Chapter XV EFFICIENCY PRINCIPLES APPLIED TO MEASUREMENT AND CURE OF WASTES
(Harrington Emerson - The Twelve Principles of Efficiency)
The ideal that inspires the formulation of the principles of efficiency is elimination of waste, wastes of all kinds.
Elimination of all wastes may indeed be a Utopian ideal, not to be realized in the life of our planet, but any waste elimination brings its immediate reward.
The ideal of the Twelve Efficiency Principles is waste elimination, and to this end they have been formulated.
No navigator, whether pirate or merchant-man, can make best time for himself and his ship who does not know great-circle courses, the shortest path from port to port, who does not modify his course as little as possible on account of intervening land, shoals, adverse winds, or currents. No man can achieve greatest success for himself, whether a farmer of great wealth or captain of industry, who does not eliminate wastes from his own operations.
Why should we formulate principles?
Caesar, Hideyoshi, English statesmen, the founders of the United States, Napoleon, Bismarck and von Moltke, transmitted organizations founded on principles. Most American industrial plants and business houses have come to grief in the second generation, and even corporations resting on special privilege like railroads and street-car lines, have passed into receivers' hands and undergone drastic reorganizations. In trying to control the great corporations, our captains are governed by intuitions not by principles. They maintain disastrous and wasteful competition when what is wanted is principles
that would work for elimination and equitable distribution of the immense gain.
Will the United States Steel Corporation endure? Not unless it succeeds in substituting principles, efficiency principles, for the intuitions of Carnegie, of Schwab, substituting efficiency principles even for the intuitions of that great genius, J. Pierpont Morgan.
It has often happened that in industrial plants where high efficiencies were being obtained, visitors confounding system with efficiency have come, have collected devices, cards and forms, have gone away supposing they had the secret of efficiency. It is as if a man should appropriate a lawyer's library and think this made him proficient in the law. There are millions of devices, forms, cards; no one can grasp them all, understand them all, and the chances are that not one of them will exactly fit in an untried place, even as no eye-glasses exactly suit any other pair of astigmatic eyes.
When, however, all the devices and methods can be collected under a few heads — ten, twelve, fifteen; when it is possible to show that a few principles cover all the possible devices — then the thinker can work backwards and ask himself what devices or methods or plans has he that will maintain (for instance) ideals, or that will give him reliable, immediate, and adequate records.
It is easy to test the efficiency of a plant because inefficiency is due to one of two causes. Either the principles of efficiency are not known, or they are not applied. If the principles are not used, high efficiency is impossible; if they are theoretically approved but not applied, high efficiency is also impossible. One of the main purposes of the principles is to give instruments of precision wherewith to test efficiency.
In going into a plant, seeing the evidences of great inefficiency, the first step is to find out what is ; next, to set up standards; then to insist on the use of the principles, first to test the administration, and then to direct the plant, knowing with absolute certainty that if they are applied by a valiant and competent man, standards will inevitably be attained. There is, of course, no absolute and final standard. The standard initially adopted is always one plainly within sight, easily attained. A standard of 54 miles an hour from New York to Chicago is attained today; it would have been ridiculous twenty years ago. A speed of 25 knots an hour across the ocean was planned for and attained by the Mauretania and Lusitania; it would have been absurd in 1862, when the fastest steamer took 9 days and other good steamers were 12 to 13 days on the ocean. Having ascertained what is, having set up standards, the plant manager and his counsellors ought not to go out and collect forms and devices and cards, ought not to install clocks and devices and checks, systems and methods, but ought to go into retirement and search their own minds and hearts and by some device or method test the extent to which they can apply principles. A convenient device is to assign a score card to each principle, to draw on the card a checker-board of a hundred squares, and by marking out squares record his judgment and that of other experts as to the extent to which efficiency principles are being applied.
The questions are not as to the number of employees, or whether the buildings are brick or wood, the equipment new or old, the employees men or women, white or black, free or unionized, nor where the plant and what the product is ; but the first question is, "What are the ideals?"
To illustrate the method we can tentatively apply it to the greatest industrial corporation the world has ever seen — the United States Steel Corporation. From every point of view it ranks high, higher than most corporations. Organized only ten years ago, it started with the ideals of 1901, and if we have any belief in progress these were higher than the prevailing standards when the Standard Oil Company was struggling to the front. There is as much difference between the ruthless methods of the old Standard and the friendly dinners of Judge Gary as there is between the "eye for an eye" of the Old Testament and the Golden Rule of the New Testament.
Twelve years ago the steel business of the country was greatly disorganized. Every man did what was good in his own eyes. There was always a feast or a famine, very profitable or very ruinous prices; it had become an axiom that the condition of the iron trade was an in-fallible barometer of general business conditions. Very able men, financiers, lawyers, great steel producers, combined to bring order out of chaos, and the United States Steel Corporation was formed. It has been managed with great prudence and wisdom, perhaps with as great wisdom and prudence as industrial knowledge at that time made possible. It has recently been investigated and it is interesting to gather from the mass of testimony the ideals of both investigator and investigated.
The ideals of the Corporation seem to have been :
(1) Law abidence.
(2) Rational publicity.
(3) Steady prices at a high level.
(4) Maximum tonnage.
(5) Permanence for its own business by the purchase of large ore and coal reserves.
(6) Rapid improvement of the properties so as to make them worth the capitalized value.
(7) Maintenance of a high level of wages.
(8) Identification of the worker with the profits of his work, thus increasing his interest in his occupation.
These ideals are summed up by Judge Gary in a declaration in an address at Brussels to 160 representatives of steel interests in Europe and America, in which he declared that "There should be established and continuously maintained a business friendship which compels one to feel the same concern for his neighbor that he has for himself. It is nothing less in principle than the Golden Rule applied to business/'
Critics have carpingly suggested that the principle should be called "The Golden Rule Limited'' since it takes no account of mankind outside of steel. This is both unjust and narrow. The actual price of anything is not important, the relative price is, and even more important is it that relative prices should not fluctuate but gradually sink compared to labor. It is the immense merit of the Corporation that it has maintained prices of products and compensation per hour of labor, also that by eliminating useless wastes in selling and in fighting competitors it has been able to make good the ideals of corporate value set up in 1901.
The criticism ought not to be that it has eliminated several hundred million dollars of waste without any detriment whatever to the Commonwealth, but that it has not been able to eliminate more waste, and from the gain not only add to its own profits but also gradually lower price of products as measured in dollars, and increase the compensation, measured in dollars, of efficient workers, thus doubly adding to the purchase power of wages efficiently earned.
It will be interesting to use the United States Steel Corporation as a concrete example of the way the principles of efficiency might be of service to those who direct and administer large corporations.
Waste elimination in production expense has not yet become one of the effective ideals of the Corporation. Does it cost less or more to produce steel today than it did twelve or fifteen years ago? Is it not costing less per ton to transport freight, less per mile to transport passengers on the railroads, than it did fifteen years ago? Has the Steel Corporation attained a present rational low limit of cost of production ? If it is not applying systematically all the principles of efficiency to every minutest operation, then naturally its costs are unduly high, and if it did apply these principles, its costs would be lower, with gain to all !
The Corporation has not applied the principles firstly because there were other vital and elementary problems more pressing, and secondly because the principles had not yet been formulated and their value to a very limited and almost unknown extent been demonstrated by F. W. Taylor, H. L. Gantt, James M. Dodge, W. J. Power, E. E. Arison and many others.
If the United States Steel Corporation were to be checked up by efficiency principles, ideals would be first formulated that would be of universal application, and the lesser ideals of the Corporation would be checked up in comparison. By this test as to the first principle, Ideals, it would be given high credit for some, fair marks on others, and as to others it would be found very defective. It could not be otherwise, since there have been men highly connected with the Corporation in whom the public could not have any general moral confidence either as to their comprehension or execution of ideals except of the lowest order. Tonnage, the shibboleth of steel production, is a low ideal working havoc in more ways than one.
Common Sense, the Corporation has steered a remarkably wise course along a channel beset with many difficulties and with the materials at hand wonders have been accomplished. The Corporation is vulnerable only to small degree for what it has done, but to a large degree for what it has not done. It is not by any means as up-to-date as a modern American battleship which an concentrate repeated heavier salvo fires on a target at a greater distance in a shorter time than any other battleship in existence.
Competent Counsel. Here again there appears to be deficiency of omission. Counsel has been taken in many directions, legal, financial, political, technical, but in other directions competent counsel has neither been invoked nor secured because its need was not realized.
In one Pittsburg shop there are fifty-six different nationalities employed, men of many different races. In London there has just met a Universal Races Congress with delegates from all nations and all the races in the world. (I know private American businesses that have sent members to this Races Congress in order to be better prepared to handle the race problems that occur in American shops.) Is the Steel Corporation represented there? If not, how could it afford to miss the opportunity ?
Discipline and the Fair Deal, recognized as principles, have both been conspicuously insisted on, and both are intensely desired by the Corporation in spite of local murmurings and occasional sore spots, occurring solely because the principles have not been worked down far enough*
When it comes to the application of the principles of Reliable, Immediate and Adequate Records and of Determination of Standards, the Corporation does not rank high because it is only a systematized business, not one scientifically managed, because it has not yet emerged from the antiquated standards of accounting so beautifully developed by the Venetians shortly after the adoption of Arabic numerals. The old principles of accounting plainly in evidence in a modern bank are three in number: (1) Destination; (2) authority; (3) balance.
In a deposit bank it is imperative to know where to credit a deposit, the destination of the account ; it is so imperative to have proper authority for drawing out money that if a man's wife, or partner, or best friend attempted to check on his account the bank would be horrified and call on all the minions of the law to prevent and punish such sacrilege. The bank is happy when as to the whole and as to each account there is balance.
These ideals are fine, important and desirable, but wholly inadequate. The bank does not care how the depositor acquired the money nor how he spends it after it is withdrawn. Its supervision covers a very limited field. It is this limited field that corporation accounting has to date covered. It is not broad enough.
In the Illinois Central Railroad car-repair frauds under which the road lost about $5,000,000, destination was perfectly observed, for bills were charged to definite accounts ; also as to every voucher authority was forthcoming, each being approved by some official; finally there was perfect balance between vouchers and expenditures. When the frauds were revealed, President Harahan pathetically mourned that trusted friends had deceived him.
The modern cost-accounting fundamentals are Standards, Efficiencies, Equivalents. The Lusitania in crossing the ocean steams a measured number of miles, in a recorded time. To do this requires about 60,000 horse-power, each horse-power hour requires a pound and a half of coal. I know nothing of the records of the Lusitania, I have never seen any of them, but off-hand I can estimate that it takes about 1,000 tons a day to run the ship. This is a standard, not a record.
There is, as to the Lusitania and all other large steamers in regular service on definite, fixed and measured courses, a predetermined standard of expense for coal ; and against this standard, actual consumptions are checked, or may easily be checked for every voyage, closely compared, and keenly scrutinized.
If the Illinois 'Central had had standards for car repairs, any standard — $31 per car per year as Turner attained on the Pittsburg and Erie; $35 per car per year as Van Alstyne attained on the Northern Pacific; $42 per car per year as some railroads might think sufficient; $56 per car, an amount that any competent investigation will show to be too much; $70 per car per year, about the average of all the railroads — then the Illinois Central repair cost at the rate of $140 per car per year would be judged as having lot waste.
Repairs per freight car owned may be a defective unit to measure and compare, but the illustration holds good, as any other unit, repairs per car mile, would still show Turner and Van Alstyne in the lead, the Illinois Central far behind.
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and there would have been instant inquiry by officials, by Wall Street, by shareholders, by Interstate Commerce Commission, by rivals and critics, as to the why and wherefore of the low efficiencies, as to the absence of equivalence between moneys spent and results obtained.
The United States Steel Corporation has records of productive cost which it may think are standards, but they are not; they are mere records of what has been accomplished in the past, and there is absolutely no direct connection between what has been and what ought to be. Records grope in the past, standards reach into the future, ultimate standards are always ahead of what has ever been. Practical standards hang like stalactites from the roof of ideal standards, records are built up like stalagmites from the floor of actual performance ; it is only when stalactite tip and stalagmite tip join and fuse that both become a column of efficiency strength. Does the Steel Corporation know as to every detail what ought to be as well as it knows what has been? If it does not, it is merely systematized; it cannot measure its losses, and where there is no standard there is inevitably waste, and very great waste.
We next consider the application of the principles of Standardized Conditions and Standardized Operations. Are conditions standardized to the same extent as in a railroad track, as in railroad cars and locomotives, always maintained in a high degree of efficient repair, because life is at stake if they are not?
Poor belting, poor abrasive wheels, poorly maintained machines, delayed deliveries of material, do not endanger life in the operation of an industrial plant; therefore nobody cares very much, and because nobody cares, because no alarm clock goes off, lax and slack conditions prevail. It is not even necessary to prove that laxity and slackness exist; the legitimate assumption is that they do unless the contrary is proven.
An eight-year-old child who has never been to school presumably cannot read, and to prevent arrest by the truant officer proof of efficiency has to be furnished by the parent to the municipal authorities. So with corporations who have not learned the alphabet of efficiency. In the Corporation have single operations been standardized, not only the centralized, supervised and oft-repeated operations, but also the decentralized, unsupervised, occasional operation?
Continual hammering on the same spike will ultimately sink it into very hard wood, it is an oft-repeated operation; but it is much harder to throw a stone straight. Therefore we hammer as did prehistoric men ; the operation was almost as perfect then as now; but we have had to develop a staff of thirty men working all together to standardize such an unusual operation as throwing a 1,000-pound shot at an enemy's vessel.
Has the Steel Corporation so standardized conditions and operations as to enable it to draw up Standard-Practice Instructions covering all details? No one standardizes without reducing the standards to written form. The object of surveys is to make maps, more or less elaborate, that all may profit. If there are no maps of a region it is safe to assume that there are few and imperfect surveys. By its collection of standard-practice instructions the Steel Corporation could demonstrate its efficiency status, whether very elementary or far advanced. With a good chart in his hands one captain can replace another without danger even in risky waters. In industrial plants most of the charts are under some foreman's or worker's hat, and it would not be possible (as it ought to be) , without loss, to walk in a new industrial army, privates and officers, and take up interrupted work, without delay or loss.
As to the next principle, Despatching, it is undoubtedly applied by the Corporation on a wholesale scale but not in detail. Large steamers laden with ore are regularly despatched from the far end of Lake Superior to the lower end of Lake Erie. Big apparatus is used for loading and unloading these steamers; but is each scoopful handled with the maximum of efficiency? As railroads have found out, it is quite as important to despatch passengers into trains and out of them again as to despatch the trains. In the despatching of minor operations all except standardized industrial concerns are weak.
Finally we come to the principle of Efficiency Reward. As to every human effort, for the highest result and for joyful, healthful effort, three conditions must prevail :
(1) There must be pleasure in the work; it must be a game, not a task; it must be what learning to ride on a bicycle or learning to skate is to a boy, or learning to dance is to a girl, or playing golf is to the elderly business man, or auto speeding to the automobile driver.
(2) There must be a definite end in view, a definite accomplishment in a given time, not a vague, never-ending grind. We are not accustomed to endless day or end-less night; both are depressing, and so also is a perfect unchanging climate or sea. Men want change, always change, the sting of the blizzard with the certainty of the broil of the camp fire at the end of the tramp. The ordinary man will scarcely hold his breath a full minute, but if trained by a single lesson and nerved to a definite task, timing himself, he can hold his breath for a minute and a half, for two minutes, for three minutes, or even for four. He acquires form.
(3) Form is the third requisite for easy, graceful, pleasurable work. Compare the skilled skater with the novice, compare the skilled man riding horse or bicycle, scarcely a muscle in use, with the frantic efforts of the learner, compare the dexterity of the juggler with the clumsiness of the imitator.
The Steel Corporation has installed the plan, the duty of profit sharing, but has it recognized the principle of Efficiency Reward in the great army of its workers ? Has it set up a standard task in a standard time? Is there immense joy in each one's work ? Is there perfected form in doing the work?
Minimum effort put forth in best form to attain a standard in definite time gives the joy of work, and this joy is added to the pleasure of securing the special reward for proficiency. Are these the conditions under which the steel workers labor? If not, the workers cannot be efficient and wastes are occurring.
Whether we check up the making of a pin and its cost or the operations for a decade of the greatest corporation in the world, the same methods can be applied to reveal weaknesses and to show the need of special remedies. The principles of efficiency are to the industrial plant what the principles of hygiene are to life. If man, woman or child does not have constantly changing air of sufficient purity, an abundance of good food and water, plenty of exercise as well as rest and sleep, constant keen interests and sudden changes, health will suffer, no matter what the occupation.
No matter what the occupation, no act is efficient if the principles on which efficiency is based are lacking.
Benjamin Franklin - Habits of Living - Based on Principles
Franklin collected thirteen principles to cover the small amenities of daily life. They were: Temperance, silence, order, resolution, frugality, industry, sincerity, justice, moderation, cleanliness, tranquility, chastity, humility. Each week he picked out one and practiced it diligently, thus creating a habit. Each year he practiced each one a full week in each quarter, thus covering them all four times each year. He kept this up for many years. The uncouth Franklin of early manhood who found fault with his wife for giving him a silver spoon and a china bowl for his bread and milk instead of a pewter spoon and earthenware crock, developed into the statesman and man of the world who won the respect of Englishmen, the admiration of Frenchmen, and the gratitude of Americans. In a similar way ought the principles of efficiency to be applied and reapplied.
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Commentary
KVSSNRao
It is interesting to note that now philosophy of lean system is said to be Elimination of Waste.
Updated 7.2.2024, 12.11.2021, 19 April 2015
3 October 2013
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