Economics of efficiency

Front matter

Cornell University Library

3 1924 002 746 802

■ m

Preface

The growing complexity of the American industrial system and the increasing keenness of competition have introduced a new era in business. Goods are produced and sold on small margins, and the extent of profits depends in a large measure upon efficiency. A new business science has grown up in our midst, and it may be called the science of efficiency. Efficiency is the watchword of future industrial progress, growth, and expansion. The nation which produces with the greatest efficiency will be the one which will lead the van of industrial nations. The business man who heeds the edicts of efficiency will be the one who will be able to produce at the least cost, and to command markets.

The aim of efficiency is the elimination of waste. The new science of efficiency bases business activity upon' knowledge. Knowledge takes the place of guesswork I and ignorance. Efficiency demands a scientific study of the different phases of work to ascertain how it can( best be done with the least expenditure of energy, time, . and materials. It is giving business a critical aspect, by making a study of how things should be done and how they are done. The chief aim of this book is to open the eyes of business men to the underlying principles of efficiency, to emphasize the importance of these principles, and to explain their methods and workings in such a way that all business men will profit.

NORRIS A. BRISCO.

New York, Oct., 1914.

Chapter I Economic Need Of Efficiency Page

Industrial Efficiency a New Study — Effects of Factory System — New Science of Business — Human Factor Neglected — Extent of Wastes — Efficiency the Goal — Conservation of Workers — Accurate Knowledge of Workers — Requisites — Specialization — In Factory — Effects on Labor — Dangers

— Demands of Industry — Requisites for Future Industrial Progress — Standardization — Extent — Kinds — Competition

— Led to Lower Costs — 'Varieties of Utilities — Factors in Production — Land — Labor — Capital — Management — Business Men Should Heed Efficiency 1

Chapter II

Evolution of the Efficiency Movement — Efficiency — Meaning — How to Ascertain — Denominator — Computed] Efficiencies

— Efficiency in Public Administration — Wastes in the Educational Systems — Applying Efficiency to Work — How to Introduce Changes — Wastes — Kinds — How to Eliminate

— Strenuousness vs. Efficiency — Efficiency Protects Health

— Importance of Knowledge — Method of Obtaining — Importance of Scientific Study of Business — Search for Ideas

— The One Best Way — How to Attain — Problems to be Solved in Efficiency . 27

Chapter III Management And The Plant

Foundation of Efficient Management — Organization — Importance — System — Requisites — Advantages — Coordination

— Handling of Details — Requisites for Reports — Suggesx CONTENTS

PAGE

tions and Ideas — Importance — Cost System ^— Requisites — Advantages — Plant Location — Design of Buildings — High Grade Machines and Tools— Quality — In Buying — In Production — Savings from Waste Products — Storage of Materials— Store Room — Moving Goods in a Plant — System in Shipping Goods — Routeing Goods — Inventory — Buying

— Selling — Requisites — Advertising — Requisites — Credit,

its Place in Business 45

CHAPTER IV MANAGEMENT AND LABOR Importance of Human Factor in Business — Cooperation — Personality — Rights of Workers Respected — Duty of Employees to Employers — Enthusiasm — Loyalty — Importance of Sympathy — Importance of Incentive — Methods of Handling Men — Driving — Leading — Permanence in Working Force — Methods of Holding Men in Organization — Promotion from the Ranks — Efficiency and Health — Contentment — Tardiness — Punctuality — How Ascertained — Irregularity — Causes — Soldiering — How to Eliminate — Authority Clearly Defined — Discipline — Methods of Enforcing— Qualities Essential in Superintendents ... 69

Chapter V

METHODS Guesswork and Ignorance in Business — Intelligent Direction of Work — Old Method of Doing Work— Wasteful Effects — How to Ascertain Best Way — Best Conditions of Work — Theory vs. Practice — Time Study — Motion Study — Requisites for Finding Standard Methods — Time for Task — Importance of Rest — Standard does not Mean Perfection — Responsibility upon the Management — Adoption of Standard Methods — Supervision — Importance — Cooperation of Workers — Just Remuneration — Methods and Time Work

— Planning Department — Job Work — Efficiency and the Best Way 89

CONTENTS xi

Chapter VI Page

Importance of Skilled Workers — Buying Machines vs. Hiring Labor — Requisites for Efficient Labor Force — Uncertainty of New Worker — Common Practice in Hiring Men — Experimenting with Men — Evils of Constant Hiring and Firing

— Requirements of a Place — Experts in Hiring Men — Misfits — How to Fill a Vacancy — Employment Department — Requisites for Selection of Workers — Fundamentals for Efficient Work — Health — Sight and Hearing — Signs of Health — Nervous System — Barriers to Employment — Habits — Age Limit — Drifters — Personal Letters — Intelligence — Thrift — Industry — Characteristics which Promote Efficiency — How to Detect — Skill — Experience — Limitations and Possibilities of Men — Selection of Apprentices — Card Record — Efficiency and the Buying of Labor . 106

CHAPTER VII TRAINING Changes from Industrial "Revolution — Training of Workers Neglected— Importance of Trained Men — Apprenticeship System

— Characteristics — Abuses — Modified Apprenticeship — Sudden Demand for Skilled Workers — Opposition of Unions

— Industrial Intelligence — Adaptability — Training in Best Methods — The Corporation School — Methods of Instruction— Instructors — Where Possible — Character of Training — Shop Instruction — Practice Shops — Cooperative Industrial Schools — Industrial Evening Schools — Industrial Training in Public Schools — Industrial Schools — Trade Schools — Trade Preparatory Schools — Manual Training Schools — Vocational Schools — Best System for Training Workers 131

CHAPTER VIII HABITS Habit, Its Meaning — Instinct vs. Habit — ' Nervous System and Habit Formation — Nerve Paths — Repetition — Results of xii CONTENTS

PAGE

Proper Habits of Work — Identical Repetition — Habits of Industry — Importance — Wastes — How to Ascertain Best Methods — Training — Importance — Classes in Habit Formation—Apprentice—Skilled Worker— Why Employees Oppose Changes — Requisites for Changes — Conversion of New Methods into Habits — Habits of Living — Of Eating

— Classes of Habits — Effects of Intemperate Habits — Value of Habit in Industrial Society ..... 159

CHAPTER IX FATIGUE

Causes — Effects —[Power of Work Varies with People — Reserve Force — Effects of Toxic Impurities — Fatigue and Memory — Cause of Stupidity — Efficient Cycle — Sleep — How Much is Necessary — Importance of Food and Health

— Relaxation — Antidotes to Fatigue — Rest Periods — Accidents — Effects of Dirt, Dust, and Noise — Effects of Speeding — Limits of Work — Length of Working Day — Training in Resisting Fatigue — Real and False Fatigue — Effects of Sitting at Work — Methods of Conserving Energy

— Wastes from Fatigue 178

CHAPTER X

Health and Efficiency — Effects of 111 Health — Conservation of Health — Importance — Environment rand Efficiency — Lighting — Natural vs. Artificial — Daylight — Windows — Electric — Advantages over Gas — Lamps — Overhead and Individual — Conservation of the Eye — Eyestrain — Injurious Lighting Conditions — Glare — Flickering — Strong Contrasts — 111 Effects of Gas — Effects of Foul Air — Value of Pure Air — Air Conditioning — Ventilation — Natural — Artificial — Temperature — Air Circulation — Humidity — Dust — Varieties — Effects — Prevention — Fumes and Gases — Effects on Workers — Environments and Ignorance 199

CONTENTS xiii

CHAPTER XI WELFARE WORK

FAGB

Drain of Sickness upon Industry — Medical Department — Functions — Emergency Hospital — Physical Examination — Treating Ailments — Dispensary — Home Environments — Encourage Proper Habits of Living — Medical Department and Efficiency — Nutrition — Indigestion — Lunches — How to Assure Proper Lunches — Drinking Water — Sources — Lavatories — Individual Lockers — Facilities for Baths — Rest and Recreation Rooms — Varieties of Welfare Work

— Benefit Associations — Educational Work — Club House

— Monthly Papers — Clubs — Savings Banks — Vacations — Pensions — Prizes for Home Keeping — Business Motive in Welfare Work 224

CHAPTER XII

Classes of Accidents — Unavoidable — Preventable — Need of Statistics — Losses from Accidents — Study of Accident Prevention — Divisions — Causes — Ignorance — Carelessness

— Clothing — Standard Dress — Poor Lighting — Cleanliness — Breakages — Insufficient Space — Slippery Floors — Alcohol and Accidents — Fatigue — Intervals of Rest — Safeguards — Old View — Dangers in Oiling and Cleaning Machinery — Protection of Eyes — Preventive Spirit — Museum — Management and Accidents — Emergency Room First Aid — Employment of Children — Factory Inspection

— Compensation in Accidents — Necessary Measures in Accident Prevention 252

CHAPTER XIII

Losses from Fire — Reasons for Excessive Fire Losses — Functions of Fire Prevention — Chemistry of Fire — Combustion

— Spontaneous Combustion — Favorable Conditions — xiv CONTENTS

l PAGE

Causes of Fire — Matches — Smoking — Gas-jets — Oil Lamps — Precautions in Electric Wiring — Methods of Heating—Dangers in Open Spaces — Dangers in Dust — Automatic Fire Alarms — How to Install — Manual Alarm Boxes — Fire Patrols — Automatic Sprinklers — Operation — Fire Pails — Chemical Extinguishers — Standpipes — Fire Escapes — Philadelphia Fire Tower — Fire Walls — Fire Drills — Fire Protection as a Science 284

CHAPTER XIV

Importance of the Wage Question — Requisites for its Solution

— Parties to Wage Problem — Various Systems of Pay — Time Wages — How Fixed — Disadvantages — Individual Records — Piece Rates — Rate Cutting Cause of Trouble — Guesswork — Rate Fixing — The Task and the Rate — How to Establish a Just Rate — Essentials — Duties of the Employee — Classes of Workers — Health Precautions — Workers' Share in Fixing Rates — Profit Sharing — Method of Distributing Profits — Disadvantages — Contract System

— How it Operates 314

CHAPTER XV

Halsey Premium Plan — How it Operates — Ascertaining of Standard Time — Precautions — Rowan Premium System — How it Operates — Gantt Bonus System — How Standard Time is Ascertained — Instructions — Elimination of Guesswork — Soldiering Eliminated — Health Precautions — The Bonus — Reward for Foremen — Differential Piece Rate System — Requisites — Instruction Cards — Precautions in Fixing Tasks — System in Operation — Task Idea in Day Work — Emerson Efficiency System — System in Operation

— Piece and Job Work — Remuneration Proportionate to Output .340

CONTENTS xv

CHAPTER XVI ORGANIZED LABOR AND EFFICIENCY METHODS

PAGE

Trade Union, Its Meaning — Unscrupulous Leaders — Exploitation Unjust — Progress and Elimination of Work — Employees Suspicious of Employers — Opposition to New Machines — Effects on Labor — Wages and Output — Efficiency and Protection of Workers — Intellectual Development — Care of Aged Workers — Pensions — Opposition to Piece Rate — Proper Piece Rates Benefit Labor — Forms of Wage Bargaining — Individual — Collective — Union. Demands, Based on Guess — Aims of Unionism — Ignorance of Meaning of Efficiency 359

Chapter I

This is the age of industry. Industrial achievement is the aim and the goal of all civilized nations. National progress and growth are based upon industrial industrial progress. Industrial advancement efficiency, a has been rapid, and to-day the world is progres- new study" sing with greater rapidity than ever before. Developments and improvements in every niche of industrial life follow one another in rapid succession. They are the rewards of tireless industry, of superior ability, and of genius. American genius is second to none in the world. It has devoted itself chiefly to conquering the forces of nature, devising labor-saving machinery and devices, and making improvements in facilities of transportation and of transmission of intelligence. The last few years have opened a new field, and new problems have presented themselves for American genius to solve. This new field is industrial efficiency. Its borders have hardly been touched, and American genius must be directed to its domains. If so, the revelations which will result will be as astonishing as those resulting from the industrial revolution of the eighteenth century. American genius has not failed in the past, and will not in this case. The future promises in the new field of efficiency, industrial improvements and developments which will make the industrial progress and growth of the twentieth century greater than the phenomenal record of the nineteenth.

Manufactures have developed, in less than two centuries, from mere hand and household industries to those Evolution of machine and factory. For thousands of of manufac- years previous, goods for the satisfaction of turing- all the wants of man were made in households,

or in simple workshops adjacent thereto. During the early part of the eighteenth century, the worker performed his work in his own home, where he provided raw material, owned hisown tools, furnished the motive power, which was his muscles, and was his own Blaster. By the middle of the century, many changes in the industrial system had taken place, and considerable capital was used in manufacture. Merchants grew rich by furnishing raw material to workers, paying them at piece rates to produce finished articles, and selling these in markets. By this time, many experiments and successful attempts had been made to economize in production by the application of capital through labor-saving devices and machines. But the great mechanical inventions took place in the period from 1 760-1 790. This was followed by the discoveries of the application of steam power, and commencing with 1830, with marked improvements in facilities of transportation on land and water.

The various inventions introduced so many changes in the industrial system that the process of change is called Develop- ^e Industrial Revolution. The workers were ment under called upon to attend machines, and to work the factory m workshops owned by the employer. The system. grouping of laborers and machines in buildings for the purpose of production is known as the factory system. The factory and not the home became the unit of production. With the increase of capital and the improvement of machinery, the factory made it possible to manufacture goods in larger quantities, and of a more varied nature. New improvements in facilities of transportation opened larger markets, and to meet the increased demand, production on a larger scale followed. The development under the factory system made the modern business enterprise possible.

The factory system with its extensive use of machinery, power, and capital, combined with extensive division of labor, introduced new problems of ad- The factory ministration. The small business enterprise system and with its simple organization and methods, laborso characteristic of the domestic system, gave way to the large business unit with its complicated organization and complex methods. Intensive organisation became a necessity, and the independent worker of the domestic system became a part of an organization under the guidance of a new official, the manager. A clear and definite line was gradually drawn between managerial ability and labor. The laborer became a specialist, and was deprived of all responsibility except that of doing efficiently the task assigned hrrn. The present Laborand industrial system has been a development managerial from the simple organization to the complex, abmtya process of evolution. Each stage of the development has been attended by labor problems, social difficulties, and class conflicts. The inattention of employers to the new problems has been the chief cause of the numerous clashes between workers and employers. Many of the clashes and much of the antagonism which now exists between the two great factors of production could have been prevented if employers had recognized from the beginning the proper place of labor in our industrial system.

The nineteenth century has been frequently called the century of the machine. Successful industrial management was concerned largely with obtaining greater efficiency through two sources : firstly, the acquiring of Progress a more highly efficient plant through more and efficient buildings and arrangement, and sec-

markets, ondly, the acquiring of more improved and specialized equipment for the different processes. Production was greatly increased which necessitated more extensive markets. Manufacturers realized that industrial development was dependent upon markets. The question of markets has always been a fundamental one in industrial progress. Improved machinery and production on a larger scale drove the manufacturer to extend his field from the locality to the nation, and further improvements made more extended markets an absolute necessity. With the entrance of our commodities into the world's markets, competition became more intense, and the question of costs became more important, but during the nineteenth century, the average employer in his efforts to lower costs centralized his attention

upon buildings, equipment, machinery, and ofTusmess6 methods- Near the close of the century, a few

more enterprising employers had their attention attracted to the human element, the most important factor in production, and this attraction is the beginning of a new science of business, the science of efficiency, which is a secure and sound foundation for further growth and greater industrial progress.

It is astonishing that it was hardly more than a quarter of a century ago that employers realized that men and Three prob- not money were the determining factors in lems in pro- commercial and industrial undertakings, auction. Three important problems enter into production, the material, the machine, and the labor. The keen competition arising from entering foreign markets drove manufacturers to tax their ingenuity to devise methods for lowering costs. Attention first turned to improved machines, equipment, and economies arising from large-scale production. The closer study demanded by increasing competition made clear the limitation upon machines and equipment. Atten- Attention to tion was directed to the labor factor, and busi- the human ness men then recognized the importance of the factorhuman factor. This factor, so long neglected, has come into prominence as the one to be depended upon to lower costs, make possible successful competition, and pave the way for greater industrial growth and expansion. The human factor is the most difficult one in production, and the most important in the keen competitive activity of the present industrial struggle.

Machines have been given special study since the introduction of the factory system, but the human factor has been neglected. Machines depend for Human their output upon the labor attending them, factor long and the worker does the real work of industry. ne8lected' Why should he not be studied to ascertain, as in the case of machines, if wastes exist, or if better methods can be devised for doing work, so as to increase the output with the same physical and mental exertion ? Economic necessity in meeting competition drove manufacturers to pay attention to the human factor, and to give it closer study in order to devise methods of lowering costs, so as more successfully to compete in home and distant markets.

Manufacturers were amazed at the extent of the wastes which were found in their plants. Wastes of material, time, and energy were found everywhere. A prominent manufacturer declared wa*stes° that they were getting only about 50 per cent of the ability of workmen in their factory. Another stated that few shops produced more than 60 per cent of the work that it would be possible for them to produce with the same working force and the same physical Problem to equipment. The chief problem which arose eliminate was how to eliminate these wastes. How can wastes. an industrial country hampered with the presence of wastes compete with one with the wastes partially or nearly wholly eliminated? It is impossible. It is a dollars-and-cents proposition, and when manufacturers realize this, they will pay heed to the conditions existing in their plants, and make endeavors to eliminate as much waste as possible. The goal is the obtaining of the greatest possible output of the highest quality, and with the least expenditure of material, time, and energy, but at the same time not in any way impairing the health of the workers. The work of studying conditions of material, machines, and labor

to ascertain methods for reaching the goal and tbigoah7' °f putting the methods into practice is called

efficiency. Efficiency is the goal in industry. The nation which nearest approaches this goal in its industrial and business pursuits will be the one which will lead the van of industrial nations. Efficiency enters every field of business activity and is not confined to manufacturing enterprises. Efficiency methods will make this nation the greatest of all industrial nations, and in an enterprise will be the greatest guarantee of success.

Human activity is the most valuable of all factors which enter into our business fife, yet until recently, Greatest of less tnan two decades ago, little or no systemall wastes, atic thought was given to the protection and that of labor. tne conservation of the human element in business. The greatest of all wastes is that of labor. It is all the more serious because it is the human factor which is being wasted, and this factor has always been, and will always be, the greatest factor in every branch of business activity. What a saving would result to this nation if we could eliminate, say, 10 per cent of the wastes of the human element, and how much it would mean to laborers if we could increase the percentage to forty ! Such saving would not demand a greater expenditure of energy, but a better directed energy. Manufacturers would also profit, as it would lower their costs of production, and would place them in a position more successfully to compete in foreign markets.

The elimination of wastes is the greatest problem in every form of business activity. Wastes are found in every factor of production. The greatest exist with the human factor, and the most 0f efficiency! difficult place to save waste is with this factor. This presents the most serious and the most difficult problem confronting business men. The new study of efficiency is concerned with the elimination of all wastes, but its most difficult task is the elimination of the wastes of the human factor. So overshadowing is the human factor that its study is the essence of efficiency. It is a dollars-and-cents proposition, and is of vital interest to every one engaged in business activity. Re- conservacently, the American people have been aroused tion of to the need of conservation. Attention was workersaroused, and was focused upon wastes of forests, rivers, mines, and farm lands. No attention was given to the greatest waste, the waste of human beings, more terrible and appalling than all the others. This was unknown, and people were in ignorance of its extent, until necessity drove the business man to study the human factor in order to discover means of lowering costs.

The most valuable resources of a nation are its own people, and it is only recently that employers are realizing this. Human hands and brains furnish the bases of great industrial growth, and are the foundation upon which our future industrial extension will be based. The most valuable possessions of a workman l&lucZ are his health, strength, and intelligence, serve as The conservation of health and strength, the well as prolongation of working life, and the preven- 1 tion of disease are problems which affect

the nation at large, and every employer in particular. Human life is gradually being recognized as a business asset. Employers are realizing the fact that it is a cold business proposition, and that it pays to conserve the health and the strength of employees. It is a function of this industrial nation to conserve as well as to produce. Wastes should be eliminated. Goods should be produced in increasing quantities and at lower costs. Production should continue with the greatest possible saving of wastes, with the best utilization of natural resources, labor, and capital, and with the greatest conservation. Business men should realize that economic conditions have a great effect upon business activities, and the efficiency with which they are performed. It is the economist who in the future will prove the greatest friend of business men in solving the important question of efficiency. Business which is conducted by one part of society at the expense of another cannot be justified, and will not be tolerated under the new efficiency movement.

Labor should be conserved, directed, and given just and fair remuneration. Efficiency demands this, and Efficiency as soon as business men realize that exploitanot expioi- tion does not pay, and that efficiency does, the tationpays. reiati0ns between employers and employees will be less antagonistic, and both will find it to their advantage to work for their common interests. Our industrial progress will to a large extent depend upon our conforming to the fundamental principles of efficiency. It is only during recent years that this has been realized by business men. This realization and efforts to ascertain and follow these fundamental principles is a dollars-and-cents proposition, and as such appeals particularly to business men. The chief aim of this book is to open the eyes of business men to the underlying principles of efficiency, to educate them to the importance of these principles, and to explain their methods and workings in such a way that all business men will profit.

With the ignorance and the wastefulness with which our business was conducted throughout the nineteenth century, one marvels at our industrial growth Labor and expansion. It is not long ago that each methods of workman ground his own tools, and ran ma- the last chines at rates that seemed to him suitable. century- No worker knew if work could be done better or faster, because he was supposed to go ahead with his task, and not to stop and try experiments. Skilled mechanics learned their trades by observing others work, taking what movements they thought necessary, and doing whatever appeared to their liking. The object was to learn to do a certain task, and little heed was paid to the question whether or not it was the best method. Each man was supposed to be the judge of his own speed. The average man simply worked fast enough to hold his position, and, if possible, to soldier and not be discovered. No attention was paid to protecting workers from machines, as they were supposed to keep out of the way, and if one was injured, it was usually blamed to the carelessness of the worker, and not to the negligence of the employer. With these conditions prevailing in the average business plant, is it a wonder that the progressive business man marvels at our industrial growth and expansion during the last century ?

Management was lax, as everything was based largely upon guesswork. There was little knowledge of the

general principles underlying organization, and methods of tne well-organized business was the exception, business Little heed was paid to system, and the average jJJ^*6" manager kept the details of the business in his

head. He was supposed to look after details, as well as important matters, and to get his information by observation. He laughed at system, and thought it hindered rather than fostered success. The only guide as to whether or not the business was prospering was the bank account, the ability to meet obligations. No knowledge existed as to costs, and no system of cost finding, or cost accounting was found. In re^ gard to costs, everything was based on guess. Guess, haphazard, chance, and luck were the bases of conducting the average business, until recent years. Such methods work, if coupled with judgment and a more or less large margin between selling and cost prices. With keen competition and small margins they fail. They must be eliminated, and their places taken by costfinding systems, by organization, and by knowledge in dealing with men, materials, and machines.

The expression "Knowledge is power" is one which has been handed down from antiquity. Knowledge is Accurate an absolute prerequisite of efficiency, but knowledge knowledge itself is of little avail in obtaining and greater efficiency and business success. The

proper use of knowledge is what is needed in business. Efficiency is obtained by first acquiring knowledge, and then making proper use of that knowledge. Knowledge as regards machines and equipment has been applied with varying success. The latter part of the nineteenth century showed great development in the acquiring and the applying of knowledge that obtained

THE ECONOMIC NEED OF EFFICIENCY n

greater results from machines and equipment. The application of exact knowledge was during the last century confined to mechanical equipment. Little was done to obtain a knowledge of the human factor, the greatest factor in production. The neglect of this factor was due more to ignorance on the part of the employer than to anything else. Accurate knowledge should be obtained of the human factor in the various phases of business activity, and applied so as to obtain efficient results. The application of accurate knowledge to the human factor, as well as to the other factors of production, reduces human effort to a minimum and increases production with lessened exertion. The great problem confronting every business man is to furnish daily the prescribed quantity and quality of work in all its varieties by the most efficient methods, and with a minimum amount of capital locked up in work.

Men should be studied as well as machines. Methods of modern science should be applied to the acquiring and the applying of accurate knowledge regarding the human factor in business. The knowledge value of scientific knowledge in industry has applied to long been recognized, but the idea of apply- ^t„"man ing it to ascertain what a man can do is new. The characteristics of the human element should be carefully studied and analyzed. Much has been done during the past decade, but the study is as yet in its infancy. With its present beginning, much is to be expected from the next few years. Many results have been obtained, but these are slight compared with what will follow. The study will not only benefit large employers, but all employers. The greatest benefit will come to the laboring class in general, as it will assure them proper working conditions, just wages, and higher standards of living.