Work, wages, and profits

Front matter

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WORKS MANAGEMENT LIBRARY

Chapter I. The Application of the Scientific Method to the Labor Problem

Economical Utilization of Labor the Great Modern Problem for Engineers and Managers — Limitation of Output by Workers — Limitation of Workmen's Allowable Earnings by Employers — How These Tendencies Militate against the Common Good — Permanently Successful Management Must Be Beneficial to both Employer and Employee — The Inefficiency of Ordinary Management Systems — ^The Inefficiency of Ordinary Labor — The Possible Betterment Obtainable through Scientific Study — The Attainable Output Generally Three Times the Present Average — Realization of This Large Possible Productivity Depends on the Manager — His Guide Is Scientific Investigation — The Three Parts of the Problem Defined— The Benefits Secured. 19

Chapter II. The Utilization of Labor

The Commercial Axiom that Good Bargains Benefit both Parties — The Same Principle now Realized in Industrial Relations — Efficient Work Goes with High Wages — Inefficient Plant Design or Equipment Makes Efficient Labor Impossible — Common-Sense Methods in Improving Plant Efficiency — Scientific Study Necessary to Determine the Efficiency of Operations — Instances of Uneconomical Methods — The Elements of Operation Study — How Operation Times are Standardized — How the Workman Is Induced to Reach Standard Times — The Four

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Conditions Necessary to Secure Best Results — Exact Knowledge of the Best Way of Doing the Work — Instructing the Workmen how to Do It — Wages as an Inducement — Loss of Bonus as a Preventive of Failure — Management and Wages. 33

Chapter III. The Compensation of Workmen The Passing of the Age of Force — The Conflict between Employer and Employee — ^Trade Unions ; Why They Exist — Collective Bargaining the Inevitable Accompaniment of a Class Wage Rate — Its Disadvantage to the Employer — Its Disadvantage to the Progressive Workman — Possibility of Offering the Individual Worker Something Better than the Union — Ordinary Methods of Wage Payment and Their Tendencies. 51

Chapter IV. Day Work

Day Work Defined — What Regulates Day Wages — The Class Wage Rate Destructive to the Efiiciency of Labor — Keeping Individnal Efficiency Records — The Difficulties and the Possibilities — Practical Methods Outlined — The Results Secured in Practice — The Suggestion of a System that can Supplant the Union 65

Chapter V. Piece Work

How It Differs from Day Work — How Ordinary Piece Work Involves the Same Evils as the Day Wage — Why Ordinary Piece Work Produces Labor Troubles — Unreliability of Ordinary Time Records and Foremen's Estimates — How the Efficient Worker under the Ordinary Piece-Rate System Is Penalized — A New and Better System Proposed — Its Essentials — Expert Investigation, Standard Methods, Capable Workers, Proper Instruction, Sufficient Compensation — Why the Ordinary Foreman can not Do the Work of the Expert — Ordinary Shop Difficulties in Introducing the System — How They may Be Overcome — ^Training of Workmen — Compensation of Workmen and of Train-

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ers — ^Keeping Good Faith with the Men — ^The Value of the Efficient Man to His Employer — A Modern Counterpart of the Apprentice System 77

Chaptee VI. Task Work with a Bonus

A Review of the Wage Conditions That Lead to Labor Unions and Labor Conflicts — A Survey of What Has Been Accomplished in Rewarding Efficiency and Promoting Labor Peace — The History of the Bonus System — Its Early Results — How It Succeeded at the Bethlehem Steel Works — How Its Abandonment There Brought Back Labor Troubles — A Recapitulation of the Elements of the Successful System. 103

Chapter VII. The Task Idea

Fundamental Principle Underlying Task Work with a Bonus — Its Essential Difference from the "Drive" Method — The Task Idea Suggested by Proved Experience in Training Children — The Inspiration of Working for an Object — Task and Bonus in Accord with Human Nature — Task and Bonus Therefore a Proper Foundation for Successful Management — The Problem Is to Set the Proper Task — Obstacles Discovered in Practical Experience — Schedules as Tasks — Scheduling Miscellaneous Work — Individual Efficiency Rapidly Raised by Simple Schedules — Practical Introduction of the Scheduling System — Preparation for Task Setting — What Steps It Is Necessary to Take — ^How Hard the Task Should Be — ^Performing the Tasks — Obligations of the Management — ^Task Work in a Machine Shop — Actual Experience in a Bleachery — Planning and Task Setting Often Increase Output Threefold — ^Maintaining Proper Conditions 121

Chapter VIII. Training Workmen in Habits of Industry and Co-operation

Habits of Industry More Valuable than Knowledge or Skill— How These Habits Are Cultivated by the Bonus System — Its Practical Applications Explained in Detail — How Habits of Work Are Practically Cultivated— How Quality

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as Well as Quantity of Output Improves— The Setting of Tasks — The Standardization of Work — Obstacles to the Introduction of the System — Helps to Its Stability after It Has Been Introduced — The Co-operation of the Men Secured — The Reasons Why Work Is Better as Well as Larger — Method of Introducing the System into a New Plant 147

Chapter IX. Fixing Habits of Industry

Records of Specific Cases Since 1905 — ^The Task and Bonus System in a Cotton Mill — Individual Records of the Weavers Exhibited on a Colored Chart — The Chart Explained and Discussed — Experience in a Weave Shed Exhibiting Great Success — Colored Chart Showing the Bonus System Applied to Winding Bobbins — Discussion — Colored Chart Showing Conditions in the Same Department Three Years Later — Colored Chart Showing Task and Bonus System Applied to Spoolers — Progress of Efficiency Pointed Out — Chart Showing Task and Bonus System with Inspectors — Chart Showing Actual Results on Wages, Output, and Unit Costs in Folding-Room — How the Results Were Maintained for Three Years Continuously — Colored Chart Showing Results in a Worsted Mill — Colored Chart Showing Increase in Efficiency of Weavers — Colored Chart Showing Maintenance of Result for Several Years — How the Spirit of Co-operation Is Established 175

Chapter X. Results

Diagram Showing Comparison Between Old Conditions and New — Improvement in Ratios of Output, Wage Costs, and Wage Rate — Betterment of Quality as Well as Quantity of Output — Reorganization Effected in a Packing-Box Factory — Chart Showing Results Secured with Automatic Screw Machines — Chart Showing Betterment in Miscellaneous Machine Work — Similarity of Effects in All Cases— Effect on Reduction of Overhead Expense — Treatment of Mistakes in Task Setting — Universality of the Principles Proved by Charts — The Essentials of the Methods Employed — Favorable Physical and Mental Effects Observed Among Bonus Workers 207

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Chapter XI. Prices and Profits

The Trust Movement of 1890— Effects of Consolidation on Economy of Operation — Effects of Union Labor on Increase of Production Cost — Two Ways of Increasing Profits: Increasing Selling Price or Decreasing Production Cost — The Vicious Cycle of Increased Prices — Horizontal Rise of Wages Not a Cure but a Transient Expedient — ^Necessity of Adjusting Prices to Value — The Economic Law That Permanent Large Profits Can Be Secured Only by Efficient Operation — American Reliance on Huge National Resources Most Unsafe — Increased Efficiency a Question of National Importance — Scientific Methods Must Be Applied to Manufacturing Problems — Difficulties Inherent in the Factory System — How Task and Bonus Restores the Advantages of the Older Order — The Elements of Manufacturing Cost — Profits Can Be Greatly Enlarged Only by Increasing Efficiency of Operation — The System of Management Advocated Insures Efficient Control — The Cost Is Small 227

Chapter XII. A Practical Example

Origin of the Task and Bonus System— Elements of the System — ^The Limitation of Bonus — Making Out Instruction Cards — How Task Times and Work Methods Are Determined — Advantages of Bonus over Piece Rates — Application of Instruction Cards to a Machine Shop — Illustrations of Typical Cards — The Man Record — Daily Balance of Work — A Foundry Schedule and Balance — Illustration of Balance Sheet — The Daily Balance as a Permanent Record — A Machine-Shop Balance and Schedule — Illustration — ^Value of Balance Not Dependent upon Method of Compensation — Cost of Keeping Balances — Illustrations of Time Cards — Time Records — Cost Determinations — Cost of Time-Keeping System — Determining Progress of Production — Difficulties of Getting a Daily Balance — Values of the Balance when Obtained — ^The Schedule System — Routine and Expert Work — General Principles and Details 253

TABLE OF ILLUSTRATIONS

Man Record Sheet 68

Weavers' Achievement of Task 182

Fixation of Habits of Industry 182

Disappearance of the Slack Monday Habit 186

Maintenance of Conditions for Three Years 189

Disappearance of Slack Saturday Habit 190

Betterment of Output by Bonus to Foremen 190

Twelve Months' Improvement under Task and Bonus

System, Girls Working in a Folding Room 192

Bonus Record of Girls in a Worsted Mill 194

Same Room Later, Showing Progress of Betterment 194 Results of Too Great Haste in Putting Workers on

Bonus 196

Errors of Hasty Start Corrected by Perseverance 200

Very Recent Record Showing Success of Task and

Bonus in Spite of Hostility of Workers 204

Improvement of Ratios of Production, Wage-Cost,

and Earnings by Task and Bonus Methods in

Pillow-Case Factory 208

Improvement of Output, Wage Earnings, and Production Cost of Small Automatic Machines 213

Improvement of Output, Wage Earnings, and Production Cost of Large Automatic Machines 214

Improvement of Output, Wage Earnings, and Production Cost in Miscellaneous Machine Work 217

Instruction Card for Turning a Crank Shaft 264

Instruction Card, Planing Locomotive Frames 265

Instruction Card, Drilling Cylinder Cover, (Front). 267 Instruction Card, Drilling Cylinder Cover, (Back)__ 267

Graphical Balance for Foundry Records 273

Graphical Record, Building 15 Locomotives 276

Graphical Record, Showing Effect of Deficient

Frame-Drilling Capacity 277

Time Card for a Machine Shop 282

Time Card Used in a Bleachery 283

Rack for Time Cards 284

THE APPLICATION OF SCIENTIFIC

METHODS TO THE LABOR

PEOBLEM

Chapter I THE APPLICATIOj^ OF SCIEISTTIFIC METH- ODS TO THE LABOE PROBLEM

' I ^HE greatest problem before engineers -*- and managers today is the economical utilization of labor. The limiting of output by the workman, and the limiting by the employer of the amount a workman is allowed to earn, are both factors which militate against that harmonious co-operation of employer and employee which is essential to their highest common good.

Scientific investigation is rapidly putting at our disposal vast amounts of knowledge concerning materials and forces, which it is the business of the engineer to utilize for the benefit of the community. Well-designed plants and efficient labor-saving devices, to be seen on every hand, bear testimony that

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lie is doing at least a portion of Ms work well. When, however, it comes to the operation of these plants and the utilization of these labor-saving devices, the lack of co-operation between employer and employee, and the inefficient utilization of labor, very much impair their efficiency.

The increase of this efficiency is essentially the problem of the manager, and the amount to which it can be increased by proper study is, in most cases, so great as to be almost incredible.

In considering the subject of management we must recognize the fact that in this country, so long as a man conforms to the laws of the State, he has a right to govern his own conduct, and to act in such a manner as his interests seem to dictate. Granting this, it follows that any scheme of management to be permanently successful must be beneficial alike to employer and employee, and neither labor unions that regard their interests as essentially antagonistic to that of employers, nor employers' associations whose only effort is to oppose force with force, can ever effect a permanent solution of the problem of the proper relations between employers and employees.

SCIENTIFIC METHODS FOR THE LABOR PROBLEM 21

Boards of arbitration are temporary expedients, and the results of their work are seldom better than a sort of Missouri compromise, to be fought out later ; for although they be composed of men of the highest intelligence, and of the greatest integrity, the conditions under which they are organized and the means at their disposal never enable them to get more than a superficial knowledge of the subject. The information such a board gets is all in the form of testimony, which, although it may be honestly given, can never produce a complete understanding of the subject; for, as a rule, neither employer nor employee knows exactly in detail the best way of doing a piece of work, and, as far as my own experience goes, they never Jcnoiv exactly lioiu long it should take a good man fitted for the work, and provided ivith proper implements. Before intelligent action can be taken in any case these facts must be known.

In order to get a general idea of the conditions that exist in the mass of our manufacturing industries it is necessary to review briefly the manner of their development.

The expert mechanic, who, with a business growing to larger proportions than he could take care of, hired a few men to help him, and directed tliem all by his personal example and skill, first gave place to tlie small factory, wliich lie could run on tlie same lines.

Today, however, even tlie smaller factories have grown beyond the point where they can be directed or controlled by one man, and methods which were successful on the smaller scale fail now to apply on the larger. The factory is divided into departments, each directed by a foreman, who, in many cases, has had no training in management, and often has no capacity for it. He is invariably overworked if he attempts to do his duty, and the manager seldom has time to inquire into his troubles, but frequently tries to remedy matters by appointing another foreman, often making matters worse.

Again, if expenses are too great, and it seems impossible to meet competition, there is seldom any serious effort made to find out why expenses are too high, but it is assumed that the way out of the difficulty is to reduce wages. It never appears to occur to a manager that perhaps the cause of the excessive expense may not lie with the workman, but with the management. Managers rarely seem to suspect that, if the workmen were more

SCIENTIFIC METHODS FOR THE LABOR PROBLEM 23

intelligently directed, tlie output per man might be largely increased without a corresponding increase in expense.

Those who have given even superficial study to the subject are beginning to realize the enormous gain that can be made in the efficiency of workmen, if they are properly directed and provided with proper appliances. Few, however, have realized another fact of equal importance, namely, that to maintain permanently this increase of efficiency, the workman must be allowed a portion of the benefit derived from it.

To obtain this high degree of efficiency successfully, however, the same careful scientific analysis and investigation must be applied to every labor detail as the chemist or biologist applies to his work. Wherever this has been done, it has been found possible to reduce expenses, and, at the same time, to increase wages, producing a condition satisfactory to both employer and employee.

The great difficulty in instituting this method of dealing with labor questions is that usually neither employer nor employee has sufficient knowledge of the scientific method to realize either the amount of detail work necessary, or the extent of the benefits to be derived from it. In general, their inclination is to adhere to the methods with which they are familiar, and to distrust all others, even though their methods have failed to bring them appreciably nearer the solution of their problems, and the newer methods have produced results far more satisfactory than they even hoped for. A scientific investigation into the details of a condition that has grown up unassisted by science has never yet failed to show that economies and improvements are feasible that benefit both parties to an extent unsuspected by either.

The scientific laboratory for the study of materials and forces, originally considered as belonging only to educational institutions, has recently become a recognized necessity in all our large industries, and to it principally the great advance of recent years has been due. As yet, however, in but few cases has any definite attempt been made to study in a scientific manner the most efficient way of utilizing the human labor. Of how much work of various kinds the ordinary man has done, we have many records; but of how much a man specially suited to any class of work can do, we have almost no knowledge.

SCIENTIFIC METHODS FOR THE LABOR PKUBLEM 25

Enougli study has been spent on the subject, however, to determine that men speciallysuited to any particular kind of labor, if supplied with proper implements and intelligently directed, can do on the average at least three times as much as the average workman does, if the limiting factor is physical exertion; and, if assured sufficient compensation, the average workman will do this increased task, day after da}^

The ratio of what can be done to what is done is even greater than three to one in work requiring skill and planning. Well thought out plans alone, if accompanied by complete instructions for doing work, often produce an increase of more than 100 per cent, over what is usually done. This is particularly true in complicated work, which should be planned most carefully, but which is often not planned at all. It is usually left to the judgment of a busy foreman, whose first knowledge of what is to be done reaches him with the order to do it. In such a case, it is the exception when the work does not cost in wages several times what it should, and this with no fault of the foreman or workman.

These facts have been established in numerous cases of ordinary labor, in doing macHne-shop work, in building engines, and in the erection of strnctnres of various kinds. Similar possibilities have been indicated wlierever the slightest effort has been made to study or to plan, showing that in many instances a condition of affairs exists which is not only wasteful to the owners, but discouraging and unjust to the workmen, most of whom would be willing to do more work to earn increased pay if only the opportunity to do so were offered, and they were guaranteed that they would not ultimately lose by doing so.

Mr. E. F. Du Brul, formerly the Commissioner of the National Metal Trades Association, an organization of employers formed to protect themselves from the unjust demands of the labor unions, stated some time ago that a large majority of strikes were produced by mismanagement. Mr. Du Brul has perhaps had more general experience with striking employees than any other man in this country, and his conclusion is that the best insurance against strikes is good management. He, therefore, strongly advises managers to study the subject. The necessity for this advice will become evident when

SCIENTIFIC METHODS FOR THE LABOR PROBLEM 27

we realize that hardly any two managers, unless they have been trained under the same influence, agree as to the proper way of dealing with any of the intricate questions that are constantly arising between employer and employee; much less will they agree on any general principles of management.

There have been in the past and are today great managers. Are there not some general principles by which they either consciously or unconsciously are governed! In other words, are there not some general principles, applicable, at least to a large number of cases, according to which substantial equity can be insured between employer and employee, and a higher degree of efficiency realized from their harmonious co-operation?

The only successful method of determining general laws has been that of scientific investigation, and, in the study of questions involving human labor, enough has been done to show that the same method is applicable to at least a large number of individual cases, and there is good reason to believe that it is universally applicable.

Labor unions demanding all they can get, and employers' associations organized simply to oppose the demands of the unions, can never evolve a satisfactory system of management ; for, altliougli each, in its way, may be (and undoubtedly is) often beneficial to its members, both are formed with the idea of using force only, which can never be a substitute for knowledge.

Although a board of arbitration may be useful in averting a crisis, the decision of such a board founded on such facts as are available should be professedly only temporary in character, to be revised later according to the results of a scientific investigation of the matter in dispute, to be undertaken at the earliest possible date.

This problem consists of three parts :

First. — To find out the proper day's task for a man suited to the work.

Second. — To find out the compensation needed to induce such men to do a full day's work.

Third. — To plan so that the workman may work continuously and efficiently.

The problem is difficult, for a man suited to the work must be found and induced to work at his full capacity. The details of the work must be arranged so that he can work most efficiently, and the time to do each detail must be carefully studied with a stop

SCIENTIFIC METHODS EOR THE LABOR PROBLEM 29

watch. From such detail observations it is possible to deterniine what a good man can do, day after day, and there is but little difficulty in finding out what men have to be paid to make them do all they can; for, although men prefer, as a rule, to sell their time, and themselves determine the amount of work they will do in that time, a large proportion of them are willing to do any reasonable amount of work the employer may specify in that time, provided only they are shown how' it can be done, trained to do it, and guaranteed substantial additional amounts of money for doing it. The additional amount needed to make men do as much as they can depends upon how hard or disagreeable the work is, and varies from 20 to 100 per cent, of what they can earn when working by the day, according to their own methods and at their preferred speed.

The cost of these initial investigations is necessarily large, for they can be made only by capable men who have had the special training necessary, and hence the expense must be borne by the employer; but the returns, when the results of these investigations begin to be applied, are so great as to pay; in a short time for the investigations, to

30 WOEK, WAGES;, AXD PROFITS

allow a substantial increase of wages to the employee, and to leave a good margin of profit to the employer.

The benefits which have been derived from such investigations are:

An increase of output.

A decrease in cost of product.

Better workmen attracted by higher wages.

Improvement of quality of product due to better workmen and more careful supervision.

These results are well worth striving for, and the fact that they have been obtained by the application of the scientific method to the ordinary problems indicates strongly that progress is to be made in such matters by the scientific method, which has been responsible for other kinds of progress in the past.

Chapter II EFFICIENT UTILIZATIO]!^ OF LABOE

T T has become an axiom in the commercial -■- world that in the long run those transactions most promote prosperity which are advantageous alike to buyer and seller. It is coming to be realized in the industrial world that the same thing is true regarding the arrangements between employers and employees, and that no arrangement is permanent that is not regarded by both as being beneficial. In other words, the only healthy industrial condition is that in which the employer has the best men obtainable for his work, and the workman feels that his labor is being sold at the highest market price.

The employer who insists on more service than he pays for, and the employee who demands excessive wages for his work, both lose in the long run. The former worries continually about how to manage dissatisfied workmen, who are continually on the verge of a strike, and in dull times the latter lives in constant dread that his employer may no longer be able to continue business, and he may be out of work. In other words, unless efficient work goes with high wages, the result is apt to be disastrous to both employer and employee, and if we would have satisfactory workmen we 'must learn how to make their labor efficient, for it is to efficient labor only that high wages can be uniformly paid.

Again, if a plant is badly laid out, if it contains inferior or antiquated machinery, or if the management- is inefficient, it may be impossible for the best workman to do an amount of work really entitling him to good wages. Any one of these causes and others may explain why a plant, whose name for years has been a synon5^m for prosperity, has gradually become less prosperous, until finally it scarcely holds its own by decreasing the wages of its employees. The final stage of such a plant is to close down indefinitely, and to remain for years a monument to the short-sighted policy of its owners and the misfortune of its employees.

The time to make provision against such a fate is not when sharp competition begins to show the need of it, but when prosperous times produce a large surplus of earnings.

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Out of such earnings ample provision should be made to take full advantage of all improvements in apparatus or management that are available.

Improving a plant does not necessarily mean enlarging it, but equipping it with the best and most efficient apparatus scientific investigation can suggest and ingenuity can devise.

Improving the system of management means the elimination of elements of chance or accident, and the accomplishment of all the ends desired in accordance with knowledge derived from a scientific investigation of everything down to the smallest detail of labor, for all misdirected effort is simply loss, and must he home either hy the employer or employee.

In a proper system of management practically all loss of this character is eliminated, and the saving effected by this alone will usually pay all the expenses of the system and leave a handsome profit.

Wherever any attempt is made to do work economically the compensation of the workman is based more or less accurately on the efficiency of his labor. Very fair success in doing this has been accomplished in day work by keeping an exact record of the work done each day by every man, and by fixing his compensation accordingly. This method, however, falls very far short of securing the highest efficiency, for very few workmen know the best way of doing a piece of work, and almost none have the time or ability to investigate different methods and select the best. It often happens then that a man working as hard as he can falls far short of what can be done on account of employing inferior methods, inferior tools, or both.

We can never be certain that we have devised the best and most efficient method of doing any piece of work until we have subjected our methods to the criticism of a complete scientific investigation. Many people who have been accustomed to seeing an operation performed in a certain way, or to performing it in that way for a number of years, imagine they know all about it, and resent the intimation that there may be some better way of doing it. Anybody, however, who carefully analyzes the sources of his methods will find that the mass of them are either inherited, so to speak, from his predecessor, or copied from his contemporaries. He will find that he knows but little of their real origin, and consequently has no ground on whicli to base an opinion of their efficiency.

Even such a simple operation as shoveling is done very nneconomically in many places. I have seen the same shovel used for coal, ashes, and shavings, and this when coke forks were available for the shavings. The foreman had apparently given the subject no study, and was content if the men were at work. The idea of working efficiently had never occurred to him. This is, of course, an extreme case, but it is a real one, and all degrees of efficiency exist between this and the case where each workman is provided with the proper implement and given a specific task, for the accomplishment of which he is awarded extra compensation.

The knowledge needed to set a task, even in such a simple case as shoveling, is much greater than is at first realized, for hardly any two substances can be treated exactly alike, and the same substance is often much harder to shovel from the top of a pile than from the bottom, which rests on a smooth, hard surface. In studying shoveling the first thing to be determined is the size of shovel, which must be gauged to hold the weight which it is most economical to handle. The second step is to find how long it takes to fill the shovel. For sand, fine coal, ashes, etc., it makes no difference in loading the shovel whether the material is taken from the top or the bottom of the pile; bnt in egg coal, broken stone, or lump ore, the difference is very great ; for, while it is quite easy to get a full shovel from the bottom of the pile which rests on a smooth, hard surface, it is, in some such cases, practically impossible to fill a shovel from the top of the pile without actually raking the material onto the shovel. Again, the distance or height to which the material is thrown is a factor in all cases, not only because the higher or longer throw takes slightly more time, but because it takes more energy.