Chapter C: E. Knoeppel (2)

All of this but emphasizes the importance of having the storeroom and stores system under the exclusive control of one man. No one should be allowed to interfere with the work of the chief stores clerk. If there is any cause for criticism it should be taken to his superior. Suggestions from foremen and others who are obliged to make use of the storeroom, should, and probably will, be welcomed by the average stores clerk, but no foreman should instruct one of his men to place material in the storeroom except as instructed by its head.

Aside from the storeroom proper, the stores clerk will have charge of material stored outside of the plant. Lumber, fuel, and heavy castings are examples of material coming under this head. Nevertheless, his records should include all of this material, and he should have general supervision over its storage in order that he may more readily determine, or more closely estimate, quantities in stock.

=21. Receiving.= In the organization of the _stores department_, it is necessary to provide for a record of the _receipt_ of all material and supplies. The system must be so constructed that it will not only insure a record of all goods coming into the establishment, but prevent the acceptance of goods which should not be received.

All receiving should, therefore, be in charge of one man. In the larger industrial enterprises, a receiving clerk is employed, whose duty is to receive and receipt for all goods coming into the establishment, and to deliver them to the storeroom or the department in which they are to be used. The stores clerk may, in a small concern, perform all of the functions of the receiving clerk.

When goods come in, the receiving clerk will refer to his file of purchase order copies to find if the goods have been ordered. It will be remembered that an alphabetical file has been recommended for these orders, which are to be filed under the name of the shipper. The reason for this is that the package does not always show the nature of its contents, while the name of the shipper is almost invariably shown somewhere on the package or on the shipping tag.

Goods should not be accepted by the receiving clerk unless he has an order. To do so is liable to cause trouble. As an illustration, we will suppose that the concern has made a contract for material on which deliveries are to be made at stated intervals. The first shipment received shows that the material is not up to specifications and the contract is cancelled. Pending an adjustment, the receiving clerk is instructed to accept no more material on the contract. If he does so, the concern will very likely be obliged to pay for it, and it may even have a bearing on the entire contract.

Another class of shipments which must be carefully watched is the return of goods by customers of the concern. In some businesses, this question is not important; in others, great care must be exercised to insure proper credit. In a manufacturing or a trading business other than retail, the customer will usually notify the house that he is returning goods. When such a notice is received, instructions should be given to the receiving clerk whether to accept or refuse them.

One class of business in which the receipt of returned goods must be handled with extreme care is the installment business. Most installment contracts vest title to the goods in the seller until all payments are made. To avoid payment, a customer may return goods without notice. Acceptance by the seller cancels the contract at once. A safe rule to follow, therefore, is to accept no returned goods until authorized to do so by one in authority.

The receiving slip, Fig. 13, Page 16, is to be filled out by the receiving clerk. One copy will go to the purchasing agent and the other to the stores clerk. From these reports the stores clerk makes his record of material received. In some cases material ordered for the use of a particular department is to be sent direct to the department and not to the storeroom. A third copy of the report should be made which will be sent to the department, from whence it will go to the stores clerk, properly receipted.

=22. Deliveries.= The stores clerk, being in custody of all stock, is responsible not alone for its safe keeping but for deliveries. He must be in a position to show what stock has been delivered, to whom, and for what purpose.

There is but one method that will insure an accurate record of deliveries and that is, to deliver no goods without a written order or requisition, signed by one having authority to authorize withdrawals.

Each department, or shop, should be supplied with storeroom requisitions, numbered consecutively with the department number or letter; that is, a requisition from one shop might be numbered _B_ 100, another _C_ 100. These requisitions should be made in duplicate or triplicate. When the duplicate form is used, the original is sent to the stores clerk and the duplicate retained by the foreman. When the stores clerk has completed his records and the foreman has received the material, both copies are to be sent to the cost department. One copy acts as a check against the other, making it impossible for either the stores clerk or foreman to make false returns. To make identification easy, the two blanks should be printed on paper of contrasting colors. In the cost department one copy should be filed according to the department in which the requisition originated, keeping the numbers consecutive, and the other under the production or job order number. On completion of the order, the latter copy can be destroyed as it will no longer be needed. The departmental copies may also be destroyed, say at the end of a three months' period.

Sometimes it will be found advisable for the stores clerk to retain a copy of the requisition, in which event the triplicate form will be used, two copies being sent to him. He will file his copy by production order numbers, if for material, or by departmental numbers, if for supplies.

All requisitions should provide for a record of prices and values, these to be entered in the cost department. If this is omitted it will be necessary for the cost clerk to enter the items and extend cost on another blank; when included, he can post values direct from the requisition to the permanent cost records. Place should also be provided on the requisition for the signature of the one who receives the material.

A form of requisition adapted to the use of the average manufacturing enterprise is shown in Fig. 23. This form shows the _department number_, the _date_, the _production order number_, _quantity_, _description_, _cost_, and _value_. At the bottom the necessary _form of receipt_ is provided. Usually this form will be found adequate for both material and supplies. When used for supplies, the purpose for which they are intended is to be inserted in place of the production order number. Special forms for supplies and repair material are used in some plants. These should differ in color from the _material_ requisitions. A form of this character is illustrated in Fig. 24.

STORES RECORDS

=23.= The installation of a stores─record system calls for the exercise of judgment of the highest order, for the record of material and supplies is of no less importance than the record of cash. As has already been stated, material should be accounted for with the same fidelity as cash; a dollar's worth of material should be regarded as a dollar in gold.

The stores record system should be an integral part of the accounting system of a business; it should be checked as carefully as any account in the ledger. Only by making the stores record a part of the accounting system can it be operated successfully.

Stores records may be divided into two classes──one recording both quantities and values, and one recording quantities only. Frequently both classes are used in one establishment. In the storeroom a system is maintained which records quantities without prices; in the cost department a record of values and quantities may be kept.

The records kept in the storeroom are primarily intended to show quantities on hand, or rather quantities that should be on hand. Sometimes these records show prices, but there appears to be no good reason why this should be done. It is better to have all accounting of values done in the accounting department.

The records under consideration are those of the storeroom. These records must show _quantities received_ and _quantities issued_, from which a record of the quantity on hand can be obtained. To supply the necessary information, the records must show quantities of each article or kind of material in stock, which necessitates a system of units. Some articles will move much more rapidly than others; therefore, a bound book is not practical. Either cards or loose leaves can be used successfully, a card or sheet being used for the record of each article.

In order that the records may be instantly available, they must be properly classified. The classifications should follow the same lines as the ledger accounts, which will correspond with the classifications adopted in recording the original inventory. Records of material and supplies should be separated, and each divided into classes. The cards or loose leaves should be filed and indexed according to these classifications.

For example, we will suppose that one division of the material account is hardware. On one index will be written the word _Hardware_, the index forming a main division. Back of the index all cards or sheets recording articles that come in the hardware classification will be filed, these records also being properly classified and subdivided. In the hardware stock will be found screws of several classes, as round─head bright, round─head blued, flat─head bright, flat─head blued. In the _S_ section, back of _Hardware_, one index will be headed _Screws_. This division will be subdivided by indexes headed with the names of the classes or kinds of screws. The stores record cards or sheets will then be filed back of these subdivision indexes in the order of sizes. A card or sheet may be used for each size, or several sizes may be recorded on the same sheet.

=24. Verification of Stores Records.= When indexed in this manner the stores record of any article can be quickly located, and the sectional divisions will assist greatly in verifying the records. While the stores records are intended merely as records of material in stock, their accuracy must be verified by an actual inventory, just as the cash account is verified by a count of cash on hand. However, if thoroughly classified, it is not necessary to verify all of the stores records at one time; they can be verified by sections, or the record of a single article can be verified by an article inventory, without regard to other records.

Accounts in the ledger should be arranged to correspond with the stores classifications, that is, purchase accounts should be carried with materials forming the main divisions of the stores records; as _Hardware_, _Bar Steel_, _Foundry Material_, _Foundry Supplies_, and _Factory Supplies_. When the stock of one class, as hardware, is inventoried, the result should be recorded on the regular inventory sheet, priced, and extended, and the total compared with the hardware purchase account in the ledger. Any discrepancies should be adjusted at once, but if the records are carefully kept, and an inventory of each class is taken two or three times a year, the discrepancies should be practically nil.

If the routine prescribed is faithfully followed, there is no theoretical reason why stores records should not check as closely as cash, with the possible exception of bulk stores, like fuel and ores, where estimates are necessary. Even then, if inventories are taken when these stores are at the lowest point, there should be little difficulty in arriving at accurate results. However, the greatest responsibility rests on the chief stores clerk. He must not let a single pound of material leave the storeroom without an order, for it is on the accuracy of his records that all of the accounts are based. The order copies received in the cost department furnish the basis for all material charges. Here prices are entered and extensions are made. The chief cost clerk will transmit to the chief accountant weekly or monthly recapitulations of all material charged out. The chief accountant will credit his purchase accounts and debit _Manufacturing_, _Maintenance_, _Repair_, or _Expense_ accounts as the case may be. _Purchase_ accounts thus become _controlling_ accounts of the stores records, and the latter takes its legitimate place as an integral part of the accounting system.

RECORD FORMS

=25.= All forms for stores records, no matter what the class of material recorded, possess certain characteristics in common; yet the information required about each special class is usually of such nature that a special form is advisable. This may mean the use of several forms in the same establishment.

When installing any system, however, it is more economical to invest more money in printing and have forms that fit exactly, than to attempt to make special records conform to forms prepared for other purposes. If certain specific information is required, the form should be designed to exhibit just that information, and if the form is properly designed, the saving of time both in recording and consulting the record will much more than offset the slight additional cost of special printing.

The number of forms must not be so large as to cause confusion, but against the opposite extreme the cost of time must be considered. It will be found that the value of clerks' time is greater than the cost of printing.

=26. Material and Supplies.= For material and supplies the same form will be found satisfactory in most establishments. The form should provide for the name of the material, the unit in which it is purchased, the purpose for which used, the location in the storeroom, and quantities received and delivered. Fig. 25 shows a form designed for records of this class. In addition to the headings specified above, spaces will be noted at the top of this card for _maximum_ and _minimum_. These refer to the quantities of material to be carried in stock and represent the high and low limits. These limits should be established for each article in stock and when any article reaches the low limit a report should be sent to the purchasing agent on the form shown in Fig. 11, Page 14. This form provides for a record of order numbers for all deliveries, a feature which should be incorporated in all cases where the form is for the use of a manufacturing business. At the extreme right is a column headed _verified_. When an inventory is taken, the date and balance on hand is to be entered under this head.

A conventional form is shown in Fig. 26. The special feature of this form is a column for a record of orders placed. Usually this column is not required on the record of the stores clerk, but, if used, the order numbers should be entered from the receiving clerk's copy of the purchase order. On both of the forms illustrated several columns are provided for _deliveries_ to one for _receipts_. This is necessary, as deliveries are in smaller quantities and much more frequent than receipts.

Fig. 27 shows a form that includes _values_ as well as quantities. This is not considered necessary, as a rule, for the storeroom, but where the stores records are kept in the factory office, as is sometimes done, it is a good plan to include values. On the reverse side of this form a complete record of orders is kept.

Another form that includes values is shown in Fig. 28. This form is well adapted for a record of almost any class of material or supplies.

The form illustrated by Fig. 29 is specially adapted for a record of supplies. Under the head of _distribution_ the department to which the supplies are issued is entered.

=27. Parts and Finished Stores.= A record of parts and finished stores is very essential in many manufacturing enterprises. The modern tendency in machinery manufacture, for instance, is to standardize production, making all parts interchangeable. Parts are manufactured in large quantities, on special orders, and placed in stock until needed.

It is very necessary to know the condition of the stock of parts to insure against overstocking, and to prevent the supply running low. A record of parts should therefore be maintained on the same lines as for material and supplies. Usually, a parts storeroom, with a clerk in charge, is maintained apart from the material storeroom.

The form illustrated by Fig. 30 is designed for a record of parts and finished stores. This form provides for a record of the same information as given for material, with the addition of the number and size of the part. No change is needed in the form of record of receipts and deliveries.

Fig. 31 shows another form for parts. The special feature of this form is the record of values, which is advisable if the records are kept in the cost department. Parts records are more frequently kept in the cost department than material and supplies records.

=28. Material Returned to Stock.= When a foreman receives an order to manufacture a certain article, or part, he estimates the quantity of material required and draws it from the storeroom. Naturally he does not always estimate the exact quantity; he may run short or have material left when the job is completed.

Unless the material can be used immediately on another job, it should be returned to stock, with a report to the stores department. The form for such a report is shown in Fig. 32. An essential feature of this form is the order number for which the material was drawn, this being the production or shop order number.

When the stores clerk receives unused material and this report, he will enter the quantity on the stores record under the head of _receipts_, and forward the report to the cost department. The cost and value will then be entered and credited on the cost records.

=29. Material Transferred.= When a foreman has left─over material which can be used on another job, a report is necessary to insure credit to the job for which it was drawn and a charge to the job on which it was used. Fig. 33 is a form for this report. This shows the numbers of the jobs for which the material was drawn and to which the material has been transferred. After entering the correct quantities on his stores record, he sends the report to the cost department. If it is not considered necessary for the stores clerk to make these corrections on his records, the report may be sent to the cost department by the foreman.

MACHINERY AND EQUIPMENT RECORDS

=30.= In every business enterprise there should be kept a record that will give a full and complete history of every machine or other article of permanent equipment. There are many ways in which such a record will prove valuable.

Not infrequently a new part will be needed for a machine which has been in use for several years. There may be no mark on the machine showing the name of the manufacturer; perhaps no one remembers from whom it was purchased. The result is a frenzied search through books and files──confusion──a vexing delay──all for the want of proper records.

Or, there is a fire, resulting in the loss of a machine costing $3,000.00 that has been in use two years. The adjuster figures depreciation at, say, 10% a year, or $600.00. There is no record showing that it cost $400.00 additional to install the machine, or that repairs have been put on it to maintain its efficiency. At least the depreciation should be figured on a basis of $3,400.00, the real cost of the machine.

A proper record would show the original cost, the amount expended for repairs and additions, and the amount charged off for depreciation. Such a record should be kept, but no special form is required. The machine inventory form, Fig. 15, answers the purpose. For the more important machinery, one of these sheets should be used for each machine. These sheets constitute a machinery and equipment ledger, controlled by the machinery and equipment accounts in the general or special ledger. Thus the connection between these records and the general accounting system is maintained.

THE TOOL ROOM

=31.= One department of a factory that is either a source of expense or a factor in saving money, according to the way it is conducted, is the tool room. The tool storeroom is referred to here, rather than the department maintained by large manufacturing enterprises for the manufacture of machine tools.

Every manufacturer is obliged to maintain a complete stock of tools of sufficient size to meet the requirements of his establishment. Unless these tools are properly cared for, the investment is very liable to creep up to a point entirely out of proportion to the requirements.

Perhaps no class of property in a manufacturing plant is so frequently lost as small tools. When no storage place is provided, workmen are liable to leave tools where they were last used. They are soon scattered about the shops and, because they are not readily found, new tools are purchased.

A special tool room is usually necessary, though in some cases the tools can be stored and cared for in the material storeroom. In plants manufacturing machine tools for their own use, the foreman of the tool department can care for the small tools in connection with his regular work. It is also the duty of this department to keep the tools in proper condition for use.

For the storage of tools there should be provided racks and bins in suitable sizes. All tools should be numbered and the sections of the tool rack given corresponding numbers. For example, the stock includes one dozen hammers of a given size and style. This tool is given number twenty and the number is stamped on each hammer. The hammers are placed in section number twenty of the tool rack. At the same time twelve brass checks are stamped with the same number and hung on a hook above the section containing the tools.

A section of such a tool rack, showing the number checks, is illustrated in Fig. 34.

There are several methods of keeping track of tools issued to workmen. In some plants a written receipt is required for each tool issued, but this plan is not recommended for the reason that the workman should not be asked to take the time to write a receipt, or to wait until it is made out by the tool─room foreman. He should be given the tool promptly and the system employed should not cause him to waste time.

To overcome these difficulties, the check system is used. There are several variations in the operation of this system, but, in the opinion of the writer, the double check system is the most practical and satisfactory.

First, the tools are numbered, as described above, and a brass check provided for each tool. Then a board, divided into squares, as shown in Fig. 35, is prepared. In these squares the names or numbers of the men obliged to draw tools are written. Each square contains two hooks on one of which twelve checks bearing the man's number are hung. When workman No. 2 receives tool No. 15, one of the No. 2 checks is taken from the board and hung above section No. 15 in the tool rack; at the same time one of the No. 15 tool checks is hung on the second hook in the No. 2 square on the board.

It will be readily seen that there must be, at all times, twelve checks in each square on the board, counting both tool and workman's checks. Reference to the tool rack will show how many tools have been issued and what workman has them. The advantage of this system is that it is practically automatic. A perfect record of the movement of tools is kept without the necessity of making entries on cards or in books.

Another method of operating the double check system is to supply the workman with a number of tool checks, these checks bearing the workman's number. When he wishes to withdraw a tool he presents one of these checks, which is hung above the tool rack. One of the checks bearing the tool number is then placed on the hook under the workman's number on the board.

One disadvantage of this system is that the workman is more liable to lose checks than he is to lose tools. Theoretically, the number of checks in possession of the workman at any time, added to the number of checks on his hook on the board, should equal the number originally given to him. If, however, he loses a check, it usually means a dispute, as the workmen naturally does not feel that he should be penalized by failure to return a check on which no tool has been issued. All things considered, the method first described is probably the most satisfactory.

=32. Tool Records.= While the system described above furnishes a complete check on the tools, it should be supplemented by a record which will serve as a perpetual record of values. The tools may be divided into two classes, namely, _machine_ tools, and _small_ tools, each requiring a somewhat different form of record.

Fig. 36 is the form of record for machine tools, this being on either a card or loose leaf. One card is used for each tool required. The record shows the name of the tool, the number, size, purpose for which used, and date made. Below this is a complete record of the cost, showing quantity manufactured, cost of material, labor, and burden. When tools are destroyed a record is made showing date and value, and the balance on hand is debited in the last column.

For small tools Fig. 37 is used. This record shows much the same information as for machine tools. The special feature of this form is the record of quantities received from time to time, number delivered and returned, and number destroyed. As a rule, it is unnecessary to record deliveries on this card, though in the case of some very expensive tools, it may be advisable to do so.

Both of the forms referred to above are filed in the same manner as other stores─record cards. The main divisions would be by name, or by departments, with subdivisions according to size.

RECORDS OF LABOR AND MANUFACTURING ORDERS

LABOR RECORDS

=1.= The successful outcome of any project, in whatever field of endeavor, depends on the coöperation of labor. Labor is energy applied. The intelligence with which the energy is applied determines its productiveness. The unskilled laborer applies energy, in the form of his own strength, directly to the task before him. The skilled worker uses his skill to direct the energy of nature that has been applied to propel machines and appliances, which in turn have been created by the skillful manipulation of inanimate properties. Thus the combination of natural forces and the intelligent application of those forces, under the direction of a skilled man, result in the highest degree of productiveness.

In the employment of labor, there are two parties to be considered──the employer of labor and the seller of labor. The desire of the first is to secure the results of the labor at the lowest possible cost per unit of production rather than at the lowest cost per individual. The desire of the second is to secure the highest price for his labor, based on the unit of time rather than on the unit of production.

In the final analysis, the desires of the two are found not to be inconsistent, nor opposed to each other. The employer cares little what labor costs per unit of time, provided the cost per unit of production is kept down to the lowest point; the seller of labor cares not how many units of production result from his labor provided he is paid a satisfactory wage.

The ideal method of regulating the payment of wages is, therefore, one which will insure to the laborer a high wage under conditions resulting in a correspondingly high rate of production. To solve this problem, to evolve an ideal system, has long been the study of engineers. The studies of these men are bound to have a far─reaching effect. From the older method of an exclusive day wage to the modern systems that combine day wage and piece rates, is a long step. Investigations and experiments, now going on in all directions, are carrying the movement forward, and are destined to evolve an ideal system.

WAGE SYSTEMS

=2.= Wage systems, as applied to manufacturing industries, may be divided into the general classifications of day wage, piece rate, and premium systems. Besides these three, there are a number of systems, bearing the names of their originators, which are the result of a combination of certain features found in two or more of the three general methods. A study of modern wage systems necessarily involves a study of the distinguishing features of the three primary methods.

=3. Day Wage.= Of the three general plans on which labor is paid, the oldest and best known is the day─wage plan. It is the most widely used because best understood. The day─wage plan contemplates the payment of a stated wage for a stated unit of time. If all men performing the same task were equally skillful, or if the wage rate could be adjusted in conformity with the varying degrees of productiveness found in every body of workmen, the day─wage plan would be ideal. But neither of these conditions exists.

Workers are liable to insist on the application of the rule of organized labor, that all men performing similar tasks shall be paid the same wage. Since all men are not equally skillful, this results in certain inequalities. On the one hand, the wage rate is based on the lowest rate of production, which is unjust to the more skillful man, who either reduces his productiveness to the level of the least skillful, or transfers his energies to another field of endeavor. As an opposite extreme, the rate is based on the highest rate of production, which is manifestly unfair to the employer.

In actual practice, then, it is necessary, from the standpoint of the employer, to employ overseers to drive all workmen to a maximum rate of production, which, theoretically, means the elimination of all workers who are unable to attain the maximum. Again an injustice results, this time to the weaker man.

=4. Piece Rate.= The first plan evolved, in the search for a plan that would remedy the inequalities of the day─wage plan, was the piece─rate plan. The piece─rate plan contemplates the payment of a stated wage per unit of production, without consideration of the rate of production.

The argument was advanced that a uniform rate per unit of production would result in an equitable wage, because based on the productive skill of the individual. But the plan has failed in many cases to produce the desired results, for the reason that it does not take into consideration the factor of time.

In the establishment of a wage rate, the factor of time must be considered, or the rate will not be equitable as between employer and employe. The employer must furnish the shop, the tools, the power, the heat and light. The cost of these items does not necessarily vary in direct ratio with the increase or decrease in production. These expenses must be absorbed by the finished product, therefore, even under a piece─rate plan, the rate of production (the factor of time) has an actual bearing on the rate per unit.

From the standpoint of the employer, the rate per unit should be based on the productiveness of the individual, and should insure to the most skillful, a wage as high as, or slightly higher than, he would receive under the day─wage plan. This would, in theory, give to the less skillful man a wage exactly commensurate with his skill. But as workers become more and more skillful, and increase at the same time their productiveness and their earning capacity above normal, there is a tendency on the part of the employer to reduce the rate per unit to bring the aggregate wage back to normal. The result is that the worker, fearing a reduction in the rate, limits his production to the number of units that will insure an average wage.

Thus the system fails in its object. It does not reduce the cost of production to the lowest point. However, when piece rates are intelligently applied they are found very satisfactory in certain lines. But in all cases, the piece rate tends toward a uniform rate of production, and, while reducing the cost of superintendence, involves the expense of inspection. The latter, however, is not necessarily an added expense, for, as a rule, inspection is required regardless of the wage system in use.

=5. Premium Systems.= To obviate the difficulties found in both the day─wage and piece─rate plans, the _premium_ or _bonus_ system was evolved. This improved system of wages is intended to fulfill the following conditions:

1. A guaranteed rate per hour for each grade of work for a contract period.

2. An average earning power continuously higher than usual.

3. A lower cost per unit to the employer as wages automatically increase.

4. A supplemental earning power, or bonus, to the worker above the day wage, the bonus being based on efficiency.

The premium system is a combination of day wage and piece rate, involving the establishment of standard times for stated tasks. It is based on the theory that if, when a standard time has been fairly established, the worker performs a task in less than standard time, he is entitled to a bonus, or extra pay, for the time saved. The bonus is based on the wage rate paid for standard time.

For what part of the time saved the workman should be paid, depends on circumstances. It might be argued that the workman is entitled to full pay for all of the time saved, but other factors than the dexterity of the workman enter into the time saving. The employer supplies additional power, there is an extra cost for wear and tear on machinery, and an extra quality of material; all have a bearing on time saving. The employer is, therefore, entitled to a part of the saving.

The original premium system is known as the _Halsey_ plan. There are, however, several well─known modifications of the plan, all based on efficiency, but each having certain distinguishing characteristics. No more clear presentation of the essential features of the best known premium systems has been made, than is found in a review by Mr. Carl Bender, published in the Engineering Magazine, from which the following is quoted:

HALSEY PREMIUM PLAN

To mitigate to some extent the evil workings of piece rates, Mr. F. Halsey invented the premium plan shown in Fig. 1.

The slant of the wage line may be at any angle from horizontal, straight piece rate, to coalescence with day rate line. This system possesses at least four valuable points:

1. It pays day rates if a longer time is taken than standard.

2. It is a very flexible system and can be adapted to different conditions.

3. It lessens but does not obviate the necessity of changing rates.

4. It lessens but does not wholly remove the inclination to limit output.

It is in one respect a step backward, since it substitutes uncertainty for definiteness as to wage costs. Nevertheless, the Halsey system was an admirable step in advance. Usually the worker is given either one─half or one─third the time he saves. Psychologically it is much better than piece rate, since most workers are more inclined to lessen their time than to increase the number of pieces turned out. A man will deliberately decide that he ought not to turn out more than five pieces a day, but he will not feel the same desire to avoid breaking his own record of two hours per piece.

Under the Halsey system, no limit is placed on a man's earning power per hour, and also a minimum piece rate of one─half or one─third the initial rate per piece is allowed, so that if a man worked on his own time, he would at least receive per piece one─half or one─third standard pay.

TAYLOR SYSTEM

A fundamental departure was made by Mr. Fred W. Taylor, in his differential piece─rate system, a diagram of which is shown in Fig. 2. Mr. Taylor does not establish an initial time by guess or by assuming a more rapid gait than on day work, nor does he appropriate other unscientifically determined times. His method is to standardize all conditions in the shop, to make them as perfect and smoothly acting as circumstances will permit, and then to determine a reasonable minimum time in which the job can be done. As a result, Taylor's standard times are very much lower and also very much more carefully and accurately determined than any system hitherto considered. Mr. Taylor scorns the suggestion that by any chance the worker could earn excessive wages. Any wages that an unusually efficient worker can earn are legitimately his own. Assuming that under the Taylor system a worker should do four pieces in four hours, his wages for the time would be $1.00, but Mr. Taylor allows an increase of 20 per cent, 25 per cent, 30 per cent, or even more, according to the class of work, for ascertaining standard time. Let us assume 20 per cent increase. The worker then receives for four pieces in four hours, $1.20, a rate of $0.30 each. For less than four pieces the maximum hourly rate is $0.25, therefore $0.25 each. If the worker only delivers three pieces in four hours, his earnings are only $0.75, or $0.1875 per hour. Mr. Taylor's system awards, therefore, a heavy and increasing premium for high efficiency, a heavy penalty for low efficiency.

The method of standard time determination is so rigorous that the worker cannot figure on curtailing his output. He has to hustle to make wages even at the low piece rate, and if he succeeds in this, a very little extra effort will give him a higher piece rate.

The excellence of the system lies in the accuracy with which proper rates are predetermined. It is, however, somewhat inflexible and not so well adapted to work in which unforeseeable variations in time occur.

THE GANTT BONUS SYSTEM

Mr. Gantt, a disciple of Mr. Taylor, introduced at the Bethlehem Steel Company a bonus plan, see Fig. 3.

As in Mr. Taylor's system, the proper time is most carefully and accurately predetermined. If the worker reaches the proper time, he is given a bonus of 25 per cent above normal wages for the time. If he does still better, he is given half of what he makes, as in the Halsey plan. If he does not reach standard time, he is paid only 75 per cent of normal wages for the excessive time, provided bonus earned permits the imposition of this fine. If he had bonus to his credit he would not be fined, however much he fell below standard.

This system has shown certain psychological disadvantages in practice:

1. The men have made it a point of semi─honor, among themselves, not to do better than standard times.

2. Although the actual fines for failing to reach standard times were insignificant, the men claimed that they were being robbed of thousands of dollars in this manner. Neither fall─downs nor ability to lessen standard time are always up to the man. It is therefore unfortunate when a favorable chance occurs to lessen time, that the worker deliberately holds back. It is also often unjust that he should be fined for what may not be his fault.

Actual experience with these different wage systems brings out the fact that psychology accounts for quite as much as any fair condition, and that a good wage system must not only be fair but must also hit the men right.

EMERSON EFFICIENCY SYSTEM

The most recent wage system is the Efficiency System, evolved and perfected in theory by Mr. H. Emerson and his assistants and practically applied by the officials in the shops of the Santa Fé Railway.

This wage system superficially resembles the Halsey line, Fig. 4, but in theory and in fact differs radically from all previous wage systems, although it embodies much that was best in all of them. It retains the principle of day pay irrespective of performance. It retains in modified form the principle of a flat piece rate. Like the Halsey system, it pays more per piece for less competent work. Above all, it retains Mr. Taylor's and Mr. Gantt's principle of accurate and scientific shop organization, including standard times for every job and operation.

It pays a high premium above wage or piece rate for coöperation or assistant foremanship on the part of the worker, and finally, as part of regular and daily shop practice, it revises erroneous schedules whether they be too low or too high, and it makes this revision without lessening the earning power of the worker. In addition it substitutes for the costly, annoying, inaccurate time recording of each job, a general monthly efficiency record which covers the shop as a whole, each department, gang, foreman, worker and job, and, based on accurate study and efficiency, it predetermines, before work is begun, the absolute cost of every operation.

These results are facilitated by recognizing that the attainment of standard conditions as to all operations depends on four totally different elements:

(1) The shop itself must be highly organized and efficiently operated.
This is a duty that devolves solely on the management, and for poor
organization and operation the worker is not responsible.

(2) The character of the work itself, the quality of materials, etc.,
may vary greatly on the same job at different times. Neither manager
nor worker is wholly responsible for this variation.

(3) Assuming standard shop and work conditions, the worker himself
can do much to coöperate with the management in making the other
conditions as well as himself effective.

(4) Costs should be standardized for the shop on a basis of normal
conditions and be adjusted in the counting room on the basis of the
monthly efficiency factor.

(a) As an incident to high shop organization and efficient operation,
the standard time required for every job should be scientifically
ascertained.

(b) To eliminate accidental and unavoidable variations in material,
etc., the worker is allowed to sum the standard time of all his jobs,
gaining on some, losing on others, averaging closely even.

(c) For coöperating with the management in eliminating wastes, the
worker is paid a 20 per cent bonus for the efficiency of 100 per cent,
which means, that the time taken for all his jobs must be equal to
the standard times allowed for all his jobs. If he takes 10 hours on
a 1─hour job and 1 hour on a 10─hour job, his average remains 100 per
cent.

(d) The same work is assumed to be done always in the same standard
manner. Variations from standard are a general charge or credit to
shop efficiency, not a specific variation in cost. A train passenger
is not charged more because his train has been delayed by a snowstorm,
or less because a fair wind and a clear track made the particular
train run less costly than usual.

Under the efficiency system the worker is entitled to standard day rates, even if he is doing nothing. If, however, by reason of special individual effort or skill, he does his work faster, he is entitled, not to a part (one─third or one─half, as in the Halsey system), but he is entitled to be paid in full for all the time he saves. As he has not less coöperated with the management, he is, in addition, entitled to 20 per cent bonus for all the time he works.

Therefore, if a worker whose pay is $0.25 per hour delivers 300 hours of jobs in a month of 250 working hours, he receives:

1. 250 hours at $0.25 $62.50
2. 50 hours saved, at $0.25 12.50
3. 20 per cent on 250 hours' pay 12.50
──────
Total $87.50

If, however, the worker does not so coöperate with the management as to make the shop operate at high efficiency, himself included, he does not receive as much extra pay, but a lessening amount until at 67 per cent and below he is paid day rate and no more.

The diagram shows plainly the efficiency wage line beginning at 6 hours, showing 20 per cent increase at 4 hours, standard time, and paying 4 hours time even if the work took no time at all──a condition that arises practically quite often, as when a worker runs two jobs at the same time, or when he does work on his own time.

While the diagram can be applied to a 4─hour job, the worker is not paid by the separate job, but is paid straight day wages and a bonus for his full─pay period efficiency. For each per cent of efficiency there is a corresponding increase in pay.

For 100 per cent efficiency the increase is 20 per cent, and for each 1 per cent increase in efficiency above an efficiency of 100 per cent, the pay also increases 1 per cent; therefore, for 120 per cent efficiency the pay is increased 40 per cent. Below 100 per cent the pay table runs as follows:

Efficiency Additional Pay
Per Cent Per Cent
67 0.00
74 1.
80 3.27
85 6.17
90 9.91
95 14.53
100 20.

The system has other merits:

(1) It standardizes not only the work of each worker, but also of every
foreman, every department, and of the shop as a whole.

(2) It therefore standardizes the shop cost of every job, whether it is
done by a cheap apprentice in two hours, or a high priced mechanic in
10 hours. The average shop or department efficiency factor equalizes
accidental variations.

(3) It separates absolutely all questions of wage rate from questions
of output, shop conditions, or individual excellence.

(4) It fines the management heavily if shop conditions are not
maintained so as to realize standard times.

(5) It puts no limit on the ambition or earning power of any man.

(6) Standard times are being constantly corrected. If the standard man
cannot average 100 per cent on his schedules, it is evident that some
of them are too short and ought to be lengthened. If on the other hand,
a new machine tool is introduced, new schedules are drawn up for it,
but the worker will not, on that account, make less than he did on the
old schedule.

It is too much to expect that any system of paying wages will prevent an outbreak of selfish interests whether of employer or wage earner. There will, however, be a distinct gain if the nature of the disagreement can be made entirely distinct and plain. Clear thinking must precede clear acting, and this description of different wage systems may contribute towards clearer conceptions and more just practice.

To establish a modern wage system, standard times must be determined on a scientific basis, and the rate must not only be equitable as between employer and employe, but, as Mr. Bender has said, "it must hit the men right." Shop conditions must be right and every facility given the workmen to attain standard time or better, including teaching him how to do the work in standard time. The _speeder_ or _task setter_ employed under the day─wage plan must be superseded by the _instructor_, who, instead of selecting the most speedy worker and basing standard times on his operations, first determines as closely as possible what the time should be, and then teaches his men how to attain that time. Where stop─watch methods foster discontent and breed antagonism, instruction is followed by coöperation. The average man does not object to doing a task in a stated time when he is given the facilities for doing the work that will make that a reasonable time. Add to this the incentive of extra pay for equaling or bettering that time, and his coöperation is insured.

METHODS OF TIME KEEPING

=6.= Time keeping may be divided into two classes. The first class includes methods of recording the total time that the employe works during a pay─roll period. The second class includes methods of recording the results of the labor of each employe──the quantity produced, expressed in the units adopted by the trade in which he is employed.

Ordinarily, trading concerns require records of the first class only, the pay of the employe being based on the time spent, rather than on the quantity of his production. This is because of established custom and the difficulty of measuring his production. Primarily, the pay of the employe is based on his efficiency, but it is not always practical to attempt to reduce the results of that efficiency to standard units.

Manufacturers require records of both classes. Not only is it necessary to know how many hours each employe has worked, but the quantity of production must be known.

It is true that a manufacturing business requires the services of some employes whose productiveness is not readily expressed in standard units, in which cases the first method only can be used. These are the men who are necessary to the economical operation of a department or shop, or of the plant as a whole, but whose time cannot be charged to a particular job. Labor of this class is termed _indirect_ or _non─productive_.

The labor of most employes in a manufacturing plant is applied directly to the production of specific articles, or to the completion of certain definite jobs. This makes it possible to reduce the results of their labor to definite units. Labor of this class is termed _direct_ or _productive_.

Records of production, as well as records of time, are necessary for two reasons. First, when the piece rate or the more modern premium system is used, employes are paid according to the number of units produced. Second, to obtain accurate records of costs, it is necessary to have accurate records of production.

For the purpose of determining the amount of wages due the piece worker, time records are not needed; records of production supply the information required. But to determine the actual labor cost per unit, time records are needed even in the case of piece workers. Piece rates are based on continuous production at a uniform rate. A marked falling off in production means a perceptible increase in the cost per unit for overhead expense. For example, we will suppose that a manufacturer has $50,000.00 invested in machines operated by piece workers. One of the definite items of expense to be apportioned to the product of these machines is interest, at say five or six per cent. If production falls to one─half of the normal quantity, because one─half of the machines are idle, the amount of this one item of expense that must be borne by each unit of production is doubled. Or, we may have two workers operating identical machines on the same class of work, the production of one being twice that of the other. The overhead expense is the same for each employe and each machine, consequently the cost of the finished product is affected by the factor of time. The piece worker who fails to maintain the rate of production established as standard in his or her trade, is not a profitable worker.

=7. Time─Keeping Systems.= There are several systems or methods of time keeping in use. No one system is adapted for use under all conditions. Like all other classes of records, the time─keeping system must be selected with reference to the conditions under which it is to be operated. The system used in a factory, where all operatives are housed in one or more buildings, is not well adapted to the needs of a contractor whose men may be working on jobs located at points widely separated.

In this discussion, we will consider first the systems used to record the total time employed. This will be followed with descriptions of systems for obtaining records of production.

=8. Time Book and Check Systems.= Of the time─keeping systems that have been at some time considered standard, the oldest is the time book kept by the time─keeper. This system required the time─keeper to identify each man at work, and to record, opposite his name in the time book, the number of hours worked each day. Sometimes a special time─keeper was employed, or the foreman might keep the time book for his own men, the time books of all foremen being turned in for the purpose of making up the pay─roll. A system so dependent on the memory of one man never could become satisfactory.