lines of work at first seemed ridiculous to their contemporaries but the practical application of their ideas has far outstripped their broadest conception of these sub- jects. There is no doubt that the new science of management will come into its own through exactly the same process of transition. The few chief exponents of scientific manage- ment are in exactly the same position as were the inventors and investigators mentioned above. No one can deny that the field of the organizing engineer opens into vast fields of 21 22 PRACTICE VS. THEORY progress. The benefits which will accrue from the universal application of the new science of management will affect in a greater or less degree all of the working class in this country, eventually the world. The author predicted in a lecture before the New England Railroad Club at Boston, December, 1904, that the science of management was "slowly but surely becoming universal in this country." That was nearly thirteen years ago and he now reiterates the same prophecy. In fact, the striving for efficiency in life as well as business is becoming universal much faster than any one, except the best informed, realizes. This is primarily due to the fact that in the last six years, scien- tific management has been prominently brought to the at- tention of the entire country on several great occasions. Chief of these are : 1. The Interstate Commerce Commission investigation in 191 1 into the proposed increase in railroad freight rates. 2. The formation in New York, December, 191 1, of the Society to Promote the Science of Management. 3. The conference on scientific management at the Amos Tuck School of Administration and Finance at Dartmouth College, in October, 191 1. 4. Formation of the Efficiency Society in New York, in the spring of 19 12. 5. Congressional Committee's investigation and report on the Taylor and similar methods of scientific management in 1912. In addition to the above mentioned events there has been a general exploitation and discussion of the subject in nearly, if not all, of the trade journals, monthly magazines and society transactions, to say nothing of the newspaper reports, etc. All of this publicity has of course had its effect. Fortunately and justly, the majority of the articles and discussions have been favorable in their attitude. The few which have not been so were obviously written by per- FREDERIC A. PARK HURST 23 sons scanning the subject superficially or with distorted vision. I am sure that all the chief supporters and exponents of scientific management will join me in heartily inviting a thorough and impartial investigation of its principles and the results which follow a practical application of those prin- ciples. Such an investigation is the easiest, most logical and surest way of enlightening oneself on the subject. It is unfortunate that a number of would-be critics have appar- ently not made a thorough and impartial study of this sub- ject "on the ground." They have evidently passed the door and guessed as to what was within. They have a perfect right to guess, form their own opinions, etc., for their own personal satisfaction. When they attempt, however, to ex ploit their supposed knowledge of the subject to the detri- ment, intentionally or otherwise, of those directly to be bene- fited by the adoption of scientific management, it is time they and their followers become enlightened. There are undoubtedly many "theorists" who believe that scientific management can be studied, rehearsed and memo- rized in the school room or library and "presto!" an effi- ciency engineer is born. It must be acknowledged that many efficiency engineers have sprung into the field in just this way. They are full of theory but not the theor}\ and without the practical knowledge of their subject or of men. Many theories may of course be formed by as many dif- ferent men. These theories but reflect the scope of each man's imagination or grasp of the fundamentals. There may be many theories as to scientific management, what it is, its scope, value, etc. That these theories vary so widely is but natural. They are due entirely to a lack of under- standing, or full comprehension of the fundamental prin- ciples. Mr. Fred W. Taylor defines scientific management as a combination of the following elements : A. "Science, not rule of thumb." B. "Harmony, not discord." jfj^M^ 24 PRACTICE VS. THEORY C. "Co-operation, not individualism." D. "Maximum output in place of restricted output." E. "Development of each man to his greatest efficiency r.nd prosperity." Many people consider the above combination of elements a theoretical proposition which works out easily on paper but will not resolve itself into a practical solution. Let us analyze Mr. Taylor's principles separately: A. "Science, not rule of thumb." There has been much criticism of the word "science" or "scientific" as applied to ihe problem of management. Many critics claim that there can be nothing scientific in works-management and that the word so used is incorrect. Webster's definition of science is : "Systematized knowledge of the conditions and relations of mind and matter; accepted facts and principles as demon- strated by induction, observation or experiment." If sys- tematized investigation and compilation of data |>ertaining to knowledge of the conditions and relations of mind and matter do not represent the most important feature of proper management, then what does? A common-sense method of proceeding with each piece of work is to find (a) What must be done. (b) What material used. (c) How must it l^e done. (d) With what tools. (c) How long will it take. (/) When will it be done. (g) What will it cost. To answer these preliminary questions satisfactorily one must have a complete knowledge of the equipment and ma- terial involved, of the qualifications of the individual work- ers and of the various other elements entering into the com- pletion of each piece of work. This comprehensive knowl- edge comes through specially trained men, detailed to carry on and record all investigations necessary. It is most cer- tainly in line with scientific methods of procedure. FREDERIC A. PARKHURST 25 B. "Harmony, not discord." It is needless to say much in the way of advocating the desirability of harmony over dis- cord. This of course is axiomatic and there can possibly be no sustained criticism of such a feature in any form of man- agement, whether scientific or otherwise. C. "Co-operation, not individualism." Another com- mon-sense element which allows of little controversy. D. "Maximum output in place of restricted output." A concern to be successful, and to run its business profitably, must realize from its equipment and working force a maxi- mum output and each must maintain that condition if it hopes to stay in business in the face of modern competition. The country is suffering to-day from over equipment in the way of plants and accessories. The result shows a great waste both in first investment and indirect charges including depreciation while the plant is running, to say nothing of the great overhead charge and depreciation in slack times when the plant is lying idle. Why deny that maximum production is too often striven for in a most unintelligent way ? As far as the personnel is concerned, maximum pro- duction can only be obtained by surrounding them with the elements mentioned above— science, harmony and co-opera- tion. E. "Development of each man to his greatest efficiency and prosperity." Here again we have an element which should need but little argument in support of it. In point of fact, however, we often find opmions to be diametrically opposed to what we would naturally expect to find. The trouble, however, is not with the principle involved or with the theory that it is a desirable and necessary thing to strive for — this maximum efficiency and prosperity. The cause is often a lack of knowledge of what is involved and a deplor- able misunderstanding of the objects and intentions of those striving to bring about maximum efficiency. I have discussed these principles at some length and many may think I am going over ground which has already been covered. My object, how^ever, in doing this is to again bring 2() PRACTICE VS. THEORY before those who have not clearly analyzed the principles of scientific management what is involved and just what the ideal is. There has been too much taken for granted on the part of some critics. The result has been a certain factor of opposition, which is wholly uncalled for. May this resume help to clear the subject. One of the common criticisms heard is to the effect that "scientific management may do for some kinds of work, but it will not do in ours." The exp>onent of the science of man- agement must ever bear in mind that he faces an educational proposition continually. It is easy to condemn something which one does not understand. This being an admitted fact and bearing in mind that many of the persons directly af- fected by the introduction of scientific management are nor in a position to understand these things, it behooves every organizing engineer to pay special attention to this one fea- ture — namely, education. In considering the educational feature one must not over- look the psychological element involved. To the author's mind this is the most important factor in the successful in- stallation of the science of management, and is the one thing which has made failures from what would otherwise have been successes. That such failures have existed cannot be denied. It is equally true that the trouble has never been with the principles involved but usually w^ith the general unfitness of those attempting to carry out the work. Other failures can be traced to the attempt to copy and install some particular feature of scientific management without the rest of the elements necessary. Men attempting to do this usually have a superficial book-knowledge of the subject and are wholly lacking in the true conception of the ideals and principles involved. Practical shop experience and the abil- ity to handle men are absolute requisites for the successful introduction of the principles by any engineer. Before taking up in detail some examples to illustrate the difference between the theoretical feature, or the bare out- line of principle, and the practical method of installing those FREDERIC A. PARKHURST 127 4 # principles, I want to emphasize the fact that it is not so much what you do in the way of radical changes as in how you make them. Again I repeat that the true conception and realization of the psychological element and its bearing on every branch of management work must be recognized as the most important of all the elements. To be successful ihe organizing engineer must master the psychological fea- ture of each and every problem first, last and always. Now as to the methods used in the practical application of the above mentioned principles, the organizer must thor- oughly acquaint his client wath what is involved in order to realize from these principles maximum results. Stockhold- ers, directors and ofificers of the company must be informed ^s to what may be expected in the way of results. They should thoroughly study all phases of the problem and try to realize the difTficulties likelv to be met. Not the least of these will be the idiosyncrasies and biased ideas of some of the personnel. The fact must not be lost sight of that at least some of the older and most valuable employees must be patiently and carefully weaned from some or most of their old traditions and habits. Those of the old school must not be blamed if at first they show ignorance or disapproval of radical changes. Their environment and training is re- sponsible for this frame of mind. These same men will be the most enthusiastic and the strongest supporters of the new regime when they begin to see its advantages. They will be the first to show a new and lasting sense of satis- faction and contentment with the elimination of friction, the maintenance of schedules and the increased results easily accomplished with a minimum of mental and physical outlay. The period of transition is often a long and annoying one for all concerned. This is due to the many variables to be overcome. Patience and tact will win out in the end if each and every one realizes that every one is human after all. Time is the essential factor, and the time required depends upon the mental attitude of each. The author to-day enjoys 28 PRACTICE VS. THEORY the friendship and co-operation of many men now working under scientific management, who at first opposed him at every turn and condemned new methods before sufficient time had elapsed to prove their worth. Men must be shown, educated, led, not driven. It is only the extreme case where in the end a man has to be removed for failure to al)ide by the new order of things. Study each man's charticter, find the avenue of approach and he can be educated and made efficient in spite of himself. Many men, particularly those in the more responsible positions, have a natural and deeply rooted antipathy for being shown by others. They wish lo be known and recognized as the originator of all that is new or an improvement over the existing order of things. It has been my experience that one of the best and surest ways of handling persons of this make-up is to accomplish the desired end through suggestion. In the majority of cases a few words followed judiciously with concrete ex- amples to illustrate your point will sow the seed of desire. This seed will immediately take root and sprout forth as an (.riginal and newly discovered method sure to meet the exigencies of the occasion. This method will not do with all men of this mental attitude. Some will not be influenced or convinced until shown by actual accomplishment. Others can be recruited by the proper presentation of the results of an analytical study of conditions followed by cold, impartial figures. Figures talk, especially if they are always recap- itulated into a bare statement of value in dollars and cents. Other men will l:>e found in every organization who have an inherent faith in any new^ departure ordered by their superiors. Such cases do not offer the same kind of handi- cap, as do those above cited. They do offer another possible source of trouble however: that of a too earnest wish to reach the desired goal, without due appreciation of the diffi- culties and conditions to be overcome and changed. Mate- rial difficulties can be removed with comparative ease. Changes directly affecting the personnel are often far from easy and continual restraint must be exercised for this rea- son. If this restraint is not present the too enthusiastic ,i FREDERIC A. PARKHURST 29 department head or some subordinate will find himself op- posed by a stone wall of personal opposition. Many men can be led but only the few can be pushed. Education of the rank and file is fully as important as the education of the principals and heads of departments. The education of the former is much easier, however, when the latter have graduated, so to speak. Let those at the top set the example. Shop men as a rule have the erroneous idea that their superiors and office force are inclined to consider themselves on a much higher plane and seemingly force themselves to the necessary intercourse with those beneath them. There is no doubt but that in many cases this con- dition exists. That it is often so is most unfortunate as w^ell as unnecessary — and most undesirable. One of the greatest advantages of real scientific management lies in the fact that such a demoralizing and disastrous condition of affairs is eliminated. I do not mean to imply by this state- ment that scientific management is the sole remedy for such a condition, but it is nevertheless a sure remedy. In point of fact, under scientific management the rank and file are placed in position to demand and get from their superiors proper working conditions, and as to maintenance of equip- ment and supply of material, to get co-operation, and the "square deal." Responsibility is placed where it belongs. No one high or low can "put it over" on another, because the responsibilities and duties of each are clearly defined in writing. The pressure of responsibility is not one sided and concentrated in one place, or directed towards the weak. It is equalized. Instead of turmoil and contention like the troubled and restless sea, which makes smooth running im- possible, we have the calm and reliable medium of a harlx)r sheltered by the bulwarks of harmony. The least opposing influence immediately becomes apparent. It can be localized and remedied at once. The best influence is an honest confidence in the entire personnel. An efficient organization with reliable heads and a spirit of co-operation in touch, through these mediums, j ? 4 i 30 PRACTICE VS. THEORY with all of the personnel, lays the foundation for a lasting and trouble-free industrial or business condition. To bring about these conditions eternal vigilance is necessary. No one must be allowed to harbor any misunderstanding as to the intent of the reorganization. Investigate and trace to its source every disturbing influence. Let no one misunder- stand the ultimate object in view. Openly advertise and propound the chief elements or principles of our new science of management. A. Science, Not Rule of Thumb Having observed the above essentials, the next step is to bring under control equipment, methods and output. This has formerly been left to the foreman and bosses. Details and responsibilities have been thrust upon them which should be borne by others. Specialization is the order of the day under scientific management. The modern planning room is the first really radical inno- vation. The production clerk, order-of-work clerk, route clerk, material boss, shop engineer, time-study man and speed bosses, are new functional men. These are created to take off of the shoulders of foremen and others, duties for which they are specially trained. Through this depart- ment we begin to control shop equipment, methods and material. The different planning-room men begin through analyti- cal study of conditions to determine the shop conditions. Work for the shops is planned and distributed in the most efficient way. Delays due to faulty equipment are investi- gated and a recurrence made impossible. Equipment is tuned up, cared for and kept in repair. The result is that each machine and man is made more productive. There are no waits or delays on account of absence of material with which to work. Some men or machines are not piled up with work while others work from hand to mouth. The work ready for processing is evenly and judiciously distrib- uted. I have known of cases where one-third (1-3) of a FREDERIC A. PARKHURST 31 day of man and machine, often of gangs of men, has been wasted, due to such causes. This condition is common ; the effect is demoralizing and tends to gradually decrease the daily output per man. Over equipment due to lack of plan- ning and to pure guesswork is also largely responsible for a decreased output per capita. Production clerk, order-of- work clerk, route clerk, and material boss remedy this. Having provided for the maintenance of standardized equipment, conditions and flow of material, the methods must be investigated. The shop engineer determines the tools and methods; the time-study boss determines the standard time, and the data is available for the issuance of instruction cards. The speed bosses then see that the in- struction cards are followed and the standard time realized. ( LECTURE III fundamentals; practice versus theory i:^ the SCIENCE OF management ( Continued) It will be seen by the above brief explanation (see Lec- ture 2) that what is ordinarily done by one or two men is (lone under scientific management by six or seven or more, depending upon the kind of business. What is the result? Each of the chief planning room men becomes highly profi- cient in his particular branch. Through them it is possible to itemize and analyze into small elements all details of a business. They have complete and up-to-date records of all work which has been done. Comparison can be made, both of methods, quality, tiuic and cost. Relative capacity of ma- chines, men. productive units and departments can be made, and work planned and distributed accordingly. Elemental operations can be standardized, and men can be trained to do them in standard time with a minimum of effort. Each man's efficiency can be kept track of and his work and pay regulated, independent of his fellow workmen. The ac- cumulation of data makes possible the correct determination of how much men as well as machines can do daily without undue fatigue and eventual break-down. We can safeguard our machines by not overloading them, because stresses due to tool pressure, torque and vibration, can be controlled through instruction cards. Fewer accidents will occur on this account because detailed study of operations determines the best and safest way to do a given piece of work. Not many people realize how comparatively few different ele- mental operations are actually necessary for the performing of all kinds of work in any one trade, until they have analyzed and studied them personally. Consider the above carefully and then answer the follow- ing questions for yourself. Can any foreman who is in 32 FREDERIC A. PARKHURST 33 charge of the average sized department with all its variety of equipment and its twenty-five to fifty or more men, keep track of all the above elements and so obtain maximum effi- ciency? Were he mentally and physically capable of all the work necessary, could he be an expert and highly proficient in so many different lines ? Could he even find time to both plan and execute on the scale required ? Would he be in pos- session of the data necessary to absolutely control methods, conserve the time of each man, eliminate delays, etc. ? Could he be always fair and just and impartial in handling his men? The answer is most emphatically no. A jack of all trades is master of none. Yet ordinary management often demands of its foreman all of the above and more. What will the planning room accomplish for a concern? Combined with bonus system of extra remuneration, it will result in doubling, tripling, and sometimes quadrupling the output of a plant. It will reduce labor costs, including the extra overhead from 30 per cent, to 50 per cent, and in- crease wages from 35 per cent, to 50 per cent. — in some cases even more. A word will not be out of place regarding obvious advan- tages of these methods in setting correct rates. It is not un- usual to find piece or premium rates set by the usual guess- work methods that allow a man to earn $7.00 to $8.00 per day for much less return than represents a fair day's work. I have known of several cases where a piece rate was cut nearly in halves because the man was earning about $8.00 per day. After the cut he still earned $8.00. Obviously the original rate was four times what it should have been. The work did not require skilled help and $4.00 per day would be a generous wage. Aside from this, the man was limiting output during the time he was making on the original rate. He doubled his output when the rate was ait. Had stop watch observations been made by a properly trained time study man, preferably one who was skilled in the trade under observation, this could not have happened. The re- sult of improperly set rates need not be discussed here at { 34 PRACTICE VS. THEORY length. They include dissatisfaction on the part of the firm ; the inevitable cut and continual dissatisfaction on the part of the men; limitation of output; increase of discontent and deceit and eventually labor troubles. The elimination of these troubles will save many times more each year than it costs to run a planning room. When a foreman sets a rate, he estimates it by using day- work output as a basis. He adds something to it for luck and sets his rate. Actually the rate of day-work under or- dinary shop conditions as compared to bonus work under scientific conditions is i to 3 or 4 on the average ; some cases I to 10 or even more. There are certain difficulties to overcome when establish- ing bonus in a plant accustomed to piece or premium im- properly set. These difficulties consist chiefly of a marked difference in the maximum earning power of a man based on a bonus rate set after an itemized time study, as com- pared to the arbitrary piece or premium rate. The preceding paragraph has explained in part what these differences are. In addition, however, to the difference in the ultimate day's earnings, more trouble is met with in trying to educate the workman to an entirely new viewpoint. This can best be explained by calling attention to the fact that what we pur- chase is a man's time and not his output. It is up to the organization to see that a fair output per day is realized. When this output reaches a fair average maximum, the extra remuneration is in the form of a bonus, the result being an increased daily earning. Comparing a differential bonus scale of prices, however, the tendency on the part of the man is to consider it only as a piece rate. To further illustrate this point, if we have a job that has been paying seven cents (7c) a piece and the production has been about fifty pieces per day, the piece rate earning of the man is $3-50- I^ this method of payment is replaced with differ- ential bonus, the tendency is to compare the difference in earnings of the day for the last few pieces. The result is that the man feels he is being paid at only the rate of say. FREDERIC A. PARKHURST 35 two cents (2c) a piece, losing sight altogether of the fact that he has been assured of his nominal day rate irrespec- tive of his production. The above mentioned troubles are not found where im- properly set piece or premium rates do not exist. Neither is there similar trouble in establishing bonus rate in a shop which has worked only under regular hourly or daily wage. One often has to contend with the natural antagonism of some men who feel that the installation of bonus is some means in disguise of further reducing their earning power. This objection, however, can readily be overcome after the men realize that the rates will be established correctly in the first place, and remain unchanged so long as the piece or job remains unchanged, in design, method or equipment. Of course guaranty not to change rates would as readily apply to piece or premium work under like conditions. The trouble, however, is that piece or premium work is usually priced arbitrarily and so results in unfair rates, both to the man and to the firm. Therefore, it is practically impossible to guarantee any permanency. B. Harmony, Not Discord This is the second element of the combination defined by Mr. Taylor. How often we hear the criticism that harmony is realized in almost all lines of business and that it has nothing whatever to do with, neither should it be particu- larly identified with, scientific management. If this is so, and if harmony is such a well-understood and common ele- ment, why don't we see more of it in the average manufac- turing or industrial establishment? The fact remains that in a great many instances, harmony is conspicuous by its absence. Many of the chief reasons for this condition can be traced directly to the case illustrated in the last few pre- ceding paragraphs. Its absence is often due to that great variable the personal factor. This is particularly so in large plants which have grown rapidly and abnormally. Their sudden growth has demanded the mushroom type of or- 36 PRACTICE VS. TIIKORV ganization which must of necessity lack the refinement of one more deliberately planned. There are a great many factors tending to create discord, some of which require an immense amount of time to re- move. As far as the personnel is concerned, this can be handled and developed in the way previously referred to in this article. When that is accomplished the next move is to inspire everyone with the ix)licy that only the square deal will prevail. To bring alx>ut this condition, extremely strict order of discipline must be maintained and the ix)licy of the company clearly defined so that everyone can work in har- mony with it. Each member of the organization must be forced to realize the fact that everyone is employed to work for the company's interests, and co-operate and work in harmony with his associates. Discrimination of individuals must be absolutely prohibited. This latter dictum is one likely to be far-reaching in its nature. Men have to be trained to lay aside their personal likes and dislikes and to regard their work from an entirely different viewpoint. This is hard at first, but after they become accustomed to the new order of things and begin to realize the certain ad- vantage, it is as natural to work harmoniously as otherwise, and much more comfortable. One of the greatest disturbing elements in connection with building an efficient and harmonious organization is the one of poor pay. It is a mistaken idea on the part of many managers and heads of departments that they are earning money for the company and running their depart- ment cheaply by the employment of cheap help. This is as true of office employees as it is of the rank and file. The layman little realizes the actual difference between output per man as compared to large differences in pay i)er man. For example, many cases can be cited where a man earning $2.50 has an output which can be expressed by unity; by an expenditure of more money for sufficient sui>ervision, proper maintenance of equipment, etc., plus extra incentive to the man for following instructions and putting up a fair FREDERIC A. PARKHURST 37 day's work, a production can be realized which may be ex- pressed by 3 or 4 and sometimes much more. The difficulties in the way of remedying this condition while promoting harmony are very many. This statement may seem strange, but it is nevertheless true. In many cases the greatest objection comes from those who are eventually to be directly benefited by this change of condition. The average shop man presents another stumbling block by con- sidering his own particular work more or less his private asset, of which the firm should know little or nothing. In other words, he feels that the more dependent the firm is upon him for information, the more secure his position with them will be. The fact is lost sight of that promotion is often denied a man because through lack of organization and knowledge on the part of the firm, he is forced to re- main in a minor position. When data of each man's ability is in the hands of the firm, advancement can be made com- mensurate with his ability without in any way tending to disrupt or retard his work or that of his department. In order to bring about this condition and establish a self-sus- taining organization, each incumbent of important posi- tions, including heads of departments, should train and have immediately under him a successor competent to take over his duties and responsibilities at a moment's notice. This condition can pertain to a small organization as well as to a large one. A man may often fulfill the duties of several positions where the duties of one do not require all of his dailv time. C. Co-operation, Not Individualism This element in a general way can be considered in the same manner as harmony. Individualism in the ordinary form of management can be likened to co-operation under scientific management in much the same way as individual effort among a body of men can be compared to well-trained and highly-organized team work. Our modern professional baseball team is probably one of the greatest examples of scientific management before the world today. The fact is 1} 38 PRACTICE VS. THEORY little realized by the thousands of enthusiastic fans who watch one of our league games. Great enthusiasm is often manifested over some startling or spectacular play on the part of an individual which may appear to be absolutely spontaneous. The truth of the matter is that the majority of such plays have been carefully worked out by long and tedious practice and intricate time studies. The result is that with the player on base and the ball in a certain part of the field, or in the hands of a pitcher about to be played, the success of the proposed play can almost invariably be predetermined. This has been brought down to an exact science. It may seem ridiculous to say that the modern battleship is handled and controlled by a planning department ; neverthe- less this is exactly true. The handling of a battery of large guns in record time and the percentage of hits which ten years ago seemed absolutely impossible, involves the co- operation of a great many different men. The use of highly perfected instruments, combined with the predetermined condition of the atmosphere, variations and speed of the wind, weight and condition of powder, etc., all enter into the problem. In the report of the battle of Santiago, our patriotic and enthusiastic populace marveled at the feats of gunnery and markmanship displayed by the United States battleships. The truth is that today it would be considered a most disgraceful exhibition. Only five per cent of the shots fired at Santiago reached the mark and at compara- tively short ranges. Today, under like conditions, from sixty-five to seventy-five per cent of the shots would reach their marks and at ranges mounting as high as eight or nine thousand yards, and at speeds double those involved in 1898. In industrial establishments like comparisons can be made. Investigation will show an immense amount of duplication between departments. Similar operations in like trades will be found to vary w^idely in method and more widely yet in time consumption. Each journeyman has his own particu- FREDERIC A. PARKHURST 39 lar idea of how his work should be prepared, how his tools should be forged or ground, and the condition of the ma- terial with which he works. Thus these elements become great variables because the whim and biased notions of the individual make them so. Standardization of these elements greatly simplifies them. Lack of unity of purpose and ideals results in the individual limiting himself and his chances of advancement as well as limiting that most vital of all in- terests, his earning power. Complete co-operation and unity of men, methods and equipment will revolutionize the entire tone and capacity of a plant. Where departmental functions, both as a whole and in detail, do not thoroughly dovetail into a harmonized whole, friction and disruption will exist. It is a well-known fact that we are not today, as a rule, turning out the high- class, all-around mechanics that we did years ago. The reason for this is obvious, although the remedy for it is not so obvious to the layman. There can be no dispute over the fact that scientific management favors the apprentice, handyman and journeyman rather than the firm itself. When organized labor realizes what scientific management actually is, they will find they have much more to gain by co-operation and acceptance of its principles than they can hope to gain by any other method. This statement can be easily proved by investigating the plants working today under its form of management. It may be well here to cite a remark made by the superin- tendent of a large and well-established industrial plant in the East. In speaking to one of our noted efficiency engineers of the work which was being accomplished, he said that his firm would be thoroughly satisfied if the only benefit they realized from scientific management was the increased wage and higher moral standing of their men and the attendant prosperity which would accrue from the change. This state- ment expresses a sentiment which many of the laboring class cannot acknowledge exists on the part of the manu- 40 PRACTICE VS. THEORY facturer. Such sentiment is growing, however, and that the fact is not more fully realized by the working man is to be regretted. D. Maximum Output in Place of Restricted Output Reference has previously been made in this article to the ratio of production under ordinary management to that under scientific management. A great part of this is due, of course, to the change in organization, plant methods, etc. The balance is due to the increased effort and interest ex- hibited by the men, encouraged by a higher average of w^age. The natural incentive on the part of the men is lack- ing unless all elements referred to are present. As soon as a betterment of condition has been realized, men are men- tally in a different attitude, and will naturally exert them- selves to earn the additional compensation. The demoralizing effect of incorrect rate setting cannot be over emphasized. It tends to promote a disposition lo deceive and restrict output. Such a condition naturally breeds discontent and lack of confidence in the management. One must rely largely on the individual's tendency to better his own condition when the opportunity presents itself. When the man learns how to produce his maximum with the prospect of a definite and immediate reward, he finds more pleasure in his work. He is mentally in condition to aspire to do the best that is in him and he develops the natural pride which is more or less latent in everyone. E. Development of Each Man to His Greatest Efficiency and Prosperity This development comes as a natural result of the pre- ceding elements working in accord. The highly-trained and efficient men receiving a large weekly pay make better citizens than the inefficient and underpaid. They are en- abled to do better for their families, as to housing, clothing, and feeding them, and they are enabled to give their chil- FREDERIC A. PARKHURST 41 dren better education. There are many children of today denied the education that belongs to them with the result that their entire after-life is handicapped. They are denied the advancement and opportunities which are more and more becoming subject to the individual's mental develop- ment. If the little red schoolhouse is to represent one of our chief constitutional pillars in which we take so much pride, it must be supported by a high standard of American citizenship. What this really means can only be fully ap- preciated by the study of home conditions in a largely for- eign community employing low-grade and comparatively ignorant help. The development of a healthy mind and body while young is the only possible mainstay to a cosmo- politan nation such as this United States is growing into. As efficiency will bring about the increase in wages, so it w^ill ultimately result in the decreased cost of the necessities of life. In other words, when we become universally ineffi- cient, both individually and collectively, in all walks of life ranging from the farm to the banking house, our net return per capita is going to be greatly increased. We must make radical changes in most of our traditional ways of doing things and we must realize a new standard of ideals. This can only be brought about by a long and painstaking course of hard knocks and experience. Stu- dents of this subject should study it from the practical standpoint and by close detailed investigation of its actual workings. It is not in any sense a subject to be learned trom books, but one which must be learned from close contact with and thorough understanding of the personal element involved. Only in this way can the psychological conditions be fully appreciated and understood. LECTURE IV "^PUT YOUR HOUSE IN ORDER"' Up to the present time only a small minority of foundry- men have taken up scientific management to any great ex- tent. This may, perhaps, be due to the fact that the litera- ture on the subject has been devoted almost exclusively to other branches of manufacture. The foundry offers fully as large a field for conservation of materials and human energy as does the steel mill, machine shop, printing house or textile mill. The foundry man is probably more or less familiar with what is being accomplished through the application of the science of management to trades other than the foundry. He may not realize what the adoption of such principles would mean to his own particular business. In treating this subject the writer confines himself strictly to the practical side of the question based upon his own actual experience, as he believes that the science of management can be most clearly interpreted when so specifically treated. The limits of this paper will not permit much detail, but it is hoped that an interest, commensurate with possible results, may be aroused from the foundryman's point of view. The preliminaries necessary to getting "your house in order" measure the results you can obtain. There is much to be considered before the detail of reorganization actually commences. This fact is too often overlooked, and partial or entire failure follows, because the foundation did not contain the essential factors. These prerequisites involve both the owner or stockholders upon the one hand, and the organizing engineer upon the other. They may be consid- ered under the following heads : Owners' responsibilities require : A. An intelligent general knowledge of the science of management in theory and in practice. 42 FREDERIC A. PARKHURST 43 B. An acquaintance with plants now running under such principles. C. A clear perception of their own plant conditions and organization in comparison with the more complex methods based upon the science of management. D. An understanding of the radical changes which must be made from the established conventions. E. A thorough investigation into the experience and qualifications of the organizing engineer. F. An absolute support and recognition of the authority of the organizing engineer, once he assumes his duties. G. A complete realization of the importance of the con- trolling factor, "time." The organizing engineer's responsibilities require : H. A preliminary inquiry into the business, plant, and owner's relations to same, as well as their conception of the science of management and their ability to see the installa- tion of such carried to completion. /. A report upon necessary changes which shall incor- porate recommendations and the probable improvements to accrue. /. A study of the personnel and plotting of the organiza- tion. K. A determination upon a method of procedure which shall expedite the reorganization along lines consistent with best permanent results, a minimum cost, and relief of great- est elements of inefficiency as soon as possible. L. The establishing of a self-sustaining organization, supported by clearly defined ideals, written instructions, au- tomatic reward for efficient work with the personal factor a paramount one. The above items cover the chief factors which demand serious consideration. Let us discuss them individually. 44 PUT YOUR HOUSE IN ORDER A. An owner decides in an enthusiastic moment to put his plant under the new science of management. It is not sufficient. Such a decision should only be reached after a knowledge of indisputable facts and much calm reflection. He is making an investment, which, from first to last, will use a goodly amount of money and time. Suppose that he has an established prestige and a profitable business which has been in successful operation for years. He must not jeopardize it for an experiment. Of course, there are many cases where the financial statements of a company*s condi- tion show a profit where quite the reverse is true; but for argument's sake, let us assume that a concern is prosperous and has been "making money" for a majority of the years it has been in existence. That fact does not prove that it is going to continue to do so. Present-day business condi- tions are rapidly changing. Our old margins of profits are disappearing. New factors are constantly springing up within the field of competition. Today it is a new tariff schedule, tomorrow a wave of unrest in the Labor world. Furthermore, we are getting more and more wasteful. We have enjoyed too much prosperity. Labor gives us less work per hour, paid for at an ever increasing price. Why ? We have grown too big to watch the small details. We have grown too fast to take the time to train skilled help. We have lost the personal touch which was the small own- er's greatest asset. The destructive result is inefficiency; and it is a germ which continues to grow and multiply until its prevalence ruins a company. Only drastic measures will eliminate it. The owner must consider his problem dispassionately. He is facing the inevitable if his competitors grasp at the solu- tion first. What is the answer? It can be found by those methods which develop the personal touch, grasp of detail, control of materials, accurate knowledge of all the variables afifecting any business and maximum prosperity through high wages for the rank and file. J FREDERIC A. PARKHURST 45 B. That this answer has been proved can be established by a visit to many plants running under the science of man- agement. There are enough of them to afford ample op- portunity for the study of its workings under prevailing manufacturing conditions. They are old, established plants, prosperous before the installation of such methods, but doubly so now. That does not necessarily mean a doubling of the net profits, though such is true in some cases. An increased prosperity is realized through several factors : (a) Greater profits. (b) Satisfied customers, hence more staple and steady source of orders. (c) Less nomadic and better satisfied labor due to higher wages and better shop conditions which results in an absence of labor troubles. (d) Ability to safely and intelligently meet fair competi- tion through efficient manufacturing methods and accurate cost records. It is hoped that each person interested will verify for him- self the conditions existing in plants running under scien- tific management. A day spent in each, of several so or- ganized, would be of advantage to any owner. Such firms rather invite a study of their conditions. The owner con- templating the adoption of methods founded upon the prin- ciples of scientific management, owes to himself and his associates all the advantages that can come from an intelli- gent study of these methods in actual operation. C. That you may compare the ordinary foundry with its possibilities under correct methods, let me draw you a pic- ture of a foundry as it actually appears under such methods. The first impression one receives is that no one, from the office boy to the laborer, seems in a hurry, yet each is busy. This is quite contrary to imagined conditions. Though there is no apparent hurry, each one has plenty to do and ever>^thing is moving along at a high speed. The individual has specific duties, and his written instructions cover every 46 PUT YOUR HOUSE IN ORDER FREDERIC A. PARKHURST 47 detail of his work. He makes few false moves. He is paid more than he could get in any shop run under old lines. There are operations being performed at an unheard of speed. For example, here is a man making 600 cores per day when formerly 150 was a day's production. There are 90 crank cases a day from one pattern that the best foundry imd pattern shop talent said could not exceed 40. Castings are poured under pyrometer control, material taken to and from the men. One sees specially trained men, not molders, pouring difficult molds successfully. The time study men are making analyses of operations on a job and timing each with a stop watch. * Do the men object? They did at first, but they receive a bonus of 25 per cent of their wages while they are being timed and they realize that when the correct time has been established they make more money on that job because of the bonus attached. Now let us look at the indirect elements which are re- sponsible for this production and the smooth running of the shop. Chief of these is the planning room, or "brains of the shop." The several important functional men em- ployed through and about the shop are : 1. Production clerk. 2. Route clerk. 3. Order-of-work clerk. 4. Schedule clerk. 5. Time study foreman. 6. Material foreman. The planning room organization, combined with their shop representatives, remove much of the detail that is or- dinarily delegated to shop foremen and gang bosses. The first mentioned few men are specially trained to several branches of the work necessary to the official operation of a plant. They are all specialists. Their duties are carefully defined and responsibility for every detail is definitely placed. / * t* I Briefly, the work of the planning room staff is as follows : 1. The production clerk is the head of the planning room. He is held responsible for those under him and their work. He sees to the proper distribution of charges of all labor routed to the shops. He supervises the ordering of material; also cost and stores records and other general details. 2. The route clerk routes all work to the shops by means of work orders and distributes this work to the proper benches, machines or men by means of the planning board, a duplicate of part of which is in each department. He does not, however, have anything to do with the "order of work" or of the records of its condition in process. 3. The order-of-work clerk is responsible for the cor- rect processing of all work in the shops and the maintenance of shipping date schedules. He plans the order in which operations at each bench or machine are performed so as to finally bring the component parts of the work for each order through on a given date. 4. The schedule clerk keeps the process schedule, issues the daily schedule and job tally sheets to the shop, and in conjunction with the order-of-work clerk checks and follows up details of work in process. These two men also control the orders for overtime work that may from time to time be necessary to maintain shipping promises. 5. The shop methods are controlled by the time study foreman. He is responsible for the time study work. This includes the analysis of all operations, the fixing of times, computation of bonus and the instruction of the employees until they can meet the bonus production called for. He is also responsible for the instruction cards. These cards are the final detail record of the standardized practice as finally determined after the study of conditions and completion of time studies. Part of the times are covered on the standard time sched- ule of sub-elemental operation times. These times apply to all jobs. Only a few of the operations in a new job have 48 PUT YOUR HOUSE IN ORDER to be timed. The bonus for a given production is obtained directly from the authors standard differential bonus sheets. These sheets show the bonus figures for any one of fifteen classes of labor for any production. • 6. The material foreman, under orders from the planning room, or through the routing si>ecified on the work orders, controls the movement of all material in process. This ap- plies to everything. The workmen or their helpers are not allowed to go after the material they are to use. Neither are they allowed to deliver it to the next destination after they are through with their part of the work. In a foundry this applies to delivery of sand, chills, wire, nails, core plates, flasks, cores, metal (pouring gang), movement of castings, etc. In fact, all material to be moved is in charge of the material foreman. This applies from the time it is ready to move the first time until it has reached its final destination. D. It can be readily seen that the division of responsibi- lities as above outlined must tend to much greater plant efficiency of operation than can be realized by holding each foreman responsible for his part of all these things. The development of an organization as above outlined must of course impress the older regime as more or less radical. This is obvious. At the same time, the method of procedure affects the smoothness of operations during the period of transition. The responsibility for this is up to the organiz- ing engineer. E. We come now to the selection of a competent en- gineer, expert in the use of methods based upon the prin- ciples of the science of management. He should be a man of varied shop experience and have a thorough knowledge of business. He must know men and be able to appreciate the psychological influence in dealing with them. The en- tire problem is one of education ; and success can only be obtained through a capacity which will control the ever- varying human factor while the new order is being estab- lished. ' I i FREDERIC A. PARKHURST 49 F, The successful issue lies with the engineer, but the management must support his authority to the limit. The owner cannot be too careful in the choice of an expert, but once a choice has been made, stand firmly by him. The moral effect of this attitude will remove half the* obstacles ordinarily met. G. The element of time is the essential agent which pro- duces results. The length of time required to put any given plant on a sound basis of efficiency can be but roughly esti- mated. Each plant offers its own problems and each prob- lem must be met and disposed of according to varying cir- cumstances. Many indirect influences have a heavy bearing upon the situation. As a general proposition, the small plant will require at least between two and three years. The larger and more complex the plant, a correspondingly longer time is neces- sary. What three years would do for one concern would take six to do in another. The tendency is too often to rush the work. Many failures have resulted from just this cause. Owners contemplating the installation of the new methods should bear this in mind and profit by the experience of those who have been successful in their results. Build the foundations slowly if need be, but absolutely surely. H. We have contemplated the chief points to be consid- ered by the owner. The organizing engineer assumes the larger responsibility when he undertakes the successful re- organization of any plant. He should make a careful in- vestigation of the existing executive management, the offi- cial and shop personnel, the physical plant and methods. It is not safe to assume that because a plant is not run upon recognized scientific principles that it is inefficient. If this fact is overlooked, the organizer may find a condition where his services are not needed to make material improvements. There are some lines of business which, on account of their simplicity or peculiarities, can be little improved. In any case, conservative, sane and explicit information as to the possibilities should be given. The organizer must be ( 50 PUT YOUR HOUSE IN ORDER sure that the principals thoroughly understand all that is involved and are in a position to see the changes carried out. /. When a complete understanding has been reached with the owners, a preliminary report should be submitted, deal- ing with the unusual conditions or glaring inefficiencies. Immediate attention should be directed to such and a remedy for same found at once. By prompt recognition of such details, not only may large savings begin, but they may make the installation of the new methods pay for their own expense. This item of cost is in many cases an important one. A realization of the fact by the engineer often enables him to carry on the work on a scale which will not prove a burden to his client. In cases where the ultimate savings are doubt- ful, in consideration of the cost of the change, the facts should be so clearly stated that a misunderstanding on the part of the client would be impossible. Such cases will be rare. In most cases the final, direct and indirect savings will be many times the cost of installing the modem methods. Furthermore, the gain is a permanent one and the return will be felt for years. An efficient and permanent organization is as much if not decidedly more of an asset than so much plant. An- drew Carnegie once said that could he retain his organiza- tion, the loss of his plants would not be fatal: he could in a short time replace the latter and outstrip his competitors. 7. The next step for the engineer is to thoroughly study the available human material and plan his organization to use it. In a plant of any size there is enough material to fill all requirements. The men will have to be trained, tried out, shifted and tried again. It will be the exception who is not finally placed satisfactorily. A great asset of the old employee is that he does not need to be taught the details of the particular business. Other requisites being at all equal, he is the better choice. The organizer must exercise extreme care, patience and tact in establishing the new line-up. He has to contend with FREDERIC A. PARKHURST 51 \ petty jealousies, age, term of services and similar obvious conditions. One of the most difficult situations is the neces- sity for changing the incumbents of more important posi- tions. This is especially so in cases where he may have to put a man into a place of less importance, but which he is pre-eminently fitted to fill. There is an old saying, "A new broom sweeps clean," but the writer has never found it necessary to prove the adage. There are cases where one is obliged to remove an old em- ployee, but it is the exception rather than the rule — if the reorganization is carefully planned and built up. Just here a word about the organization record might not be amiss. The record contains a complete set of all instructions covering in detail the duties of each member of the organization. A new incumbent in any position needs but to study them to become thoroughly familiar with his duties. Too much stress cannot be laid upon the importance of these records. They assure the maintenance of details and routine long after the organizer has completed his work. They are an asset to the firm because they show how and why each detail is handled in a certain w^ay. No man needs miss promotion because no one else can step into his job. Neither can an employee "corner" his services because he alone knows his particular part of the work and so thinks he is indispensable. Such a man cannot be dispensed with too soon. This record is for reference of all department heads and they are invited to use it freely to familiarize themselves with the new order as the work progresses. K. The order of procedure in working out detail in methods depends wholly on the local plant conditions. There can be no hard and fast rule. Each problem must be met in a different way. No two plants are suffering from exactly the same measure of the same elements of ineffi- ciency. One plant, though very inefficient, may have a highly developed stores system. Another may have no stores system at all. One plant may know its costs and another not. A congestion of orders may be a great handi- 52 PUT YOUR HOUSE IN ORDER I ! m cap and again the difficulty lies in an inability to get ma- terial when wanted. All these combinations have to be treated as they occur. Each kind of business offers its own likely chances for inefficiency. One of the greatest elements in any business is the labor proposition. No matter how good your plant, how economical your furnaces, how much material you may have, the man is what counts. Plant, furnaces, materials! Absolutely use- less without the human agency. As stated before, lalx)r is giving us less work per hour for a steadily increasing wage. This condition is going to grow worse for some time to come. The reasons are too well known to need discussion. We must consider the remedy. L. "Put your house in order." Build up an adequate and self-sustaining organization. No iron-clad system and fixed detail of method can be generally applied. The true science of management lies not in a definite set of forms or ?. standard line of procedure. The fundamental principles remain constant. The sys- tem, forms, etc., are but a means to an end. The entire combination, to be effective, must realize certain results. In addition to a self-sustaining organization supported by written instructions, subject to revision to suit ever-chang- ing conditions, we must automatically reward each employee for work well and efficiently performed. He must not be left to his own devices. All the elements of his work must be under absolute control. To do this the personal factor must be recognized as paramount. This condition can be realized by fair and competent management, and the co- operation of the rank and file will be obtained permanently. Give a generous bonus in addition to the day wage, for a good day's work well done. You will have a better satisfied and higher standard of employee. Your house will be in order. 1-A. 1-B. 1-C. LECTURE V FIRST ESSENTIALS Preliminary Investigation. The Form of Organization. The Organization Record. This lecture will discuss the above subjects, following closely Chapter I of the text. Examples of experiences with other plants will also be brought in to emphasize important points. 53 I, . i i I I I'Vi 2-A. 2-P>. 2-C. LECTURE VI DEPARTMENTAL FUNCTIONS Functions of the Sales Department and Counting Room. Functions of the Engineering Room. Functions of the Drafting Room. This lecture will treat of the above subjects, closely following Chapter II of the text. LECTURE VII DRAFTING ROOM METHODS VII. Drafting Room Instructions, VIII. Instructions for Drawing and Sketch Indexes. XXXI. Shop and Drawing Boys' Instructions. This lecture will discuss the several instructions referred to above, which instructions form part of the Appendix of the text. The object of reviewing instructions is to enable the student to understand the way in which instructions are drawn up in detail to cover the functions of certain departments. 54 55 Mi If' I'i! J' 3-A. 3-B. 3-C. 3-D. LECTURE VIII PLANNING ROOM Planning Department. Duties of the Superintendent. Functions of the Planning Department. The Production Clerk. 1"^ The above subjects will be discussed, following closely part of Chapter III of the text. i i V >"■ 56 LECTURE IX PLANNING ROOM INSTRUCTIONS X. Production Clerk's Instructions. XI. Planning Department Monthly Report. The above instructions will be covered in detail, following the Appendix of the text for the instructions mentioned. > 57 li J m hi I fi$ '3 i LECTURE X PLANNING ROOM (contiiiued) 3-E. Thk Shop Engineer. 3-F. The Stores Clerk. 3-G. The Cost Clerk. 3-H. The Route Clerk. 3- I . The Order-of-Work Clerk. 3- J. The Shipping Clerk. 3-K. The Receiving Clerk. 3-L. The Time Clerk. 3-M. The Schedule Clerk. The above subjects will be discussed in continuance of the de- scription of the detail work handled by different functionaries located in the planning room, or working in conjunction with it. This lecture will follow that part of Chapter III of text indicated above. 4' LECTURE XI PLANNING ROOM (contiiiued) 3-N. The Factory Mail System. 3-0. The Time Boy. 3- P. The Inspector. 3-Q. The Stores Keeper. 3-R. The Move Material Boss. XXXI. Inspector's Instructions. This lecture will discuss the above subjects, completing Chapter III of the text not already covered. This lecture will also include a discussion of Inspector's Instructions XXXI, forming part of Appen- dix of the text, page 281. 4\ 58 59 'I i I f . :'' 1 m \ 4-A. 4-B. LECTURE XII ROUTING AND CONTROL OF WORK The Routing of Work Through the Shops. Symbols (For further reference see "Symbols" published by the author in early 1917). The above subjects will be discussed, following closely part of •Chapter IV of the text. LECTURE XIII ROUTING AND CONTROL OF WORK (cOntinUCd) 4-C. The Functions of the Material Boss. 4-D. The Functions of the Order-of-Work Clerk. 4-E. Gang Bosses. 4-F. The Speed Boss* This lecture will complete the discussion of the remaining part of Chapter IV of the text. 60 61 |.;i - m LECTURE XIV ROUTING AND CONTROL OF WORK (coiltinucd) XIV. Anticipating Requirements both as to Rough Material, Machining Operations and Assembly. XV. Order-of-Work Clerk's Instructions. XVI. Movement of Batches in Installments. XVI r. Route Rack Signals. This lecture will be confined to discussing the details of the in- structions mentioned above, forming part of the Appendix of the text. LECTURE XV STORES, LABOR AND COST 5-A. The Creation of a Stores Department, the Methods of Classifying and Housing all Material (Rough or Fin- ished) not in Process of Manufacture, and the Order- ing OF Stores either to be Purchased Elsewhere or to BE Made in the Shops. 5-B. The Perpetual Inventory or Stores Ledger, showing how it is kept up to date and checked to always agree with the Actual Stock. The above subjects will be discussed following the outline as given in part of Chapter V of the text. The student is referred to the author's "Predetermination of Prices" for a further insight into the controlling elements necessary in connection with costing. I 62 63 LECTURE XVI STORES^ LABOR AND COST (continued) 5-C. The Means used to get Correct Returns for all Times EXPENDED on WoRK, WHETHER AS EXPENSE OR AS PRODUCTIVE Labor, including Operation Times. 5-D. The Combined Cost and Route Sheet, and the Methods Employed to Distribute and Collate all Material and Labor Charges as well as Overhead Expense. This lecture will complete the discussion of this subject as out- lined in Chapter V of the text. I* ^ 1 I ^ 64 LECTURE XVII INDIRECT COSTS 4- A. Expense Symbols. 4-B. Expense Distribution. 4-C. Distribution of Burden. 4-D. Erroneous Methods of Distribution. 4-E. Differential Process Rate Method. 4-F. Undistributed Burden. The above subjects are treated in detail and reprinted complete from Chapter IV of the author's "Predetermination of Prices." Figures re- ferred to have been omitted and the student is referred to the above mentioned book for further information. INDIRECT EXPENSE . The third element of true cost presents a more intricate problem to solve, because the items of indirect costs are less easy to determine and control than the direct items of labor and material. The direct items are incurred by a specific job and charged to that job, but the indirect items are incidental to all jobs as a whole, since they cover administrative, financial, sales and operating outlay. The majority of the indirect expense must remain nearly con- stant irrespective of the volume of business. A small part of the expense is a variable and can be controlled as neces- sity arises. To separate the variable or partly controllable factors from the more constant factors, it is essential to make a comprehensive analysis of all indirect expense. When such an analysis has been made the need of adopt- ing a diflferential process rate or differential burden method of distribution will be obvious. 4-A. Expense Symbols A typical expense distribution chart is shown in Fig. 16. The figure shows a chart somewhat amplified and more complete than the ordinary business would require. The amplification is purposely carried out to make the application more general and to better illustrate the method. 65 I J' I 11- '>. Ill n 66 EXPENSE SYMBOLS For convenience, a typical list of X accounts, showing the subjects they cover, is given. The following X symbols should only be used in combination with the plant symbol A, B, C, etc., or a department symbol lA to IZ. (See Fig. 15.) XI. Salary of managers, superintendents, department heads. X2. Clerical wages. X3. Other labor. X4. Supplies. X5. Maintenance of buildings and stnictures. XO. Maintenance of equipment, furniture and fixtures. Subdivided by machines, etc. (See Table I.) X7. Care of plant (AX7) or department indicated. X8. Miscellaneous expense, not supplies. X9. Miscellaneous small tool expense. XIO. Experimental and test expense. Xll. Fuel. X12. Maintenance of electrical equipment. X13. -Maintenance of air compressors and piping. X14. Maintenance of boiler, stacks and accessories. X15. Maintenance of steam and water piping outside of boiler and engine room. X16. Maintenance of oil pumps. X17. Maintenance of heating system. XI 8. Advertising. X19. Traveling expense. X20. Maintenance of motor cars and trucks. X21. Pattern and flask expense. X22. Sand. X23. Injuries to employees. X24. Acetylene expense. X25. Inventory expense. FREDERIC A. PARKHURST 6j X26. Crucibles and pots. X27. Replacement of stock chills. X28. Electricity purchased outside. X29. Gas. X30. Freight and express. X31. Defective material and workmanship, and main- tenace of contracts. X32. All bad work expense not belonging to X31. X33. To X49 inclusive may be used to cover any specific needs of a business. X51. Legal expense. X52. Insurance. X53. Taxes. X54. Depreciation. X55. Interest. X56. Oxidation. Each of these groups have numbered items similar to XI to X56 inclusive. General Expense GAX. General administrative expense. ' GBX. General sales expense. GCX. General comptrollers and fi- nance expense. GLX. General lalx)ratory expense. GOX. General operating expense. GPX. General purchasing expense. It should be noted that X32, bad work expense, may include bad accounts under GCX32 and unearned burden under GBX32. This list is only typical and suggestive. The division of the burden should be sufficiently complete to cover all of the divisions of expenses desired. Always use one sequence of symbols. To properly summarize ex- pense, we must be able to show the different symbols at the left of the sheet and in each department column to the right interpolate figures that apply to each department and for each expense symbol. Each X symbol means the same thing all the way across the sheet. Many departments \y\\\ use only a few^ of these numbers, while others will use j^er- haps half or more. 68 DISTRIBUTION OF BURDEN 4-B Expense Distribution Cost sheets are opened for each department. Each col- umn of each department's set of sheets is devoted to the X symbol used by that department. The end of the month the sum of these sheets drawn off by X numbers is posted to the indirect expense symbol summary sheet illustrated in Fig. 15. The vertical footings of the indirect expense symbol sum- mary sheet represent the total indirect expenditures for each department for the month. The cross additions of each X account represents the total expense for each X sym- bol for each month. The vertical footing of the extreme right-hand total column must agree with the cross-footing of the totals at the bottom of the sheet. From the analysis sheet above described (Fig. 15) the total departmental expense for each period, weekly, monthly, quarterly or yearly, is determined. It is not sufficient, how- ever, to prorate these departmental total expenses by means of a burden without separating or further distributing item X6 (Maintenance of Equipment). It is possible that in cer- tain kinds of business or in a plant having but little machin- ery, or perhaps apparatus of but one size or type and costing approximately the same, the sum total of the departmental expenses w^ould give a distribution close enough. This con- dition does not ordinarily obtain, however, so it becomes necessary to separate the equipment burden, and recognize the w ide range in the cost of operation and expense incident to the various tools and apparatus. Each piece of machinery, equipment or w^ork point should have its individual burden or differential process rate deter- mined as in 4-D. 4-C. Distribution of Burden Table I illustrates equipment expense summarized by months and covering one year. The amounts opposite each machine symbol represent the total monthly equipment charge made up of the items listed in the preceding para- graph, plus X6 expense charges. These totals, divided by I FREDERIC A. PARK HURST 69 the nominal number of hours for each machine, represent the machine rate or burden. This nominal rate is determined by assuming that each machine should operate on a fair aver- age basis of so many hours per month or year. The class of business, of course, governs how this is determined. Let us take for example a plant running one shift of 10 hours, based on 300 working days per year. The normal full working capacity would then be equivalent to 3000 machine hours per year per machine. It cannot, of course, be fig- ured that on an average each machine will work the full 3000 hours. The records of the business will indicate what per cent is a fair figure to use, in determining how many hours to divide for each month into the total machine ex- pense, to determine the machine burden per hour. The same basis is used w^here a plant nms 24 hours divided into several shifts. On a basis of 3000 hours maximum per year, or 250 hours per month, we can assume for illustration that each machine should average an operating time of 80% or 200 hours per month. This 200 hours divided into the total machine expense (see 4-B) represents the machine hourly burden. It may be well to mention at this point that in the event any or all of the machines are working their full allotted time, the actual direct hours can be divided into the expense for that period. Some firms make no allowance for less than 100% capacity, but use the full number of yearly hours as a basis. On the other hand, if the machines operate less than the fair average amount of time, we cannot use a higher burden by dividing each month's cost by a greatly reduced number of hours. If this is done, the result will be an excessive burden per hour. It is not necessary, of course, to always figure the 80% or full running time used in the example above. Some classes of equipment or some kinds of business might make it desirable to use a some- what smaller percentage, and vice versa. In the event, however, that only half of the accepted percentage was run on a machine, or a lot of machines for a period, it would i J' I' i I M [V ,'. 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TtioCM OOOrfOQ CM On i-H tF CM 10 CM to -CM CO CO CM CM CM 00 -00 1—1 .CM CM • T-H • 00 On -cm '1—1 I CM 00 c ro CM 00 CM 00 On 00 to fo r^ rvj ■o ro 1— Tf r^icMco ^ Tj-ro CM .-^ . fo f^J "^ O ■^ •— I to CO 00 000 -O^IOn VOOnCMOO CON© •"«^^^ lOlO'^'^ O "^ C/w • CO VO to •oc CM CM in ^s CO CO to CO o NO CM ^ to On VO »— ' to t^ • 10 "^ CO O • ^^ -^ CM VO I i^r-^ o CM to 10 to 00 t^ CM '^ OT^ 1^— < to 10 CO CM • vO •^ • to ;00 •O CO o x> a >* (A 00 0\ I— • I— • »— I VO NO NO NO NO XKJI K/l K/l k^ rS rS »^ r'S CM -^ tr; CM CM • r- ^^Cjco-^to I nOIv.00,hCM Pl, Ph CLi Cli Ph I Q-iP-iPmnm NOVONONONO I VO VO VO VO NO K/ K/ K/ Kj* Kj* s> S*^ ►v' *s> S/" 1^ rS rS r'N r'S ?S rS f'S ?S I'S co'*toNo^s. 0»-^CM 00O\»-<^ ^ VO NO NO VO NO VO NO ^ NO NO r'S I'S rS rS r'N I ir^tr^f^/^^ I: u ^ 1 ,il( : 74 X6 ANALYSIS o H > i c gn < 9 u s 3 < •8 ^ £ • •••« ••• ^^ • :SS^?S^ t • • •o\ • )^ • • •••• ••• g^j • • »••• ••• • • v-4 • • :9 :gS :85 : f^ :3 o E k>i k> k> k^ kyi I Stf' K^* K> b^ K> ^ I'S ?>! rS rS I rS rS rS rS rS I 1-H ! CMf^'^iOVO XXXXX i §8 in ^ o i i ^ oi ^ FREDERIC A. PARKHURST 75 not be fair to charge against cost, double the amount of burden. The disposition of undistributed (or unearned) burden is discussed in 4-F. The Hmiting of the machine hour burden or other burden rates to a maximum amount, which must not be exceeded, applies equally to departmental or other burden distribution. In the event that a plant is running very slack and pro- ducing large amounts of stock, the use of the actual burden, for low capacity, would result in an excessive cost and a false inventory value. It is not fair or equitable to use fig- ures so obtained as part of the inventory. If the undis- tributed burden is of such proportion that it offsets the profit on the amount of work done for the period, it is en- tirely a general business loss and one which the writer con- tends should ordinarily be shown as a sales expense. In making such a statement, it is realized that general condi- tions would have to be taken into consideration and allow- ances made for "seasonable" variation in sales, spirit of the times, etc When the burden chargeable to machines has been de- ducted, the balance of the departmental expense must be distributed on a basis of so much per direct hour. This is determined by dividing the direct hours departmentally, as shown by the operating statement, into the indirect ex- pense, after substracting that part prorated as a process rate or pound burden (as some foundry departments should be prorated). These burdens, except the pound burden, should all be distributed on a productive hour basis. Occasionally one will find departments which will require a still different basis of prorating. For example, in a foun- dry where certain of the department expenses and costs of operation are directly in proportion to the weight handled, such departmental expenses must be prorated on the pound burden basis. Other foundry indirect expense, however, should be prorated at so much per direct hour. A complete operation anlysis makes such facts evident at a glance, and the indirect expense can be separated both by items and departments, so as to isolate those which must be distributed u { [I 76 DISTRIBUTION OF BURDEN by one method from those which must be distributed b; another method. It is axiomatic that no one method can give correct results in a business of any size, where one has a great variety of product or has several departments and a variety of equipment. After the indirect expense distribution has been worked out to show the actual amount of money for each depart- ment prorated against each order group, these amounts should be posted to the operating statement (Fig. 16). Each order group should also show departmentally the bur- den rate figured for the period. All of these figures appear in the third section of the operating statement entitled **In- direct Expenses." Fig. 16 does not show the various rates of burdens for want of space. It should be understood, however, that the differential process rate is the correct method to use. Under each order group there may, and probably will be, several burden rates. These should be expressed as departmental hourly burden, or process rate burden, or pound burden rate, or possibly a general expense burden rate and a sales expense burden rate. Ordinarily the writer believes in including the general and sales ex- pense in the total departmental burden, so as to have as few rates as possible. All of the several hourly burden rates may be added to the machine burden rate, or process rate, to get one total hourly burden rate for each machine or process point. Any pound or piece burden rate would, of course, remain separate. In distributing burden, the orders (F) covering l)etter- ments and additions to factory, land, etc., and the orders (P) covering additions and betterment to plant equipment each carry their proportion of burden. It should be borne in mind that work on these order groups should be con- sidered productive, or direct labor, as far as the depart- ments are concerned that do the work. They should carry their burden just as though they were made on an order chargeable to a customer. It is sometimes desirable, how- ever, to use a burden rate which does not include the mini- mum profit factor for the F and P orders, so as to hold I !. / FREDERIC A. PARKHURST 77 down the increase in the property account and not show an excessive asset. After deducting any burden so prorated to the F and P orders, the remainder of the departmental burden is apportioned to the main order groups. When the amounts covering the indirect expense pro- rated to the various order groups, departmentally, have been distributed, these total amounts are carried out to the A, B, etc. order totals column (see Fig. 16) to the right; and into the grand total column at the extreme right of the operating statement. The grand total indirect expense transposed into the bracket at the right completes the second and last main item to compose true costs. The sum of the direct cost plus the sum of indirect costs equals true costs, and balance with the control accounts indentified by depart- ment symbols. To summarize: The department expense sheet, with a column devoted to each expense symbol affect- ing that department, gives the summary per month. This summary is prepared so as to get departmental, machine, process and pound burden amounts of expense so that the differential process rates can be determined for that period. To repeat, for emphasis, these rates must be determined by using as a basis a fair number of productive hours for the period based on the plant conditions. Rates beyond this fair average must not be used if excessive, thus giving a false cost. An undistributed burden should be considered a sales department expense. The sum of the different de- partmental burdens represent one total amount (in dollars and cents) for the period. This amount is itemized by order groups and appears as a summarized distribution on the operating statement (Fig. 16). 4-D. Erroneous Methods of Distributing Indirect Expense The most common methods of distributing burden are by percentage, by flat hourly rate or by straight pound rate as used in the average foundry. The percentage basis of distribution is perhaps one of the most common, and also one of the most unreliable methods possible to con- ceive. For argument's sake, assume that a burden fixed on I 78 DISTRIBUTING INDIRECT EXPENSE the percentage basis is 100% of the direct wages, then a distribution of 6 cents per hour burden to a 6-cent appren- tice is made, a burden of 20 cents an hour to a 20-cent man or 40 cents an hour to a 40-cent man. The true facts of the case show that it costs fully as much for floor space, heat, light and superintending for the apprentice as for the 20-cent, 30-cent or 40-cent man. The cost of supervision, wear and tear on tools and other equipment is probably more in fact for the low-priced help than it is for the higher paid journeyman or skilled workman. On a per- centage basis, the apprentice boy's work bears only a small part of the burden which he actually incurs, while the 40 cents an hour skilled workman's job is being charged with more of the burden than he incurs. The percentage basis of distribution takes no cognizance of the machine hour rate, which distributes a few cents an hour on an inexpen- sive tool and possibly a dollar or two on large tools. With this variable undivided, the percentage distribution is fur- ther thrown out of balance, so that any figures obtained by the use of percentages are most unreliable. To further illustrate the argument, assume that a burden of 100% is what the percentage figures show, which means that for the various rates mentioned, the following cost, exclusive of material, exists. $.06 per Hour $.30 per Hour $.40 per Hour 10 hours $ .60 100% burden 60 Total $1.20 $3.00 3.00 $6.00 $4.00 4.00 $8.00 Another erroneous method of distribution is the blanket rate based on productive hours. Here is an error not so glaring as the percentage basis, but one which also fails to take into consideration the variance of the burden due to the diflferent equipment involved. Neither does it take into consideration the fact that part of the burden should be distributed on one basis and part on another basis. Using f FREDERIC A. PARKHURST 79 the same examples as given above, but prorating at say 30 cents per hour burden, the result shows below. $.06 per Hour 10 hours $ .60 Burden at $.30 3.00 Total $3.60 $.30 per Hour $.40 per Hour $3.00 3.00 $6.00 $4.00 3.00 $7.00 The wide difference in the costs, exclusive of material, shown by the tw^o preceding sets of examples illustrates that there is something radically wrong with one method, at least. Now let us assume the three conditions under the method of distribution, being described herein. A correct departmental burden and a machine hourly burden have been determined by analysis. Assume further that the de- partmental burden is 12 cents per hour and that the work is being done on a machine with a burden of 40 cents per hour, a cost comparison would stand as follows : $.06 per Man 10 hours labor $ .60 10 hours machine rate 4.00 10 hours dept. rate 1 .20 Total $5.80 $.30 per Man $.40 per Man $3.00 4.00 1.20 $8.20 $4.00 4.00 1.20 $9.20 In considering the last problem, it should be borne in mind that the department is operating while the job is being processed ; likewise, the machine time shows that the departmental and machine rate for the same number of hours spent on that job must of necessity be the same whether the job is done by a 6-cent, 3a-cent or 40-cent an hour man. Of course, under the best type of manage- ment, a 40-cent man is not put on a 6-cents-an-hour job, or vice versa, under usual conditions. Any concern, however, employing a large number of men is likely to find during periods of business depression that it is necessary to use a higher priced man on work requiring less skilled labor, in 8o DISTRIBUTING INDIRECT EXPENSE •II ii order to keep the man employed. In many such cases the labor charged to the job is charged at the rate which the grade of work demands. The balance of the man's rate is charged to the department. In contrast to the necessity quoted, the opposite one sometimes arises, where lack of labor of a sufficiently skilled type makes it imperative to use, say, a 30cent man on a grade of work ordinarily requiring a 40-cent man. In such cases the job is charged with labor at the rate of 30 cents and the man, while working on that job, receives a bonus charted from the class in which the 40-cent man would stand, thus receiving added remuneration because of the higher class work. When the man goes back to his usual grade, his bonus returns to its usual class. Neither diver- gence from the ideal point of standardization is desired, but may prove valuable in keeping intact an organization under trying conditions. To further illustrate the discrepancy which will be seen between costs figured with a dififerential burden divided to obtain true results, let us assume a job taking 10 hours' labor and done on different machines with their individual process rate burdens. 1st example : $.10 per hr, mach. burden 2nd example : $.25 per hr. mach. burden 3rd example : $1.50 per hr. mach. burden Labor $.30 per hour; $.12 per hour Dept. burden -f $.12 per hr. Dept. burden-!-$.30 labor=$ .52 per hr. +$.12 per hr. Dept. burden+$.30 labor=$ .67 per hr. f $.12 per hr. Dept. burden4-$.30 labor=i$1.92 per hr. SUMMARY 1st Example 10 hours $3.00 $.12 Dept. burden 1.20 Machine burden 1 .00 Total $5.20 2nd Example 3rd Example $3.00 1.20 2.50 $6.70 $ 3.00 1.20 15.00 $19.20 FREDERIC A. PARKHURST 81 A comparison of these figures w^ith the preceding ex- amples will show w^ithout any argument that an error must exist somewhere. Not only does the blanket or percentage method give us a cost which is not a true cost, but it seri- ously affects quotations and selling prices, so that there can be no intelligent control of these. Furthermore, the small job is carrying a large amount of burden which be- longs to the larger job run in large or powerful machines, while the jobs processed in these large machines do not begin to carry the burden that properly belongs to them. (See Fig. 17.) To illustrate how an hourly and pound burden is used in figuring costs, let us assume a job requiring a total of 30 direct hours (molding, core making, trimming, etc.) and weighing 80 lbs., another weighing 200 lbs., and another that nets 1000 lbs. of good castings all for 30 hours direct labor. 12 3 80 Lbs. 200 Lbs. 1000 Lbs. Labor $9.00 $9.00 $9.00 Average hour burden $.60... 18.00 18.00 18.00 Pound burden at $.03 2.40 6.00 30.00 Total $29.40 $33.00 $57.00 or cost per lb. exclusive of metal $.3675 $ .165 $ .057 Study of the above example will readily convince the reader that such a basis of figuring readily shows up the good job from the poor. Prices can be intelligently and confidently fixed. Oxidation and shrinkage, fuel, defective loss, etc., melting, handling, pouring, shipping, trucking, etc., are "pound" items. All other items come under hourly burden expense. A job without cores takes no core or "knocking out" burden. Why charge them with any? The use of this differential hourly and pound burden for foundry work is the key to correct costs for that class of work, as it is for other trades. If the class of work in a shop changes overnight, as it often does in the jobbing busi- w 82 DISTRIBUTING INDIRECT EXPENSE ness, the cost distributed to jobs automatically takes care of itself. Under the flat-rate or percentage method this condition does not stand. So far general overhead as burden has not been specifi- cally considered, but it has been assumed as added to the departmental burden so as not to confuse the average reader. Refer to Fig. 17. This diagram is based on ap- proximate figures. The same basis of figuring is main- tained throughout. The curves are based on the assump- tion that the problem is confined to one department carry- ing a definite departmental burden per hour. The burden, of course, includes miscellaneous department expense, fore- manship, general sales, administrative expense, etc. To the department burden has been added a machine hour burden figured on equipment ranging in value from $100.00 up to $8000.00. Each machine burden includes interest, depre- ciation, power, maintenance expense and its proportion of the departmental expense that can be prorated to it, based on the proportion of heat, light, floor space, etc., allotted to each machine plus the wages of the operator. The wage used starts at $1.80 per day for productive labor working without machine equipment or with equipment up to the value of $100.00. This direct labor wage also includes an allowance for bonus. Bonus is charged as a direct item (including the foreman's bonus, which is paid on a per- centage basis depending on what the men earn on each job). The direct labor rate, which starts at $1.80 per day, including bonus, increases as higher priced equipment is brought into use up to $4.40 per day, including bonus, for the $8000.00 unit. The problem illustrated in Fig. 17 is figured on the as- sumption that there is but one machine, or process point, for each of the unit valuations shown on the diagram for that department. The figures above mentioned are repre- sented bv the curve marked "true cost line based on differ- ential burden method." Assuming that the true cost line (Fig. 17) represents one day's work for each unit, the sum total of these vari- FREDERIC A. PARKHURST 83 ous amounts will equal the total expenditure for running the department for one day of ten hours. This amount di- vided into the productive hours represented (work units times 10) will give the average rate per productive hour. This is the flat-rate-per-hour figure often used and is repre- sented on the diagram (Fig. 17) by the straight horizontal line. The shaded area to the left of the point where the horizontal line crosses the true-cost line represents an ex- cessive false cost. In other words, labor performed in a department using low-priced men and operating low-priced equipment carries two or three times the burden that it should. As the valuation of the equipment used by each in- dividual increases, the difference between the false cost ob- tained by the flat-rate-per-hour method and the differential burden method becomes gradually less. At a certain point the flat-rate burden line crosses the true-cost line. At the point of coincidence we gtt the same cost for each of the two methods illustrated, providing, of course, that the ratio of productive hours is the same for each work unit. The moment we pass by the point of intersection of the flat-rate-per-hour burden line with the differential burden line, the shaded area represents the minus and false cost obtained by the flat-rate-per-hour method. In other words, at this point the flat-rate method does not distribute enough burden to work being done on the higher priced machines or equipment. Such class of work shows a cost which is too low, figured on the flat-rate-per-hour-method, just as the other class of work to the left of the diagram shows a figure too high. Under the differential process rate method, the burden per hour changes with the valuations of the equipment, increased wage, interest, depreciation, power, maintenance charges, etc. The expense of operation is distributed in proportion to the operating cost of equipment necessary to turn out a given job. The basis of figuring cost should be one which will allow one manufacturer making certain parts to intelligently compare with another, equipped to do the same, his costs or estimates. A method of figuring cost. 84 DISTRIBUTING INDIRECT EXPENSE which will take into consideration all of the elements in- volved in turning out a given product, will mean something as a cost comparison. Another direct effect of incomplete cost methods or incor- rect methods of distributing burden results in a great many firms being unable to determine whether they should man- ufacture their own product or whether they should purchase it outside. There is no gainsaying the fact that a firm equipped for and experienced in the manufacture of certain products should be able to turn out that product at a cost cheaper than one could do who is not familiar with special- ization in that given line. Compare the cost of the specialist making certain kinds of product, figured on the flat-rate-per- hour burden, with costs consuming the same amount of time as shown by the shop making the same product, but not equipped or specializing in that line, and still using a flat- rate-per-hour method. It will be found there is a great dif- ference in cost. The reason for this difference is that the manufacturer specializing in a certain class of work is equipped for it and his department does not carry the wide range of equipment that the other plant which does not specialize has to carry. Though their methods of figuring the flat-rate burden may be the same, still the specialist equipped for that class of work will not have the wide vari- ation between his costs and the true costs that would be found in the other department. Though his flat-rate-per- hour burden method is incorrect, still for his class of work it will average closer than will the same method used by the manufacturer who turns out a large range of product rather than a special or limited line. 4-E. Differential Process Rate Method The wide difference in cost, obtained even by the same method in different plants, will well emphasize the impor- tance of having a differential process rate determined along the lines to be expounded. It is as absolutely necessary in the determination of true costs to have a true distribution of burden as it is to know how much direct labor and FREDERIC A. PARKHURST 85 direct material was employed or used in connection with any specific operation or job. No argument can be sus- tained that supports a method averaging a wide range of equipment which ignores the relative wear and tear and the relative power and consumption of investment, or which does not recognize the various classes of labor employed to use that equipment. To obtain an accurate distribution, iirst, determine the several burdens which the problem presents and keep them separate as far as the monthly expression of their valuation, and the analysis of the amounts from which they are deter- mined are concerned. An analysis of the statement for the period is desirable. Compare the different burden amounts both by amount and by burden rate, as the expenses going to make up these amounts can be more readily separated and understood in this way. Second, after the differential burden rates have been determined and are ready for use, either in connection with estimates or the recapitulation of costs, the several hourly rates may be added together, to make one fixed sum for each piece of equipment or work point. Of course, if the several burdens include a piece or pound burden, this fig- ure will have to be used as still another item and added to the cost or estimate as a separate amount. The point is that several burden rates for one unit or work point may be combined so as to have less factors to use in connection with figuring. The latter method is preferable and the detail below is based on such a combination. In this connection it is sometimes possible and desirable to include the operator's rate in the total figure used, but it is not recommended. It requires a great deal of detail and supervision on account of the fluctuations in rates as applied on different work, particularly when the shop is not working to its normal capacity. Charge all bonus as a direct item against each job, as it is a variable factor. Combine the hourly rates and list them by work units de- partmentally. Include in this total rate all the various items above considered. 86 DIFFERENTIAL PROCESS RATE METHOD Total true cost is compounded of the hourly differential process rate plus pound, piece or other burden not possible to include in the process rate, plus direct labor, to which bonus has been added, plus direct material. The following- items are to be figured for each individual machine, bench or other piece of apparatus that constitutes a work point. In cases of a duplex machine that is operated by more than one man each item must be figured separately for each work point. For example, a double bufiing wheel stand has two work points. Symbolize each end and figure each as a separate machine, splitting cost installed, etc., to the correct proportion for each work point, all in accord- ance with the following schedule of factors. Schedule of Differential Process Rate Factors. (9-hour day.) ITEM NUMBER Symbol of machine or work point. Maker's name. Style. Size or number. Floor space allotted to same. Horse-power actually consumed. Value installed complete. Interest, insurance and taxes. Depreciation. Indirect machine cost (X4 and X6). Heat, light and rent. Power and transmission expense. Total "B" yearly charges (8 to 12 in- clusive). Machine rate per direct hour (Item 13 divided by 2000). Department base rate per direct hour (XI to X32 exclusive X4 and X6). Local plant base rate per direct hour and for departments not provided for in 15. (AXl to AX56). General administration, financial, sales and operating expense (GAX to GXX inclusive) per direct hour. Minimum profit factor per direct hour. j^ r 19. Process rate to use per direct hour for _.„ . , I each specific work point, viz. sum of Differential process rate. [ 14^ 15^ 15^ 17 and 18. Description of equipment used at each work point by each individual em- ployed as direct labor. B Items forming yearly 1. 2. 3. 4. 5. 6. 8. 9. charges at each work j 10. point described above 11. in A. [ 12. 13. 14. 15. Hourly rates. 16. 17. 18. 19. FREDERIC A. PARKHURST 87 Basis on which Differential Process Rates are Figured as per Schedule Above. (Computed on a 9-hour day.) Item No. 1. Symbol. 2. Maker. 3. Style. 4. Size. 5. Floor space. DESCRIPTION ITEMS (1-7 inclusive) This symbol indicates the particular machine, bench or other apparatus constituting a work point and is for identification purposes. Maker's name. Whether hand, power, turret, universal, etc., de- pending on kind of equipment. Detail sufficiently to assist in determining general style of the machine, bench or apparatus. Give sufficient data to indicate main capacity measurements of the apparatus and maker's num- ber or symbol if one is obtainable. This is to be expressed in square feet. Make an allowance for working space around machine or bench adequately to handle its material. This forms the basis for prorating heat, light and rent. Item 11. This item is to be based on the actual horse-power used for each machine compared to the total horse-power on any one transmission line. (See 7-f.) 7. Value installed. This figure should be the total cost in running order set up and includes cost of: a. Machine and appurtenances. b. Freight. c. Cartage and placing on site. d. Millwright work and material, cost of foundations, assembling, etc. e. Belts, etc. /. Proportion of cost of motor drive and wiring ; or of transmission shafting, wiring, motor and belt which drives same. Base on H.P. consumed as compared to total on any one line. (See 6 and 12 and list herewith.) 6. Horse-power. ' : if ii in f IMI 88 DIFFERENTIAL PROCESS RATE METHOD TABLE II Example for 7f LINE SHAFT NUMBER Horse-power 13.5 18.5 35 5 and 6 24 35 Motorcost $180.00 $275.00 $320.00 Wiring cost ... . 98.50 197.00 345.00 Belt cost 17.60 26.40 35.20 Transmission cost 217.00 280.00 280.00 $275.00 $320.00 197.00 345.00 26.40 35.20 280.00 224.00 Total cost ..$513.10 $778.40 $980.20 $778.40 $924.30 Per H.P $38.00 $42.09 $28.00 $32.43 $26.40 YEARLY CHARGES (8-12 inclusive) Based on the above we must now determine the cost per year ex- pressed in dollars for the following factors. The total of 8 to 12 inclusive (13) will then be divided by 2000 hours to determine the hourly rate for 14. (See 14 and 15 below.) Item No. 8. Interest, etc. — Based on sum of : a. Interest b. Insurance c. Taxes ■use prevailing rates. 9. Depreciation 20% This figure is used on the assumption that the (To be varied to equipment running at maximum capacity for 5 suit conditions) years becomes more or less obsolete, or has such a reduced value as compared with the latest im- proved machines that it will have to be replaced, or almost entirely rebuilt. 10. Indirect machine This item includes any repairs or maintenance cost. cost, and material or sundries incidental to the daily operation, etc. Expenses X4 and X6 for each machine or bench by symbol. 11. Heat, light and This item is prorated to each machine or bench rent. based on "5" after deducting the amount charged to the department rate as explained for "15.'* FREDERIC A. PARKHURST 89 EXAMPLE Light Equipment Heating Plant Land and Building Cost Installed $900.00 $4352.00 $27,500.00 Totals Interest $54.00 $261.12 Depreciation 90.00 435.20 Electricity 252.00 Fuel and labor 2000.00 Insurance 3.60 17.40 Taxes 2.70 13.06 $1650.00 1375.00 105.00 82.50 $1965.13 1900.20 252.00 2000.00 126.00 98.26 Total rent per year. $6341.58 In the example shown the total rent chargeable to the department, based on that department's valuation in light- ing and heating equipment and in its land and building, amounts to $6341.58 per year. If we assume a total floor space of 20,000 square feet we have $.3178 per year rental per square foot. The number of square feet allotted to each work point (Item 5) multiplied by $.3178 gives the yearly charge for that work point (Item 11). The total cross added amount (Item 11) subtracted from $6341.58 leaves a balance of undistributed rent which forms one of the depart- mental charges included in Item 15. Item No. 12. Power and transmission Ex. 13. Total yearly charges. 14. Rate per hour for 13. This should be based on the horse-power hours for each motor drive for 2000 hours per year ; or total horse-power hours X cost for elctricity per horse-power hour. Add maintenance of shaft, belt, etc., not provided for above in "10." Pro- rate as per "6." The sam principle applies to any kind of power. This is the sum of 8 to 12 inclusive expressed in dollars, and covers one year's cost for each work point sparately. HOURLY RATES (14-18 inclusive) The yearly total for each work point (see 13) is to be divided by 2000 to determine the cost per hour. The normal year of 2000 direct hours is determined as follows: 90 DIFFERENTIAL PROCESS RATE METHOD a. 300 working days per year. b. 300X9 hours per day =2700 direct hours per year. c. Consider 75% capacity as a fair average normal working year or 2025 hours: say 2000 hours per year for each work point. Item Na. 15. Dept. base rate. This rate is determined by taking all of the ex- penses of a department that are not included in 8 to 12 inclusive and dividing same by the product of direct man daysX2000, or: Dept. Yearly Expense (8 to 12 inclusive) Total dept. direct man hours per year =Dept. Rate. 16. Local plant base rate per di- rect hour. The Departmental yearly expense includes all XI to X32 (less X4 and X6) items in operating statement. From the figures so determined for a year we must subtract the amount of money rep- resented above in Items 8 to 12 inclusive, and which have already been prorated into the ma- chine rate, else we have it in twice. This can be readily done by subtracting the sum of Item 13, cross added for all symbols, from the total in- direct cost of running the department for one year. The department base rate is the same per hour for each work point in that department. This amount is determined as follows. From the operating statement there must be determined the yearly charges against the plant as a whole which have not been distributed into the depart- mental base rate, Item 15. This Item 16 is to in- clude all AXl to AX56 expense plus department expenses XI to X32 for the departments, such as office, shipping, receiving, timekeeping, planning, etc., etc., which are not included in department rates, Item IS. All yearly land and building charges and other items lare to be included for that part of the plant not distributed into the machine and departmental FREDERIC A. PARKHURST 91 rates, Items 14 and 15. tributed : This includes undis- a. Interest. b. Taxes. c. Insurance. d. Depreciation. e. Also unapportioned AX and departmental items above mentioned. The sum for one year determined as above explained is to be brought down to a rate per direct hour by the same formula as given for Item 13, viz. : Undistributed Local Plant Yearly Charges Total direct hours for entire plant =Local Plant Rate. Item No. 17. General base rate. 1 ^^ The local plant base rate so determined is the same for every work point. This item is the sum of the general expenses of the business not included above. If there is more than one plant, these charges are prorated monthly to each plant. These expenses are cov- ered by the GAX to GXX, Items 1 to 56 inclu- sive, and do not include any charges provided for in any of the foregoing items, 13 to 16 inclusive. The sum of these general expenses for one year prorated to each plant should be divided by the normal total direct hours worked by that plant as explained above for Item 16. This rate per hour is the same for all work points. 18. Minimum profit Use for this a rate per hour (for example. 15c to factor per di- 25c), which will net a minimum profit per year rect hour. on the invested amount of at least 6%. The pro- duct of the total normal work points for any plant multiplied by 2000 hours (for a 9-hour day), divided into 6% of the total investment for that plant will give the correct amount per hour to use as a minimum profit factor. This is a safety factor to' be considered part of cost of production. DIFFERENTIAL PROCESS RATE (19) 19. Differential pro- This amount for each work point is the sum of cess rate to Items 14, 15, 16, 17 and 18. A list of each work be added to point identified by symbol should be made with every hour of the process rate shown opposite each work point, direct labor. Reference to this list gives instantly the correct rate to use for any operation when figuring either estimates or costs. u 92 UNDISTRIBUTED BURDEN 4-F. Undistributed Burden A number of different ways of disposing of undistributed or unearned burden has been suggested and in fact used to some extent. Too often the matter is overlooked entirely. Modern business now demands that this very important point be definitely settled and disposition made of it. The fact must not be overlooked that past practice is not ap- plicable in these times. Why? Because business condi- tions no longer permit of long prices, cheap materials and labor, orders coming in unsolicited, ignorance of costs and "guessed at" selling prices. Elsewhere emphasis has been laid on the importance of limiting the chargeable burden when it is too high due to low production. The reason as explained above is so as not to get excessive costs or high (and false) inventory valuations. On the other hand, it seems fair to get advan- tage of a burden slightly below the high limit established whenever the volume of business makes this possible. The establishment of this high or "limit" mark should be based on fair averages and the consensus of opinion of the prin- cipals. By the establishment of a maximum burden limit (either hour, pound or other unit of distribution) we are able to use that limit figure to estimate costs when establishing selling prices. Such estimates must always l)e based on this maximum allowable burden limit — no more or no less. In the author's estimation, the unearned burden should be debited to the Loss and Gain account. Each monthly operating statement should show the amount of this charge in a separate item. This same amount should also be ex- pressed in memo as an item properly chargeable against sales expense for that period. This can appear as an extra item of sales bad work expense, X32. i LECTURE XVIII ESTIMATING 6-A. Machine Shop. 6-B. Foundry. The following discussion of the above subjects has been reprinted from Chapter VI of the author's "Predetermination of Prices." Fig- ures referred to have been omitted and the student is referred to the above mentioned book for further detail. The foregoing chapters have shown the method of analyzing and obtaining detailed figures for the compilation of true costs. Without a cost analysis and detailed informa- tion, it is impossible to make an accurate estimate. An estimate should contain no minutest per cent of "guess work." It should be based on a complete detail knowledge of everything pertaining to the operation of the plant which is going to manufacture the product on which the estimate is to be made. The more highly organized the plant and the more complete the plant's records are, the more correct will be the estimate. It is necessary to predetermine costs preparatory to reaching the true selling prices. The predetermination of a cost, of course, depends on the records above referred to, though past records represent the basis on which predeter- mination of cost depends. In plants where the science of management has established elemental operation and pro- duction standards and where the efficiency ratio is a figure which is always known, the predetermination of costs can be worked down to such a point that the actual cost and the estimated costs will agree within a very few per cent. On the face of it, the statement that cost can be predeter- mined sounds a little "fishy" to the layman. P!ractice has proved that the predetermination of cost is not only possible, but an established fact and a most essential one for the producer and purchaser alike. A complete discussion of the subject of estimating would take up too much space, as the details vary much in different 93 ! 94 MACHINE SHOP kinds of work and in different lines of business; but it may be well to mention several of the important points to be considered when making estimates on the average jobbing or machining jobs in any of the allied metal trades, including foundry work. 6-A. Machine Shop The following is an abstract from one of the author's in- structions on estimating issued to a plant manufacturing machine tools and dies and doing some jobbing and develop- ing w'ork. An estimate should be written (using form FAP36a) for every proposal quoting a price for product not standard. The form above referred to must be filled out complete as per the printed matter thereon. (See Fig. 23.) Estimates shall be made only by those authorized by the Company (chiefly the Engineers) and by those to whom estimate books have been issued. These books contain a white original form and one yellow duplicate with some- times a blue triplicate. The white original, when com- plete, must be forwarded to the Sales Manager, who will see that it is filed with the prospect's correspondence and attached to the file copy of the proposal. The carbon or yellow copy remains in the book for the reference of the estimator. The following rules should be observed in making all estimates : a. Divide the job into as many groups as possible. Treat each group or item separately and completely. Make this grouping conform to that which will be used in making out the order. The estimates can then be closely checked while w^ork is in process and after it is completed. The estimate should be used as a guide by the Order Clerk w'hen itemizing the general order. b. Include every item of the expense incident to pro- ducing the article or articles being estimated on, including special sales expense (if any), designing, drawing, engineering supervision, patterns, all ma- i FREDERIC A. PARKHURST 95 terial in detail by classes and weight, labor by indi- vidual operations and prices as much as possible, including assembling, fitting up, testing, photograph- ing, crating, boxing, loading, etc. c. A list will be provided giving the differential process rates, or if this is not available, the item of expense must be provided for by the estimator and the "amount" left to be filled in by the Production Man- ager. Treat other questionable items in the same way. Leave nothing out; the costs will be provided in all cases where they are not available to the estima- tor. d. The estimator knows from the original inquiry com- bined with the specifications of the Engineering de- partment w^hat is to be estimated on. The Engineers often are the only ones who have all the details. All material, labor, etc., must be included or else the sales department cannot intelligently quote. Failure to do this, or a resort to pure "guess work," means a loss to the Company. e. All estimates should total as costs to the manufacturer, and not selling prices. Fixing the selling price is not up to the estimator. /. An intelligent analysis (including the itemizing) of an inquiry is absolutely necessary before proceeding w^ith the detailed estimate along the lines outlined above. The fact must not be lost sight of that if the estimate is not accurately made, the cost is likely to overrun, resulting in a loss. All weights must be very accurately calculated based on the rough sizes of the material before finishing. When issuing the general order for any job on which an estimate has been prepared, it is the Chief Order Clerk's duty to see that the estimate number appears in the w^ord- ing of the order for each item on which there was an esti- mate. This reference is for the attention of the Engineers and Draftsmen so that the designing may be carried through in accordance with the estimate, and for the planning de- 1^ V Ik,' li: 96 MACHINE SHOP partment so that they may intelligently route and bring the job through within the cost limits estimated. The sales department should never quote a price until an accurate and careful detailed estimate as above described has been made. On new die work a definite price should never be quoted, but use the estimates as a guide to deter- mine about how much the dies should cost. The experi- mental cost on this class of work is always an unknown quantity. Let us refer, at this point, to Chapter II, 2- A to 2-I inclusive, wherein a number of functional developments of management are explained as having an important bear- ing on true costs. The preliminaries, or shop control of work in process, and all indirect expense items, have a very direct influence on the accuracy of an estimate. One real- izes the particular truth of such a statement when appre- ciating that in the last analysis an estimate is practically the predetermination of costs. The Planning Room is directly responsible for the con- trol of materials and labor and all other resources, so as to not only maintain standards, but to preclude any possibility of costs overrunning estimates through lack of knowledge of just what was included at the time the estimate was made. Verbal orders from customers must be approved in writing. See forms shown in Figs. 24 and 25. In developing a correct estimate on any new work there are many items to be considered and in practically every business there are some items which are subject to such variations that it is very difficult to predetermine their cost. Specific experimental features always add a distinctly unstaple factor especially where new designs of drawn or stamped work are involved. In such cases, estimates rep- resent an approximate rather than a definite figure on which to base a fixed selling price, and such estimates should be considered as only an approximate indication of what the work will cost the customer. Prices should be based on cost plus a profit figured in any of several ways, which will be discussed in detail under Chapter VII. FREDERIC A. PARKHURST 97 Regardless of the kind of business and the class of work to be estimated on, it is imperative that the estimator be supplied with complete data based on analytical costs of both direct labor, direct material and the various indirect expenses. These expenses should be expressed in terms of differential process rates and burden rates with all their variations. Classes of work permitting of a definite estimate should always be figured on a full consideration of all the figures available. These should be applied in accordance with the methods outlined above. When the time study methods are sufficiently advanced so that a check can be kept on the plant efficiency, direct labor cost should be figured on the maximum efficiency basis. After the figures have been compiled, those which vary according to the relative efficiency of the man per- forming the direct labor should be increased by using the plant efficiency factor as it stands from period to period. Assuming the plant efficiency to be running 70% of the time study standard, or maximum, the estimates for this part of the work would be increased by 1.43. If the men are running around 80% of the maximum efficiency, such an estimate would be represented by the factor 1.25. This factor alters with the conditions. In cases where the effi- ciency factor is not used, the estimate must be figured on a basis of existing records. 6-B. Foundry The following is an abstract from a standard instruc- tion covering the method of estimating on foundry work, including machine operations in cases where the price cov- ers a piece machined complete. The estimate form FAP134 is made up in book form (see Fig. 26), so that a white original copy may be used in connection with the carbon paper and detached from the book when the estimate is complete. The white orig- inal is filed in Sales department. The yellow copy remains in the book as the estimator's record of each estimate. A detachable carbon "rider" is also provided to give an extra 98 FOUNDRY record of the general specification of the estimate, equip- ment, method, average weight, etc. The rider is sent to the Planning Room as their guide in handling the order. (See Fig. 2y.) All of the information asked for in the printed heading forming the top part of the sheet should be filled in com- plete. The heading indicates the basis on which the esti- mate was made and the method under which the plant expects to run the order in the event the business is secured. In making estimates, do not assume a lot of conditions but be sure all of the points referred to on the form are ac- counted for. If one does not have full information of what is required for a job, it will be a hopeless task to intelli- gently estimate what it will cost. Neither can one hope to intelligently fix a selling price which will be profitable and yet not excessive. In cases involving more than one different price, a sepa- rate detailed estimate is to be made of the cost of castings from each pattern or each different size or design, whether rough or finished, or both. Estimates must be made only by a duly authorized person and approved by the local manager, production man- ager and superintendent. All estimates shall be made in accordance with this instruction and on estimate form FAP134. The original copy of all estimates shall be filed in the estimate file. All orders received subsequent to or based on an estimate must show the estimate number on the general order form. When cost sheets are closed up, the summary cost card, Form FA Pi 45, shall also show the estimate number. In making estimates, be sure that full information is had regarding the pattern equipment from which such castings are to be made. Whenever possible, it is desirable that full pattern equipment be made in the pattern shop con- nected with the foundry which is to supply the castings. There will be cases, of course, where the customer desires to furnish his own equipment. In such case the foundry officials can often consult with him in reference to furnish- FREDERIC A. PARKHURST 99 ing the proper kind of patterns, rigged up to suit the best foundry practice. Whether the patterns are made new, and furnished by the customer or made new by the foundry the most careful observation must be given to the kind and style of each pattern and the method of rigging up. All patterns for small work should be plated wherever possible. Pattern equipment and estimates should include core dryers, and any special rigging or jigs that may be necessary in con- nection with making or setting cores. It shall be the policy as far as possible to include such rigging in the cost of the pattern equipment, all of which should be paid for by the customer. Include in this charge to the customer ever\^- thing not part of the regular standard equipment and in- clude labor of getting it rigged up, also cost of jigs, gauges, etc., used in setting or sizing cores. In case of patterns and equipment already in existence, and for which new patterns cannot be obtained, the foundry should keep in close touch with the customer to see that such patterns are kept up in first-class condition. Many gated patterns require matches, which after some use be- come more or less broken down around the edges. If the matches are not kept in good repair, the foundry cannot realize maximum production on such jobs. It should be the foundry policy to refuse to run patterns which are not in proper condition or which are so arranged that the foundry will be put to additional expense in turning out castings. In such cases, the foundry must get the co-opera- tion of the customer toward putting the patterns in first- class shape, with his authority, of course, and with the understanding that such altering or repairing of patterns is to be charged up to him. There is no economy in running pattern equipment after it begins to get out of repair, or pattern equipment which is not adequate, or properly arranged, for the class of work in question. It must be the policy to give patterns careful inspection, and if necessary make sample molds enough to be sure that the pattern and other accessories are in first- S "it lOO FOUNDRY class shape and ready for regular production. This work must be done by the Equipment Foreman, who is a specially trained man. When the equipment is satisfactory, it may then be passed to the job rack, preparatory to being for- warded to the proper floor bench or machine and accom- panied by the proper flask (or flasks), bottom boards, etc., for regular production. If a heavy floor job, it should be tried out on the floor where it is to be run. A foundry cannot immediately develop its pattern equip- ment fully along the lines above described, but such should be the policy. By continually working in this direction a great improvement can be effected, not only in the cost of producing castings but in the quality and deliveries. The above facts should be borne in mind whenever making esti- mates, and I repeat for emphasis the fact that the foundry should not "allow" in "castings estimates," anything for pattern expense or equipment which should be charged up to the customer. On the other hand, do not hesitate to add into your estimate anything which is necessary for the proper production of the job. Pound Prices Pound prices are to be figured on a basis of the net mini- mum weight of each casting. Piece Prices Piece prices are to be figured on a basis of the average weight of each casting, plus 5% to io% as an allowable foundry weight variation under commercial production conditions. This percentage varies with the class of work. The Planning Room, or Office (as the case may be) daily checks piece weights of all castings shipped the day before. The check consists of a comparison between the average weight list on file in the Planning Room or Office, and the charge slips turned in by the Shipping Clerk for the previ- ous day's shipments. This method is in vogue at the pres- ent time, and is a first check in locating errors in shipping weights and billing. The method also catches any errors FREDERIC A. PARKHURST lOI which might affect the average weight list, due to an altera- tion in the pattern unknown to the Planning Room or Office. Although it is unlikely that changes will be made in the shops without orders, commercial productions may increase the weight of the castings by several per cent, due to strains, inequality in cores, etc. It is, of course, neces- sary for production records that such changes be known. When selling by the piece price, the method provides a check to keep the weight within the estimated limits. Al- though there is an allowance of 5% or 10% variation in weight in estimates for castings sold by the piece, still it is to every one's advantage to hold the weight as near normal as possible. On some classes of work an excessive weight variation might mean much more in failing to machine properly than in wasting of metal. The following method is to be employed in making esti- mates for castings from each different pattern : a. Consult existing cost data to determine direct labor similar cost on the particular job in question, or for a similar job, if such a record exists. (See price card Fig. 28.) b. Study the average direct labor cost record of work of the same general class, if such record exists. When consulting records referred to in items 'V and "6" above, consider only the direct labor cost, and not the total cost including burden. The item of burden is likely to vary. The prevailing rate of burden at the time the estimate is made should be used. For data on "Burden" see Instruction 108. c. Consult with the Superintendent, Time Study Fore- man, Pattern Shop Foreman, and Cost Clerk, for data and estimates on direct labor costs. For details of each estimate see Form FAP134, Fig. 26. The estimated total labor cost, determined as per items "a'\ ''h" and 'V above should be based on the average prevailing rate, plus the bonus, paid the class of help to be employed on that particular work. These figures are to be 102 FOUNDRY based on specific equipment to be run by a definite prede- termined method, and in the size flasks best adapted to the job. For standard production data, flask sizes, etc., con- sult the time study foreman. Work as much as possible from data on standard time sheets, Form FAB150. Burden Differential burden rates and differential process rates will hereafter be referred to as "burden." (See Instruction 108.) This burden is to be added to the estimate on the basis of so much money per man hour (and not as a per- centage factor), plus a pound burden. It may be well to explain here the reason for distributing the burden on a man day (or hour) basis rather than by percentage or tonnage basis. Experience has shown it is more accurate to distribute on the basis of time, rather than on the percentage of wage paid. In other words, time is the chief controlling factor in business. Men are hired on a time basis at so much per hour, and the extra bonus they earn also applies to a definite length of time. Indirect ex- pense, salaries, etc., cover a definite time. Heat and light and power are maintained for a definite time each day. Finally a day's work is concluded by having expended so many direct hours to turn out a certain volume of work, per each man employed, as direct labor on all production. For each man so employed as direct labor on all productive work, so much money has been paid out for a man day, a unit of time. In addition that man day has cost us one man day's proportion of a burden. Why do many foundry- men ignore this time element? In addition to the hourly burden there is a pound burden, which covers the distribution of expense for departments iD, 2F, iF, iG, iS and loX. The total burden is pro- rated for these six departments on a pound basis in addi- tion to the departmental hourly burden. This distribution is obtained by taking the burden for the current month and applying it to the number of pounds of good castings enter- ing into the estimate in question. Pound burden is dis- tributed to castings in addition to the departmental or FREDERIC A. PARKHURST 103 process rate burden. Other burdens exist for pattern work iP and for brass finishing work 2U. This is prorated on the hourly burden basis, also under the differential process rate. To properly summarize the preceding, it should be noted that we have several rates of burden distribution, which in the aggregate are called our differential burdens. The list follows: Any estimate or cost summary must include one or the other, and perhaps several of the following groups of burden. These are to be used departmentally for each of the following groups. (See Instruction 108.) Castings j Hourly burden and pound burden. Pattern and flask / work (iP, iK I Hourly burden. and lU). ( Machining j Differential process rate. Plant Efficiency Factor In considering items 'V, "b" and 'V^ a conservative estimate of day work may be used without any addition due to the plant efficiency, as such a conservative estimate would in itself cover such allowances. Eventually, however, when all direct labor is under control, and standard production figures govern nearly every case the plant efficiency factor comes into use. It is to these standard maximum produc- tion figures, as per the bonus schedules and standard ele- mental time sheets, that the following factors apply. (See Form FAP150, Fig. 29.) Local plant conditions at the time of the installation of scientific methods are often such as to make it necessary to start bonus as low as 60% of the maximum calculated pro- duction. Later on, as the men begin to earn bonus, and come nearer the maximum, this factor is changed to 70%. Later this factor is raised to 80%. Plant efficiency factors are as follows : For 60% plant efficiency multiply cost by 1.66. For 70% plant efficiency multiply cost by 1.42. For 80% plant efficiency multiply cost t^ 1.25. I04 FOUNDRY I! I Referring to the plant efficiency factors shown on page 98 it is obvious that when estimating a job in a 70% effi- ciency plant the factor 1.43 shonld be used for work on which the bonus starts at 70%. For work on which the bonus starts at 60%, the factor 1.66 should be used. On the other hand, w-hen all the bonus work starts at 80%, the esti- mate should be raised by the factor 1.25. This factor is, of course, only used in estimates where the basis of estimating is equivalent to 100% bonus production. In cases where the estimate is based on conserAative day work estimates or actual cost figures, the factor does not apply and the actual figures are used. If the estimate is based on standard time sheets form FAP150, the time to be used will be found in the maximum bonus time column. The detail of filling in an estimate form is as follows: Form FAP134 is made u]) in book form, so that the white original w^ill be used in connection with the carlx)n paper and detached from the book when the estimate is complete. The yellow copy remains in the book as the estimator's record of each estimate. A detachable carbon ''rider" is also provided to give an extra record of the general speci- fication of the estimate, equipment method, average weight, etc. The rider is sent to the Planning Room as their guide in handling the order. AH of the information asked for in the printed heading at the top of the sheet should always be filled in complete. The heading indicates the basis on which the estimate was made and the method under which the plant expects to run the order in the event the order is booked. Overtmie is an important consideration, and should be controlled through the medium of the overtime order. (See Fig. 30.) In making estimates, do not assume a lot of conditions and be sure all of the points referred to on the form are accounted for. In other words, if full information of w^hat is required for a job is not at hand it will be a hopeless task to intelli- gently estimate what the job will cost. Neither can one hope to intelligently fix a selling price which should be FREDERIC A. PARKHURST 105 ..k profitable and yet which though profitable will not be ex- cessively so. It will be noted that the estimate form is divided into six sections numbered from i to 6 inclusive. The follow- ing references (sections i, 2, 3, etc.) refer to the sections indicated on the form. Section i (Special Items). This section covers any special items of costs, if there are any, which may enter into the estimate in question. The item should be expressed in hours, the rate per hour shown and the amount of money ex- tended to the "Amount" column. The burden for this item should represent the hourly burden based on the prevailing rates. The burden rates should go into the "Rate" column and the amount of the burden (the hours on the line above multiplied by the burden rate) go into the "Amount" column. If there is any material applying to this section of the estimate, it should be shown in the "Amount" column. The "Amount" and "Hour" column should then be totalled; this total represents "Section i total." Section 2 (Pattern and Flask Estimate). This section is intended to include all items entering into the estimate as far as pattern and flask expense is concerned. On the first line should appear the total hours, rate and amount ex- pended on this item, including departments iP, iK and lU. In the second line the pattern burden should represent the iP burden multiplied by the total hours on the line above, and the amount carried into the "Amount" column. The third line shows any direct materials or sundries that may enter into the costs of this part of the work. The total of these items for Section 2 gives us "Section 2 total." Section 3 (Castings Estimate). Under this section we have various items, such as core making, molding, knock- ing out, trimming, and any other direct labor as well as a bonus item for each of the foregoing. Opposite each of the items above mentioned should appear the total hours, rate and amount covering all direct labor that can apply to any of those groups and affecting the possible costs of the job being estimated upon. The above items should be i Hi io6 FOUNDRY added, so as to get a sub-total representing the total direct hours and direct amount. The sub-total should then be increased to a new amount by multiplying it by the plant efficiency factor, either 1.25, 1.43 or 1.66 referred to above. To this new amount should be added the hourly burden based on the new total of hours determined by the use of the plant efficiency factor just referred to. On the next line should be added an additional burden representing the pound burden. The next and last item making up the castings estimate is the freight from the foundry to the F.O.B. of the customer, providing freight is paid by the foundry. The footing of these four last- mentioned items (bearing in mind, of course, that sub- total of Section 3 is ignored because it has been replaced by a larger amount on the next line) represents the "Section 3 total." Section 4 (Metal Estimate). This section includes on the first line the prices (F.O.B. our plant) of the number of pounds of metal required for the quantity on which the estimate is based. In the "rate" column should appear the rate per pound used in determining the amount in question. On the next line should be shown the number of pounds of chips that can be recovered as salvage priced at a conserva- tive rate per pound, and the amount deducted from the metal cost on the first line. The balance gives us our "Sec- tion 4 total." Section 5 (Tools for Machining Estimate). This sec- tion is totalled up to show the hours, wages, and material estimate for the tools for each of the twenty operations. A summary total is arranged to carry the total tool labor in hours and amount into the right-hand columns. On the next line appears the total tool material in one amount. The third line takes the tool burden, which burden shall be the total process rate for work points applying on tools for the job in question. These three items foot to an amount which gives us the "Section 5 total." Section 6 (Machining Estimate). This section is totalled to give the estimate of hours, wages (including ^' II FREDERIC A. PARKHURST 107 bonus) and material for each of twenty machining opera- tions. The material column is to include only miscellaneous material, such as screws and other parts purchased in con- nection with the part being machined ; and is not to include the material in the casting itself. This item was taken care of in "Section 4." The total machining labor for "Section 6" should appear in hours and amount in the right-hand column followed by the total material. The next item of burden represents the process rates for the number of hours estimated as applying to each work point used in ma- chining. These items sum up to the "Section 6 total." The detail of the estimate is now complete. Sections i, 2, 3, 4, 5 and 6 totals shall now be brought down to the bottom of the estimate form in the summary section. To the right of these totals appears the profit for each item as well as the percentage which the profit represents of the estimated cost. Methods of figuring profit are considered in Chapter VII. The cross-addition of the total and profit items represents the amount for the selling price columns. This selling price is divided by the quantity of pieces in- volved and the per piece selling price carried out into the right-hand column. The footing of these 6 items gives the total estimated cost and total profit, from which is obtained total selling price and total selling price per piece for the work covered by the estimate. A line is also provided on which to show the sum of the price per pound in cases where it is desirable to express the price in such manner. It should be noted that the profit is not determined on a per- centage basis. The percentage column in the summary part of the estimate sheet referred to shows how much the per- centage of profit actually is. It is simply a statement of fact and not an indication of the method of determining the said profit. '! ) -V ! 'I ri' LECTURE XIX PROFIT AND RELATIVELY TRUE SELLING PRICES 7-A. Per Productive Hours. 7-B. Per Pound. 7-C. Per Piece. 7-D. Per Cent of Cost. 7-E. Mutual Satisfaction. VIII. Conclusion. The following discussion of the above subjects is reprinted com- plete from Chapters VII and VIII of the author's "Predetermination of Prices." In the preceding chapters the various factors involved as influencing the determination of true costs and the com- putation of estimates have heen considered. Reference to Fig. 1 6 will show a record of five methods used in determin- ing profits. The profit of a business is a variable circumscribed by very broad limits, l>ecause the factors which should, seldom control it. Scientifically, profit can be intelligently figured if it is based upon correct, absolute costs. It is the writer's object to show a systematic method, based upon working practices, of computing profits to suit each of several actual conditions confronting a business man. It goes without saying, of course, that it should be the object of every manufacturer to get as large a margin of profit as possible consistent with the foundation of a per- manent business and commensurate with the quality of product to which that profit applies. Prices should not necessarily be fixed by a definite mar- gin based on the cost of a job, but sometimes by the value of that job to the consumer. There are cases, of course, where the actual cost of production is out of all proportion to the intrinsic value of the piece as determined by ordinary standards. In such cases the oddity of the job and the com- plication of it give a cost apparently out of proportion. io8 FREDERIC A. PARK HURST / 109 This, of course, is the customer's loss in one sense of the word and he must expect to reimburse the manufacturer to the full amount of the cost plus a reasonable profit. In general, a reasonable profit should be interpreted as meaning a profit based on what is a fair allowance over and above the elements (direct and indirect) entering into the cost of the product. The author does not believe that there is a first-class up-to-date concern that will not be will- ing to buy — all things being equal — at a price which will net the vendor a profit of, at least, 10%. This being the case, the matter simmers down (on a close competitive basis of price fixing) to a certain amount added to the total cost of the work including all items of cost (direct and indirect) based on an honest distribution of overhead or burden. This 10% may be added to the total cost of the job, as shown by the cost summary, which, of course, must include all differential burden, both hourly and pound. The fact should not be lost sight of in adding profit to determine a selling price, that under the science of manage- ment a firm has more to sell than its visible product. It has engineering and technical ability to put at the customer's disposal. It has service in the broadest sense of the word. It assures quality and maximum production. All these factors guarantee positive and definite shipping schedules. They make it possible to not only sustain the prevailing prices, but to work toward an automatic adjustment of prices based on the "value received" by the buyer. 7-A. Per Preductive Hour In the majority of business the writer prefers the method of basing profit upon the productive hour except in cases where necessity makes some other basis apparent. It is just to assume that with a given plant and investment running under fairly normal conditions, a certain net profit should be realized. Of course the figure depends on the shop conditions and the kind of work handled, but any invest- ment should realize for the owners a fair percentage of profit after all items of depreciation, expense of operation, a > • m i! ; i III hi IIO PER POUND reserve charges, etc., have been taken care of. It should be borne in mind that the net earning in dollars and cents which capital desires to realize also represents a certain working capacity. This capacity can be brought down to a figure representing productive hours. These productive hours divided into the amount representing the desired earn- ing capacity gives the rate per productive hour to figure as a profit. Such an hourly profit figure is then used in connec- tion with costs and estimates. If one realizes that the entire basis of production and payment is time, one expects to earn in a given time a net amount of profit amounting to a certain figure. The profit must be earned by the expenditure of so much direct time to turn out that product. In figuring the profit on a basis of so much per productive hour, it is assumed, of course, that the indirect expense covers everything in connection with miscellaneous ma- terials, bad accounts, etc. The productive hour basis of figuring profit represents a net profit for every direct hour of work applying on the job. 7-B. Per Pound The pound basis of figuring profit is applicable to cer- tain lines of business where the percentage of labor is small and where the logical unit to use is pounds or tons. This method is the most commonly used in computing estimates and profits in the average foundry business. Personal ex- perience forces me to consider it an entirely erroneous method to use in connection with foundry work. If profit is figured on such a basis, the same error occurs that is developed by the distribution of indirect expense, exclu- sively, on a pound basis. Many foundry jobs require a great many hours' labor to get out a comparatively small tonnage, while others require very little labor to get out a very large tonnage. It is not safe to rely entirely on profit at so much per pound. The profit on foundry work in the majority of cases, assuming the average variety of work with its many fluctua- i FREDERIC A. PARKHURST III tions and variations, should be figured on a basis of so much profit for each direct hour expended on each indi- vidual job. It is true that some figure might be included as a small factor on the pound basis. This should only be used, however, to compensate for some variation which could be corrected only by the use of a pound factor. 7-C. Per Piece The determination of profit on a basis of so much per piece is the logical method to use in cases where the pro- duction is one in which the logical unit of measurement is piece. The ratio would need to be a fairly constant one, however. Assume a condition where a concern is making but one or a very few diflferent articles, where the produc- tion is large and the labor fluctuation is small, then a piece profit may be a logical method to use. In other words, if the desired profit on a certain volume could be as well figured at so much per piece, and the piece unit is the con- ventional term to apply to that product, then it is logical to figure profit at so much per piece. In considering the use of the piece profit understand that the method is recommended only where no complica- tion occurs, from the possible changes in product, which is involved by a number of kinds or sizes of pieces. In a business where the production is controlled in a large meas- ure by automatic or semi-automatic machines, where the labor ratio is low, the piece basis of figuring profit is a logical one. 7-D. Per Cent of Cost This basis has certain advantages, particularly when ap- plied to miscellaneous or experimental work which does not, perhaps, represent any part of a certain line of product. Even then the fact must not be lost sight of that a large fluctuation in direct hours on various jobs is after all the chief factor in work of such kind. It is probable that the per cent of cost should more often be used in conjunction with the hour method, so as to cover a percentage of profit on quantities of material purchased for these special and i; 112 PER CENT OF COST r;'" I experimental jobs. On this class of work there is a certain expense directly incurred in connection with purchases, stor- ing, handling of material and the carrying of accounts for such material not part of a regular stock on which it is fair to add a small percentage of the cost. This percentage may be figured exclusively on the material. Then the direct productive hour profit could be added as the regular profit rate, thus taking care of the large volume of direct labor involved. There will be cases where there is some advantage in using a combination of several methods of determining profit. As suggested in the preceding paragraph, the com- bination of a per cent and a productive hour basis is often desirable. On the other hand, the indirect expense items going to make up burden and which are charged into the cost in any event, ordinarily take care of all items of cost affecting the handling of material, carrying of doubtful and bad accounts, etc. 7-E. Mutual Satisfaction It is a well-known fact that a great many commodities are sold on the established market prices. Supply and de- mand ordinarily determine the market price on a great many commodities and materials. The difference between the available market price and the cost of the article to the producer ready to ship represents a margin of profit which in one sense can be described as a mutual satisfaction profit. The term "Mutual Satisfaction" more particularly, how- ever, applies to cases where a patented article is sold at a price a great many per cent higher than the true cost of it to the manufacturer. On the other hand, the article in question has a value to the customer regardless of what it cost the manufacturer. If an article is manufactured for $1 and can be sold for $2.00 or $2.50, and the customer is perfectly willing and glad to pay $2.50 for it, the margin of $1.50 represents a mutually satisfactory profit. There are many special machines which have cost a great deal to develop, selling at a price which apparently repre- FREDERIC A. PARKHURST 113 sents a very large margin of profit over the total cost to the manufacturer. On the other hand, the purchase of such a machine enables the purchaser to turn out his product very much cheaper than he could otherwise do; and he is only too glad to buy at a price which allows the manufacturer of the machine a very large margin. Mutual satisfaction is undoubtedly the best term to use in describing this method of determining profit. After all, a satisfactory and fair price is one which both vendor and purchaser mutually agree upon in a transaction between two. If both are con- tent there can l)e no logical argument against such a method. It is not the intention to suggest or advise the asking of an exorbitant profit, just because the product is one which the other fellow cannot buy elsewhere. If a vendor charges an exorbitant margin of profit, he is inviting a competition which, though it may involve expensive designing and the invention of new methods, will eventually lead to getting on the market an article to compete with his. Competition is, of course, a good thing. At the same time there is a limit, and the average manufacturer will find that he ordi- narily has more to gain by not getting the habit of charg- ing exorbitant prices than he has by trying to boost values beyond a fair limit. A good safe margin of ])rofit which shall amply protect against times of bad business, so mak- ing the average a fair one, is a much better policy and will result in a more permanent and staple business. A i^urchaser is better satisfied to buy a product netting the manufacturer a good margin of profit, when that manu- facturer bases his profit on accurate costs. A complete method of detailed distribution of costs permits the manu- facturer to charge to his orders a fair margin of profit, equally, on practically all of his product. One firm is not paying an exorbitant profit on his order to offset the loss on another firm's order. There is a great deal of business being handled in these days at a loss, because the manu- facturer does not know how much one article costs as com- pared to others. If he doesn't know the individual cost of an article how can he lower the cost on the unprofitable article? u .11 1 114 MUTUAL SATISFACTION As first stated in these pages, it is not sufficient to know weeks after a job has been completed how much it will cost and how much you can sell it for. This information should ahvays be at hand within a very close limit of variation before the order is placed on the books. If the methods described here are followed, the result will be a very marked change in the figures representing the cost of various arti- cles produced. Some of the supposedly profitable product will be found to be exceedingly unprofitable, and that part which was supposed to be unprofitable may be found to be most desirable. In any event, the net result of the rear- rangement will be a set of figures which will represent true cost. These true costs plus a fair margin of profit will result in a relatively true selling price. A firm no longer needs to bid at so much a piece, or so much a pound, or name such and such a price for an article because it thinks competitors are going to quote approxi- mately so much. Too often prices are quoted, based on the assumption that a competitor will hold to a certain figure and, "if we want the business we had better quote about so much less." A firm knowing its true costs and selling prices need never be afraid of quoting any selling price regardless of what he thinks the other fellow may quote in competition. No good business concern wants to buy an article because it can buy it the cheapest as far as the face price of it is concerned. What the customer wants is good service. He is willing to pay a price that will allow the firm giving that guarantee of service a living profit. The firm deciding to quote by guess-work methods may have some luck for a while, but must somehow, sometimes, shirk something to "break even" on guess-work prices. "All is not gold that glitters." Analyze your product. Know your costs. The firm having true costs data at their command need never fear competition, providing they real- ize soon enough that they must also have a competent, pro- gressive, and up-to-date sales organization with confidence in its prices. Without the latter, their true costs and rela- tively true selling prices will avail them little. FREDERIC A. PARKHURST 8— Conclusion 115 This book covers what is probably the most vital branch of any business. Without true costs on which to base sell- ing prices, the stability of any business is, to say the least, uncertain. The reader must not for a moment imagine that the definition of the word cost as the author uses it is that limited by the dictionary. In other words, we should not continually strive toward lower relative costs at the expense of, nor to the knowing detriment of our fellow-worker or employee. Today we no longer associate the lowest cost with the least output in wages. In establishments employing the most modern methods involved in the science of manage- ment the lowest costs are realized when the remuneration to the employee reaches the peak. Nor is the cold-blooded comparision of facts and figures the only measure of value. Modern striving for low costs, which under proper and scientific management pays the highest wage, has resulted in the improvement in a marked degree of working condi- tions, as well as in the personnel itself. It is true that many of the physical improvements in factory, equipment, tools, safeguarding life and limb brought out in recent years have often been prompted by selfish motives. On the other hand, this work is becoming more and more general from a strictly humanitarian standpoint. We cannot overlook the personal factor. We realize as time goes on that the satisfied and well-paid worker has an economic influence which far exceeds his direct monetary value to his employer. The highly paid workman has a highly stimulated interest in his work. He becomes a thinker. Being a thinker, he becomes better able to dis- criminate between what is good for him and that which is likely to prove detrimental. To continue his high pay, he continues to care for himself. His opportunities are greater. He lives better and does more for his family. Other effects of this higher pay to the workman come from his desire to better educate his children and become a better citizen. He spends more and he saves more. As L ii6 CONCLUSION If: he begins to realize these things and what these changes mean, he becomes a potent economic factor in pubHc hfe. His work is more productive, as he does more of a better quahty. He co-operates with his employer and his em- ployer's organization. In other words, he is more or less a partner in the business in that he gets a special extra remun- eration for his cost reducing value, and he gets it in cash every week with no questions asked. His bonus increases as his efficiency increases. All of the foregoing has its direct effect on costs. Not because of the fewer hours spent to do a piece of work. Far more important is the moral, harmonious and coopera- tive influence of an efficient individual in an organization. Only by such a condition can control be obtained of all the elements entering into costs. Economical operation and low cost means the maximum efficiency in output of energy, high wages, and a conser- vation of material and labor. A dollar saved is lOO per cent, profit. A one dollar order from a customer may mean ID cents or 15 cents (10% to 15%) profit. In the future the successful business will begin its economy by eliminat- ing wastes rather than by cutting wages and the sum total of expenditures for a given output will become the objective point of attack from which to eliminate. Goethe said, "If the world is not governed by figures, they at least show how the Avorld is governed." If the American business man, with his command of unlimited and unexcelled resources of practical thought, capital, equipment and energy, will govern his industrial world by "true" figures and not guess work, his supremacy and that of the American workman will be impregnable. LECTURE XX THE TOOL ROOM 6-A. The Standardization of Methods and Tools. XXVIII. Instruction for Tool Foreman. XXIX. Instruction as to Tool Requirements. XXX. Instruction for Care and Storage of Tools. This lecture will discuss the details incident to the standardization of methods and tools under section 6-A. forming part of Chapter VI of the text. The three instructions above noted will also be discussed in detail and will be found in the Appendix of the text 117 \.l 6-B. 6-C. LECTURE XXI MANUFACTURING AND ERECTING The Development of a Manufacturing System. The Handling of Erection Work. The above subjects will be discussed in detail following Chapter VI of the text, with additional discussion of the work in other factories. LECTURE XXII TIME STUDY AND BONUS 7-A. Introduction of Time Studies. 7-B. Analysis of Time Studies and the Development of In- .STRucTioN Cards. The above subjects will be discussed as outlined in Chapter VII of the text, so as to follow the organization lineup at the Ferracute Ma- chine Company. V ii8 119 i 7-C. 7-D. LECTURE XXIII TIME STUDY AND BONUS ( Continued) Discussion of Piece Work, Premium, Bonus, Differential Rate and Differential Bonus Systems of Wage Payment. Method used by the Author to Compute Differential Bonus. i This lecture will discuss the two remaining parts of Chapter VII of the text, completing the study of this part of the subject as applied to the Ferracute Machine Co. : ■ "'; n I 1 20 LECTURE XXIV TIME STUDY AND BONUS (continued) 9. The Control of Methods and Labor through Time Studies AND Sub-Operation Times. 10. Time Study Foreman. This lecture will discuss in further detail the work necessary inci- dent to time study and bonus as indicated by the two above mentioned divisions which are reprinted complete from the author's "Scientific Management in the Foundry," sections 9 and 10. The discussion of the subject in this lecture will cover considerably more detail than did the preceding lectures on the same subject and will also give the student an idea of the elements involved in the study of foundry methods. 9 — ^The Control of Methods and Labor Through Tin*e Studies and Standard Sub-Operation Times All of the above mentioned pre-requisites have their value as a part of the whole. The actual savings they effect are very great, but we come now to the most radical part of real scientific management, that part which helps us immensely in the development of all the branches of management that have been mentioned earlier in this article and that part which makes possible a larger production than is otherwise obtainable. Fundamentally we must obtain a thorough knowledge of all factors in a condition to scientifically control it. To do this we must first care full5? analyze each thing we have to do into all its elements. Having done this the next step is to take up each branch or element individually and one at a time. The chief element aside from material in foundry work is labor. The control of methods and the necessary labor element are closely related. In one sense the method is distinct from the labor necessary to make that method effective. On the other hand we cannot dispense with the labor. Our method may contemplate the most complex and efficient 121 ► 122 CONTROL OF METHODS AND LABOR mechanical appliance, leaving but little for the human ele- ment to do to realize great pro f i curacy is everything, for times once determined for a given condition, cannot be changed. As previously stated, they constitute a large percentage of future time determinations. 13 — Standard Sub-Elemental Times for Bench and Squeezer Work In section 12 above will be found a long list of variables for floor work, on which standard times apply. A similar list of standard sub-elemental operations has also been worked up applicable to bench and squeezer work. There are about 31 of these elemental sub-operations for all of which standard times have been determined for various classes of work. The variables to be provided for in establishing these standard times have been brought down to a definite standard. They consist of the following: — Job Qasses I — Non-cored work 2 — Cored work Pattern Equipment Single Gated Plated Methods Bench (All hand methods) Machine (Power and hand Squeezer) Flasks Snap and solid flasks — 15 different sizes by plane dimensions and 5 depths for each: — 75 combina- tions in all. The following will help to describe more fully the sub- divisions of the above job classes. It may be mentioned here that plated patterns come in the same "job class" as gated work. See Fig. 8, which illustrates a few of the many varieties of work which have been standardized. Job Class I Non-Cored Work I a. Plain — ^single pattern lb. Plains — ^gated pattern ic. Irregular — single pattern id. Irregular— gated pattern le. Complicated — single pattern if. Complicated — gated pattern • Job Class 2 Cored Work 2a. Plain^ — single pattern 2b. Plain — gated pattern 2c. Irregular — single pattern 2d. Irregular — ^gated pattern 2e. Complicated — single pattern 2f. Complicated— gated pattern In addition to the standard times which apply to both cored and non-cored work must be added core setting times for job class 2 work. Times have been established for core setting covering from i to 8 cores for a single pattern and from 2 to 42 cores per mold for gated or plated patterns. Based on the factors referred to in the last 3 preceding paragraphs, we have the following combinations for any of which it is possible to instantly determine the standard production data directly from the tables, viz. — Standard production all tabulated and indexed (as per table 2) 36325. Elemental operation times (bench) 9(X). Elemental operation times (bench plated) 900. Elemental operation times (machine) 900. Elemental operation times (machine plated) 900. Elemental operation times (core setting) 69. Standard times applying on the above and admitting of an almost unlimited combination 1440. Operations variable by both job class and mold sizes 900. Total tabulated combinations 42334. 146 STANDARD SUB-ELEMENTAL TIMES TABLE II A TYPICAL STANDARD PRODUCTION DATA TABLE hi r — JOI « r^T A 00 ^¥7 T»/~iXTTTC /^T A CC Q i CLASS 2cj BOWUa CL.Aao \ r « £• a Number of Cores to Set Single Pattern 1 & s d 1 2 3 4 5 6 7 8 2 4 10x24 6 1440 M P C Itt 168 2585S 1S4 154 1723S 142 132 122 114 187 Itl 142 132 122 114 107 101 2032S 3020S 32S2S 3229S 3243S 3245S 147 294 2330S 14S 580 2163S 7 1680 M P C ISt 159 2586S 14C 146 2731S 135 128 117 118 184 88 135 126 117 110 104 98 2288S 3234S 2691S 3241S 3246S 3246S 148 280 2331S 138 552 2526S 8 1920 M P C ISt 150 2031S 13f 139 2730S 128 128 113 188 188 85 129 130 113 106 100 95 2530S 3224S 3228S 3239S 3253S 3259S 133 266 2332S 132 528 2541 S 9 2160 M P C 143 143 2534S 133 133 2033S 123 118 188 182 87 82 123 116 109 102 97 92 2531S 3236S 3238S 3255S 3261S 3257S 127 254 3004S 128 504 2540S 10 2400 M P C IM 136 2529S 127 127 2034S 118 111 185 88 84 88 118 111 105 99 94 89 3230S 3232S 3242S 3256S 3258S 3287S 122 244 1701S 121 484 3159S 11x26 6 1716 M P C ISS 158 2287S I4i 146 2731S 135 12s 117 118 183 88 135 125 117 110 103 98 2288S 3226S 2691 S 3241S 3240S 3246S 138 276 2528S 138 544 2350S 7 2002 M P C 148 148 2042S 138 138 3225S 128 118 112 185 M 84 128 119 112 105 99 94 3223S 3235S 3237S 3242S 3256S 3258S 131 262 2i77S 128 516 2165S 8 2288 M P C 14t 140 2029S 130 2590S 121 114 187 181 85 81 121 114 107 101 95 91 3227S 3229S 3243S 3245S 3259S 3264S 124 248 2595S 123 492 2166S 9 2574 M P C ISZ 132 3030S 124 124 2733S lis 188 182 87 82 87 115 108 102 97 92 87 3231S 3233S 3255S 3361S 3257S 3304S 118 238 2693S 117 468 1724S 10 2860 M P C 12f 125 3226S 118 118 3230S 118 184 88 S3 88 84 110 104 98 93 88 84 3241S 3244S 3246S 3262S 3260S 3318S 112 224 1704S 111 444 1726S 12x16 6 1152 M P C IM 180 2036S 184 164 20388 158 138 128 128 112 185 150 139 128 120 112 105 2031S 2730S 3223S 3224S 3237S 3242S 157 314 2096S 155 620 2928S 7 1344 M P c m 171 2037S 157 157 2039S 144 133 124 118 188 182 144 133 124 116 109 102 2283S 2033S 2733S 3236S 3238S 3255S 151 302 2593S 148 5% 1767S 8 1536 M P C 1C3 163 2027S ISO 150 2031S 138 128 128 112 185 188 138 129 120 112 105 10) 3225S 2530S 3224S 3237S 3242S 3253S 145 290 2167S 143 572 2226S 9 1728 M P C ISC 156 2692S 144 144 2283S 133 124 118 188 183 87 133 124 116 109 103 97 2033S 2733S 3236S 3238S 3240S 3261 S 138 278 2537S 137 548 2164S 10 1920 M P C ISt 150 2031S 138 139 2730S 128 128 112 188 188 85 128 130 112 106 100 95 3223S 3224S 3237S 3239S 3253S 3259S 134 268 25%S 132 528 2541S -i Though the above represents over 42,000 tabulated com- binations, it is possible to make up other combinations to meet almost any desired case. It often happens that some variable on a new job throws it out of the standardized tab- ular group. In such cases, all that it is necessary to do is to add or subtract certain sub-operation times from the i I FREDERIC A. PARKHURST 1 47 TABLE II— Continued A TYPICAL STANDARD PRODUCTION DATA TABLE 8 10 -JOB CLASS 2F BONUS CLASS 8 Number of Patterns on Plate 12 14 16 18 20 22 24 30 36 42 14S 2224S 141 1128 1779S 138 1390 2552S 135 1620 2064S 133 1862 2316S 138 2060 1814S 127 2286 3012S 125 2500 2716S 123 2706 2130S 128 2880 1884S 116 3480 21238 113 4068 27368 118 4620 1933S Uf 816 1752S 135 1060 1783S 132 1320 2504S 121 1548 2149S 127 1778 3010S 124 1984 2632S 122 2196 2445S 128 2400 2214S 118 2596 3274S 116 2784 21868 111 3330 31368 186 3888 18938 186 4452 3284S 138 780 1760S 12s 1024 26143 128 1260 1772S 124 1488 2416S 121 1694 3271S 118 1904 2348S 117 2106 2737S 115 2300 2569S 113 2486 2720S 111 2664 18328 187 3210 3297S 184 3744 18698 183 4326 3300S 124 744 2470S 123 984 2158S 121 1210 3267S 118 1416 2241S 118 1624 2946S 114 1824 1791S 112 2016 2263S 111 2220 1811S 188 2398 327SS 187 2568 23988 183 3090 3298S 181 3636 18988 88 4158 3164S 118 714 3699S 118 944 2757S 118 1160 2155S 114 1369 1769S 112 1568 2773S 118 1760 1822S 188 1944 2621S 186 2120 2780S 185 2310 2499S 183 2472 27858 188 3000 22128 87 3492 18998 96 4032 22S2S 135 810 2092S 133 1064 2324S 131 1310 2370S 128 1536 1798S 125 1750 2711S 123 1968 2142S 128 2160 1812S 118 2360 2779S 118 2552 3276S 114 2736 1831S 118 3300 22108 187 3852 2395S 185 4410 23068 128 768 1754S 128 1008 2270S 124 1240 2618S 122 1464 2449S 118 1666 2701S 117 1872 1790S 115 2070 2566S 113 2260 2717S 111 2442 3295S 188 2616 18358 186 3180 24958 183 3708 28108 181 4242 32828 121 726 3288S 128 960 2271S 118 1180 3290S 118 1392 2196S 114 1596 2318S 112 1792 2628S lie 1980 1816S 188 2160 1812S 188 2332 3303S 184 2496 18888 161 3030 32808 89 3564 18978 97 4074 32838 lis 690 2549S 114 912 1747S 113 1130 2707S 118 1330 2504S 188 1512 2556S 187 1712 2400S 186 1890 2081S 183 2060 2781S 182 2244 2900S 188 2400 22148 87 2910 32318 95 3420 19268 93 3906 30808 118 660 25oes 188 872 1751S 188 1060 1783S 188 1272 2505S 184 1456 1802S 182 1632 1796S 181 1818 3311S 88 1980 1816S 88 2156 2104S 86 2304 18388 83 2790 29328 91 3276 18498 98 3780 18948 153 918 2372S 158 1200 2221s 148 1480 1803S 144 1728 1793S 141 1974 2559S 138 2208 2519S 135 2430 22298 133 2660 2312S 138 2860 2213S 127 3048 3015S 122 3660 24378 119 4284 27258 118 4872 2958S 148 876 2272S 145 1160 2155S 142 1420 2066S 138 1668 2558S 138 1904 2348S 133 2128 2191S 138 2340 1809S 128 2560 2258S 125 2750 2719S 123 2952 2126S 118 3540 22358 115 4140 25148 113 474^ 2729S 141 846 2548S 138 1112 2550S 137 1370 2152S 133 1596 2318S 131 1834 2366S 128 2048 2634S 12s 2250 2714S 123 2460 2134S 121 2662 3249S 118 2856 18S5S 114 3420 19268 111 39% 18928 188 4578 32818 135 810 2092S 134 1072 2613S 132 1320 2504S 128 1548 2149S 128 1764 2317S 124 1984 3632S 121 2178 3248S 118 2380 2295S 117 2574 2215S 115 2760 25178 111 3330 31268 188 3888 18938 186 4452 32848 131 786 2373S 128 1032 2157S 127 1270 3006S 124 1488 2468S 122 1708 2629S 128 1920 1817S 117 2106 2737S 115 2300 2569S 113 2486 2720S 111 2664 18328 188 3240 19028 185 3780 18948 183 4326 3300S Standard time sheets. Table II is a typical table and is an exact copy of one of the set of 90. An immense amount of detail work was necessary before the standardization of all the above variables and their pos- sible combinations was complete. It was necessary to take thousands of time studies. These studies had to apply to a I m ■ < t I 148 STANDARD SUB-ELEMENTAL TIMES FREDERIC A. PARKHURST 149 great variety of patterns of all classes and for each of the above mentioned forms of equipment, method and flask sizes. The result of all this work has been gratifying, how- ever. All of the standard data has now been tabulated with the result that 95 per cent of all bench and squeezer work done by any of the six foundries of the Aluminum Castings Co. can be put on bonus direct from these tables. This means definite and absolute standardization. Short run work can be put on bonus at once without the necessity for taking time studies on each pattern. By this method it is possible to apply scientific manage- ment methods to a short job which would ordinarily run out long before a satisfactory time study could be made. The importance of this one feature alone must not be under- estimated. As several of the Aluminum Castings Co. foun- dries do practically a jobbing business, the value of these tables can be readily appreciated. This standard data has even more value in several other ways than the feature above mentioned. In the first place there is no guess work as to the most economical combina- tion of pattern equipment, number per mold, size of flask, method to be employed, etc. A glance at the tables tells instantly what is the best combinations to employ for each job to assure a maximum production and minimum cost. Yet another great value is that of having definite data on which to base estimates. This appHes both to the routine work of estimating, as well as the solving of problems of this nature by the sales representatives. This is true of both the floor, bench and squeezer data. Combining these advantages and the ability (through accurate analytical costs) to check up past performances puts a firm employing these methods in position to practically predetermine costs. New equipment can be made to absolutely agree with the best standards and practice. There is no longer need to guess and try "rule of thumb" methods or "cut and dry'* until we hit the right way, or the best combinations. It is impossible here to list all of the many advantages to be de- rived from this data. The results speak for themselves. We are finding new uses and new value in this standardized data every day it is in use. All bench and squeezer jobs at both the Detroit and Cleveland plants have been put on bonus direct from these standard production data sheets for the last six months. We have yet to find a case where the men have been unable to reach the production asked for. Neither have the maxi- mum production figures been exceeded. The author claims that the standardization of foundry operations and practice here described marks an epoch in the history of foundry work and is in itself the vindication of scientific manage- ment in this virgin field. 14 — Standard Miscellaneous Data The Time Study Foreman is responsible for the follow- ing standard data. This data must be kept up to date. The list given below is subject to revision and amplification to suit varying conditions and plants. Flask Data — Flasks are tools, hence come into the "T" class of symbols. Our flasks must be listed in a systematic manner in order of dimension : commencing with the small- est "Ti, T2, T3, etc., new flasks take the next number. The following shows how this list should appear : Flask Record Inside Contents Weight Flask Pattern Quan- Dimensions Bars Weight cubic with san.d symbol symbol tity L W D lbs. Flask Record — Continued inches Net wt. sand Weight rammed Net wt. full of sand of sand C-Cope D-Drag this pattern Weight of board Handling Times of Sand and Equipment — The data we are accumulating on the weight of sand rammed "soft," "medium" and "hard" will allow us to determine an average weight per cubic inch or foot. The chief controlling factor in most of our work (exclusive of the standard elemental sub-operations) is the weight of sand to be shoveled and rammed, area and contour of flasks and the weight of the I50 STANDARD MISCELLANEOUS DATA FREDERIC A. PARKHURST !: cope and drag complete. To these shall be added the un- usual but necessary operations peculiar to certain jobs not covered by our standard production data. After we have standard times on the sub-operations we will then base all our calculations on our standard of "allow- able work in foot pounds per man." Core Work — Standard data for this work will be similar (but much simpler) to that above mentioned in the list of standard sub-elemental operations. The chief factors to de- termine (for each core box of each pattern) are listed in a manner similar to that shown above for molding operations. This detail need not be repeated here. Tool and Equipment Data — Keep a complete record on each time study of each job of the tools and equipment in use. Do not lose sight of the fact that the time study must include all information (or references) pertaining to each job or operation. All material and the quantities used per unit of work must be fully specified as well as the tools and equipment. This information is absolutely essential before the instruction card or bonus chart can be issued. Files — File all time studies, in a vertical loose-leaf file, arranged numerically by the "time study number." Keep a 3x5-inch card index to the time study file, arranged by classes of work and in alphabetical and numerical order of piece symbol or other identifying mark. This card shows the complete routing for each piece as well as the bonus maximum and bonus chart number for each operation. References — A general treatment of the subject of time study work will be found in "Applied Methods of Scientific Management," copy of which is on file in the planning room, and same is understood to be a part of these instruc- tions, particularly matter on pages 147 to 166 inclusive. Responsibility for Jobs on Bonus — After a satisfactory time study has been made and the time for a job determined (and the bonus list issued) the real work begins. It is up to the Time Study Foreman and his assistants to follow each new bonus job until it is going satisfactorily, both as to method, quantity and quality. They must not relax their 151 vigilance until such time as the job reaches the maximum production called for by the Differential Bonus Chart. When this production has been reached and held for a time (and then only) the men themselves will see that it does not fall off through any fault of theirs. 15— General Instructions to Time Study Men The time study men. must not forget that they are in the position of functional bosses and must deport themselves accordingly. In developing a position of this kind, care must be taken in setting an example to the men and by in- dustry and ability try to raise the general standard of the shop. In keeping your records, be systematic and study the symbol system as it is developed so that you will fully ap- preciate what is involved in the different series of symbols which will be put in use from time to time. The use of symbols means a large saving of time by greatly reducing the work, besides simplifying records. In connection with your regular time study work you will be expected to report to the proper parties all matters pertaining to the violation of the shop rules. These should be carefully studied so that the time study men will be thor- oughly familiar with them. Time study men can also be of material assistance to the shop employes by instructing them regarding the details specified in the rules with which they may be unfamiliar, or do not understand. w i I LECTURE XXVI TIME STUDY AND BONUS (contiliued) 16. Parkhurst's Differential Bonus. The above subject will discuss the author's diflferential bonus in somewhat more detail than is covered in the text, and previously dis- cussed in Lecture 23. The following is reprinted complete from the author's "Scientific Management in the Foundry," section 16. It is not the intention here to enter into a discussion, academic or otherwise, of the advantages of the various forms of remunerating labor. Based on the writer's experi- ence with day work, piece work, premium and bonus, he has during the last ten years developed a differential bonus system. The differential system, as described below, has been flexible enough to be readily adaptable to any require- ments put upon it. Using the same fundamental principle throughout, the application of the standard differential bonus charts is universal. The author's experience has been that with properly standardized hourly rates for various grades of labor in each trade involved, the addition of a generous bonus for high production will give greater results than any other method. As he has had occasion to remark before, we pay for the employe's time, we arrange his equipment and sup- ply a more or less complex organization to control that equipment and the materials in process. By positive means we determine the maximum production that the average good man can turn out per day and we certainly have the privilege of utilizing the time we pay for to the best advan- tage and toward this end. Obviously, however, it is not fair to the worker to prevent his participating in the saving that is realized. We do this by means of increased wages (in the form of bonus) in proportion to the additional work he turns out. 152 FREDERIC A. PARKHURST 153 If the employe is assured of a day's pay his mental atti- tude from the very start is going to be more favorable than i f his pay depends entirely on what he turns out for a day's work, as under the piece work system. In a piece work shop the men are often put on strange jobs and though they work hard all day they are not able to earn more than one- third or one-half of a regular day's pay. This may go on for several days before they can make their average piece work day's pay. This obviously is unfair. The premium system, though it carries a specific day rat- ing, is not efficient in that the average methods used leave too much to the judgment and will of the individual em- ploye. In other words, you can't get maximum production if you say to a man that his rate will be $2.50 a day and that he gets the equivalent to half (or some other propor- tion) of what he saves, over and above, say ten pieces per day. The tendency of this method is for everyone from the management down to tend to approximately what the man ought to do, and if this approximation is wrong it limits production, because he will not make all that he pos- sibly can. The same thing applies to piece work where rates are incorrectly set. By the adoption of standard hourly rates and differential bonus for different classes of work, combined with a proper organization, including an especially strict inspection serv- ice, you can much better control your labor and product than you can under the average piece work system. Combine with the above methods accurate information as to exactly what is involved in each job, how long each job should take based on stop watch observations; add to these an openly advertised policy that under no circum- stances will you reduce a rate once set. Table 4 in section 18 indicates what the result will be. To develop and standardize the differential bonus, as used by the author, he decided to provide in standard charts for fifteen different bonus classes. This classification applies to the job and not to the man. In other words, jobs are classi- fied as belonging in bonus class i, 3 or 8, as the case may i n |m I ■ 1 ^ }: 154 PARKHURST DIFFERENTIAL BONUS be. Each bonus class number is equivalent to 25c per day maximum bonus for 100 per cent efficiency. Therefore, a job rated as belonging under bonus class 5 would pay $1.25 maximum bonus for 100 per cent efficiency. The differential is figured on a basis of 10 per cent of the maximum bonus for 50 per cent production and 100 per cent bonus for 100 per cent production. It might be further explained here that the bonus jobs are seldom started as low as 50 per cent of the calculated maximum of production. More generally in a new shop the bonus is started at 60 or 70 per cent, depending on the local shop conditions'. Fig. 9 shows a standard differential bonus chart covering two charts, namely 100 and loi units per day. The letters A, B, C and D, representing 50, 60, 70 and 80 per cent pro- duction respectively. The letter 5* represents standard pro- duction or 100 per cent efficiency. In Fig. 9 referred to, chart 100 was illustrated, so as to more readily explain the percentage basis used at the different stages of a plant's efficiency. To further explain, it should be noted that local plant conditions, the class of help and other variables govern to a great extent the progress that can be made particularly. This is particularly true of the early stages of reorganiza- tion work. During these early stages, it is necessary to com- mence the bonus sometimes as low as 60 and sometimes as low as 50 per cent of the maximum bonus production. This statement can be more readily appreciated when one stops to consider that it is not unusual to ask for five or six times the production per day under bonus that has been the ordi- nary practice of the shop under day work. If we start bonus (even though it is a small amount) at 50 per cent or 60 per cent of this maximum, we put the bonus nearer the reach of the employe. This tends to encourage him to make a little effort to demonstrate for himself whether bonus can be made or not. Of course, at this stage of his work he has the help of the Time Study Foreman to see that he does not waste time in false moves. As time goes on the average FREDERIC A. PARKHURST 155 efficiency of the shop becomes higher and the starting point for new jobs can be raised to 70 per cent and later to 80 per cent of the calculated maximum. In all cases the bonus at given percentages is the same on any chart, whether it starts at 60 per cent or higher. At the Detroit plant of the Aluminum Castings Co. all bonus jobs have been figured to commence at 80 per cent of the maximum bonus production. This 80 per cent factor was established Sept. i, 191 3. We have yet to find a case where the man did not earn bonus, nor have we found any case where the maximum bonus was appreciably exceeded. It should be understood that the figure of 80 per cent above mentioned, means the point at which the bonus commences. On all jobs it is expected that the average workman will reach 90 per cent to 100 per cent of the maximum produc- tion. The exceptional man will go to 100 per cent and be- yond. This exceptional man with the ability to exceed what the average good worker can do is perfectly welcome to the extra remunerations that he gets by exceeding the 100 per cent mark. It should be noted that though the bonus charts are figured to 100 per cent production, if a man should ex- ceed this amount by 5 or 10 per cent the differential is ex- tended down to the figure which he actually realizes. In other words, there is no limit. Fig. 10 illustrates a typical bonus chart form FAP 117. At the time this chart was issued, all bonus commenced at 70 per cent of the maximum. The success of any form of management lies in the con- fidence which the management is enabled to instill into the personnel. Subterfuge and excuses for changing rates must be absolutely avoided. The writer has always made it a point never to lower a bonus rate once established. This policy is openly published in the shop rules with concerns he has been identified with. He owes the success of his methods in a great measure to the fact that the personal factor has been of paramount consideration with him and all of those who come in contact with him and his methods know that prices will not be lowered, providing of course the equipment and 156 PARKHURST DIFFERENTIAL BONUS FREDERIC A. PARKHURST 157 Standard Differential Bonus Chart. Form FAP201 Frederick A. Parkhurst, M. E. Organizing Engineer. STANDARD DIFFERENTIAL BONUS CHARTS IM AND Itl 1 Sheets, Sheet 1 SS B 1 ■ Bonus Production in— -^ (The decimal over the bonus cl ass figures . are Units per day for the differential or increment of change.) Chart. Chart. .0045 .009 .0135 .018 .0225 .027 100 101 1 2 3 4 5 6 SO 51 .025 .050 .075 .100 .125 .150 51 52 .030 .059 .089 .118 .148 .177 52 53 .034 .068 .102 .136 .170 .204 53 54 .039 .077 .116 .154 .193 .231 54 55 .043 .066 .129 .172 .215 .258 55 56 .048 .095 .143 .190 .238 .285 56 57 .052 .104 .156 .208 .260 J12 57 58 .057 .113 .170 .225 .283 .339 58 59 .061 .122 .183 .244 .305 .366 59 60 .066 .131 .197 .262 .328 .393 60 61 .070 .140 .210 .280 .350 .420 61 62 .075 .149 .224 .298 .373 .447 62 63 .079 .158 .237 .316 .395 .474 63 64 .084 .167 .251 .334 .418 JOl 64 65 .088 .176 .264 .352 .440 .528 65 66 .093 .185 .278 .370 .463 .555 66 67 .097 .194 .291 .388 .485 .582 67 68 .102 .203 .305 .406 .508 .609 68 69 .106 .212 .318 .424 .530 j636 69 70 .111 .221 .332 .442 .553 463 70 71 .115 .230 .345 .460 .575 .690 71 72 .120 .239 .359 .478 .596 J17 72 73 .124 .248 .372 .496 .620 744 73 74 .129 .257 .386 .514 .643 .771 74 75 .133 .399 .532 .665 798 75 76 .138 .275 .413 .550 .688 .825 76 77 .142 .284 .426 .568 .710 .852 77 78 .147 .293 .440 .586 .733 .879 78 79 .151 .302 .453 .604 .755 .906 79 80 .156 .311 .467 .622 .778 .933 80 81 .160 .320 .480 .640 .800 .960 81 82 .165 .329 .494 .658 .823 .987 82 83 .169 .338 .507. .676 .845 1.014 83 84 .174 .347 .521 .694 .868 1.041 84 85 .178 .356 .534 .712 .890 1.068 85 86 .183 .365 • *rffO .730 .913 1.095 86 87 .187 .374 .561 .748 .935 1.122 87 88 .192 .383 .575 .766 .958 1.149 88 89 .196 .392 .588 .784 .980 1.176 89 90 .201 .401 .602 .802 i.oai 1.203 90 91 .205 .410 .615 .820 1.025 1.230 91 92 .210 .419 .629 .838 1.048 1.257 92 93 .214 .428 .642 .856 1.070 1.284 93 94 .219 .437 .656 .874 1.093 1.311 94 95 .223 .446 .669 .892 1.115 1.338 95 96 .228 .455 .683 .910 1.138 1J65 96 97 .232 .464 .696 .928 1.160 1.392 97 98 .237 .473 .710 .946 1.183 1.419 98 99 .241 .482 .723 .964 1.205 1.446 99 100 -.246 .491 .in .982 1.228 1.473 s 100 101 .250 .500 .750 1.000 1.250 1.500 FIGURE 9.— PARKHURST'S STANDARD DIFFERENTIAL BONUS CHART OF A SET OF 1,000) FROM WHICH THE FIGURES FOR THE INDIVIDUAL BONUS CHARTS SHOWN IN FIGURE 10^ SEE PARAGRAPH 241. NOTE — S = Standard production for specific conditions, as defined by the instruction card for each job and based on accurate stop watch observations. A. B C or D represent quantity at which bonus is to commence; once deter- mined for a job this starting point is never changed for that job. Opposite the quantity per day will be found in each column (Bonus Class) the bonus per day in dollars and cents for that class. L .0315 7 .175 .207 .238 J270 .3a .333 .364 .396 .427 .459 .490 .522 .553 .585 .616 .648 jm .711 .742 .774 .805 .837 .868 .900 .931 .963 .994 1.026 1.057 1.089 1.120 1.152 1.183 1.215 1.246 1.278 1.309 1.341 1.372 1.404 1.435 1.467 1.498 1.530 1.561 1.593 1.624 1.656 1.687 1.719 1.750 .036 8 .200 .236 .272 .308 .380 .416 .452 .488 .524 .560 .596 .632 .668 .704 .740 .776 .812 .848 .884 .920 .956 .992 1.028 1.064 1.100 1.136 1.172 1.206 1.244 1.280 1.316 1.352 1.388 1.424 1.460 1.496 1.532 1.568 1.604 1.640 1.676 1.712 1.748 1.784 1.820 1.856 1.892 1.928 1.964 2.000 .0405 9 .225 .266 .306 .347 J87 .428 .468 .509 .549 .590 430 .671 711 .752 .792 .833 .873 .914 .954 .995 1.035 1.076 1.116 1.157 1.197 1.238 1.278 1.319 1.359 1.400 1.440 1.481 1.521 1.562 1.602 1.643 1.683 1.724 1.764 1.805 1.845 1.886 1.926 1.967 2.007 2.048 2.088 2.129 2.169 2.210 2.250 BONUS CLASSES Continued .045 10 .250 .295 .340 .385 .430 .475 .520 .565 .610 .655 .700 .745 .790 .835 .880 .925 .970 1.015 1.060 1.105 1.150 1.195 1.240 L285 1.330 1.375 1.420 1.465 1.510 1.555 1.600 1.645 1.690 1.735 1.780 1.825 1.870 1.915 1.960 2.005 2.050 2.095 2.140 2.185 2.230 2.275 2.320 2.365 2.410 2.455 2.500 ,0495 11 .275 .325 .374 .424 .473 .523 .572 .622 .671 .721 .770 .820 .869 .919 .968 1.018 1.067 1.117 1.166 1.216 1.265 1.315 1.364 1.414 1.463 1.513 1.562 1.612 1.661 1.711 1.760 1.810 1.859 1.909 1.958 2.008 2.057 2.107 2.156 2.206 2.255 2.305 2.354 2.404 2.453 2.503 2.552 2.602 2.651 2.701 2.750 .054 12 .300 .354 .406 .462 .516 .570 .624 .678 .732 .786 .840 .894 .948 1.002 1.056 1.110 1.164 1.218 1.272 1.326 1.380 1.434 1.488 1.542 1.596 1.650 1.704 1.758 1.812 1.866 1.920 1.974 2.028 2.082 2.136 2.190 2.244 2.298 2.352 2.406 2.460 2.514 2.568 2.622 2.676 2.730 2.784 2.838 2.892 2.946 3.000 .0585 13 .325 .384 .442 .501 .559 .618 .676 .735 .793 .852 .910 .969 1.027 1.086 1.144 1.203 1.261 1.320 1.378 1.437 1.495 1.554 1.612 1.671 1.729 1.788 1.846 1.905 1.963 2.022 2.080 2.139 2.197 2.256 2.314 2.373 2.431 2.490 2.548 2.607 2.665 2.724 2.782 2.481 2.899 2.958 3.016 3.075 3.133 3.192 3.250 .063 14 .350 .413 .476 .539 .602 .665 .728 .791 .854 .917 .980 1.043 1.106 1.169 1.232 1.295 1.358 1.421 1.484 1.547 1.610 1.673 1.736 1.799 1.862 1.925 1.988 2.051 2.114 2.177 2.240 2.303 2.366 2.429 2.492 2.555 2.618 2.681 2.744 2.807 2.870 2.933 2.996 3.059 3.122 3.185 3.248 3.311 3.374 3.437 3.500 .0675 15 .375 .443 .510 .578 .645 .713 .780 .848 .915 .983 1.050 1.118 1.185 1.253 1.320 1.388 1.455 1.523 1.500 1.658 1.725 1.793 1.860 1.928 1.995 2.063 2.130 2.198 2.265 2.333 2.400 2.468 2.535 2.603 2.670 2.738 2.805 2.873 2.940 3.008 3.075 3.143 3.210 3.278 3.345 3.413 3.48(1 3.548 3.615 3.683 3.750 FOR 100 AND 101 UNITS PER DAY. THIS IS A MASTER TABLE (ONE BONUS CHARTS MAY BE TAKEN WHEN MAKING THE INDIVIDUAL 158 PARK HURST DIFFERENTIAL BONUS method remains unchanged. Furthermore, he uses no ''ex- cursion rates/' A job once set is fixed forever. In order not to leave a wrong impression regarding the closing sentence of the preceding paragraph, a word of ex- planation is desirable. We are continually being confronted with slight changes in pattern equipment or methods that theoretically and fairly would even call for the revision of the bonus prices. Where this change of equipment does not make any material difference, say only 5 or lo per cent, we in the majority of cases let the original bonus chart stand. We are very careful not to take advantage of any slight alteration of equipment to reduce a price. We are also careful to let the man realize that the entire scheme of man- agement from start to finish is one that contemplates fair treatment to him. The writer can cite cases of where the head man of a molding gang has asked for an additional laborer to dump out, stating if this man was supplied he could raise his day's production from 70 to j-j molds. This was done on one particular job and the job ran for weeks at the average of over 76.2 good castings per day. The production of 76.2 castings, referred to, under bonus represents an increase of 103 per cent over the old piece work production, which averages 37.5 castings per day. This same man asked to be told a day before the pattern was to go out of the sand so that he and his gang could put up a record that no other gang could touch. It is spirit of this kind which spells co- operation and harmony and gives the greatest results under any form of management. Reference to Table IV in section 18 will give an idea of the majority of foundry operations covered by the differ- ential bonus being described. These same principles have been applied, however, to miscellaneous work, such as re- moving large quantities of dirt, in one instance a pile con- taining 2,700 cubic yards. Reconstruction work has also been handled on the same basis of remuneration. In other words, the entire scheme of bonus contemplates the applica- tion of this method of remuneration to practically every- one within the organization. FREDERIC A. PARKHURST 159 Bonus Chart. Form FAP117 The Aluminum Casting^s Co. BONUS CHART 138-1 SHEET, SHEET 1 Instruction No Date, March 8, 1913 NOTE— The following prices will be paid as Bonus in addition to hourly wages based on Good Pieces which pass in after this specific operation, except that Defective not due to work specified on this Chart will not be deducted in paying Bonus. These Bonus Prices will not be lowered no matter how long the job may run with this pattern, core boxes, equipment and by the method and desigrn specified in the instruction referred to and with the number of operatives mentioned below. OPERATION— Molding. SYMBOL-AA-3S76. CUSTOMER— The Studebaker Corporation. EQUIPMENT — Drag on Power rollover machine; cope on horses ram up 13 flat chills in cope; also tuck bars, ram and step off. OPERATIVES AND CLASS NO.— 1 Molder, Class 7; 2 Helpers, Class 5. Good Bonus, Bonus, Good Bonus, Bonus, Castings. Class 5. Class 7. Castings. Class 5. Class 7 140 .575 .805 171 .924 1.293 141 .586 .821 172 .935 1.309 142 .598 .837 173 .946 1.325 143 .609 .852 174 .958 1.34 144 .62 .868 175 .969 1.356 145 .631 .884 176 .98 1.372 146 .634 .90 177 .99 1.388 147 .654 .915 178 1.003 1.404 148 .665 .931 179 1.014 1.419 149 .676 .947 180 1.025 1.435 150 .688 .963 181 1.036 1.451 151 .699 .978 182 1.048 1.467 152 .71 .994 183 1.059 1.482 153 .721 1.01 1S4 1.07 1.499 154 .733 1.036 185 1.081 1.514 155 .744 1.041 186 1.093 1.53 156 .755 1.057 187 1.104 1.545 157 .766 1.073 188 1.115 1.561 158 .778 1.089 189 1.126 1.577 159 .789 1.104 190 1.138 1.593 160 .80 1.12 191 1.149 1.608 161 .811 1.136 192 1.16 1.624 162 .823 1.152 193 1.171 1.64 163 .834 1.167 194 1.183 1.656 164 .845 1.183 195 1.194 1.671 165 .856 1.199 196 1.205 1.687 166 .868 1.215 197 . 1.216 1.703 167 .879 1.23 198 1.228 1.719 168 .89 1.246 199 1.239 1.734 169 .901 X.TfO, 200 1.25 1.75 170 .913 1.278 • • • FIGURE 10.— BONUS CHARTS ISSUED TO EACH EMPLOYE (OR GROUP OF EMPLOYES). THE FIGURES ARE TAKEN FROM THE STANDARD DIFFERENTIAL BONUS CHARTS ILLUSTRATED IN FIG. 9, SEE PARA- GRAPH 245. Another application may be described in reference to a bonus scheme, which has been worked out for the remunera- tion of the inspection force. This is termed "quality bonus." Figures have been determined representing what the I GO per cent mark for quality would be for each of the following factors : A Foundry Defective Castings. B Total Cost of Repairing, Soldering and Welding. C Percentage of Defective Castings returned from customers. i6o PARKHURST DIFFERENTIAL BONUS |r':| ■h The figures which have been determined for each of the above items A, B and C, represent an efficiency mark ap- plicable to quality which nets all of the inspectors a maxi- mum bonus. The differential of this bonus is figured in exactly the same way as described above for other work. If the above marks are realized to the extent of 80 per cent of the maximum, the bonus commences and by the usual differential grades along to the 100 per cent mark. Another interesting application of this differential bonus method of payment, is the application of this principle to brass meltng in the coke furnaces in the Detroit plant of the Aluminum Castings Co. This same method will be ap- plied to the brass melting in the Cleveland plant by the end of the year. The following is a copy of the differential bonus chart 3574D covering the details of this brass melting bonus. The description of the way this is handled, as shown by the chart referred to, is self-explanatory. Bonus Chart No. 3574D Differential Bonus for Melting Lsmux Metal The following prices, based on man-furnace hours per heat, will be paid in addition to hourly wages for time consumed on the job by the Lynux melting gang, based on a 12-hour furnace day. The metal will be sent to the furnaces in weighed charges. It is to be melted and delivered to skimming box (ready for the pouring gang) at a pouring temperature high enough for the class of work for which it is intended. Furnaces are to be operated on natural draft, using coke as fuel, which coke will be delivered into bins back of furnaces, but is to be broken by the melting gang. A half hour will be allowed for building a fire. Power hoists have been provided for lifting the pots from furnaces. The different kinds of Lynux are to be graded by the foreman ac- cording to time required for melting and a chart will be issued showing the "equivalent in standard heats" for any number of pounds of the various grades. The standard heat is regarded as grade 6—240 pounds in two hours. The computation for "man-furnace hours per heat" is to be made as follows: (1) Compute from the daily job time cards the total man-hours spent by the melting gang. (2) The sum of the hours which each individual furnace runs will give the total furnace hours. FREDERIC A. PARKHURST 161 (3) For each heat melted compute from the table its "equivalent in standard heats" and the sum of these gives the total standard heats. (4) (31/2 total man-hours) -f total furnace hours=total man-fur- nace hours. (5) Total man-furnace hours=Man-furnace hours per heat. Total standard heats. Delays caused by conditions beyond the control of the melting gang will be allowed for. These prices will not be changed as long as present conditions of operation remain the same. Differential Bonus Class 5—0.01406; Bonus Class 6—0.01687 Bonus based on man-furnace hours per standard heat as computed from record of daily charges and heat equivalent table. (See Table III.) hrs, Man Melters* Each Man urnace bonus Helper bonus furnace per heat. Class 6. Class 5. hrs. per heat. Class 6. Class 5 5.00 $1,162 $ .969 4.50 $1,331 $1,109 4.95 1.179 .983 4.45 1 atJ^IO 1.123 4.90 1.196 .997 4.40 1.365 1.137 4.85 1.213 1.011 4.35 1.382 1.151 4.80 1.230 1.025 4.30 1.398 1.165 4.75 1.247 1.039 4.25 1.415 1.179 4.70 l.»>3 1.053 4.20 1.432 1.194 4.65 1.280 1.067 4.15 1.449 1.206 4.60 1.297 1.061 4.10 1.466 1.222 4.55 1.314 1.095 4.05 1.483 1.236 4.00 1.500 1.250 In computing the bonus each day reference lias to be made to the Brass Furnace Heat Equivalent Table 2 here- with. The Daily Metal Room Report gives a record of each different alloy number. Each alloy number belongs in one of the metal groups 5 to 10 inclusive. The sum of the equivalent heat figures for each group melted each day divided into the total man furnace hours for that day gives the man furnace hours per heat. The combination of man hours and man furnace hours enables us to maintain a minimum of labor and assures the use of a minimum number of furnaces per day. Other- wise, additional furnaces might be fired up to get a few extra heats at an excessive cost for fuel. The method has been in vogue for several months and has worked out very successfully. Figures in the heat equivalent table are based on the results of actual time studies for the various groups of metal and for varying charges. These figures check out J* I I t i I 162 PARKHURST DIFFERENTIAL BONUS TABLE III BRASS FURNACE "HEAT" EQUIVALENT TABLE (Used in connection with Differential Bonus Chart No. 3574D. Lynux Melting Practice) FREDERIC A. PARKHURST 1. Stan dard Heat- -240 lb. charge, Group 6 in 2 hours. Pounds r —Standard Heat Equivalents- > per Metal Group charge. 5 6 7 8 9 10 S .30 .25 .214 .082 .052 .129 10 .42 .35 .300 .100 .056 .133 15 .48 .40 .343 .117 .059 .137 20 .54 .45 .386 .133 .062 .141 25 .552 .46 .394 .150 .066 .145 JO .565 .47 .403 .153 .069 .149 35 .582 .485 .416 .156 .073 .153 40 .600 .500 .428 .159 .076 .157 45 .615 .512 .438 .162 .079 .162 50 .630 .525 .450 .166 .082 .166 55 .645 .537 .460 .169 .085 .170 60 .660 .550 .472 .173 .069 .174 65 .675 .562 .482 .176 .092 .178 70 .690 .575 .493 .180 .096 .183 75 .705 .587 .503 .183 .099 .187 80 .720 .600 .514 .186 .103 .191 85 .735 .612 .525 .190 .106 .195 90 .750 .625 .536 .193 .110 .199 95 .765 .637 .546 .197 .113 .204 100 .780 .650 .557 .200 .117 .208 105 .795 .662 .568 .203 .120 .212 110 .810 .675 .578 .206 .124 .216 115 .825 .687 .589 .210 .127 .220 120 .840 .700 .600 .213 .130 .225 125 .855 .712 .611 .216 .133 .229 130 .870 .725 .622 .219 .137 .233 135 .885 .737 .632 .223 .140 .237 140 .900 .750 .643 .227 .143 .241 145 .915 .762 .654 .230 .147 .246 150 .930 .775 .664 .234 .150 .250 155 .945 .787 .675 .237 .153 .254 160 .960 .800 .686 .240 .157 .258 165 .975 .812 .696 .344 .160 .262 170 .990 .825 .707 .247 .163 ,2S7 175 1.005 .837 .718 .250 .166 .271 180 1.020 .850 .728 .253 .170 .275 185 1.035 .862 .739 .256 .173 .279 190 1.050 .875 .750 .260 .176 .2M 195 1.065 .887 .760 .2M .180 .288 200 1.080 .900 .771 .266 .183 .292 205 1.095 .912 .782 .269 .186 .296 210 1.110 .925 .792 .272 .190 .300 215 1.125 .937 .802 .276 .193 .304 220 1.140 .950 .813 .279 .196 .309 225 1.155 .962 .824 .282 .200 J13 230 1.170 .975 .834 .285 .203 .317 235 1.185 .987 .845 .288 .206 .321 240 1.200 1.000 .857 .291 .210 J25 very close in practice and the first day the furnace gang worked on this schedule they earned bonus. Fig. 1 1 shows a very interesting large crank case job run on the floor under bonus early in 1912. The record of this 163 job during 38 days' run — four duplicate sets of equipment, is as follows : • i • U S & V > JO V. good per 9 hr. day. olders good. *3 V fid ^ c CO . ** m 8 ♦J ost per good case. PU 5? H 15 < S Q QpQ H u 1 1,039 3,395.0 37.72 27.55 28.6 $23.27 $ 9.121 $33,391 $1,175 2» 1,140 3,268.5 36.31 31.40 32.2 25.64 12.926 38.566 1.228 3 1,042 3,398.5 37.64 27.70 29.1 23.06 9.607 32.667 1.180 5 984 3,310.0 36.77 26.75 28.3 34.06 8.832 32.882 1.230 Averages of four patterns 28.35 29.55 $24,005 $10,121 $34,126 $1,203 J ' ♦Gang on pattern No. 2 was a picked gang considered the fastest and best workers in the shop, always worked together and received extra high wages owing to their efficiency. Old average good production under combination of day wages and premium — 15.15 cases. Old average good production cost under combination of day wages and premium — ^$1,196 per case. Bonus average production increase, 87.2 per cent per case. Bonus average cost increased $0,007 per case. This is an example of an occasional case where the direct labor cost is not reduced. The saving is thus confined to less overhead and greater capacity due to increased production. Old foundry defective from all causes when netting 15.15 good cases per day was 25 per cent. Foundry defective from all causes under intense bonus production when netting 28.35 good cases per day was but 9.83 per cent. Foundry defective loss under intense bonus production and Scien- tific Management methods was reduced 60.7 per cent. Average bonus equals 42.2 per cent over regular day wages. Fig. 12 shows a typical core job, on which the average daily production is 1,305 cores per nine-hour day. The core illustrated is a Packard hub cap core. Fig. 13 represents another large floor job. This is a four- cylinder oil pan for which three sets of equipment were made to assure the customer of a production of 75 good castings per day. A great many thousand of these pans have been made of this design. The average production runs from 108 to 115 molds per nine-hour day. Another typical core job is illustrated in Fig. 14. This is a transmission bearing core and the average production is 1,620 cores per nine-hour day. Fig. 15 illustrates a transmission job run by a molding gang of four men and two laborers employed in dumping 164 PARK HURST DIFFERENTIAL BONUS out and cutting sand. The production on this job averages 160 to 180 good castings per nine-hour day. Fig. 16 illustrates a typical bench job. This is an intake manifold, on which the average production is 150 molds per nine-hour day. Work of this kind, as well as all other bench and squeezer work is covered by the standard data de- scribed in Section 13. Fig. 8 referred to in Section 13 illus- trates a small variety of the work covered by these standard tables. Before closing with the subject of the application of dif- ferential bonus, attention is called to Table IV. The object of listing so many different items rather than expressing the results obtained in total lump figures, is to show up the great difference in production increases and cost decreases between different jobs. In other words, it w'ill be noted that production increase runs from only a few per cent to over 700 per cent. The figures in the cost decrease column in a few instances show practically no decrease in cost and in others the decrease is 80 or more per cent. These figures illustrate better than can be done in any other way, the great variations that exist in the average job, both as to the pro- duction standard and direct costs. In other words, under ordinary methods, it is comparatively easy for jobs to be limited in production due to the apparent similarity be- tween one job and another. These figures also show up the great difference between what in the judgment of the average good mechanic should be a day's work and what actually should be realized when the facts are accurately determined. In studying over the figures representing the percentage of cost reduction, as shown in Table IV, it can be seen that there is a very wide difference on some jobs between the production increase and the cost decrease. In other words, in some cases the cost decrease is very little and the production increase is very high. We also have the reverse condition where the cost decrease is high and the production increase is much lower. All of these go to prove the neces- sity which the job should run, as well as the proper balance of labor required to run that job efficiently. u LECTURE XXVII DEPARTMENTAL AND PLANT EFFICIENCY BONUS 27-A. Departmental Efficiency Bonus 27-B. Plant EpFiaENcv Bonus. This lecture will cover certain applications of departmental and plant efficiency bonus, but owing to the limited time, the subject must be most superficially dealt with. The student is referred to the author's "Scientific Time Study and Differential Bonus" now in the course of preparation, for complete information on the whole subject of special and efficiency bonuses. 27-A. Departmental Efficiency Bonus The foregoing lectures have introduced in considerable detail, different phases of time study and bonus work. Vari- ous applications of bonus based on standard elemental sub- operation times have been referred to, always in connection with some specific job or operation. To complete the en- tire scheme of differential bonus as used by the author, it is necessary to provide bonuses for the department heads or department executives w^ho have to do with the operation of the department as a whole. Departmental efficiency bonuses cannot well be determined until substantially all of the direct and indirect operations or jobs have been success- fully placed on bonus. In an attempt to solve the problem of equitably applying differential bonus to departmental and plant efficiencies, some rather extensive studies had to be conducted to bring certain elements of indirect and technical, as well as clerical labor, under control and to schedule same on a bonus pre- paratory to getting the departmental efficiencies themselves. These studies involved the determining of necessary factors for control of furnace performance, pouring gangs, chill sorters, wire straighteners, sand and metal handling, sand mixing, knocking out cores, inspection, trimming, soldering, welding, calculating and posting bonus slips, etc., etc. For 165 ni m r i66 DEPARTMENTAL EFFICIENCY BONUS instance, I give below a copy of Bonus Chart 9053D, which represents an efficiency bonus chart for carrying and pour- ing metal. It is an example of a study, which, though not particularly complex in itself, took considerable time to com- plete and had to be completed before the bonus could be issued. BONUS CHART 9053D, MAY 1, 1917; DEPT. IF, BONUS CLASS 4 Efficiency Bonus Chart for Carrying and Pouring Lynite Metal TO IM AND IMa When Using a Hand L.\dle and Two Wheel Carrier Standards : .103 man minutes per pound metal poured in IM unit. .164 man minutes per pound metal poured in IMa unit. The following differential bonus will be paid in addition to hourly wages, based on the number of pounds of metal poured by the men who used the hand ladles and the two wheel carriers in IM and IMa department, except that all defective castings due to the carelessness of the pouring gang will be deducted when paying bonus. The following instructions and specifications must be strictly followed : Equipment : The following equipment is to be used when pouring Lynite metal in IM foundry unit: 1 — An iron hand ladle which weighs when empty 26 pounds and when full of molten aluminum metal within 1" from the top will hold 28 pounds of metal; with the ladle use a two wheel carrier which can be pushed over the floor with very little effort. 2 — A pyrometer is located at the North entrance of IM, in a convenient place so every pot can be tested for correct temperature; the man carrying metal must skim every pot while the temperature is taken. 3 — Time allowance is figured in the standard time to keep all equipment in first class condition. Each pouring pot must be cleaned and blackened every morning and the carrier oiled. When not in use all equipment is to be kept in its proper place. 15 ) FREDERIC A. PARKHURST 167 4— The pouring gang must keep the floor clean around the pyrometer for a radius of five feet. They must not allow any accumulation of skimmings or spilled metal to collect at this place. Method : The method used in handling the melted metal with hand ladle and carrier is as follows : One man operates the hand ladle. He dips the metal out of the furnace with the same ladle he used to carry the metal. The ladle is then placed in the two wheeled carrier and the man pushes carrier along on the floor to the pyro- meter. Here the metal is tested for temperature, and each ladle full is skimmed. The metal is then taken where it is needed and poured. The operator returns to the furnace ready for another ladle of metal. Tally : The tally will be taken from the production report and listed on a special sheet, a sample of which is incorporated in this chart. Gr. W^. Gr. Wgt. No. Pounds Pounds Piece Cstgs. Per Metal Man Dept. Symbol Poured Casting Poured No. Time Gang Worked Dept. Effi- Minutes Worked ciency Bonus The weights of each casting must include all gates, sprues, risers, etc., and the total weight of metal poured will be computed by multiplying the gross castings weight by the number of cast- ings made from each pattern. The total for all patterns will give the total weight of metal carried for the day. All defective cast- ings due to anv fault of the pouring gang will he deducted when figuring bonus and the gang will lose credit for the pounds of metal in every defective casting they make. Standard Times : The standard time by which the bonus will be figured when carrying metal in hand ladle using two wheel carrier from any part in IF to any point in IM unit is .105 man minutes per pound of metal poured. The standard time by which the bonus will be figured when carrying metal in hand ladle using two wheel carrier from any point in IF to any point in IMa is .164 man minutes per pound of metal poured. Method of Figuring Bonus : The bonus will be figured daily from the production report and when the total efficiency reaches 80%, bonus in Class 4 will be paid in proportion to the time each man works on the job. A specimen sheet showing the computation of the bonus is incor- porated in this chart. r 1^ 1 68 DEPARTMENTAL EFFICIENCY BONUS ■ k k Example of Figuring Bonus: Total pounds of metal poured in IM 10,000 pounds " IMa 5,000 pounds 10,000 X .103 = 1030 standard man minutes 5,000 X. 164= 820 Total 1850 4 men worked 9 hours on the job. 4 X 540 = 2160 actual man minutes. Then the standard man minutes divided by the actual man minutes worked on the job equals the working efficiency of the gang. 1850 = 85.5% Efficiency 2160 85.5% Bonus, Class 4, pays $.739 bonus for 9 hours for each man. The following prices will not be lowered no matter how long the job may operate provided the method and equipment specified in this chart are not changed. EFFICIENCY BONUS CHART 9053D, BONUS CLASS 4 Standard : .103 Man minutes per pound for all metal poured in IM Differential for 1% Efficiency = $.018 " IMa Gang Efficiency 9 hrs. Bonus Paid 9 hrs. Gang Efficiency 9 hrs. Bonus Paid 9 hrs. 80 .640 91 .838 81 .658 92 .856 82 .676 93 .874 83 .694 94 .892 84 .712 95 .910 85 .730 96 .928 86 .748 97 .946 87 .766 98 .964 88 .784 99 .982 89 .802 100 1.000 90 .820 In reference to the above bonus chart, the following tabulation shows a record under date of May 1, 1917, of how the tally was kept on this job for the several men employed. ^ 2 2 Q m H < PQ p3 2 ^ Q > X > o u w o PQ u o H U W o u 9 C O n C jj PQ C ^!£ s C si •* u d o .5 ^ c rt O FREDERIC A. PARKHURST 169 ^cvj^r^j 0000 rri ro C^l r^J lO ro ro 10 10 10 to ir; ir; lOiO irjiomm ""^'^'^ \n \n iTi iTi iTi 0\ 0\0'^0^ O"^ • • • • " OQOOO ococx xoo 00c 00 0\ On On Os 3 1^ eg CM 00 00000 t^ t>. ^N, i>. 90 ininwiiri* eg »r5 o trj to Lo vo vn O O ^ eg O O Qtoto 10 to to to rQ eg o to to ON 00 00' O to to I CQCn eg eg CM eg to to to to 1 I) :^ c 'u C PL. vO' ifOCM I NOVO CCPC CQ CC CCQ i eg Cnj CM CM CM CM CM CM rocofO I , to to to to to to to to to to to ' §g ON ON 8g o\S OnON J^ 1 1 :^ be c u Ph 1 •1 be c U 1 C H i ■*- :^ p- ^ Total •^oc ) to CM tOfOCM -^ NOoo;>g T— < ^ OvT ■ QiO ) O NO egcNj NO NO QOn SnO'C i 170 DEPARTMENTAL EFFICIENCY BONUS h ¥ I As another example of what is involved in the preparation prior to the determination of departmental efikiencies, the following record of a study in connection with department IQ devoted to the mixing of core sand, will be of interest: TIME STUDIES IN iQ THE PROBLEM The work in iQ Department consists of a great number of miscellaneous operations, all of which pertain to the mixing" of core sand. The sand is unloaded from the cars in the storage sheds and storage yards and used from storage as conditions of production, demand. The outline of sand storage plan (a copy of which accompanies this report) shows that there are twenty-two different storage sheds and one stor- age yard, all at different distances from the sand mixing room. The sand is brought from the storage shed to the mixing room in wheel barrows and dumped in special bins provided at mixing machines. Before the time studies were taken it was necessary to slightly rearrange the layout of the sand mixing department and blue prints show the arrangement before and after the change was made. The big item in this change was keep- ing the sand wheelers from delaying the work of the man who fills the pails. The new arrangement as shown on the blue print shows how the wheelers fill the storage spaces from behind and do not interfere with the men who fill the measuring pails for the machines. The other miscellaneous operations in iQ Department are as follows : 1. Filling the measuring buckets for mixing machines. 2. Mixing regular standard and special batches with machines. 3. Mixing special standard batches with small electric riddle. 4. Transferring of the mixing sand by the Lary car to the core- rooms. 5. Grinding rosin and sweeping up the floor and miscellaneous trips to the stock-room for supplies. These operations were carefully investigated and studied with watches until the times and standard methods were established. FREDERIC A. PARKHURST Method 171 The method used to establish the standards was as fol- lows : The first job study was for wheeling sand from the stor- age bins to the mixing machine. Several different men were taken and observations made on their work. We wanted to select a man who was steady and reliable in this work and a good average worker. Observations were made on eight men until we found the man who met the physical qualifications the conditions required. The elemental de- tailed studies were studied until they were all standardized as follows : 1. Trip from the mixing room to the storage shed, wheel-barrow empty, standardized on a basis of the distance per foot. 2. Load wheel-barrow with sand, standardized on a basis of six buckets per load or three hundred pounds per trip. 3. Trip from the storage shed to the mixing room, wheel-barrow loaded, standardized on a basis of per foot of distance traveled. 4. Dump sand in storage bin, standard for all loads. When these standards were determined they were used to figure the standard times per trip to storage bins and bonus was established on this standard time per trip. (Op- erations 2 and 4 are standards for all trips; Operations i and 3 depend on the distance traveled.) In order to have a good check on our standard time we have selected several different men and made complete day's observation on their work. We found these men made bonus for the total day's work for several days in succession and were anxious to be put on bonus. Other operations have been timed and studied in the same manner and in every case these elemental operations were standardized and often used on several different operations. Based on the above, bonus chart 9036D, dated Feb. 12, 1917, applying to department DiQ was issued reading as follows : ''!?; 172 DEPARTMENTAL EFFICIENCY BONUS FORMULA USED IN COMPUTING THE STANDARD TIMES FOR WHEELING SAND FROM STOR- AGE BINS TO MIXING MACHINES (WxL) plus (DxT) plus K plus (dxt) equals Time Allowed for wheeling standard load of sand any dis- tance, where W = weight of sand L = standard loading time per pound D == distance wheeling load d = distance wheeling empty wheelbarrow T = standard time for wheeling a standard 300 pound load a distance of 1 foot t = standard time for wheeling empty wheelbarrow distance of 1 foot K = standard time dumping load. The following are the values for the items listed above, these all \ieing based on detail time studies. W = 300 pounds sand L D T d t K = .00415 minute = distance wheeling loaded wheelbarrow = .054 minute time to wheel standard 30O pound load distance of 1 foot = distance to wheel empty wheelbarrow = .004 minute time to wheel empty wheelbarrow distance of 1 foot = .22 minute time to dump load. Fatigue allowances were as follows : 10% additional time for all trips beyond one-half the distance down the shed. 20% additional time for all trips that were not further than one- half the distance down the shed. BONUS CHART 9036D, FEB. 12, 1917; DEPT. IQ, BONUS CLASS 4 Bonus Chart for Wheeling Sand in iQ from the Various Sand Sheds and Yard Storage to THE Mixing Machines, 300 Pounds of Sand for a Wheel-Barrow Load Operations : Load wheel-barrow. Wheel to mixing machines. Dump sand in bins. Return to sand storage. FREDERIC A. PARKHURST 173 Equipment : All sand is to be wheeled in a metal wheel-barrow with ca- pacity of three hundred pounds or more of sand. A good sand shovel which will hold not less than twenty-one pounds of sand. Method : The sand is loaded in wheel-barrow not less than three hun- dred pounds per load and wheeled to bins in mixing room where it is dumped into the proper bins. Method of Tally and Computation of Bonus : Example of Figuring Bonus : A tally clerk stationed at the entrance of the mixing room records the man's numbers, the bins from which he wheels the sand and the clock time each load is delivered. The number of wheel-barrow loads from each bin is multiplied by the respective standard man minutes allowed. The standard man minutes di- vided by the actual minutes worked by the operator equals the working efficiency and bonus will be paid according to the working efficiency of the operator. In case a weighing scale is installed, all sand will be weighed. The total weight of sand wheeled by one man from each storage bin, multiplied by the standard time per pound for that respective bin equals the standard minutes. The standard minutes divided by the actual minutes equals the working efficiency. Bonus will be paid according to the working efficiency of the operator. The following is a list of standard times per trip and standard time per pound of sand wheeled: Standard Time in Standard Time in From Door Minutes per trip Minutes per pound 1 2.24 .00746 2 2.44 .00748 4 2.64 .00880 5 2.45 .00817 6 2.98 .00993 8 3.20 .01067 10 3.43 .01143 12 3.65 .01216 14 3.73 .01242 16 3.93 .01310 18 4.20 .01400 19 3.81 .01270 20 4.51 .01503 21 4.20 .01400 22 (yard) 5.39 .01799 23 4.51 .01503 SIh if m ^: ;• 'I 174 DEPARTMENTAL EFFICIENCY BONUS Example of Figuring Bonus: Suppose one man wheeled thirty-eight loads of sand from pile in the yard, seventy-five loads of dry sand from door 1, and twenty loads from door 14. This man worked nine hours on the job. Determine his bonus. 38 loads from yard X 5.39 Standard Min. Allow = 204.82 Std. Min. 75 " " door X2.24 " " " = 168.00 " 20 " " " 14X3.73 " " " = 74.60 " FREDERIC A. PARKHURST 175 Total 447.42 " Total standard minutes worked = 447.42 " actual " " = 540. 447.42 Man efficiency = 82.8 540 For 82.8% efficiency for 9 hours in Class 4 pays $.690 Bonus. The following prices will be paid as bonus in addition to hourly wages based on the working efficiency of each man on the job. These bonus prices will not be lowered no matter how long the job may run, provided the equipment and method specified in this chart are not changed. Differential per 1% efficiency = $.018 % Efficiency Bonus Paid 9 hrs. 9 hrs. 80 .640 81 82 83 84 85 86 87 88 89 90 .658 .676 .694 .712 .730 .748 .766 .784 .802 .820 % Efficiency Bonus Paid 9 hrs. 9 hrs. 91 .838 92 .856 93 .874 94 .892 95 .910 96 .928 97 .946 98 .964 99 .982 100 1.000 As another example, bonus chart 9058D issued May 26, 1917, for department DIQ is reproduced below. This chart covers the preparing of pitch and rosin for binders, the delivery of binders to the mixing machines, and various janitor's duties in depart- ment IQ. BONUS CHART 9058D, MAY 26, 1917; DEPT. IQ, BONUS CLASS 3 Efficiency Bonus Chart for Preparing Pitch and Rosin Binder, Deliver Binder to Mixing Ma- chines AND Various Janitor Duties Department iO Bonus paid 80% efficiency. Standard per pound rosin and pitch prepared for mixing ma- chines .14 man minutes. Trip to IN with refuse 8 man min. Trip to stock room for supplies 5 man min. Shovel in elevator all loose sand 30 man min. General sweep and clean-up of entire department 30 man min. The following differential bonus will be paid in addition to hourly wages, based upon the number of pounds of pitch and rosin binder delivered to sand mixing machine and also upon the efficiency attained in the performances of certain other duties as specified in this chart. , .- . , The following instructions, methods and specifications must be strictly adhered to: Duties and Standard Time Allowance for each : GROUP No. 1 1. Breaking open barrel of rosin or pitch in yard. Using a pickax the iron hoops are cut in two and then with a few blows the barrel will fall apart. The top, bot- tom and staves of each barrel must be cleaned of rosin or pitch by scraping with the edge of a shovel. The staves, top and bottom are placed in a pile and the hoops ar- ranged in another pile. 2. Delivery of Material The barrel staves, tops and bottoms are loaded on a wheel- barrow and taken to wood pile in yard. It is possible to load the wood from about two barrels at one time. The hoops are wheeled to box in yard for holding rubbish. The rosin or pitch is loaded in a wheel-barrow and hauled to IQ where it is placed in separate bins until such time as used. During rainy weather the barrels must be in- doors when opened. , Standard time for Group No. 1 (operations 1 and 2) .04«J man min. per pound. GROUP No. 2 3. Filling pulverizing mills with pitch and rosin. The pitch and rosin should be broken into small lumps before being placed in the mills. Each mill should be filled to its capacity and refilled as soon as possible. The mixtures must be thoroughly pulverized and must be free from lumps when taken from the mill. Standard time for Group No. 2 (operation 3) .0557 man mm. per pound. ^ GROUP No. 3 4. Delivery of mixture to sand mixing machines. As to the pitch and rosin, it is pulverized and the mixture taken from the mill and shoveled into metal tote pans or at times into a large wooden box which has a capacity of six tote pans. The pans or boxes are weighed and then dragged in to the sand mixing machines. It is important that there be a sufficient supply of rosin and pitch binder at the sand mixing machines at all times. Standard time for Group No. 3 (operation 4) .0360 man min. per pound. ,, , , , As the operations in Groups 1, 2 and 3 are all based upon the same factor,— that is, the pounds of mixture produced, they can be considered as one unit. So the total of the standard times for Group 1 (1. Breaking open barrel of rosin or pitch .0403 man. min. (2. Delivery of material .0080 " " Group 2 (3. Filling mills .0557 Group 3 (4. Delivery of binder 0360 Total .1400 M ^ "rA \k .11 176 DEPARTMENTAL EFFICIENCY BONUS GROUP No. 4 Miscellaneous Operations : 5. The refuse which comes from the riddle on the sand mix- ing machine is to be wheeled to the riddle in Dept. IN. The wheel-barrow must be well filled; no time will be allowed unless wheel-barrow is full. Standard time for this operation is 8.00 minutes per trip. 6. Sometimes it is necessary for a man to be sent to the store room for supplies. Time allowance for this operation 5.00 minutes per trip. 7. Sand falls from buckets in elevator and must at times be shoveled into pit. Time allowance for this operation 30 minutes per day. This work should be done as often as it is necessary in order to keep floor clean. 8. For making a general clean-up of the entire floor of IQ so that it is satisfactory to the foreman, an allowance of 30 minutes per day is made. Equipment : 1. Metal wheel-barrow, common foundry type. 2. Short spade. 3. Ordinary pickax. 4. Hammer for breaking lumps of rosin and pitch. 5. Four pulverizing mills. 6. Metal tote boxes; average capacity sixty-two pound mixture. 7. Large wooden box; capacity equal to six tote boxes. 8. Broom. Method of Figuring Bonus: The bonus will be figured daily from a standard tally sheet showing the total pounds of rosin and pitch binder delivered to the sand mixing machines. Time allowance is made for each load of refuse wheeled to IN ; for each trip to store room for supplies, for shoveling sand which falls from elevator into pits, and for general sweeping up of the floor of mixing room, including pas- sageway as far as 2F department. Suppose thirty-one hundred pounds of binder are delivered to mixing machines. The standard time per pound for all operations covering the preparation of the binder is .14 man minutes. 3100 X -14 = 434 standard man minutes. Also four wheel-barrow loads of rubbish were hauled to riddle in IN. 4 X 8.00 = 32.00 standard man minutes. Sand was shoveled into elevator pits in a satisfactory man- ner during the entire day. Allowance 30 man minutes. The entire floor of mixing room was cleaned in manner satisfactory to the foreman. Allowance 30 man minutes. No trips made to store room. FREDERIC A. PARKHURST Total standard man minutes for all operations — 177 1. 2. 3. 4. Preparation and delivery of mixture Wheel into rubbish heap Shovel sand into elevator pit General sweep up 434. 32.00 30.00 30.00 Efficiency Total 526.00 Man's clock card showed 9 hours, or 540 Standard minutes 526 or = 97.5% Actual minutes 540 The bonus for 97.5% efficiency for 9 hrs. in Qass 3 = $.717 The following prices paid as bonus will not be lowered, no matter how long the job may operate, provided the method and equipment specified in this chart are not changed. Differential per 1% efficiency = $.0135 Efficiency 9 hrs. 80 81 82 83 84 85 86 87 88 89 90 Bonus Paid 9 hrs. .480 .494 .507 .521 .534 .548 .561 .575 .588 .602 .615 Efficiency 9 hrs. 91 92 93 94 95 96 97 96 99 100 Bonus Paid 9 hrs. .629 .642 .656 .669 .683 .696 .710 .723 .737 .750 There are many more similar and many more complex problems which have to be solved before the departmental efficiency determinations can be made. I am bringing- in unusual applications of time study and differential bonus so as to illustrate the point that depart- mental efficiency does not always, in fact very seldom, de- pend solely on the average efficiency of all of the direct jobs or operations which may themselves be under bonus. In machine departments, or departments working with purely mechanical apparatus and with material that can be con- trolled by the piece, the application, of departmental effi- ciency bonus is very simple. In the foundries, for example, there are a variety of elements of indirect labor which in themselves represent, in the aggregate, a very large propor- tion of the man hours worked in the plant. These must be brought under control by a scientific analysis and some equi- table scheme of bonus developed to remunerate these men I 178 DEPARTMENTAL EFFICIENCY BONUS for high efficiency, or else to obtain departmental efficiency records, we should have to exclude a tremendous proportion of the hours. This has been done in some plants because it has been considered impracticable or far from economi- cal to take the time to bring these elements under control. Department DiQ referred to above was under observa- tion by two time study men for an aggregate time for them both, totaling nearly four months. The result of the study, however, enabled us to put all of the labor in that depart- ment on bonus, greatly increasing its efficiency and effecting a saving in a short time equal to about 2000 hours per week, or $600.00: or a saving of about $2500.00 per month based on the same volume of business. After all of the various classes of work mentioned above, and all of the direct or indirect operations or jobs have been standardized and controlled through the medium of bonus charts, and men have been trained to work in accordance with them, a department report is issued daily by the tally and time clerks to the time study department. These re- ports are totaled for the week and from them is determined the departmental efficiencies. Based on such records as the foregoing, it is possible to institute the departmental efficiency bonus, which is well illustrated by our departmental and plant efficiency bonus chart 9030D, copy of which follows: DEPARTMENTAL AND PLANT EFTICIENCY BONUS CHART 9030D, FAP 205 Bonus Covered by this Chart is Payable only to Foremen and Department Heads, and in Ac- cordance WITH Instruction 145. The efficiency bonus will be figured for each department separately as fast as bonus in each department will permit of the department reaching an efficiency of at least 60%. The departmental efficiency bonus will be paid every week based on each department's efficiency, irrespective of the efficiency of other departments. On the 15th of every month, an additional bonus will be paid, based on the average plant efficiency of the whole plant. FREDERIC A. PARK HURST 179 The Bonus will be figured in accordance with the following for- mula in which : H h R K Hours paid for in each department or plant. Hours on Bonus, Reciprocal of average efficiency of all jobs on bonus X 100. Constant (2) H =: Department or plant efficiency. h X R + K (H-h) The above formula is the same for both departmental and Plant efficiency, except that the value given to each of the symbols will be the department values in one case and the plant values in the other. The value given to "H" in every case will be the total hours paid for as shown by the clock time cards exclusive of certain hours rep- resented by a list on file with the Local Manager, which are to be de- ducted when figuring each department's and each plant's value for "H." Example of Bonus Figured H = 1242 hours h == 1011 " Average efficiency for all jobs = 92% 1 X 100 R = = 1.088 92 Then 1242 1242 1011 X 1.088 -\- 2 (1242-1011) 1561 .795 X 100 = 79.5% 79.50% pays 15.77% Salary = .795 IM Efficiency % of Salary Paid Efficiency % of Salary Paid 100 25.00 79 15.55 99 24.55 78 15.10 98 24.10 77 14.65 97 23.65 76 14.20 96 23.20 75 13.75 95 22.75 74 13.30 94 22.30 73 12.85 93 21.85 72 12.40 92 21.40 71 11.95 91 20.95 70 11.50 90 20.50 €9 11.05 89 20.05 68 10.60 88 19.60 67 10.15 87 19.15 66 9.70 86 18.70 65 9.25 85 18.25 64 8.80 84 17.80 63 8.35 83 17.35 62 7.90 82 16.90 61 7.45 81 16.45 60 7.00 80 16.00 Differential 1% Efficiency Pay, .45% of Salary. THE ALUMINUM CASTINGS CO. January 1, 1917. i8o m. PLANT EFFICIENCY BONUS 27-B. Plant Efficiency Bonus The determination of the plant efficiency bonus is a com- paratively simple matter, as it is calculated at the end of each month from a summary of the performance of each department for that month. The departmental summary is made up from weekly departmental records mentioned pre- viously in this lecture. The departmental efficiency bonus shown above is paid every payday and for the departmental efficiency for the last preceding week. The plant efficiency bonus is paid on the 15th of each month on the plant efficiency for the pre- ceding month. As previously stated, the determination of these depart- mental and plant efficiencies is one of the last steps to be taken in connection with the installation of scientific meth- ods throughout the operating departments of a plant. By the time the departmental and plant efficiency bonuses are in operation and bonus is being earned under the schedule described in this lecture, substantially everyone in the organ- ization except certain office employees, is participating in some kind of a bonus. Each plant and each department in the plant works in accordance with a list authorized from time to time, naming those who participate in either the departmental or plant efficiency bonus, or both. Likewise, there is a standard list published which controls the number of hours which can be subtracted from the total hours worked in each department or plant before the "H" hours are computed. The following table is a typical example of how the de- partmental efficiency is summarized for each month. The total gives the plant efficiency on which to base the plant efficiency bonus. FREDERIC A. 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