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 manufacturing 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 machinery that must be shipped from the
assembling floor, this expense is usually charged to manufacturing.
EXPENSE DISTRIBUTION CHART
=23.= To present a graphic record of expense distribution, the chart,
Fig. 8, is used. This chart separates commercial and manufacturing
expense, showing amounts, while Fig. 7 shows to which branch each item
belongs.
This chart subdivides commercial expense into _executive_,
_accounting_, _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 department.
The distribution will naturally vary in different businesses and,
before this chart can be prepared, the exact distribution must be
determined. In this chart, packing and shipping is included as a
commercial 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.
[Illustration: Fig. 7. This Shows How Salaries and Wages are
Apportioned to the Two Principal Divisions of a Business]
[Illustration: Fig. 8. This Chart of Expense Distribution Shows the
Amount of Executive and Administrative Salaries, and Expense of Every
Class, and Their Correct Apportionment]
EFFECT OF PHYSICAL ARRANGEMENT
=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 financial
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, about 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 deserving
of careful study by the student of business organization. While some
hard-headed business men may regard the question of minor importance,
it is significant that the largest and most successful enterprises,
financially, are those in which employes have been supplied 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 be 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 factory. It should, if possible, be close to the
department in which the material is subjected to the first operation.
The shops themselves should be arranged to facilitate the movement
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.
Likewise, the machine shop, if the process be continuous, should be
located next to the assembling department. Or, if a "parts" storeroom
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 materials through the shops to
the finished goods storeroom, 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. Where 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 impossible 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 problem for engineers,
a number of cases might be cited where the accountant, called in to
systematize the accounting methods of a manufacturing 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.
[Illustration: Fig. 9. Layout of a Typical Manufacturing Plant]
Logical arrangement of the office has as great an influence on the
economical conduct of the work as does the physical arrangement 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
employed 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 placed 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 eyesight 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-communication 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 department, with which it
is in constant communication.
The workers in a department should be placed to facilitate the movement
of their work from one desk to another. Heads of departments or chief
clerks should be within easy reach of all employes in the department,
and accessible to the executive.
Offices of executives should be located with reference to their duties.
The sales manager and purchasing agent should be accessible 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 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 departments.
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
departments 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
accessible to the public 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
patronage.
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
today.
[Illustration: Fig. 10. Floor Plan of a Modern Administrative Building]
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,
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, prepared to
meet the usual demands of a store of that character.
The department store of today is a model of systematic arrangement.
Not only are the goods grouped in departments, but the departments 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 recognized
department 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. Goods are classified, 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 inaccessible corners are
reserved for goods called for less frequently.
THE COMMITTEE SYSTEM
=28.= We have already referred to the necessity of coöperation in every
successful organization. We do not wish to be understood as advancing
this idea of coöperation 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 coöperation of every workman, no matter how obscure
his position, and to secure this coöperation it is necessary 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 coöperation. The problem of securing
this coöperation 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 appreciated.
No matter how willing you may be to receive them, the workman 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. Experience 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 superintendent,
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 departments.
The work of this and all other committees must necessarily be adapted
to the requirements of the business, but, as a general proposition, the
matters to come before the committee may be stated as follows:
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.
3. 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
orders.
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 personal
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 manufacture
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 departmental
committees. The committees will be composed of the foremen interested,
the tool room foreman, and the head of the cost department.
The work of the committee, so far as relates to a particular
department, will be very similar to that of the general factory
committee. The discussion will cover:
1. Standardization of product and suggestions for new designs.
2. Progress on improvements already started.
3. 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 foremen,
with the superintendent, for the discussion of problems of a general
nature 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 superintendent. 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 committee 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
important 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.
5. Discussion of proposed new product.
6. 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 customers'
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
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 committee. 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 other 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
advertising should be based on the cost of actual sales, giving due
consideration of course to the season of the year, general tendency of
the times, and other factors which might temporarily have a disturbing
influence.
=34. Organization Committee.= Another committee of importance, which,
for convenience, we will call the organization committee, is one which
discusses all questions pertaining to accounting and record systems.
This committee will be headed by the comptroller and will include the
sales manager, advertising manager, credit man, purchasing agent,
and superintendent. Sometimes it will be advisable to call into the
meetings the chief accountant, cost clerk, stores clerk, and even shop
foremen.
As indicated above, the chief work of this committee will be a
discussion of systems. While the comptroller prescribes all systems of
record, reports, statistics, and accounts, he should make no radical
changes without discussing the proposed change with those whose work
will be directly affected.
Many systems, good in theory and which with coöperation would work
out in actual practice, have failed because they were forced on the
business. A systematizer may install a good system and get it into
operation, but unless he has secured the coöperation of those upon
whom its operation will devolve, he will very likely find that after
he leaves there is a gradual disintegration until conditions are worse
than before the change was attempted.
It is seldom that a foreman or a clerk will resent a change if he is
made to feel that he is, in part at least, responsible for the change.
When new systems are introduced in the shop, the foremen are quite
likely to look upon them as a means of checking up their departments--a
sort of police supervision. The writer has had considerable experience
in the introduction of systems into factories, and has invariably found
that the coöperation of the shop foreman could be secured by asking
for his advice. Before prescribing a form or a system of records for
a department, he has made it a point to discuss the difficulties with
the foreman, always leading the foreman to put forward what seemed to
him the greatest difficulties, and then when these have been apparently
solved, to ask the foreman if he does not think such and such a plan
would work. When dealing with particularly obstinate foremen he has
even gone so far as to suggest a plan which is plainly impracticable,
for the very purpose of leading the foreman to suggest a practical
solution. Needless to say, in such cases the foreman gives the plan his
hearty support, because he has been made to feel that the importance of
his suggestions has been recognized.
_Committee Meetings._ The frequency of meeting of the committees herein
suggested must be decided by each manufacturer. No hard-and-fast rules
can be laid down, but generally these suggestions will apply:
General factory committee, weekly.
Departmental factory committees, once in two weeks.
Job bosses and general foremen's meetings, monthly.
Sales committee, weekly.
Advertising committee, monthly.
Organization committee, monthly.
_Committee Secretaries._ At each committee meeting, a stenographer
should be present to act as secretary. When no record is kept,
discussions are quite likely to be rambling rather than confined to a
specific subject. Then, too, matters which were discussed at the last
meeting have grown hazy, and if a man who is responsible for putting
into operation a given suggestion has failed in his duty, there is
always the chance that no one will think of it at the next meeting
unless he brings it up. If, however, an exact record is kept of these
discussions and full reports are delivered to every member of the
committee before the next meeting, a foreman, or other member, will be
very careful about making statements or promises unless he knows that
they can be fulfilled.
Where possible, it is best to have the same stenographer act as
secretary to all committees, as he will become familiar with their work
and can handle it much more expeditiously.
THE SUGGESTION PLAN
=35.= In many factories, and even in mercantile establishments, a
modification of the committee idea has been successfully introduced in
the form of what is known as the suggestion plan. This plan consists in
asking for suggestions from all workmen, these suggestions to pertain
to manner of handling their own work, improvements for the benefit of
the business as a whole, safety appliances, sanitary conditions, and
anything that may be of benefit to the business.