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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: Cleveland. Chamber of Commerce. Title: Employees' incentive plans in Cleveland... Place: [Cleveland] Date: [1921] MASTER NEGATIVE « COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD Cleveland* Chamber of conmeroe*, Conmdttee.on V J^abor relations* . \ Employes* incentive plans in Cleveland indus- tries* Report of the Committee on labor rela- tions of the Cleveland chamber of commeroet J Cleveland, 19 21 3 cover- title, 95 py 23 om« . r. "■ ■ . ■ • - Bibliography: p* 90-91 o MHiiMMHii i RESTRICTIONS ON USE: TECHNICAL MICROFORM DATA FILM SIZE: SSaak. REDUCTION RATIO: \1--\ IMAGE PLACEMENT: lA (m^ IB IIB DATE FILMED: U-H-^M TRACKING # : INITIALS: fil M^M Ol^lSi FILMED BY PRESERVATION RESOURCES. BETHLEHEM. PA. 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C S^^ Columbta lHnibers(ttp f intljeCttpof^togorb LIBRARY School of Business f m Employes' Incentive Plans in Cleveland Industries Report of the Committee on Labor Relations of The Cleveland Chamber of Commerce Approved by the Board of Directors January 12, 1921 ^y..#u^. if^^ '# LABOR RELATIONS REPORTS PREVIOUSLY PUBLISHED, 1. Safety Devices and Factory Organizations for the Pre- vention of Industrial Accidents (1) 1913 2. Violence in Labor Disputes (2) 1915 3. Violence in Labor Disputes, Second Report (2) 1916 4. Industrial Profit-sharing and Welfare Work (1) 1916 5. Two Letters (Correspondence Between County Pros- ecutor and Committee on Labor Disputes) (2) 1916 6. Violence in Labor Disputes, Third Report (2) 1917 7. Substitution of Woman for Man Power in Industry (1) 1918 8. Is the ''Strike Guard'' Ordinance Valid? 1919 9. Method of Collecting Non-resident Alien Income Tax 1919 10. Labor Relations in Cleveland, a Declaration of Principles Establishing a Proper Basis Therefor 1920 IL The Plumbers' Strike 1920 12. Violence in Labor Disputes, Fourth Report 1920 13. The Causes of High Building Costs in Cleveland (3) __ 1920 14. An Argument for Local Boards of Adjustment in Rail- road Labor Disputes (4) 1920 (1) By the Committee on Industrial Welfare, succeeded by the Committee on Labor Relations in 1918. (2) By the Committee on Labor Disputes, succeeded by the Committee on Labor Relations in 1918. (3) By a Special Committee, composed of certain members of the Committees on Industrial Development and Labor Relations. (4) By a Special Committee, composed of certain members of the Committees on Transportation and Labor Relations. EMPLOYES' INCENTIVE PLANS IN CLEVELAND INDUSTRIES Introduction *' Where possible, incentives and opportunities should he of- fered to employes to increase their earning capacity. '* This statement appears in the Declaration of Principles of The Cleveland Chamber of Commerce, adopted in April, 1920, as the Chamber's labor relations plan. A wide range of such incentives and opportunities is found locally, including: (a) Individual incentives — wage payment methods contain- ing incentive features whereby individual ability and ambition are stimulated and rewarded. (b) Group incentives — plans for employes' profit sharing, bonuses and stock ownership. This report' deals principally with Cleveland plans for em- ployes' profit sharing, bonuses and stock ownership. Such plans may be classified as group incentive plans. However, in the light of its study of the subject, the committee recognizes as fundament- ally correct the principle of offering employes individual incentives, based on individual effort and accomplishment. Examples of plans illustrating this principle are therefore included in this re- port. The purpose of the committee in making this study was two- fold : first, to ascertain the policies underlying local profit sharing, bonus and stock ownership plans and the methods employed, and second, to determine what results are being obtained. Nearly 600 firms in the Cleveland district were recently inter- viewed through questionnaires and visits. Approximately 19% reported various plans under the following classifications, here- after defined: Profit sharing plans, Limited profit sharing plans. Bonus plans. Stock sales plans. Basic Principles of Incentive Plans As a result of its study, the committee has formulated several basic principles which, in its opinion, should underlie incentive plans of the types under consideration and without which such plans are unlikely to prove effective : 1. An incentive plan should have as its fundamental pur- pose the increasing of the value of employes' services both to themselves and their employer. 2. Such a plan should serve to promote confidence and understanding between the employer and employes. 3. To that end, the benefits to employes should be sub- stantial and in addition to the current rate of wages. I Employes* Incentive Plans 4. The plan should not represent paternalism or philan- thropy on the employer's part. 5 The participants in the plan should be informed as to the factors affecting the payment and amount of the incentive. 6. They should, preferably, be represented in the admin- istration of the plan. 7 The plan should be designed to meet the needs of each enterprise and accomplish the worthy objects of the employer. 8 The success of any plan is particularly dependent upon the effectiveness of its management. Any plan no mat- t^ how admirable may be its features, will fail unless it is properly managed. Intermediate Objects of Incentive Plans 'As stated above, the fundamental purpose of an incentive plan should be to increase the value, both to the employer and employes of the employes' services. Many intermediate objects of incentive plans are iUustrated throughout this report. They include : in- ceased productive efficiency, reduced labor turnover, prompt and regular attendance, loyalty, interest in work, thrift and self -devel- omnent. Wherever, under existing wage systems, these factors are not given due weight it is the proper function of incentive plans to remedy this situation. Definitions A Cleveland individual incentive plans may be defined as offering incentives to individual employes based on their accom- plishment, individuaUy or in small groups, measured by prede- termined standards of production. B. Cleveland group incentive plans may be classified and de- fined as follows: 1 profit sharing plan, a profit sharing plan contem- plates an agreement between an employer and his employes whereby the latter receive, in addition to wages, a prede- termined proportion of the profits. 2 limited profit sharing plan. In a limited profit sharing plan, it is provided that certain employes or classy of employes will receive, in addition to wages, a predetermined proportion of the profits. 3 bonus plan, a bonus plan provides for the distribu- tion to employes of sums in addition to wages, which sums are not based upon a predetermined percentage of the profits but, in general, are given as rewards. 4 stock sales plan, a stock sales plan is provided by certain corporations whereby the purchase of company stock by employes is facilitated. Introduction 5 Arrangement of Data Many Cleveland group incentive plans are hereafter described in detail under the four main classifications of profit sharing, lim- ited profit sharing, bonus, and stock selling plans, accompanied by summaries for each classification. Certain individual incentive plans have been selected to illus- trate the principles underlying this class of employes' incentives. The Chamber of Commerce has on file supplementary data which are available to employers, employes and students of indus- trial relations. Edgar E. Adams H. B. Bole N. J. Clarke J. 0. Eaton Charles E. Denney Richard A. Feiss R. J. Frackleton Alfred Fritzsche Hugh FuUerton F. M. Gregg S. H. HaUe A. T. Hills C. W. Hotchkiss John G. Jennings Crispin Oglebay H. C. Osborn Melvin Pattison Robert E. Power Alexander Printz H. A. Rock F. W. Smith W. B. Stewart Stephen W. Tener W. H. Thompson E. G. Tillotson Whiting Williams COMMITTEE ON LABOR RELATIONS, By W. B. McAUister, Chairman. December 1, 1920. V CLEVELAND INDIVIDUAL INCENTIVE PLANS TYPES (1) Aluminum Manufactures, Inc. (2) The Columbia Axle Co. (3) The Printz-Biederman Co. (4) The Wellman-Seaver-Morgan Co. (5) The White Sewing Machine Co. (6) The Van Dom Iron Works Co. SUMMAEY Cleveland Individual Incentive Plans ALUMINUM MANUFACTURES, INC. 2800 Harvard Avenue PRINCIPAL business: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of aluminum castings. 250-275 (Cleveland Plants) 1912. CHARACTER OP THE WORK: The company produces aluminum eastings of all kinds. The work is largely jobbing or semi-jobbing. The automotive industry takes a consider- able portion of the company's product. PRODUCTION STANDARDS: Standards are set by time study for jobs operating on the bonus plan. They are guaranteed against reduction for any reason except change of method. Owing to the changing nature of the industry, the standards are rarely in force for more than two years. The workmen may protest standards believed to be unfair. Such stan- dards are either checked by time study or an effort is made to convince the workmen of their fairness. The nature of the work is such that a gang or group of employes may work on an operation. In this case, the standard is set for the production of the group. INSTRUCTION : The instruction of new employes is not an important problem. Crafts- men such as molders are expected to be skilled in their craft. Such instruction, as is necessary, is given by the foreman, superintendent and others. Much help is given by the time study analysis. RETAINER PAY: The employe receives wages, at his hourly rate, until such time as he is able to earn a bonus. PAYMENT OF INCENTIVES: The employes are classified according to their skill and the character of their work. A standard bonus, which may be earned by accomplishing 100% of a standard task, is set for each class. A differential bonus based on the standard bonus is given for producing 80% or more of the standard task. The bonus is computed as follows: It is assumed that the employe would receive a bonus, equal to 10% of the standard bonus, if he produced 50% of the standard task. The bonus increases according to this relation as the pro- duction approaches 100% of the standard task. In order to increase the in- centive value of the plan, bonus is not usually paid until the employes' produc- tion is at least 80% of the standard. There are instances, however, when bonus is paid for 60 or 70% accomplishment. The incentive, to exercise great dili- gence and acquire skill, is much greater if no bonus is given until the employe produces a substantial amount than it would be if a small bonus were given for accomplishing 50% of the standard task. The relation, which governs the amount of bonus which may be earned, may be expressed mathematically as follows: b = (9/5x — .80) B Where *'b** is the bonus earned, ''x*' is the ratio of the amount actually produced to the standard task and ^'B'' is the standard bonus given for accomplishing 100% of the standard task. The standard bonus has no direct connection with the employes' base rate. The company pays the current rate for labor. The basic hourly wage rates for a given class of labor may vary from time to time in accordance with the 10 : Employes* Incentive Plans Cleveland Individual Incentive Plans 11 law of supply and demand but the standard bonus for that class remains unchanged so long as existing jobs continue. However, it may be reduced on new work. All bonus payments are in addition to the employes' basic hourly wages. In order to enable the workman to compute his earnings easily, a bonus schedule appears on the bonus card for each operation. GUARANTEE OF EABNINGS: It is guaranteed that the employes wiU receive at least their hourly wages. IDLE time: Idle time, due to causes over which the employe has no control, does not affect his ability to earn a bonus. The employe receives payment for such idle time at his hourly rate but his efficiency is computed only on the basis of his working time. MAINTENANCE OF QUALITY: The method has not increased the amount of scrap or the cost of inspec- tion. The employes understand that no bonus is paid for work spoiled be- cause of faulty workmanship. It is stated that they are debited for all scrap for which they are responsible. EMPLOYES PRODUCTION RECORDS: The employe's job ticket is the original record of his production and is the authority for bonus payments. A list of the hours worked on bonus and the percentage of efficiency is made daily. RESULTS REPORTED BY THE EMPLOYER: Under this system, the employes wages are 30% to 60% greater than their day wages. On 271 operations, production increased 86.8%, and costs were reduced 31%. While the employes were suspicious of the methods at first, the more ambitious men now like it THE COLUMBIA AXLE CO. 850 E. 72nd Street PRINCIPAL business: NUMBER OF PEOPLE EMPLOYED: PLAN WAS established IN: Manufacture of automobile axles. 700. 1916. CHARACTER OF THE WORK: The company manufactures many styles of automobile axles. The work is sufficiently repetitive to permit the determination of accurate standards* PRODUCTION STANDARDS: A production standard is determined for each operation by time study. As far as possible, the study is taken on a workman of average ability. All studies are taken in the workman's presence and every effort is made to convince him of the fairness of the methods and the correctness of the standards. In determining standards, due allowance is made for set up time, fatigue, time required to change work ticket and other similar factors. The operator may protest production standards which he considers un- fair. At his request, such standards are checked by further time study or past records. If it is necessary to set a temporary standard, the workman's time card is plainly stamped "Temporary." Such standards are usually set for one month. The piece rate method of wage payment has been applied to all stand- ardized work which includes approximately 94% of the direct and 40% of the indirect labor. INSTRUCTION : The instruction of the employes rests with the foreman. No instruction cards are issued to the workman, except the blueprint of the piece on which he is working. If the employe consistently fails to produce the standard quantity, and the standard has been previously proven correct, his performance may be checked by time study. Further instruction regarding the performance of those elements of the operation on which the employe is slow, is then given. If the employe is constitutionally unfit to satisfactorily perform the operation, he is first transferred to other work. If unfit after second trial, he is re- leased. RETAINER PAY: New employes or employes transferred to new operations may work one week at their basic hourly rate. After this time, they are expected to accom- plish at least the standard production. PAYMENT OF INCENTIVES: On the basis of the production standard, a piece rate is so set for each operation as to enable the employe to earn from 30% to 70% more than his basic hourly wages. The base wage is stated to be the * * low going-wage ' ' for the required class of labor. The piece rate then is: P. E. = Basic Hourly Wage . X F Standard Hourly Production The factor F varies from 1.3-1.7. The employes are paid their basic hourly wages plus the excess of their piece rate earnings over their basic wages. The piece rates are guaranteed against any cut until the following Jan- uary, unless the method of operation is changed. In the past, the average earnings of piece rate workers have been from 40 to 90% greater than their base wages. GUARANTEE OF EARNINGS: It is guaranteed that the employes will be paid at least their basic hourly wages. IDLE TIME: In case of idleness due to machine break-downs or other causes beyond the employe's control, he is transferred to a new operation or paid for the time involved at his base rate. MAINTENANCE OF QUALITY: The cost of inspection is less than under the day work method. The pro- duction incentive and the fact that no payment is made for spoiled work produce a more careful and skillful workman. Under this method, the first piece produced is inspected on each opera- tion and other pieces checked from time to time. All pieces receive a final inspection. EMPLOYES PRODUCTION RECORDS: The operation tickets called a ** Piece Work Productive Ticket" furnish a record of each employe's production. I' , II I 12 Employes' Incentive Plans BBSULTS REPORTED BY THE EMPLOYER: The eflSciency and morale of the men have been greatly increased by this method of wage payment They are apparently satisfied with its fair- During the years from 1914 to 1920, the earnings of the employes increased 185-190%. Unit labor costs increased less than 10%. So far during 1920, the productive hours per unit have been lowered about 20%. The plan was eminently successful for several years prior to the estab- lishment of a Workman's Committee which has been in effect approximately one year. THE PRINTZ-BIEDERMAN COMPANY W. 6th and Lakeside Avenub PRINCIPAL BUSINESS: NUMBER OP PEOPLE EMPLOYED: FLAN WAS ESTABLISHED IN: Manufacture of cloaks and suits. 800. Bonus Plan — 1st one, Fall 1917: Guaranteed Pay, Fall 1918. There are certain features common to the following wage incentive plans. 1. Setting of the standard time based on scientific time studies. Guarantee against cutting of the standard time. Payment for idle time and day work. Production bonus for attaining standard production. In addition to these features, a Service Bonus is paid. 2. 3. CHARACTER OF THE WORK: The work is subject to the seasonal fluctuations in the volume of businessi, and to the changing styles. However, many of the fundamental operations entering into the manufacture of cloaks and suits, are the same regardless of ■tyle. PBODUcnoN standards: The standard time is determined for each operation by time study of the elements, comprising the operation. These elements are recorded and care- fully analyzed to determine the best method of doing the work, the time required and the nature, extent and cause of any variation in time. From this analysis, the standard times are applied by arranging the various related elements in the proper sequence. In this way, standards on each new style are obtained by determining what must be done, and grouping the elements accordingly. No standard is accepted as final, until it has been explained satisfactorily to the conmiittee of the employes. After this, if an employe feels that the standard is unfair, it is again taken up, and adjusted, if necessary. Employes are guaranteed against a cut in the standard, unless new methods and improvements are introduced. INSTRUCTION : Instructions are written for each operation, based on the information obtained from the time standards. These instructions are used by the foreman as a basis for instructing the employes. XBTAINXB PAY: Employes working under a guaranteed pay system, who are obliged to work on an operation of a lower class, are given an hourly retainer to cover the difference between the base rate of the two operations. Cleveland Individtial Incentive Plans 13 When employes are asked to do work of the same or higher class, with which they are not familiar, they are paid temporary retainers suflficient to prevent any loss in earnings. For example: Under the guaranteed pay sys- tem, the following retainer is most frequently used: The first nine hours — an hourly retainer of 70% of the standard hourly rate The second nine hours— an hourly retainer of 40% of the standard hourly rate The third nine hours — an hourly retainer of 10% of the standard hourly rate PAYMENT OP INCENTIVES: Tosh and Bonus Plan in the Cutting Department The following plan is considered best suited to this department, be- cause of the high uniform skill of the men and the importance of maintaining quality in this work. 1. Jobs are divided into classes and an hourly rate is set for each class. - . 2. The standard time is set, from the classified data, for each in- dividual job. If the work is done in standard time or less, a produe- tion bonus of 25% of the standard time is given. This tends to keep the efficiency at a Httle above 100%, as no bonus is given for efl&cieney less than 100%, and it isn't worth while to speed up unduly. Thus quality is protected. Tasic and Bonus Plan in the Operating Departments The following plan was established in 1918, in the tailoring departments, as a temporary measure to increase production, and afford the employes an opportunity to earn more money. The time standards were set only tem- porarily at that time. Accomplishment 1. 130% of standard time 2. 115% of standard time 3. 100% of standard time 4. 85% of standard time Bonus Beceived 5 ^ per hour 7 ^ per hour 10 ^ per hour 13.1^ per hour Guaranteed Pay System The following system is being extended throughout the tailoring depart- ments, as fast as the final standard times are completed. 1. A TniniTniiTn hourly rate is set f oj each class of operation. 2. A standard hourly rate is set which is 25% higher than the minimum. 3. The piece rate for an operation is set by multiplying the stand- ard time by the standard hourly rate. 4. This piece rate is the basis of payment while there is work avail- able. . 5. For an efficiency of 100% or more on all 3obs completed during the day, a production bonus of 6 cents per hour is paid in addition to piece work earnings. 6. Employes are given 50 cents a day for perfect attendance. GUARANTEE OF EARNINGS: Employes, operating under the task and bonus plan, are paid by the hour when there is no work available. ^ ^ Under the guaranteed pay system, the employe is paid at the mimmum hourly rate for work which has no production standards. IDLE TIME: Employes are paid for idle time due to causes beyond their eontroL Under the guaranteed pay system, they are paid at their minim u m hourly rate. 14 Employes' Incentive Plans Cleveland Individual Incentive Plana 15 >l (i- 1 MAINTENANCE OP QUAIiITY: The correction of faulty workmanship must be made by the employe on Ms own time. EMPLOYES PRODUCTION RECORDS: Daily reports, showing the production of each employe compared to the standard production, are received by the management, enabling them to investi- gate low efficiencies to determine whether the employe receives the right instruc- tions and is fitted for the job, and high efficiencies to insure the maintenance of the proper standards of quality. RESULTS REPORTED BY THE EMPLOYER: The ability to measure the output of the individual has helped to in- crease the production of the plant, in some departments as much as 50%. By taking upon itself the responsibility of idle time, the management has instilled greater confidence in the employes and has broken down one of the objections to the Piece Kate System. By checking up the individual efficiency, the management has been better able to place the employes in positions for which they are best fitted and has eliminated from the organization those who were unwilling to produce. By standardizing the work and finding the best way of doing it, foUowed by more definite instructions, a better quality has been maintained. THE. WELLBIAN-SEAVER-MORGAN CO. 7000 Central Avenue PRINCIPAL business: number OP PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of heavy machinery. 600. 1917. CHARACTER OP THE WORK: The company manufactures, to order, a varied line of heavy machinery. The characteristics of the work are to a large extent those of a jobbing busi- ness. PRODUCTION STANDARDS; Owing to the fact that the work is large, the number of machines on an order is usually small and the work is not to any extent repetitive, the com- pany does not consider it practical to set standards by time study except in special cases. In general, the production standards are the estimates of ex- pert mechanics. A production standard once set is not reduced unless there is a change of method. The company believes that this policy is fundamental to the suc- cess of its plan. If an employe believes that a standard is incorrect, he may protest. An investigation of his method of performing the operation is then made. If the employe can prove that the standard is wrong, it is properly adjusted. It is recognized that much of the plan's effectiveness depends upon the receiving of a substantial bonus for exceptional production. INSTRUCTION: The work requires highly skilled mechanics, directions, no instruction is necessary. Excepting the foreman's RETAINER PAY: Eetainer pay is not necessary. The workmen must be able to set up their work. They are paid at their hourly rate for such work. PAYMENT OP INCENTIVES: The employe is paid, in addition to day wages, 50% of the value, at his hourlv wage rate, of the standard time saved. , , ^^ x Employes are hired at a basic hourly wage which is at least the current market rate. GUARANTEE OP EARNINGS: It is guaranteed that the employes will earn at least their basic hourly wages. IDLE time: Idle time, due to causes other than the employe's negligence, does not affect the earning of a bonus. The employe is paid for such time at his hourly rate. MAINTENANCE OP QUALITY: The method has not affected the quaUty of the work nor increased inspec- tion costs. • EMPLOYES PRODUCTION RECORDS: Eecords are kept which give a check on the productivity of each work- man. RESULTS REPORTED BY THE EMPLOYER: It is estimated that this method has reduced the required operating time on the average job 20% to 50% and that the earnings of bonus workers are 20% to 70% above their day wages. .u :, ^ ** v ♦!.«+ +1,^;, The more ambitious workers like the method and often ask that their work be put on bonus. THE WHITE SEWING MACHINE CO. E. 79th and St. Clair Avenue PRINCIPAL BUSINESS: NUMBER OP PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of sewing machines. 500-750. 1918. CHARACTER OP THE WORK: The product is well standardized, repetitive and production standards can be easily determined. PRODUCTION standards: Production standards are determined for the various operations by time study of their elementary operations. The standard performance time is ex- pressed in points. Each point is equivalent to one minute. For a job whose standard performance time is 30 minutes, the equivalent would be 30 points. The production standards are guaranteed against reduction, except m case of change of process. It is sometimes necessary to set temporary stand- ards for new models but such standards are clearly marked temporary and are not officially posted. ^ . « , ^ -, j ^ ^ Employes may protest standards considered unfair. Such standards are investigated and changed if found incorrect. INSTRUCTION : The instruction of employes, regarding the performance of operations, is given by the job foreman or the machine setter. 16 Employes* Incentive Plans BKTAINKE PAY: Employes, learning new operations, or new employes receive hourly waeea until they are proficient. J & PAYMENT OP INCENTIVES: Each employe is hired at a basic hourly wage rate, which corresponds to the ^rrent market wage for the class of labor required. The value of the production points varies with each employe and is equal to hia basic hourly rate divided by 60. ^ As an employe completes a job, he is credited with the equivalent num- ber of points. His operation tickets record the number of points accumu- lated to his credit during a work period. In addition to his day wages, the employe receives 75% of the value of all points credited in excess of the number of points, which is standard for the work period. The remaining 25% w divided among supervisory employes such as job setters and job foremen. For an eight hour day, the standard number of points is 480. Expressed mathematically the employes earnings are: Earnings = (H X ») + .75 (P — S) R/60 = (H X R) 4- -0125 (P — S) B 4. ^of/I?" ^ *^® number of hours worked, **R'Mhe basic hourly wage ff?/, . ^1. number of points accumulated during the work period and » is the standard number of points for the work period. As the production standard is higher than the average production ob- tained under the day work system, the company saves the day work labor cost of any difference in production between the day work average and the the standard, and all of the overhead charge on any increased production. If an employe has averaged 60 points or more per hour during any four guccessive days, he is thereafter credited with 70 points for each hour worked on jobs which have no production standards. GUARANTEE OF EARNINGS: It is guaranteed that the employes wiU not earn less than their basic hourly rate. Those who are habitually unable to earn a premium, are trans- ferred to other work. IDLE time: Employes, who have averaged 60 points or more per hour during any four successive days, are credited with 70 points per hour for all idle time not due to their negligence. maintenance op quality: The company believes that the operation of this method has not tended to reduce the quality of the product. employes production records: The time study department is notified daily concerning operations whoso ■tandards are not being met. Such standards are immediately investigated. BBSULTS REPORTED BY THE EMPLOYER: The older employes objected to the system at first. AU employes are now apparently well satisfied. There has been a very satisfactory increase in production. Note: The Brown Hoisting Machinery Company and The Hydraulic Pressed Steel Ck)mpany are installing similar plans. ill; Cleveland Individual Incentive Plans 17 THE VAN DORN IRON WORKS CO. 2685 E. 79th Street principal business: NUMBER op people EMPLOYED: PLAN WAS established IN: Manufacture of steel office furniture, steel lockers, shelving, automobile frames, joist hangers and miscellaneous con- tract work. 1150. March, 1919. character of the WORK: The office furniture line is standard and quite repetitive. The automo- bile work IS largely repetitive but it is subject to the constantly cSngrg conditions m the automotive mdustry. The contract work presents the usual difficulties to the determination of production standards encountered S non-repetitive work standard machine shop operations, shearing, notch3 en^e^% ""^^ ""^^ assembling, riveting, spot Welding, |is weldSf,' PRODUCTION STANDARDS: The production standard for an operation is determined by time studv of Its elements. The standard time includes a suitable alloZnc! fTUS changing time cards, setting up the machine and similar factors It IS guaranteed that the standard time per unit will not be reduced un- less the method of operation is changed. xeuucea un The employes have the privilege of protesting against any standards which they consider unfair. Such standards are investiglted and if n^es^r? checked by further time study. ^ ' necessary, INSTRUCTION : The instruction of employes rests with the foreman A rate sheet is issued for each part, to each foreman in charge of any operations on the part. The rate sheet gives a description of each operat^^/ the number of the department in which the operation is performed the nZ- ber of the machine on which it is performed, the hourly production at wS the premium rate starts, and the price per piece given'^r tS ttmf stdy trT"" "^^^^'^^^ ^'^ ^^^^^^^^^ ^' ''^ ^^^^^^^ - In case the employe can not maintain a satisfactory rate of production and the correctness of the standard has been established, a time stujy of the operation is made to determine which elements are consUing more th^ the standard time. The employe receives further instruction i/ the Leth^d of performmg these elements. luetnoa or Employes who are constitutionally unable to produce at a satisfactorv rate, are transferred to other operations for which they are adapted. ^ RETAINER PAY: ^^Employes are paid their basic hourly wages while learning an opera- PAYMENT OP INCENTIVES: is so^sVthat r"'' ""^ **"" production standard, the piece rate for an operation *h. a^^A ^ *^! employe produces at a rate which is less than 70% of the standard rate of production, he receives only his basic hourly wage ofo P\ If the employe produces at a rate which is over 70% of the standard rate of production, his earnings give him a slight premium over his basic hourly wages. As his rate of production increLes hS earnings continue to increase. ^creases, nis r » ^■'!||i' 18 Employes* Incentive Flans (3) When the employe produces at a rate which is 100% of the standard rate of production, his premium earnings are approximately 25% more than his basic hourly wages. The basic hourly wage is approximately the market rate for the class of labor required. GUAKANTEE OP EABNINQSt The company guarantees that the employe will not earn less than the base wage at which he is employed. IDLE time: Employes are paid at their basic hourly rate for idle time due to causes beyond their control, such as lack of work, machinery breakdowns or other delays of a similar nature. MAINTENANCE OP QUALITY : The piece price is not paid for work, spoiled because of faulty workman- ship. In flagrant cases of spoilage, the employe may forfeit his piece work earnings in excess of his guaranteed day wages at the discretion of the man- agement. EMPLOYES PRODUCTION RECORDS: ^ A daily production report is made from the employees time cards, and is sent to the Superintendent of each production center showing: (a) The employe's number (b) Part number (e) Operation number (d) Total pieces produced (e) Hours worked on the operation (f ) Pieces per hour representing 100% production (g) Pieces per hour actually produced (h) Past hourly production — ^high and low. This record not only checks production but it enables the management to detect inaccuracies in its standards. i« j ^ v A further check on the accuracy of the standards is afforded by a "Prffliiium Work Summary,- a record of performance for each operation on each part, which collects the following data. (a) Order Number (b) Operator's number (c) Part number (d) Output (number of pieces produced) (e) Hours (time taken to complete the number) (f ) Pieces per hour (g) Machine number (h) Date operation was worked on No record is kept of the individual workman's efficiency. RESULTS REPORTED BY THE EMPLOYER: The Company has noticed a marked improvement in the results obtained by the various departments. Production has increased but ^^^ ff"« ^l^^f^^^^ of work is being maintained. There is less supervision required as each man s increased earnings are dependent upon his own efforts. Cleveland Individual Incentive Plans 19 SUMMARY OF INDIVIDUAL INCENTIVE PLANS The essential feature in plans of this type is the offering of individual incentives based on aceomplishment. An equal opportunity is afforded to aU workmen to increase their earning capacity and better their condition through the exercise of greater diligence in the performance of their tasks and in the perfection of their skill. The payment of incentives, based on accomplishment, presupposes the existence of some production standard by which such accomplishment can be measured. Analysis of individual incentive plans indicates that in most instances : (1) Such standards are determined by time study, whenever practical. Time study IS understood to mean (a) the analysis of an operation into its elements and the determination of the best methods, (b) the scientific de- termmation of a standard time for each element, (c) the study and synthesis hi these elemental times, (d) the determination of a standard operation time mcluding due allowance for fatigue and necessary delays. ' (2) The determination and recording of elemental times is done in the workman s presence. He is informed of the reasons for taking the time study and his co-operation enlisted. (3) Time studies are based on an average workman's performance. (4) Great care is exercised to insure the accurate determination of pro- duction standards. The employes are guaranteed the full benefit of their earning power without fear of an increase of the production standard, unless a change of method is made. The instruction of the workmen, in the best method of performing an operation, is correlative with the determination of production standards Proper instruction is usually an important factor in the success of an indi- vidual incentive plan. In some cases, the employes receive a retainer, often a certain guaranteed proportion of their wages, for a limited time while thev are learning an operation. ^ There are many methods of applying the principle of payment in pro- portion to productive ability. The principal methods, offering incentives for mcreased production, are: (1) Straight Piece Work The workman is paid a certain price per piece for each piece produced. (2) Guaranteed Piece WorJc Similar to straight piece work except that the employes' basic hourly wages and the production standards are guaranteed. (3) Differential Pilece Work »,n„.i^ ^'^"^^ ""l*® 'l.^- ?®* *\^* *^^ employe will earn approximately his basic hourly wages by attaining the production standard. Payment for all pieces produced m excess of the standard, is made at a much higher rate. (4) Contract Work Certain employes submit bids for a job. The lowest bidder is guaranteed his basic hourly wages and, on completion of the work, receives the excess, u any, of the contract price over wages received. (5) Time Work With Production Standards Each job is time studied and individual records of efficiency posted periodically. Discharge, lay-offs, promotions and wage increases are made on the basis of these records. (6) Time Premium Plan A standard production per hour is determined by time study. The em- compVt^!''''' '^''^ ^^^' ^* ^ ^'''''^^ '^^' ^""^ ^'^^ production hour 14 ' 20 Employes* Incentive Plans Cleveland Individual Incentive Flans 21 I (7) The Ealsey Fremium Plan A standard time is set for each job. The employe receives his basic hourly wages plus a certain percentage of the value, at his hourly rate, of the time saved. (8) The Bowan Premium Plan The workman receives his hourly wages plus a premium equal to the value, at his hourly rate, of the time actually taken, multiplied by the ratio of the time saved to the standard time. (9) Gantt Task and Bonus Plan If a given task is completed within the standard time, the employe re- ceives, in addition to his basic hourly wages, a premium equal to a certain percentage of the value, at his hourly rate, of the standard time. (10) The Parkhurst Differential Bonus Plan A standard bonus, which may be earned by accomplishing 100% of ft standard task, is set for each class of employes. Graduated bonuses based on the standard bonus, are paid for accomplishing given proportions of the standard task. (See Aluminum Manufactures Plan.) (11) The Emerson Efficiency Plan When the employe's efficiency, considered to be the percentage of the standard time to the time actually taken is 66-2/3%, he receives a small bonus. As his efficiency increases, the bonus increases rapidly. (12) The Premium Point System The standard performance time for an operation is ejcpressed in points Each point is equivalent to one minute. The value of a point is equal to the employe's basic hourly wage rate divided by 60. In addition to hourly wages, the employe receives the value of all points accumulated in excess of the standard number of points for the work period. (13) The Diemer Bonus and Premium Plan A variant of the Gantt and Halsey methods. Many concerns guarantee that their employes' earning capacity will not be impaired because of new methods or other causes beyond their con- trol. In some plans, it is guaranteed that the employes will not be paid less than their basic hourly wages while in others they are paid their basic hourly wages for time lost due to insufficient supply of work, unavoidable idle time, work for which there is no production standard, and similar conditions. Guar- antee of earnings usually strengthens the workman's confidence in the fair- ness of such plans, and meets a common objection to the offering of wage incentives. In general, experience does not show that the offering of incentives depreciates the quality of the product nor greatly increases the cost of in- spection. Specialization, the offering of an incentive and, in most instances, the fact that no payment is made for spoiled work, often increase individual skill and the quality of the work. As a further incentive, many concerns maintain records of employes' pro- ductive efficiency. These serve as a basis for promotion, transfer and dis- charge, and enable the management to check the daily performance of the workmen and the accuracy of standards. In some instances, individual incentive plans have increased produc- tion 25% to 100%, wages 20% to 90%, and have reduced costs 10% to 30% or more. The majority of the successful plans observe the following principles: (1) The best production methods and standards are determined, pre- ferably by time study or other scientific methods. (2) Provision is made for the instruction of the workmen in the proper performance of these methods. (3) The standard production time, once set, is not reduced unless the operation method is changed. (4) Wage incentives are offered for increased production. The methods of payment are designed to meet the needs of each individual business. (5) Employes are paid their basic hourly wages for day work and idle time not due to their negligence, provided they are required to remain in their work places. (6) In many instances, employes' production records are maintained as an aid to promotion and discharge, a check on individual production and the accuracy of standards. f. CLEVELAND PROFIT SHARING PLANS TYPES 1. The Browning Company 2. The Underwood Typewriter Company (branch) 3. The Willys-Overland Company (branch) 4. The Cleveland Twist Drill Company 5. The Astrup Company 6. The W. S. Tyler Company SUMMABY Cleveland Profit Sharing Plans 25 THE BROWNING COMPANY 16226 Waterloo Boad FBINOIPAL business: NUMBER OP PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of locomotive cranes. 600. 1917. I \: !:|l ' ELIGIBILITY TO PARTICIPATE: In order to participate, the employe must have been on the payroll con- tinuously for three months prior to the close of the profit sharing period, and must still be in the employ of the company on the date of payment of the profit share. Subject to this condition, all employes, including company officers, are eligible. EXTENT OP PARTICIPATION: Approximately 96% of the employes participate in the plan. DETERMINATION OP THE FUNDS AVAILABLE POR DISTRIBUTION AMONG THB EM- PLOYES : At the end of each quarterly period, there is set aside out of the net profits, exclusive of taxes, an amount equal to 1%% on the outstanding capital stock and surplus as a fair return on the invested capital. Ten per cent, of the remaining profit is then set aside for distribution among the employes. DETERMINATION OP THE INDIVIDUAL SHARE: The profit sharing fund is pro-rated among the employes on the following basis: Those employed more than three months but less than one year share in the ratio of their total salary for the profit sharing period to the total amount of salary and profit sharing allowances of all of the employes par- ticipating. Those employed between one and two years share on the basis of their total salary plus an allowance of ten per cent, for the purpose of computing their profit share. Each year thereafter an additional allowance of ten per cent, is added for the purpose of computing the profit share. When the employe has served continuously five years or longer, his profit share is computed on the basis of his salary plus an allowance of 50%. Except as above described, there is no limit on the amount of the em- ploye's profit share. PAYMENT OP THE PROPIT SHARE: The profit share is paid, by check, on the first pay day in February, May, August and November. FORFEITURE : Employes leaving voluntarily or by discharge, forfeit their right to the profit share for the current period. The amount forfeited is distributed to eligible employes. Employes, who are necessarily laid off, receive the profit share earned by them during the current period. If reemployed, they retain their former status as to length of service. Sickness, death or layoff has no effect on the right to participate in the profits for the current period. ADMINISTRATION OP THE PLAN: In connection with the profit sharing plan, there is a system of employe representation. Two representatives (one for the day force and one for the night force) are elected by employes of each department. These representa- tives meet regularly, twice each month, with an official of the company and make recommendations on all appropriate subjects. 11 M 26 Employes* Incentive Plans The employes, through their representatives, can verify the company's statement of the profits. The profit sharing plan may be modified at the discretion of the board of directors. BHASONS GIVEN FOB THE INSTALLATION OP THE PLAN: It is stated that the installation of the plan was prompted by * * intelligent selfishness.*' It was believed that tiiese means would prove effective in creating a spirit of co-operation and good will among the employes for the good of the whole organization. RESULTS REPORTED BY THE EMPLOYEE: A fact which is largely attributed to the above plan, the average annual production of pounds per man during the two years ending June 30, 1920, as compared with the year ending June 30, 1918, increased 26.7%. During this two year period turnover was radically reduced. The employes are apparently enthusiastic over the plan. THE XTNDERWOOD TYPEWRITER COBIPANY (Branch Office) 820 Huron Road PRINCIPAL business: Typewriter sales office. number op people employed: 6760. Cleveland office — 65. PLAN WAS established IN: 1916. m ELIGIBILITY TO PARTICIPATE: All employes who have two or more full years of service on December 31st of any year and are still employed on April Ist next, participate in the dis- tribution for the year. EXTENT OF PARTICIPATION: In 1919, 46% of employes participated. DETERMINATION OP THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE EM- PLOYES : Twenty per cent, of the net profits, excluding amortization funds and dividends, is set aside for employes. Of this 20%, five parts go to group No. 1, composed of employes having five or more years of service, three parts to group No. 2, having from three to five years, and two parts to those employed from two to three years. DETERMINATION OF THE INDIVIDUAL SHARE: The profit share for eaith group is divided among its members on the basis of wages earned. Each member is entitled to a share based on his wages in proportion to the total wages of the group. This share is credited to the employe's account. t PAYMENT OP THE PROFIT SHARE: The credits to the employes are made April 1st and form a fund for purchasing stock of the company for the employes. FORFEITURE : Any person selling his stock without consent of the trustees of the profit sharing plan forfeits his profit sharing rights for one jear. In case of death, the employe's estate receives the full amount standing to his credit. Cleveland Profit Sharing Plans 27 ADMINISTRATION OP THE PLAN: The employes have no voice in the administration of the plan. Five trustees have been selected by the board of directors of the company. These trustees receive and handle the funds to be distributed to the employes. The decision of the trustees is final in matters relating to the fund. STOCK PURCHASING FEATURES: As soon as the credits of any employe reach a sufficient amount, the trustees invest the money in the common stock of the company. Liberty Bonds or other good security. Stock of the company is sold to the employe at the market price. Each year, including 1919, an extra dividend in addition, and equal, to the regular company dividend has been paid, by the trustees, to all employes holding their stock through the year immediately preceding. This extra dividend was forfeited if the stock was sold or the employe resigned or was discharged. He may withdraw all other sums on three months' notice with the approval of the trustees. REASONS GIVEN FOR THE INSTALLATION OP THE PLAN: It was intended to create a fund for use by employes or their families in case of sickness or death; to promote closer relations with employes; and to share with them the results of their own increased efficiency. RESULTS REPORTED BY THE EMPLOYER: It has obtained the co-operation of the employes and has aroused their interest in the welfare of the company. THE WILLYS-OVERLAND COMPANY (Branch Office) 6604 Euclid Avenue PRINCIPAL BUSINESS: . NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Automobile sales and service. About 20,000. aeveland office— 110. January, 1919. ELIGIBILITY TO PARTICIPATE: Every employe of six months or longer is eligible to participate. EXTENT OF PARTICIPATION: Not stated. DETERMINATION OF THE #UNDS AVAILABLE FOR DISTRIBUTION AMONG THE EM- PLOYES: After setting aside out of the net profits 7i/^% on the permanent capital, (the net book value of assets, not including good will, patents, trade marks, etc.), as a return to capital, 3% to cover depreciation, and 1% as a contingency fund, the company divides remaining profits equally between the stockholders and employes. DETERMINATION OF THE INDIVIDUAL SHARE: The employe's share is pro-rated among the individual employes on the basis of the wages earned by them during the profit sharing period. When the employes' share of the profits for a given profit sharing period is 6% to 8% of the total wages, 6% of his wages for the profit sharing period is credited to each employe, except that he does not receive a share equivalent to less than four cents per hour for each hour worked. When the employes' share is 8% to 10% of the total wages, 8% of his wages is credited to each employe except that no employe's share is less than four and one-half cents per hour. 28 Employes* Incentive Plans Cleveland Profit Sharing Plans 29 i! men the employe's share is 10% or more, 10% of his wages is credited to each employe except that no employe 's share shall be less than five cents per hour. In any period, the excess of the amount credited to each employe is carried to his credit until the foUowing March, when a final adjustment is made. The books are closed for the year on December 31st. PAYMENT OF PEOFIT SHABIS: Profit shares are paid in cash. Distributions are made in April for January, February and March, in July for April, May and June, in October for July, August and September, «nd on December 24th for October and November. The December profit share IS paid m March together with the excess from previous distributions and the adjustments between books and inventory. PORFEITUBE: Employes who are discharged for cause or who are absent two consecutive days or three tmies in thirty days without an acceptable excuse, forfeit their profit sharing privileges. Disposition of the sums forfeited is decided on the merits of the case by ABMINISTEATION OP THE PLAN: The plan is administered by the ** 60-50 Division'' consisting of five men elected by the factory employes and five men selected by the company. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: It was desired to improve the relations between the company and its employes and to enlist the employe's co-operation. RESULTS REPORTED BY THE EMPLOYEE: It is believed that the plan has improved the company's labor relations and increased the individual efficiency, though this is hard to prove in view of the peculiar conditions existing during the past year. THE CLEVELAND TWIST DRILL COBIPANY 1242 East 49th Street PRINCIPAL BUSINESS: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of twist drills, reamers, etc. 1400. 1915. ELIGIBILITY TO PARTICIPATE: Everyone on the payroll is eligible to participate providing that (1) participant is a bona fide employe at the time the distribution is made; and (2) he does not receive a share of the profits from any other source except regular dividends. ^ EXTENT OF PARTICIPATION: Approximately 75% of the employes participate under this plan. DETERMINATION OF THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE EM- PLOYES : After providing necessary reserves, dividends of 8% on the invested capital are paid out of the net profits. The remaining profits are divided between the stockholders and the employes in the ratio of invested capital to payroU. DETERMINATION OP THE INDIVIDUAL SHARE: The share of the employe varies with his length of service with the com- pany, and his earnings during the profit sharing period. Those having two years' service receive a dividend on wages at the same rate at which the stock- holders receive extra dividends. Those employed one to two years receive a dividend at three-fourths rate. Those employed less than one year receive dividends at one-half rate. There is no limit to the size of the profit share. PAYMENT OF THE PROFIT SHARE: Profit shares are paid in cash, annually in December. FORFEITURE : Employes forfeit their profit sharing rights in case they resign or are discharged. In case of sickness, death, or temporary lay-off, a dividend is paid on the employe's actual earnings during the profit sharing period. ADMINISTRATION OF THE PLAN: The employes have no voice in the administration of the plan, but are thoroughly informed regarding it. The company may modify the plan at will. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: It was installed as a means of linking the success of the company with the prosperity of the employes, and as a means of stabilizing the working force. RESULTS REPORTED BY THE EMPLOYER: The company feels that the plan has helped to increase the efficiency of the employes and to stabilize the working force, and has improved the rela- tions between the company and its employes. PARTICIPATION CERTIFICATES : In addition to the regular profit sharing plan, all employes of five years standing are permitted to purchase ** participation certificates." These cer- tificates have no fixed value, but employes may pay $10.00 or multiples thereof, on them. The amounts paid are endorsed on the certificate and draw 6% interest. In addition, a dividend is paid on amounts, deposited with the com- pany for a full year, at a rate equsd to the dividend rate on the book value of the capital stock above 8%. A certificate is non-transferable, but the holder may surrender it at any time and withdraw the amount represented by it and 6% interest. He can invest an amount in the certificate equal to, but not exceeding, the amount of his annual earnings. The company may redeem or recall the certificate at any time at its face value plus accrued interest at 6%. An employe leaving the service must surrender his certificate. THE ASTRUP COMPANY 2937 West 25th Street PRINCIPAL business : Manufacture of awnings, tents, and awning hardware. NUMBER OF PEOPLE EMPLOYED: 80-100. PLAN WAS ESTABLISHED IN: January 1, 1920. eligibility to participate: All employes, including officers, participate after one year of continuous service with the company, ending January 1st. I« 30 Employes* Incentive Plans Cleveland Profit Sharing Plans 31 lit EXTENT OP PARTICIPATION: Approximately 75% to 80% of the total number of employes participate. Thifl includes officers of the company. ^ ^ ^^pa-Mj. DETERMINATION OP THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE EM- PLOYES : r..n4it "^T?'"* ^^ ^^"^ ^\ ^^^ mvested Capital is first provided out of the net profits Next an amount equal to 12% of the invested capital is set aside as tn^ /Sa . ^?^?°8io° o^ *he business. The remaining net profit up to ffltCi *^%f ""^'^^i ''T^^^ ll distributed among the employes exclusive of S^^ -^v^^^ ?.?^* ^^''''^ 2^^^ *^^ *^® invested capital is divided equaUy between the stockholders and employes, including salesmen. DETERMINATION OP THE INDIVIDUAL SHARE: »o„o^^*'***u°'?^?t'^ Share Of the profits is based on the proportion of his wages to the total wages of those participating. PAYMENT OP THE PROFIT SHARE: The profit share is paid in cash at the close of the fiscal year. FORFEITURE : char^d*^* sharing rights are forfeited when an employe resigns or is dis- Sickness, death or layoff has no effect upon the right to participate. ADMINISTRATION OF THE PLAN: The employes have no voice in the administration of the plan. Thev can venfy the company's statement of the profits. The management can alter the plan at will. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: It was introduced to promote cooperation among employes. RESULTS REPORTED BY THE EMPLOYER: The plan has been in operation for too short a time to judge, but appar- ently It has aroused interest and tends to hold men. THE W. S. TYLER COMPANY 3615 Superior Avenue PRINCIPAL BUSINESS : Manufacture of wire cloth and mining screens. number op PEOPLE EMPLOYED: 1,000. PLAN WAS ESTABLISHED IN: 1914. ELIGIBILITY TO PARTICIPATE: Ail those employed continuously for six months are eligible to participate. EXTENT OF PARTICIPATION: Fully 80% of the total number of employes participate. DETERMINATION OP THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE EM- PLOYES : The principles on which the plan is based are: ,. .S}^ ^^1 employes, without regard to class of employment, are eligible. ' (2) Employes participate in any and all dividends (aside from 6% interest on capital). ' (3) No rules for qualification are required under the plan, nor are any penalties imposed depriving employes of dividends. (4) All dividends are based on the total wages paid, including pay- ments for bonuses, premiums or overtime. Out of net earnings, 6% interest is paid on the capital stock, included in the first dividend of the year. After this has been provided, the eligible employes participate in all cash dividends paid during the year. They receive a dividend on their total wages or salaries for the preceding year ending December 31st at the rate paid on the capital stock. The amount disbursed as dividends varies annually with business conditions. DETERMINATION OP THE INDIVIDUAL SHARES: The profit sharing employes are divided into two classes, as follows: Class A: Those employed one year or more on December Slst of the pre- ceding year, receive dividends on their wages at the same rate paid to stock- holders. Class B: Those employed six months to one year receive dividends at one- half rate. PAYMENT OF THE PROFIT SHARES: The profit share is paid in cash, and usually at the end of each quarterly period during the succeeding year. This, however, is subject to change if, in the opinion of the management, conditions warrant it. FORFEITURE : The profit sharing privilege is forfeited by an employe leaving the serv- ice of the company for any reason whatsoever. Sickness or layoff has no effect upon the right to participate. ADMINISTRATION OF THE PLAN: Employes have no voice in the administration of the plan and cannot verify the company's statement of the profite. The directors may modify the plan at wilL REASONS GIVEN FOR THE INSTALLATION OP THE PLAN: The plan was installed because the company desired to benefit the em- ployes and share its prosperity with them. RESULTS REPORTED BY THE EMPLOYER: While not primarily intended to increase the efficiency of the workmen it has had this effect. It has maintained a loyal force through the last few years. SUMMARY OF PROFIT SHARING FLANS The following table shows the date of installation of the profit sharing plans described, the general type of business and the number of employes in each case. Plan No. Type of Business Plan Installed in Number Employed I 2 3 4 6 6 Manufacturing 1919 1914 1916 1920 1916 1917 20,000 (local 110) 1,000 6,760 (local 65) 100 1,000 500 With one exception, these plans were established after 1914. Employes* Incentive Plana Cleveland Profit Sharing Plans 33 iii> Probationary Period 6 months 6 months 2 years 1 year none 3 months KLIQIBILITY: While all employes are eligible to participate in the profits, it is usually required that they first serve a probationary period. PUm No, 1 8 3 4 ff 6 This indicates the sentiment in favor of a short period of probation. The length of the probation period is influenced, to a large extent, by the character and intelligence of the employes who participate and generally, is shorter for the lower grades of labor. Certain plans have other conditions ef eligibility. In four cases, it is required that the participating employes must be in the employ of the com- pany at the time the distribution of the profits is made. In another case, an employe is not eligible to participate in the profits, if he receives a share of the profits from any source except dividends. EXTENT OF PARTICIPATION AND SIZE OF THE PROFIT SHARE EXPRESSED AS PER- CENTAGE OP THE EMPLOYE 'S WAGES AND OF THE TOTAL PAYROLL : Firm No. 1 2 3 4 5 6 Per cent, of total number of employes who participate 80% 4Q% 75%-85% 75% 96% Per cent, of wages received as profit share • ••■••■• 25%-35% Per cent, of total payroll paid out as profit share 20%-25% 15%-20% 10% 8%-10% 12% 7% re The lowest average percentage of their wages, which employes receive am ft profit share, is about 10%. DETERMINATION OF THE FUNDS AVAILABLE FOE DISTRIBUTION AMONG THE EM- PLOYES : There is a variation in the rates which are considered a fair return for the use of capital. One firm deducts from the profits, 6% interest on the value of the capital stock. Another allows 7%, while two more allow 8%, on the capital stock and surplus. In one instance the rate is 7%% on the net book value of the assets. In every case, an amount representing a fair return on invested capital is deducted before any profits are shared. The methods of sharing the profits may be summarized as follows: After the return on invested capital has been deducted from the net profits — Plan 1 (a) 3% is deducted from the net profits for depreciation. (b) 1% is deducted for a contingency fund. (c) Of the remaining profits 50% is credited to the employes and 50% to the stockholders. Plan 2 (a) The employes participate in all dividends at the same rate on their wages that is paid to the stockholders on the par value of their stock. Plan 3 (a) A certain percentage is deducted for amortization. (b) 20% of the remaining profits is divided among the participat- ing employee. Plan 4 (a) An amount equal to 12% of the invested capital is set aside for the expansion of the business. (b) Profits remaining above this amount plus interest at 8% on invested capital, up to 25% of the invested capital, is divided among the employes. (c) The profit above 25% of the invested capital is divided equally between the employes and the stockholders. Plan 5 (a) Remaining net profits are divided between the stockholders and the employes in the ratio of the invested capital to payroll. Plan 6 (a) 10% of the remaining net profit is set aside for distribution among the employes. DETERMINATION OF THE INDIVIDUAL SHARE: In all cases, the participating employes share in the profits in proportion to their wages, or some percentage of their wages. In three cases, the profit sharing funds are pro-rated, without restrictions, among participating employes, on the basis of their wages for the profit sharing period. In two cases, there are length of service conditions whereby the employes do not share on the basis of their total wages until they have been em- ployed for a certain period. Prior thereto, the employes share in the profits on the basis of certain percentages of their wages. These percentages in- crease as their length of service increases up to the time when they share on the basis of their full wages. In the first of these plans an employe who has been with the company from six months to one year, receives dividends on his wages at one-half the rate paid on the capital stock. Thereafter he partici- pates at the full rate. In the second, employes who have had less than two years of service participate as follows: More than two years' service — full rate; More than one year's, but less than two years' service — three-fourths rate; Less than one year's service — one-half rate. One plan provides for an allowance increasing with length of service, and added to the wages earned during the profit sharing period, to form the basis on which the employe's profit share is computed. PAYMENT OF TH? PROFIT SHARE: The following table summarizes the method, time and conditions of pay- ment of the profit shares: Conditions governing use of profit share ^ None Plan No. How paid When 1 Cash Quarterly 2 Cash Quarterly 3 Credited to stock purchasing fund Yearly 4 Cash Yearly 6 Cash Yearly Check Quarterly None Can't out None None None sell stock with- permission With one exception, the profit shares are paid in cash or by check with- out any conditions requiring compulsory saving, etc. The opinion seems to pre- vail that, while such condititons have certain merits, they are not generally advisable. The time of payment is influenced by accounting rather than profit shar- ing considerations. In most cases where the distribution is made yearly, it is believed that a more frequent distribution would be desirable if it were feasible, as it would better sustain the interest of the employes throughout the year. Employes* Incentive Plans WOBFE3TUBM: The most common reason for forfeiture is leaving the service of the com- panj. In four plans, employes forfeit their right to a profit share by resig- nation or discharge before the end of the current period. In one case, the profit sharing right is forfeited only by discharge. In five cases, sickness or death has no effect upon the right to participate in the profits for the current period. One plan, containing a stock purchasing feature, provides that the profits to the employe's credit in the stock purchas- ing fund, shall be paid to the employe 's estate in the event of his death. Another plan has a clause whereby profit sharing rights are forfeited in cases of absence or tardiness in excess of a stated number. In two plans, forfeited profits are distributed among the remaining par- tieipants. ADMINISTRATION : Two plans provide for some form of employe representation whereby the employes have a voice in the administration of the plan. The employes can verify the company's statement of the profits in two others. In every ease, the management may modify the plan at its discretion. One plan provides that the profit sharing funds, used to purchase stock, ghall be managed by five trustees selected by the company. BSASONS GIVEN FOR THE INSTALLATION OF THE PLAN: Three firms stated that the installation of their plan was prompted, at least partly, by a desire to obtain the interest and cooperation of their em- ployes. Stabilization of the working force and greater efficiency are the objects of two more. Two manufacturers state that their main reason for installing their plans ifBS a desire to benefit their employes. In both instances, it was considered that the installation was ''good business.'* In another case, one of the objects was the establishment of a fund for death benefits. BESULTS REPORTED BY THE EMPLOYEE: Five firms report that their plans have resulted in increased cooperation, interest and efficiency. In four cases, the plans have been helpful in reduc- ing labor turnover. In all cases, they are considered beneficial. I« CLEVELAND LIMITED PROFIT SHARING PLANS TYPES 1. Name Withheld 2. Cleveland Tractor Company 3. The Hydraulic Steel Company 4. The Kiaynee Company 5. The B. L. Marble Company 6. The Marshall Drug Company 7. National Woolen Company 8. Reliable Stove Company SUMMARY Cleveland Limited Profit Sharing Plans 37 NAME WITHHELD PRINCIPAL business: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of machinery. 250-300. 1917. jlllU \u ELIGIBILITY TO PARTICIPATE: The superintendent submits to the president of the company a list of employes who are entitled, in his opinion, to share in the profits. The list is usually limited to employes whose ability contributes appreciably to the suc- cess of the business. EXTENT OF PARTICIPATION: Approximately 12% of the employes participate. DETERMINATION OF THE FUNDS AVAILABLE FOR DISTRIBUTION AMONO THE PAR- TICIPANTS : The management states that basic theory of the plan as follows: The employes' contribution of labor is considered as their investment in the enterprise just ks is the money contribution to the company's capital. The current wages of labor, and the current price of capital are paid to insure the continuance of the labor and capital contributions. The extra incentive necessary to induce employes and investors to take the manufacturing risk is provided in the distribution of profits. After paying 6% on the capital and surplus of the company and retain- ing the necessary percentage of earnings in the business, the company divides the remaining profits between the stockholders and the participating employes in the ratio of the capital and surplus to the payrolL DETERMINATION OF THE INDIVIDUAL SHARE: The employes' share of the profits is divided among the participating em- ployes on the basis of the wages earned during the year. If the stockholders receive an extra dividend on capital and surplus, in addition to 6%, each participating employe receives a dividend on his wages for the year at the same rate. PAYMENT OF THE PROFIT SHARE: The profit shares are paid yearly in cash. The profit sharing rights are non-assignable. FORFEITURE : Employes forfeit their share of the profits on leaving the service of the company before the close of the profit sharing period. The superintendent may drop any one from the profit sharing list at his discretion. Sickness, death or layoff has no effect upon the right to participate in the profits for the current period, but the employe, or his estate, would receive a smaller share of the profits inasmuch as the amount of his wages for the in- complete profit sharing period would be less than for the whole period. ADMINISTRATION OF THE PLAN: The employes have no voice in the administration of the plan, and they cannot verify the company's statement of the profits. The company can alter the plan at wiD. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The purpose was to reward the loyalty of those employes who had rendered long and valuable services. RESULTS REPORTED BY THE EMPLOYER: The plan has been of assistance in retaining the valuable employes and in developing their loyalty and cooperation. Employes' Incentive Plans Cleveland Limited Profit Sharing Plane 39 ■^ i CLEVELAND TRACTOR COMPANY UOOO EiTOLiD Avmnn THE HTDRAULIC STEEL COMPANY Illuminating Building PRINCIPAL business: NUMBER OP PEOPLE EMPLOYED; PLAN WAS ESTABLISHED IN: Manufacture of tank type tractors. 1201. January 1, 1919. AMONG THE PAB- SLIGIBILITY TO PARTICIPATE: The decision, as to which employes are eligible to join one of the profit vmrmg groups, regts entirely with the management. SXTBNT OP PARTICIPATION: Approximately 25 men, or 2% of the total number employed, participated in the management group; 57 men, or 4% of the total number employed par- ticipate m the department heads group; and 60 men, or 5% of the total 'num- ber employed, participate in the assistant department heads group. DETERMINATION OP THE PUNDS AVAILABLE POR DISTRIBUTION TICIPANTS : ^._^^ certain percentage of the net profits of each quarter is set aside for distribution among participating employes. The participants are divided into three groups, as follows: (1) the man- agement group, composed of the executives of the company; (2) department heads group; and (3) assistant department heads group. The profit sharing funds are distributed among the groups as follows: Group (1) receives 25% of the fund; Group (2) receives 20% of the fund and Group (3) receives 15% of the fund. The remaining 40% is distributed by discretion of the Board of Directors. DETERMINATION OP THE INDIVIDUAL SHARES: Each participating employe shares in the funds alloted to his group in the proportion which his salary bears to the total salaries of the group. PAYMENT OP THE PROFIT SHARES: Profit shares are paid quarterly in cash. There are no restrictions on the use or payment of these shares. PORPEITURE: A member of a profit sharing group, who leaves the service of the com- pany during a quarterly period, does not participate in the profits for that period. If he works during the entire quarter and leaves the service of the company at the end of that quarter he is paid whatever profit share has been earned. ADMINISTRATION : The administration of the plan rests with the board of directors Thev may modify the plan at their discretion. ' ' The participating employes must accept the company's statement of the profits. Members of a profit sharing group cannot be discharged without the privilege of a hearmg before the two Vice Presidents. BXASONS GIVEN POR THE INSTALLATION OF THE PLAN : The installation of such a plan was considered to be good business. It was thought that it would increase the efficiency of the plant and benefit both the company and participating employes. RESULTS REPORTED BY THE EMPLOYER: It has caused an increase in the efficiency of the plant and has given the men an incentive to prevent waste. PRINCIPAL BUSINESS: NUMBER OP PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Pressed steel stampings, automobile frames. 4000 (four plants). 1911. ELIGIBILITY TO PARTICIPATE: Eligibility is confined to members of the executives, managers or oper ators groups. Membership in the ''pools'' depends on performance "^'^~~ members are taken into the pools on January 1st and July 1st. New EXTENT OF PARTICIPATION: Approximately 20% to 25% of the total number of those employed par- ticipate in the plan. While participation is confined to certain classes, those employed ar^ advanced to profit sharing groups as rapidly as possible. DETERMINATION OF THE FUNDS AVAILABLE FOR DISTRIBUTION: Out of the net profits, each plant sets aside an amount sufficient to pay a return of 8% on its invested capital. Of the remaining profits, a certain per- centage, previously determined by the board of directors, is set aside for dis- tribution among the employes. This percentage averages about 30%. The plant retains 50% of this for its own **pool" and turns the remaining 50% into a "combined pool" formed by similar contributions from all of the plants of the company. This combined ' ' pool ' ' is distributed back to the individual plants accord- ing to their net worth, and is included in their profit sharing funds. DETERMINATION OF THE INDIVIDUAL SHARE: The Company, in a statement to its employes, makes this classification of the personnel of the organization: '*A — owners who own stock; B — executives: the executive office staff, the plant managers, the develop- ment department and the district office staffs; C — managers: assistant managers of plants and department managers; D — operators: department superintendents, foremen, unit bosses and re- sponsible clerks; E — employes: those who work under the direction of operators; F — dependents: we recognize the obligation due to the dependents of those whose entire activity is given to this company." It is further stated — "To owners, a normal return and, after that, a sharing with those who serve. To executives, managers and operators, fair wages plus a share in the profits; to employes, fair wages plus extra pay for extra effort; to dependents, protection; to all, opportunity for advancement." The profit sharers are formed into two organizations. The managers form the senior, and the operators the junior, organization. In each plant, the money which is to be distributed is divided into two equal parts, one of which goes to the senior, and the other to the junior, or- ganization. The senior organization's money is divided into shares. The plant man- ager, in conjunction with the plant executive committee, awards a certain num- ber of shares to each member, the number varying between members in ac- cordance with the judgment of the manager and the executive committee. Employes* Incentive Plans I \m\ The junior organization's share of the profits is divided among the in- dividual members on the basis of their wages and length of service. For each year of continuous service, a member is given a certificate representing a sum equal to 10% of his wages for the year. This is known as his profit sharing principal. Each member participates in the ratio of his principal to the total of such principal amounts. PAYMENT OF THE PROFIT SHARES: Payment is made in cash, semi-annually, on July 1st and January Ist. FORFEITURE : A member forfeits his profit sharing rights when he leaves the company. The management can remove a member from a profit sharing group for cauBO* ADMINISTRATION OF THE PLAN: The employes have no voice in the administration of the plan but through the medium of their shop committee they can make recommendations re- garding modifications of the plan. They are given an opportunity to verify the company's statement of the profits. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The installation of such a plan was believed to be ''good business." In a statement to employes, the president of the company says: ** First, let me state that this profit sharing plan is a straight business proposition. Nothing is being given away." RESULTS REPORTED BY THE EMPLOYER: The plan has stimulated the interest and efficiency of the employes and has paid from a business standpoint. It has been effective in keeping down the labor turnover and in creating satisfactory labor relations. THE EAYNEE COMPANY 6925 Aetna Boad Cleveland Limited Profit Sharing Plans 41 PRINCIPAL BUSINESS: NUMBER OF PEOPLE EMPLOYED; PLAN WAS ESTABLISHED IN: Manufacture of children's clothir- 600-800. 1914. ELIGIBILITY TO PARTICIPATE: Certain people who are in a position to affect the profits, are given cer- tificates at the discretion of the management. EXTENT OF PARTICIPATION: Approximately 6% of the total number of employes participate in the plan and these are for the most part employes who hold responsible positions. DETERMINATION OF THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE PAR- TICIPANTS : It depends upon the number and value of the profit sharing certificates which are issued. DETERMINATION OF THE INDIVIDUAL SHARE: Certain employes are given a profit sharing certificate which entitles them to an amount of extra salary equal to the dividends on the number of shares of the company's common stock, represented by the certificate. PAYMENT OF THE PROFIT SHARE: The equivalent amount of dividends is paid annually to the participants, by cheek, when the regular dividends are paid. The right to profit shares are non-transferable. FORFEITURE : To receive a dividend, the employes must be in the employ of the com- pany at the time the dividends are declared. The certificates expire automatically at the end of the year. The man- agement may renew them at its discretion. ADMINISTRATION OF THE PLAN: The management decides the questions of who shall hold certificates and how many shares of stock each certificate shall represent. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: It was intended to serve as a reward for employes in responsible posi- tions and to stimulate greater efficiency. RESULTS REPORTED BY THE EMPLOYER: The management feels that the plan has helped to retain the participat- ing employes. The plan does not apply to the rank and file of employes, most of whom are women, as their service is usually brief and they are not interested in deferred payments of any kind. (Firms having similar plans: The Federal Knitting Mills Co., The L. N. Gross Co.) THE B. L. MARBLE COMPANY Bedford, Ohio PRINCIPAL BUSINESS: number of PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of office chairs. 250. 1919. ELIGIBILITY TO PARTICIPATE: The management, at its discretion, admits responsible salaried employes to participation in the plan. EXTENT OF PARTICIPATION: The participants, about S]/2% of the total employed, are executives and employes holding responsible positions as superintendents, officers of the com- pany, office heads, etc. DETERMINATION OF THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE PAR- TICIPANTS : After the necessary reserves have been provided, 10% of the net profits is set aside as the participating employes' profit share. DETERMINATION OF THE INDIVIDUAL SHARE: The profit sharing fund is pro-rated among participating employes on the basis of their monthly wages. M II iilll 42 Employes' Incentive Flans Cleveland Limited Profit Sharing Plans 43 PAYMENT OF THE PROFIT SHARE: The profit shares are paid in cash at the end of each month. porfeittjre: The profit sharing privilege can be forfeited only by leaving the service. Sickness has no effect on the right to participate. ADMINISTRATION OF THE PLAN: By the management. SEASONS GIVEN FOR INSTALLATION OP THE PLAN: It was desired to increase the efficiency and at the same time obviate the necessity of raising salaries BESULTS REPORTED BY THE EMPLOYER: There is a greater effort on the part of everyone. (Firms having similar plans: The Enamel Products Co.; Potter, Teare ft Co.) THE MARSHALL DRUG COMPANY Public Square PRINCIPAL BUSINESS: Maintain a chain of retail drug stores. number of PEOPLE EMPLOYED: 300-400. PLAN WAS ESTABLISHED IN: 1903. ELIGIBILITY TO PARTICIPATE: Managers and assistant managers only are eligible to participate. SZTSNT OP PARTICIPATION: Between 12% and 15% of the total number employed, participate in the DETERMINATION OP THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE PAR- TICIPANTS : Ten per cent, of the net profits of each store plus 20% of the gain in net profits over those of the previous year are given to each store manager. Five per cent, of the net profits of the store go to the assistant manager. The manager may divide the 20% of the gain in net profits with his assistant at his discretion. DETERMINATION OF THE INDIVIDUAL SHARE: As stated above. PAYMENT OP THE PROFIT SHARE: The profit share is paid in cash at the end of the year. The profit shar- ing rights are non-assignable. FORFEITURE: There is no forfeiture except in case of discharge. ADMINISTRATION OF THE PLAN: The participants can verify the company's statement as to the profits. The plan may be modified by the management at will. REASONS GIVEN FOR INSTALLATION OF THE PLAN: The management wished to create in its valuable employes a more per- sonal interest in the business. RESULTS REPORTED BY THE EMPLOYER: It is believed that the plan has increased the efficiency of the participants, and has promoted a closer relationship between them and the management. NATIONAL WOOLEN COMPANY 3131 West 33rd Street PRINCIPAL business: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: ELIGIBILITY TO PARTICIPATE: Participation is confined served at least one year. Rework wooL 350. 1918. to officers and salaried employes who have EXTENT OF PARTICIPATION: Approximately 12% of the total number of employes participate. DETERMINATION OF THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE PAR- TICIPANTS : An amount, sufficient to pay a dividend of 6% on the preferred stock and 8% on the common stock and surplus of the company, is first set aside out of net profits. Of the remaining profits, 5% of the first $25,000, 10% of the next $25,000, 20% of the next $25,000, and 25% of the balance of the profits are set aside for distribution among the participating employes. The maximum amount of profits, which can be distributed, is fixed at $40,- 000, except that the board of directors may authorize the distribution of an additional $10,000.00. DETERMINATION OP THE INDIVIDUAL SHARE: The employes' share of the profits is distributed among participating em- ployes on the basis of their salary and length of service. An employe, who has been in the service for five years or more, participates on the basis of his full salary; 4 years, on the basis of 90% of his salary; 3 years, on the basia of 80%; 2 years, on the basis of 70%, and one year on the basis of 60%. The individual employe shares in the profit sharing fund in the propor- tion which his salary basis bears to the total of the salary bases. The limit of $40,000.00 on the profit sharing fund places a limit on the amount which each individual employe may receive as a profit share. PAYMENT OF THE PROFIT SHARE: The profit shares are paid, in cash, in December and May. FORFEITURE : Employes, leaving the service voluntarily, forfeit their share of the profits for the current profit sharing period. If they are discharged, they do not for- feit their share. Sums forfeited are distributed among the remaining par- ticipants. Sickness, or layoff does not affect the right to participate, except that, by earning less wages during the profit sharing period, the employe would receive a smaller profit share. ADMINISTRATION OF THE PLAN: The employes have a voice in the administration of the plan, and may verify the company's statement of the profits if they so desire. I flnff 44 Mmployea* Incentive Flans Cleveland Limited Profit Sharing Plans 45 BXASOKS GIVIN FOR INSTALLATION OP THE PLAN: It was installed as a means of compensating for the increase in the cost Of living, and as an incentive to employes to continue in the service of the eompanj. RESULTS REPORTED BY THE EMPLOYER: The plan has improved the relations existing between the participatinj? employes and the company. It is felt that the plan has been in^rumental in retaining the more valuable employes. (Firm having similar plan: The Austin Co.) EELIABLE STOVE COMPANY 1787 E. 40th St. FMNCIPAL BUSINESS : Manufacture of stoves, ranges, gasburning appliances. NUMBER OF PEOPLE EMPLOYED: 320-500. FpiiauteB. PLAN WAS ESTABLISHED IN: 1910— amended in January, 1920. ELIGIBILITY TO PARTICIPATE: Employes who receive a salary less than $1200.00 per year, or who re- ceive commissions on sales or payment on piecework, are not entitled to par- ticipate m the plan. ^ ^ par Employes whose full time is not given to the company or who are em- ployed m manual labor, which does not involve the oversight of others are not entitled to participate. * Factory foremen, warehouse employes, assistant foremen, engineers, ship- ping clerks and office employes are eligible. ^ EXTENT OF PARTICIPATION: r.io^^^^i*''^**®]^ 1?^^ ""^ *^® ^""^^ '''''^^^ employed, participate in the plan. They are for the most part employes who hold responsible positions. DETERMINATION OP THE FUNDS AVAILABLE FOR DISTRIBUTION AMONG THE PAR- TICIPANTS : -n^itf*^' T^^^ reserves have been provided, and 6% on the capital and ^^Zr^ ^f.^^ *''^. ^^> ""i ***« remaining profits is then set aside for distribution If the participation fund for any year does not exceed $5 000 00 such amount is not credited to the participants, but is held by the Treasurer as midivided profits and an equal amount is added to subsequent participation funds until such funds exceed $5,000.00. ^ip'nwn DETERMINATION OF THE INDIVIDUAL SHARE: The employes' share of the profits is distributed among the eligible em- ployes, on the ba«s of their salary, less $1,000.00. Each employe shares in the proportion which his salary above $1,000.00 bears to the total of such amounts for aU of the participating employes. PAYMENT OF THE PROFIT SHARES: ♦n iJJ"! FlfK'^u''^ ^\^ P^^ ^T^7' They are held until the accumulation to the credit of the employe is sufficient to purchase for his account one share of the stock of the company for each $100.00 of his yearly salary. After this stock has been completely purchased, the employe's profit shares are paid to mm in cash. ^ Profit sharing rights are non-assignable. FORFEITURE : Employes who leave the company, forfeit their right to a share of the profits for the profit sharing period. Sickness, death, or layoff, has no effect on the right to participate. ADMINISTRATION OF THE PLAN: The employes have no voice in the administration of the plan. STOCK PURCHASING FEATURES: The company holds each employe's profit share until the accumulation is sufficient to purchase one share of the company's stock for each $100 of the employe's annual salary. Interest at 6% is paid on amounts held for the purchase of stock. The stock certificates are turned over to the employe when fully paid. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The plan was installed to develop a spirit of cooperation among those employes who are in a position to influence the profits of the company. RESULTS REPORTED BY THE EMPLOYER: The plan creates a desire to get into the supervisory class, and for this reason, it stimulates the employe's interest in his work and probably tends to increase his efficiency. Inasmuch as a great many employes have been with the company for a considerable period of time, it is difficult to determine the effect which the plan has had in stabilizing the working force. The plan was originally extended to all employes earning $1,200.00 or more per year, but in the case of factory employes it was not successful owing to the fact that they were not able to understand the factors influencing profits and the method of computing the profit share. They were dissatisfied when the profits were small, and could not understand the fluctuation in the profits which took place from year to year. For this reason the plan was amended tO exclude those employed in manual labor and to include only those whose duties involve the oversight of others, providing they earn more than $1,200.00 per year. (Firms having similar plans: The Best Foundry Co.; The Dangler Stove Co.) SUMMARY OF LIMITED PROFIT SHARING PLANS The Cleveland plans, classified by the committee as limited profit sharing, including those described above, may be summarized as follows: Plan No. Type of Business 1 Manufacturer 2 Betail 3 Manufacturer 4 Manufacturer 5 Manufacturer 8 Manufacturer 7 Manufacturer 8 Manufacturer 9 Wholesale 10 Manufacturer 11 Wholesale 12 Manufacturer and Wholesale 13 Betail 14 Manufacturer 15 Manufacturer 16 Manufacturer 17 Professional Service Company Plan Installed in 1919 1903 1914 1910 1918 1919 1917 1911 Prior to 1913 1919 1911 • • • • 1914 1911 1914 1916 1914 Nwmber Employed 1,201 350 700 320 350 250 275 4,000 90 121 80 • • • • 1,700 700 650 500 4,000 4$ Employes' Incentive Plans Cleveland Limited Profit Sharing Plans 47 the pliws^aU^^ statistics show the various groups of business into which i Groups Professional Service Betail Wholesale Manufacturing Number of Plans 1 2 3 U positUm ™*''**'^*^ ®^ *^®^ P^^^ *^® ^^^ *o reward people in responsible • i^^®*?"^rij^ **^^® ^^^^ *^** ^^^^ 0^ t^e plans are found in firms hav- ing less than 500 employes: Number of employes 50- 100 101- 250 251- 500 501-1000 over 1000 Number of plans 2 8 ELIGIBILITY: ^lo^P^"",?*® *^® fact that most of these plans are intended to reward em- ployes holding responsible positions, the decision as to who are eUgible usually rests with the management. This is true in eleven plans. In two plans, participation is confined to a certain general class of em- ployes, such as salespeople, office employes, etc. Tm«4 Jo^o ^^^% ^K?""'?® ***** .*" e°iployes, who occupy certain designated positions, are eligible to participate. Another plan provides that the employe, to be eligible, must earn a certain minimum salary, and must not receive a commission on sales or any pay for piecework, or be engaged in manual labor not involvmg oversight of others. Length of service is a condition of eligibiUty in only one case. This plan provides that the employe must have had at least one year of service with the company. v« "xi,** EXTENT OF PARTICIPATION AND THE SIZE PERCENTAGE OF EMPLOYEES WAGES BOLL PAID OUT AS PROFIT SHARES: % of total number of em- Firm No. ployes who participate — OP THE PROFIT SHARE EXPRESSED AS A AND AS A PERCENTAGE OF TOTAL PAY- 1 2 3 4 ff 6 7 8 8 10 11 12 13 14 15 16 17 11% 12%-15% 70 10% 12% 8%- 9% 12% 20%-25% 25% 10% 5% • • • • -1% 15% 4% 10% -1% % of icages re- ceived as profit shares 15%-25% 25%-50% 10%-40% 6%- 7% 40%-50% 50% % of total payroll paid out as profit shares -1% « • • • -1% -1% 11% MOTK:— 'The minus sign indicates ''less 16%-23% 200% -300% 30% 300% 25%*100% 40% io%-i5% 20%-30% than." -1% 5% In the majority of cases, the number of participating employes is between 6% and 15% of the total number employed. This is because these plans are used to reward a limited number of employes. Number of plans 2 2 5 5 Percent, of total number of employes who participate Less than 1% 1%- 5% 6%-10% 11%-15% 16%-20% 21%-25% The percentage of wages, received as a profit share, is much larger in the case of limited profit sharing than in the case of profit sharing. This is due to the fact that a smaller number of employes participate and they are, in general, the more important employes. The following table shows the per- centage of their wages, which the employes receive as a profit share: Percent, of totaX number of pUuM 12.5 % 12.5 % 31.25% 31.25% 12.5 % Percent, of wages received as a profit share 5-10% 11-20 21-30 31-40 41-50 Over 50% Number of plans 1 1 4 2 2 3 Percent, of total number of plans 7.7 7.7 30.7 15.3 15.3 23.1 DETERMINATION OF THE FUNDS AVAILABLE FOR DISTRIBUTION: The rate of return, which is considered fair for the use of capital, varies between the different firms. The majority of the firms consider 6% on the capital invested and surplus as a fair return. In a few plans, a rate of HJo is specified. Very few plans require a return above 8%. ^. . ., ^ ;j In many instances, the share of the profits which should be distributed among the participating employes is a definite percentage of the net profits; in three cases it is 10%; and in one case it is 30% of the net profits. One firm specifies that the net profits, over and above a fair return for the use of capital, shall be divided between the stockholders and the employes in the ratio of the capital and surplus to the yearly payroU. A few concerns distribute among employes, a percentage of the protits which increases with increasing profits. In one case the scale is as follows: 5% of the first $25,000 of net profits above a stated rate of interest on the investment is distributed among the employes. After this, 10% of the next $25,000, 20% of the next $25,000, and 25% of aU the net profits above these amounts is distributed. There is a limit of $40,000 to the amount of profit which may be distributed. ^x. t, innf ^t One concern, operating a chain of retail stores, provides that 10% of the net profits of each store shall go to the manager, 5% of the net profits shall go to the assistant manager, and 20% of the gain in net profits over the preceding year goes to the manager, who may share this with his assistant at his discretion. . , . . v^ »i.„,« Another concern divides its participating employes into groups who share in the profit sharing funds as foUows: Group 1, the management group, 25%: Group 2, department heads, 20%, and Group 3, assistant department heads, 15% of the funds. The remaining 40% of the profit sharmg funds is disposed of by the board of directors of the company in accordance with its own discretion. . , ^ ^ . 1 In three instances, profit sharing certificates are issued to certam ©mploy®8- The amount distributed depends upon the number of shares of stock which these certificates represent. They participate in the profits at the same rate that dividends are paid on the common stock. Employes* Incentive Plans * BOfC^/ t^^^^AT^"i' "'"'<='' operates a number of plants, has a plan whereby Kstritutl^ 1^' "'f P"""*' *^*'"""« *" distribution, goes^^to a fSj This combined fid Ts^^r^distribXrt t^ th."*!?*'^^^ ^^T *•' »* *■>« P'»°t«- S-ntrThirnho JV "-S^^"?" "oe?1nrthentn';'l?.':rsh*a^^^^^^ rd^jiorin-rttr'prtto -r^ZTZeT ''-'' -^ ''''-' '"'^''™™^^ profite''m« ^^'V1*.h' •'""fK P;""?**" *''** » <="**'" percentage of the net di^torr^ ^ '" **'* •'™"'*™ ** «■« discretion of the board of BKTERMINATION Or THE INDIVIDUAI, SHARE- «cipIS.stn?hTU: o'*/teir''^a"r1o/'"'Tw„":.h'"'*?"*"'' ""r^ *"« P"' cent.^ of p,o«ts to J ^^.TZ,.oJZ\:i^/:^l.r:^,'-£,^^^ ticip^ ^.Zr^i^ 4e';r. IS^r/unt"^' tCSo^^le'^tarer of their salanes, which increase with length of service as fnltnw. - Ti?„ ' Sari^^twT^eaT'rZ' '^^ °"^ ^*"'./" ^ th^'asis'of"' 0%-of?h:" o^ro"; ioovro7thei?ii/a''i:srs/'''*™' '"^'■' '""^ ^'"'"' ««%' «-» fi- yo- «u..i!^ *5* ""^ "' P™"' sharing certificates, the amount which the Darticinant ^r7siLWhin:r*ti'«c:r^^ °' '^-'-^ »' --»■" ^'--^ -^ ^-iTn^! the ^e:''ftrLt"LSf .tifolr^tytereiv^ l^rTl,Tl\\^' gross profits, less the amount which is ailowed To rras'^dr^wingVcount One firm divides its profit sharing emDloves into fwn «rn„r^o mu group, consisting of the higher executLsTceive fc ^taif S^ oTth" profit sharing funds which is divided into shares. Each mL^ber of the ^roun receives a certain number of shares, fixed by the pla^ manager ^fZ executive committee of the plant. The members of the j^iZ^freanTzation composed of minor executives, share in funds for their group on the bast of their wages for the current period. ^ ^ ^^ ^^ PAYMENT OF PROFIT SHARES: /OX '^u® following table shows for the various plans, (1) how thev are naiil Plan No. How Paid 1 Cash 2 Cash 3 Check 4 Cash 5 Cash 6 Cash 7 Cash 8 Cash 9 Cash When Quarterly Yearly Yearly Yearly Semi-annual'v Monthly Yearly Semi-annually Yearly Conditions on payment of profit share None None None None None None None None None 10 Cleveland Limited Profit Sharing Plans None 49 11 12 13 14 15 16 17 Cash Cash Christmas, New Year 's and balance at end of fiscal year Yearly • ■ • • Cash Cash or Yearly stock Yearly Cash Cash Cash Yearly Yearly Yearly Deposited to employes* credit. Draws interest at six per cent. None Held for one year unless employe holds stock to value of his salary. None None None The data show that fourteen concerns pay profit shares in cash. One concern pays the shares by check, and another pays by cash or stock, de- pending upon the amount of stock which the participating employe owns. In the latter case, it is required thut each participant owns a certain number of shares of stock, depending upon the amount of his salary. The following table summarizes the periods in which the profit shares are paid. The majority of firms pay their profit shares annually. In most cases accounting reasons influence the time of payment. When Paid Monthly Quarterly Semi-annually Yearly Miscellaneous Numlter of Plans 1 1 2 11 1 FORFEITURE : In most of the plans, the conditions of forfeiture are few and simple. In every case, sickness, death or layoff has no effect upon the right to participate provide that discharge for cause is ground for forfeiture. In three cases, forfeiture rests entirely with the discretion of the management. In almost every case sickness, death or layoff has no effect upon the right to participate m the profits for the profit sharing period. One firm provides that, if an employe leaves the service voluntarily, he forfeits his right to the profit share, but if he is discharged he receives it. In the majority of cases, there is no provision for the disposition of for- feited profit shares. In only two cases, is it stated that the forfeited sums shall be distributed among the remaining employes. In the case of profit sharing certificates, it is usually provided that the agreement shall expire automatically at the end of the current year, and shall be renewed for the ensuing year at the discretion of the management. ADMINISTRATION : In fourteen plans, the participating employes have no voice in their ad- ministration. In one plan, however, the participants have a voice. The employes are permitted to verify the company's statement of the profits in only two instances. In eight cases, the management may modify the profit sharing agreement at will. In three, they may modify it at the end of the current year. One plan has an interesting clause which provides that members of profit sharing groups cannot be discharged until they have had a hearing before the two vice-presidents of the company. REASONS FOR THE INSTALLATION OF THE PLANS: The principal object is to increase efficiency of employes holding respon- sible positions. This reason is given in eight of the cases reported. IL I m Employes* Incentive Plans 1 1 The rewarding of faithful or responsible employes is also an important object. In five instances, this reason has been given for the installation of the plan. In five cases, the installation is the result of a desire to develop the co- operation or loyalty of the participating employes. Two firms made the installation because they thought it was **good business/' and two others, in order to hold certain valuable employes. In no case, are the motives, which have prompted employers to install profit shar- ing, stated to be altruistic. RESULTS REPORTED BY THE EMPLOYER: A summary of the results which have been obtained by the various plans, indicates that they have generally been successful. In nine cases, they have resulted in an increase in efficiency. In five more, they have been instru- mental in holding valuable employes or in decreasing the labor turnover. A decided improvement in the relations, existing between the participating em- ployes and the management, is reported in five instances. There are only three firms which report that there have been no noticeable results. These firms, however, do not report that the plans have caused any unrest. CLEVELAND STOCK SALES PLANS TYPES 1. American Steel & Wire Company 24. The Cleveland Hardware Company 3. The Ohio Bell Telephone Company 4. The Cleveland Worsted Mills 5. The National Acme Company 6. The Penton Publishing Company 7. The Euss Manufacturing Company 8. The Standard Parts Company 9. FuUer and Smith. SUMMARY I ll "» Cleveland Stock Sales Plans 53 AMERICAN STEEL AND WIRE COMPANY Western Eeserve Building PBINCIPAL business: Iron and steel, billets, rods, wire, wire goods and nails. NUMBER OF PEOPLE EMPLOYED: 30,000 (9200 in Cleveland). PLAN WAS ESTABLISHED IN: 1903 — the agreement is revised yearly in ac- cordance with the market price of the stock. ELIGIBILITY TO PARTICIPATE: All officers and employes are eligible to participate. EXTENT OF PARTICIPATION: On December 31, 1918, more than 36,646 employes of the United States Steel Corporation were stockholders under the plan. Their aggregate hold- ings amounted to more than 143,528 shares of stock. It is impossible to ascer- tain how many employes, in addition to those still receiving the special bene- fits, hold stock for which these special benefits have ceased, but it is believed that their numbers would greatly increase the figure here given. CONDITIONS AND TERMS OP PAYMENT ON WHICH THE STOCK IS SOLD TO EMPLOYES : In 1919, employes were permitted to subscribe for the common stock of the United States Steel Corporation at the price of $92.00 per share. The number of shares for which an employe might subscribe varied with the size of his salary or earnings in accordance with the following schedule: Employes salaries J 690.00 690.01 1,533.34 2,146.67 3,450.01 4,216.67 4,983.34 6,900.01 7,820.01 8,740.01 9,660.01 13,225.01 14,375.01 15,525.01 16,675.01 17,825.01 18,975.01 receiving annual or earnings of or less to $ 1,533.33 to 2,146.66 to 3,450.00 to 4,216.66 to 4,983.33 to 6,900.00 to 7,820.00 to 8,740.00 to 9,660.00 to 13,225.00 to 14,375.00 to 15,525.00 to 16,675.00 to 17,825.00 to 18,975.00 to 32,200.00 Cottld subscribe for a maximum number of 1 share 2 shares 3 shares 4 shares 5 shares 6 shares 7 shares 8 shares 9 shares 10 shares 11 shares 12 shares 13 shares 14 shares 15 shares 16 shares 17 shares Payment of subscriptions is made in monthly installments of not less than $2.00 per share or more than one-quarter of any one month's salary. Installments, exceeding the minimum, must be in even dollars. Payments for the stock must be completed within three years from the date of purchase. Interest at 5% is charged on deferred payments. Until payment of the subscriptions has been completed, any dividends, paid on the stock, will be credited to the account of the subscriber as part of his payment. After the stock has been issued to the subscriber, further divi- dends go directly to him. 54 Employes' Incentive Plans I Subscriptioiis are canceUed for the following reasons: 1. By request of the subscriber. 2. By voluntarily leaving the service. 3. By discharge. 4. Failure on part of employe to resume employment when requested. 6. By discontinuing payments, without the consent of the corporation, for three consecutive months. When a subscription ia cancelled, the amounts paid in are returned to the irabscriber, together with interest at 6% per annum. No credit is given for dividends or other benefits. INDUCEMENTS OR REQUIREMENTS FOR THE EMPLOYE TO RETAIN HIS STOCK: When the stock is fully paid, the employe may dispose of it as he sees fit, but if the employe keeps the stock and exhibits the certificate to the company treasurer each January for five years after date of purchase, together with a statement from a proper official that he has been continuously in the employe of the company during the preceding year, he receives a special cash payment of $5.00 per share for each share of stock, or a total of $25.00 during the five years. If at the end of any year, the subscription is not paid up, this special benefit of $5.00 per share is credited as a payment on the stock. The special benefits are forfeited when during the five year period a subscriber sells his stock, voluntarily leaves the service, is discharged for cause or fails to resume employment when requested. Benefits so forfeited go into a fund earning 5% interest. At the end of each five year period, this fund is divided pro rata among the subscribers, who have retained their stock. This additional compensation averaged $16.05 per share during the past 12 years. REASONS GIVEN FOR THE INSTALLATION OP THE PLAN: To enable employes to buy, imder a contract with the corporation, one or more shares of stock each year upon terms, offering a safer and more profit- able investment, than they could possibly find for their savings elsewhere. EESUIiTS REPORTED BY THE EMPLOYER: Not stated. (Firm having similar plan: The Globe Machine & Stamping Co.) THE CLEVELAND HARDWARE COMPANY 4518 Lakeside Avenue PRINCIPAL business: number op PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: ELIGIBELITT TO PAETICIPATl: Manufacture vehicle hardware and forgines. 2500. * 1912 and was superseded by revised plans in 1918 and 1919. The foUowing plan will be in force for the year 1920. Executives and employes in responsible positions are permitted to par- ticipate in the plan at the discretion of the executive committee of the com- pany. EXTENT OP PARTICIPATION: By reason of the limited number who are eligible, participation in the plan is small. The number of employes participating is now about 3% of the total number employed. Cleveland Stock Sales Plans 55 CONDITIONS AND TERMS OP PAYMENT ON WHICH THE STOCK IS SOLD TO EMPLOYES : The company and the employe sign a contract for the sale of a certain number of shares of the capital stock of the company to the employe on the terms outlined below. (1) The Stock Certificates are held by the company for a period of five years to insure the full performance of the contract. During this period the employe enjoys the rights of a stockholder, except as limited by the contract. (2) The purchase price of the stock is determined for each individual sale at the time the contract of sale is drawn. Payment for the stock is made in ten equal semi-annual installments. The unpaid balance of the purchase price draws interest at 6%, payable with the installments of the principaL (3) All stock dividends are held by the company for the five year period. (4) The company may rescind the contract. (a) When at any time within the five year period, the employe leaves the service of the company. (b) When the employe defaults in any payments of principal or interest and the default continues for a period of thirty days. (c) Upon any other grounds satisfactory to the company, with- out notice. (5) In case the company rescinds the contract upon grounds (a) and (b), it is required to pay to the employe within 30 days of the date of such action all principal payments made by him. In case the company rescinds the contract on ground (c), it may issue to the employe, at its option, as many shares of stock as are fully paid together with the proportionate amount of any extra stock or cash dividend which are then declared and due. All other principal sums which have been paid to the company are returned to the employe in cash. (6) In the event of the death of the employe, his legal representa- tives acquire only such rights as are reserved to the employes, upon the election of the company to rescind the contract on the ground that em- ployment has ended. (7) The contract is non-assignable. INDUCEMENTS OR REQUIREMENTS FOR THE EMPLOYE TO RETAIN HIS STOCK: There are no inducements for the employe to retain his stock other than the fact that the stock is a good investment. After the certificates have been delivered to the employe, he may dispose of them as he sees fit. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The management believes that the men should have a certain share of the profits if they help to produce them. RESULTS REPORTED BY THE EMPLOYER: It is believed that the plan is beneficial, but there is no way of knowing exactly what the results have been. 56 Employes* Incentive Plans Cleveland Stock Sales Plans 57 IH I THE OHIO BELL TELEPHONE COMPANY E. 9th and Huron Rd. KTTMZ^L^^f''''^^^ Operating BeU Telephone service. NUMBER OP PEOPLE EMPLOYED: 3,000. PLAN WAS ESTABLISHED IN: 1916. ELIGIBILITY TO PARTICIPATE: All employes, who have served one year, are eUgible to participate. EXTENT OF PARTICIPATION: Not stated. CONDITIONS AND TERMS OF PAYMENT ON WHICH THE STOCK IS SOLD TO EMPLOYES: -wt^!!f ^i® employes are permitted to purchase one share of the common stock of the company for each $300.00 or fraction thereof of their annual wages or salary. The stock is purchased for their account at the current market price. «..f^f^"'^"V?J *^^ ^^""^^ '^ ™^^^ ^* *^^ ^^*^ *** ^3.00 per month, $1.50 semi- S Ui^^em^'lo e ^^' installments are deducted f roin the wages .r.r.1^7. dividends declared on the stock daring the period of payment are applied to the unpaid balance. f .^ " « « Interest at the rate of 6% is charged on the unpaid balance. In case of sickness, death or layoff, the agreement may be cancelled in which case, the employe, or his family, receives the amount which he has paid or payments may be continued or suspended for a certain period at the discretion of the company. ^ INDUCEMENTS OR REQUIREMENTS FOR THE EMPLOYE TO RETAIN HIS STOCK: 1 . T^® employe receives the certificates when the payments have been com- pleted. He may dispose of, or keep them as an invstment at his own dis- CF6 vlOIl* REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: Employes are given the opportunity to purchase stock in order to increase their interest in the success of the company. Aui-rease RESULTS REPORTED BY THE EMPLOYER: The plan has not resulted in any decrease in the labor turnover, but it itrem^'lres ""P'***''®^ ^^« relations existing between the company and (Firms having similar plans: The Electric Controller & Mf? Co • The Ohio Body & Blower Co.; The Hydraulic Steel Co.) ^' * CLEVELAND WORSTED MILLS COMPANY 5932 Broadway PRINCIPAL BUSINESS : Manufacture of woolen and worsted cloth. NUMBER OF PEOPLE EMPLOYED: 5,000. PLAN WAS ESTABLISHED IN : 1905. . ELIGIBILITY TO PARTICIPATE: Participants must have had one year of service with the company. EXTENT OP PARTICIPATION: !•«, Jo!/^""^" ^^^ employes, who have bought stock by this method, is quite large and is steadily increasing. ' H"**^ CONDITIONS AND TERMS OF PAYMENT ON WHICH THE STOCK IS SOLD TO EMPLOYES : The stock is sold to employes at par. Its actual value is considerably above par. At least 5% of the value of the stock must be paid at the time of purchase. The employe's note, bearing interest at 5%, is taken for the balance. The only restriction on the amount of stock, which an employe may own, ig his ability to pay for it. The dividends are paid directly to the employe. He is expected to re- duce the note regularly by an amount at least equal to the dividends. INDUCEMENTS AND REQUIREMENTS FOR THE EMPLOYE TO RETAIN HIS STOCK: The par value of the stock is $100.00. If an employe wishes to sell his stock within three years after the date of purchase, he must sell to the com- pany at $105.00 per share. After this time, there are no restrictions on the disposition of the stock. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The company wished to awaken the interest of the employes in the suc- cess of the company and to develop a spirit of co-operation among them. RESULTS REPORTED BY THE EMPLOYER: It is thought that the plan is developing a spirit of loyalty among the employes. (Firm having similar plan: The Eclipse Electrotype & Engraving Co.) THE NATIONAL ACME COMPANY East 13 1st and Coit Boad PRINCIPAL BUSINESS: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of machine tools and screw ma- chine products. 3500. 1908. ELIGIBILITY TO PARTICIPATE: Eligibility to participate is limited at the discretion of the management. EXTENT OF PARTICIPATION: In general, it is the older and more valuable employes, who are permitted to participate in the plan. At present, upwards of 10% of the total number of employes participate. CONDITIONS AND TERMS OF PAYMENT ON WHICH THE STOCK IS SOLD TO EM- PLOYES : The company purchases its stock on the open market and sells it to cer- tian employes, on a partial payment plan, at approximately purchase price. The terms of the agreement of sale vary with each individual employe. The general principle is that a certain proportion of the value of the stock is paid at the time of sale and the balance is paid in installments. The employe does not receive the stock certificates until the stock is entirely paid. The number of shares of stock, which an employe may purchase, is limited at the discretion of the management. 58 Employes* Incentive Plana Cleveland Stock Sales Plans 59 INDUCEMENTS OB REQUIREMENTS FOB THE EMPLOYE TO RETAIN HIS STOCK: ^ There are no conditions surrounding the ownership of the stock. After It ha« been completely purchased, the employe may dispose of it as he sees fit. However, the stock pays a good rate of dividends, and the company tries to show the employe that it is to his advantage to retain the stock as an investment. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: It is intended to reward valuable employes, thereby inducing a spirt of co-operation in them and holding them to the company. RESULTS REPORTED BY THE EMPLOYER: The plan has held the men who have participated. It has aroused their interest in the welfare of the company and has secured their co-operation. (Firms having similar plans: The Cleveland Fruit Juice Co.: The Hotel Statler Co.) THE PENTON PUBLISHING COMPANY 12th and Chestnut PRINCIPAL BUSINESS: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED: Publication of magazines. 200. 1917. ELIGIBILITY TO PARTICIPATE: Employes, who have been in the service of the company for two years or more, are eligible to participate. EXTENT OF PARTICIPATION: The number of employes owning stock is steadily increasing. Approximately 36% of the employes own 375 shares of the preferred stoek. *^ CONDITIONS AND TERMS OF PAYMENT ON WHICH THE STOCK IS SOLD TO EMPLOYES : The board of directors of the company has set aside 2000 shares of second preferred guaranteed 8% stock, par value $100.00, for sale to em- ployes. Eligible employes may purchase annuaUy an amount of this stock equal in value to 10% of their salary in accordance with the following schedule: an employe whose income is not more than $1500.00 per year— 1 share ;; *; *' ** $1500.00 to 2500.00 «* ^ —2 shares ; " " 2500.00 to 3500.00 " '* —3 shares " *' " *' 3500.00 to 4500.00 '* " —4 shares and a similar relation holds for those earning more than $4500.00 per year. The stock is purchased in ten equal monthly payments. It is guaranteed a dividend of 8%, payable quarterly. Interest at the rate of 6% is charged on the unpaid balance. The stock certificates are turned over to the employe when payment has been completed. INDUCEMENTS OR REQUIREMENTS FOR THE EMPLOYE TO RETAIN HIS STOCK: The stock is non-transferable, but it can be surrendered at any time to the Superior Savings and Trust Company, transfer agents, where a fund is maintained for the purpose of taking up such stock. This fund is equal to at least 10%, of the value of the outstanding stock. Surrender of the stock does not affect the standing of the employe with the company. If, at the close of the fiscal year, the common stockholders have received a dividend in excess of 8%, the holders of second preferred stock receive the same dividend in excess of 8%. it REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The company desires to promote length of service and a spirit of co- operation among the employes. RESULTS REPORTED BY THE EMPLOYER: The plan is useful in holding those employes who take advantage of it, and in increasing their interest in the general success of the business. As these are the more valuable employes, a good nucleus is formed around which the organization is built. THE RUSS MANUFACTURING COMPANY 5700 Walworth Ave. PRINCIPAL BUSINESS: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Soda fountain, cafeteria equipment. 190. 1915. ELIGIBILITY TO PARTICIPATE: All employes, who have been in the service of the company for one year or more, are eligible to participate. EXTENT OF PARTICIPATION: Approximately 60% of the employes own stock. CONDITIONS AND TERMS OF PAYMENT ON WHICH THE STOCK IS SOLD TO EMPLOYES : Employes, having one year of service, may subscribe for five shares of common stock, at par. The stock may be paid for in installments, which are deducted from the employe's wages, at the rate of $1.00 per week. Employes, who have been in the service for two years, may subscribe for ten shares, which may be purchased at the rate of $2.00 per week. Employes, who have been in the service for three years or more, may sub- scribe for twenty shares, which may be purchased at the rate of $4.00 per week. The par value of the stock is $100.00. A 10% dividend on the stock is guaranteed to the employe for a period of five years. The dividends are applied to the payment of the stock. The agreement, between the company and the employe, is in the form of a contract. INDUCEMENTS OR REQUIREMENTS FOR THE EMPLOYE TO RETAIN HIS STOCK: There are no inducements other than the guarantee of dividends. When the cash payments and dividends reach an amount equal to the purchase price of the stock, the certificates are issued to the employe who may hold or sell them as he sees fit. In case the employe leaves the service or is discharged, the amount paid by him is refunded together with accrued dividends. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The company wished to create a spirit of loyalty and co-operation among the employes. RESULTS REPORTED BY THE EMPLOYER: There has been a decided betterment of conditions, increased loyalty, co- operation and more regular attendance. 60 Employet* Incentive Plans Cleveland Stock Sales Plans ei THE STANDARD PARTS COMPANY Standard Parts Building FULLER AND SMITH Guardian Bldo. PRINCIPAL business: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of automobile parts. 2322. ^ 1918. ILIGIBILITT TO PARTICIPATE: ment^^S^'^plfprl? T'.*- ''^^*^ ^"P^"^". "P***^ **»« judgment of the manage- ment. In general, participation is confined to salaried employes. EXTENT OP PARTICIPATION: stock^ETrpC'^^ '' ^"^ '^**^ "^^^ '' -P^^^- ^-e P-c^ased ^""""EMPrOYir '^^^ °'' PAYMENT ON WHICH THE STOCK IS SOLD TO '^ftf^r^i""^^^ Who are permitted to purchase stock undei this plan si^n a Stock Agreement" setting forth the conditions and terms of^Ie' ^ nf fZ "^""P^y pureliases, on the open market, a sufficient number of shares of the common stock of the company to fill the subscription chase?'exc^nt ILfM *' «"t)scribers at the average price of the shares pur- chased except that the price cannot exceed $75.00 per share. A payment of $7 50 per share is made by the employe when the agreement is sS and a note bearing interest at 6% is executed for the balance ^ * no*.J^® fu^^*" certificates are then issued and deposited with a bank desi^r- nated in the agreement, as collateral for the note. " ^^" » ^a^** ^* *^« agreement, the comp^any ^f p!i^lnJfT/^*/*°'^^'?°^ ^*- ^" ^"^ *^^' *»»« agreement is cancellJd if fhs.f ZJ?inl^* *■' ^°I ^"^ payment for thirty days. Two plans provide ^ uS Se °^ '^'''''*'^' °'''^* ^^" ^^"^^ ^^^'^^ ^'^ *^^ company at a (9) Character or Mnd of stock: ficf ^L?r'L'°r*^''®'/.T"'^'' ^"^^ '*' ^^^ ^ ^^ employes, except one where 8% preferred stock of the company is sold. In this insta^Jce, life stock par- ticipates in any dividends above 8% on the common stock at the same rate. INDUCEMENTS OR REQUIREMENTS TO RETAIN STOCK: w..f h°«i\\ ""^J^"*! ""{ <^»'8«s, no inducements are offered other than the Whf« /if investment In one case, employes wishing to sell their stock ISJ^,Tof / ^**'° ^T""^ ^i ^'"'^ ^^^ purchase, must sell to the company at a stipulated figure above the purchase price. Another company provides that the stock shall be non-transferable, but that it may be surrendered to the l^J'liZ ^^Tlt ^* '!\ purchase price at any time. A fund equal to 10% of the value of the outstanding stock is maintained to take it up. One concern at'^t's b^ok v*^ur ^^^^ "^^"^ "^^^ ^ ^^' °'''^* ""^^"^ '* ^^^ ^ *^® company f«. o^T /^™P^"^1« «^7 a special bonus to employes who retain their stock for a certain number of years and fulfill certain employment conditions. In one instance, the employe receives a bonus of $5.00 per share for each year he reiains his ^tock up to five years. Another company has the same clause in Its plan except that the bonus is $2.00 per share per year. In the first in- stwice, forfeited bonuses form a fund which draws interest at 5%. At the mLtg^'thelrXS/"""'' *" '""' '' '"'*"'"*^^ """"« the Subscribe™ REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: Many reasons have been given for the installation of these plans. In nine cases, they are intended to awaken the interest and cooperation of the employes. In four cases, they are used to reward faithful or valuable service- four other mstanees, to promote length of service. Two firms installed their plans because they felt that those employes, who helped to produce their profits, should have a share in them. ^ * RESULTS REPORTED: » In seven instances, it is reported that the plans assisted in developing a spint of loyalty and co-operation. Four plans have been the means of holdini valuable employes. One plan has resulted chiefly in more regular attendance. One firm is unable to state the results obtained. 1/ CLEVELAND BONUS PLANS TYPES 1. Brown Hoisting Machinery Company 2. The Cleveland Metal Products Company 3. The Electric Controller & Manufacturing Company 4. The Lakewood Engineering Company 5. The Sherwin-Williams Company 6. The Stone Shoe Company 7. The Warner & Swasey Company 8. The Widlar Company 9. Nicola, Stone & Myers SUMMAEY I: \ Cleveland Bonus Plans 67 BROWN HOISTING MACHINERY COMPANY 4403 St. Clair Avenue PRINCIPAL business: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of hoisting maehinery. 1100. 1916— amended 1920. ELIGIBILITY AND EXTENT OF PARTICIPATION: Employes who are on an hourly basis in the tool room, machine shop, paint shop, carpenter shop, pattern shop and the receiving and shipping rooms, are eligible to participate. Approximately 82% of the total number of em- ployes, exclusive of salesmen, actually participate. About 90% are eligible. DETERMINATION OF FUNDS AND INDIVIDUAL SHARES: Eligible employes, who have worked the full number of hours for a given pay period, less not to exceed one hour, receive a bonus of 10% of their wages for the period, exclusive of payment for overtime. PAYMENT OF THE INDIVIDUAL SHARE: The employe's bonus is paid in cash at the end of each pay period. FORFEITURE : An employe, leaving the service, forfeits his bonus for that pay period- Failing to work the full number of hours for the pay period, less one, he forfeits his bonus. However, employes can accumulate a reserve credit of one hour for each pay period in which they have worked the full number of hours, and one-half hour in case they have completed the full number of hours less not more than one-half hour. Accumulated reserves may be used to cancel future delinquencies hour for hour. In case they exceed the reserve, the excess is not deducted from future reserve hours. Field work does not affect an employe's attendance record. ' ADMINISTRATION OF THE PLAN: The settlement of all questions, in connection with the plan, rests with the management. REASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The company desires to share any saving which can be obtained by greater regularity of attendance on the part of the employes. RESULTS REPORTED BY THE EMPLOYER: It has been of assistance in reducing the amount of tardiness and ab- sence. (Firm having similar plan: The Printz-Biederman Co.) THE CLEVELAND METAL PRODUCTS COMPANY 7609 Platt Avenue PRINCIPAL BUSINESS: NUMBER OF PEOPLE EMPLOYED; PLAN WAS ESTABLISHED IN: Manufacture of oil stoves, kitchen utensils, enamel ware, etc. 3300. 1918. ELIGIBILITY AND EXTENT OF PARTICIPATION: All superintendents, foremen and assistant foremen may participate in the plan after they have proved their worth to the company's satisfaction. These employes represent about 3%% of the total number of people em- ployed. 68 Employes* Incentive Plans '■,;: DETERMINATION OP THE INDIVIDUAL BONUS: The bonus is based upon the work done by the department head in secur- ing the maximum efficiency. The important items of departmental expense and management are listed, and it is required that each department head ap- proach this standard which is arbitrarily placed at 100%. He is graded on a special basis, which is adapted to the different details of his department's work. The items on which he is graded, are grouped under the general head- ings of Production, Labor, Organization and General Efficiency. Following is a partial list of these items: (a) Production, 1. Output of department 2. Quality of output 3. Scrap 4. Equipment conditions 5. Care of stock (b) Labor, 1. Productive labor 2. Non-productive labor 3. Overtime labor 4. Labor turnover 5. Lates and absentees (e) Health, 1. Accidents 2. Welfare (d) Organization, 1. Eesponsibility 2. Organization of department 3. Discipline 4. Order and cleanliness 5. Cooperation 6. Foreman's Club (e) General Efficiency 1. Thrift 2. Suggestions 3. Accuracy trnder these headings there are more detailed sub-items. Each item is weighted with a maximum number of points which can be allowed for it. The total which the employe can make for all items equals 1,000 points. A committee of three men from the factory manager's office grade each man as follows: Each committeeman makes a weekly trip through the shop unaccompanied, and grades each item for each department head. The com- nuttee meets monthly, compares notes and assigns grades. A report of these grades is placed before the factory board for approval. After approval a written statement of the results of his month's work is given to each de- partment head. On the basis of this grade, he receives a bonus, which is credited to a special savings account. From month to month additions, as earned by him, are credited to this account. Superintendents and foremen who receive a grade of 100%, are given a bonus equal to 20% of their salary. If they recevie a grade of 90%, they are given a bonus equal to 18% of their salary, etc Assistant foremen who receive a grade of 100%, are given a bonus equal to 10% of their wages. If their grade is 907©, they receive a bonus of 9% of their salary, etc. Cleveland Bonus Plans 69 PAYMENT OF THE BONUS: At the end of the year, each participant receives a pass book for the accumulated bonus and interest in his special savings account. To date, the bonus of the superintendents and foremen has averaged about 18% of their wages, and for the assistant foremen about 9% of their wages. The cost to the company is less than 1% of the total payroll. POBFEITURE : There are no conditions of forfeiture. If an employe leaves the service of the company he receives the bonus that he has earned. ADMINISTRATION OP THE PLAN: All of the details of grading the participants are handled by the com- mittee of three men appointed from the factory manager's office. However, any participant who objects to a low grading may make a complaint to the (Jeneral Superintendent or the Factory Manager. All complaints are im- mediately investigated, and adjustments made if warranted. SEASONS GIVEN FOR THE INSTALLATION OF THE PLAN: The plan was devised for the purpose of increasing the efficiency of the plant in general. RESULTS REPORTED BY THE EMPLOYER: The plan has done much to increase efficiency of the new men. The older foremen formerly received an arbitrary bonus based largely upon length of service. The new plan which is based solely upon efficiency has not been re- ceived with equal favor by all of them. (Firm having similar plan: The American Fork & Hoe Co.) THE ELECTRIC CONTROLLER & MANUFACTURING COMPANY 2700 East 79th Street PRINCIPAL BUSINESS: number of PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: The manufacture of automatic controllers for direct and alternating current mo- tors, crane controllers and lifting mag- nets. 600. 1915. ELIGIBILITY AND EXTENT OF PARTICIPATION: Every one employed for three months prior to December 15th is eligible to participate in the plan, provided he is still in the employ of the company on December 31st. At present, approximately 90% of the total number of employes par- ticipate. DETERMINATION OP FUNDS AND THE INDIVIDUAL BONUS: The size of the individual bonus depends upon length of service as fol- lows: Employes who have been in the service of the company prior to De- cember 15 for a period of (1) Three months to one year, receive a bonus of 3% of their wages or salary received during the bonus period; (2) One to five years, a bonus of 5%; (3) Five to ten years, 7%; (4) More than ten years, 8%. n Mmplotfes* Incentive Plana 'm PAYMENTS or THE BONUS: The employe receives his bonus in cash on New Year's eve. FORPEITUKE: An employe leaving the service before the end of the bonus period for- feits his bonus. Time in the Army or Navy of the United States or time lost by temporary layoff IS included when computing the employe's bonus. ABMINISTBATION OF THE BONUS: The administration of the plan rests solely with the management. The company revises the plan yearly and the revised plan is in force for the ensuing year. SEASONS GIVEN TOR THE INSTALLATION OF THE PLAN: The plan was intended to promote length of service. BESULTS REPORTED BY THE EMPLOYER: The plan has been successful in reducing the labor turnover. The com- pany believes that it has also been helpful in producing better relations be- tween the management and its employes. 1., (^™8 having similar plans: The Cleveland Provision Co.: The Grant Motor Co.; The L. N. Gross Co.; The May Co.; The Hotel Statler Co.) THE LAKEWOOD ENGINEERING COMPANY 117th Street and Berea Boad PEINCIPAL BUSINESS: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of industrial trucks, electric locomotives, clam shell buckets, etc. 700. 1919. This plan is the outgrowth of a number of previous plans. ELIGIBILITY AND EXTENT OP PARTICIPATION: ♦1,.^'^^®'*^ f^-T l""*!^ regarding elegibility to participate. The employes themselves decide what qualifications are necessary. At present approximately 100% of the employes participate in the plan. DETERMINATION OF FUNDS AND INDIVIDUAL SHARES: Expense budgets are made up for the sales and production departments based on both the maximum business, which the company can reasonably ex- pect, and the minimum business with which it will be content. The budeets are set by the management in consultation with the heads of the departments, and aj-e graduated between the maxinmm and the minimum. Each depart- ment IS considered separately and has its own budget. One-third of any saving which a department can make over its budeet goes to the company, one-third to the members of the department, and one- third to a contmgency fund to carry the department along and insure the men tneir jobs m times of business depression. PAYMENT OF THE INDIVIDUAL SHARE: The money which is distributed is divided chiefly on the basis of the employe s salary. However, the employes may change this basis if they so desire* Cleveland Bonus Plans 71 FORFEITURE : There are no causes for forfeiture other than leaving the service. The employes have the right to make any conditions of forfeiture which they see fit ADMINISTRATION OF THE PLAN: The administration of the plan rests entirely with the employes. They can verify the company's statement of expenses. The company may modify the plan at the end of the year. REASONfe GIVEN FOR THE INSTALLATION OF THE PLAN: The plan is an effort to promote and reward eflSciency. RESULTS REPORTED BY THE EMPLOYER: The management sees greatly increased interest on the part of the em- ployes. In many cases it has caused a reduction in sales and manufacturing costs. THE SHERWIN-WILLIAMS COMPANY 601 Canal Boad PRINCIPAL business: NUMBER OF PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Manufacture of paints and varnishes. 350. 1919. ELIGIBILITY AND EXTENT OF PARTICIPATION: AH employes of a department, including the foreman, are eligible to participate in the plan. New employes participate from date of hiring, pro- viding they remain 30 days, their dividend being withheld for that period. Approximately 80% of the total number employed participate in the plan. They are all in the manufacturing departments. DETERMINATION OF FUNDS AND INDIVIDUAL SHARES: A standard cost per 100 units is set for each department. This stand- ard cost is set from the average cost records for a year and includes the items of overhead and direct labor concerning which the employes are able to effect savings. Any saving which the employes or the company are able to make over this standard cost during a given month forms a fund which is divided equally between the company and the employes. An itemized report of the expense account is furnished to each depart- ment at the end of the month. The dividend charge for the month is shown on the report but it is not one of the items entering into the unit cost. Those employed more than three months share in the dividend fund on the basis of their total wages for the month. Those employed less than three months, but more than one month share in the fund on the basis of 50% of their wages. No dividend may exceed 25% of the total wages earned by a department. Any surplus over this 25% limit goes into a special surplus account which is divided among eligible employes, at the end of the fiscal year, on the basis of their earnings for the year. They must be in the company's employ at the end of the year. PAYMENT OP THE INDIVIDUAL SHARE: Each employe receives his monthly dividend in cash, shortly after the end of the month. 71 Employes* Incentive Plans Cleveland Bonus Plans 73 I PORPEITURE : Employes who leave the service before the end of their first month for- feit their share of any dividend which may be declared for the month. Forfeited shares are distributed among the remaining employes. Sick- ness, death or layoflP have no effect upon the right to participate, except that insofar as the employe's earnings are reduced, his proportionate share would be smaller. ADMINISTRATION OP THE PLAN: The employes participating constitute the *' fifty-fifty ' ' club, whose ob- ject IS to promote greater efficiency. The general superintendent of the fac- tory is the president of the club. There is also a committee composed of the foreman and one elected repre- sentative for each 20 workmen of a department The general superintendent presides over the committee meetings. The monthly meetings are held on the company's time, following com- pletion of the previous month's expense reports. The monthly dividend checks are distributed at these meetings, and there is open discussion of ideas for increased production and efficiency. Any recommendations made by the com- mittee are forwarded to the management. REASONS GIVEN FOR THE INSTALLATION OP THE PLAN: The company wished to decrease the labor turnover and increase the ef- ficiency, interest and cooperation of the employes in the business. RESULTS REPORTED BY THE EMPLOYER: The plan has accomplished all that was expected of it in the way of in- creased co-operation and efficiency. In addition, the company has been able to obtain many valuable ideas from the employes through the monthly shop zneexings. THE STONE SHOE COMPANY 312 Euclid Avenue PRINCIPAL BUSINESS: number op PEOPLE EMPLOYED: PLAN WAS ESTABLISHED IN: Ketail sale of shoes. 125. 1916. ELIGIBILITY AND EXTENT OP PARTICIPATION: Practically 100% of the sales people operate under this plan. They com- prise about 80% of the total number of people employed. All sales people are put on the plan as soon as they join the organiza- DETERMINATION OP COMMISSIONS: Salespeople are given a drawing account, the size of whi;^ o/v^s* NEH APR 2 01994 COLUMBIA UNIVERSITY LIBRARIES This book is due on the date indicated below, or at the expiration of a definite period after the date of br;x^wi„.^ provided by the library rules or by special arrangement wlt^ the Librarian in charge. 8«nienc wiin OAT« •OflROWCO DATE DUE DATE BORflOWSO T DATE DUE C26(747; MlOO M: mm^ ■m^ COLUMBIA UNIVERSITY UBRARip 0044261497 !«««4fc»,rrr>1"'|i I lij-.rrw.^sr- .s- 4t .ip^^sgraw^K^ »■/•...<._ .,„..., '"■''" ■'•••""IMMlHIU.). • • , " . -.< END OF TITLE