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second day of the month, past due accounts must be taken up and dis-
posed of. In addition are the daily tasks as indicated by the lines
extending to the daily line.

When a task is to be performed two or three times in a month,
the line is broken and the letter inserted at each break. Even the
time of drawing off a balance sheet, once every three months, is
indicated. A similar chart should be made to show tlie routine
duties of each department.

Such charts, supplying, as they do, complete working schedules
for the routine of each department, soon reduce the time taken by
routine tasks, which is of no little importance in the conduct of a
well regulated department. They fill a place in office routine anal-
ogous to that of the working plan in the shop. , The same idea can
be carried out, and will prove equally valuable, even in an office
where the bookkeeper does all of the work.


22. We have seen how authorities, responsibilities and even
routine duties are most graphically represented by means of charts —
the working plans of the recording divisions of the business. For


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purposes of record, the distribution of the expenditures for salaries
and wages of those who make up our organization is of equal im-
portance to the definition of the authorities and duties.

If the accounts are to be of value they must be correct, and they
cannot be correct unless every item is charged to the proper account.
The value of correct accounts is recognized. They do more than
show what we have received or the expenditures for a specific purpose
during a stated period; they show when and why an expense b in-*
creased or decreased. With such information to point the way to
economies in the future, instead of records that show us merely the
amount of an expense already incurred, accounting takes its rightful
place artine of the most important functions of a business enterprise.

Probably more businesses have failed owing to the lack of proper
accounting methods than from any one other cause. Many a busi«
ness has been rejuvenated — turned from failure to success — by the
introduction of a system of accounts that truthfully portrays its activ!<*
ties. Few business failures are the result of a failure to buy goods at
right prices, or to establish selling prices that show a profit. The
more usual cause is found in leaks in the expense account. Any
method that locates the leaks places us in position to stop them.

The chief value of accounting records lies in the opportunity
afforded for comparison. The fact that a certain expense amounted
to $900.00 last month furnishes no information of special value; but
when compared with the amount expended for the same purpose
two, three and four months ago (if these expenses are analyzed and
compared with production or sales or whatever factor would affect
the amount) the figures assume an important significance. But if
expenditures are erroneously applied, if an amount has crept into an
expense account that does not belong there, the comparison had better
not have been made. Thus is seen the necessity of an absolutely
accurate distribution.

Here the chart — the working plan — is again applied to excellent
advantage. The chart, Fig. 7, applied to salary and wage distri-
bution, shows to which of the two principal divisions each item
should be charged. This is the important question — to properly
apply expenses to the commercial and manufacturing branches.
Subdivisions of such a chart segregating expenses of each division
are easily made.

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The application of the items from which lines lead only to the
commercial or manufacturing branch is readily understood. Between
the two are several items from which lines lead to both branches,
indicating that the expense is to be divided. This division should
be given close study. Care must be used that too large a part of any
item is not applied to either branch. The salary of the general
manager, and usually the comptroller, will be equally divided. The
duties of the chief accountant, chief stenographer and stenographers
being chiefly in connection with the commercial branch, only a small
portion of their salaries is charged to manufacturing. Shipping
clerk and packers* salaries are charged to either one or the other
branch, depending upon the nature of the enterprise. In a manu-
facturing enterprise where all goods are delivered to stock rooms
ready for shipment, packing and shipping is a sales expense and is
charged to the commercial branch; in a plant building heavy ma-
chinery that must be shipped from the assembling floor, this expense
is usually charged to manufacturing.


23. To present a graphic record of expense distribution, the
chart. Fig. 8, is used. This chart separates commercial and manu-
facturing expense, showing amounts, while Fig. 7 shows to which
branch each item belongs.

This chart subdivides conunercial expense into executive, ac-
counting, office, sales, and credits and collections, showing totals for
each and for the entire commercial branch. Manufacturing expense Is
subdivided into executive, accounting, purchasing, engineering, and
shops and equipment.

A comparison of these statements from month to month will
show just what every item is and indicate the slightest increase in
any class of expense. Similar charts can be readily prepared for
any business, segregating expenditures of each branch, division, or

The distribution will naturally vary in different businesses and,
before this chart can be prepared, the exact distribution must be de-
termined. In this chart, packing and shipping b included as a com-
mercial expense, while, as stated previously, in some businesses it
would be a manufacturing expense. All such questions must be
decided before the chart is prepared.


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Fig. 8. Tlila Chart of Expense Distribution Shows the Amount of Executive and Ad-

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miniBtratlYe Salaries, and Expense of Every Class, and Their Correct Apportlonmenl


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24. However efficient the personal organization, satisfactory
results can be obtained only under proper environment. It is not
merely a question of pleasant surroundings for employes, but a finan-
cial proposition; not a reform or a fad, but a money-making plan
that governs the engineer in laying out a plant.

This is not to be a discussion of welfare work, al)out which much
has been published. Our purpose is to point out the business economy
of a proper physical arrangement of office, store or factory as against
the wasteful methods of a systemless grouping of men and machinery.

The question of physical environment is a practical one that has
been solved by many enterprising concerns, and the subject is de-
serving of careful study by the student of business organization.
WTiile some hard-headed business men may regard the question of
minor importance, it is significant that the largest and mast successful
enterprises, financially, are those in which employes have been sup-
plied with the most comforts, surrounded with approved safeguards,
and aided in their work by the latest appliances of proved worth.

There is an old axiom to the effect that even a good workman
cannot be expected to do good work with poor tools. It is equally
true that he cannot be expected to do good work in either unsanitary
or inconveniently arranged shops and offices.

25, Factory Plans. The planning of a manufacturing plant is
a question for the engineer, rather than the accountant or business
organizer, but a few general remarks on the subject will not be out of
place in this paper.

It may l)e stated as a fundamental principle that the factory
should be planned to facilitate the movement of raw material from one
department to another. In the ideal factory, storage for raw material
will be provided where it can be economically received and easily
procured when needed in the factorv\ It should, if possible, be
close to the department in which the material is subjected to the first

The shops themselves should be arranged to facilitate the move-
ment of partly completed parts from one department or shop to
another. To illustrate, a foundry should be so located that castings
can be taken direct to the machine shop, or smith shop, not through
another shop or in a round-about way.


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Likewise, the machine shop, if the process be continuous, should
be located next to the assembling department. Or, if a "parts" store-
room is maintained, it should be located between the machine shop
and assembling department. Storage for completed goods should
be adjacent to the assembling department, and convenient to the
shipping room or platform.

The chart, Fig. 9, shows a typical layout of a manufacturing
plant operating both a foundry and wood shop. Naturally the
foundry and wood shop are as widely separated as possible. Storage
of foundry materials is provided for just outside of the foundry, while
lumber is convenient to the wood shop.

The arrows indicate the movement of raw materiab through the
shops to the finished goods store-room, and from thence to the shipping
platform. If these lines are traced it will be seen that at no point is
the material twice moved over the same ground. Each move takes
it to the next operation and one step nearer completion. ^Vhere
materials and parts enter a shop at two or more points, the lines are
merged, showing that these materials leave that shop as one piece,
part, or finished article. A feature underlying the whole plan is
economy in the movement of work in process. All work moves
through a shop, not back and forth in the shop.

The ideal conditions do not always exist, neither can they be
brought about in every case. Many plants, built in the past, have
been planned without due regard for these matters; their importance
was not appreciated and the buildings are so located that it Is impos-
sible to secure entirely satisfactory results. However, if present
conditions are studied carefully, many improvements can be brought
about at slight expense. While, as we have intimated, this is a prob-
lem for engineers, a number of cases might be cited where the account-
ant, called in to systematize the accounting methods of a manufac-
turing business, has suggested physical changes in the shops that have
resulted in marked reductions in costs.

26. Planning the Office. The average office is arranged in a
very haphazard way. Departments are located with little regard for
their departmental relations; desks are placed where they fit best
rather than according to any preconceived plan.

Logical arrangement of the office has as great an influence on
the economical conduct of the work as doe^ the physical arrangement


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of the shop. The most important requisite in the layout of an office
is good light. While ideal conditions are impossible to attain in some
buildings used for offices, much can be accomplished by placing the
desks to take full advantage of the light that is available.

The writer once visited an office in which sixty or more people
were emplc^ed in one big room. Most of the light came from the
rear and practically all of the desks faced the light, which is recognized
as most injurious to eyesight. The manager of the office was asked
why the desks were not {Jaced in proper position, and he replied that
they were placed so that the employes would sit with their backs to
the entrance, and not have their attention detracted from the work
by visitors. He considered this an important move, but overlooked
the more vital fact that his employes were not only ruining their eye-
sight but were actually doing less work than would have been done
under more favorable conditions.

A change was consented to. As many of the desks as possible
were so placed that the worker would receive the light from the left;
some received it from the right and a few from the back. Three
months later this manager readily admitted that his employes were
turning out at least one-third more work, and their general health
was greatly improved.

The location of the departments and the private offices should
be carefully considered. Departments in which the work is of a
nature requiring frequent inter-con^munication should be located
as closely together as possible. For instance, the sales department
should not be placed between the order and accounting departments,
but the order department should be close to the accounting depart-
ment, with which it is in constant conmiunication.

The workers in a department should be placed to facilitate the
movement of their work from one desk to another. Heads of depart-
ments or chief clerks should be within easy reach of all employes in
the department, and accessiUe to the executive.

Offices of executives should be^ocated with reference to their
duties. . The sales manager and purchasing agent should be acces-
sible to the public. The general manager should be within easy
reach of other officers but not necessarily accessible to the public.

The importance of conveniently arranged offices is receiving
much serious thought, and many of the larger industrial enterprises


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are erecting ideal administration buildings. In all specially planned
buildings^ the tendency is toward large rooms, rather than smaller
rooms separating the departments. A large room insures better
light and air, and space can be utilized to much better advantage.

Fig. 10 is a sketch of the first floor plan of the administration
building of one of the large industrial enterprises. This is, in many
respects, an ideal arrangement.

A noticeable feature is the location of the filing department
in the center of the main room. Here it is easily reached by all

At either side of the filing department are the sales and accounting
departments. In the sales department several sales managers' desks
will be noted, with desks for their assistants across a narrow aisle.
It happens that, in this particular business, sales are divided into de-
partments corresponding with the classes of goods manufactured,
with a sales manager for each department.

The accounting, order, and credit departments are conveniently
arranged, and the auditor is located where he can overlook the entire
office. Executive offices, across the front of the building, are access-
ible to the pubhc and those in the general offices.

27. Store Plans. The subject of store plans is one of utmost
importance to the merchant. His success is influenced to a great
extent by the first impression received by the prospective customer.
If that impression is favorable^ if he is greeted by an orderly, well
arranged store, if his comfort and convenience have been considered,
the customer will return and give to the store at least a part of his

The old-fashioned general store, in which all sorts of merchandise
was sold, offered little to commend in respect to orderly arrangement.
As a rule, the goods were jumbled together in a confused mass with no
thought of segregating them in departments. Yet this country store,
found in every hamlet, was the forerunner of the department store of

The advent of the department store was a case of adapting the
merchandising methods of the country village to the needs of the city.
A miscellaneous stock of merchandise, greater in size but similar in
character to the country store stock, was gathered in one big store and
subdivided into departments. To compete with one-line stores,


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stocks must be equal in volume, which meant that the department
store must carry as large a stock of clothing or of shoes as the exclusive
clothing and shoe stores. The stocks must be as complete and as
well displayed; each department must be a fully stocked store, pre-
pared to meet the usual demands of a store of that character.

The department store of today is a model of systematic arrange-
ment. Not only are the goods grouped in departments, but the de-
partments are logically grouped and located to suit the convenience
of the customers. If one wishes to buy house furnishings, hardware,
or dishes, he will probably find them in adjoining departments.

But the departmental idea is by no means confined to the recog-
nized dejmrtment store; it is a feature of every well regulated store
dealing in exclusive lines. Stocks of shoes, hardware, clothing, and
furnishings are all divided and the classes segregated by departments.

The departments themselves are subdivided. Groods are classi-
fied, and each class placed in special compartments. Goods most
frequently called for are near at hand on shelves where they can be
easily reached. Top shelves, space under counters, and other inac-
cessible comers are reserved for goods called for less frequently.


28. We have already referred to the necessity of cooperation in
every successful organization. We do not wish to be understood as
advancing thb idea of cooperation for the benefit only of executive
officers and heads of departments. It must extend farther than this —
it must penetrate to every nook and corner of the shop.

We must have the cooperation of every workman, no matter
how obscure his position, and to secure this cooperation it is neces-
sary to instill in him an interest in the welfare of the business as a
whole. Treat him as a mere cog in the wheel and he will very likely
be content to do as little work as possible and still draw his pay, with
no thought of bettering conditions in his department. But show him
that you recognize his ability — that you know that he knows how his
work should be done — and he will readily lend his cooperation.
The problem of securing this cooperation has been given much
study, and those who have met with the greatest success have done
so by showing the workman that his advice and suggestions are


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No matter how willing you may be to receive them, the work-
man naturally hesitates to make suggestions personally. But give
him an opportunity to discuss a point with others of his kind and it
is surprising how many practical ideas will be brought out. Ex-
perience has shown that this spirit of working for the good of the
business can best be maintained through the formation of standing
committees. Such committees bring out the best ideas of the men
composing them, and invariably work for the good of the business.

29. General Factory Committee. In the manufacturing branch
of a business, the first committee to be formed is the general factory
committee. This committee is usually composed of the superin-
tendent, who acts as chairman, the chief engineer or designer, the
tool room foreman, or the special designer of tools, the head of the
cost department, and two or three foremen of the most important

The work of this and all other committees must necessarily be
adapted to the requirements of the business, but, as a general prop-
osition, the matters to come before the committee may be stated as

1, Reports and discussions of the standardization of the product.

2. Reports of progress on new designs or the redesigning of old product
which has been authorized at previous meetings.

8. Discussion of economies in general operating methods, economies
in cost of production, and all questions of a similar nature.

4. A report on routine work in the factory — whether stock or special
contracts — condition of orders, and condition of stock to fill future

5. The question of promotions. If all promotions in the shop are
brought before this committee for approval, it will do away with
the charge of favoritism of foremen in advancing relatives or per-
sonal friends without regard to their qualifications. A foreman
who is obliged to recommend promotions to this committee, will be
very careful that the promotion is deserved.

30. Departmental Factory Committees. Many factories manu-
facture more than one line of goods. In such factories it is advisable
to have committees to discuss progress in each specific line. Members
of the factory committee should act as chairmen of these depart-
mental committees. The committees will be composed of the fore-
men interested, the tool room foreman, and the head of the cost

The work of the committee, so far as relates to a particular


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department, will be very similar to that of the general factory com-
mittee. The discussion will cover:

1. Standardization of product and suggestions for new designs.

2. Progress on improvements already started.

'i. Economies in operating expense and cost of production.
4. Reports on routine work.

31. Job Bosses. Carrying the committee plan a step farther,
it is well to hold occasional meetings of the job bosses. The foreman
of each shop will act as chairman and discuss matters pertaining to
work in his own shop with the job bosses under him.

In most factories it is also advisable to hold, at least once a month,
a general foremen's meeting. This should be a meeting of all fore-
men, with the superintendent, for the discussion of problems of a
general natiure and problems relating to specific shops.

32. Sales Committee. In the commercial branch, perhaps the
most important committee is the sales committee. This committee
should consist of the general manager, who acts as chairman, the
sales manager, advertising manager, chief engineer, and superin-
tendent. At times it may be advisable to call in the head of the cost
department and the tool room foreman.

At the meetings of this conmiittee the following subjects will
come up for discussion:

1 . General sales report, showing progress of the business as a whole.

2. Territorial sales reports, showing sales in each territory. Both of
these reports should exhibit comparisons between the current and
preceding periods.

3. Reports of sales classified according to the nature of the product,
or specific lines of goods. This is in some respects the most impor-
tant of the reports, since it shows which are the fast and which the
slow moving lines.

4. Suggestions for and a discussion of proposed improvements in the
present products.

.'). Discussion of proposed new product.
0. Standardization.

In the discussion of the three last named subjects the engineer
and superintendent are especially interested, and it is here that the
presence of the cost clerk or the tool-room foreman will be required.
A salesman naturally assumes the attitude of considering his custo-
mers' desires of the greatest importance. Naturally he wants the
factory to manufacture the goods that he can sell. But a discussion
of difficulties to be surmounted, increased costs, and like questions


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will go far toward bringing him into line and convincing him that the
interests of the house lie in his pushing standard goods.

33. Advertising Committee. A committee which is to a certain
extent a subdivision of the sales committee is the advertising com-
mittee. The general manager should act as chairman, and will have
with him on the committee the comptroller, advertising manager, and
sales manager.

The work of this committee will be confined to a discussion of:

1. Results of past advertising, including periodical, street car, bill-
board, and all otlier forms.

2. Appropriations for current advertising.

These advertising reports are very important, for, after sufficient
time to establish an equitable cost basis has elapsed, all future adver-
tising should be based on the cost of actual sales, giving due con-
sideration of course to the season of the year, general tendency of the
times, and other factors which might temporarily have a disturbing

34. Organization Committee. Another committee of impor-
tance, which, for convenience, we will call the organization committee,

Online LibraryIll.) American School (LansingCyclopedia of commerce, accountancy, business administration ... [microform] → online text (page 4 of 27)