Alexander Hamilton Institute (U.S.).

Modern business : a series of texts prepared as part of the modern business course and service (Volume 4) online

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University Research Library



This book is DUE on the last date stamped below



JAR 2 2 19:^
JUL 1 193r '



fi£C i 2/1933



«Ar 7 7 1934



^TUftT^ 6 1937

May 2




Form L-9-15m-8,'26






0EC 18 1953;

ipEB 1 5 1954
•UN 1 6 197^'





A SERIES OF TEXTS PREPARED AS

PART OF THE MODERN BUSINESS

COURSE AND SERVICE OF THE

ALEXANDER HAMILTON

INSTITUTE




ALEXANDER HAMILTON INSTITUTK
NEW YORK



79512



Mociern Business

EDITOR-IN-CHIEF

JOSEPH FRENCH JOHNSON

Dean, New York University School of
Commerce, Accounts and Tinance

MANAGING EDITOR

Roland P. Falkner

associate editors
Leo Greendlinger, Charles W. Hurd



Volume Titles

1. Business and the Man ....

2. Economics of Business ....

3. Organization and Control

4. Plant Management ....

5. Marketing and Merchandising .

6. Ad\'ertising Principles ....

7. Salesmanship and Sales Management

8. Credit and the Credit Man .

9. Accounting Principles ....

10. Cost Finding

11. Corporation Finance ....

12. Business Correspondence .

13. Advertising Campaigns ....

14. Railway Traffic

15. Foreign Trade and Shipping .

16. Banking

17. Domestic and Foreign Exchange

18. Insurance

19. Office Management ....

20. The Exchanges and Speculation

21. Accounting Practice and Auditing

22. Financial and Business Statements

23. Investment

34. Business and the Government .



Authors
Joseph French Johnson
The Editors

Charles W. Gerstenberg
Dexter S. Kimball
The Editors
Herbert F. de Bower
John G. Jones
The Editors
The Editors
Dexter S. Kimball
William H. Walker
Harrison McJohnston
Mac Martin
Edwin J. Clapp
J. Anton de Haas
Major B. Foster
E. L. Stewart Patterson
The Editors
The Editors
Albert W. Atwood
John T. Madden
Leo Greendlinger
Edward D. Jones
Jeremiah W. Jenks



PLANT MANAGEMENT



BY

DEXTER S. KIMBALL, M.E.

Professor of Machine Dexign and Construction
in Cornell University



MODERN BUSINESS

VOLUME 4



ALEXANDER HAMILTON INSTITUTE
NEW YORK



COPTRIGHT, 1919, BY

ALEXANDER HAMILTON INSTITUTE



COP"iTlICHT IN GREAT BRITAIN, 1919, BY

ALEXANDER HAMILTON INSTITUTE



The title and contents of this volume as well as the
business growing out of it, are further protected
by laws relating to trade marks and unfair trade.
All rights reserved, including translation into
Scandinavian.



Registered trade mark, Beg. JJ. S. Pat. Off., Marca
Registrada, M. de F.

Made in U. S. A.



PREFACE

In 1903 Mr. F. W. Taylor presented before the
American Society of Mechanical Engineers a remark-
able paper on "Shop Management". This paper was
the first of its kind and the first attempt to formulate
what might be called a philosophy of industrial man-
agement. The paper met with an instant response
and it has done more to quicken the study of this sub-
ject than any document of its kind ever written be-
cause it raised for the first time in a clear cut manner
the query as to whether management was essentially
an empirical matter depending upon personality, or
whether there were basic facts or principles that could
be applied without reference to personal ability.

Without raising the much debated question as to
whether industrial management can ever be placed on
a strictly scientific basis it appears that there are a
number of well-defined principles on which successful
management must rest. These principles were all
well known long before Mr. Taylor presented his
classic paper, but he was the first to present a group
of these principles in an orderly manner as a basis for
industrial management.

The first part of this book aims therefore to pre-
sent in a simple manner the methods and principles
that men have found to be economically helpful in



VI



PREFACE



managing industrial enterprises and to explain in a
concise manner the origin and background of our
present industrial system. It is recognized, however,
that while these methods and principles can often be
discussed abstractly they can never be applied suc-
cessfully without taking cognizance of the human ele-
ment involved. The latter part of the book, there-
fore, treats largely of those phases of industrial man-
agement that involve consideration of the workers
themselves. The treatment of all topics is necessarily
brief and only such illustrative matter has been in-
serted as was necessary to clarify the text.

The author has drawn freely from the writings of
other workers in this field and an effort has been made
to acknowledge such help in the text. Grateful ac-
knowledgment is here made for all such assistance.
The author will be thankful for suggestions, criti-
cisms, or corrections that will make the book more
valuable or more accurate.

Dexter S. Kimball.

Ithaca, N. Y.



TABLE OF CONTENTS
CHAPTER I

THE BASIS OF MODERN INDUSTRY

SECTION PAQB

1. A New Industrial Day 1

2. Industrial Ideals 1

3. Other Industrial Systems 3

4. The Roots of Modern Industry 3

5. The Industrial Revolution 3

6. Industrial Growth of the United States ... 4

7. Industrial Concentration 6

8. Modern Industrial Problems 6

CHAPTER II

FUNDAMENTAL INDUSTRIAL PRINCIPLES

1. Leadership and Method 8

2. Transfer-of-Skill Tools 9

3. Transfer of Mental Skill or Intelligence ... 10

4. Division of Labor 11

5. Mass Production 12

6. Coordination of Effort 13

7. The Use of Recorded Experience 14

8. The Scientific Method 15

9. Conclusions 16

CHAPTER III

CHARACTERISTICS OF MODERN INDUSTRY

1. General 18

2. Increase in Size of Factories 18

vii



viii PLANT MANAGEMENT

SICnON PAGH

5. Specialization 20

4. Characteristics of Specialized Industry .... 22

6. Effects and Dangers of Specialization .... 23

6. Standardization 24!

7. Interchangeability 24?

8. Standard Methods and Standard Times ... 25

9. Advantages and Limitations 26

10. Summary 27

CHAPTER IV

METHODS OF ORGANIZATION AND ADMINISTRATION

1. Departmentization 29

2. System 29

5. Principles of Organization 31

4. Military or Line Organization 32

5. Line and Staff Organization 34

6. Functional Organization 36

7. Line and Functional Control Compared ... 38

CHAPTER V
COORDINATIVE INFLUENCES

1. Organization Charts 40

2. Orders and Returns 41

3. Administrative Diagrams 43

4. Committees and Their Characteristics .... 44

5. Executive or ^Manufacturing Committee ... 47

6. Equipment Committee 48

7. The Shop Conference 49

8. Summary 49

CHAPTER VI

PURCHASING

1. General 52

2. Importance of Purchasing . . . a .^ . . 54



CONTENTS vs.

SECTION PAGE

3. The Purchasing Department 55

4. The Purchasing Agent 56

5. Authority of the Purchasing Agent ..... 58

6. Material Requisitions 60

7. Price, Quahty and Quantity 62

8. Time of Delivery 63

9. Purchase Orders 64

10. Receiving and Inspecting Materials 66

11. Purchase Analysis . 68

CHAPTER VH

STORING MATERIAL

1. Stores and Stock 71

2. Finished-Parts Storeroom 73

2. Administration of Stock and Stores 74

4. Storeroom Functions 75

5. Ordering Material for Repairs or for Continuous

Production 77

6. Ordering Material for Intermittent Manufacturing 78

7. Storeroom Methods 81

8. Stores Ledger or Continuous Inventory ... 83

9. Storing Indirect and Special Material .... 86

10. Administering Finished-Parts Storeroom ... 87

11. Finished-Stock Record 89

12. Visual or Physical Inventories 90

13. Issuing and Evaluating Material 91

CHAPTER VIII
PLANNING AND PRODUCTION DEPARTMENTS

1. Planning in General 93

2. Growth of the Planning Idea 94

3. Planning the Construction Features .... 94

4. Planning Under Old Methods 95

5. Production Departments 97



X



PLANT MANAGEMENT



BKCTIOW PAGB

6. Stock-Tracing Ledger 97

7. Functional Foremanship 98

8. The Order-of-Work or Route Clerk 100

9. The Instruction-Card Clerk 101

10. The Time and Cost Clerk 102

11. Summary 102

CHAPTER IX
INSURING RESULTS— SECURING INDUSTRIAL DATA

1, The Gang Boss and the Speed Boss 105

2. The Inspector, the Repair Boss and the Disciplina-

rian 105

S. Order-of-Work Methods 107

4. Data for the Instruction Card 108

5. Data on Characteristics of Machines and Processes 109

6. Industrial Data, Cutting of Metals 110

7. Time Study 112

8. Methods for Making Time Studicr, 114»

9. Interpreting Time Studies 115

10. Motion Study 117

11. Refined Methods of Motion Study 120

12. Significance of Time Study and Motion Study . . 121

13. Objections to Time and Motion Study .... 122

CHAPTER X

STANDARDS

1. General 125

2. Standards of Form and Size 125

3. Standards of Excellence 126

4. Standards of Administration 128

5. Engineering Standards . . 129

6. Standard Materials 131

7. Standardization of Quantity 132

8. Standard Methods .... ^ ... . 133



CONTENTS xi

SECTION PAGB

9. Standard Tools . . . . * 134

10. Standard Performances 136

11. Standard Conditions 137

12. Other Standards 138

13. Permanence of Standards . . ' 138

14. Effect of Standards 140

CHAPTER XI
THE CONTROL OF QUALITY— INSPECTION

1. The Attainment of Standards 143

2. Inspection in General 145

3. Growth of Inspection Methods 146

4. Division of Responsibility 147

5. Inspection of Purchased Goods 148

6. Basis of Inspection During Fabrication . . . 149

7. Inspection in Mass Production 150

8. Unit Inspection 153

9. Relations of Inspection to the Workman . . . 153

10. Quality versus Quantity 154

11. Other Forms of Inspection 155

12. Organization of the Inspection Department . . 155

13. INIethods of Conducting Inspection 157

14. Inspection of Performances 159

CHAPTER XII
REWARDING LABOR— OLDER METHODS

1. General 161

2. Effect of Industrial Changes 161

3. Effect on the Worker 163

4. Net Effects on the Labor Problem 163

5. Importance to the Employer ...... 164

6. Two Primary Methods of Rewarding Labor . . 165

7. Daywork 167

8. Advantages and Defects of Daywork .... 168



xn PLANT MANAGEMENT

SECTION PAGH

9. Piecework . . * 170

10. Difficulties of Piecework 171

11. Contract Systems 173



CHAPTER XIII
REWARDING LABOR— NEW METHODS

1. General 176

2. Halsey Premium Plan 177

3. Advantages and Defects 178

4. The Rowan Modification of the Halsey Premium

Plan 179

5. Taylor Differential Piece Rate 180

6. Comparison with Older Methods 182

7. Labor Displacement 183

8. The Gantt Bonus Plan 185

9. Comparison with Other Methods 186

10. The Emerson Efficiency Plan 188

11. Practical Operation of Emerson Plan .... 189

CHAPTER XIV
COMPARISON OF WAGE SYSTEMS— PROFIT SHARING

1. Comparisons General, not Exact 191

2. Comparison of Costs 191

3. Deductions 193

4. Comparison of Wages 194?

5. Conflicting Interests 195

6. The Appeal of the New Wage Systems . . . .196

7. Modern Tendencies 197

8. Rights of the Employer 198

9. Resume 200

10. Profit Sharing 202

11. Further Variations of Profit Sharing .... 204*

12. Cooperative Systems 205



CONTEXTS xiS
CHAPTER XV

STATISTICAL RECORDS AND REPORTS

SECTION PAGB

1. Need of Statistics ii07

Financial Statement 208

Value of Reports 209

The Monthly Statement 210

Departmental Reports 212

Labor Reports 213

Interpreting Labor Reports 215

Lost Time 216

Material Reports 217

Character of Material Reports 218

Spoiled Work and Defective INlaterial .... 219

Expense Reports 220

Special Reports 221

Form of Reports 223

Management Standards 225

Graphic Methods 226

17. Making Use of Reports ......... 229

CHAPTER XVI

LOCATION OF INDUSTRIAL PLANTS

1. Economic Importance 230

2. Concentration of Industry 231

3. Migration of Industry 232

4. Causes of Localization of Industry 233

5. Nearness to Raw Material and to Markets . . . 234«

6. Influences of Water Power 236

7. Influence of Climate . 237

8. Influence of Labor Supply 237

9. Influence of Capital 238

10. :\ [omentum of an Early Start 239

11. Localization within a Given Area ..... 240



xiv PLANT MANAGEMENT

CHAPTER XVII
ARRANGEMENT OF INDUSTRIAL PLANTS

SKCTIOK PAGE

1. Old Methods 244

2. Classification of Process 245

8. Important Features of Plant Planning .... 247

4. Process Planning 248

5. Size of Floors and Buildings 250

6. Arrangement of Machinery 251

7. Principles of Equipment Arrangement .... 252

8. Final Arrangement of Departments 254

9. Buildings 255

10. Provision for Expansion 256

11. Application to Very Large Plants 257

CHAPTER XVIII

PRACTICAL LIMITATIONS IN APPLYING
INDUSTRIAL PRINCIPLES

1. Advanced Methods Not Always Applicable . . . 260

2. When Labor-Saving Machinery is Profitable . . 261

3. Costs Incurred ]VIay Exceed Costs Saved . . . 262

4. Will Workers Cooperate? 263

5. Attitude of Organized Labor 264

6. Labor Saving Brings Change, Perhaps Suffering . 265

7. Difficulties of Introducing Changes 266

8. The Worker Opposes Changes 267

9. Instructing the Worker 268

10. Influence of Public Opinion 268

CHAPTER XIX

PROBLEMS OF EMPLOYMENT

1. The Problem in General 270

2. Labor Turnover 271

3. The Causes of Labor Turnover 272



CONTENTS xv

BECTIOV PACIB

4. Cost of Labor Turnover 273

5. Methods of Reducing Turnover 276

6. The Modern Employment Department .... 276

7. Sources of Labor Supply 278

8. Empirical Methods of Selecting Employes . . . 280

9. Physical Fitness 282

10. Specifications of Work to be Performed . . . 283

11. Mechanical Tests 284*

12. Psychological Tests 285

13. Educating the Worker 286

14. Transfers and Discharge 287

1 5. Reducing Fluctuations in Output 288

16. Fatigue 288

17. Differences Between Old and New Conditions . . 290

18. Length of Rest Periods 291

CHAPTER XX

EMPLOYES' SERVICE

1. Causes and Origin S93

2. The Work of Robert Owen 294

3. Modern Efforts 295

4. Definition of Employes' Service 296

5. Health Conservation 296

6. Hygiene and Comfort 298

7. Ventilation 299

8. Washing and Dressing Facilities 300

9. Toilet Facilities 301

10. Lighting 301

11. Individual Equipment 302

12. Housing 303

13. Accident Prevention 303

14. Educational Efforts 306

15. Apprenticeship Schools 306

16. Continuation Schools 307

IV— 2



xvi PLANT MANAGEMENT

BKOTION FAGie

17. Education for Adults — Americanization . . . 307

18. Education Outside the Works 309

19. Financial Aid 310

20. Recreation 312

21. Shop Athletics 313

22. The Future of Employes' Service 31 4«

23. The Spirit of Service 315

CHAPTER XXI

SCIENCE AND MANAGEMENT

1. Theories of Management 317

2. Scientific Knowledge 318

3. Measurement of Human Effort 319

4. True Status of Scientific Management .... 320

5. Fallacious Views 321

6. Selective Features 322

7. The Great Industrial Problem 32*=?

8. Conclusion . 323



PLANT MANAGEMENT

CHAPTER I

THE BASIS OF MODERN INDUSTRY

1. A new industrial day. — Oiu' own times have
undergone, without doubt, the gi-eatest transforma-
tions in industrial methods that man has as yet accom-
phshed. Men now hving have seen the handicraft
arts practically disappear and have seen machine in-
dustry, mass production, and factories of unbelieva-
ble size take their place. Younger men have known
no other condition. To them it may well appear that
this complex industrial fabric is fixed, or nearly so,
but as change has been the order of the day in the
past, there can be no doubt the future holds the prom-
ise of further developments. Industrial methods are
still in rapid flux and with the kaleidoscopic indus-
trial changes go far-reaching political and social dis-
turbances. The industrial employer who ventures
into this turbid sea without some knowledge of these
changes and the tendencies which they portend is
comparable to the sailor who puts to sea without com-
pass or rudder.

2. Industrial ideals. — Ever since man has been

upon the earth his first thought has been of his animal

1



2 PLANT MANAGEMENT

needs, to procure food, shelter and clothes, and to
subdue inclement and unfriendly nature. But in all
times and in all places even when his bodily wants
have been meagerly supplied his mind has instinctively
turned to speculating as to whence he came, why he
is here, and whither he goes when he departs hence.
And as he weighed his bodily necessities against
his speculative conclusions he built up what we are
pleased to call a philosophy of life. At times in-
dustry has occupied only a despised and lowly place
in this philosophy, at others it has been exalted to the
highest position as man has evaluated differently
these two fields of activity. There can be no intel-
ligent discussion of industry without full recognition
of this important relation, especially at the present
time, since never before have ideals played such an
important part in industrial problems. We are in-
terested in industrial problems, as such, but we are
more interested in men and should never lose sight of
the human side in any industrial considerations. The
idea that industry should be a means of giving all
men physical comfort, mental development and spir-
itual uplift is distinctly an ideal of the present day.
3. Other industrial systems. — At different periods
and among different races of men industry has been
conducted in many and varied ways. Many indus-
trial systems have preceded the present, and we have
no guarantee that the present system will be perma-
nent. All preceding systems, however, had one com-
mon characteristic. They were all based on handi-



THE BASIS OF MODERN INDUSTRY 3

craft and handicraft processes. The tools used were
comparatively primitive, the worker was the indus-
trial unit, and generally speaking, congregated labor
was comparatively rare. The skill of the worker was
the important factor in production and his tools were
an auxihary to this skill.

4. The roots of modern industry. — Institutions
once established do not change over night. Revolu-
tions in industry take place slowly- Tho we fre-
quently hear the expression that the invention of a
given machine has revolutionized a given industry,
there is always much inertia to be overcome. Capital
invested in existing plants is not scrapped immedi-
ately. Often the older machinery wears out before
the newer and improved machines replace it. As
time goes on perhaps the speed of replacement in-
creases, but certainly in the beginnings of our modern
industrial system steps were taken cautiously and
slowly. In this fact we have the reason why traces
of the older order remain today, and why a genera-
tion ago the old and new seemed still to be in active
competition.

We cannot fully understand the problems of mod-
ern industry without going back to the eighteenth cen-
tury, to what historians call the industrial revolution.
It was then that the roots of modern industry sprouted,
tho the tree has only come to a large fruition in our
own time.

5. The industrial revolution. — Near the end of the
eighteenth century certain machines appeared in the



4 PLANT MANAGEMENT

textile industry of England which were destined to
change the course of industry. While priiiitive when
compared with some modern machines, these machines
were of far-reaching importance. They required so
little skill of hand in their operation that the operator
at once became of secondary importance, and his skill
of hand merely a supplement to the skill of the ma-
chine. The era of machine industry was thus ushered
in. Before "The Industrial Revolution," so far as
we know, no such industrial methods had ever been
used by man. Large machines, some of them fairly
complex, had been built long before that time, but in
these machines of the industrial revolution the "trans-
fer of skill" from the worker to the machine was so
great, as to constitute an epoch-making event.

The invention of the steam engine coming about the
same period did much to accelerate the growth of the
new system. Until that time the size of power-
driven industrial establishments was limited by the
size of some waterfall. But with this new source
of power all limitations from this quarter were in-
stantly removed, and factories immediately began to
grow in size.

The industrial changes following the revolution
brought many social changes. Political changes fol-
lowed also in the wake of the social changes. We are
not directly concerned here with these matters and
will discuss only those changes which pertain strictly
to factory organization and management.

6. Industrial growth of the United States. — The



THE BASIS OF MODERN INDUSTRY 5

industrial progress to which reference has been made
is strikingly illustrated in the record of manufactur-
ing growth in the United States, which is found in
the census reports. Tho abortive attempts to gather
information in regard to manufactures had occurred
earlier, the first authoritative information was col-
lected by the census of 1850. At that time the term
manufacturing was broadly defined to include any
mechanical operations, and in addition to factories it
comprised the building trades and hand and neighbor-
bood manufactures. A gi-oss product of half a bil-
lion dollars was recorded in 184.9 which fifty years
later had grown to ten billion dollars. Hand trades
and allied operations had come in the course of time
to occupy a subordinate place in our industrial pro-
duction, and since 1904 they have been excluded from
the enumeration of manufactures. Of a total prod-
uct of ten billion dollars they had constituted in 1899
about one-tenth. Now it is interesting to note that
the average product of these hand and neighborhood
industries in 1899 was $2,600, and to contrast this
figure with the average of $4,300 for all establish-
ments in 1849. The factory as we know it today had
reached only a slight development by the middle of
the last century as the relatively close approximation
of these figures demonstrates.

7. Industrial concentration. — The large size of
modern manufacturing plants is one of the notable
characteristics of industry. Growth in this direction
seems for the moment to have no limits. Every one



6 PLANT IMANAGEMENT

can recall particular factories which in his own ex-
perience or that of his neighbors have grown from
small beginnings to extensive proportions. These
personal observations are confirmed by the official
record. In 1904, 79.3 per cent of the manufacturing
product of the United States came from factories
whose annual product was $100,000 or more, but in
1914 the output of such factories had risen to 84.6 per
cent of the national production. Or again we find
the record that in 1909 only 14.4 per cent of industrial
workers were employed in small establishments with
not more than 20 men each, while in 1914 this propor-
tion had fallen to 13.1 per cent of the workers.

8. Modern industrial problems. — There can be no
doubt then that the distinctive problems of modern
industry are those which grow out of the large size
of industrial units. There is, moreover, every pros-
pect that these conditions will be accentuated in the
future. A clear grasp of what is involved in them is
therefore of the utmost importance for all who would
understand modern industry or play a role in it.

Of the productive efficiency of modern industrial
methods there can be no doubt. Nor can there be
much doubt that in the long run all men will be bene-
fitted because of them. There are certain aspects of
these new methods, however, that often render their
extension inexpedient; for apparently no industrial
progress can be made without some change that af-
fects some group of workers adversely. The min-



THE BASIS OF MODERN INDUSTRY 7

imizing of these adverse effects is one of the great
problems of industrial management.

REVIEW

What is the ideal of the present day with regard to the place
of industry in the welfare of society?

What were the characteristics of the handicraft processes?

Wliat was the characteristic feature of the so-called industrial
revolution and what effect did the invention of the steam engine
have upon the new industrial system ?

What, in general, did the term "manufacturing" include in the
middle of the nineteenth century?

What adverse effects accompany industrial progress?



CHAPTER II

FUNDAMENTAL INDUSTRIAL PRINCIPLES

1. Leadership and method. — The history of the
race is filled with the achievements of great men who
have attained results, apparently because of their
great personality. Undoubtedly personality always
has been and always will be an important factor in
guiding and inspiring men. But the more we study
the work of great leaders the more apparent it be-


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