The man who combines in himself the maximum sum of these three abilities is the man best adapted to succeed as the executive of an industrial enterprise. Since the introduction of systems of cost analysis and unit-payments for work done, engineers have become best qualified to act as managers of manufacturing plants. We include contracting and railroading among manufacturing industries, for the contractor manufactures structures, and the railroader manufactures transportation.
Before cost analysis had been developed to its present stage of excellence, the successful manager of men was usually one who had relied upon his lynx eyes and his knowledge of the weaknesses of human nature. He was often a man who owed his success largely to the fear he could inspire in his subordinates. He was domineering; he held his men to their tasks; he was, indeed, an industrial captain; and he used army discipline. He regarded every worker as a thief who would not hesitate at petty larceny of time, even in the face of the foreman, and who delighted in grand larceny behind his back. His foremen were his spies; and he set himself to spy upon his foremen. But cost-analysis engineering is evolving a wholly different class of managers and foremen.
To most people, a cost-keeping system means nothing but a sort of bookkeeping; and they are unable to understand how a bookkeeper can develop into a successful manager. But the truth is that modern cost keeping involves cost analysis, and cost analysis involves a study and comparison of methods and machines, and such a study leads to improvements and to commercial success.
Cost keeping, in the sense that we use the term, has for its main object the determination of the efficiency of men. A proper system of cost keeping tells you daily what each workman or each gang of workmen has accomplished. It is better than a foreman, for it cannot "stand in" with the men. It is better than a foreman, for it costs you less and it tells you more. A cost-keeping system tells you who are your good men, and who are your lazy men. It shows you whom to discharge, and whom to promote. It tells you whose wages are too high, and whose are not high enough. And, finally, it leads to that ideal condition of industrial organization known as profit-sharing. How often have we read in novels of Utopia, where all men share in the profits of all business; and how often have we smiled with incredulity at the prospect? Yet Utopia is right here in America, in spots; and it is a Utopia far more rational than that of the dreamers. There are many firms that pay their men on a unit-price or bonus system. This is profit-sharing, and it is a profit-sharing begotten by the use of cost-keeping systems; for, when a manager has learned by cost keeping that certain men or groups of men produce more than others, he soon perceives the advantage of stimulating them to further use of brain and muscle by paying them either a bonus for each unit produced in excess of a prescribed minimum, or a unit-price for each piece of work performed. The men invariably respond to this stimulus, and often in a remarkable degree. It is nothing unusual for a man to increase his output 50 per cent upon the introduction of a bonus system of payment; and there are many instances of increase amounting to 200 per cent. Each man then becomes a contractor, and works with the zeal of a contractor, for his earnings increase as his energy and ability increase. This is practical profit-sharing that any workman can understand. It is not something vague and intangible, like 5 per cent per annum. It is something very real and immediate, for a man can feel it in the pay envelope at the end of every week.
Cost keeping, then, leads to better management, although dispensing largely with submanagers. It substitutes the record card for the "big stick," yet the record card itself is the biggest stick ever devised.
The Science of Management. The managing of industrial enterprises is still more or less of an art; but the art is fast passing through the period of evolution that produces a science. There are, unquestionably, certain underlying principles of management which can be summarized into rules or laws. These rules or laws constitute the science of management, and it is our purpose to present certain of the more important laws of management.
Individual Incentive. When a group of men undertake to do a certain piece of work, such as shoveling earth into a wagon, the tendency is for each man to do as little as his neighbor. The inevitable result is that the shovels move with rhythmic precision, and the slowest man becomes the pacemaker for the rest. If any one of the men is ambitious to do a larger day's work, he is deterred by the knowledge that his employer will never know that it is he to whom the credit is due for a larger output. Then, too, the other men are apt to upbraid an ambitious man, and urge him not to set a "bad example" by working fast. To offset this tendency to fall to the lowest level of efficiency, employers have placed foremen over their employees, the duty of these foremen being to accelerate the motions of the men in any way possible. Each foreman has an individual incentive to get work done economically, for his employer studies the total amount of work done by the gang under the foreman, and rewards or punishes the foreman accordingly, the reward usually consisting of praise and an increase in salary. But the workmen under such a foreman have no individual incentive, and they will shirk their tasks as far as possible. Clearly, then, the first law of management is to create an individual incentive for every employee to do his best.
Creating Individual Incentive in a Gang. There are, and always will be, certain kinds of work that must be performed by a group of men working together, or, as we shall call it, a gang of men. When this is the case, the first step to be taken is to devise a method of readily and accurately measuring the work performed each day—not each week or each month—by the gang. The next step is to notify the men that, for all work performed daily in excess of a specified number of units of work, a bonus or premium will be paid for each excess unit. Of this bonus, the foreman will get a specified percentage, and the men will divide the rest among themselves. Thus a powerful individual incentive is created. It is true that certain men in the gang will remain less efficient than certain others, but the general average output will be greatly increased. The foreman himself will have enough incentive to see to it that the lazy or inefficient workmen in the gang are discharged, for it will no longer pay him to play the part of indulgence for the sake of being "a good fellow."
Devising Ways of Dispensing with Gang Work. Simply because it has always been the custom to do certain classes of work by gangs, should not deter a manager from endeavoring to devise a way of splitting the gang up into individual units. Indeed, it should be self-evident that if the creating of individual incentive is the fundamental law of management, a great amount of study may profitably be devoted to increasing individual incentive by doing away with gang work entirely. To illustrate, let us assume that 12 men are engaged in shoveling earth into wagons, working in two gangs of 6 men, with one foreman supervising the 12. If a sufficient number of teams and wagons are used, there will always be 2 wagons in the pit being loaded, and 6 men shoveling into each wagon. As fast as a wagon is loaded, it pulls out, and an empty one takes its place. If a manager is told that he can do away with this system of gang work, he will usually reply that it is impossible. Nevertheless, it is possible to reduce this gang work to individual work in most instances, as follows:
Instead of having 2 wagons and teams in the pit all the time, have 6 wagons without teams—6 empty wagons. Assign two men to each wagon. Provide a dividing board between the sides of each wagon, running either longitudinally or cross-wise, so that each man has his definite half of the wagon to fill. Then pair the men off according to their respective abilities, putting the two best men on one wagon, the two next best on another wagon, and so on. When a team brings an empty wagon into the pit, let it be unhooked from the empty wagon and hooked to a loaded wagon, thus saving team time, which would otherwise be consumed in waiting for the wagon to be loaded.