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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: Duncan J John side of works I l«C©- e w Yo r k] Date: [191 MASTER NEGATIVE # COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD islnese RESTRICTIONS ON USE: Duncan, John Christie. The economic side of works management ... [New York? "jgil] 2 p. 1., p. 183-316. illus. (incl. forms) 19J em Thesis (ph. d.) — ^University of Pennsylvania. "Appeared in 1907 in the Business world" and forms the third part of the author's Principles of industrial management, cf. Pref. 1. Factory management. Library of Congress Copy 2. TS1SS.D8 11-3493 ■iiif © Feb. 27, 1911 ; 2c. Mar. 1, WlTTA 283089; D. Appleton & co., N. Y., N. Y. ( : TECHNICAL MICROFORM DATA nLM SIZE: .r^i^myY^ DATE FILMED: TRACKING # : REDUCTION RATIO : QV IMAGE PLACEMENT: IA/HA ) IB IIB \\-7it^'^ INITIALS : <^ MM OZ6^3 FILMED BY PRESERVATION RESOURCES, BETHLEHEM, PA. BIBLIOGRAPHIC IRREGULARITIES MAIN ENTRY: Duncan. John Christie The economic side of works management Bibliographic irregularities in the Original Document: List all volumes and pages affected; include name of institution if filming borrowed text, .Page(s) missing/not available: .Volume(s) missing/not available: Illegible and/or damaged page(s):_ .Page(s) or volume(s) misnumbered Bound out of sequence: Page(s) or volume(s) filmed from copy borrowed from X Other: pagination begins with page 183 TRACKING*: MSH02643 ^ > O 0> ^ VI o 3 3 > ^ c ./ 3 3 ■^ O f"i5iiPisi=|5|j fr & k; f- liNj ro 00 c> cx> K3 b ro 1.0 mm 1.5 mm 2.0 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyzl234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 2.5 mm 1234567890 rX^^ t.<^ ^S' ^s u f^ ^d> no ^O f^ is^ ^5^ ^<' ^^' -^^ ^o f^ m O -o m -o O O > o m ■^ Tl C CO O 00 m > 3D O m THE ECONOMIC SIDE OF '*i WORKS MANAGEMENT A THESIS PRESENTED TO THE FACULTY OF THE GRADUATE SCHOOL OF THE UNIVERSITY OF PEMSYLVANIA IN PAR- TIAL FULFILipT OE THE REQUIREMENTS FOR THE DEdHtoF DOCTOR OF PHILOSOPHY BY JOHN CHRISTIE DUNCAN .'•'*'n^. I V -'■ Columbia ISnttiemti XjISR-^'^ ^ * " - « Ri- ;::..■ ■ I V! ^'fC . kf''^ ^ ■ ' ^ . w :H,„j' t J ■J?f*J I.' * •\ • 1 I 17' .r JfMS^gf^' ^'i'S^l'^S THE ECONOMIC SIDE OF WORKS MANAGEMENT #1] A THESIS PRESENTED TO THE FACULTY OF THE GRADUATE 'SCHOOL OF THE UNIVERSITY OF PENNSYLVANIA IN PAR- TIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY BY JOHN CHRISTIE DUNCAN pnHiMpf It J \^ 'L nil I*'" '' \Jpvv. l >' I I9U Copyright, 1911, by D. APPLETON AND COMPANY ''"^^'^^U^^' JD 3-l> ilv,-AJ4*''^#" ? 1)3 12- ,1 In jP' PREFACE This thesis appeared in 1907 in the Business World Tinder the title of The Economic Side of Works Manage- ment. The understanding was that reprints would be made, but, unfortunately, before that could be brought about the magazine changed hands, the manuscript was lost, and the plates destroyed. The writer would have reprinted the articles as they appeared in the Business World had it not been for the fact that the paper was materially changed for editorial purposes without his knowledge or consent, and some of the parts were omitted which should have appeared. To have reprinted the paper as it appeared in the Business World would not have done justice to the thesis nor have been a creditable piece of work for a Doctorial dissertation. In the meantime the writer had started a book on the general topic of the Principles of Industrial Management, and had used his thesis notes as a basis for the third part of the book. The publishers of the book did not feel free to let the rewritten thesis appear before the book, and as it was impossible to reprint the original thesis, the authorities of the University of Pennsylvania very generously consented to accept the third part of the book in order to fulfill' the technical university requirements. This reprint contains all the original matter in the first thesis, but it is presented in a little better form. CHAPTER XIII THE THREE TYPES OF ORGANIZATION In Parts I and II the questions which the business exec- utive must consider have been discussed. The creation of an ideal equipment solves about one half of the problem of industrial management. The plant must yet be put under a satisfactory organization before it can be well managed. The wo^s manager must so combine the equipment which has been given him with labor and material that the product of the plant will be the cheapest and best that can be manu- factured. The sales department must put the goods on the market efficiently. The works manager's field in the concern is limited to the production department of business. His work begins with the receipt of the order and ends with its shipment. He has nothing to do with the soliciting of orders, he is not concerned with the finances of the firm nor with its legal diifi- culties. His work begins and ends with production. To perform his duties ideally : 1. He must get the work performed rapidly. 2. He must get the work performed accurately. 8. He must get the maximum result from the machinery. 4. He must get the maximum product from the raw ma- terial. 5. He must see that improvements in methods are intro- duced. In order to get this work performed, there have been evolved three kinds of industrial organization — ^the military, fimctional, and departmental types. 183 184 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT \ w The Military System of Organization.— This is the old- est and was almost the only one until very recent years. According to the military scheme, all power and authority for directing the work emanate from one man, who is held responsible for everything that is done in any part of the division under his control. With his plan the leader does not give general directions and then look for results. He keeps control of all details that arise within his sphere of command. The armies of former ages were run according to this plan. The general-in-chief gave directions concern- ing the health of the men, the way they should march ; he saw to the provisioning of the troops, and in fact Caesar, Napoleon, Frederick, and many other great military leaders, directed the affairs of the state as weU. Curiously enough the modem army is no longer run according to the old style military system. The health of the troops is under the care of a distinct body of men, the provisioning and supplying of the troops is attended to by another group of oflScials. The commander-in-chief now decides upon the general plan of the campaign. He plans where and how battles shall be fought, but modem warfare no longer makes it possible for him to lead his men as did the youthful Alexander, the great Napoleon, or as did Scott, Lee, or Grant in American history. The army now has a staff organization which cor- responds very closely to the departmental system used in the progressive firms of to-day. With the military system of industrial organization every (^cer in each division or subdivision is held responsible for all that happens within his province. No matter what mis- takes are made, he is the one who must stand the conse- quences. If a foreman has charge of a shop and that shop runs behind in orders, is extravagant in the consumption of supplies or power, or is deficient in the quality of work turned out, the foreman in charge is responsible. He is given a division presumably sufficiently small to make it THE THREE TYPES OP ORGANIZATION 185 possible for a reasonably good man to look after details, and everything is considered distinctly within the scope of his duties. He is expected to keep his men always supplied with work. He must see that the machines are in working order. He must be able to select good men and keep them. If any question arises concerning how things should be done, he should be able to give explicit directions. He must de- tect work that is not properly done, know on whom to saddle the blame, and must also remedy the faults. In a word, he must be a thorough, aU-round man to fill his place properly. A trained man of ordinary ability can efficiently direct from fifty to one hundred and fifty people in simple, ordi- nary tasks which require little mechanical ability. It is only the exceptional man of considerable experience and famili- arity with the work who can profitably direct more than one hundred and fifty or two hundred workmen. In continuous industries, of both the synthetical and analytical types, a large number of processes are simply and easily directed. The work is almost entirely routine. The machinery is nearly if not quite automatic. There are no great calls upon the intelligence of the foreman, because there is very little to be done outside of seeing that the workers are at their posts and are turning out an adequate amount of material. In such industries, the military organization is ideal, because the task should be quite within the limits of the foreman's ability, and the responsibility can be constantly fixed upon him. If he fails to prove equal to his position, there is no great diffi- culty in obtaining another man. Generally speaking, the executives of these types of industries do not find their labor management problems difficult of solution in the production departments. Their energies can be directed toward the dis- tributive department, and to finding a corps of workers who will develop the mechanical efficiency of the machinery, look to the economies of the processes and power-saving possibil- ities and to other similar questions, I ^ 186 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT In industries which depend to a greater extent upon the ingenuity and efforts of the laborer who cannot be so greatly aided by machinery, the military organization shows its weakness. The machine shops in the assembling industries were the first to feel the limitations of the military system. For many years, no one noticed ite deficiencies, because the shops were small and one man could attend to all the details and give a fair degree of satisfaction. When, however, the de- partments grew to more than two hundred workmen, the scheme began to breaJ. down. No one could look after all the details of so large a shop. It was useless to discharge the overseers, because no one could be found equal to the tesk. It is a dictum in management that if punishment by dis- charge does not eliminate failures and mistakes in an or- ganization the scheme in itaelf is viteUy wrong. Works managers gradually came to appreciate that the defecte wei« due to the eystem, bo they sought to elimiimte the w«*nes,es of too highly co^centn,!^ .uLri^ hy divid- ing the leadership among several men, each being equally responsible to the superintendent. This solved the problem of giving the foreman a reasonable number of people to look after, but it increased the unj)roductive labor expenses and tended to make a conflict in authority and interests. For example, the foreman of the machines in order to make a good showing would be apt at times to have his men rush the work through in a hasty manner, expecting the erecting gang or bench hands to make good his deficiencies. The bench foreman would also slight his work. If heavy castings were to be moved by the cranes, two foremen, equal in au- thority, would put the riggers and crane men in an exceed- ingly unpleasant situation because both would insist upon immediate attention. There was but one outeome. The rig- gers served whomsoever they pleased. The writer is familiar with a shop where the riggers were bribed by an ambitious THE THREE TYPES OF ORGANIZATION 187 gang boss to attend to his requests. He needed the services of the crane for a considerable length of time. However, there were intervening periods of a half hour or so in which the crane could be used to fill machines and move other cast- ings. Instead of using this time and making the favored man wait an occasional quarter or half hour, the riggers stood by the job, holding up the machines and erectors the better part of the day. Of course this is an exceptional and most glaring example of the weakness of this scheme, but it is nevertheless a weakness which grows out of too extended a spreading of the military system. Briefly summarized, the advantages of the military system of management are : 1. It unifies the work, putting it all in the hands of one individual. 2. It fixes the responsibility for the performance of tasks in a definite manner upon certain individuals. Its disadvantages are: 1. When a plant becomes too large the foremen are held responsible for too many things, and cannot justly be held accountable for blunders or for smallness of productivity in machines and men. 2. The foremen have so much to do that they cannot see to the introduction of improvements as rapidly as is desirable. The military system of works organization in a large con- cern leads to chaos in management, because it fails to pre- vent bad work and to stop the nursing of jobs. It has no means of rewarding the efl&cient man or of punishing the poor worker or loafer. Managers of plants who worked with the military system in their younger days were puzzled as to why the later generation developed so few good foremen and wby it brought forth so many poor workmen. They did not rec- ognize the fact that it was due not to a degeneration in the younger members of the community but to an inherent fault in the system. Thoughtful etudents felt the need of some- ii »l 188 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT thing, but hardly knew what. Some plants tried varying schemes of running their work. Several concerns hit upon the plan of piece wage payment and careful inspection of material by independent inspectors who were held responsi- ble. This scheme has worked with a reasonable degree of success, but there are so many ways of fooling the inspector and of getting bad work passed, and there are so many possi- ble evasions of the piece wage scheme that it was soon re- alized that another change was necessary before this method would prove efficient. The piece wage payment and inspec- tion scheme did lead to something better. Piece workers, on account of the fact that they are working for themselves, are insistent upon allowances being made for all kinds of contingencies. The manufacturer finds it more profitable to lighten their duties, and to limit as little as possible the movement of the workers. He soon begins to study how the work can be divided and men assigned to cer- tain parts. From this development arose the functional sys- tem of organization. The Functional System.— li^hB greatest exponent in Amer- ica of the functional system of organization is Mr. Frederic W. Taylor, a past president of the American Society of Mechanical Engineers. Mr. Taylor has held a great number of responsible positions in various sections of the country, and hm made an enviable reputation in the engineering world. His paper entitled ^'Shop Management," delivered before the Society of Mechanical Engineers, is a memorable contribution. In that paper he discussed the management of a shop under the functional system of organization. ^ functional organization consists in so dividing the work of management that each man from the assistant superinten- dent down shall have as few functions as possible to perform. "^ THE THREE TYPES OF ORGANIZATION 189 1 Cf . Transdctions American Society of Mechanical Engineers^ Vol. XXIVt Paper No, 1003. p. 1391, The scheme is based upon the theory of the division of labor as applied to management. A workman in a machine shop according to this plan is not under one but several foremen. Mr. Taylor advocates four shop bosses : gang boss, speed boss, inspector, and repair boss. The gang boss has charge of pre- paring the work up to the time that the piece is set in the machine. He must show his men how to set the work on the machine in the quickest possible time and in the best possible way. The speed boss has the function of providing the proper tools for the workman on the machine. He must see that the cuts are started at the right place and that the fnachine is speeded up to its proper limit. The inspector is re- sponsible for the quality of the work, and both workmen and speed bosses must finish the work to suit him. The repair boss sees that each machine is kept in working condition, is clean, free from rust and scratches, and is properly oiled. In addition to these four shop overseers the workmen come into contact with the representatives of the planning department, whose function is to relieve the shop foremen of all thought of how the work should be arranged and distrib- uted to the machines. Four representatives of the planning- room also come in contact with the workmen, the order of work or route clerk, instruction card man, time and cost clerk, and the shop disciplinarian. The route clerk writes a daily list, instructing the workmen and all shop bosses as to the exact order in which the work is to be done by each class of machines or men. The instruction card man states in writing the general and detailed drawing to refer to, the piece number and cost order number to charge the work to, the special jigs to use, the depth of cut to be made, the number of cuts to make, and the time in which the job should be fin- ished. He also sets the piece rate. The time and cost clerk sends to the men through the instruction card all the infor- mation they need for recording their time and cost of work, and he secures the proper returns from the men. tt 190 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT "In case of insubordination or impudence, repeated failure to do their duty, lateness or unexcused absence, the shop disciplinarian takes the workman or bosses in hand and applies the proper rem- edy, and sees that a complete record of each man's virtues and defects is kept. This man should also have much to do with read- jostins the wages of the workmen. At the very least, he should invariably be consulted before any change is made. One of his important functions should be that of peacemaker." * To quote Mr. Taylor again: "The greatest good resulting from this change is that it becomes possible in a comparatively short time to train bosses who can really and fully perform the functions demanded of them, while under the old system it took years to train men who were after all able to thoroughly perform only a portion of their duties. ... Another great advantage resulting from divided foremanship is that it becomes entirely practicable to apply the four leading prin- dples of management to the bosses as well as to the workmen." « The four leading principles of management to which Mr. Taylor refers in this last statement are: 1. A large daily task should be given to the men. 2. The men should be given standard conditions, making it possible to perform the task. 8. They should be given a high pay for success. 4. They should lose in case they fail to reach the require- ments of the daily task.* Viewing the subject from a broader point of view, there are other advantages to be gained from the functional organi- zation. 1. The work is divided so that one man need attend to only one thing. It enables complete specialization of labor. 2. It definitely fixes the responsibility for the performance of each function upon one man. » Transactims American Society of Mechanical Ennineers, VoL XXIV, pp. 1393, 1394. » Ibid. , p. 1394. » Ibid. , p. 1368. THE THREE TYPES OF ORGANIZATION 191 8. It allows the workman opportunity to think out im- provements by enabling him to make an intensive study of his work. Notwithstanding all of these advantages the functional system of organization has not proven popular or successful in a number of plants where it has been tried. It causes men to lose initiative. It has a tendency to shift and divide the responsibility in spite of the contrary intention. This has been found to be true in several places where the plan has been tried. The difficulties that have been encountered in carrying the scheme through are: 1. It requires a great amount of clerical work to fill out instruction cards and write out all orders and minute instructions necessary for the complete enforcement of the scheme. 2. It is exceedingly hard at times to define clearly to whom certain functions belong and on whom the responsi- bility rests when things go wrong. For instance, no less than eight bosses outside of the shop disciplinarian come into di- rect contact with the workmen. Four of these men make out instructions, and four others say how they should be carried out. It not infrequently happens that the man who makes out the instructions is somewhat vague in his directions, in the hope that the speed boss or gang boss wiU make up de- ficiencies. If a mistake occurs under these conditions, it becomes a difficult matter to determine who is to blame, because the instructions man will plead that they were not interpreted correctly and the other bosses wiU assert that such interpretations could be made. Sometimes the instruc- tion card man will give instructions and the gang bosses may see a better method. If they do, the chances are that they wiU want to put their scheme into operation. Hence there wiU be a conflict of authority. If a boss adheres to the system and doesn't follow the best method possible under the circumstances, the firm is paying for a system of man- 14 !l!!ii HH 192 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT agement which is failing in its purpose of getting the goods out in the cheapest possible manner. 8. It is cumbersome and expensive to operate. In every shop the jobs must be assigned to men at aU kinds of odd times during the day. If a workman desires to start on his job he must come into content with at least three of those boBses before he can do anjrthing. There are usually several men desiring jobs at one time. Under a system where the workman is supposed to know how to set up a job and inter- pret instructions, he merely needs to find out what he is sup- posed to do, and do it, caUing on the boss only when there are complications. With this functional scheme he is not supposed to act on his own initiative. As a matter of fact, so many bosses really hinder the work. They irritate the men and are expensive to keep up, because in a large shop they must have a number of sets of bosses to carry out the scheme as laid down. The Departmental System. — In advocating the functional system of works organization, Mr. Taylor made a valuable contribution in that he brought out the idea of dividing the work in such a way that it could be looked after by func- tions rather than by complete units. No plan of organiza- tion can be successful unless it is workable. The military type fails to be workable in large organizations, because it is impossible to get men who are capable of filling the lead- ing positions. With the functional plan it is possible to train a sufficient nimaber of men to carry out the functional duties, but it is only under the most exceptional conditions that these various functions can be clearly defined and the scheme worked without conflict and irritation. If there is a remarkable man at the head who can smooth all points and be everywhere present whenever a difficulty arises with con- flicting ideas and authorities, the system has a chance of working; but in this every-day world a highly sensitive or- ganization of that character, no matter how perfect on paper, THE THREE TYPES OP ORGANIZATION 193 is bound to be disrupted by the bumps and collisions of daily strife. A finely adjusted, compensated astronomical chronometer wiU keep perfect time, provided it is wound up at certain stated intervals, and is kept from jars and vibra- tions and extremes of temperature, but for ordinary day use to carry around in the pocket, a dollar watch may prove more satisfactory. Works managers need the doUar-watch combination, and they have found it in combining the good features of both the military and functional systems of or- ganization. Hundreds of plants at the present time use the departmental system without being fully aware of what they are doing. The departmental system does the following things : It divides the plant up into a number of clearly defined departments, and puts each under the control of a gang boss, who is given general directions to work to and is held re- sponsible for results and not for servile attention to detailed instructions. Thus in a machine shop there is a man to look after the large machine tools, such as lathes, planers, and milling machines. Another foreman will be appointed to look after the erection of the large parts of the engine, another will be given a valve-setting gang, and still another may be given charge of the tool-room, and another will look after the stores. The riggers or crane men will be under a sub-foreman, who will have to keep all the machines supplied with work. In addition to these, the repair department will be in the hands of one man, a tool-making and grinding de- partment in the hands of another, and the stores department in the hands of another. All of these men will be imder a head foreman or superintendent. Each man is held responsi- ble for the output of his machines. When a set of drawings of an order comes into the shop, the head foreman will ex- amine the drawings and caU in the various gang bosses. He will tell them the things they are to look after. Each man clearly understands, from either written or oral instructions, 194 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT THE THREE TYPES OP ORGANIZATION 195 Ml IHHI his particular province. It is then his duty to keep his ma- chines going and his men employed on their particular tasks. The work, when performed and inspected, is passed on to the other departmental boss. If the succeeding gang boss finds any defects in the work, he must at once report the mistakes, or he will be held responsible for all defects uncovered by his immediate successor. The departmental system divides the work up into small departments, each under the absolute control of a man, and the departments are so related to each other that no individ- ual workman will have to obey two bosses. The riggers, for instance, in the military system served any man upon re- quest. In the functional system, the riggers obey a rigging boss who is at the beck and call of a half dozen functional foremen. In the departmental system, the rigging boss learns from the head foreman the conditions of the large castings, and about when they are to be moved, and adjusts his gangs in such a way that there will be a minimum of waiting throughout the entire shop. If the head foreman finds any men idle due to the fact that they cannot work because cast- ings are not moved, he can at once ascertain whether the boss rigger has arranged the movements correctly, or whether there is insufficient crane service. Whatever the reason, there is one man from whom an explanation can be de- manded and readjustments promptly made. If the machines are not turning out sufiicient work or are giving poor service, the departmental boss cannot blame the speed boss or an in- struction-card boss. He has the machines to look after. If his men are not efficient, he is to blame, because he should report and discharge the delinquents. If the machines are in bad condition, he is at fault, because it is his duty to re- port defects and breaks at once, and insist that they bfe re- paired. A machine boss should never let a ma only put the bolt or nut blanks in and see that as each step --—'■r^t^ i^- III II m 204 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT is completed on the machine the succeeding tool is applied to do tiie next step at the proper time. (b) The modem drill press. In some cases the drill press has a great number of spindles, so that the one machine turns out a number of pieces of work at the same time. Here the attendant must be constantly on the alert to see that the vari- ous spindles are supplied with material in order to keep the entire machine productive. (c) The modern loom — ^an excellent illustration of this type of machine. The more recent loom will stop whenever a thread breaks in either direction in the cloth. The atten- dant must be capable of tying the broken threads and start- ing the loom at any time. He must be deft in handling the material and must not mix threads or get them tangled in the weaving process. (d) The modem spinning frames or spinning mules. These do not require very great skill on the part of the atten- dant, but do need adeptness in handling the fine threads. (e) The slotting and modem key-way cutting machines of the machine shop. The attendant must adjust the feed or rate of cutting to suit the requirements of the material or the machines, and must be able to select the proper tools for the various cuts. The tools are readily learned and do not vary with the same material and cut, so that after once learned such machines can be ran by an ordinary person. (3.) The third type of machines requires great skill to ran because such machines are designed either to handle a large variety of work which must be performed with exact- ing accuracy or they require unusual steadiness of nerve and skill to operate. Examples of these machines are: (a) The large lathes and milling machines in general machine shops. These machines get a great variety of work every day; sometimes they are used to bore out cylinders, again to tum shafting, and in fact one never can tell just what they may be called upon to do, THE LABOR FORCE 205 (b) Large planers and shapers are another variety of the same class of machines. They may be used to cut grooves, smooth off the top of plane surfaces, finish the sides of castings, and the variety of castings they may be required to handle is indefinite. (c) Steam hammers in forges, such as make ship work and other heavy forgings. (d) The roll sets which make steel rails, structural iron, ship plates, and other work of a similar type. This third class of machines requires the services of the third class of workers discussed below. III. A high grade of skilled labor. — The worker need not be of powerful physique, but he must be in good health, and possess the following qualifications : 1. Ability to interpret accurately complicated instructions either from blue prints, drawings, or from written or oral communication. 2. Ability to concentrate attention on details, to use skill and patience in accurately carrying out, in the concrete re- ality, the pictured idea of the inventor or engineer. This class of laborer is the most highly skilled non-pro- fessional group of people in existence, and must be well paid. Indeed, they frequently obtain wages which compare favor- ably with the salaries of teachers and the incomes of lawyers, doctors, and other professional men. They are needed in foundries to make complicated castings, in the pattern shop to produce the patterns for the foundry, in the machine shops to run the large lathes and machines to which jobs of varied dimensions are assigned. Such a man is entrusted with val- uable material, and if he makes a mistake its results are far- reaching. A pattern-maker once misread a drawing, making the inlet into the condenser on the wrong side of the condens- ing apparatus. The pattern went through the foundry. The casting came into the machine shop and was machined in many parts before the mistake was discovered, and it cost 206 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT the firm some $800 to rectify the error. In another case, a man in charge of one of the large lathes misinterpreted a drawing and tnmed a certain piece of material one thirty- second of an inch smaller than it should have been. The casting was some forty inches in diameter and seventy-odd inches in length. The mistake was discovered when it was attempted to fit it into the other parts, and it was utterly worthless — ^a loss of several hundred dollars to the firm. It is absolutely necessary for men holding such places to be thoroughly equipped. To train a man for this rank, he must first of all be intelligent, naturally resourceful, and pos- sess the innate ability to visualize a described idea. To ob- tain tjae development of these latent qualities the workman must have : 1. A preliminary education of such a degree that he can readily acquire an accuracy in interpreting instructions. In a word, he must have a receptive, active mind. 2. He must serve an apprenticeship. This preparation must be in shops, night schools, and other places where he can leam more than the mere routine of his tasks. He must attain the attitude of mind that we look for in the profes- sional man, the ability to depend on himself for carrying out work, and an unwillingness to jump at conclusions. The great problem of a manager in any place is to intro- duce machinery and so to arrange the work that the unskilled worker will be unnecessary, and the call for the highly skilled man will be small. Unskilled exhausting toil is so monoto- nous that the employee can take little or no interest in his duties, and the work itself is so unprofitable that a concern cannot afford to give a wage that will encourage men to be alert and faithful. The man reasons rightly that if he gets discharged he can get as good a job in another place ; and if he doesn't find an opening, society will give him a living at least, which is little, if any, less than he is now getting out of aU his exertion. THE LABOR FORCE 207 An organization which must have a large number of the third class of workman, the highly skilled man, is likewise undesirable, not because his services are not valuable, but because so much depends on him. His grade is so high that it is difficult to obtain him. He is well worth his wages in any organization if he is efficient and does not make mis- takes ; but if he does err, even occasionally, considerable loss may be entailed. Therefore it is highly desirable to get machinery to do as much of his work as possible. The second class of worker is the most desirable. The advantages of this class are : 1. A short apprenticeship makes the man valuable to the employer. 2. The employee with his limited capacity feels his de- pendence on the employer, and is likely to be a faithful and attentive workman because he receives a larger income than the ordinary laborer, and could in most cases obtain employ- ment only as a less valuable man in another place. 8. The employee becomes very dexterous in doing one thing, and is thus able to turn out a large product. It is possible to run but few plants without using more of the third class than are readily available. They are neces- sary as bosses and leaders of the first and second groups, and unfortunately they cannot be developed rapidly from either one of them. Shop managers find themselves seriously han- dicapped, from time to time, in getting men who can take charge of departments, who can become gang bosses and fore- men in the various divisions of the organizations. So im- portant has the specialization of labor ^Decome that the old style apprentice in the shop has almost completely vanished. A few weeks of practice enables a man to run a loom, but to get a good loom foreman a man should come through an ap- prenticeship which has taught him every part of the loom and its running mechanism. It takes a very short time to leam to run a drill press or milling machine, but it is an exceed- 15 208 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT THE LABOR FORCE 209 ingly hard proposition to get a man who can tell what classes of work should go on the machines, how they should be at- tached, how the tools should be adjusted, and a hundred and one other such matters. It requires little intelligence to scrape in a valve seat, but it requires skill to set the valves of the variety of engines that come into some of the large general shops. So pressing has the need of this highly skilled class of mechanic become that in spite of the profit- ableness of the second class, corporations now make every effort possible to encourage young men to advance past the mere routine of making goods. A number of large concerns are devoting a great deal of attention to the development and teaching of apprentices. Apprenticeship. — The General Electric Company of Lynn, Massachusetts, about 1902 put into operation an ap- prenticeship system which has proven to be beneficial both to the firm and the employees. They organized a special de- partment devoted entirely to the training of apprentices. This department was put under the direct control of a superinten- dent, who was especially qualified to teach young men the principles of their trades. The company also established class rooms in the factory in which the boys are taught drawing, and are given instruction in engineering science. The training received by a student at Lynn is so broad *^that the graduate apprentice is prepared to fill a position as a skilled joume3nnan or as industrial foreman in any mechani- cal establishment. ' ' * The Baldwin Locomotive Works of Philadelphia is an- other well-known firm which has established an apprentice- ship system. They have not, however, set apart a separate school or department for the training of the young men. A learner goes into the various shops and departments and * The Annals of the American Academy of Political and Social Seimce. Vol. XXXIII, No. 1, January, 1909, p. 143. gathers knowledge and experience from things as they actu- ally go on in the usual course of events in the works. In order to provide for several classes of apprentices they have made provision for three classes of applicants. Apprentices of the First Class. — The first class includes boys of seventeen years of age who have had a good common school education, and who bind themselves by indentures (with the consent of a parent or guardian in each case) to serve four years ; to be regular at their work ; to obey all or- ders given them by the foreman or others in authority; to recognize the supervision of the firm over their conduct out of the shop as well as in it ; and to attend such night schools during the first three years of their apprenticeship as will teach them, in the first year, elementary algebra and geome- try; and in the remaining two years, the rudiments of me- chanical drawing. Apprentices of the Second Class. — The second-class in- denture is similar to that of the first class, except that the apprentice must have had an advanced grammar school or high-school training, including the mathematical courses usual in such schools. He must bind himself to serve for three years, and to attend night schools for the study of me- chanical drawing, at least two years, unless he has already sufficiently acquired the art. A^jjjr entices of the Third Class. — The third-class inden- ture is in the form of an agreement made with persons twenty-one years of age or over, who are graduates of col- leges, technical schools, or scientific institutions, having taken courses covering the higher mathematics and the nat- ural sciences, and who desire to secure instruction in practi- cal shop work. The indenture or agreement in each case obligates the company to teach the apprentice his art thoroughly and to furnish him opportunity to acquire a practical knowledge of mechanical business. The firm is also bound to retain the I 210 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT THE LABOR FORCE 211 ill« apprentice in service until he has completed the terms of the indenture or agreement, provided his services and conduct are satisfactory. In all cases the firm reserves the right to dismiss the apprentice for cause. The rates of pay in the different classes are as follows : let year 2d year per hr. per hr. Apprentices of the First Class 7c. 9c. Apprentices of the Second Class 9c. lie. Apprentices of the Third Class 16c. 20c. 3d year 4th year per hr. per hr. lie. 13c. 13c. In addition to the rates mentioned above, apprentices of the first class each receive an additional sum of $125, and apprentices of the second class an additional sum of $100, at the expiration of their full term of apprenticeship. By the course of training provided for in this system, it is believed that a great benefit will axjcrue to the mechanic as well as to the employer. To young men who have received a thorough technical education, the two years' course in shop work is especially recommended.^ Mr. N. W. Sample, superintendent of apprentices in the Baldwin Locomotive Works, states that the system has proven quite satisfactory. ••Three years after the first indentured apprentice completed his term, there were employed over two hundred graduated, first- class, all-round mechanics capable of assignment to any shop, and 0f this number fifty occupied places of responsibility as heads of departments, foremen, assistant foremen, contractors, and leading workmen. It is no longer necessary to go outside of the works for any talent desired." ^ The Westinghouse Electric and Manufacturing Company is another firm which is laying much stress upon the proper 1 Circular No. 3, Apprenticeship System, Baldwin Locomotive Works. « The Armals of the American Academy of Political and Social Science, Vol. XXXIII, No. 1, January, 1909, p. 177. development and training of young men for their works. They have two apprenticeship systems, that of the Trades and that of the Engineering. The former is designed for young men who have not had a technical education. The latter is intended for graduates of technical schools and colleges. The Trades Apprentices are recruited from young men between the ages of 16 and 23 years. All under 21 years must have their parents' or guardians' consent embodied in the agreement which is made with the company. The term of service for the Trades Apprentice is four years, while that of the engineering class is two. The company is generous in its treatment of the men. They are given very fair remuneration during their term of service, and are promoted from task to task as their capabil- ities develop. The promotions are accompanied by graded increases in wages. The trades apprentices are started at 9 cents per hour, and at the end of each year receive an increase of 8 cents per hour until they complete their term. The en- gineering men are started at 18 cents per hour, for which sum they work one year of the time, or 2,740 hours. After* this first year of service, they are remunerated at the rate of 20 and 22 cents per hour, the former rate being granted for the first six months of the second year, and the latter being for the next six months. The firm takes care that the young men to whom they grant the privileges of apprenticeship have the fundamental training and native ability to make proper use of the oppor- tunities. Those who desire to become enrolled in the work are obliged to make application in their own handwriting, and must tell their father's name, state his business, they must give their name, age, height, weight, educational and other training, the foreign languages they speak, the degrees they have received, and the schools or colleges they have attended, and no one is considered who does not submit a recent photograph. Hip 212 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT While they are serving their time an exact record is kept of their conduct and performance within the plant; and, if they are trade apprentices, their outside night school work is carefully graded and recorded. They are marked for work- manship, personality, and outside class work. A young man has an incentive to do his best in every department ; because, if at any time he becomes incompetent through neglecting his work or studies, or is insubordinate, he is liable to dis- missal. Dismissal means he loses both a job and a chance to better his future condition. If he honorably completes the temi of service, the firm in the case of trade apprentices pre- sents a substantial reward in the form of $100 and a diploma, which tells the Avorld that he is competent to follow some definite line of work. The engineering apprentices receive no gratuity, but obtain certificates. Nothing so clearly indicates our progress both in the in- dustrial and educational fields as do these highly organized apprenticeship systems. This development has taken place within the last ten years. Indeed it is not that long since apprentices in some places were started in at $2 per week, and raised a dollar or so every year until they were earning a weekly wage of $6 by the time their terms expired. In the older shops, his training depended very largely upon the caprice of his foreman and his own assertiveness. If he were wide awake and insistent upon getting acquainted with all claflses of work which went on in the shop, he would get a good ti-aining. If, however, he were not a favorite or a for- ward kind of youngster he would frequently secure a poor training for a future career. The writer knows of one plant which still has the old style of apprenticeship contract, and the trouble it has had to find competent foremen, gang bosses, and workmen is evidence that a far-sighted, generous policy is the most profitable. Individual Ability.— No firm can hope to be successful if it is dependent upon unusual ability of any considerable THE LABOR FORCE 218 portion of its workers. A large number of firms whose work is of such a nature that a formal system of indenture is inad- visable or impossible have adopted the policy of supplying an understudy of some kind to every man who has charge of a department containing a number of men. This assisfamt or helper is expected to acquaint himself with all the duties of his chief, and is supposed to act in his absence. In this way the plant is never at a loss to fill any position which may be vacated in any department. One large organization engaging some 40,000 employees will not promote one from a lower to a higher position unless that same man has trained a subordinate to fill his position. This insures to the firm available workers for every possible position, and it also has a tendency to develop a very friendly feeling between the heads of departments and their assistants, because the de- partmental head sees that it is to his distinct interest to have capable subordinates. Another firm takes the attitude of fearing the coming man. Every foreman or division head likes to impress all of the superior officers with the idea that, if he leaves, the de- partment will suffer. In a measure he speaks the truth, be- cause those individuals take care to have subordinates who possess few of the larger qualities needed by men of initia- tive. The firm as a consequence is terribly handicapped, and as is to be expected, the work in the departments is so unsatisfactorily performed that every few years there is a general ''shake-up" in the plant, entailing the resignation and dismissal of a large number of the departmental heads. Thus the short-sighted policy pursued by every one in the plant to hold his job is the very thing that is hindering his personal advancement and the general prosperity of the firm. This concern has not paid a dividend on its stock for more than a half dozen years, while the former company's stock has averaged 7 per cent for a generation. THE PAYMENT OF THE WORKMAN 215 CHAPTER XV THE PAYMENT OF THE WORKMAN In order tx) get the maximum product from any set of employees, the manager must consider: 1. The best methods of keeping the men employed at their maximum limit while within the plant. 2. The best methods of making their work accurate. When one establishes a wage scale he should have those two objects in mind. The greatest incentive a man can have to work faithfully is to be paid according to some scheme whereby his remu- neration is directly proportional to his output. How to estab- lish a wage scale which will yield this maximum output for a minimum wage cost is a problem that has troubled man- agers for years. The oldest scheme of wage payment is to pay the worker a certain fixed sum for the time he is employed in the plant. In the hands of a vigorous overseer thoroughly conversant with all the work in the plant, the time system proves satis- factory provided the plant is so small that the foreman in charge can keep in constant touch with all that is going on. From the employer's point of view it might appear that nothing can be more perfect than the time system of wage payment; because every increase in output that the man makes means an absolute gain to the owner of the plant. The curves A A^ in Fig. 24 show how increased exertion contributes to the profits of the firm ; the employee gets the same compensation whether he does one piece or a hundred, while the employer can see with glowing satisfaction his wage cost per unit dropping downward. There is but one 214 difficulty with which the employer must contend in this re- munerative scheme. The employee will not give his best efforts so long as added exertions do not bring immediate returns. The only tangible encouragement a man has in the time system is that his rate of pay will be increased from time to time as he demonstrates his worth. In a large shop it is impossible for a foreman to be in such intimate contact with all the men that he can make wage adjustments that Avill be strictly fair to each individual. It is hard to measure the efficiency of a man by his general attitude or by his talk. Some of the best talkers and apparently most industrious workers may be confiiTiied loafers and the least efficient men in the firm's employ. The only practicable way of establishing a satisfactory time-rate system is to divide the men into groups or classes and fix a maximum and minimum rate for these classes. If a man is valuable he may get his wages raised to the maxi- mum within the class, or he may be advanced to another class. The wages are fixed by bargain between the men and the employer. This bargaining may be done either collec- tively at the dictation of a labor union, which fixes mini- miun wage rates, or it may be done by the individual work- men fixing their wages with the foreman. At best, the wage adjustment is largely guesswork so far as rewarding individ- ual men for what they do. Unless there is some means of measuring what a man does, it is unsafe to depend upon personal likes and dislikes. Here lies the inherent weakness of the time-rate system. A foreman will often raise wages not because a man actually produces more, but because he thinks the man more efficient. Managers in plants have long appreciated the fact that there should be a different method of fixing standards of wage payment than on the basis of personal conjecture. The average man is not inclined to overexertion. Fre- quently his chief aim seems to be to do the least amount of (f 216 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT work necessary tx) keep from getting discharged or being re- duced in pay. Foremen are much annoyed and firms lose thousands of dollars through the idleness of men from one cause or another. A great deal of this lack of energy on the part of the men is not due to wilful idleness but to oversight on the part of the foremen. Men will frequently get a job completed and wait with perfect complacency until the fore- man comes to them with another task. In some poorly run shops men waste as much as half a day waiting for the fore- man to find out that they are ready for a new job. There are also other kinds of time losses. Men will frequently wilfully kill time in order to make work last. Machines will not be run to their maximum capacity because to do so will finish a job so long before quitting time that it will be necessary to lift off the piece and adjust another about the time the whistle blows. One will sometimes see men in day-rate shops actu- ally make their machines run without doing anything at all in order to appear to be working and so do away with the ne- cessity of changing a job at some inconvenient time. Man- agers of plants are not ignorant of these conditions. The wilful dishonesty and lack of willing cooperation on the part of the employees have made the daily wage system a poor means of remuneration for many kinds of work. Wide-awake men rightly reason that if a scheme could be devised by which workmen lose money for idle time, they would not be so inclined to sit with bovine patience until their foreman finds them out of work and starts them on another task, neither would they be apt to waste time wilfully in order to start new woi:k at a more convenient season or to save a job when work is getting low in the shop. It is rational to assume that the remuneration for labor should be on the basis of all ordinary commercial transac- tions, that the man should be paid for what he does, that compensation should be by the piece-rate system. There can be no more effective way to prevent idleness, because the 2 3 4 5 e 7 8 9 Pieces PER Houit* — ^ Pig. 24.— Comparison of the Time-Rate and Piece-Rate Systems. 218 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT idler is fully as much a loser as the firm. Viewed from the workman's standpoint, there can be no more profitable means of remuneration. Fig. 24, on lines BB^ shows that on the piece-rate system of wage payment a man automatically raises his hourly rate by increasing the output. The firm apparently does not gain directly from the increased effort, ae is shown by the fact that the wage cost per piece is a con- stant quantity. (See lines B' B\ Fig. 24.) From the dia- gram one would conclude that the piece-rate system of wage payment would be a system strongly advocated by the work- man. The opponents of the piece-rate system are not the employers, but the men. Their opposition is based upon good reason, and yet, from the employer's point of view, it is almost impossible to eliminate the objection. To fix piece rates one must be guided by the capabilities of the em- ployees. When managers introduce the scheme they try to be fair to the men and estimate the time it will take to per- form certain tasks on the basis of previous time records made by men employed on the day-rate system. These records are from the very nature of the case inaccurate, and it is found invariably that nearly every one underestimates the work- man's eflBciency when he has an incentive so great as that offered by the piece-rate system. In some cases the output of the workman will increase seven and eight times his esti- mated maximum. Under these conditions the manufacturer finds he is often paying extravagant prices for labor which is either unskilled or semi-skiUed in type. In these competitive days, he can- not afford to pay exorbitant daily wages to men whose train- ing is of a low order, because his competitors will soon adopt a daily wage or a piece-rate schedule of a very much lower wage standard. The result is that the piece-rate system of wage payment in industries, which have not been thoroughly standardized and developed, has been found exceedingly un- satisfactory, because the workmen consider it unfair to cut THE PAYMENT OF THE WORKMAN 219 their rates, and the managers find it almost impossible to establish a rating which will be satisfactory to themselves and to the employees without considerable adjustment. The breakdown of the piece-rate system is due to the fact that it is impossible to adjust rates without friction. The men consider every reduction of the piece rate an illustration of the employers' greed, while the employers feel that the in- creased output is another example of how grossly employees have deceived them in the past in order to mislead them into paying excessive wages. Both sides feel disgruntled. Employers who have experimented with this system and have discovered the skill a laborer possesses, have endeavored to apply the theory of giving a large incentive to some one who can guide and direct the men and yet pay these workers a day rate. There are plants in this country which apply this scheme, and call it the Contract System. The foremen in charge are given a certain price for the work they do, they hire and direct the men, usually paying them on a day basis, and fixing their wages at the lowest possible point the men will agree to take. Under the contract system of working, the foremen have their income based upon the work they can get from these men. The scheme has a tendency to develop a body of alert overseers who are always after the men to see that they are not wasting time either through laziness or by incompetence. The system when it operates makes men work, but it has the unpleasant disadvantage of developing slave-driving habits. Many men will not stand for such treatment; and unless the work is of such a nature that a rather low type of worker can be employed and taught the tasks to be done, the company is liable to have a great deal of trouble with its labor under this contract system, although in some plants it has worked successfully for many years. Mr. Henry R. Towne, a number of years ago, conceived a scheme which has had a profound influence upon pay sys- tems, because he introduced an incentive rather than a coer- 220 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT THE PAYMENT OF THE WORKMAN 221 cive process to get men to increase their exertions.* His scheme is briefly this — find out what has been the average cost for a given amount of output in the best year before he introduced the system. With this as a unit he determines what the labor cost for the same quantity has been for each succeeding year. The difference in labor cost between the two gives him the savings made for the firm by the extra effort of the labor force. This saving he distributes in the following way: 60 per cent is retained by the firm, 10 per cent is given to the foremen in charge of the work as an inducement to them to get men to increase output, 40 per cent he distributes to the gang bosses and workmen through- out the plant on the basis of their annual wages. The re- muneration is given at the end of the year or at the end of some considerable length of time shorter than a year. This sharing of the gain with the men has in it a num- ber of defects, the most important of which are : 1. The reward is remote. 2. The method of division is not likely to encourage great activity because the men do not receive shares in proportion to their individual efforts. Some writers have criticised the system, because it makes the men share gains which they say may be due to improved methods of work or to better management. There may be some basis for this statement, but Mr. Towne's paper dis- tinctly stipulates that the books shall be so kept that any improvements in management will not be shared by the workmen save in so far as they actively assist in the work. The paper specifically notes that it is only fair to share with the operatives the savings which their activity makes for the firm. The remoteness of the reward and the method of division are, however, serious objections, and these Mr. F. A. Halsey circumvented when he presented the premium plan of remu- nerating labor.' Mr. Halsey believed witli Mr. Towne that the workman should be rewarded only in so far as his actions lower production costs. He, however, appreciates the fact that a much better incentive will be given to men if they are paid at once their exact share of all the profit they make. His scheme is briefly this : A man is given a certain rate per hour. A piece of work is assigned to him which will be allowed a certain number of hours time in which to be done. If the man performs the work in a shorter time, he will be given a fixed percentage of the value of the time saved. This extra sum will be paid to him as a premium to his wages, and on that account the Halsey scheme is called the Premium Plan of Remunerating Labor. The idea of the scheme is to establish the shop on a piece-rate system, in which the men will be guaranteed a certain daily wage. If the management has fixed the price of the unit of work performed at too high a figure the work- man will share his extra productive value with the manufac- turer in a manner that will not require the cutting of the rate. In a word, by dividing the gains due to his extra pro- ductivity, both the manufacturer and the worker profit, and the worker will have no reason to limit his output because there will be no rate cutting. The* lines AA^ Fig. 25, show how by this system a man increases his hourly wage in a very material way by increas- ing his productivity. At the same time he cuts the unit price per piece considerably for the firm. (See lines A^A\ Fig. 25.) The figure shows just how Mr. Halsey manages to make unnecessary any cuts in the unit rate. By his sys- \ ^ Transactions American Society of Mechanical Engineers, Vol, X, p. 600, No. 341, "Gain Sharing," by Henry R. Towne. ^ Transactions American Society of Mechanical Engineers, Vol. XII, p. 755, "Premium Plan of Paying for Labor," by F. A. Halsey. 222 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT tern, the workman by increasing his wages actually cuts the cost of production. His only method of obtaining a big reward is to cut the unit cost. Thus the employer has a decided advantage. If we look at the other term of the con- tract we find that the workman is guaranteed a standard daily wage, so that he can feel that he is not on the piece-rate sys- ISo j 3 lao \oS Y^ 75 - 45 1 30 15 1 1 1 1 1 1 1 1 MALSer P«IEM»UH PIAH • ^ ROWAk) PffS-HIUM PCAU— — - t > ?^ ^ ;^ 4 « ^ f /^ * - >Oi\. ^ 1 ^ /- -i^ A06 4 «^ ^ V OPjCi ; co^ STP S. 'nc<: , r e^o ^T |PCi5 ^pTi St" 5 or w «» hi 30 m VI 2 3 A S 6 7 6 9 10 Pieces peFf h^ui^*^*^ Pig. 25.— Comparison of Halsey and Rowan Premium Plans. tern. If the price per unit has been set too low, he is not compelled to overexert himself in order to make a fair daily wage. The advantages of the Halsey system are : 1. The men are encouraged to produce more by being rewarded in proportion to what they do. THE PAYMENT OF THE WORKMAN 223 2. The reward is immediate and substantial. 8. The employer, in sharing the gains of the extra exer- tion on the part of the worker, does not have the necessity of cutting the rate in an arbitrary manner, hence the workman's mind is relieved of the fear of having his wages reduced arbitrarily. A British modification of the system was put into opera- tion by David Rowan & Company. Mr. Rowan's wage curve is plotted B B od. the same diagram (Fig. 25) , which shows Mr. Halsey's premium plan, while the Rowan piece cost is shown as line 5 ' 5 ' on the same diagram. Accord- ing to Mr. Rowan's idea, if a job has been allotted too much time, even with the Halsey system, a man may get a remu- neration out of all proportion to the value of the work. For example, if a man should be allotted one hour to do a piece of work worth 80 cents, and if he should increase his pro- ductivity ten times, with the Halsey system he would get $1.20 an hour. This is considerably better for the firm than his hourly rate would be with straight piece work. The lat- ter cost would be $3 an hour. (See Fig. 25.) Mr. Rowan believes, however, that even Mr. Halsey's scheme is too extravagant in its reward, so he devised a plan of so adjust- ing the premium that every increase in wages should be equal to the percentage the operator saves on the time. For ex- ample, if a job is allotted one hundred hours and the man's rate is 30 cents per hour, the cost of the work would be $30. If he does the job in ninety hours, with his hour rate 30 cents, the time wages on the job would be $27. He has saved, however, 10 per cent of the time, and gets a 10-per- cent increase in wages on the actual time cost. Should he do the work in eighty hours, the time rate would be $24. Twenty per cent' time saved on $24, the time cost, would be $4.80. A comparison of the two tables will show the wage scale (wages rate 30 cents per hour) as worked out by the Halsey and the Rowan methods. 16 224 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT THE PAYMENT OF THE WORKMAN 225 COMPARISON OF DIFFERENT METHODS OF CALCU- LATING PREMIUMS.! Halsey's Method. HOOTB Allowed. 100 100 100 100 100 100 100 100 100 100 Hours Allowed. 100 100 100 100 100 100 100 100 100 100 Hours Taken. ETi 100 90 80 70 60 50 40 30 20 10 ime Wagres on Job. $30.00 27.00 24.00 21.00 18.00 Premium Earned on Job. $0.00 1.00 2.00 3.00 4.00 Total Labor Cost. 15.00 5.00 12.00 6.00 9.00 7.00 6.00 8.00 3.00 9.00 .30 9.90 $30.00 28.00 26.00 24.00 22.00 20.00 18.00 16.00 14.00 12.00 10.20 Workman's Rate per Hour. $0.30 .311 .325 .343 .366 .40 .45 .533 .70 1.20 10.20 Rowan's Method. Hours Taken. 100 90 80 70 60 50 40 30 20 10 1 Time Wagres on Job. $30.00 27.00 24.00 21.00 18.00 15.00 12.00 9.00 6.00 3.00 .30 Premium Earned on Job. $0.00 2.70 4.80 6.30 7.20 7.50 7.20 6.30 4.80 2.70 .297 Total Labor Cost. $30.00 29.70 28.80 27.30 25.20 22.50 19.20 15.30 10.80 5.70 .597 Workman's Rate per Hour. $0.30 .33 .36 .39 .42 .45 .48 .51 .54 .57 .597 The reader will observe that while the Rowan plan com- pared with the Halsey method does prevent excessive earn- ings on the part of the employee when he multiplies his output many times, it on the other hand gives a decidedly 1* 'Trade Unionism and Labor Problems," by John R. Com- mons, p. 287. greater reward to the workman until he more than doubles his productive capacity. Is this a desirable characteristic of a wage system? Does not the Rowan Premium tend to encourage the workmen to remain at a lower level of effici- ency than the Halsey Premium? To be perfectly fair to Mr. Rowan, it should be stated that his rate is adjusted for the purpose of making special cuts unnecessary. If a man loiters about his work when the rate is being set, he cannot reap too great a harvest by * ' rushing. ' ' The scheme certainly does act automatically in reducing output cost, but it seems highly probable to the writer that men who work under it would be somewhat inclined to "nurse" their jobs when they found that their added exertions increased their wages so slightly as the system does in the later stages. In 1895, Mr. Fred W. Taylor read a paper before the American Society of Mechanical Engineers, in which he recognized the advantages of the Halsey system and its su- periority over any previously proposed scheme, but pointed out that it has one very grave defect — while it encourages the workman to do good work, it gives only a passive incentive by not punishing him for not doing his best. In other words, the Halsey system permits men to gather premium for work done, but it does not necessarily stimulate a man to produce his utmost. In order to introduce this element, Mr. Taylor proposed a scheme of wage payment which both punishes and rewards, and which he calls the differential piece-rate system. According to this plan, a man is rewarded only after he attains a certain fixed standard of work. If he does not accomplish the job in a given time, instead of being paid an ordinary piece-rate price, he is paid a piece-rate price considerably lower than the one paid if he does the work within the stipulated period. If the usual output of a 30-cent-an-hour man in an ordi- nary shop is one piece in an hour, Mr. Taylor would by his timing process find that an individual working at his maxi- 226 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT THE PAYMENT OF THE WORKMAN 227 imim rate on every part of the job could accomplish three pieces in an hour. He would then fix his rate as follows : Three pieces in an hour would be made tlie standard. If a man could perform three pieces an hour he would get, not as he would get in the day-rate shop, thirty cents an hour, or ten cents a piece, but fifteen cents a piece, or some similar amount, for each piece performed, so that his hourly rate, if I (So 135 P z hf JO It 9o 60 4S 3p iS -7'— / li i^/ >^ A f \^y " ■'■ 1 • p c< £L pr 1£ g£E • -\ > Ul t or loMI^ Fig. 26.— Taylor Differential Piece-Rate System. he reached three pieces in an hour, would be forty-five cents. If he performed more than three pieces in an hour, say four or five, he would still get 15 cents a piece for every one per- formed, so that the workman, as shown by Fig. 26, would raise his wages by a fixed amount for every piece finished. If, however, he could not make three pieces within the allot- ted time, he would not get 15 cents a piece, or even 10 cents a piece. He may be given but 8 cents for every piece made below three pieces. With such a scheme one can easily see that it is very important indeed, from the workman's point of view, to perform a large amount of work in a day. This plan of reward differs from any of the others in another essential, aside from the differential piece-rate idea, viz. : The time allowed to do the job is very accurately deter- mined. The superintendents of the works make a careful study of the exact time it needs to take to do the jobs, work- ing in the quickest known way, and the workmen are allowed a period just sufficient to permit them to perform the task in the most approved fashion in which it can be done. Thus there are two ideas involved in Mr. Taylor's differential piece-rate system: (1) a punishment for one who does not perform the task, and a reward for the one who does, which is the method of payment idea; and (2) the workman has accurately determined for him by his superiors the time it should take to do the work. In a subsequent paj^er entitled "Shop Management,"^ Mr. Taylor discusses in detail his method of ascertaining the time it should take a workman to perform his task. Every job is divided into its elemen- tary operations ; and an attendant, by means of a stop watch, observes the time in minutes and seconds it takes a good workman to perform each part. The total time of the job is then fixed by adding together the time it takes to accomplish all of these elementary steps. With the time thus deter- mined, a task is given which will keep a good man biisy in performing, and yet which is within his possibilities. Mr. Taylor emphasizes the idea that the task must be so hard that only a first-class man can perform it. He gives high wages and secures a low labor cost by accurately determininer the maximum possible output of a workman, and compell?' him to reach that standard. He utilizes the hitherto un ^ Transactions American Society of Mechanical Engineers, Vol. XXIV, pp. 1337-1480. ^ m m m 228 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT alized possibilities of the laborer by learning what those pos- sibilities are, and giving the reward only if they are attained. The Halsey system, as criticised by Mr. Taylor, is defec- tive, because it does not give the workman a definite goal to reach, hence the high wage paid does not reduce the output cost as it should. In the American Engineer and Railroad Journal for February and December, 1906, there appeared two articles THE PAYMENT OF THE WORKMAN 229 iffOr O % r y > •*riCCC« PCR HOUR •^ Fig. 27.— Emerson Differential Piece-Rate System. descriptive of the Santa Fe's shop-management scheme. The first article is entitled, ' ' Shop Betterment and the Industrial Method of Profit Sharing, ' ' by Harrington Emerson. The second article is entitled, '' Betterment Work on the Santa Fe," written by the staff writers of the Journal. These two articles have been the source of much comment, and of arti- cles in other magazines. Mr. Emerson has devised a piece- rate system, which in many respects is analogous to the Tay- lor plan. He determines from previous shop records, and by a careful study of the best possible ways of performing the work, how long it should take to do each task as it comes into the shop. His scheme of remuneration is, however, different from Mr. Taylor's as regards the basis of payment. After determming the minimum time it takes to perform a task, a man is paid a fixed daily rate of say 30 cents an hour until he performs two thirds of the standard task. If he performs the standard task, or 100 per cent, which in our illustration would be three pieces in the hour, he is given an extra reward of one fifth of the regular wages for the opera- • tion. If he performs more than two thirds of the work, but less than the standard, he is likewise paid a gradually in- creasing bonus, as shown by curve A A on Fig. 27. If the workman can perform more than three pieces in an hour, he is paid the high price per piece for every piece he makes over the standard. The Emerson system differs from that of Mr. Taylor in one respect. It is not a piece-rate system un- til the man performs at least two thirds of the standard task. Between the Halsey system and the differential piece-rate system, as developed by Messrs. Taylor and Emerson, there is another plan proposed by Mr. H. L. Gantt, called the * ' Bonus System for Rewarding^ Labor. "^ Mr. Gantt 's scheme differs from the differential system in that it is not a piece- rate system, yet it is like the Taylor system, in that it does set a definite task for the person to perform. If the individ- ual performs the task within the given time, he is paid his regular hourly rate and a certain stipulated bonus. Every job is allotted a certain amount of time ; if the man performs the task within this time, he is given the bonus, and as soon as he finishes one job he is given another, to which he is like- ^ Transactions American Society of Mechanical Engineers, Vol. XXIII, 1902, p. 341. 280 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT THE PAYMENT OF THE WORKMAN 2S1 i li I i (iii! ! IM wise allotted a definite amount of time. The result is that if a man in the course of a day doubles his output, he will get a day's wage plus the bonuses, which are atfeiched to the separate jobs he has performed. If he fails to do the work within the allotted time, he gets only his day's wage. As a matter of fact, it makes very little difference which system of wage pa}Tiient is used. There is no reason why the Halsey system need be a *' drifting" system, as termed by Taylor. The thing that makes the differential piece-rate system effective is that the manager of the shop determines the time that should be taken to do the work, and fixes his differential rate accordingly. Should the manager of the plant, where the premium system is applied, fcike the same means to determine the minimum working time, the premium system could be adjusted equally well. There are shops which have tried both the premium and the differential piece-rate systems; and, after giving both a fair trial extending over many months, found the premium plan considerably more satisfactory. On the other hand, there are shops which have tdtimately decided upon the differential piece-rate system. Indeed, the method of payment is not so important, if the concern can find a scheme that will justly determine the possibilities of a worker. The system of wage payment for this purpose is a secondary matter. The method of obtain- ing the possible speed at which a worker can produce is the real problem of management, and the real object of all wage- payment systems should be to reward him in such a manner that he will produce this maximum. Mr. Taylor suggests his unit-time study method to obtain the speed possibilities of the man; Mr. Halsey gets his data by studying shop records and carefully observing the men. Both schemes have produced good results under different con- ditions. Generally speaking, the unit-time study system is successfid in shops which handle contracts of a more or less unvarying character, and are not compelled to follow exact- ing requirements. In one shop of a miscellaneous type which handled work that had to be exceedingly accurate, the unit- time study system, after a fair trial extending over many months, proved a most dismal failure. When men tried to make the calculated time, they spoiled the work. In another shop it has proven successful, yet the same man who made it a success in the one shop, failed to make it a success in the other, and he had the cooperation of the management in both cases. The cause of the failure in the one shop was the exacting type of the work, and in the other the success was due to the rather crude character of the output. In the shop where the differential system failed the pre- mium system was next tried, the time being predetermined by previous shop records, and by keeping after the men; and the scheme was successful, the very scheme which Mr. Tay- lor so severely condemns. In his paper, Mr. Taylor emphasizes one thing which should not be passed over without some comment. He does not advocate the paying of high wages so much as he urges the paying of wages which are considered high by the aver- age workman of the grade he employs. His plan is to teach a low-grade man to do work which would otherwise be given to a highly skilled man. ''The writer" (Mr. Taylor) "goes so far as to say that almost any job that is repeated over and over again, however great skill and dexterity it may require, providing there is enough of it to occupy a man throughout a considerable part of the year, should be done by a trained laborer and not by a mechanic. A man with only the intel- ligence of an average laborer can be taught to do the most difficult and delicate work if it is repeated often enough, and his lower mental caliber renders him more fit than the mechanic to stand the monotony of repetition."^ ^ Transactions American Society of Mechanical Engineers, Vol. XXIV, p. 1347. 282 THE PRINCIPLES OP INDUSTRIAL MANAGEMENT Care must be taken not to carry that policy too far. There are concerns in this country employing this means to have their work performed. One plant has advertisements in papers every once in a while for men. They employ a high-salaried man, who is nominally in charge of a large de- partment, but whose work is delegated to an assistant. The chief of this department spends so much time getting people that he is not in touch with the work as he should be. He gets men at a low price, and just about the time they are trained they leave. The plant is in a state of unrest and irritation at all times, due to the fact that about one third of the working force is always just learning, and is making mistakes that cause the gang bosses and foremen to be blamed for not looking after the men. These, in turn, vent their spleen on the man who ignorantly makes mistakes. This concern, however, looks with pride upon its average wage rate per man, and fully believes that it is carrying out a sound labor policy. On the contrary, the low average per man being paid for work regarded elsewhere as safe only in the hands of skilled men is costing the firm dearly in spoiled work. In order to determine the best way to carry on a plant, one should not be guided by any set of opinions or by any one system. The manager should know the men's records, the amount of material that is used and wasted, the amount of defective products returned by purchasers, and the per- formances of the machinery. These are the things which his shop accounting system should tell, as the following chapters wiU explain. CHAPTER XVI RECORD OF THE WORKERS If the management establishes a fair wage scale, it can enforce the performance of good work by discharging incom- petent workers, because well-paid men want to do good work in order to hold their jobs. If the wage scale is unfairly low the workmen will be able to find better, or at least as good, employment elsewhere, so that discharge is no threat to com- pel good work under these conditions. Assuming a fair wage scale, how can the management enforce the performance of accurate work? Obviously, there is but one way, and that is to punish the workmen who turn out poor work. Good management dictates more than a policy of finding out what each man does. To have good work turned out as a matter of course, is the goal for which all concerns should, strive, and this can be done only by getting rid of the poor men and by seeing that no incompetent men are re-employed. To keep good men, rewards must be given either by promo- tion or advances in wages from time to time. To reward the right employees, there must be an accurate record kept of the men from the time they enter the plant until they leave it. For a small shop, a foreman can be secured who may be entrusted with determining the efiiciency of the employees, because if he is in the habit of being easily deceived by in- competent assistants, the defect soon manifests itself to the management. In large plants, however, good foremen are frequently embarrassed by poor workmen; and, many times, poor workmen, after being discharged from one department, find employment in other departments until their delinquen- 233 I *l ^ I n 284 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT cies are again discovered. If insufficient record is kept of their service in the plant, they may, after a time, be re-em- ployed in the department in which they first demonstrated their inefficiency, and even under the original foreman. No ordinary person, having under his constant guidance three hundred to four hundred men, can keep in mind all past employees. It is not hard to discharge a man if he dis- plays inefficiency, but by the time he has proven his inca- pacity, the firm loses money, and the man himself is being done an unkindness by being given even passive encourage- ment to work in a field for which he is unfitted. It is better for him to be compelled to discover a place where he will be serviceable, or to find an occupation more suited to his ability. Some few years ago, there was a plant which did not believe in keeping records of its employees. The foreman hired men whenever he needed help. In one instance, an em- ployee was caught idling and was discharged. He lost half a day, was re-employed in another department the next morn- ing, and at the end of the week, in spite of the lost time, he received more money for the same work than he would have had with his old job under the other foreman. The second time he *' soldiered'' as much if not more than the time before, but was circumspect enough to be employed very assiduously whenever the officials approached his vicinity. Another organization transferred men from one depart- ment to another without ever recording such changes in the main office. A vacancy once occurred in a department where- in a man desired to be located, and he asked permission to change. The boss signified his consent by saying, ''All right, I'U send your time to the main office. " A week later the pay envelope showed that the man was paid for working in two departments at the same time. To cap the climax, when he reported the overpay, he was reprimanded by his former boss, who said, "You might have kept quiet and not RECORD OF THE WORKERS 285 have gotten me into trouble. It didn't do you any good to squeal. ' ' And it surely did not, for the man was now com- pelled to wait two weeks for his next week's wage, the pay- master remarking that it took so much time to make the correction. In order to make the foreman responsible for good work, both in quality and in quantity, the manager should take pains to supply him with efficient men, and to do this he should have a working scheme that will keep proper record of the employees. In a large concern, this can be done to best advantage by establishing a labor bureau. A small con- cern can safely let the time department keep a card-index record of the men. The problem of the labor-employing bureau may be divided into several parts : 1. To select and employ the proper laborers for different duties. 2. To keep record of the employees who are still em- ployed, with their status as workers. 3. To keep record of all people who have been employed at any time with reasons for their dismissal and their record as employees. The best basis for good judgment is accurate knowledge. If an employer secures accurate knowledge of an applicant for a place before he hires him, he can save himself much trouble and some expense. There are several things a manu- facturer should know at once about an employee. 1. Has he any constitutional weaknesses or injuries? 2. His approximate age. 3. His educational qualifications. 4. His experience. The first three can be gotten pretty accurately by combin- ing answers on the part of the applicant with personal obser- vation. The fourth one is not so easily determined by asking questions, especially if the applicant is inclined to be un- ' #i«' 236 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT truthful. Many men apply for Jobs for which they are unfit- ted or have had a very meager preparation. In one shop an ex-weaver secured a position as a steamfitter by merely stating to the hiring clerk a lot of hypothetical experience. As a matter of fact the young man did not know the differ- ence between a pipe-wrench and a pipe-cutter, but he held the iob for six months befo^ he made too many blunders. The safest way to determine a man's experience is to have him state the names of his former employers and people to whom one. can be referred who can tell about his efficiency and conduct from actual experimental knowledge. Considerable thought should be put upon the framing of the questions on the application blank. For instance, in asking for the practical experience the applicant should be requested to state the trade or occupation learned, the length of time in service, and what was done while in service. In this way the applicant will give definite information con- cerning his work and will not have a chance to branch off into meaningless generalities. Every question should be so framed that the answer to it must be brief and give definite information about one thing. Some firms require the applicant to state age, whether BMirried or single, whether he uses drugs, liquor, or tobacco, whether he belongs to a union or not, whether he is a citizen of the country, if he knows anyone in the plant, why he left his former place, the number of people depending on his wages, whether he speaks English and can read and write, what wages he expects, what he previously earned, does he look for further advancement, why he wants to be employed by that particular plant, and sometimes even other questions. One large concern asks no less than forty questions of every prospective employee. When one goes to that extent he is getting data which even if truthfully given would be unnec- essary for any but the most unusual conditions. The data, however, cannot be depended upon after it is obtained. RECORD OF THE WORKERS 287 Men, especially those in middle life, are very apt to misstate their ages. Several years ago a large concern determined to find out the ages of all of its employees, both those who had been long in service and those who were just being engaged. In hardly any case did the men state their exact age. The younger men overstated their age from one to five years, and the older men understated their age five years and more. In one case a man of more than sixty years told the clerk, ''I am forty-three, and if you come around thirty years from now I'll still be forty-three.'^ Men resent questions of an inquisitorial nature. They rarely object to stating whether married or single ; but when asked why they want to be employed in the plant or whether they expect any advances in wages, they feel they are being asked what a workman once called ' ' fool questions anyway. ' ' Much more information can be obtained about the man by looking up references. Some firms make it a point to send out blank forms to previous employers of an applicant whom they contemplate hiring. Others look up the refer- ences of every man who applies, so that they will have a trustworthy list of available candidates. The letter seeking information about the employee should be framed in such a way that the former employer can answer very briefly and definitely questions which will give one a very good idea of the capabilities and personality of a man. One form of a letter of this character is shown below. Dear Sir: has applied for a place as and has given your name as reference. Will you kindly answer the following questions regarding , and if there is any other information relating to him which is of interest, we shall be indebted to you for it. 1. How long was the above man employed by you? 2. In what capacity? 3. What was his rate per hour? 4. What advances did he get, if any? ■' ' 288 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT RECORD OP THE WORKERS 239 I It 5. Is he a good mechanic? 6. Are his habits good? 7. Is he regular in attendance and industrious? 8. Why did he leave? Any information you give us will be treated as strictly confi- dentJaU and we shall be glad to answer requests of a similar nature regarding men who give our name as reference. Very truly yours, This letter embodies questions which can be accurately answered with little trouble on the part of the individual who receives it. Some officials object to telling the public or business rivals what wages they pay their workmen. If experience shows that firms are unwilling to state the wages they have paid to past employees it is well to omit the ques- tion, and in fact all questions which they believe another company would not care to answer. The reason for leaving out such questions is that if there are too many objection- able requests there is a strong probability of the letter being ignored. After one has obtained full information concerning the man, the next step is to keep a record of him as a worker. No recording scheme is of value unless it records actions as well as opinions. By this is meant that one of the most xm- safe bases for judgment of a man's ability is what some individual thinks of him, unless the estimate is supported by evidence which shows the basis for the opinion. The scheme which keeps record of the employees should do two things. In the first place, it should keep accurate record of what each person is doing so as to enable the fore- man and other ofiicials to place the men to the best advan- tage in the plant, and in the second place it should make it impossible for men to be put on the pay-roll who are not doing the work they are expected to do, or who may not be in existence at all. A good employee must at least : 1. Be regular in his attendance, prompt in his appear- ance at starting, and faithful in his stay in the plant. 2. He must be diligent while within the plant. 3. He must be efficient. It was shown in the previous chapter how the plan of wage payment develops the diligence and efficiency of the em- ployee, but no matter what the wage scheme is, unless it has back of it some recording device to keep track of what a per- son is doing, it is impossible to gather data for the establish- ment of a good wage system, or to determine the cost of the article; and it is likewise impossible for the management to ascertain who are the good and who are the poor employees. A man is a good man for the firm if his average record is good, and a poor man for the firm if his average record is poor. The basis for determining his standing should be, *'Whathashedone?" Foremen are very apt to make wrong estimates of men, because they do not know their averages of efficiency. For example, in one place there is a bright, capable man who has on numerous occasions, in face of considerable difficulty, erected engines. His work has always been done with few men, and these not of the best, yet he has not made a serious mistake in the erecting of several engines. There is another man who on two separate occasions was likewise given some engines to erect. On these two occasions it hap- pened, through laxity on the part of the shop management, that he was able to borrow men from other gang bosses, and the engines he had to erect were of such a nature that he could use nearly all the temporary bolts and other material which the other gang boss had been compelled to collect in order to erect some previous machines. The first man's in- genuity in gathering material enabled the second man to take advantage of these conditions, and in addition he used some laborers who were not properly charged to the job. In the 17 240 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT course of the erection he made a great many mistakes, had holes drilled in the wrong places, which made it necessary to have them tapped out and filled with plugs, he did nearly twice as much actual work in getting the cylinders and hous- ings in the proper place, and his work all through was de- cidedly that of an amateur. Nevertheless his engines were done in a week's less time than were the other man's. He had established for himself a record in the plant, and when there was an opening for advancement he was given prece- dence over his rival. Workmen in the humbler positions are sometimes compelled to submit to such conditions. The foremen do not mean to be unjust. They cannot be alto- gether blamed for advancing the wrong man, when that per- son makes a spectacular showing. In the case above cited, if there had been exact time records kept of all the time ex- pended on each engine, there would have been a considerable showing in favor of the first man who did not get the reward. There is nothing so fatal to the discipline of a plant nor so disastrous to its smooth and profitable working as to have a, body of men irregular in their appearance, who come late and go out at odd times. Efficiency is, to a great extent, a matter of faithfulness ; and, if a firm insists upon regular and prompt appearance, it is paving the way for good work. There is only one way to stop irregularity — make it unprofitable. If a firm weeds out the non-dependable individuals, it will, before long, de- velop a good working organization. To weed out these un- desirables one should have an accurate record of the entering and leaving time of all the workers in the concern. One of the most effective devices of time recording, and the one first adopted, is the time check. This is used in a variety of forms. 1. The in-board out-board form. At the entrance of the works are placed two boards, one marked ^* out-board,'' placed near the gate, and the other marked "in-board," RECORD OF THE WORKERS 241 placed farther toward the work rooms. Every man is as- signed a numbered check, which hangs with the correspond- ing number on one or the other board according as he is in or out of the works. While the men are filing in, taking their checks off the out-board and hanging them on the in- board, a watchman stands near by to see that no one takes other than his own check. The gate is closed as soon as the signal for starting work is given, so that no one can get to his check after starting time without calling the timekeeper's attention to the fact. 2. A modification of the above scheme is to give the men actual possession of the check, which they drop in a box on entering the works. Obtaining the time record by either method is a simple matter. After the plant is started, all the checks are in, and the timekeeper makes a record of the num- bers. In the second plan he takes the checks into the work- rooms and returns them to the men. In this way he comes into actual contact with each workman, so that there is no possible means by which one man can drop another's check into the box without being detected. 3. The third plan dispenses with the check. The work- man is given a number, which he must announce as he en- ters a specified gate. A clerk at the entrance crosses off the number as the employee calls it out. With this scheme, it is impossible for a man to give more than one number, and the clerk has an immediate record of the men who are in the plant. 4. While these schemes are effective for plants of mod- erate size, or where the work-rooms are close to the entrance, they fail to be thoroughly satisfactory when the departments become scattered over a large area. Unless there be some kind of a check on the men after they enter the main gate, those disposed to shirk will take advantage of the opportu- nity to waste time in getting to their places after they have recorded their entrance. To prevent these losses the large 242 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT RECORD OF THE WORKERS 248 m'.> \ «(i firms have been forced to adopt some plan which would re- cord the employee's entrance into the department in which he is due. A check plan of surmounting the difficulty is to have a clerk distribute the checks at some main entrance, and then require each man to hang his check upon a board within the department in which he is working. This scheme proves effective in insuring the prompt appearance of the men in their departments, but it involves more clerical work than is necessary, because it requires a set of clerks at the entrance gates as well as another set who make record of the checks as they are hung in the departments. In order to reduce clerical work to a minimum and at the same time record the time accurately, mechanical devices have been perfected. 5. The recording clock. The greatest improvement that has been made in timekeeping devices is the introduction of the recording time-clock. There are a number of styles and varieties on the market, but all aim to : 1. Enable the employee to record his own time of enter- ing and leaving the plant, thus preventing errors on the part of timekeepers. 2. Enable the timekeeper to compute readily the number of hours each employee has to his credit, thus saving clerical work in making up the pay-rolls. 3. Prevent employees from entering the departments after starting time and leaving before quitting time. These clocks are often used in connection with a shop cost system, and have proven very satisfactory. (See Fig. 28. ) According to this scheme a card is made out once every week or two weeks for each man. The man gets a num- bered card, which is placed in the rack "out" before he enters the plant. When he goes to his department he inserts the card into the slot A , depresses the knob 5, which records his time of entering. The card is then placed on the '4n" rack. When he leaves the plant he takes the card from the '4n" rack, goes through a similar process, and records his leaving time, after which he places it in the ''out" rack. This card at the end of the week, two weeks, or half month, records the total number of hours he was within the plant, and all latenesses or irregular leaving are stamped in red ink, thus calling attention at once to his delinquencies. At By courtesy of International Time Recording Co,, Endicott, N, Y, Pig. 28.— Recording Clock with Cost Equipment. Each clock can conveniently keep record of two hundred people. the end of every day, the timekeeper enters the daily hours in the total column, so that at the end of the period the cards can readily be made up and each man given his wages from the record. In many cases the back of the card is used as a check, so that the payment is made by merely having the paymaster and forema^n sign and countersign the back of it. In any cas9, the cards for each man are kept and filed under his name, thus giving a truthful record of his regularity as a worker, truthful because it shows him by his own actions and not by a report of opinions. 244 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT The recording clocks help in making out the pay-rolls, and in keeping accurate record of the men passing in and out of the plant; but if the time scheme does only this, the firm has a very poor system. Good accounting demands that no plan is complete unless it can be verified automatically from independent sources. Moreover, one should know not only that a man has been present during a certain period, but also that he was an efficient worker while he was present. His efficiency can be determined by knowing what he has done with the time recorded on his time card. Several schemes may be cited by which a record is kept of a man's actions while within the plant. 1. Send a timekeeper around every day to get from the workmen the time they expend on each job or contract. 2. Have the man list on a card his tasks from the begin- ning to the end of the day. 3. Have the man record on separate slips of paper for each contract the hours he spent on each particular job. 4. Have the office attach to each job, or piece of material, a tag on which the workman records his name or number and the time for his operation. 5. Have a multiple part tag attached by the office, so made that as each operation is completed, the workman tears off a portion on which is stated his operation, number, and time elapsed. 6. Have the office make out a slip for each operation to be performed on every piece of work for every contract. In this case the man is allotted the work, and the time is stamped when he is given the paper. When he returns it, it is again stamped, and the elapsed hours and minutes will show his time on the job. Another slip is immediately given him, so that he has mapped out for him his entire work. In the first scheme, the timekeeper is sent around to enter in a book the time each man spends on each contract. (See Fig. 29.) The time allotted to each contract may be quite o o PQ 6 Eh 5 a o QQ c s o 6 246 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT RECORD OF THE WORKERS 247 inaccurate, especially if the shop has several contracts or different classes of orders. In one plant where this scheme was in operation, the men would give the wildest kind of guesses as to the time they spent on each job. Their only care was to see that the amounts they apportioned around equalled the total time they spent within the plant. Coupled with its inaccuracy, such a plan entails an unnecessary amount of clerical labor; because the time of each contract must be summarized on an analysis sheet (see Fig. 80) be- .ftKV^V- J J // ' - f /J^» j^i.'" i^/XJ^ ItiLO^ \ ^£41"^ S-lf9'^ 61 11^%^^ \r$J^ H'^ /JL hl^ /iJL, /Uva^ iTcdt \ H'^ Ka/ /»A4, i^cj. /^Ka. V by Cos**" Cle»-W only Value c^ i-inoe o-f Value of work done on To+ol each unit iro daiB . l-osft StXK 3kS Pig. 39. man's position, it should be entered on his permanent file card. (See Fig. 40. ) At the end of each year the general average of the man, as shown by his output record (Fig. 88), should be entered on the back of his Permanent Record Card filed in the Employment Bureau's office. (See Fig. 40.) This last card should not be destroyed, unless the employee is known to be dead. While he is retained in the plant, it should be filed in one drawer, and when he is released it should be taken out of the employed file and entered in the unemployed file, so that whenever a man seeks reemployment he can be at once investigated. Some firms obviate the ne- - :c St 35 1 -^ b 1 ? 8 ^ « h ^ M I ^ 8 0: p ^ ■ • • *Q ^ ^ h 'b '^ *o < ^ • u ^1 ■ t! J = ' • Q ■ • • 1 K ^,1 •>• 1 55 ^ Q: ^ •^ 1^ « c ki I 8 li Q» i 2: Uj o (V- • % c ? a. ki Q > ^ O ^ lU >- Uj >^ ■^i^ « ^ ^ 5 u ^ * h 5 ?: 5 ^ ^ n. r. ~ IV» **^ 1.. i(\ 1. 5^ • ^S V %» f o k4 0: 5 N u % C O 1 I 1 o o o It 35 I( _____ DB^ HB^ ■■■■■ mmma ■■■■ RECORD OP THE WORKERS 259 CQ 4-> a d) Q >» 2 a O o o a m bo a N c« s s 4-> U O A cessity of copying the workman's record twice by combining the essential features of the two cards shown in Figs. 88 and 40, and filing them in the foreman's or manager's office while the men are engaged; and in event of discharge or quitting they are sent to the employment office. In this way the employment office has on file only the former employees, while the managers keep in touch with the present help. This method of handling cards has its advantages and dis- > CO^T or D£r£CTS DUE DEPTS roH MONTHS or YEAR i9i JJkH. FEB. MAf^ APS MAY iurim JULY AUG. a£PT. OCT /W7K pec. - -*•-'■-•.-. ^ ISO 4 r ' - V ^'^^ .K' ^»V' ^ " ^ *• %. b * \r ^ ^ ^^ ^ ^ ^ ^ ^ ^ ^ ♦•♦♦ « r^^ ^^ "" ' Dep± M). / MONTHS O^pt AfaZ ♦ ♦ ♦ ♦ i)&pf ^o.3 - Pig. 42.— Chart of Errors showing Monthly Efficiencies of Departments. advantages. It is cheaper in cards, filing space, and copy- ing, but the cards are apt to become soiled, torn, mislaid, and even permanently lost in the general handling and pas- sage between departments. If the employment office retains its copy at all times, then the loss of the output card in the shop is not so serious as it is when only one card is kept. While the manager should have a record of the efficiency of each man in the plant, that is not sufficient. He should know just how much each department wastes and loses, and what have been the causes for all losses. A foreman's effi- ciency is determined by his ability to prevent men from wasting time and spoiling material. ^ ■ ^ 5 ' 1 'i 1 1 5 ^ ^ 1 ^ ' -« 1 o ■ CO ■ >c a> ■ Jt p «s ■ k ^1 o ^M Pi 1 ^ 5 i 7 o L ^ 0: T^ - ■ s & m i 1 / ^ I ^ 1 ^ -1 1 1 ? 8 - 5 I **« i ii ■ >I " ■ i «..» -M E f Q ■ CO 1 ■ -■ — ' -^ • 1 ^ m k : 1 i H «l « 'H "^ -• S S i!j| 8 ft J J][l_ RECORD OP THE WORKERS 261 Two plans of recording defects can be used, either sum- marize the errors in tables (see Fig. 41), or make a chart of the defects chargeable to each department according to their number or cost, or both number and cost. (See Fig. 42.) To make the charts involves but slightly added expense above the cost of tabulation, because the information must be tabu- lated before it can be charted. The added advantage, how- ever, is worth more than the increased cost; because a chart shows, at a glance, tendencies over periods of months, while the table compares for only one month at a time. If a manager keeps these general comparative records, and if, in addition, he has a detailed record of why the losses occurred in each department (see Fig. 43), he can intelligently criticise the work of his lieutenants and can make changes which will be improvements and not mere ''shake-ups." I RECORD OF RAW MATERIALS 263 CHAPTER XVII RECORD OF RAW MATERIALS In the process of manufacturing goods, two classes of material are used, direct and indirect materials. The direct are those which go into the manufacturing of a product, and stay with it when it is in its marketable form. The indirect are goods used in the process of manufacturing, but which never become a part of the product. In making a desk, for instance, lumber, nails, varnish, rotten stone, sand paper, polishing cloth, and other materials are used. The lumber, nails, and locks are part of the desk when finished; while the rotten stone, sand paper, and polishing cloths though neces- sary in order to put a beautiful finish on the desk, do not appear as part of it when ready for the consumer. In making an engine it is necessary to use iron, steel, brass, and other metals, and also molds, oils, waste, and other materials which are quite as necessary as are the steel, iron, and brass, although they appear nowhere in the make- up of the engine. Good management insists upon two things regarding raw materials : 1. The greatest care possible should be exercised in pre- venting waste and losses on direct material. 2. The greatest possible economy to prevent undue expen- ditures for the indirect materials. To secure maximum economy in materials it is necessary to: 1. Purchase them from the lowest-priced firms when goods are at their lowest prices. •I oco 2. See that the material comes up to the contracted standard of excellence in quality. 3. See that the quantity purchased is obtained. 4. See that the goods are delivered at the specified time. 5. See that they are properly housed and stored. 6. See that there is no unnecessary waste in the plant. 7. See that no losses can occur, except through waste. In order to accomplish these seven ends it is necessary to have a complete record of the most reasonable supply firms, to know the best time to purchase goods, and to have an exact checking system. 1. To attain the first aim^ the purchasing department should be in constant touch with the market from which the raw materials are obtained. In small concerns, some mem- ber should gather information as to the causes that influence the prices of raw materials. He should find out the seasons when they are cheapest, should know the prices of the vari- ous usable qualities, and keep himself informed as to weather conditions, crop failures, and other causes likely to affect prices. The firm should also take advantage of the market, e.g., if a cotton manufacturer finds that he can purchase his cotton most advantageously during a certain month in the year, he should arrange his finances so that he can acquire his cotton at that time, but he should probably not purchase an entire year's stock of raw material during a single month or so, and then pay storage on his purchased goods and interest on the money used to secure them. Most companies have a regular purchasing agent or pur- chasing department to look after securing supplies. In some concerns, a very strict account is kept of the price quotations for every day in the year; and in some cases, the price changes are charted on squared paper, and curves are plotted showing price movements for each day of the year. For most lines of material, and for all ordinary businesses, such a scheme is unnecessary. Some goods have higher prices [I 264 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT during some seasons than others, and the management of the plant should endeavor to buy during the favorable time, al- though if he must borrow funds, the price he pays for his goods will be the market price plus interest, as well as stor- age and insurance. 2. Quite as important as purchasing the material at the right time and at the lowest possible price is to have some scheme by which one can be certain of purchasing the most useful quality of material. The common plan is for the pur- chasing department to establish standards for all of the ma- terials to be purchased, and then have all goods tested before acceptance. Many large concerns have well-equipped labora- tories that establish standards and test all purchased materials in order to see that they fulfil the terms of the specifications. In many branches of work it is not only desirable to make a preliminary test of the material, but also to keep track of the material while it is going through the plant, and to test the finished product of which it becomes a part. This is espe- cially important for plants having no special department for testing materials and such goods as are hard to stand- ardize. It is not difficult to keep track of materials. A continu- ous industry plant, which manufactures several styles and grades of some textile material, can keep record of the raw material which goes into the various lots of goods by num- bering the lots and recording specifically the material charged to these lots. Whoever buys the finished product will have the lot number recorded against his name. If the finished product from this raw material should turn out to be bad, or to be unsatisfactory to the customers either in wearing qual- ities or in other respects, they will report to the manufactu- rer who is able to tell, by turning to the Index Record (Fig. 44), which shows the customer's name and lot number, what raw goods proved to be unsatisfactory, and, as he keeps a record of his purchases, he is able to tell from p ^ n P * i^zi V C 1 ' l5 - •^ ^ h.^ ■ I 4 gf 1 — [ — 1 — 1 — 1 — 1 — I J — L- J — " ' — " — ' — » — » — ^— ■ 1 ^ in U o It I t s^ ^. ,5 0. ll ^ it I QQ o a O CO 03 bo .1-4 T3 01 O O o bo Pi 0) u o o X a> 1X4 i f' 266 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT whom lie bought the unsatisfactory raw material. (See Fig 45 V V &• To illustrate the records needed for an assembling in- dustry an automobile plant may be selected. The parts of an automobile are purchased from widely different sources. If the product should prove unsatisfactory, the manager will hear specific complaints in the form of objections about some particular parts of the machine. If the defect is real, in- vestigation will soon show whether it is due to faulty ma- terial or to workmanship, and if proper records are kept of the source of the former, it is not hard to discover where the fault lies. The fact that the material is bought from widely different sources does not offer any serious objection, because the firm, as a rule, buys the same parts from a very limited number of firms, e.g., the engines and engine parts will come from one or two firms, and their products have characteristics which soon betray their origin. 3. See that the quantity purchased is obtained. One of the most fruitful causes of losses in large concerns which do not have a good receiving system is shortness in weight or amount due either to mistakes or open dishonesty on the part of their employees and others. In order to see that the firm gets all the goods for which it pays, the usual plan is to establish a store-room and to let the order go through the following routine: Have the purchasing department make out the items in triplicate on a special blank, sending one copy to the firm from which they order, one to the receiving department, and retaining one on their own files. When the consignment arrives, the man in the store-room should be compelled to take his copy of the order, compare it with the invoice, and then check the actual items of the invoice against tihe goods received, sign the two slips, and send them up to the purchasing department, where they are checked against the purchasing department's copy, and approved. The invoice will be sent to the accounting department, which Q Q: O "g (0 "■"■ ^mm ■""" ■"^ ^^" — ""Jl to ■ - J - 53 1 5 ? < 1 \ti 1? »i.^ 'p I till o ii\i r i •0 CJ 1 Q g • I. t i 1 c < ' ■ • nS: I-. jUI t" 0} •FN u 03 > O 0) P o u o m u CQ S3 u o o 19I 1 Mmfun N«. 50GAR DELIVERED CHAR. PURIFIERS 5WEET WATER C05T5 - Na AtWT. Gala, Spec. Gray. Am+. Galo. Specific GrovH-y t.«ib«r Gross Per lb. Prod. Unprod. TiM^ CHep. SUGAR RECEIVED Amt. on Hand ^r^»nA SfMCkl Gals. Specific Gravi+y Gab. Sp.G _ 1 trrng Tofoi • Fcr a^Ck rk «niy I Fig. 49.™Record Slip showing Amount of Goods which passed through a Department in Bulk. condition. Of course, there may be wastes in the chemistry of the process; but, if these are once revealed by the scientist, the measuring gauges can be made to show their importance. In such a plant, the task resolves itself into making a permanent record of the product of each department, as shown by the weighing of the solids and the readings of the registers on the tanks, stills, boilers, and other holders of the liquids, and the length of time ea<;h amount took to pass RECORD OF FINISHED AND UNFINISHED GOODS 285 through every particular step in the process. If these slips (see Fig. 49) for each day's work are sent to the cost clerk, he can add the direct labor cost on each portion of the prod- uct : and can apportion the percentage that the said depart- ment carries of the managerial expenses-rent, taxes, interest, depreciation, repairs, and the like, and thus determine unit costs. Each department can be required to fill out forms like Fig. 49, and, at the end of the day, send them to the cost clerk, who can enter them on a cost ledger sheet, ruled something like Fig. 50. In a plant of this character, where nothing is sold except from general stock, it is desirable to know what has been the amount of waste in different mixtures, as well as their stage of completion within the plant. The former can be deter- mined very readily by making note of the total amount of the various ingredients of the mixture, and noting at the end of the process the total amount of the different kinds of fin- ished products obtained from this mixture. If accurate ledger record is kept of the material as it passes from one step of the process to the other, one can tell, by merely look- ing on this summary page, the amount that has been received, the amount that has passed through, and the balance on hand. One can also tell the extent of the loss that has been entailed in purifying the product to any particular degree. If, at any time, a new order should come in for a lot of ma- terial, or if a cargo of new raw material should be delivered, the manager of the plant can turn to the ledger sheets and ascertain just what is the condition of the orders under way, and how soon he can utilize the raw material awaiting his disposal, or how soon he can deliver any unusual orders. The ledger can also tell him whether or not one department is smaller in capacity than it should be to bring about the best results for the firm. In fact, the ledger, if well kept, affords just as accurate an inventory of goods in process of manufacture as of the raw materials. II TT - 5 „ _. _. £M 11 1^ 1 ^J ^3 _ ^K^ ^14 ll 1^ I 4j -i ^ Pi ^ * -I-I II -Z V r ^ k K k ^ S^ s O U s> «*j ."^ 5 s I^S 1 1 1 T *NT .a O O O O O p 9 PQ O c 1^ — ' ^ -p CO C •S g rv. 4j § s bo m QQ O O o o o [Z4 RECORD OF FINISHED AND UNFINISHED GOODS 287 In the manufacture of hats, shoes, furniture, and similar materials, there is a more difficult problem. The product cannot be measured in bulk, and the time taken to manufac- ture cannot be recorded for each lot in a group way. The . commodities are made up of pieces which must be handled as units, and the steps in fabrication are such that each product must be acted upon separately by the attendant at each machine. A good way to keep account of products of this type is to pass them through the factory in small quantities. Hat fac- tories, shoe establishments, and textile mills divide their products into lots which may include pieces of so many yards, or comprise one, two, three, or more dozens units or pairs A production order is written out for each lot of goods, and two methods may be used to record the exact condition of the lot in the process. 1 The production order may be arranged m the form of a "tag having detachable slips. (See Fig. 35.) As each operator finishes his step in the process, he detaches his por- tion of the tag, and sends it to the accounting department, where all tags are summarized on a partly finished goods record sheet for goods which pass through departments in lots (See Fig. 51.) To determine what is in each depart- ment by Fig. 51, one need only note the number of lots which have been received, but which have not been passed on to another machine or step. If one of the departments has received a great number of lots and does not seem to be delivering them as rapidly as they are turned in to them, the management can at once search out the reasons, which may be lack of men, insufficient machinery, or may need more ability on the part of the foreman to get the work out. 2 According to the other scheme, a tag or slip is made out for each operation (see Fig. 86) , and every day the fore- man of each division makes a list of the jobs he finishes and then gives this record to the accounting department. In the SO I hi JJ _ ^^ ^^ ^^ ^^ e 0) — -mm iEi::__ ID i K «> (J IS ^ J 1 1 \ ; Q K 10 U 1? 1. 1 1 ^^ 4 1> • • M • • • « 3 • « •"• % m • • • 5 • ff • • D .... 7, .... 9 « . • . 10 a a 3. 4 t S a 7 4 »« 1 la I IS I a S 7 9 10 a I I It 3 M 3 I 3 I 3 4 7 8 •» >« *. 6 6 6 la • • • • 6 18 4 36 a 10 I II >. .. t la t IS I 13 6 6 4 10 a 13 4 16 4 30 4 '4 a a6 a a8 a 30 4 8 a 10 4. 14 *; t8 2 33 a8 a 30 t 3 I 4 a 6 t 7 » 9 I 10 3 13 a IS t 3 a t a I 1 4 *6 7 9 to a • • « 3 13 4 4 • ■ a 4 4 6 4 a 4 8 * . 10 >4 18 U .. . . . . • • • ¥ . * « 4 a !• I I t a t ■ This works .... It .... ia • « • • 13 * * .... 14 .. .... 10 * . . .... 17 .• '• ** *. *^ .* • . . .. IB «* ** .• •• .. .. .... 19 •* *' >. *« ** ** .... ao ». .« .. .... at • •i .... a3 ♦. .* *• .* •• ** . « • • '24 •. *. .* .^ ** * " .... ,as '. ** *. *' ** •* . • . . m6 •* .. •• .. .. •• ___ aide shows how the table would look if the were short of frame drilling capacity. I a a 3 4 I 8 9 10 la >3 I I t I I a t < I a I a I » 3 4 S 7 8 9 to la «S 15 This side sbowa a record as actually kej>t Fig. 58.— Records Showing Output of Machines. Adapted from a Paper Given by H. L. Gantt, * * A Graphical Daily Balance in Manufacture," Transactions American Society Mechanical Engineers, vol. xxiv, pp. 1322-36, Figs. 290, 291. have. A large textile establishment once introduced a num- ber of costly looms which were guaranteed to turn out a cer- tain quantity of cloth within a given period. In testing the looms it was found that they made the output with little 812 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT apparent effort, but when it came to examining the output records of the departments, it was found that the looms were not nearly so efficient as they were expected to be. It was found on investigation that the loss in output was due to lost time taken in repairing and looking after the machinery. The manager then kept a record of the amount of repairs and of lost time on the looms, and found to his amazement that they were not nearly so efficient as the ones that had been discarded. Upon further investigation he found that the operators were unfamiliar with the electrical starting devices, and through their ignorance were causing the firm a loss of hundreds of dollars. Many concerns keep records of this type for every machine in their plant, and they find the records are helpful in determining what machines are best suited to their purposes, as well as being useful in determi- ning the repair and depreciation charges. (See Fig. 59. ) Within recent years, some important textile concerns have adopted an effective inventory scheme. A plan is made of every department of the establishment, and on it is indi- cated every max^hine or piece of equipment within the sec- tion of the plant represented. All pieces in the department are numbered, no matter how small, and are shown in the drawing. (See Fig. 60. ) In addition a separate record is kept containing an accurate description of the machines, and also information relating to their prices, dates of purchases, rates of depreciation, from whom purchased, by what power driven, when and how disposed of, and the amount realized on their disposal. (See Fig. 59. ) The drawings alone present considerable information. They show the dimensions of the plant or department, and indicate the exact position of every piece of equipment, while on the same sheet with the drawing is tabulated a brief de- scription of the machines, the number of each, the methods of driving them, and a description of the motive power. A more detailed statement of these items is entered on type- o O a iLl O id > kJ Z I o < - i • - * 1 10 tr < 1 hi " 1 4e9 /a«/p -2 1 tl C ■ 4- t \ 1 • 1 o H ^ 4- « a (0 — . c 1 ^ 1 (L OC I J n ^ Pi 1 I '8 t ^*1 O 1*? s ■si 3* <5 6 i 1 L L 1 1 « L t 2 1 j» "*» £ m 1 L- _ 814 THE PRINCIPLES OF INDUSTRIAL MANAGEMENT written sheets, which give full descriptions of the inventory. Whenever a change is made in the equipment, the drawing is altered, the table is corrected to correspond with the change, and the descriptive part of the record is corrected in order to give accurate indication of the new conditions within the plant. Accuracy and fairness in keeping these inventory records are essential. Insurance companies prefer, at times may even insist, that they be kept by disinterested appraising firms in order to guarantee absolute trustworthiness. It is not, however, an imperative necessity for an outsider to keep such records ; because fallacies may be detected from internal evidence. Save in unusual cases, machinery is acquired by purchase, a bill of sale is always given with such transac- tions, and the machine-manufacturing companies keep their sales records. In case of any dispute the insurance com- panies can refer to these records; and thus, by making proper depreciation allowances, obtain a close approximation of the value of the machinery from an independent source. This inventory record possesses a number of advantaged. Aside from its importance in case of fire, it keeps the firm thoroughly informed ns to the exact status of all its posses- sions within the plant. The true value of the equipment, both in total and in individual items, is never obscured. Even if the records are not accurately kept they serve as a convenient basis for tracing out the original value. It fre- quently happens that the assured will, unless he possesses such a record, be unable after a fire to tell just what his losses are. Many times he overlooks important items in his loss statements to the insurance companies, and does not recover amounts to which he is justly entitled. Insurance companies feel quite justified in paring down claims when- ever their validity is in any doubt, and there are often pos- sibilities for disagreement where no such record is kept. Seldom, indeed, after large conflagrations, are adjustments \ f ij n poo t < c c » ? 8 u VI O o •0 ,5 H O I * = o QffgS^^^^ ..^.^5 <: s i!^?! 1 ' ' t t t T « 1 a s 1 X «l iD i M t r ' m s * r » it: m 1 t '■"1 , 1 T » P O i ^fc-t-i^'*- ^, ^n^ - - _ - «V — «» «; «»i - -NW - H C -.1! « > < > « < * - ' V •a ; » • » S •* - 5^ > « « • « » s = s r » 'kk MM §11 1 r 1 » « 5 • i 3 s « • I m r t < a ■ ji ft « » ^sl.m-|-WiW.- - - - - Cll- .-«| ,2M ^ • ' i-«AeW I 'Sii Ml ■11;