The human factor in industry

Front matter

-NCH2

THE MACMILLAN COMPANY

NEW YORK • BOSTON • CHICAGO • DALLAS ATLANTA - SAN FRANCISCO

Preface

The constantly increasing interest on the part of employers of labor in their employes has led the authors to prepare this volume, which deals primarily with personnel and service work in industry. It has, of course, been impossible in the consideration of these two important subjects to omit reference to other questions which are involved, such as wages, hours of labor, working conditions, etc.

How great has been the interest in the human factor in industry, is evidenced by the ever increasing literature on the subject. The War and the industrial problems arising from it added greatly to the literature published by governmental agencies and private individuals.

In the books, pamphlets, monographs thus far issued, there has been no general discussion of the problems involved. Most of the studies made have been along special lines and have dealt only with certain phases of the problem. The average employer, interested essentially in production and the relation of service measures in industry to increased production, has had no single volume or group of volumes to which he might turn for the information he required. To help supply this need has been the thought of the authors.

It is our hope that the employer who has developed service activities will find something of use to him. The employer who is considering their introduction in his plant may find the material here made available of value to him in formulating his plans. The general reader who is somewhat at sea regarding these newer industrial movements may possibly find an answer to his question. The volume,

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we hope, may be used as a text book in service and personnel management technique.

In the past the treatment given to this phase of industrial work has been by industry rather than by subject. The former has the advantage of giving a complete picture of the particular industry. Arrangement by subject has the advantage of enabling the reader to learn the cumulative experience of many employers and to acquaint himself with the philosophy which underlies such experience. With this in mind, we have endeavored to give, under proper subject headings, an analysis of what has been accomplished in industry, and an interpretation of the purposes and motives which have brought personnel and service work into being.

In the last analysis, the value of personnel and service work will be measured by the employer in terms of increased production and by the employe by the opportunities which are accorded to him for personal development both financial and spiritual. Both groups will measure such service by the yard-stick "Does it pay ? " " Is it worth while ? " Will production increase in quantity and in quality? Will the worker have opportunity for better living and for better self-expression ?

We have not attempted to incorporate a complete bibliography, but instead have limited ourselves to a citation of the sources of information in regard to any given fact. These studies in themselves form a reasonably good selected bibliography of the subject.

We are exceedingly grateful to Miss Laura S. Seymour for her enthusiasm and interest. But for her efforts, and especially her ability to organize material, we doubt whether we would have found the time to prepare this work. We want to take this opportunity to thank Miss Emily H. Huntington for her assistance in the preparation of the chapters on "Insurance" and "Community Activities," Miss Con-

PREFACE ix

stance A. Kiehel for her help on the chapters on "Recreation," and Miss Marguerite A. Goeks, Reference Librarian, for her effective work in collecting, assorting, and preparing material. We trust that we have given credit to the authors whose investigations and writings we have used and to the corporations and individuals who responded so willingly and at much length to our inquiries for specific information.

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Table Of Contents

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Preface .......... vii

CHAPTER

CHAPTER I INTRODUCTION The Function of Labor Administration

" For the strength of the pack is the wolf, and the strength of the wolf is the pack." — Kipling.

Human Factor Ignored in Quantity Production. — Modern industrial history is the history of the war against waste ; the war for economy of effort in methods of production and complete utilization of raw materials. In the striving for these results the proprietor of the small workshop with his few workers gave way to the corporation housing its industrial armies in large factories. With the concentration of workers and capital under one management, the inanimate machinery of manufacturing was perfected and cared for; the human machinery, on the other hand, until recently was practically ignored. Differentiation of processes made the workers' tasks more simple and mechanical and lessened the need for skill. The worker lost individuality and became essentially an adjunct to the machine, easily procurable, easily replaceable, and apparently requiring little consideration or thought.

The Workers' Only Part in Production a " Fair Day's Work." — The growth in the size of the business unit of necessity destroyed the personal relation between employer and employe. This separation contributed to the easy and common belief of the manufacturer that he could overlook the effect of work and working conditions on his employes. The employer was interested in obtaining a working force but not in maintaining it. But the maintenance of the mental and physical vitality of the workers, which makes possible vigorous and willing effort, is an essential in modern machinized industry. It is in forgetting this that employer, employe and community suffer from the diminished productivity of a devitalized indifferent working force, one that has been taught that its only part in industry is to give a " fair day's work."

Past Efforts to Improve Working Conditions. — It would be unfair to state that since the inception of modern industry, employers have made no attempts to ameliorate the lot of the worker and to combat the unfavorable conditions inherent in machine production. Improvements of two kinds have gradually taken place — those forced upon the employer and those voluntarily granted by him. The first comprises those brought about by legislation — such as limitation of hours of labor, sanitation of factories, and industrial accident compensation, and those brought about by collective bargaining — such as reduced hours, improved working conditions and higher wages. The voluntary efforts of employers to improve working conditions have been variously known as industrial betterment, welfare work and service for employes. As these terms indicate, employers have made voluntary improvements in the past largely in an altruistic spirit and not as a measure of economy.

New Attitude toward Labor Administration. — To-day the progressive employer realizes that, apart from other reasons, economy alone demands further adjustments between work and workers, and considers service to employes an integral part of production. To this end. departments of labor administration have been organized in many plants in recognition of the needs of the human factor in industry. They aim to increase output by providing the worker with every physical and mental stimulus fco greater efficiency. Labor administration is concerned with those activities carried on by employers and employes jointly or separately which benefit both, have as their unit the industrial plant and are not enforced by law or by organized labor * Carrying out the instructions of a legislature or conforming to the demands of a union are the negative approach to the problems involved. These instructions and demands merely enforce accepted standards. To secure the best interests of the employer and employes the progressive manager must be in advance of prevailing conditions of employment. He must improve and devise new methods for the economical application of human labor to production.

Standards for Evaluating Labor Administration

Experimental Period Past. — Labor administration has passed through its first stage, that of experimentation. The second period, one of interpretation and evaluation, has been reached. The future depends upon the result of this scrutiny. If labor administration can be shown to be of value, and can be correlated to efficient management, it will enter into the third period, that of extension and expansion.

Three Points to be Considered. — Community, employer, and employe agree that the fundamental purpose of industry is to produce the greatest possible quantity and the best quality of useful commodities with the least possible cost and effort. Each one measure- industrial achievement

* In Industrial Management, October, 1917, "Labor Maintenance Service" is defined to include "those factory and community activities conducted by employers, employes, or by both jointly, for the direct benefit of the employe- and for the indirect improvement of production." As indicated above, this definition does not seem Mifficiently restricted.

with a different rule. The community wants the lowest legitimate retail commodity price; the employer, higher dividends on the capital investment; and the employe, a larger share of profits in the form of wages. In justifying the expense of labor administration it must be proved not only that it leads to increased production but that the benefiis derived are distributed among all three groups. The policy holders in a mutual insurance company will favor the installation of rest and recreation rooms for employes of the company and medical equipment for their care, if these do not reduce dividends. They judge from the standpoint of the consumer in considering the price of a commodity, and their adverse or favorable judgment may affect the sale of policies. In any cooperative enterprise and other lines of business to a less obvious degree, the consumer's point of view is important with respect to appropriations for labor administration. On the other hand, a corporation must prove to its stockholders in terms of dividends that this service is sound business. Further, an employer may arouse the distrust of his employes if he installs any form of such service without first convincing them of its immediate value to them. There are, therefore, two distinct phases to the evaluation of labor administration — first, does it mean improved quantity or quality of output, and secondly, how do the consumer, the management, and the worker share in the benefits of this improved output?

Effect on Productivity. — It is difficult to estimate the value of labor administration in concrete terms. When possible, results in dollars and cents and in increased output have been given in the chapters which follow. More often the value of this service can be measured only indirectly by factors such as stability of labor force, absenteeism, sickness, or accidents. Moreover, much of this work is of recent origin. The effects will be cumulative and noticeable only several years after its introduction.

Attitude of the Community. — Labor administration has been too limited in extent to warrant the statement that it has had any appreciable effect upon the community, except in isolated instances. The advanced attitude of the community toward these activities, however, is reflected in a decision of the Court of Appeals of New York, in 1909, giving the Metropolitan Life Insurance Company the legal right to purchase necessary real estate on which to erect a sanatorium :

A corporation may not only pay its employe the actual wage agreed upon but may extend to him the same humane and rational treatment which individuals practice in like circumstances. It must do this in order to get competent and effective service. Old-age pensions, medical attendance in illness, etc., are not to be defended upon the ground of gratuity or charity, but they enter into the relation of the employer and employe, become, as it were, a part of the inducement for the employe to enter the employment and serve faithfully for the wage agreed upon, and become a part of the terms of employment. . . .

The reasonable care of its employes, according to the enlightened sentiment of the age and the community, is a duty resting upon it, and the proper discharge of the duty is merely transacting the business of the corporation.

Value to the Employes. — Because labor in the past had small voice in the division of profits, its attitude toward the development of industry has been negative. Labor's cry has been for more leisure hours away from the factory and for more money to spend ; without these, increased production seems unimportant. It is inevitable that labor should retard any effort to develop human machinery which is made without its consent and its own tangible reward in view. The individual employe cannot abstract himself from his labor power, he cannot look at it as a commodity, and when an employment manager or a scientific manager assumes the authority of an expert in devising means by which the employe may double or quadruple his labor power, the latter naturally looks for the personal benefit to be derived therefrom. The employe will agree that it is good to increase the efficiency of the working force and production by any means which brings him a share in the benefits of this increase. If labor administration is translated to mean to him merely a deduction from wages for a group sickness insurance scheme, or a periodic medical examination, or the interruption of his piecework by enforced rest periods, he will be doubtful of its value. If there is the slightest suspicion among employes that their efficiency is being increased at the expense of their happiness and that so-called " labor administration " is a substitute for reasonable hours, decent wages, and independence, it is doomed to failure. If the value of this service is not apparent to the employe in higher money wages, he must at least be convinced that his own greater efficiency, due to such things as proper health supervision, opportunity for recreation, and lessened worry for the future, has increased his " real wages " and his capacity for enjoying life.

New Names for Old

Historical Origin of Labor Administration. — Preparatory to a survey of modern methods of labor administration it is interesting to trace their origin in history, prior to the adoption of the term " welfare work." The recent growth of welfare activities has been so rapid and universal that we are prone to consider them a new development in industry. On the contrary, we find that even in medieval industry employers provided for the well-being of their employes in ways which seem strikingly modern.

Provisions for the Welfare of Journeymen and Apprentices in Medieval Industry. — In the medieval guilds arrangements were made for the adjustment of grievances. In Coventry in 1520 the Masters of the Cappers were obliged

" to go once a year to all the shops of their craft and call the apprentices before them, and if the apprentice complained three times against his master for ' insufficient finding,' they had power to take him away and put him with another master." ! Nor was the sick employe cast off by the trade. In 1355 an ordinance reads that " if any serving man (journeyman) of the said trade, who has behaved himself well and loyally towards his master whom he has served shall fall sick or be unable to help and maintain himself, he shall be found by the good folks of the said trade, until he shall have recovered and be able to help and maintain himself." 2 At times the master was called upon not only to teach the apprentice his trade but also to afford him further educational advantages. In 1462 in the case of a boy apprenticed to a haberdasher at fourteen years of age for a term of twelve years, the master undertook to provide him with two years schooling.3 Hours of work were fixed by the guild. In 1482 the leather sellers, for instance, set forth that work should be clone only between six in the morning and six at night, while on Saturdays, vigils and festival days, work was to cease at three o'clock.4 All guild members were entitled to draw from a mutual benefit fund in the case of real need. This guild chest was filled with the fees charged for the enrollment of apprentices and for obtaining the freedom of the guild, and from the periodic dues collected from masters and journeymen. Even when the journeymen lost the guild franchise and probably paid smaller dues and fees than the master, apparently the guild chest still provided them and the apprentices with relief.8 From this chest the wardens distributed money for burial, for the relief of poverty, sickness, old age and unemployment, and for the support of distressed willows and orphans of the guild.6 Loans were made to tide members over a period of trade depression and to aid apprentices who were trying to establish themselves in business or find employment.7 The Carpenters of London, 1333, stipulated also that sick members should receive friendly visits from the wardens, besides being given fourteen pence a week.8

Transition from Small Workshop to Factory. — Though the status of the medieval master and workman was different, their work place was the same, their common interests were apparent, and provision for their mutual welfare was the natural result. While the so-called industrial revolution has everywhere carried in its wake a nominal democracy, the loss of contact between employer and employe has contributed to that disparity of interest between them which limits the effectiveness of modern industrial organization. But even in the beginning of machine industry and factory life, individual employers realized the value of improving the conditions of their employes and the methods adopted differed little from modern " welfare work."

Robert Owen, Father of Labor Administration. — The real father of labor administration was Robert Owen. In 1800, he took over the management, or " government " as he called it, of New Lanark, a cotton mill, built in 1784, and employed some 1800 or 2000 persons including about 500 children, a " collection of the most ignorant and destitute from all parts of Scotland, possessing the usual characteristics of poverty and ignorance." 9 By 1812 he wrote that the same population " had now become conspicuously honest, industrious, sober and orderly, and that an idle individual, one in liquor, or a thief, is scarcely to be seen from the beginning to the end of the year."

Robert Owen's policy was paternalistic and inquisitorial. No phase of his employe's mode of life escaped his inspection and regulation. One of his first acts was to enlarge, repair and rebuild the houses in the village. A rule was made by which every tenant was required to clean house once a week and whitewash his home once a year at his own expense. He amplified the village water supply, cleansed the streets and then policed them. Other " welfare " features introduced by this pioneer were voluntary company stores at which better goods could be bought than in the other stores of the village and at a reduction of some 25 per cent in price. The profits from this store supported the " Institution for the Formation of Character," a school for children, opened in 1816. The school building was used as a recreation hall for adults in the evening. A small amount of land was reserved for cultivation by the mill operatives. An asylum was built for the sick and aged. A savings bank for employes received deposits of £3000 in 1818. In the factory no child under 10 was employed. In 1816 he reduced working hours from the prevailing 14 hours a day to 12 hours with l\ hours off for meals, leaving a total work day of lOf hours.

Other Pioneers. — Robert Owen was not alone in his pioneer work. One of the most ambitious of these early efforts is told about in Homer's Report of 1845. An English company, employing 854 hands, supported not only a daily school for factory children and the children of their employes, but employed a surgeon at the factory daily between 12 and 1 o'clock, who also made home visits and distributed hospital tickets. There were a library ; a brass band with an instructor (paid by the pupils) ; a voluntary savings bank, receiving sums of from Qd. to 5s. every Saturday, and paying 5 per cent interest "on undisturbed accumulation of six months"; a sick relief fund, consisting of the fines exacted from employes; festival meetings and an annual picnic; and a fire brigade with monthly practices.10

Economy of this Service Recognized. — From the very start this work was found to pay. Robert Owen's unprecedented form of industrial government resulted in a profit of about £10,000 a year from 1800 to 1830, after paying £7000 in unearned wages when the factory was shut down in 1807, and meeting the expense of benevolences. This was an average of 1\ per cent return on the £130,000 capital investment.11 Some of this profit would seem to have been illegitimate, since Owen paid a lower average weekly wage than was common in similar establishments.

The third of Owen's essays on " A New View of Society," published in 1816, appeals " to manufacturers and other employers of labor, in their own interests no less than those of the nation at large " to follow his example. He points out the economy of caring for the plant machinery and wrote that:

If due care as to the state of your inanimate machines can produce such beneficial results, what may not be expected if you devote equal attention to your vital machines, who are much more wonderfully constructed ? . . . From experience which cannot deceive me, I venture to assure you that your time and money so applied, if directed by a true knowledge of the subject, would return not five, ten or fifteen per cent for your capital so expended, but often fifty and in many cases one hundred per cent.9

So one of the earliest experimenters in " welfare work " discovered that it paid.

Labor Administration on the Continent. — English employers' efforts to improve the condition of their employes probably did not antedate similar ones on the Continent. In France the Blanzy mining company began building houses for their employes and charging small rents, in 1834. 12 Messrs. Schneider and Company, proprietors of the Creusot Steel Works, established a provident fund in 1837, and between 1837 and 1899 advanced building loans to over two thousand workmen.13 In 1838 the Maison Leclaire, famed for its early profit sharing system, contributed one fourth of its profits to an employes' mutual aid society.14 It is interesting to note here too that Edme-Jean Leclaire attributed his fortune of 1,200,000 francs to the economy of profit sharing.

On the Continent the various relief funds of the guilds and mutual benefit societies were the earliest to be transformed into systematic insurance of employes supported in part by employers. In 1839 the Liege Mutual Insurance Fund was formed by 25 mining companies to provide for accident insurance partly at the employes' expense. The system extended rapidly through other Belgian mining districts.15 The Essen Steel Works in Germany started a sick and burial fund in 1853, and soon incorporated with it a pension fund. A fund for the relief of sickness at home was endowed in 1879, a hospital for employes in 1872, and a life insurance company in 1877. The welfare institutions of the Krupp firm developed so rapidly that their description in 1898 nearly filled a three hundred octavo page book, and in scope they have preceded any similar undertaking.15

Early Labor Administration in America. — In the United States the Lowell Textile factories began their paternal care of the factory girls in the early thirties, with boarding houses, company churches, company stores and corporation schools which children under fourteen years of age had to attend for three months every year.16 Minute rules of conduct were enforced in and out of working hours. In some cases sick funds were made up from weekly deductions of a few cents from each operative's wage. Some firms paid a physician to come once a month to the factory counting-room to vaccinate employes free of charge.17 Improvement circles and the operatives' magazine, the Lowell Offering, first proposed in 1837, originated with the girls themselves,18 though the other welfare features were severely paternalistic.

But the glowing colors in which Lucy Larcom, Harriet Robinson and other "litterateurs" of the Lowell factory painted their "alma mater" when writing for the Offering were probably exaggerated. To secure operatives "a long, low black wagon" cruised New England, whose driver was paid " a dollar a head " for each recruit " and more in proportion to the distance," so that girls were brought from too far away to enable any easy return home — thus alleged the Cabotville Chronicle in 184G. It further claimed that conditions of work and wages were misrepresented to make it appear that Lowell factory girls " could dress in silks and spend half their time reading." 19 It is probable, however, that a resident of Walden, New York, was not drawing entirely on his partisan imagination when he wrote to Niles Register, a protectionist paper, in 1827, that " it has become quite fashionable in this part of the country to seek the comfort and well being of the people employed in manufacturing establishments." 20 He concluded his letter : " Sir, a well regulated manufacturing establishment in this country is a real boarding school for young women between the ages of twelve and twenty, taken as they are from the poor and less productive class, and from solitary kitchen service ; and since the introduction of the power loom they compose a large proportion of the persons employed."

The welfare work at Lowell seems not to have been so much the result of far-sighted economy or of democratic sympathies on the part of the employers, but rather of the necessity for attracting workers. Lowell employers seem to have shown no great anxiety to retain their workers after securing them, and their " welfare work " was in no way comparable to that existent in England or on the continent.

The New Interest in Labor Administration

Labor Administration a Profession. — It seems probable that the earliest pioneers in welfare work were actuated largely by philanthropic motives. To-day fast accumulating data are proving the importance of the scientific study of the human element in industry, and labor administration is becoming a recognized branch of production. One of the first signs that the human machine was beginning to receive the systematic attention heretofore given only to the business or mechanics of production was the introduction of the Efficiency Engineer, who was called upon to supplement the management • with a knowledge of the technique of production in its relation to the workers. It was hoped that he would coordinate the man power and machine power of the manufacturing plant, between which a wasteful maladjustment had been discovered. Following the Efficiency Engineer has come the Employment Manager, who gives his time to the hiring and discharging of employes and methods of paying or promoting them. Both have come into existence since the beginning of the century.

College Courses in Labor Administration. — Handling the working force of a plant, caring for the human machinery, is fast becoming a profession. The Amos Tuck School of Administration and Finance at Dartmouth, the University of Rochester, the School of Business Administration of Harvard, the Wharton School of Finance of the University of Pennsylvania, the College of Engineering of Cornell University and Columbia University all offer courses in employment management. The Buffalo Chamber of Commerce proposes a College of Industrial Engineering to study industrial hygiene, apprenticeship, psychology, sociology, and administration. During the war several series of short courses for employment managers were given by the United States Department of Labor. "Industrial Counselors " now offer professional advice on problems of personnel management.

Manufacturers' Magazines and Associations. — The recent development of magazines dealing with the problems of plant personnel witness the rising interest in this subject. Factory, Industrial Management, System, t00%, American Industry, and the Dodge Idea, among others have been, with one exception,* established since 1900. They form a medium for the exchange of ideas not only on technical and mechanical subjects, but on all the problems of managing a working force. There are also the new organizations such as the Employment Managers' Association, the National Safety Council, the National Association of Corporation Schools, and the National Society for the Promotion of Industrial Education. The Bureau of Working Conditions of the United States Department of Labor, created during the last year of the war, indicates the growing emphasis laid on the condition of the working force. f

Reasons for the New Interest. — One naturally asks why the value of human labor has been more appreciated in the past decade than in former years of machine industry. No one reason can be given ; but undoubtedly the need for more rigid economy in the size of the industrial unit and speeding up of production have long engrossed the attention of industrial managers, but experience has shown that these alone will not successfully meet national and international competition.

The Efficiency Movement. — The term " industrial efficiency " was first applied to the human factor by Dr. Arthur Shadwell, whose study of industrial methods in England, Germany, and America appeared in part in the London Times in 1903.

Frederick Winslow Taylor's book on The Principles of Scientific Management, published in 1911, crystallized the American efficiency movement and defined it to mean not only stop-watch methods of regulating bodily movements, but to include the careful selection of men, their scientific

* The progenitor of Industrial Management, Engineering Magazine, was first published in 1891.

f The first Employment" Managers' Association was founded in 1912, the National Association for Corporation Schools in 1913, the National Safety Council in 1912, the National Society for the Promotion of Industrial Education in 1907.