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Labor Should Be Paid on Basis of Its Productivity---The Premium System Has Objectionable Features---Bonus System Seems to Be An Improvement


The Incentive to Economic Activity is the Desire for Profit.
-Edward Sherwood Mead.


NE of the first things that you learn in the study of economics is that the incentive to economic activity is the desire for profit. From the humblest worker to the president of the big corporation, the thought is chiefly concerned with the profit to be gained in doing one's work. We do not expect, however, that the laboring man nor the humble worker in an industrial plant will reason out this force or fact in business. On the other hand, the high official knows this law, and is constantly seeking to apply the economics of business to cut his costs, increase the efficiency of his organization, and thereby increase his profit.

It is reasonable to suppose so, and, moreover, the writer predicts that within the next fifteen years the heads of even the small industrial corporations will begin to realize that a man should be paid for what he produces. In the end it will mean increased production, a lower

overhead cost per piece, a lower administrative and selling expense per piece and while the profit or salary of each worker is increased, there will be a still greater proportionate profit for the heads themselves.

The writer can well imagine that his readers will take exception in some way or other to the foregoing statements, and will probably say that the piece work system, which a great many manufacturers have in use today, is the only method by which this can be accomplished. This is a fallacy from the start. There are a great many places where the piece work system can be used, but it only applies in some particular work, or for some particular parts of the factory's product. There is the premium system, the piece work system and the bonus system.



Engineers today are applying their principles of efficiency to such a degree that it may be well termed a vicious economic system. It may be all right, in these days, when business is poor and labor is plentiful, but under the present wage system, in good times, it cannot hold.

There is a new thought that is just entering the minds of a few far-sighted business men, and that is, that sooner or later, when times return to the normal again, and labor is scarce, that the laborer will naturally seek the employment where he can get the most personal profit with the least labor.

The writer cannot pass this point without referring to the drastic actions of the labor unions in maintaining their rules and regulations, the way they have in the past, and he safely can say that these unions form the most conspicuous trust that there is in the United States, or, in fact, in any part of the world today. Their influence has been felt to such an extent that it may be here said that they have destroyed the incentive of the progressive individual, laborer or working man. They ban the man who produces twice as much work. He gets no recognition of the fact except his usual daily wage, and, conversely, the shiftless laborer, who produces just enough to hold his job, is paid the same sum as the other. Where there is no incentive the good worker naturally is not going to extend himself and do more work than the man who receives equal pay for a less volume. The consequence is that the ranks of labor today are filled with a set of men who are only doing a certain amount of work, or, in other words, are doing just what they are paid for. Naturally the industrious worker is not going to use any effort toward acquiring more knowledge of the product that he is making.

Let us repeat again, "The incentive to economic activity is the desire for profit."

Now consider the subject from the other side. If the trades unions are disbanded, and a man is paid for what he knows, or for how efficiently he handles his work, isn't it reasonable to suppose that an employer will give recognition, in a monetary form, for these individual efforts?

The premium system has been tried in a great many plans, and in general it has been condemned a failure; in many respects it is a failure, for the reason that it is not fair to all workers. The idea of that system was to speed up production in a plant, and at the end of the year the company would divide a certain percentage of the profits among all its employes. Is it fair to the workman who bends all his energy to increase production, when his efforts are compared to the shiftless workman, as each gets the same premium at the end of the year? From this you can see that it simply goes to substantiate the writer's statement in regard to the unions.

The bonus system, on the other hand, is the newest of all methods for increasing the production in a plant, and this system is the one that will come into use more and more. Under this scheme, a standard day's work is established, and if a workman produces the full amount of the standard he gets his ordinary pay. If, on the other hand, he increases his work above the standard he receives, in addition to his daily wages, an additional amount, or bonus. Let us repeat again, "The incentive to economic activity is the desire for profit." What will be the result of such a system when in universal use? The employers will make more for themselves and the workmen as well will have a new desire to learn and increase their own efficiency. This is also the basis of organization, as well a preventive of strikes. There are many indirect results that will be accomplished. The constant warfare of capital and labor will show signs of a truce, and it will be also the means of stamping out socialism, to a certain extent. Isn't it a peculiar thing that when a working man has been able, by sheer force of energy, to raise himself from the class of employes to that of the employer, that all his principles change, and he then looks at the struggle of capital and labor from the side of the former


and yet only a few years ago he was on the side of the latter. It is the viewpoint and the incentive that changes him from one to the other. Go through any ordinary plant today and watch the soldiering of the men. There is no incentive for them to turn out more work and they certainly are not going to bend their energies toward increased production unless they are sufficiently remunerated for their efforts. It is true almost the world over, and when you stop to look at it, and stop to figure up the losses that are incurred by this very idleness, the results will astound even the least progressive employer. Of what use is the high priced labor-saving machine, if the man behind it does not push it to its utmost capacity? We might go so far as to say that instead of making money for you that you were losing money on the investment, in that particular machine.

One of the best examples of the profit sharing system is the United Steel Corporation. It has been aptly termed "The biggest, brainiest, fairest, most progressive corporation in the country today." This corporation, while probably the most criticised of any, is the most ably managed, and the employes' profit sharing plan is one of the most efficient in use today. You seldom, if ever, hear of strikes or troubles at any of their plants, and it is simply from the fact that their workmen, most of whom are directly interested in the company, in owning shares of stock which the company has allowed them to buy at special prices, are treated with consideration and are paid in accordance with what they all produce as well.

Many plants, that in former times paid big dividends, have not been able to pay a nominal one of late. When

questioned as to the reason most of the managers are unable to solve it and think that by reducing wages they can increase their earnings to some extent. If they could only get the proper viewpoint, and look beneath the surface, they would see one broad principle that they entirely overlooked. It has been aptly said that the Standard Oil Company is "poor" on getting the price for their product, but that they are most efficient in reducing cost. Have you ever thought of that? They do it by increasing capacity and by efficiency.

It all resolves itself down to the fact that a man must work and live. He must have the daily necessities of life and a little of the luxuries as well. Put him on the same job day in and day out, hour after hour, at the same pay, and you have a piece of machinery that is growing older, and doing less and less work. Put the incentive before him, however, and your machinery springs into life and takes an interest in the work before him. He is going to think out new ways, so that he can increase his employer's profit and thereby increase his own. Personal profit is the mainspring of energy-it is the incentive the desire for profit. It also means that we will have new efficiency and intelligence and the standard will be raised accordingly.

The bonus system is the only answer. It is necessary to the factories today, whose accounts are showing up on the wrong side of the ledger. Business conditions are not to be blamed for more than 50 per cent. of the failures, and if each were looked into it would prove this statement conclusively.

WOODWORKING PLANT COST SYSTEMS Fundamentally They Should Be Made to Determine Efficiency, Which is More Important Than Mere Cost Finding---Simple Systems at Beginning


IN CONSIDERING the installation of a cost system,


a great many of those in control of productive organizations regard it only as a matter of finding the cost of the product, entirely losing sight of its second and no less important function as a definite record of the efficiency of each department, its use in this direction being based on the records from which is obtained the labor cost of articles produced or of work executed.

Many manufacturers fail to realize that the records secured are not an end in themselves, but rather a means to an end. Finding the cost of individual articles is only one and not the most important of the uses to which such records should be put. They fail utterly in their real value and usefulness unless in their final and ultimate results, the entire system is an influence towards cost reduction and consequently towards greater profits than would be secured without them A manufacturing business is simply a productive tool; the efficiency of the entire organization is its cutting edge; and a cost system designed and operated to meet the particular conditions of each individual case, the information secured intelligently presented, and carefully considered and acted upon, is the best possible means of keeping the cutting edge in proper condition. So thoroughly is this realized by at least one of the most progressive furniture manufacturers in Eastern Canada that he has repeatedly stated to the writer that his cost system, valuable though it is in deter

mining the actual cost of each line manufactured, is of much greater and of more "dollar and cent" value in following up and devising means of improving the efficiency of the different departments of his factory.


Failure to realize this results in many cases from a wrong interpretation put upon the word "Costs." half a dozen manufacturers in the same industry what they understand by the word and if they answer off-hand, you will likely receive as many definitions. In its broad, but legitimate, sense, a cost system should cover all the expenditures of a manufacturing company, whether for construction, maintenance, production, selling, or administration and control. Unless all of these are included in its records, it is not a complete factory cost system.

In woodworking, as in other industries, cost of product is represented by the wages, materials, and other expenditures, incurred in converting raw materials into product laid down in the stock-room in a finished and completed state. In some instances, as in the case of a furniture factory in a small town, practically the entire output of which must be crated or packed for shipment, cost of product may quite correctly be taken as covering all expenditures up to and including delivery to carrier, though under other circumstances this might be inadvisable.

So far as labor cost is concerned, there are three main types or kinds of cost systems, and the cost-finding

methods in use in any factory will, if analyzed, almost invariably be found to be included in one of these types, or else to be based on a combination of two or all of them. For want of better names, these types of cost-finding methods may be considered as follows:

(a) Job Order System.

(b) Pre-determined Cost System.

(c) Operation and Specification Cost System.

The Time Basis

The basis of the job order system is the recording under some specific number or name, the time taken by workmen for the manufacture of an individual article or lot of articles, then extending the time worked at the proper rates per hour. It does not matter whether this information is noted by the men on an old envelope or piece of wood, and then grouped together, or if it is gathered by an elaborate system of official orders, time tickets, and cost sheets--the principle is the same in both cases.

The pre-determined cost system is operated by establishing the anticipated or expected cost of articles by tests or estimates. The total "labor-value" of the output for a given period figured at these anticipated costs is then compared with the total wages paid during the period, the difference, if any, being divided pro rata on each article produced or item of work done.

The principle of finding labor costs by means of operations and specifications, consists of finding the labor cost of each operation regardless of articles or lots, and dividing this cost by the number of quantity of the logical production unit applicable to each operation, then figuring costs of individual articles by means of a specification showing the number or quantity of each such labor production units it contains.

Determining the Best Plan

The nature of the business and the circumstances of each individual case must determine which is the best plan to adopt. There are, however, certain very material advantages to be secured by the last method, that is by finding costs of operations and then distributing them on individual articles. The possibility of applying this plan and the advantages of doing so are perhaps more evident in connection with the manufacture of product which is chiefly or altogether composed of wood than in industries concerned with other materials; more particularly is this the case in relation to the machine shop operations of a furniture or a chair company engaged in continuous production of staple lines. Under such conditions, when the machine shop is working at high pressure, instead of being engaged in manufacturing furniture, it is actually occupied in continuous production, the output really being so much cross-cutting, ripping, planing, sand-papering or any one of the large variety of operations. Looking at it in this light and with due regard to the impossibility of identifying the particular article or lot of articles on which a certain amount of these various operations is applied, it would seem that for the machine shop at least, working under the conditions assumed, the operation and specification method of finding costs is the logical one to apply.

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The total wage cost of each operation may be found by putting a time card covering the pay period on each machine or operation and noting on the back thereof the quantity of each lot put through. Such quantity will, of course, be expressed in each case in the production unit decided upon for each of the operations At the end of the pay period the time on these cards is extended at the rate of the man or men on the machine or operation, the result being the total direct labor cost.

Indirect Machine Shop Labor

Indirect machine shop labor is taken care of by finding the difference between the total of the direct labor costs as reported and the total of the machine shop payroll. This difference, covering such items as moving stock in process, etc., is distributed as a percentage on the direct labor costs of each operation.

By making up a specification of each line of product regularly made, showing the amount of lumber in each part and the operations each part has undergone and then pricing and extending the total amount put through each operation, the machine shop labor cost of the article is established. Its accuracy is proven by the fact that the total pay for each period is absorbed by the total output of each operation extended at the price used.

In referring to the operations submitted as illustrations, and the units of production adopted for each, it will probably be objected that an average per piece for certain operations is not correct as one piece may require three times as long for the same operation as a smaller or plainer piece. This point is provided for by arranging those parts on which the production unit is taken as being "per piece" into classes, and obtaining records of the cost of operations in the machine shop on each class. For instance, the catalog of a company making, say one hundred lines of wooden chairs, will show in most cases that so far as the backs are concerned they may be divided among perhaps five or six different classes. Similarly, as regards such operations as trimming to length, additional cards for the different classes or kinds of articles undergoing this operation are put into use and the resulting costs put on record. A specification of each article will, of course, show in itself which class the parts so treated belong to and thus the proper and correct cost for this operation will be available.

For purposes of illustration, a company manufacturing wooden chairs may be considered. It is evident that the same unit of production cannot be applied to all the machine shop operations, but if the logical unit of production for each can be determined, a specification made up for each line of chairs manufactured, and the cost per unit of each operation ascertained, the problem of Having operated a cost system in the machine shop for labor cost is solved and in addition a reliable barometer/ a number of periods, the average cost may be taken and In the machine_shop of such a factory as that under☛ a cost sheet for each article carried in the catalog of efficiency is established. made up. The form of machine shop operation cost sheet

The Final Conclusion

submitted herewith is suggested for currently recording operation costs each period. In one particular case it is the practice to make up the average cost of each operation for three months, comparing it with the rate used the last time the cost sheets were made up. It is thus readily seen every three months if changed conditions necessitate an advance, or justify a reduction, of the selling price; and in addition the information shows whether each of the different operations of the machine shop is increasing or decreasing in cost, thus determining whether the efficiency of the shop is improving, remaining stationary or retrograding.

A further advantage of this method of securing labor costs is found when prices are asked for a sample chair, or the manufacture of a new line is contemplated. After making up a specification of the article being considered, the machine shop labor cost of making it may be figured as correctly as though it had been regularly manufactured for months.

In planning for the installation of a cost system, I

would like to emphasize the fact that the usefulness of many otherwise excellent and efficient systems, has been lessened, if not entirely destroyed, by too much detail. A cost system is in itself not an end, but a means to an end, and effort is wasted and usefulness lessened in direct proportion to the amount of unnecessary or unused information it obtains. While it may be well, even when the installation of a cost system is first undertaken, to plan for all details which will ultimately be required, it is not advisable to try to put it into operation in complete detail at the beginning. After an experience extending over a good many years, installing systems for different industries, it is the writer's belief that the installation in a factory of any considerable size, should be undertaken as two distinct problems and at two definite periods not less than six months apart. The systems should be planned in full, but only the essentials at first put into effect, and the elaboration and carrying out of details taken up at a later date; that is, first build and be sure the foundation is right, then erect the superstructure.


The Lumbermen and Users of Woods, as Well as Botanists and Scientists, Have Much to Say About the Title by Which a Wood Shall Become Known


T IS much easier to name a tree than to change the name after it has been accepted by persons well acquainted with it. One of the best examples of this is yellow poplar. Bontanists have tried long and hard to prevail on lumbermen to call this "tulip-tree." That is a good, descriptive name, from the botanists' standpoint. It is the only tree in this country that bears a flower which resembles a tulip, and for that reason the name would define the tree without any probability of confusion. The United States Forest Service threw the great weight of its influence on the side of the botanists fifteen years ago. When Sudworth's Check List was published in 1898, it sanctioned the use of the name tuliptree as official.

The change of name never became popular with lumbermen and users of wood. They refused to call it by the new name. In fact, few lumbermen to this day understand what tree is meant when the name is used. The term yellow poplar is so firmly fixed that change to anything else is improbable. In some regions, however, it is called whitewood. This is particularly true in New England. The same name, however, is often applied to basswood in the same regions, and confusion is quite probable; but yellow poplar means one tree and no other.

Trees which lumbermen name are nearly always named because of some prominent characteristic of the wood. Names bestowed by botanists usually describe some feature of the leaf, fruit, flower, or bark. The wood is the only thing with which the user is concerned. It matters little to him what its shape or size of the leaf or flower may be. On the other hand, the botanist seldom looks at the wood, but gives all his attention to foliage and other external features.

Explanation of Various Names

If these facts are borne in mind, many of the double or numerous names of the same tree can be accounted for. For example, Sudworth's Check List, already referred to, contains approximately 500 trees which grow in the United States, and these trees have 2,414 English names, besides


several names in Latin without any English equivalents. This amounts to about five names for every tree, on an average. If a person will go over these names, one by he can usually pick out the names bestowed by users and those given by botanists. For example, white pine is a lumberman's name, but white bark pine is a botanist's; net leaf oak is a name devised by a botanist, but post oak is a woodman's term; lance-leaf alder is plainly a name bestowed by a man who was looking at the foliage, but red alder's name was given by users of the wood.

Useful Woods Named by Woodsmen

As a general thing, trees which are of small commercial use carry names given by botanists; but those of importance in lumber transactions bear woodsmen's names. Attempts to change names in common use are not usually successful. The failure of the effort to induce users to call yellow poplar by the name tulip-tree is an example. Another that has been equally successful is seen in the case of soft maple. Botanists want that tree called silver maple on account of the color of the leaves and bark. Nurserymen have made the change. When they sell soft maples for shade trees in yards and along streets, they sell "silver maple"; but when a lumberman buys or cuts the same tree growing wild, he calls it "soft maple." The name silver maple is probably never found written on the records of a sawmill or other woodworking factory. From the standpoint of exact definitions, the botanist's name is preferable, because there are several species and varieties of soft maples, all considered as one by lumbermen, but botanists insist on a separate name for each.

Rock elm is another case to the point. There is no question that more than one elm sometimes passes by that name in lumber yards, but the tree commonly considered as rock elm is the Ulmus racemosa of the botanist, which is most abundant in Michigan and Wisconsin. Botanists insist that the tree should be called cork elm, and it is so named in Sudworth's list of trees. That name naturally suggests itself to one who examines the living tree, because the lumps of bark on the limbs are easily seen and sug

gest knobs of cork; but the lumberman who handles logs or lumber sees no cork, and the name means nothing to him.

The hardness of the wood, however, does mean something to the man who uses it, and in recognition of its hardness he calls it rock elm. Attempts by non-users to have the name changed to cork elm have met with no success. The name is practically unknown among the users of the wood.

A similar situation exists in the case of "rock oak." Botanists do not recognize that as the proper name of any tree, yet at least three oaks are occasionally so called by lumbermen. That to which the name is usually applied is the Quercus prinus of botanists (chestnut oak). Its leaves resemble those of the chestnut, hence the name; but the user of the wood cares nothing about the leaves. Hardness and strength are what appeal to him, and he prefers to call the wood rock oak, occasionally designating it "iron oak," by which term he translates his idea into words.

Tupelo is another instance of lack of success attending the efforts of botanists to change the name of a tree to which lumbermen had already given a name. If one observes the crown of a tupelo tree in spring when leaves are young, the whole top looks as if it were sprinkled with cotton. It is the hairs on the leaves. It is a conspicuous feature and one which might reasonably be con sidered in naming the tree. It would be supposed that the botanist who gave the species its technical name (Nyssa aquatica) would have thought of the cotton and devised a term which would have recognized that conspicuous feature, but he did not, for some reason. The Latin name which he bestowed on this, the largest and least graceful of the gums, might be liberally translated "water nymph." What suggested such an incongruous name is not now known.

Users of the wood, from the days when its chief place was as "back-logs" in Southern cabins, called it tupelo, a name bestowed by some forgotten, untutored, wild Indian "botanist" who had his eye on the fruit. The name, when once adopted, stuck to the tree, and it is popularly called tupelo to this day.

Modern botanists recognized that the original name giver had missed an opportunity when he forgot about the cotton on the leaves; and they appealed to lumbermen to correct the oversight as far as possible, by changing the commercial name from tupelo to cotton gum.

Lumbermen have not acted on the suggestion. Statistical reports compiled by mills and factories seldom use the term cotton gum, and there is no reason to suppose that they will do so. Tupelo seems to be a fixture in lumber nomenclature.-Hardwood Record.


A Prescription for Sick Business

HE varnish trade needs doctoring-there's no question about that. It has the low-price disease; and it keeps itself lean and feeble with constant doses of that slow poison, just-as-good-for-less-money.

This disease, like all the diseases of business and of men, is the natural result of ignorance. So many people do not think of varnish as having a service value, as protecting the wood or the metal from decay, as preserving the paint or color or the beauty of the wood graining. They think of it only as having a deceptive value, as giving things a shine for a little while, until they can be sold.

Looking upon it as a make-believe, they want it cheap; and they push dealers into the downward competition, the struggle to undersell; and that drives the varnish maker to the cutting of values.

Because so much of the stuff is poor, people buy as little as they can; dealers regard their varnish trade as a kind of nuisance.

The cure is knowledge. Dealers and their clients must know the real values of fine varnishes, and must teach their customers. Then they will have the solid and lasting trade which is built upon quality, upon the satisfaction of users, upon the reputation for service, upon the fact that fine varnish costs less in the end.-Murphy Varnish Company, by W. S. Crowe.


Introduce Profit Sharing

QUALLY generous in proportion and somewhat more economically based than the profit-sharing plan of Henry Ford, if press reports are to be accepted, is the employes' benefit system to be inaugurated by the Home Furniture Company, of York, Pa. Workmen forgot to punch the time clock and clustered three deep about the bulletin board of the Home company on January 21, when the following notice was published:

"The Home Furniture Company, after careful consideration, has decided to recognize its employes in proportion to their faithfulness and efficiency by giving them a share in the profits. The company offers to present to each employe in its employ at the close of the year 1914 3 to 5 per cent. on the total amount of the wages received by such employes from the company during the year


"The company does not obligate itself to extend this recognition to its employes. It is subject to the faithfulness and efficiency of the employes and depends upon the successful outcome of the year's business."

According to report, the pay roll of the Home Furniture Company exceeded $50,000 during 1913 and is expected to increase during the present year. From the standpoint of the employe, the Home plan is not open to criticism. The workman, in addition to the receipt of the amount he has hitherto considered just return for his services, will share in the distribution of the profitdividend as extensively as he himself determines. From the company's viewpoint, the proposal is essentially more safe than mere philanthropic largesse. The profit-sharing will be sound because it will be merited-a deserved reward in return for the ambition and industry it has itself created.


A Booklet on Lumber Drying

HERE has been compiled by the drier department, engineering division of the A. H. Andrews Co., Chicago, manufacturers of dry kilns, a booklet on the "Principles of Lumber Drying and Practical Advice to Dry Kiln Operators," which may be had without charge upon application.

The fact that the most recent publication of the A. H. Andrews Company is designed to support their efficient methods of dry kiln installation and instruction service, detracts no whit from its value to the practical worker in wood. In addition to the explanation of the thorough investigation policy of the manufacturers and publishers, conditions of dry kiln operation necessary to effective results are described.

The booklet contains suggestions on air circulation, heat, humidity, kiln types, loading, actual drying, testing and kiln records that will appeal to the kiln operator in any association.

SOME day we will very likely have a splendid furniture trade with Mexico, better than the old-but that day seems mighty backward about coming into view.

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