Group Incentives: Some Variations in the Use of Group Bonus and Gang Piece Work [Reprint 2016 ed.] 9781512820041

Table of contents :
ACKNOWLEDGMENTS
CONTENTS
TABLES
CHARTS
INTRODUCTION
CHAPTER I FINDING
CHAPTER II. COMPOSITION OF THE GROUP
CHAPTER III. THE BASIS FOR EXTRA-COMPENSATION
CHAPTER IV. DETERMINATION AND DISTRIBUTION OF GROUP EARNINGS
CHAPTER V. PROTECTION OF THE EMPLOYEES
CHAPTER VI. SOCIAL PROBLEMS RAISED BY INCENTIVES
APPENDIX
BIBLIOGRAPHY
INDEX

Citation preview

INDUSTRIAL WHARTON

SCHOOL

RESEARCH

DEPARTMENT

OF F I N A N C E

UNIVERSITY

OF

AND

COMMERCE

PENNSYLVANIA

RESEARCH STUDIES IX

GROUP

INCENTIVES

L I S T OF R E S E A R C H S T U D I E S OF T H E I N D U S TRIAL RESEARCH DEPARTMENT I Earnings and Working Opportunity in the Upholstery Weavers' Trade in 25 Plants in Philadelphia, by Anne Bezanson. $2.50. I I Collective Bargaining Among Photo-Engravers in Philadelphia, by Charles Leese. $2.50. I I I Trends in Foundry Production in the Philadelphia Area, by Anne Bezanson and Robert Gray. $1.50. IV Significant Post-War Changes in the Full-Fashioned Hosiery Industry, by George W. Taylor. $2.00. V Earnings in Certain Standard Machine-Tool Occupations in Philadelphia, by H. L. Frain. $1.50. VI An Analysis of the Significance and Use of Helpwanted Advertising in Philadelphia, by Anne Bezanson. $2.00. V I I Analysis of Production of Worsted Sales Yarn, by Alfred H. Williams, Martin A. Brumbaugh, and Hiram S. Davis. $2.00. V I I I The Future Movement of Iron Ore and Coal in Relation to the St. Lawrence Waterway, by Fayette S. Warner. $3.00.

GROUP INCENTIVES SOME VARIATONS IN THE USE OF GROUP BONUS AND GANG PIECE WORK

BY C.

C.

BALDERSTON,

PH.D.

Research Associate, Defartmtnt of Industrial Research and Assistant Professor of Industry Wharton School of Financt and Commerce University of Pennsylvania Author of "Managerial Profit Sharing"

PHILADELPHIA UNIVERSITY OF PENNSYLVANIA

1930

PRESS

Copyright, 1930, by the UNIVEBSITT

OF P B N N S T L V A N I A

PUSS

ACKNOWLEDGMENTS Like other studies which attempt to interpret and appraise certain developments in the field of management, this investigation has leaned heavily upon the aid of industrial engineers and executives. It reflects the ideas and judgment of so many individuals that it is difficult to acknowledge the source of each contribution. T h e writer is indebted to executives in nearly every one of the companies mentioned herein. However, he has been influenced especially by the work and counsel of M r . Ε. K. Wennerlund of the General Motors Corporation. In its preliminary form, the report received the benefit of the criticism of Dr. Joseph H . Willits, Dr. Anne Bezanson, and Assistant Professor Waldo E. Fisher of the Industrial Research Department; Mrs. Lillian M . Gilbreth, of Gilbreth, Inc.; Miss B. Eugenia Lies, of R. H . Macy and Company, Inc.; D r . W . J. Donald, executive secretary of the American Management Association; Professor Erwin H . Schell of the Massachusetts Institute of Technology; M r . Robert A. Locke, General Manager, Coatesville Boiler Works; M r . R. M . Blakelock of the General Electric Company; M r . A. B. Rich of the Dennison Manufacturing Company; M r . Gorton James, formerly chief of the Division of Domestic Commerce; Miss Florence C. Thorne of the American Federation of Labor; M r . Robert P . Brecht of the University of Pennsylvania; M r . Ε . E . Brinkman of the Holeproof Hosiery Company; and M r . G. M . Fullarton, of the Western Electric Company. Miss Frances M . Kelley was of great assistance at all stages of the study. Executives of each company whose arrangements are presented in Appendix D checked the data referring to their own concerns and in many cases offered valuable criticisms of the main body of the report. V

CONTENTS PAGE INTRODUCTION

Ι

CHAPTER I II

FINDINGS

10

COMPOSITION BASIS

IV

D E T E R M I N A T I O N A N D D I S T R I B U T I O N OF G R O U P

VI

PAYING

30

III

V

FOR

OF THE G R O U P

PROTECTION

EXTRA-COMPENSATION

OF THE

SOCIAL PROBLEMS

39 EARNINGS

.

.

EMPLOYEES

RAISED BY G R O U P

56 81

INCENTIVES

88

APPENDIX A

SOME

NOTES

ON

THE

RELATION

OF G R O U P

INCENTIVES

TO

OTHER D E V I C E S OF M A N A G E M E N T Β

RESULTS O B T A I N E D WITH G R O U P INCENTIVES

C

S A M P L E A N N O U N C E M E N T S OF PLANS TO E M P L O Y E E S

D

DIGESTS OF T Y P I C A L PLANS

103 120 . . . .

124 128

BIBLIOGRAPHY

165

INDEX

168

vii

TABLES TABLE

PAGE

ι

E m e r s o n and Wennerlund Bonus Plans

60

2

E a r n i n g s per Hour at Various Efficiencies with Uniform E a r n ings at M a x i m u m Efficiency

67

U n i t L a b o r Costs at Various Efficiencies with Uniform Earnings a t M a x i m u m Efficiency

69

E a r n i n g s per Hour at Various Efficiencies with Uniform B a s e R a t e Earnings

71

3 4 5

U n i t L a b o r Costs at Various Efficiencies with Uniform B a s e R a t e Earnings

73

6

S t a n d a r d T i m e P l a n : E f f e c t s of V a r y i n g the Starting Point

7

S t a n d a r d T i m e Plan Which Divides Savings E v e n l y C o m p a n y and E m p l o y e e s

ix

. .

Between

74 75

CHARTS CHART

I II

PAGE

Earnings per Hour W h e n Earnings at M a x i m u m Efficiency A r e Uniform

66

Unit Labor Costs W h e n Earnings at M a x i m u m Efficiency A r e Uniform

68

III

Earnings per Hour WTien Base Rates A r e Uniform

70

IV

Unit Labor Costs W h e n Base Rates Are Uniform

72

xi

INTRODUCTION Group incentive is a management tool which is being used more and more widely. Consequently, enough experience has been accumulated to justify an investigation of its problems and an analysis of the various means used to solve them. This study is primarily an attempt to ascertain the methods by which group incentives have been adapted to varying conditions, and to compare and appraise these methods. Although the center of interest in this report is the use of group payment for manual and clerical workers below managerial rank, the pay of supervisory forces up to and including foremen is so often linked with that of the workers that their compensation falls naturally within the scope of this study. Profit-sharing for manual workers, however, is excluded because the connection between profits and the effort of manual workers is so tenuous as to place rank-andfile profit-sharing in a separate category. Neither is adequate attention devoted to those all-important aspects of the problem of stimulating workers which are usually summed up in the phrase, "non-financial incentives." T h e elements which affect the feelings and attitudes of workers are as important as those which center around the extra-compensation itself. Although these non-financial appeals to the interest of employees are inseparable from the financial, it seems advisable to confine this study to the latter and not to attempt to cover the entire field of incentives. T h e reaction of workers to incentive arrangements, whether instituted by the management or by mutual agreement, is a subject which needs investigation, but the difficulty of obtaining objective results forces us to exclude it ι

2

GROUP

INCENTIVES

from this study. The exclusion, however, must not blind us to the fact that workers have spiritual and intellectual interests as well as material ones, and that a too-narrow concept of the function of incentives will not enable industry to obtain the highest return from employees and for employees to secure the greatest possible satisfaction from their jobs. Moreover, the difficulty of securing a clear-cut comparison of the results obtainable from incentives based on individual performance with those based on the collective output of a group makes it unwise to attempt a final estimate of the relative merits of the two methods. Such a comparison is not essential, for it is believed that both group and individual incentives are needed, the one for interrelated and the other for independent jobs. Such evidence as lias been found regarding the benefits which employers have derived from group payment is presented in Appendix B, and its effect on the lives and happiness of those who work under it is discussed in Chapter VI. The method which has been followed in preparing this report is to find and analyze the written descriptions of group incentive plans, to visit as many companies using them as possible, and to discuss with the executives concerned the difficulties encountered in the installation of each plan and the results from its operation. In case a visit was impossible, the information was checked by correspondence. Many of the conclusions were also tested by the installation of group payment, in cooperation with the plants' executives, in a plate shop making miscellaneous products and in a tool company making standard products. Any impartial attempt to study and appraise group incentives as a tool of management must consider both their meaning to the employees who are affected by them and their effectiveness as a tool of management. Since the literature dealing with the subject treats of its management aspects to the complete exclusion of its social significance, it is important to give the latter proper attention. W e can

INTRODUCTION

raise certain questions regarding and important device upon the who are compensated by it, but present any evidence which will QUESTIONS CONCERNING T H E TIVES UPON

3

the influence of this new large groups o f workers it is extremely difficult to answer them satisfactorily.

EFFECTS

OF G R O U P

INCEN-

EMPLOYEES

Because incentives are one of the phases o f management that directly touch the lives of workers and their families, any one interested in the social aspects of industry will immediately wonder about its present and future effects. But the first question which a worker would want answered is what he gains from the arrangement in the way o f additional remuneration. W h e n day workers are placed upon group incentives, do they make more money, and how much? I f the hourly earnings are increased, how much more physical and mental effort is required? A second type o f question deals with the security o f the job and of the worker in his job. Does this device tend to increase or decrease the steadiness o f employment? D o group incentives lend themselves to misuse in the hands of shortsighted executives? I f so, what evil results may follow? Are those who work under it subject to rate-cutting? Perhaps it is equally important to inquire into the effect upon the workers' personality and physical well-being of an inducement to work faster. Is the speeding-up process so intense that partial or permanent injury is likely to result? D o group incentives offer an antidote to some o f the evils that are attendant upon mechanical production and large scale enterprise? D o they stifle or encourage initiative and individuality? D o they appeal solely to the pocketbook or also to those things of the spirit which enable men and women to derive satisfaction from their work? D o group incentives encourage the development o f leadership, ideas, and inventiveness? I n short, are their features such that an

4

GROUP

INCENTIVES

executive can justify their use to his own conscience and his workers as well as to the stockholders? T Y P E S OF LABOR TO W H I C H G R O U P INCENTIVES A R E APPLIED

Perhaps a logical introduction to a study of variations in method is to outline the types of conditions to which the plans must be adapted. For example, the jobs on which direct labor is used vary in the extent to which they are linked together. The extreme of interdependence is found in linear or progressive manufacture. Thus in the operation of a rolling mill or of a forge shop unit, the individual output cannot be isolated. If an incentive is used at all, it must be based on the combined work of the gang, for one worker's contribution cannot be distinguished or measured. Another feature of linear manufacture is that the output of an individual is often limited by the speed with which work flows to him, unless he can move from his station in the line and assist on another job. One of the problems of progressive manufacture is to maintain a balance between the operations, especially when the rate of production varies. This requires an inducement for the men to move to the spot where work is accumulating and to utilize the idle time when no work is ready at their regular stations. Direct labor is also used where the work is non-progressive, but where the jobs are so interdependent that there is a close community of interest between the workers. This interdependence is characteristic of many plants, even those with a variety of products. In fact, the increasing complexity of manufacturing tends to make more and more jobs interrelated. A third form of direct labor is found in jobs so unrelated that little, if any, community of interest exists, and where the incentive is usually based on individual output. An example is perhaps to be found in jobs which are almost complete in themselves, such as moulding on "snap" machines, or the operation of stamping presses.

INTRODUCTION

5

In many plants, the indirect labor is equally as costly as the direct and it likewise occurs in a variety of forms. For convenience we shall define it as labor which changes neither the form nor shape of the product and the cost of which cannot be directly applied to specific units. One class of indirect labor comprises jobs which are in close association with direct workers. It includes set-up men, crane operators, handlers and truckers, and occasionally the inspectors in case the inspection is a matter of routine and can be treated as a production operation. Another form is that which is separated from the direct labor operations, but in which tasks are definable and accomplishment is measurable. This is found in operations such as the receiving of materials and the shipping of finished product, and may be clearly observed in the shipment of automobiles, packing-house meat, and barrels of oil. In contrast, there is that type of indirect labor like the maintenance of machinery where it is difficult to predict how long the work should take and where the comparison of results with a predetermined standard is extremely difficult. An element of great importance in the effective use of incentives is the degree of managerial control over the factors which affect output. Precise control depends in turn on the extent of the standardization of -product, materials, machinery and equipment, tools and methods. Executives vary greatly in the quality of their management; some exercise close and some lax supervision; some have devoted large sums to engineering research and others have retained equipment and methods which are antiquated. The degree of standardization which is possible is affected both by the nature of the product and by its sales volume. Concerns like the Ford and the Gillette companies can spend large sums in perfecting a machine because their products are not likely to change and the volume is extremely large. T h e extent to which manufacturing operations can be kept under control not only varies from industry to industry, but it a f fects the amount of protection which companies must pro-

6

GROUP

INCENTIVES

vide for their workers. If standards can be maintained and if the flow of work is uniform, the output of a group is not subject to fluctuation from factors beyond its control. This ideal, however, is seldom reached, and each management must appraise the nature of its own work and its ability to keep the conditions stable. Probably the most complete control over manufacturing operations is to be found in plants which have been able to install mechanical conveyors throughout. Some prominent examples are the large automobile plants, the Hoover Company, and the meat-packing houses. At the opposite extreme are jobbing foundries and steel-plate fabricating shops. T h e ability to put improved methods into practice is also affected by the amount of repetition in the work. If the same operation is performed in the same way throughout the year, a jig or a fixture can be developed for the machine which will make the operator's method almost automatic. A wide variety of products, however, makes it impossible to crystallize the method in a mechanical fixture and, in such cases, reliance must be placed on the initiative of the worker. Neither can workers be trained in the use of improved methods if there is a constant turnover of employees. All of these differences necessitate adaptations in the incentive arrangements and constitute an approach to our study of variations in method. DEFINITION OF T E R M S

Because the terminology ordinarily used in discussions of incentives is ambiguous, it is important at the outset to define with some precision the important terms used in this report. T h e chief difference between these definitions and the terms usually employed in management literature is the distinction between " p a r , " the standard of performance arrived at by time-study analysis, and the stint or task which is actually assigned to the workers. It is not implied that this terminology is superior to that in common use, but distinctions

INTRODUCTION

7

in method cannot be made if there is confusion about the meaning of words. Maximum Efficiency

("par")

On the golf course, " p a r " represents a perfect score without luck. In the setting of labor standards, the maximum efficiency may be defined as the best time which a skilled worker can maintain under incentive payment if the working conditions remain standard. A "skilled employee" is considered to be one who has sufficient natural aptitude, together with enough experience and training, to work expertly. It implies the consistently rapid production of output which passes inspection. In repetitive operations, the skilled worker will use a rhythmical motion and will be consistent even in performing the short elements in his job. This concept is substituted for the term "average worker," for the latter varies with the calibre of applicants for hiring, the effectiveness of the selection and training, and the length of service. Standard conditions imply that all the factors which affect output, except the effort put forth by the workers, are controlled by the management with fair precision. The product, material, machinery and equipment, and methods must be kept up to the standards which are assumed as the basis for the job analysis. The wide discrepancy between the rates of production under day work and under incentive makes it advisable to consider maximum efficiency as the level of performance which expert "workers ought to maintain without injury to their health, if the conditions are standard and if their compensation is contingent on their performance. Day workers would rarely, if ever, maintain this speed. Task The stint or task is the amount of work per hour which the management assigns to be done. It is the "time allowed" for each unit of output. It is the 1 0 0 % point on the bonus curve, which under many payment plans is exceeded by both

GROUP

8

INCENTIVES

individuals and groups. T h e task level may be set at any efficiency between the maximum efficiency and the level of present performance, but perhaps the most common arrangement is to set the task level so that it may be maintained by average workers without cumulative fatigue, provided they are paid on an incentive basis and their working conditions are kept standard. T h e advantage of separating the measuring j o b of determining the maximum efficiency f r o m the administrative function of assigning the tasks explains this deviation from customary management parlance in which task time is the direct result of the time-study analysis. Per Cent

Efficiency

In all of the charts and tables contained herein, the percentage of efficiency expresses the ratio between the stint, or "time allowed," and the time actually worked. Therefore, 1 0 0 % efficiency represents the task level. Incentive

Payment

Incentive payment is used to designate compensation (usually extra-compensation) which is contingent on performance (output or quality) rather than upon the mere lapse of time. H o u r l y rates and weekly or monthly salaries are not considered to be forms of incentive payment because, under such arrangements, the relationship between earnings and output is indefinite. Group

Incentive

W h e n the bonus or premium of a group of workers is made contingent on their combined output, it is a form of group incentive. It is commonly called either group bonus or gang piece work. But when the bonus is related to individual performance, it is termed an individual incentive. Amount

of

Incentive

T h e amount of incentive offered may be measured by the difference between the actual earnings and the base rates.

INTRODUCTION

9

Since base rates vary, the amount of incentive offered in different plants cannot be accurately compared merely by the ratio of bonus to base rate. Both this ratio and the absolute amount of bonus are needed in order to judge the " p u l l " o f the reward upon the workers.

Base Rates T h e base rate is the hourly rate or fixed salary guaranteed to individual employees irrespective o f their output. T h i s base rate combined with the incentive earnings, or bonus, equals the total earnings. T h e base rate usually provides wage differentials to reflect variations in difficulty (skill) and responsibility between occupations or jobs. I t may be as high as the " g o i n g " day rate for experienced workers, or as low as a starting rate which is just sufficient to attract learners.

CHAPTER I FINDINGS

The employers who have substituted group payment for day work have universally experienced a reduction in direct labor cost. Naturally the percentage of saving is not uniform, but a very general statement of the results to be expected where the management is of average quality is a doubling of efficiency. This is brought about partly by the increased attention of management during the installation of the plan, and partly by the spur of the money reward. But similar labor savings are obtained both by individual and by group incentives, and we may be fairly certain that, properly installed, any incentive which replaces day work will reduce direct labor costs. This is especially true when both the financial and non-financial aspects of incentives are developed adequately. Sufficient factual data are not available to show the decisive superiority of either group or individual incentives, and a quantitative comparison of their effectiveness is balked by variations in other factors that affect output. In my opinion, group payment is better for jobs that are interdependent, but individual incentives are preferable for operations that are unrelated. The advantages claimed by the advocates of group incentives are: ( 1 ) T h e y are a spur to cooperative e f f o r t not individual self-interest. ( 2 ) T h e social pressure within the group encourages the slackers to increase output, whereas under individual incentives, it is argued that pressure is exerted upon the rapid workers to " p e g " their production in order to protect the rate. In order to guard the bonus that has already been earned, workers paid in groups voluntarily seek to be transferred or to be sent home when work is becoming scarce.

10

FINDINGS

11

(3)

T h e y o f f e r an inducement to u t i l i z e spare time on another operation in the team. W h e n the operations are progressively a r r a n g e d a l o n g a conveyor, the use o f spare moments to h e l p out those w h o are b e h i n d tends to keep the operations in balance even w h e n the rate o f production varies. ( 4 ) T h e y stimulate the training of n e w employees b y f e l l o w workers and the e x c h a n g e o f trade k n o w l e d g e . ( 5 ) In o r d e r to increase the g r o u p efficiency, workers assist in p l a n n i n g and supervising their o w n work. ( 6 ) " W o r k - i n - p r o c e s s " inventories are reduced because the output must pass the " p a y m e n t p o i n t " to be counted and, t h e r e f o r e , does not stop between operations. ( 7 ) T h e clerical cost of counting work and figuring the p a y r o l l is reduced and the quantities paid f o r can be checked more accurately than w h e n i n d i v i d u a l incentives are used.

Whatever the relative merits of individual and group payment, incentives based on the combined output of a team of men have a distinct place among our tools of management. Since the focus of this study is upon variations in the technique of group payment, this summary statement may properly consider the strengths and weaknesses of existing methods. COMPOSITION

OF

GROUP

The key to the most effective formation of groups is the degree to which the individuals can be mutually helpful. This depends partly on the interdependence of the jobs, and partly on the existence of opportunities to aid others by direct assistance during idle moments or by trading information. The smaller the group, the greater is the social pressure and the money stimulus felt by each individual. That the groups be kept small is especially important if a strong incentive is desired. For miscellaneous work, groups of fifteen or twenty men (and not exceeding forty) are favored by many managers. Where the work is highly mechanized and standardized, however, the size of the groups may be enlarged both to reduce clerical expense and to throw the attention of the entire force in a plant or department upon the maintenance of the production schedule.

12

GROUP

INCENTIVES

Larger groups are practical in progressive, or continuous, manufacture because the community of interest extends over a greater number of operations, and any deviation from a uniform flow of work is easily detected. But even if conveyors are used, the groups are limited in size by the length of time elapsing between the initial operation and the completion of the product. Where the length of this cycle is increased by the storage of partly finished work, additional counting points must be introduced so that employees may be compensated quiçkly after their work is done. Group payment is likely to be the only form of incentive possible for progressive manufacture, but it is of great significance that some plants which installed it first on their assembly lines only are broadening its application to heterogeneous work. Current plans differ on the payment of bonuses to supervisors based on the efficiency of their employees. Certainly the group should be provided with some form of leader, whether he is given a title or not j indeed, the men will select an informal leader if none is provided for them officially. A practice often followed is to include a gang boss, working foreman, or "group leader" with the workers' group, but to pay the foreman on a different basis. Perhaps the decision on this point should depend on the scope of the supervisor's responsibilities. But if a foreman controls important items of expense other than labor, and if his work involves cooperation with the foremen of other departments, it is commonly believed that he should not be included with the workers. Perhaps foremen of this type should be paid according to the collective performance of all of the departments with regard to controllable expense, as measured against a budget in dollars. Indirect laborers, such as truckers who can be of immediate aid to the direct workers, are usually placed in the direct labor groups, and an allowance is added in the task to cover the amount of such assistance required. Group incen-

13

FINDINGS

tives are also proving successful on such purely indirect labor operations as unloading and shipping. BASIS FOR P A Y I N G

EXTRA-COMPENSATION

Distinction Between Research Problems and Decisions

Administrative

Some of the questions to be solved before a bonus can be installed should be approached as engineering or research problems; others involve administrative decisions and policies. The research problems include the establishment of labor standards by time study or some other method of measurement, and the determination of past and present efficiency by adequate records. The administrative decisions include the selection of the bonus curve which will give satisfactory labor costs and employee earnings at varying efficiencies, the selection of the point on the bonus curve where the bonus should start, and the level at which the task should be set relative to present performance and maximum efficiency. One method of answering these administrative questions is to decide first how far above the general level of present efficiency the bonus should start. In practice, both this point and the shape of the bonus curve will usually be settled as matters of company policy before the time-study work is begun. By the decision of these two questions the relation of the task level to "maximum" and to existing efficiency is located automatically. The task or time allowed for each operation should be a uniform distance below maximum efficiency so that the attainment of the tasks {under a given amount of incentive) will require the same effort. The actual assignment of the stint or "time allowedfor each job requires the -previous analysis of how much output an hour constitutes "par" performance. Another approach to fixing the task level is first to determine maximum and present performance, and then to estimate the efficiency which the whole force is likely to main-

14

GROUP

INCENTIVES

tain under the impetus of the amount of incentive offered. This method attempts to assign tasks high enough to provide a goal to strive for, and yet low enough so that the workers will not think them impossible of attainment. The operation of any flan after it is installed is an administrative matter, whereas the continuous time study of new or changed operations in order to set standards of performance for them remains a question to be disposed of by staff research. The actual computation of the efficiency and of the bonus are also routine administrative matters, as are grievances or disputes arising from the counting of output or from mistakes in the figuring of the payroll. It is important, however, to distinguish between the actual settlement of these questions and the securing of the facts on which they can be settled justly. Questions of price arc administrative questions, but the determination of standards of performance are research matters. The Extent to -which Working ardized Prior to the Bonus

Conditions Should Be Installation

Stand-

The first step toward the measurement of " p a r " for each job is to analyze the existing process in order to obtain a clear picture of all operations performed and of the movement of material between operations. After such a process chart shows what is done in general, the design of the product should be analyzed and each of the operations, if repetitive, should be motion-studied to find out how it is performed in detail. Part of the measuring process is to check or audit the existing method in order to find out where slackness exists and suggest methods of correction. Some of the suggested improvements will be superficial and inexpensive ; others will be far-reaching and costly. T h e decision on what changes will be made is an administrative matter and the tightening up of slackness is also an operating problem which should be taken care of by line executives. But if the changes to be made are so fundamental that they involve difficult technical problems, the' solution must often be worked out by engi-

FINDINGS

15

neers either inside or outside of the standards department. The actual installation of new machinery must, of course, be made with the full cooperation of the line executives. Opinions differ on the degree of refinement which this standardization of materials, machines, and equipment should reach before incentive payment is begun. One belief is that all of the factors, together with the flow of work, must be controlled with great precision before bonuses are installed. Others hold the view that after all superficial changes, and any changes in equipment which are considered expedient at the time have been made, incentives may be used to encourage the employees and their supervisors to assist in making further improvements. From the standpoint of the -precision of measurement, it is obvious that the more stable, the factors affecting output, the more accurately "par" can be predetermined. Improvement, however, is not a final result but a process, and consequently the degree of refinement must always be relative. Consequently, in many situations it may be decided to determine "par" and present performance as accurately as possible after superficial corrections have been made, and then to adopt a bonus curve which divides the time saved between company and employees, so that the initiative of the latter can be used to raise the labor efficiency higher and higher without the temptation or necessity of making the tasks which have been assigned more difficult. The Determination of Present and Maximum

Performance

A problem which is common both to the measurement of "par" and to the finding of existing efficiency is to select the units in which output should be counted, for it is essential that they should reflect the effort and time expended by the group. The simplest units are standard finished products, such as automobile motors, but where the, products are heterogeneous, it is customary to seek a common denominator like feet, tons, or points. To find the level of present performance requires the

16

GROUP

INCENTIVES

accumulation of reliable data over a considerable feriod of time by means of records. If the record-keeping is not satisfactory at the time the analysis is begun, it is obvious that steps should be taken at the outset to secure an accurate count of the work in terms of the units of output which have been chosen, as well as reliable information regarding the time actually worked. In order that the latter may check with the time paid for by the payroll department, it is often desirable to count only the time worked during the regular working hours or during overtime which has been authorized and paid for. The determination of maximum output demands impartial measurement if it is to provide a uniform basis for the subsequent setting of task times by the management. The method of measurement should be adapted to the nature of the work. For highly repetitive operations, Gilbreth micromotion study provides the greatest precision. A method which is somewhat more crude is motion study combined with the use of the stop-watch (time study). On operations which are highly variable, however, it may be practical to use only the stop-watch and to center the attention largely upon delays by making "production studies." Although the accuracy of the results will vary with the crudity of the instruments which are used, the same careful research analysis should be devoted to the measurement. Administrative Problems of Selecting the Bonus Curve and the General Task Level The selection of the bonus curve which is best adapted to a given department or company can be decided by the chief executives only after a careful study of its effect upon unit labor costs (and total costs if overhead is high) and upon the earnings of individual employees. In selecting this curve, the management may wish to consider how the existing labor efficiency compares with maximum and to determine the ability of the company to control the factors influencing pro-

17

FINDINGS

duction and to make improvements b e f o r e the bonus takes effect. Since earnings and costs cannot be computed without first deciding upon the task l e v e l or 1 0 0 % point on any curve, it is obvious that the selection of the curve and of the task l e v e l should be considered jointly. I f the bonus curve gives all the labor saving to the employees, the management may wish to make the task more difficult than if it selects a curve which divides the time saved on a 50-50 basis. C o n v e r s e l y , if the management f e e l s that f o r psychological reasons, it w o u l d be wise to place the task l e v e l at a sufficient distance b e l o w " p a r " so that the various g r o u p efficiencies w i l l not o n l y reach 1 0 0 % but exceed it somewhat, it may wish to adopt a bonus curve which divides the time saved. O r , this division may be used so that the company may profit f r o m continued improvements w h e t h e r made by the management or by the employees. T h e method of expressing the task is usually the essential distinction between group bonus and g a n g piece work. I n the f o r m e r , the task is expressed in hours ( " t i m e a l l o w e d " per unit) or in output per hour. 1 In g a n g piece work, the task is expressed in money. T h e advocates o f g r o u p bonus maintain that it has advantages over g a n g piece w o r k because the labor cost is not fixed or inflexible and individual base rates can be adjusted to reflect improvement without affecting the pay of other members of the group. It is possible to change the base rates without creating difficult personnel problems. The

Com-parison

of Actual

Results

with

the

Task

I f the incentive is to exert its f u l l effect, not only must employees k n o w the task in advance, but they must also h a v e their actual performance reported to t h e m quickly.

Many

In small g r o u p s w i t h w i d e l y diversified base rates, it m a y be o f a d v a n t a g e to c o n v e r t the task into d o l l a r s at an a v e r a g e base rate and still operate the plan as g r o u p bonus. T h i s places the same emphasis upon the e l i m i n a t i o n o f h i g h a n d l o w - p a i d operators. 1

18

GROUP

INCENTIVES

plants post the efficiency within twenty-four hours. Even where the bonus is based on the results of a longer period, such as a week, the cumulative performance can be posted daily. T h e accurate measurement of results demands a careful check of quantities completed. It is here that group payment has a real advantage over individual. Instead of recording the work of each operator, the output of an entire group is counted and checked. Not only is the clerical work reduced, but the company can protect itself against paying for more work than is actually done. The auditing of the quantities paid for is possible under group payment, but difficult under individual. Since work is paid for only when accepted by the inspection department, it is quite usual to hold this department responsible for counting the work. It is obvious that if the current records are to provide comparisons between different groups and departments, the efficiencies must be shown in a "language" common to all departments. Although numerous point systems have been developed, they have an air of artificiality which the percentage of efficiency does not have. T h e latter involves only the division of the standard hours allowed by the actual time taken. DETERMINATION

AND

DISTRIBUTION

OF

EARNINGS

T h e total amount earned by a group is governed by the efficiency attained, the average of the base rates, and the bonus curve used. These are affected by the precision with which operations are controlled, the accuracy with which the maximum efficiency can be predicted, the ability of the management to increase the labor efficiency, and the level of efficiency at which the tasks are set. As suggested already, the determination of the task level and the selection of the bonus curve are problems which must be considered jointly. Under gang piece work, the group earnings (which equal the number of pieces multiplied by the piece rate) are usu-

FINDINGS

19

a l l y divided by assigning a base rate to each individual. T h i s base rate is multiplied by the actual hours worked. T h e total piece-work earnings are then divided among the workers according to the base earnings of each individual. U n d e r group bonus, all members of the group receive the same percentage of bonus, but since this percentage is applied to the base earnings of each individual, the bonuses differ in absolute amount. T h e base earnings of each man equal his base rate multiplied by the actual time he works. T h e efficiency is obtained by dividing the task by the actual performance, and the percentage of bonus is found by consulting whichever bonus curve is used. T h e bonus curves in common use in group incentive plans are the Wennerlund, Emerson, Rowan, and various adaptations of the standard time plan of paying ι % bonus for each gain of ι % in e f ficiency over a given point. Because the assignment of a base rate to each employee is a pricing problem, it is the responsibility of the operating management and is itself not a problem of measurement. It can be done best, however, only if records are kept to reflect individual contributions, and if the jobs or occupations are rated in difficulty and responsibility. T h e elements involved in this rating are less tangible than output and can only be graded approximately. The Amount

of Incentive

Offered

Perhaps the best measure of the stimulation offered to workers is the difference between actual and guaranteed earnings. T h e percentage of incentive is usually over 3 0 % of the guaranteed rate, which agrees with the belief of F . W . T a y l o r that for machine work it should range f r o m 3 0 % to 1 0 0 % . Obviously, the incentive is affected by the amount of base rate needed f o r protection and by the average actual earnings. T h e latter depend on the difficulty of reaching the task, the slope of the payment curve, and on the assistance given to the worker to maintain output.

20

GROUP PROTECTION

INCENTIVES OF T H E

EMPLOYEES

The safeguarding of employees against influences beyond their control is essential to secure full effectiveness. The usual form of protection is through a guaranteed base rateSome companies permit their foremen to put the employees on day work in case of temporary trouble or lack of work. Others follow the somewhat dubious practice of permitting an authorized person to make allowances for unusual delays. In order to reassure the workers against "rate-cutting," some companies give them a formal guarantee that task times will not be lowered unless the job is altered substantially. The best protection is painstaking standardization and accurate time-study analysis, but the temptation for the company to cut rates may be reduced by the adoption of a payment curve which divides the labor savings. The old members of a group should be guarded against the loss of earnings from the introduction of new employees, yet care must be taken not to make the protection too generous. In that case, old employees will encourage new ones to leave when the training period is over, so that they may benefit from the free output of other new arrivals. Consequently, it is customary to carry newcomers on day rates for about one-half of the time needed to train a man of average ability. The output during this period usually is credited to the group. Companies which pay "time and half-time" for overtime work usually do not pay a bonus on the premium hours. An hour of overtime work merely counts as a regular hour in computing the percentage of efficiency. D I F F I C U L T I E S E N C O U N T E R E D IN T H E S T A L L A T I O N A N D USE O F G R O U P COMPENSATION

IN-

Descriptions of incentive plans tend to stress the favorable results and to minimize the difficulties. Consequently, the

FINDINGS

21

employer who wants to change from day work to an incentive, and who wishes to investigate the obverse side, can find little space in the voluminous literature on incentives which is devoted to the troubles that have been faced. These difficulties may be classified into several groups: Those which resulted from the nature of the work. Those which were involved in setting the labor standards. Those which were inherent in the incentive plan. Those which arose f r o m the attitude of the workers. Difficulties Created by the Work Many employers who are using group bonus state the fluctuations in the rate of production present one of the serious obstacles to be overcome. These variations are of several types5 cyclical, seasonal, daily, hourly, and irregular. Nearly all companies experience sharp changes in their production schedules because of the influence of general business upon their volume of sales. If such a company is unable to stabilize its production by manufacturing to stock during periods of low demand, it may find it necessary to lay off employees. A reduction in the force upsets the balancing of operations and the team-work which has been developed in the groups. If these readjustments in the size of the force can be made gradually, the difficulties do not seem serious. On the other hand, sharp changes in the production schedule affect the amount of work-in-process. If the groups are large, and the points at which the work is counted are far apart, a sudden reduction in the schedule causes work which has been partially completed to dam up between the points at which credit is given. Seasonal peaks force many enterprises to hire temporary employees. This problem is found in radio plants and department stores. These temporary employees are not likely to be as skilled as those in the permanent force. Moreover, these temporary workers enjoy the advantage of not having

22

GROUP

INCENTIVES

to wait for work. It is difficult to find one arrangement which will be satisfactory during both dull and busy periods because the conditions differ so radically. A solution which has been used by a department store has been to apply the incentive only during the peak months. Another company finds it possible to establish a different task for each month in the year because its seasonal variations are so uniform. A far more serious problem is presented by peaks that are unpredictable. Where the emergency can be met by overtime, group incentive has proved effective in reducing the cost of the overtime. The permanent force often prefers the extra money which it can make by working under pressure to the introduction of new inexperienced employees. Other companies have resorted to a reserve force formed of married women who have had experience and who welcome part-time employment. The hourly and daily fluctuations are met by other methods. One of these is the movement of employees from operation to operation as they are needed. This procedure matches the payroll with the changes in volume, for a peak in one operation may occur during a lag elsewhere. Still another device fitted into many flexibility programs is to permit work to accumulate ahead of one operation while the employees are busy on another. The ¿Etna L i f e Insurance Company 2 segregates the excess or idle time by sending workers who have nothing to do to a waiting room so that those who remain on the job will maintain their regular speed. Where the flow can neither be controlled nor matched with a flexibility program, some managers have tried the expedient of lengthening the period on which the bonus is based. This is, in effect, an averaging process. Troubles Involved in Setting the Labor Standards T h e analysis of the operations in order to set uniform time standards and to keep them up-to-date presents a variety of difficulties, the most important of which are as follows: ' T h i s company uses individual incentive.

FINDINGS

23

T h e precise definition of the level of efficiency at which the time standards are to be made. T h e ability to secure an adequate sample both of the uncontrollable variations in the work itself and in the skill and effort of the workers observed. T h e frequent necessity of setting time standards to be used under incentive from observations taken upon operators who are paid day work. The establishment of the proper delay allowances to care for lack of balance of the jobs on a conveyor when the rate of output or mixture of products varies. The detection of changes in methods and equipment so that the time standards may be kept up-to-date. Since the solutions of these problems require a consideration of time-study technicalities, their discussion is reserved for Chapter I I I . Industrial engineers have sometimes been embarrassed from the allowance of a fixed percentage of the direct labor to cover the indirect labor included in a given group. As the number of direct workers increased, the fixed percentage allowed for such things as handling and supervision became unreasonably large. A method of avoiding this difficulty is to allow a definite number of hours instead of a percentage. Although the determination of standards is a research problem which should be approached without bias and for which compromise is an unsatisfactory solution, the opportunity for representatives of the workers to understand and criticize the conditions for which the standards are set and the fairness of the tasks which are finally assigned is essential to confidence. Moreover, companies which have some form of employee representation available have found that the opportunity for workers to voice their grievances and

24

GROUP

INCENTIVES

to have their doubts explained is a useful check upon their time-study men. Difficulties Inherent in the Incentive Plan Managers have experienced numerous difficulties because they were unable to determine in advance how the incentive plan would function and because the arrangement was illadapted to the conditions. A large concern now finds that its plan, which gives all the labor savings to the employees, has "pegged" its labor costs so that it has not been able to take advantage of better supervision and technical improvement because many of the changes are not sufficiently clearcut to justify lowering the task times. Consequently, the management is now considering the use of a bonus curve which will divide the labor savings between the company and the employees. The National Cash Register Company found that groups of over fifteen employees were too large to be effective unless the process was continuous. T h e Atlantic Refining Company experienced difficulty with a group that operated in two separate areas. Many managers report that they have had poor results when men whose personalities clashed were grouped together, especially in small gangs. One of the outstanding defects in poorly designed plans is the excess of clerical expense, in spite of the fact that the very nature of group bonus is an aid in keeping this expense low. T h e records necessary to compute the extra compensation apply to groups and not to individuals, and therefore, the cost of computation should be low. In fact, the opportunity to save clerical expense and secure a more accurate check of work done was one of the chief reasons that induced M r . E. K. Wennerlund of the General Motors Corporation to experiment with group bonus in the early installation at the Oakland plant. Some group plans, however, involve so many points at which work must be counted that an excessive number çf checkers and clerks are kept in the shop,

FINDINGS

25

and other managers have undoubtedly missed opportunities to simplify the clerical work of computing the payroll. A variety of minor difficulties has also been encountered. One manager reports that the bonus was not effective as long as it was paid in the same envelopes with the regular pay which the employees had been getting, but placing it in separate envelopes accomplished good results. Another carried new employees for too long a period before charging their time to the gang with the result that the old employees banded together to encourage turnover so that they might profit from the output of the new workers. T h e division of the earnings on an equal basis also raised objections from the employees because it did not reflect differences in individual ability. Troubles with Workers Failure to win their understanding and confidence explains a majority of the troubles which managers have had with their workers. W e dismiss the cases where sharp practice on the part of the management was involved, so that the discussion may be confined to the more legitimate causes of unsatisfactory employee attitudes. Employers have sometimes found that experts and the fastest workers are not enthusiastic about the group incentive if they have previously had the chance to earn high wages on an individual basis. Group payment sacrifices the individual earning power of these individuals, unless the base rates are adjusted according to the contribution of each. The National. Cash Register Company which had used individual piece work extensively for forty years found that when certain groups had been in operation f r o m six months to three years, the fast workers became apathetic. T h e dissatisfaction of these former high producers caused production and earnings to fall. The reaction of the workers to the installation of a plan has been found unsatisfactory in cases where supervision is not sufficiently strong to remove the obstacles preventing

26

GROUP

INCENTIVES

high efficiency. A contributing factor in one case was the large volume of work in the shop which made it less efficient than it otherwise would have been. T h e workers would undoubtedly have responded more quickly if the incentive had been introduced at a different time in the business cycle, namely, at the beginning of the period of revival instead of during the peak year. Managers have raised the objection that the formation of groups tends to organize the workers in a manner that may prove embarrassing. It is obvious that since the groups have a common interest, they will object in an organized fashion to things which seem unfair. Consequently, the group undoubtedly magnifies the bad results of the careless installation of incentive payment. Probably the greatest cause of lack of confidence on the part of the workers is the result of the failure to properly explain the plan or to the inability of the workers to compute their own earnings. One employer states that the former caused most of his difficulties until the supervisory forces became well acquainted with the arrangements. H e also found it useful to have the employment department explain the plan to new employees. T h e difficulty experienced by the operators in figuring their earnings was one of the reasons which caused the National Cash Register Company to change from group bonus to group piece work. Yet the writer has found educated men who have worked in automobile plants under gang piece work who testify that they could not accurately figure their individual earnings. If the groups are large, none of the group plans makes it easy for an individual to compute his daily pay until the group efficiencies are posted. SOCIAL E F F E C T S O F G R O U P INCENTIVES T h e social importance of the influence of a device that affects the compensation of large numbers of workers merits discussion, even if little that is tangible can be offered in

FINDINGS

support of the arguments. Although subject to abuses, our conclusion is that society is more likely than to suffer from this type of payment.

27

possible to gain

Like individual incentives, group payment makes it possible to earn more per hour, and it has the great social advantage of stimulating cooperation and team spirit. The actual increase in hourly earnings seems to be about 2 5 % to 3 0 % of the old day rates. Group incentives do not appear to endanger security of employment more than any other forms of improvement, either mechanical or managerial. The increase in output involves some speeding-up of the workers, but there is little indication that cumulative fatigue is resulting from group payment. The chief disadvantage to those who work under this form of compensation is that trickery on the part of unscrupulous managers is perhaps easier to conceal than is the case with individual piece work. Some of these abuses may have developed because of the failure of management to deal with sufficient frankness with the employees or their representatives on questions in which there is strong mutual interest. This point of view is well presented in a letter from Miss Florence C. Thorne of the American Federation of Labor. " I t seems to be the fashion to substitute refinements of management for standards developed through joint discussion and mutual agreement between management and workers, and yet these persons who are the work partners in the production undertaking do a lot of thinking as they use the tools and handle the materials. So when we consider group incentives, ought we not to raise the question—Did the workers as a group have anything to do with the development and administration of the plan? Can we make a scientific study of work relationships and ignore the worker's side? Group incentives involve more than management technique. The major social standard by which we can measure their efforts is—Does the individual worker make his fullest

28

GROUP

INCENTIVES

work contribution and continue to grow mentally and spiritually through this system?" THE

CONTRASTING P H I L O S O P H I E S OF G R O U P AND I N D I VIDUAL I N C E N T I V E S

The. personnel practices of an employer are important in the long run because they affect the esprit de corps of the working force. Since all of the personnel activities which we have been discussing should focus on the ultimate goal of a satisfactory morale within the company, the subject cannot be closed without referring to the peculiar part which group incentives can play in such a program. The increasing size of our industrial units has caused many executives to feel the need of something which would develop a community of interest. One approach to this problem is to develop within the company a series of teams, each of which is loyal to the company as a whole, but whose members feel an active, positive loyalty to the team itself. Individual incentives tend to destroy such team work because it is to the interest of each individual to increase his own output, even at the expense of those around him. The experts guard the secrets of their trade instead of teaching them to others. They maneuver to secure the "softest" jobs and those with the greatest money-making possibilities. The slow workers, on the other hand, feel resentful toward the high producer. Even if the company follows the policy of not cutting rates, the slow employees instinctively fear that the star worker may be endangering the rates if his daily earnings grow too large. The result is that those who have less than average ability tend to bring pressure upon the fast workers to restrict their output. When individual incentives are used, any feeling of unity within the group can develop only in spite of the emphasis upon individual self-interest. Group incentives, however, are a direct motivating influence in developing team work and group spirit. Since the members of each gang have a common objective, the premium which is placed upon team-play has great social sig-

FINDINGS

29

nificance. In contrast to the time-worn appeal, "let up all pull together," group compensation provides a constant in-, terest in the results which are attained, and at the same time builds up the morale of the force because it recognizes the interdependence of all who compose the group. It encourages the worker to greater accomplishment, but it insures that his advancement can be secured only as a member of a team and not as an individual working for selfish interests alone. Group bonus is an important device of management, but it is not a panacea. Properly installed, it provides an incentive to increase the joint output and to maintain satisfactory quality, and the adjustment of base rates to reflect effort and ability provides individual stimulation within the group incentive. It captures the interest and enthusiasm of the team and, like other incentives, it appeals to those who believe in a philosophy of leadership as contrasted with "drivingPerhaps the great significance of group incentives is that they emphas'vze team work and cooperative effort rather than individual self-interest.

C H A P T E R II COMPOSITION OF THE GROUP

Group payment is used for both direct and indirect labor. Since its use for direct labor is the more common, the size of these groups and the influences which affect their composition will be discussed first. DIRECT LABOR The direct labor groups or gangs vary in size from two to six hundred. Obviously two constitutes* the minimum number that can be called a group, an example of which is the gang of two men, one of whom is an electrician, who install Frigidaire units in apartment houses. A number of employers prefer groups which are small. T h e Westinghouse Electric & Manufacturing Company has attempted to keep its maximum at fifteen, but in its brass foundry one group contains thirty-five employees. T h e Western Electric Company also arranges groups of from fifteen to twentyfive workers under a gang boss. A number of these small groups (each under its group chief) are usually included in one payment group. The Warner & Swasey Company uses groups not larger than ten. In contrast to these companies are those like the automobile manufacturers whose work is nearly all linear or progressive. Although the Packard Motor Car Company uses some small groups, it has others as large as six hundred in number. T h e Chevrolet Company has four hundred employees who are paid together. An automobile plant in Detroit has a group of one hundred forty in its cylinder department and another of one hundred seventy on its assembly line. M a n y other plants utilize groups between these two ex30

COMPOSITION

OF THE

GROUP

31

tremes. The Edison Electric Appliance Company, which produces "Hot-point" products, uses groups numbering from twelve to one hundred. The Eberhard Manufacturing Company of Cleveland has groups varying from four to one hundred, and the Mohawk Carpet Mills has a group as large as two hundred. Although the Timken Roller Bearing Company prefers groups of twenty to fifty, its Columbus plant has a group of one hundred to one hundred twenty-five working in the automatic screw machine department. The General Electric Company at Fort Wayne, Ind., has divided approximately three thousand into one hundred thirty-five groups, an average of twenty-two men to a group. The Hoover Company has a group as large as forty, and Swift & Company has groups of forty-five men on its dressing operation, twenty-five men on washing, twenty men in the casing gang, and fifteen in the warm fancy meat department. The corn-position of the gang is affected by the community of interest of the individuals who compose it; by the length of the manufacturing cycle; and by the uniformity of the flow of work through the production departments. Of these, community of interest is probably the most important and is regarded by many production executives as the determining factor in the arrangement of the groups. T h e Warner & Swasey Company places men together when their work is so interdependent that they can be of mutual assistance to each other. The Chrysler Corporation divided its assembly into five groups which handle the frame, chassis, and body assemblies, the final assembly, and the final inspection. Using the same principle of grouping its employees according to community of interest, Edison Electric Appliance uses twenty-six groups in the shop, in addition to other groups in the clerical departments. Community of interest is strongest in linear or progressive manufacture. The fact that the department is devoted to a single purpose and that the operations are balanced with each other causes the work of each man to be closely linked

32

GROUP

INCENTIVES

with that of the other men in the line. The individual's output is not only affected but to a great extent controlled by his associates. Since this type of work has been highly developed on the final assembly lines of automobile plants, community of interest is strong enough in these situations to permit groups of large size. It is under these conditions that we find large gangs of three hundred and four hundred employees. Historically, the beginnings of group payment may be traced to progressive work where individual output was difficult or impossible to measure. Gang piece work has been used for years where individual output is inseparable, as in a rolling mill or a forge shop. In fact, some plants still believe that group payment should be confined to linear operations where the individual's contribution cannot be determined and where his output is governed by the flow of work. Group payment is used on progressive work only in the Timken Roller Bearing plant at Columbus. In contrast to employers who confine group payment to linear operations, there are those who have found it satisfactory for work which is related but not progressive. The method is used to a considerable extent in departments with a heterogeneous product, both where the operations are similar and where dissimilar. The determining factor is whether or not the employees can assist each other. The Western Electric Company uses the group method on both progressive and non-progressive work where there is a community of interest. Westinghouse Electric introduced group payment on the assembly of standard products, but has now broadened its application to work of a general character. Chrysler has found it equally satisfactory in single-purpose departments and in those with a variety of products. Delco Products Corporation uses it in all departments where workers can be of mutual assistance, as in the automatic screw machine department, and also where work cannot be measured, as in the plating department. The National Cash Register Company has also applied it to ten drill presses which

COMPOSITION

OF THE

GROUP

33

have a variety of product. The Chicago Screw Company uses it for tappers, threaders, and automatics, the workers on each of these operations forming a separate group. T h e Eberhard Manufacturing Company has applied it to heterogeneous jobs wherever the clerical work involved in individual payment would overbalance the savings, as in its grinding, trimming, and sorting departments. Although much of the work of Swift & Company (packers) is continuous, group payment is also used for the non-progressive work done by the woodworkers and car loaders (beefluggers). Perhaps the outstanding example of the broad application of group incentive is in the Edison Electric Appliance Company, where it is used on nearly all of the shop and clerical operations, even in the purchasing and engineering departments. Packard includes in its group all the operations which take place in a given department, and all operations located in the same room are paid jointly. Factors which greatly affect the size of the gang are the length of the manufacturing cycle} the evenness of the flow of work, and the ability to check defective work and to measure out-put during the manufacturing process. All of these directly influence the location of the points at which work is counted as a basis of payment, and thus indirectly determine the proper size. Where the manufacturing cycle is short, the number of pay-points is reduced. In the Chevrolet factory, as in many of the other General Motors plants, the product is counted at the end of each division. For example, all of the men who work on motors are paid by the number of completed motors, and all who work on car assembly are paid by the number of completed automobiles. The A. O. Smith Corporation of Milwaukee, automobile chassis manufacturers by continuous process, also counts the work at the end of each division. The plan which is most common, however, is to count the Work as it leaves the department. This is the method of the

34-

GROUP

INCENTIVES

Packard Company, the Edison Electric Appliance Company, the Eberhard Manufacturing Company, the Abbott Laboratories, and Swift & Company. Some employers, however, such as the Dodge Brothers Corporation, find it necessary to establish a larger number of counting stations. An increase in the points at which work is counted is especially advisable during the time that a plan is being installed. Obviously a reduction in the number of counting stations reduces clerical work and focuses the attention of the operators on the end result of their department or division. T o base the bonus upon the number of completed products which pass inspection interests the whole group in maintaining the production schedule. T h e point at which a man's work is counted must, however, be fairly close to him unless the manufacturing cycle is so short that the output of his department or division can be counted and credited to him within a reasonably short space o f time. Otherwise the incentive is lessened by the lapse o f time between effort and reward, and serious complications are introduced whenever the production is raised or lowered. Unless the flow of work is continuous and rapid, a sudden decrease in production would mean that the workers on the early operations might not be paid for some of their work for a considerable period of time after its completion. In plants which manufacture products that cannot be thoroughly tested or checked until they are completed, it is sometimes necessary to base the pay or bonus only on work which is ready for shipment and to eliminate the counting stations which would normally be placed at the ends of departments. A concern manufacturing boilers and tanks illustrates this situation. Industrial engineers usually follow the practice of starting with fairly small groups during the installation o f the plan. After the men are earning a bonus and the arrangement is working smoothly, it is sometimes possible to increase the size o f the groups (unless gang piece work is used). This

COMPOSITION

OF THE

GROUP

35

has occurred at the Chevrolet plant, where group bonus has been in use for about six years. Although there has been considerable discussion of area as a factor which should limit the size of the group, I have found little evidence to warrant this assumption. It is true that Westinghouse Electric implies that area should be considered, for the statement is made that "fifteen constitutes an efficient body where the work is not scattered over a large area." Edison Electric Appliance and Chevrolet, however, both testify that they can see no influence of the area covered by the group. This is also the opinion of other automobile plants and many of the groups work not only in rooms which are long, but also in rooms in which some of the operations are not visible to the entire gang. In a Swift plant, the "cooler" gang of twenty men which transfers the meat from the killing floor to the cooler, works over a large area. But Atlantic Refining had difficulty with a gang of eighty employees which worked on two levels. I N C L U S I O N O F S U P E R V I S O R S AND I N D I R E C T L A B O R W I T H DIRECT LABOR

THE

GROUP

It is the general practice to include the gang boss or group leader in the same group with the workers. The term "group leader" refers to a working boss or supervisor and not to a foreman who confines himself to supervisory duty. Westinghouse Electric selected a leader for each group, and Hoover finds that the group itself tends to set up an informal leader who helps to guide its planning in order to take advantage of short cuts and to increase the group output. Hoover, however, excludes the regular foreman from the gangs of manual workers. Dodge included the assistant foreman, gang bosses, and set-up men. Timken includes the sub-foreman, the truckers of the assembly department, and the repair and set-up men in the screw machine department. In its trimming department, Eberhard places the truckers with the direct workers. Many other companies include the supervisor of the rank

36

GROUP

INCENTIVES

usually designated as foreman. This is the case in the Atlantic Refining Company, the Marmon Motor Car Company, and the Edison Electric Appliance Company. This is also a part of the arrangement of Hibbard, Spencer, Bartlett & Company, hardware jobbers. Packard includes both foremen and job setters. Western Electric includes the group chief, and much of the success of the group plan is credited to this fact. T h e group is also allowed additional time to cover porterage and the necessary repairing of defective work. The foreman is omitted from the gangs in two large automobile plants. Other executives have also expressed the opinion that the regular foreman should be considered as part of the management rather than of the manual working force, and that he should not be included with the workers' groups. Some of these companies have separate arrangements for the foremen, and pay them either on the results of their own department or on the performance of the entire shop. One plan is to base their compensation not only on the labor efficiency of the workers, but on comparison with the budget of controllable expenditures for supplies and materials. But where it is desired to emphasize the efficiency of labor, this is often made the basis for the foremen's bonus. Whenever the work of the departments is so interrelated that the results of one foreman aid or affect adversely the results of another, the foremen should be paid as a group on the combined showing of the departments. INDIRECT LABOR W H I C H DIRECT

I S N O T IN C O N T A C T W I T H WORKERS

One of the most interesting applications of group bonus is to indirect labor. In the average plant the indirect labor payroll may be as large as the direct, but it is proverbially difficult to place on a satisfactory incentive plan. Group payment is being used in a considerable number of plants on operations such as loading and unloading (shipping and receiving), trucking, and routine inspection. Although it has

COMPOSITION

OF THE

GROUP

37

been tried on maintenance work, its application in this field seems to be less successful than in other f o r m of indirect labor. E b e r h a r d has groups of twelve men in the shipping department and of f o u r men in its receiving department, in both of which group incentive plans are working with great success. All of the indirect labor in the malleable f o u n d r y is on g r o u p payment, and its cost has been reduced by group incentive. This saving was demonstrated by an increase in cost during a short period when the foundry labor gang was put back on day work at the suggestion of the " s t r a w " bosses. As has already been mentioned, Edison Electric Appliance has made a wide application of group incentives to indirect labor. Its storeroom, receiving and shipping departments, tool room, inspection, engineering design and the maintenance departments are all paid in this manner. T h e Abbott Laboratories have an arrangement which includes the unloading of incoming material in the packing and shipping room and the work of the billing and tabulating departments. T h e Chevrolet plan covers truckers and shippers. D o d g e Brothers have gang payment for the shipping of service parts, and the Endicott-Johnson Company uses it in the shipping room. T h e jobbing house of H i b b a r d , Spencer, Bartlett uses it only f o r indirect labor, such as unloading and shipping. T h e General Electric Company, Fort W a y n e , obtained excellent results with truck and tractor drivers and the loads carried were increased. It also pays the shipping department on an incentive basis. T h e Holeproof Hosiery Company has group payment for loading and f o r receiving goods in the dye house, and the Nashua G u m m e d & Coated Paper Company of Nashua, Ν . H . , uses it for a group of four men in its color-mixing department. T h e Packard plan includes the truckers in the enamel department, but a bonus for inspectors was found to be unsuccessful. In another automobile plant at Detroit, the plan covers not only the set-up men, but truckers, car loaders, tool grinders, shippers and sweepers. Still another motor car

38

GROUP

INCENTIVES

company has a plan for its tool room men and for those on machine repair and maintenance. T h e Timken Roller Bearing Company at Columbus, Ohio, found that it was successful for handling, but not successful for sweeping. T h e Westinghouse plan includes group payment of maintenance men, storeroom crew, packers, craters, material handlers, and tool makers. Wilson & Company, meat packers, use group payment in their packing department. Group incentives have also been found to be practicable for clerical work. R . H . Macy & Company employ them in the depositors' accounts department. T h e Lincoln National L i f e Insurance Company, Fort Wayne, has a cost saving plan for its office force, including the accounting, bookkeeping, and order departments, and the filing and mailing operations.

CHAPTER THE

BASIS FOR

III

EXTRA-COMPENSATION

T w o distinct kinds of functions are involved in fixing the basis for paying extra-compensation. The first is the research function of determining the existing efficiency and the maximum efficiency possible with given operating conditions. A related problem which also involves research is to appraise or evaluate the relative difficulty and responsibility of each job or occupation. The second set of functions is administrative. They include the assignment to the workers of the task which the management considers as 1 0 0 % performance. Others are the setting of the base rates {i.e., pricing the jobs according to their relative difficulty and responsibility) and the selection of the bonus curve which fixes the relation of bonuses to actual performance, and the job of operating the plan. Of these administrative functions, only the assignment of the tasks and the recording of actual results are discussed in this chapter. The distinction between research and administrative problems is introduced here as an aid to clarity, and is not the usual manner of treatment, for in practice, the administrative decisions are usually embodied in the policies followed by the industrial engineers responsible for the installation. U N I T S OF W O R K

Probably the first of the research functions is to select the unit which is best adapted to expressing the task and measuring the results. T h e logical first step in the selection of a correct unit is to determine what comprises the real purpose of the work done. On an assembly line, the purpose is obviously to assemble sub-assemblies and parts into a final product which will pass inspection, and the unit will in39

40

GROUP

INCENTIVES

evitably be a completed product which has passed inspection. But for indirect labor, such as that in shipping or inspection, the answer is not always so simple. T h e unit chosen for counting the output should above all else reflect the effort and time expended. I f the time varies with the weight rather than with the number of pieces handled, then a weight unit like a ton should be used rather than the number of pieces. In addition to this all-important characteristic, the unit selected for each operation should be definite and capable o f objective measurement. Feet, pounds, and number of pieces are clearly understood, but qualities such as the cleanliness of a department permit many interpretations. T h e units which are in actual use may be classified under three heads: simple, pooled, and compound. Simple units are those which measure the entire work of a department or of a group. I f output is measured in terms of motors assembled, tons shipped, or accounts handled, the attention o f the whole group is focused on this one unit. This type may be seen most clearly in single-purpose departments. An adaptation of the simple unit is to be found in departments where a variety of products are turned out by the same group, but where it is not advisable to measure the combined result by a simple unit, such as a ton. In such a case, it is often necessary to add together the output of each kind, and pay on the total. Such an addition of items constitutes a pooled unit. A more rare type may be termed compound. T h i s may be illustrated by the device used by the Edison Electric Appliance Company in its storeroom. T h i s compound unit combines weight, number of items handled, and number of requisitions handled, and each factor is. weighted. T h e necessity for care in the choice of units may be illustrated by specific examples. In addition to the compound units used in the storeroom, shipping, and clerical departments of the Edison Electric Appliance Company, this concern also uses a number of other units, each adapted to the work o f the particular department. F o r the punch depart-

THE

BASIS FOR

EXTRA-COMPENSA

TION

41

ment, the unit is one thousand strokes of the press, and for the bake oven, $1000 of product handled. Simple units are especially easy to use where continuous manufacture makes possible single-purpose departments devoted to one product only. T h e A . O . Smith Corporation uses chassis assemblies, sub-assemblies, and parts. T h e Frigidaire Corporation, on its installation work, measures output by the number of refrigerating units installed. Most automobile concerns use simple units, such as a chassis, a motor, or a steering gear. Like other General Motors plants which are on group incentive, Chevrolet measures by the production at the end of a division, i.e., the number of assembled motors or finished cars. Hoover uses simple units, such as the motor, the handle, or the sweeper. Some plants pay on the basis of completed orders. T h e Miehle Printing Press & Manufacturing Company of Chicago pays when orders for parts or presses are shipped and the same arrangement has been adopted by the Coatesville Boiler Works. Dclco employs the number of pounds for its plating department. Eberhard makes widely varying products, many of which are produced in small lots. But since the variation in them does not greatly affect the time required, the ton is used as a unit in many of the departments. T h e Holeproof Hosiery Company uses the number of batches for the receiving gang in its dye house, and one thousand pounds for its loading gangs. T h e Milwaukee Electric Railway & L i g h t Company employs the car mile, and in its boiler house, the Tennessee Eastman Corporation uses a compound unit composed of evaporation per pound of coal, Venturimeter readings on feed water, and monthly coal consumption in tons. T h e Lincoln National L i f e Insurance Company uses the following.units for its office work: for accounting, the number of checks written; for bookkeeping, the number of accounts handled; for order clerks, orders written or received; for filing, the pieces of mail received and withdrawn; for mailing, the pounds of mail received and sent out. In its

42

GROUP

INCENTIVES

depositors' accounts department, R. H . Macy & Company employ the number of transactions as a measure of output. R E S E A R C H OR E N G I N E E R I N G F U N C T I O N S The research problems involved in determining the present output, the time standards, and in rating the occupations according to their difficulty are discussed in Appendix A. The first demands the establishment of reliable records of output and actual time if these are not already in existence. It is the general practice to record only the output which is of sufficiently high quality to pass inspection, and to count as time worked the hours which are paid for. This time represents the elapsed time spent by each worker on the job during regular working hours or during authorized overtime. If there is excessive slackness in the department, however, the actual time spent in the plant may include idle time and cause the records to be extremely misleading. Therefore, many companies attempt to secure the elapsed time by jobs or by operations so that it may more closely approximate the time which is actually devoted to the operation in question. TIME

STANDARDS

The standardization and time-study work which are usually essential to successful incentives are just as important for group payment as for individual. The time-study work must be done with just as much care and precision, but the accuracy of the time-study work is improved with group payment because the inaccuracies of the individual tasks tend to balance when these tasks are added together. The determination of uniform labor standards for incentive payment first requires a check-up of the existing methods to find out what changes must be made in product, equipment, methods, or supervision before the operating conditions can be considered sufficiently stable and satisfactory to predict output. The introduction of such improvements is ignored by some engineers, but it is usually

THE

BASIS FOR

EXTRA-COMPENSATION

considered that the careful standardization essential to long-run satisfaction.

of conditions

43

is

T h e techniques used to establish the times are too complicated to discuss here. A variety of measuring methods are available such as Gilbreth "micro-motion s t u d y , " " m o t i o n time analysis," motion study combined with time study, and rough time study. A l t h o u g h it is not appropriate to discuss time-study methods in great detail in this report, the peculiar problems introduced by group payment should be mentioned. O n e of these is the case of operations which have been placed on a conveyor before the time-study analysis is made. Since the speed o f the conveyor controls the flow of work to each individual a l o n g it, it is difficult for the observer to estimate time lost f r o m lack o f balance in the jobs. T h e solution is less difficult if the analyst has the opportunity to time the operations before they are placed on a conveyor so that the most effective combination of jobs can be determined from the time studies. I f the group have been w o r k i n g on the conveyor f o r some time, however, the observer has three alternatives, none of which are w h o l l y satisfactory. O n e is to accept the existing arrangement of jobs as the best obtainable, and then to time the individual w h o has the most work to perform {i.e., whose operation takes l o n g e s t ) . A n o t h e r is to analyze the time of each group o f elements in each j o b as w e l l as the supply of work permits. T h e third is the empirical method of experimenting with the speed of the belt and with the combination of duties into jobs until the largest output has been secured. T h e n a production study will reveal the amount of delay allowance which should be added. It is often found necessary to determine a series of such allowances because the changing of the mixture of products or of the volume of -production affects the balance. G r o u p payment introduces another time-study difficulty, because in f o r m i n g the groups it often seems desirable to include facilitating operations with the direct labor. In many cases, it would not be possible at all to place these workers on

44

GROUP

INCENTIVES

an individual incentive. M a n y of these facilitating jobs, such as trucking, are p e r f o r m e d by only one or two individuals, and it is impossible to secure a sample of observations f r o m a variety of workers. If the operations are repetitive, the time-study observer meets the same problem faced in plants that manufacture a great variety of products in small lots, and in which the work is so sub-divided that only one or two employees perform similar operations. If these facilitating operations are not repetitive, the problem is still more difficult because time and motion study may not apply. T h e stop-watch may prove of assistance but only as an aid to an analysis of the work done. Chief among the problems of setting time standards for both group and individual incentives is the precise definition of the level of efficiency at which the times are to be set. T h e customary approach is to set times which will be " f a i r f o r average workers," but this lacks the clear definition of what is being measured which is essential for uniformity. 1 Perhaps the levels of efficiency which we can define best are maximum efficiency for experts under incentive, and existing efficiency of typical workers. T h e latter should be determined by time study rather than performance records so that avoidable delays can be removed. T h e uniformity of the tasks set can be maintained by keeping them a uniform distance f r o m one of these levels, preferably maximum efficiency ( p a r ) . Another real time-study difficulty under all types of incentives is to secure an adequate sample. On many jobs only one or two operators are employed, and often time standards which are to be used for incentive payment must be based on employees who are being paid day work. W h e r e the work is repetitive, a solution is to segregate those times which are constant from those which vary according to some factor in the job, such as the thickness of the plate to be drilled. T h e constants are characteristic of handling times, 1

See pages 7 and 106.

THE

BASIS

FOR

EXTRA-COMPENSATION

45

and the variables, of machine times. T h i s segregation permits the proper time constants for certain motions to be selected f r o m a sufficiently large sample of workers. A different problem, however, is presented when the uncontrollable variations in the work itself are so great as to overshadow the influence of the operator observed. This situation is found in clerical work, non-selling jobs in department stores, and in the facilitating operations of manufacturing plants. This problem is all the more difficult when studies cannot be taken of a number of workers. In order to properly represent all of the variables that are inherent in the work, it is necessary to select the arithmetic mean or the median for each element after the avoidable delays have been eliminated. Yet some method must be devised to correct for the inadequacy of the sample and the influence of the particular workers observed. A method of rating or " l e v e l i n g " is a possible solution, but its accuracy depends upon the clarity with which it is possible to define the level of efficiency to which individual skill and effort is to be adjusted. T h e level which suggests itself f o r this purpose is the actual performance of typical workers under day work or incentive, whichever is in effect at the time the studies are made. Obviously the precision of measurement will vary with the refinement of the measuring methods and the instruments which can be employed. Although it would be preferable to be able to obtain equal precision throughout, employers do not confine their incentives only to those operations which can be surveyed with accuracy. If they did, it would often not be possible to include in the group those who merely facilitate the repetitive operations. Because it is desirable to include both repetitive and non-repetitive operations in the group payment, the practical problem is how to assure the employees that the measurement of the jobs will be done with equal carefulness throughout. T h e analysis may be equally painstaking even if u n i f o r m precision is impossible.

46

GROUP

INCENTIVES

M a n y companies report that the cost of keeping the timestudy data up-to-date is reduced by the use of group payment. SOME OF T H E ADMINISTRATIVE

FUNCTIONS

Although the tasks are usually set by the staff or research department which is responsible for the measurement of output, the decision upon the general level of efficiency at which the task should be set is really an administrative function to be settled by the chief executives of the concern with the advice of industrial engineers. As is shown in the following chapter, the policy governing the general task level is bound up inseparably with the pricing of the base rates and with the selection of the bonus curve (which, in effect, prices the extra output). T H E

R E L A T I O N OF T H E G E N E R A L TASK. L E V E L TO PERFORMANCE

AND

MAXIMUM

PRESENT

EFFICIENCY

For obvious reasons, the relation of the general task level to present and maximum efficiency is not discussed in the literature describing actual plans of group payment. T h e answer is affected by the following factors: (1)

The

d e g r e e to w h i c h

This,

close m a n a g e r i a l

in t u r n , d e p e n d s upon

a f f e c t s the precision amount

of

with

protection

which

which

control

the e x t e n t it

of

task times is necessary

can be

maintained.

standardization can

be

set a n d

to p r o v i d e

for

and the the

workers. (2)

The

e x i s t i n g efficiency o f the p l a n t and t h e a b i l i t y o f the

manage-

m e n t to increase that efficiency. T h i s s h o u l d i n f l u e n c e the s e l e c t i o n o f t h e point at w h i c h e m p l o y e e s start to earn a b o n u s . (3)

Whether, lieved

for

the

psychological

that w o r k e r s

should

effect upon

"beat"

the

the

task

worker,

rather

it

than

is b e fail

to

reach it. I f too h i g h , the tasks w i l l t e n d to d i s c o u r a g e , a n d i f too l o w , t h e y w i l l not p r o v e a goal to be attained. (4)

T h e share o f the saving in labor cost w h i c h is p a i d to t h e u n d e r the w a g e p a y m e n t system or c u r v e w h i c h

workmin

is a d o p t e d .

Managerial control is usually most precise in industries where manufacturing is continuous by nature, or in assembly industries, like the automobile, which have made the manu-

THE

BASIS FOR EXTRA-COMPENSA

TION

47

facturing operations continuous. In these concerns, the number of factors which cannot be stabilized is relatively smaller than in enterprises which manufacture a variety of products to customer's order. Consequently, emergencies and unusual situations can be controlled more closely, the timestudied task can be set more accurately, and the workers need a smaller guaranteed rate to protect them against occurrences that are beyond their control. In such a situation it is possible to locate the task near maximum efficiency and to pay a high reward for attaining it. Such a policy may be entirely unwise if the management cannot rely upon the time studies to show the maximum performance which is likely to be attained. I f a high reward is adopted, and all the labor saving goes to the employees, the company would lose heavily if the shop efficiency should exceed expectations and reach 1 5 0 % or 2 0 0 % of the task. I f the latter is likely to happen, the management usually believes it safer to adopt a plan which divides the labor saving between the employees and company, such as the H a l s e y Premium or the Rowan plan. T h e selection of a system of this type will, however, force the setting of the task at a point sufficiently low so that the shop can make a saving. A practical problem which must be faced before the task is set is to decide how the efficiency is to be raised above the existing level. In general, two methods are adopted, either independently or in combination. One is to take the plant department by department and to raise the efficiency of each one by the energetic and concerted attention of the management. T h e company assumes the f u l l burden and takes the entire gain. If this plan is adopted, it is important to start the installation in a department which can be brought up to the task without too much difficulty. This will avoid the difficulty which a large company encountered by choosing the hardest department f o r the first installation. Although the plant finally succeeded in getting this department up to standard, the path would have been smoother had it begun in an easier spot.

48

GROUP

INCENTIVES

In contrast to this method of administrative " s h o v i n g , " the arrangement provided by the Emerson and W e n n e r l u n d curves 2 leads the employees along by small financial inducements that begin at 6 7 % and 7 5 % efficiency respectively. In both cases, these bonuses increase in amount as the efficiency approaches 1 0 0 % . T h e idea behind these plans is that a f t e r the employees have received a small bonus, the incentive to increase that bonus will lead them along to higher and higher efficiencies. T h e same thought may be said to underlie the H a l s e y and the Rowan systems, because they place the task so l o w that employees can begin earning a bonus at a l o w efficiency. In actual practice a combination of these two ideas is often used. Assuming, for illustration, that the present performance of a plant under day work is at 5 0 % o f maximum efficiency, the task is set at some point between 5 0 % and 1 0 0 % . I f the point selected is 7 5 % , the efficiency is raised to that point by the management's taking all possible steps to eliminate the causes of labor loss which are within its control, such as attention to machinery and equipment, the maintenance of a steady flow of work, and close supervision over all other operating details. A f t e r the efficiency has reached the point at which the bonuses begin, the management is aided by the stimulation to additional effort and coöperativeness which the bonuses provide. T h e k n o w l e d g e that a reward is obtainable also serves as a slight incentive even when the actual performance is below the task. M r . Ε . K . W e n n e r l u n d of the General M o t o r s Corporation considers that the psychological effect upon the workers is greatest w h e n the actual performance exceeds the task after g r o u p payment has been in force for some time. It is felt that workers may be discouraged by the constant attempt to reach a goal that they just miss, and that a greater stimulus is obtained w h e n they are beating the task set. M a n a g e r s and engineers h o l d two points o f v i e w on whether the tasks should be u n i f o r m l y difficult in all d e ' See page 59.

THE

BASIS FOR EXTRA-COMPENSATION

49

p a r t m e n t s {i.e., at a u n i f o r m distance below m a x i m u m p e r f o r m a n c e ) . T h e one which is most common, perhaps, is that t h e tasks should be as nearly u n i f o r m as possible. T h i s conclusion is supported by two arguments. O n e is that the task should be u n i f o r m in order that t h e records of labor e f ficiency shall provide a reliable means of control as well as an important f o r m of non-financial incentive. T h e other is that workers will feel that the arrangements are u n j u s t if the task is made easier in some d e p a r t m e n t s than in others. A few executives take the position that because all the departments of a plant are not equally standardized, and because the existing efficiency may v a r y f r o m d e p a r t m e n t to department, the task in certain d e p a r t m e n t s may properly be set at easier levels in order that they may be better adapted to the conditions. As we have mentioned already, several companies have experienced difficulty because they a t t e m p t e d to set their standards in the hardest department first. T h e tendency to start in an easy department merely to make a showing may be deplored, but the installation of the entire a r r a n g e m e n t is greatly facilitated if g r o u p payment is started in a d e p a r t ment which can be raised to standard within a short time. Once a department has made a bonus, much g r o u n d has been gained toward developing the interest which is necessary to raise the existing efficiency u p to standard. M E T H O D OF EXPRESSING T H E T A S K

T h e task is usually expressed either in t e r m s of time or money. T h e important exceptions are those payment systems, such as the H a y n e s M a n i t and the Bedeaux, which use a common denominator like the M a n i t or B. A l t h o u g h the medium chosen to express the task may seem of little importance, it has a direct bearing both upon the problem of distributing the g r o u p earnings a m o n g the individuals and upon the chance to secure comparisons of labor efficiency. In fact, it points to the f u n d a m e n t a l distinction between group bonus and gang piece work.

50

GROUP

INCENTIVES

T h e use of money is, of course, merely the adaptation of piece work to group payment. T h e rate is expressed in d o l lars per unit of product. If the gang is very small, from two to eight men, it has been the practice in many plants to assign a piece rate to each one of the jobs in the gang, the earnings to be figured from the combined output. T h i s situation is found in the four-man forging gangs in the forge shop of Fayette R . Plumb, Inc. It is also found at the Chandler & Price Company foundry at Cleveland, and in the rolling mill of the Timken Roller Bearing Company. Money rates are also used to express the task by companies which are using large gangs. Important plants, such as that of the Western Electric Company at Hawthorne, use gang piece work. W h a t might seem to be an advantage is that the transformation to group incentive is fairly easy in case the concern has already been using individual piece rates. T h e latter are merely added together. One might argue that because of the seeming simplicity, money rates are easily understood by the workers. It is certainly true that the gang can compute its earnings in total, but where it consists of from 20 to i o o men, it is practically impossible for an individual to figure his own pay with precision. Consequently, gang piece work is not as simple for the employees as we might expect. Probably the medium in most common use for expressing the task is time. T h e task is given to the workers in hours allowed, and their pay is determined by a comparison of the allowed time with the actual time worked. This comparison is expressed as a percentage of efficiency, which is computed by dividing the allowed by the actual time. From the group efficiency, the bonus percentage is derived by using whichever payment plan (bonus curve) the company has adopted. T h e use of time rather than money is a feature of the score or more of General Motors installations made by M r . E . K . Wennerlund and his staff. Other plants which use it are the Chrysler Corporation, the Edison Electric Appliance Company, the A . O. Smith Corporation, the Holeproof Hosiery

THE

BASIS

C o m p a n y , the C o m p a n y , and Columbus. Advocates o f it is superior in (1)

be

51

Westinghouse Electric & M a n u f a c t u r i n g the T i m k e n R o l l e r Bearing Company at time instead of money basis consider that the f o l l o w i n g respects:

handled

discussed Although of Gang

in

Chapter

group

piece

work to

inflexibility cost

the

equitably

with

gang

provides

work, the a

in a c h a n g i n g

they

task

labor

accountant,

is r e d u c e d

individuals

less

friction.

calculate

the total

This

is

IV.

as w h e n

can be substituted

and

in l a r g e g r o u p s can

under

as r e a d i l y

pleasing labor

more

individuals

the

share (3)

EXTRA-COMPENSATION

In the l o n g run, the distribution o f g r o u p earnings to the can

(2)

FOR

this

cannot

is g i v e n cost has

in

which the

compute

when

labor

rates

own

hours. is

minor

labor market. W i t h

for high-priced

earnings

their

decrease

fixed.

Although

disadvantage

of

tasks in h o u r s ,

the

or

cheaper

labor

labor.

T h e expression of the tasks in time has a weakness if the groups are small and if there is a wide diversity in the base rates. T h e high paid workers benefit out of proportion to the effort expended by them when operators who receive l o w rates are eliminated. T h e

hours saved by removing 30^

operators count just as heavily toward raising the percentage of efficiency and the bonus percentage as those of

em-

ployees, but the labor saving is much less. In extreme cases, the company may pay out in bonus more than it saves. O n e r e m e d y is to convert the task f r o m standard hours into dollars at an average base rate and to express the task in money. T h e percentage of efficiency may then be f o u n d by dividing this price by the product of the actual base rates and hours worked. Still a third medium for g i v i n g out the tasks and f o r recording actual performance is a common denominator like a " p o i n t . " T h i s is a characteristic o f the H a y n e s M a n i t and the Bedeaux systems. 3 A l t h o u g h these two devices have the advantage of providing common denominators for all kinds of labor, direct and indirect, manual and supervisory, the * See page 60.

52

CROUP

INCENTIVES

same result may be accomplished by using the percentage o f efficiency derived f r o m a comparison of the allowed task with the actual performance. K E E P I N G TASK. T I M E S

UP-TO-DATE

W h e r e the number of operations and jobs is large, the clerical problem of maintaining an up-to-date file of standa r d tasks presents considerable difficulty. T h i s is especially true if indirect labor which is in close contact with the direct operators is included in the task, for changes in the allowance f o r indirect labor necessitate the revision of all the individual j o b s affected. T h e F o r t W a y n e plant of the General Electric Company has discovered that the solution to this problem is to keep the net time for the j o b separated f r o m the indirect labor allowance. T h e net time refers to the time needed for the actual production j o b as distinguished from the supplementary work of trucking, inspecting, or supervising. T h e latter should be a d d e d as an allowance in hours, not percentage, to all the j o b s in the group. T h i s arrangement permits either the net times or the allowance to be altered independently of each other. A still more serious difficulty is that of keeping track of changes in operation so that the task times may be changed whenever the shop operation changes. E v e n if a plant has a carefully prepared instruction card for each worker, a tremendous amount of training and supervision are often required if the instructions are to be f o l l o w e d . N a t u r a l l y , the worker himself suffers if he adopts a method less effective than the one prescribed. T h e r e are changes, however, over which the worker has little control which make the j o b either more difficult or more easy. A m o n g these are variations in the hardness of material or in the tolerances allowed in the part which is being machined. A heavier machine with more power or the use of improved cutting tools will have similar results. It is important that the standards department be informed of these changes even if it is not given the

THE

BASIS

FOR EXTRA-COMPENSATION

53

power to authorize them. Otherwise, the company continues to pay the old rate on a job after it has been changed, and by paying the rate tacitly approves it, though the job is substantially different. In this way, the tasks drift further and further f r o m the work which they are supposed to represent. Swift & Company have adopted a double check to protect the accuracy of its labor standards. Changes in operations are reported both by the foreman and by the checkers who represent the standards department. There are often as many as one hundred changes a week, and if they are not reported from one source they will be caught by the other. It is also valuable to supplement this device by the rule that a new job must be placed on day work until it has been time studied. T h e combination of this rule with a device such as that described above prevents a company from d r i f t ing into the embarrassing situation where it finds its rates to be inaccurate, but to be tacitly guaranteed by the fact that they were not changed at the time the operation was altered. MEASUREMENT

OF R E S U L T S A N D T H E

PERFORMANCE

TO T H E

REPORTING

OF

EMPLOYEES

If a financial incentive is to have its full effect, it seems necessary for the employees to know their rate or task in advance, and to be informed of the results of their work as soon as possible after it is completed. This involves the posting in the shop of a comparison between performance and task within as short a time as the inspection and clerical work permits. In some plants, the record is posted on shop bulletin boards on the afternoon of the day following the completion of the work. In cases where simple units can be used, the group or its foreman can make a computation of its earnings each day before they go home at night. T h e General Electric Company at Fort Wayne issues reports within twenty-four hours. At the Hoover plant the workmen çount and report their own work subject to periodic checks

54

GROUP

INCENTIVES

by the inspection and accounting departments. Timken Roller Bearing informs the men of their results on the day following. Chevrolet posts progress within twenty-four hours, and Marmon also figures it daily. Another automobile plant furnishes the information by the Wednesday of the following week, and at the Packard factory the men are informed each morning of the results of the day before yesterday. Some plants find it sufficient to compute the pay weekly or at the end of a two weeks' pay period. In these cases, the men are often not informed of their daily progress. At the Westinghouse plant, the bonus is computed at the end of the month according to the time necessary for completing the average job in that department. The Lincoln National Life Insurance Company usually pays the average job on a monthly basis. Although the Tennessee Eastman Corporation pays monthly bonuses in its boiler house, the performance is reported daily except for water evaporation. T h e Miehle Printing Press & Manufacturing Company figures a bonus on a two months' period and pays it at the end of the following month. These companies which base a bonus on a long period usually do not make reports to their employees as soon after the work is completed as do those which figure the earnings daily. Some plants, however, pay the bonus weekly, but the foremen have access to the production records so that they can figure the bonus of their group at any time they desire. Accurate measurement of results depends upon a careful check on the quantity of work completed. T h e protection of the company's interest is essential, for an accurate count of quantities produced is just as necessary for safeguarding the payroll as is an audit of the money paid out. Advocates of group incentive point to its advantage over individual payment in this respect. Where each job is paid independently, the work must be counted when it leaves individual operation or the employee's own count must be accepted and checked up by means of the production rçcords. Inaccurate reporting

THE

BASIS FOR

EXTRA-COMPENSATION

55

o f work and the consequent padding of the payroll are e x t r e m e l y difficult to avoid in plants which use individual piece work. Some industrial engineers report they have n e v e r been able to find a piece work plant in which o v e r payments were not made on some operations even t h o u g h the management had placed numerous checkers in the shop and was f u l l y convinced that no over-statement of the quantities was possible. Checkers seem to have the faculty of becoming lax in their work and of taking the operator's w o r d for the number in a lot if the quantity "looks r i g h t . " U n d e r group payment, the counting is greatly simplified because the number of counting points is enormously reduced by checking the work as it leaves either the plant or the department rather than at each individual workplace. A t the C h e v r o l e t factory, the motors are numbered serially and are counted by two people independently as they come off the end of the assembly line. T h i s quantity is the basis f o r the work of both the payroll and cost departments. Such an arrangement provides a check which is almost foolproof at a minimum of clerical expense. T h e part of the organization which is held responsible for the accuracy of the counts differs w i d e l y , but the inspection department is used more o f t e n than any other department. Sometimes factory clerks w h o report directly to the p a y r o l l department are used to count the work. I n the Chrysler plant, the payroll credits are given by the inspector. Likewise Edison Electric Appliance, Packard, General Electric, H o o v e r , and the T i m k e n R o l l e r B e a r i n g Company at Columbus, all make the inspectors responsible for the quantities paid for. Eberhard uses factory clerks. T h e Coatesville Boiler W o r k s also uses a timekeeper w h o reports to the payroll department, and D o d g e e m p l o y s counters in the shop. F o r the installation w o r k of the Frigidaire Corporation, the work is checked by a representative of the district manager's office, and in the boiler house of the Tennessee Eastman Corporation, the chief house engineer is responsible f o r rating the work.

CHAPTER

IV

DETERMINATION AND DISTRIBUTION OF GROUP EARNINGS In contrast to gang piece work, group bonus permits the selection of one of several incentive curves as the basis for figuring the bonus. These curves determine the rate at which daily earnings and unit labor cost vary with changes in efficiency, and the selection of the curve which will fit the conditions of the individual plant is linked with the other administrative decisions upon how the base rates will be priced and at what level of efficiency the tasks will be assigned. The choice of the proper curve depends upon the extent of precise control in the plant, the accuracy with which maximum performance can be predicted·, and the ability of the management to raise the existing efficiency of the shop before the incentive becomes directly effective. Other factors are the relation of existing base rates to the rates in the labor market, the absolute amount of those rates, and the threat of possible union interference. T h e selection of a curve or payment system such as the Emerson or Wennerlund is affected greatly by the level of efficiency at which the tasks are set. The determination of the task level and the selection of the payment curve mUst be considered as joint problems. Curiously enough, these two problems, which are probably more important than any other except the preliminary standardization by time study, are discussed but little in the descriptions of existing plans. Perhaps the explanation is that the setting o f the task is related to internal production problems which plants do not wish to discuss in written articles, and the selection of the curve affects the division between workers and employer of the savings in time which result from improvements in e f 56

DISTRIBUTION

OF GROUP EARNINGS

S7

ficiency. Since the average workman cannot figure out what happens to these savings, some employers are content not to make their explanation on this point too elaborate. H o w ever, those employers who use the Wennerlund curve, or any other arrangement which gives all the labor savings to the workmen after a certain point has been reached, usually stress this fact in their announcements to the employees. Under certain situations, a division of the time saved between employer and employees seems necessary to safeguard the former, and where a plan such as the Rowan or the Halsey is used, 1 no criticism can be leveled at the management because the savings are divided. Neither can we be certain that employees are resentful if their daily earnings do not advance in direct proportion to the increase in their efficiency. MATHEMATICAL USED

COMPARISON WITH

OF W A G E

GROUP

PAYMENT

INCENTIVES

PLANS

2

Since the payment plan which is chosen determines the relation both between the actual efficiency of the workers and their earnings and between efficiency and unit labor costs, it is essential to compare them as accurately as possible. T h e principal difficulty in such a comparison is choosing the assumptions to serve as a basis. Mathematical comparisons are limited in value by the degree to which these basic assumptions approach the real conditions under which the plans are installed. T h e plans vary in the amount of incentive offered, the percentage o f efficiency at which the bonus starts, and the shape of the curve. In the application of these plans, the difficulty of the task level varies from company to company. Moreover, the amount of the hourly base rates is affected by the amount of protection which it is desired to give the employees and by changes in the market rates for labor. See page 6 i . ' Great assistance in developing the method of showing· these comparisons was rendered by William T . Collins, who experimented with a number of methods of presenting them while preparing his senior thesis for the Wharton School on " A Mathematical Comparison of Wage Payment Plans." 1

58

GROUP

INCENTIVES

These factors must be considered whenever it is desired to compare incentive plans in order to select the one which is best adapted to a given case. But it must not be forgotten that in forcing plans into a mold for purposes of comparison, the effects of certain plans as used by their sponsors may be misrepresented. A S T A T E M E N T OF T H E P L A N S C O M P A R E D

The plans which are compared in the following pages are those which are in most common use with group incentives. We have selected the Wennerlund Efficiency plan, the Rowan Premium plan, the Emerson Efficiency plan, the Bedeaux Point system, and the Standard Time plan, such as that used by the Packard Motor Car Company. For the sake of comparison, we have also included two other methods which have been widely employed under individual incentive—piece work with guaranteed hourly rate and the Gantt Task and Bonus plan. It is important at the outset to define or describe our interpretation of each of these plans which are used in the comparison because many variations are found. On account of its age and simplicity, we will describe piece work first. Piece work implies a fixed rate in dollars for each unit of product and, consequently, a uniform labor cost per unit. It is rarely employed, however, except in combination with a guaranteed hourly rate. In practice, this may become effective only when the foreman definitely assigns the worker to a day-work job. But in this comparison, we assume that the guaranteed hourly rate becomes effective for any period in which the piece-work earnings fail to exceed the amount which the worker would receive at his guaranteed rate. When earnings for any given period are above the guaranteed rate: Earnings = number of units produced X rate per unit. When earnings for any given period are below the guaranteed rate: Earnings = number of hours worked X rate per hour.

Unlike piece work, the Gantt Task and Bonus flan introduces a definite task to be done and expresses it in hours

DISTRIBUTION

OF GROUP

EARNINGS

59

allowed per unit of output. For the attainment of this task, it pays a bonus which is often 2 0 % of the guaranteed hourly rate. If the task is just attained, the earnings are 2 0 % higher than if the employee is only 99% efficient, and consequently, there is an abrupt rise in earnings for reaching 1 0 0 % efficiency. If the performance is better than the task set, the earnings equal the number of hours allowed multiplied by the guaranteed rate per hour increased by 2 0 % . I f the task is not attained, earnings -= actual hours X rate per hour. I f the task 20%).

is

attained, earnings = hours allowed X (rate per hour +

In contrast to this sharp increase in earnings at one point on the curve, the Emerson Efficiency plan provides bonuses which start at a low efficiency ( 6 7 % ) and increase slowly on an arbitrary scale. The bonus earned upon reaching the task is 2 0 % . The task is expressed in time and the performance is measured by the general efficiency achieved over a period. The actual efficiency equals the hours allowed divided by the actual hours taken. I f efficiency is above 6 7 % : Earnings = (actual hours X hourly rate) + percentage of bonus earned. I f efficiency is below 6 7 % : Earnings = actual hours X guaranteed hourly rate. e"—«

The Wennerlund Efficiency Scale also pays a minimum hourly rate for efficiencies less than 7 5 % of the task; above 7 5 % efficiency, the percentage of bonus to be added to the guaranteed rate is determined from the Wennerlund curve: This curve resembles the Emerson in that it provides small but increasing bonuses to encourage the workers to attain 1 0 0 % efficiency. Above that point, the entire labor saving is paid out in bonus. T h e task is expressed in hours per unit of output and the efficiency (hours allowed divided by hours taken) determines the bonus for this group. I f efficiency is above 7 5 % : Earnings = (actual hours X hourly rate) + percentage of bonus earned. I f efficiency is below 7ζ%: Earnings = actual hours X hourly rate.

CROUP

60

INCENTIVES

T h e Bedeaux Point system has a common unit, the Β for measuring human effort. T h e Β unit consists of a fraction of a minute of effort plus a fraction of a minute of compensating relaxation, the proportion varying according to the strain. T h e number of Β units produced per hour is the measure of individual, departmental, or plant accomplishment. T h e TABLE EMERSON

ι

AND W E N N E R L U N D

BONUS

PLANS

Bonus in Percentage of Base Rate Under Efficiency in Percentage of Task

66.7 68 69 70 71 72 73 74 75 76 77 78 79 80 81 81

83 84 85 86 87 88 89 90 91 92 93 94 95 96

97 98

99 100 100-Up

Emerson Efficiency Bonus Plan O. 00 O. 01 O. 04 0 10 O 20 O 35 O 55 O 75 I 01 I 3> I 61 I 99 2 39 2 80 3 30 3 80 4-34 4 95 5 55 6 23 6 93 7 63 8 40 9 20 10 00 11 00 12 00 >3 00 14 .00 15 . C O 16 .00 17 .00 18 .00 19 .00 20 .00 Plus 1 % for each 1 % gain in efficiency.

Wennerlund Bonus Plan

I .0 1.6 2.2 2.8 3 4 4.0 4.6 5-2 5-8 6.4 7.0 7-6 8.2 8.8 9 4 10.0 I 1.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 Plus 1 . 2 % for each 1 % gain in efficiency.

DISTRIBUTION

OF

GROUP

EARNINGS

61

Β standard corresponds to the minutes needed by an average person working under existing conditions at a normal rate of speed and effort to perform an operation correctly. F o r accomplishing less than 60 5 ' s per hour, a guaranteed rate is paid. F o r each Β in excess of 60 per hour, a premium is paid. T h e premium for each extra Β is obtained by d i v i d ing the base rate by 60. O f t e n only three-fourths of this premium is paid to the workers, the remainder being reserved for the supervisors, but in this comparison, it is assumed that the premium is not so divided. I f o u t p u t is less t h a n 60 B's

per h o u r :

E a r n i n g s = actual hours X hourly rate. I f o u t p u t exceeds _ Konus

60 B's

per h o u r :

. „ X p r e m i u m p o i n t s {i.e., a c t u a l as — 60). 60 E a r n i n g s = actual hours X hourly rate + bonus. =

hourly rate

T h e Standard Time flan used in many group bonus arrangements is an outgrowth of the Westinghouse Standard T i m e plan, which in turn resembles Gantt Task and Bonus. 3 F o r each 1 % gain in efficiency above a given point, a certain percentage of the base rate is paid as bonus. A guaranteed rate is paid for efficiencies below the starting point of the bonuses. In this comparison, the starting point for the bonus is 8 0 % efficiency, and the bonus is 1 % of the base rate f o r each 1 % increase in efficiency. F o r e f f i c i e n c i e s above t h e s t a r t i n g p o i n t o f t h e b o n u s : E a r n i n g s = a c t u a l hours X h o u r l y rate + Bonus

bonus.

= actual hours X hourly rate X (actual efficiency — 8 0 % ) .

F o r e f f i c i e n c i e s below t h e s t a r t i n g p o i n t o f t h e b o n u s : E a r n i n g s = a c t u a l hours X hourly rate.

T h e Rowan Premium divides the labor saving between employer and workers, and the premium added to the base rate equals the ratio of the time saved to the time allowed. " T h e plan o f the Westinghouse Electric & M a n u f a c t u r i n g C o . employs t w o sets o f base rates, one 1 2 % higher than the other. T h e f o r m e r is paid at efficiencies below, and the latter at efficiencies above 1 0 0 % .

62

GROUP

INCENTIVES

I f t h e a c t u a l t i m e is less t h a n t h e time allowed: E a r n i n g s = h o u r l y r a t e X actual hours + premium. hours saved P r e m i u m = h o u r l y rate X actual hours X : π ϊ hours allowed I f t h e a c t u a l t i m e is greater t h a n the t i m e allowed: E a r n i n g s = a c t u a l hours X hourly rate. THE

ASSUMPTIONS ON W H I C H ARE

THE

CALCULATIONS

BASED

In order to compare these plans, we assume that maximum efficiency, or " p a r , " is uniform ( 1 0 pieces per hour, or .1 hour per piece). W e have also assumed that the task ( 1 0 0 % efficiency) is easier than "par," and in all cases, bears the same relation to it (that is, three-fourths of " p a r , " or 7.5 pieces per hour). Expressed in time, this is .133 hours per piece. O n all the tables and charts which follow, the task level is represented by 1 0 0 % efficiency, and consequently the efficiency at " p a r " is 1 3 3 % of the task. T h i s relationship between the task level and " p a r " has been selected in the belief that it approximates common practice. T h e task given to the workers is usually set so that it can be exceeded; the efficiency attained is greater than 1 0 0 % , and the bonus is larger than that specified for 1 0 0 % performance. It is to be noted that, if the output with day work is one-half o f " p a r , " the task level which is assumed here is equidistant between the two. This uniformity of the task in relation to "far" is maintained throughout the following charts. T w o sets of calculations are needed, however, because in some plants a comparison featuring the base rates is desired, and in others a comparison focused upon maximum earnings. In a district where a majority of the competitors already use incentives, a payment plan will be wanted which will permit the workers to earn as much as the "market." Since the efficiency of a group is likely to beat the task consistently but not to exceed " p a r , " the efficiency after incentives take effect will be at some point between 1 0 0 % and 1 3 3 % .

DISTRIBUTION

OF GROUP

EARNINGS

63

I f an executive believes that he can raise the efficiency of his shop to 1 2 0 % , he will select a curve which at that point w i l l give his employees the desired earnings and pay the base rate which he believes necessary for their protection. Conia m o « # ι meets this condition by keeping the hourly earnings at "par" uniform (8 of) in all the plans. In contrast, the second comparison assumes uniform base rates (50Φ an hour). Naturally, the earnings above the task diverge. T h i s comparison is useful for an executive in an industry where day work still predominates. E v e n though the actual day rates are higher or lower than 50^, the effect of each plan on earnings and labor costs w i l l be similar to that shown in Comparison # 2 . Since the proper choice of a plan requires attention to base rates, probable earnings, maximum earnings, and labor costs at all efficiencies, the two comparisons tend to supplement each other. COMPARISON

NO.

I

Since it is necessary to know the effect which the various payment systems have upon both hourly earnings and unit labor costs, these are calculated separately. T h i s comparison assumes that the maximum earnings which a group of workers can maintain is the same, and the statements which follow will not be accurate under other conditions. If all the plans are to pay 80^ an hour at " p a r , " Chart I, page 66, shows that the Rowan Premium and the Bedeaux svstern require high base rates, 6o.60 .60 .60 .60

$.522 . 522 .522 .522

$•64

• 505 • 505 • 52 •535 •55 • 575 .60

.60 .60 .60 .60 .60 .60 .60

.522 . 522 . 522

.64 .64 .64

.61 .66

.63 .66

•549 •575 .601 .626 .6525 .6785

.64 .64 .64 .64 .672 .698

• 69

.69

•72 • 75 .78

•72 • 75 •7«

•705 •731 •757 •783

•723 •749 .768

.806 .825

•72 •75 •7»

•75 .78

•7°5 •731 •757 • 783

.81

.81

.809

.81

.81

.809

.84 .87 .90

.84

•835 .862 .887

•84 .87 .90

.84

•835 .862 .887

•87 .90

.87 .90

.64 .64 .64

.787

.838 •85

* At 133 % efficiency on the above task scale, earnings under all plans are equal, being $.80. t In these comparisons, the Bedeaux system pays to the workers 100% of the value of the premium points instead of 7 5 % which is a common practice under this plan.

Company at Lancaster, except in the machine shop, and by the H o l e p r o o f H o s i e r y C o m p a n y f o r its loading gang. A m o n g the companies which use the Emerson curve is the Atlantic R e f i n i n g Company. T h e W e n n e r l u n d curve, which is similar to the Emerson curve, is important because of its use in most of the plants of the General M o t o r s Corporation which pay group incentives. T h e W e n n e r l u n d curve pays out in bonus all the labor saving above 1 0 0 % efficiency whereas the Emerson does not, and the W e n n e r l u n d bonus begins at 7 5 % efficiency instead of 6 7 % . T h e shape of the curves is also different between the starting point of thç bonus and 1 0 0 % efficiency.

GROUP

68

INCENTIVES c o

Ο

1 s» 1 I ^ Β

/

•s o £

8 w Pi £ o s

U. Ζ Ö «

il 1

°

c rt O




/ /

*

/ iv.

7/

/ / /// / ' / / / / / / / //

•

y y

X ' / ν

OÍ Ό

Él

«- C ci GO O 5 T3 ζ c/2 c 14 -α ζ c a u

6

w h Ci

?

y 0 0

t-

S r

3 rt

C «j o «" (Λ L ca

C/3 O u

ce o PQ
133 . 121 .III . 1027

*

133 . 121 .III . 1027

>133 .121 .III . I027

.0954 .089 .0867 .084 .0815 .0808 .08 .08 .08 .08 .08 .08 .08

•0955 .090 .0861 .0834 .0815 .0808 .080 •0793 .0788 •0783 .0778 •0773 •077

.0954 .089 .0833 .0825 .0815 .0808 .080 •0793 .0788 .0783 .0778 • 0773 .077

.0954 .089 .0834 .0785 .074 •0703 .067 .067 .067 .067 .067 .067 .067

.08 .08 .08 .08

.0767 .0762 .076 .0756

.0767 .0762 .076 .0756

.067 .067 .067 .067

Wennerlund Bonus

effi-

3 0 % to the employer. In addition to its share of the labor saving, the company also profits from the reduction of its overhead cost per unit. T h e effect of lowering the starting point when the bonus is 1 % for each 1 % gain in efficiency is shown in T a b l e 6, page 74, in which the earnings at 1 0 0 % efficiency are uniform. A similar result may be obtained by reducing the bonus paid f o r each additional per cent gained in efficiency. Such a curve would fit a situation where the manufacturing methods cannot be f u l l y standardized and performance cannot be predicted with accuracy. T h e employees of such a plant would need the protection of high guaranteed rates which would necessitate smaller bonuses. Moreover, in such a case the division of the labor savings assures the employer that

CROUP

7*

INCENTIVES

t ^ j

D(3

Η sí

r» «η oo ^ η O σο oo co ~ 0 0 0 0

^f r-oo go oo ^ η σο r- r- r-- r- r0 0 0 0 0

·- «- oo ^ ^ η ve V ow ^-ivO O Ί· OsΓ-rnoo TÛ J- vo Γ-ΟΟ

Ο ««Λ ft« o « κ- « H bo * c S em ΗU =Ή S

S.§

v£> V ω 5.S B 6%

20

n'A

8

10 12 16 20 24 28

APPENDIX D D I G E S T S OF T Y P I C A L

PLANS

QUESTIONS USED AS BASIS FOR DICEST

Comfosition

of the Group

1 . W h e n work is not progressive, have you f o u n d it practical to group dissimilar operations together in the same group? 2. I f the same group makes d i f f e r e n t products, do you pool them when computing the bonus? 3 . W h a t size of g a n g do you p r e f e r ? 4. Between what limits (as to size) have you tried group payment? 5. O v e r h o w great an area can a group work satisfactorily? 6. D o supervisors, truckers, or set-up men w h o are directly connected with a gang participate in its bonus? 7 . T o what extent have y o u applied group bonus to indirect labor?

Basis of

Extra-Compensation

8. W h a t units are used to measure output; simple, compound, or pooled? 9. A t h o w many points ( " p a y - p o i n t s " ) is work counted and where are they located? 1 0 . W h a t department is responsible f o r the accuracy of the count? 1 1 . H o w o f t e n are p e r f o r m a n c e reports issued to the employees? 1 2 . O n what basis is the bonus or payment distributed among the workers? 1 3 . D o the f o r e m e n have any direct part in the setting of the individual base rates or of the task times?

Results Obtained 1 4 . W h a t proportion do the total employee earnings bear to their base rates? 1 5 . H a v e you noticed any reduction in inventory? 1 6 . H a s group payment resulted in a reduction of the clerical cost of figuring the payroll? 1 7 . Has the direct labor cost per unit decreased? 1 8 . H a v e you noticed any reduction in the cost of indirect labor, such as supervision, trucking, inspection, or training? 1 9 . W h a t has been the effect o f group incentive on quality?

Protection of the Employees 20. H o w do you arrange f o r the introduction o f n e w employees into the gang? 2 1 . H o w do you take care of idle time or of l o w production because of the f a i l u r e of management to maintain standards? 2 2 . H o w do you handle overtime f o r employees on group payment? 2 3 . D o you guarantee that the group w i l l receive a m i n i m u m hourly rate? 2 4 . D o you guarantee the task times? I f so, f o r how long? 2 5 . F o r what type of wage payment did you substitute group incentive? 26. W h a t bonus curve or wage " s y s t e m " is used to compute the group bonus? 128

APPENDIX

D

A B B O T T LABORATORIES, N O R T H

Composition

of the

129 CHICAGO,

III.

Group

1 . O n non-progressive w o r k , dissimilar operations are g r o u p e d together. 2 . W h e n the same g r o u p makes d i f f e r e n t products, they are p o o l e d . 3 . P r e f e r a b l e size o f g a n g b e t w e e n 8 and I 5. 4 . T r i e d groups o f 6 to 3 0 . 5 . A r e a over w h i c h g a n g work m a y be as large as one f o r e m a n can efficiently control. 6 . Supervisors, truckers, and set-up m e n are i n c l u d e d in the g r o u p payment. 7 . G r o u p bonus a p p l i e d to indirect labor ( u n l o a d i n g o f i n c o m i n g materials; packing and s h i p p i n g r o o m ; b i l l i n g and t a b u l a t i n g ) .

Basis of

Extra-Compensation

8. S i m p l e u n i t s ; in e f f e r v e s c e n t salts d e p a r t m e n t , one point is a l l o w e d p e r p o u n d or filled b o t t l e ; in packing or shipping departments, two points per o r d e r and one point per item. 9 . Pay-points are at the d e p a r t m e n t exits. 10. 1 1 . Bonus checks are paid m o n t h l y . 1 2 . Bonus is distributed a m o n g the workers e v e n l y . 1 3 . " T h e y are consulted and sold 1 0 0 % b e f o r e plan is s t a r t e d . "

Results 14. I 5. 16. 17. 18.

Obtained

T o t a l e m p l o y e e earnings arc 1 0 5 % to 1 3 0 % o f base rates. In some instances, there has been a reduction in i n v e n t o r y . Excess w a g e bill d e c l i n e d fastest in g r o u p bonus departments. Shipping department payroll reduced $ 3 , 0 0 0 a year with 1 0 % v o l u m e ( $ 2 . 0 2 per $ 1 o f net sales; $ 1 . 9 2 in 1 9 2 7 ) .

more

19.

Protection

of the

Employees

20. 21. 2 2 . G r o u p bonus supplanted ment. 23.

Basic pay is

figured

overtime

except

for

maintenance

depart-

on time c l o c k ; bonus on production.

24· 2 5 . Piece rates and day rates are still in e f f e c t , but g r o u p bonus also. 2 6 . A bonus is paid f o r each point e a r n e d over the quota, w h i c h varies w i t h the n u m b e r o f e m p l o y e e s in the d e p a r t m e n t .

GROUP

130 ATLANTIC

REFINING

INCENTIVES COMPANY,

PHILADELPHIA,

PA.

Composition of the G rouf 1. 2. 3. 4.

O n non-progressive w o r k , dissimilar operations are g r o u p e d together. W h e n the same g r o u p makes d i f f e r e n t products, t h e y are p o o l e d . P r e f e r a b l e size o f g a n g not o v e r 3 0 - 3 5 . H a s tried groups b e t w e e n 2 - 8 0 ; 8 0 p r o v e d too l a r g e because g a n g

w o r k e d in t w o b u i l d i n g s . 5. A r e a should not be so large that m e n cannot see each other. 6 . F o r e m e n , c l e r k , j a n i t o r , inspectors connected w i t h the groups included in bonus. 7 . G r o u p bonus is a p p l i e d to indirect labor on s h i p p i n g p l a t f o r m ( 8 - 1 0 men).

Basis of

Extra-Compensation

8. S i m p l e , p o o l e d , and c o m p o u n d units are used. C o m p o u n d unit used on still c l e a n i n g in o r d e r to take account o f variations in w e i g h t o f coke a n d n u m b e r o f tubes. 9 . W o r k is usually c o u n t e d as it leaves g r o u p . F o u r pay-points are used w i t h i n one g r o u p on account o f variation in w o r k . 1 0 . F o r e m e n ( c h e c k e d by a c c o u n t i n g ) are responsible f o r accuracy o f count. 1 1 . P e r f o r m a n c e reports are issued d a i l y , except in t w o locations w h i c h are on t w o - w e e k pay p e r i o d . 1 2 . B o n u s is usually paid as a percentage on the w o r k e r ' s base salary f o r the time spent on bonus w o r k . 1 3 . F o r e m e n can r e c o m m e n d changes t h r o u g h s u p e r i n t e n d e n t to rate committee. T a s k times set by industrial e n g i n e e r i n g d e p a r t m e n t .

Results Obtained 1 4 . T o t a l e m p l o y e e earnings are 1 1 5 % t o 1 5 0 % o f base rate. Average about 1 3 0 % . 1 5 . I n v e n t o r y was r e d u c e d in one location by g r o u p i n c e n t i v e . 1 6 . N o saving in c l e r i c a l cost o f figuring p a y r o l l because amount o f i n d i v i d u a l piece w o r k has n e v e r been l a r g e . 1 7 . R e d u c t i o n in direct labor cost. Biggest gain on slack days. E f f i c i e n c y on one operation u n d e r d a y w o r k 5 3 % ; u n d e r p i e c e w o r k 6 5 % to 8 2 % ; group 1 0 3 % . 18. 19.

S a v i n g in indirect as great as in direct labor. I n d i r e c t labor anxious to make g o o d s h o w i n g in eyes o f d i r e c t . F o u n d i m p r o v e m e n t in q u a l i t y because m e n are c r e d i t e d f o r g o o d work only.

Protection of

Employees

2 0 . N e w e m p l o y e e s are c h a r g e d to g a n g i m m e d i a t e l y . 2 1 . I f m a n a g e m e n t is responsible f o r t e m p o r a r y c h a n g e an a l l o w a n c e is m a d e .

in

conditions,

APPENDIX

D

2 2 . P a y s time a n d h a l f - t i m e f o r o v e r t i m e , but no bonus on

131 premium

time. 2 3 . G u a r a n t e e s that the g r o u p w i l l receive a m i n i m u m rate. 2 4 . W r i t t e n statement that supervision can make any c h a n g e in

condi-

tions or methods p r o v i d e d it does not a f f e c t the e a r n i n g p o w e r o f the m e n . 2 5 . Substituted g r o u p p a y m e n t f o r i n d i v i d u a l piece w o r k on standard w o r k , and p r e m i u m system on non-standard w o r k . 2 6 . A n u m b e r o f curves are used, o n e o f w h i c h approaches the E m e r s o n curve.

132

GROUP

INCENTIVES

C H E V R O L E T MOTORS, F L I N T ,

MICHIGAN

Composition of the Group 1. Except on progressive work, dissimilar operations are not grouped together. 2. When the same group makes different products, they are pooled. 3. Preferable size of gang—50. 4. Has tried groups as large as 400. 5. Area has no effect on group. 6. Set-up men are included in bonus; other supervisors are not. 7. Group bonus applied to indirect labor (truckers, shippers, stock handlers, tool grinders, and tool crib tenders). Basis of

Extra-Compensation

8. 9. 10. 11. 12.

Simple units are used. Work of each factory is counted for payment at shipping point. Payroll department is responsible for accuracy of count. Performance reports are posted within twenty-four hours. Bonus is usually paid as a percentage on the worker's base salary for the time spent on bonus work. 1 3 . Foreman recommends base rate; superintendent O.K.'s it.

Results Obtained 14. Employee earnings average about 1 4 5 % of base rates. 1 5 . Inventory was reduced by group incentive. 16. Found saving in clerical cost of figuring payroll. 17. Direct labor cost reduced. 18. Reduction in cost of indirect labor. 19. Quality improved. Protection of Employees 20. New employees are placed in group immediately, and company does not carry them at all. 2 1 . Allowances are sometimes made at the end of pay period in case of idle time, or production lost through fault of company. 22. For overtime, pays time and half-time for day work only. 23. Day rates are guaranteed. 24. There is no formal guarantee of task times. 25. Group payment substituted for piece work. 26. Wennerlund curve is used.

APPENDIX DELCO

PRODUCTS

Composition of the 1. O n

D

133

CORPORATION,

DAYTON,

OHIO

Group

non-progressive

work,

dissimilar

operations

are

grouped

when

workers can h e l p each other and w h e n i n d i v i d u a l w o r k cannot measured

(plating

2. I n a f e w cases, w h e n t h e same g r o u p m a k e s d i f f e r e n t p r o d u c t s , are 3.

be

work). they

pooled.

P r e f e r a b l e size o f g a n g 8 to

4. T r i e d

groups

between

10.

2

and

300;

large

groups

never

proved

satisfactory. 5. G r o u p s h o u l d c o v e r as s m a l l an area as possible a n d be w i t h i n o f each 6. Group

leaders

and

job

setters

are

have large groups, the trucker

always

is also

included,

and

cellaneous parts f o r e x p o r t , and

where

we

included.

7 . G r o u p b o n u s is a p p l i e d to i n d i r e c t l a b o r — b o x - m a k i n g ,

Basis of

sight

other.

laundry

packing

mis-

work.

Extra-Compensation

8. 9. I f part is if

finished

not,

then

in d e p a r t m e n t , t h e p a y - p o i n t is a f t e r last o p e r a t i o n ; at i n s p e c t i o n

point

before

leaving

department.

In

most cases a p a r t has o n e p a y - p o i n t ; in a f e w cases, as h i g h as f o u r . 10. T h e

inspection

department

is r e s p o n s i b l e

for

the

counting

of

the

base

and

work. 11.

Performance

12. T h e

bonus

added

reports

are

issued

is e x p r e s s e d

to the

in

base rate

daily.

terms to

find

of

per

p l i e d b y t h e h o u r s w o r k e d to g e t t o t a l 13. T h e

cent

the earned

of

rate

rate, w h i c h

is

earnings.

f o r e m e n assign a base r a t e , w i t h i n a p r e s c r i b e d l i m i t ,

to t h e a b i l i t y o f

the operator.

The

is

multi-

foremen

O.K.

according

the

standard

t i m e as set b y t h e t i m e s t u d y d e p a r t m e n t .

Results

Obtained

14. Total

employee

earnings

B o n u s s h o u l d be a b o u t 15.

Inventory

was

reduced

on

are

approximately

33%

of

account

base of

125%

of

base

rates.

rate. a mutual

interest

in

getting

parts t o a p a y - p o i n t . 16. T h e

change

from

approximately

individual 60%

piece work to g r o u p bonus resulted

saving

in

the

clerical

cost

of

in

figuring

the

supervision

and

payroll. 17. Reduction 18. O n

in

account

direct of

labor

cost.

a community

interest,

the

cost

of

t r a i n i n g has b e e n c o n s i d e r a b l y r e d u c e d . 19.

Scrap has b e e n r e d u c e d a n d q u a l i t y i m p r o v e d b y t h e f a c t t h a t will receive credit only

f o r parts p a s s i n g

inspection.

group

134 Protection of

GROUP

INCENTIVES

Employees

20. A training period is provided f o r each job, the length of which is determined by the job. During this period, one-half of the new operator's time is charged to group and one-half to expense. T r a i n ing period is seldom over three days. 2 1 . Idle time is taken care of by a group allowance made out by the foreman covering hours lost and charged to proper expense account. 2 2 . For overtime, employee receives one-half his base rate in addition to his regular earnings. 2 3 . Base rates are guaranteed. 24. Task times are guaranteed f o r one year if no changes in tools, materials, layouts, etc., are made. 2 5 . Group payment substituted f o r individual piece work. 2 6 . Wennerlund curve.

APPENDIX

D

135

EDISON E L E C T R I C A P P L I A N C E C O M P A N Y , I N C . , C H I C A G O ,

III.

Composition of the Group 1 . O n non-progressive work, dissimilar operations are grouped together. 2 . W h e n the same group makes d i f f e r e n t products, they are pooled. 3 . P r e f e r s gangs as small as possible so that they w i l l have a common interest. 4 . G a n g s vary f r o m 3 to 80. 5. Size of area does not affect results, but p r e f e r a b l e to have gang in one room. 6 . Facilitating workers w h o are directly connected with a gang are included in bonus. 7 . G r o u p bonus is applied to indirect labor (shipping, receiving, storeroom, inspection, b i l l i n g , traffic, statistical, service station clerical group, cost reduction department, shipping department office).

Basis of

Extra-Compensation

8. 9. 10. 11. 12.

Use both simple units and compound units. C r e d i t f o r work is given when completed part leaves department. Inspection department is responsible f o r the accuracy of the count. P e r f o r m a n c e reports are posted daily. Bonus is usually paid as a percentage on the worker's base salary f o r the time spent on bonus work. 1 3 . F o r e m a n has nothing to do with the setting of rates. Results

Obtained

1 4 . T o t a l e m p l o y e e earnings vary f r o m 1 2 5 % o f the base rate.

to approximately

145%

IS·

1 6 . A considerable saving has resulted in the clerical cost of figuring the payroll. 1 7 . Direct labor cost reduced. 1 8 . F o u n d reduction in cost o f indirect labor. 1 9 . Q u a l i t y improved because workers are not paid f o r work that is spoiled.

Protection of

Employees

2 0 . V e r y f e w allowances are made f o r new employees, except w h e n group is increased materially. Consequently the old employees teach new ones in short time. 2 1 . W h e r e management has made an error, group is credited w i t h the time involved. 2 2 . F o r overtime, pay time and h a l f - t i m e on the day rate, but bonus on straight time o n l y . 2 3 . Guarantee day rate, but do not guarantee bonus earnings. 2 4 . G u a r a n t e e task times so long as the equipment is not changed. 2 5 . Substituted group payment f o r day and piece work. 2 6 . R o w a n curve is used.

GROUP

136 FRIGIDAIRE

CORPORATION,

INCENTIVES

DETROIT,

MICHIGAN

(INSTALLATION

WORK)

Composition of the Grouf ι . On non-progressive work, dissimilar operations are sometimes grouped. 2 . W h e n the same group makes different products, they are pooled.

34. 5. 6. 7.

Gangs contain 2 to 6 men, an average of 4. Work over area of two to three square miles. G r o u p leader is included (number limited to one per g a n g ) . A l l work connected with installation is on group bonus.

Basis of Extra-Comfensation 8. Simple units are used. 9. Credit is given at end of each installation. 1 0 . Representative of district manager's office is responsible f o r counting the work. 1 1 . Performance reports are issued daily. 1 2 . Bonus is usually paid as a percentage on the worker's base salary f o r the time spent on bonus work. 1 3 . Foremen have no direct part in setting the base rates or task times.

Results Obtained 1 4 . T o t a l employee earnings are 1 2 0 % to 1 4 0 % of the base rate. 1 5 . Inventory not reduced (no opportunity). 1 6 . G r o u p payment has not caused a saving in the clerical cost of figuring the payroll. (Were on day work.) 1 7 . Some direct labor cost reduced 4 0 % . 1 8 . Cost of indirect labor reduced (training). 1 9 . Quality improved—men paid only a f t e r inspector's O . K . , and repair mistakes on own time.

Protection of Employees 20. H a s regular method of day-work allowances f o r new employees. 2 1 . D a y work is paid f o r idle time or production lost in the failure in management to maintain standards. 2 2 . F o r overtime, pay straight time plus bonus earned. 2 3 . Guarantee base rates. 2 4 . Task times guaranteed until a change in task occurs. 2 5 . Substituted group payment f o r day rates. 2 6 . Wennerlund curve is used.

APPENDIX GENERAL

Composition

of the

ELECTRIC

D

COMPANY,

FORT

137 WAYNE,

IND.

Group

1 . O n non-progressive w o r k , dissimilar operations are g r o u p e d together if groups are close e n o u g h to have a c o m m u n i t y o f interest. 2 . W h e n the same g r o u p makes d i f f e r e n t products, t h e y are p o o l e d . 3 . P r e f e r a b l e size o f g a n g b e t w e e n 2 0 and 4 0 . 4 . T r i e d groups b e t w e e n 6 and 3 0 0 . 5. Area d e p e n d s e n t i r e l y on nature o f w o r k i n v o l v e d . 6 . A l l direct c o n t r i b u t i n g h e l p i n c l u d i n g " l i n e inspectors" are i n c l u d e d in bonus. 7. G r o u p bonus is a p p l i e d to g r o u p bonus (construction and m a i n t e n a n c e work, tool and die rooms, p o w e r house, truck and tractor drivers, and various office g r o u p s ) .

Basis of

Extra-Compensation

8. 9. W o r k is counted either at exit o f c o m p o n e n t part o f 1 0 . In

production

work,

d e p a r t m e n t or at a point

where

unit is c o m p l e t e d . the

final

inspectors

are

responsible

for

the

accuracy o f the count. 11.

P e r f o r m a n c e reports are issued to the m e n

12.

Based on t h e i r d a y - w o r k wages f o r the p e r i o d

daily. (base rate X

hours

worked). 13.

Foremen

Results

r e c o m m e n d base

rates.

Obtained

1 4 . T o t a l e m p l o y e e earnings are 110% to 1 5 0 % o f base rates, d e p e n d i n g on the basis o f set up. 1 5 . D e c i d e d reduction in work-in-process. 1 6 . G r o u p p a y m e n t has reduced the clerical cost o f figuring the p a y r o l l a p p r o x i m a t e l y 5 0 % o f cost u n d e r piece w o r k . 1 7 . D i r e c t labor cost reduced a p p r o x i m a t e l y 1 0 % over a l l . 1 8 . R e d u c t i o n in indirect labor cost. 1 9 . Q u a l i t y i m p r o v e d ; g r o u p paid f o r g o o d w o r k o n l y .

Protection of

Employees

2 0 . L e a r n i n g p e r i o d i f necessary is p r o v i d e d f o r n e w e m p l o y e e s . Usually man is c h a r g e d against the g r o u p . 2 1 . I f b r e a k d o w n is over one h o u r , the operators are p a i d f o r lost t i m e at their day rate. T h e r e are no other standard a l l o w a n c e s . 2 2 . F o r o v e r t i m e , g r o u p is c h a r g e d w i t h actual hours w o r k e d and i n d i v i d u a l is paid g r o u p bonus on such hours. T i m e a n d h a l f - t i m e and d o u b l e - t i m e paid d e p e n d i n g on w h e n the o v e r t i m e exists. N o g r o u p bonus is p a i d on excess allowances f o r o v e r t i m e . 2 3 . M i n i m u m rate is not g u a r a n t e e d to g r o u p as a g r o u p , but each m e m ber is g u a r a n t e e d an amount equal to hours w o r k e d at p a y r o l l rate.

138

GROUP

INCENTIVES

24. Task times are changed only when conditions change, never on account of high earnings. 25. Substituted group payment for day work and piece work. 26. T h e Rowan Efficiency plan is used.

APPENDIX THE

Comfosition 1. 2. 3. 4. 5. 6. 7.

B.

of the

F.

GOODRICH

D

COMPANY,

139 AKRON,

OHIO

Group

On non-progressive work, dissimilar operations are not grouped. When the same group makes different products, they are not pooled. Preferable to pay on an individual rather than on a gang basis. Largest gang tried on group payment—25. Group can work over an area of 4,000 sq. ft., if all on same floor. Indirect labor paid separately. Group payment is applied to all indirect labor.

Basis of

Extra-Comfensation

8.

9· 1 0 . Production and staff departments are responsible for the accuracy of the count. 1 1 . Performance reports issued to the men daily. 1 2 . Bonus distributed according to base rate earnings. 1 3 . Standards are compiled by time study departments and approved by foremen before becoming effective. Results

Obtained

1 4 . Total employee earnings are approximately 1 3 3 % of base rate. 1 5 . Inventory was reduced, but not necessarily because of wage payment plan. 1 6 . Group payment has causcd no saving in the clerical cost of figuring the payroll. 1 7 . Direct labor cost reduced. 1 8 . Indirect labor cost reduced. 1 9 . Standards of quality are maintained. Protection of Emfloyees 20. Schedules of learners' rates are established for each operation in case of new employees. 2 1 . Idle time or production lost are paid for at base rate of employee. 22. Overtime treated the same as regular time. 2 3 . Guarantee minimum rates. 24. Task times are guaranteed until the method of operation is changed. 25. Substituted group payment for piece prices. 26. Bedeaux system is used.

140

GROUP HOLEPROOF

Composition

of the

HOSIERY

INCENTIVES COMPANY,

MILWAUKEE,

WIS.

Group

1. 2. 3. 4. 5. 6.

On non-progressive work, dissimilar operations are not grouped. When the same group makes different products they are not pooled. Gangs as small as possible preferred. Has tried groups of 3 to 25. Group can work over an area of about one-half a citv block. Supervisors are included in bonus; truckers and other indirect labor are not. 7. Supervisors in one department are on a group arrangement.

Basis of 8. 9· 10. 11. 12.

Extra-Compensation

Units used to measure the work are compound.

Each department is responsible for the counting of its own work. Performance reports issued to the men once a week. Bonus is usually paid as a percentage on the worker's base salary for the time spent on bonus work. 1 3 . Foremen have no direct part in setting-up of rate for each man or in setting-up of task time. They cooperate in standardizing the method.

Results Obtained 14. Total employee earnings are 1 3 0 % of base rates. 1 5 . No reduction in inventory was noticed. 16. Not enough group work to notice any difference in clerical cost of figuring the payroll. 1 7 . Direct labor cost reduced. 18. Had reduction in indirect labor cost, but not all due to bonus. 19. Effect on quality has been good. Protection of Employees 20. New employees are trained first, then put into regular operation. 2 1 . Employees either wait for work or are sent home is case of idle time. 22. 23. Guarantee minimum rates. 24. Task times are guaranteed unless methods are changed. 25. Substituted group payment for day work. 26. Halsey Premium system is used.

APPENDIX THE

Composition

HOOVER

of the

COMPANY,

141

D NORTH

CANTON,

OHIO

Croup

1 . On non-progressive work, dissimilar operations are not grouped together. 2. When the same group makes different products, they are not pooled. 3. Preferable size of gang, 1 5 . 4 . T r i e d groups between 6 and 1 5 . 5. Largest area over which group work is 6 0 0 sq. f t . 6. T h e working leader of the group is included in bonus. 7 . Group bonus not applied to indirect labor. Basis of 8. 9. 10. 11. 12. 13.

Simple units are used. T h e bonus is based upon the final product of the groups. Inspection department is responsible f o r counting the work. Performance reports are issued daily. Payment is distributed according to the hours worked in group. Foreman has control subject to limit set by production manager.

Results 14. 15. 16. 17. 18.

Extra-Compensation

Obtained

T o t a l employee earnings are 1 5 0 % to 2 0 0 % of base rates. T h e r e has been a reduction in inventory. T h e r e has been no saving in the clerical cost of figuring the payroll. Cost of direct labor reduced. G r o u p will help train new members.

1 9 . T h e effect of group payment on quality has been negligible. Protection

of

Employees

20. N e w employees are not charged against the group until they are sufficiently efficient. 2 1 . N o allowance made f o r idle time or low production due to the f a i l u r e of management to maintain standards. 2 2 . N o extra allowance f o r overtime. 2 3 . M i n i m u m rates are not theoretically guaranteed, but in practice, they are. 2 4 . Task times are guaranteed f o r six months. 2 5 . Substituted group payment f o r individual piece work. 26. G r o u p piece work.

1+2

GROUP R. H.

INCENTIVES

M A C Y AND C O M P A N Y , I N C . , N E W

YORK, N .

Y.

Composition of the Gr ouf 1. On non-progressive work, dissimilar operations are grouped. 2. When the same group makes different products, they are sometimes pooled. 3. Gangs of 1 0 to 30 preferred. 4. Has tried groups of 5 to n o . 5· 6. All indirect labor (e.g., stock requisition and stock clerks) whose contribution can affect the group's output are included. Supervisors are not included. 7. Has determined a ratio of indirect labor to the direct and included indirect in the group wherever group bonus applied. Basis of

Extra-Compensation

8. Simple units are used (number of orders filled). 9. Has one pay-point—at the end of packing operation. 1 0 . Department is responsible for counting its own work, but accuracy is checked by complete control system used for another purpose. 1 1 . Partial performance reports issued daily; complete reports issued weekly. 1 2 . Bonus is predetermined amount for all pieces over minimum requirement. Same amount is given all in group regardless of base salary. 1 3 . Foremen have no direct part in setting-up of rate or task time. Rcults Obtained 14. Total employee earnings are approximately 1 2 0 % of base rates. 15· 16. 1 7 . Direct labor cost reduced. 1 8 . Had reduction in indirect labor cost. 19. There is a decided improvement in quality on account of reduction of "short" merchandise. Protection of

Employees

20. Full time charged to group except time spent in training department, which may be two days. All production added to group's total. No bonus paid the first week. (This week includes time spent in training department.) 2 1 . Idle time is deducted in calculating production rate for bonus. Base wages only paid for this time. 22. Overtime handled same as regular time. 2 3 . Guarantee a base salary. 24. Task times are not formally guaranteed. They are assumed to be permanent as long as methods, etc., remain unchanged.

APPENDIX

D

143

2 5 . Substituted group payment f o r day work. 26. Curve similar to Halsey Premium plan is used, but with IOO% task and starting point at approximately 7 5 % . F i f t y per cent split of savings above starting point.

144

GROUP MUELLER

Composition

of

the

INCENTIVES

COMPANY, DECATUR,

III.

Group

1. O n non-progressive work, dissimilar operations are grouped together. 2. W h e n the same group makes different products, they are pooled. 3. I f operations are exactly alike, as in m o l d i n g and core-making, the smaller the gangs the better. I f operations are dissimilar, groups as large as 4 0 to 50 are practical. 4. Has tried groups as large as 60. 5. T h e group can work over any area w h e r e the cost o f h a n d l i n g material through the pay-points is not exorbitant. 6. Supervisors, truckers, set-up men are included in the group payment wherever possible. 7. G r o u p bonus is applied to indirect labor (janitors, w i n d o w washers, truck drivers). Basis of

Extra-Compensation

8. 9. In the entire plant, there are about f o r t y pay-points located at places where sequence o f operations stop and the articles in question either go into storage or lie in inventory (work-in-process). 10. T h e cost accounting and standards departments are responsible f o r the counting o f the work. 1 1 . P e r f o r m a n c e reports are issued daily. 12. Base rate earnings. T h e base rate equals old day rates, and a percentage is added or subtracted d e p e n d i n g upon w h e t h e r the group efficiency is above or below 1 0 0 % . 13. Foremen have a large part in the setting o f the rate and the task times. Results

Obtained

14. 15. 16. 17. 18.

Inventory was reduced by group payment. T h e r e is a saving in the clerical cost o f figuring the payroll. T h e r e has been a considerable reduction in direct labor cost. T h e r e has been a reduction on the cost o f indirect labor, but it is due to budget control. 19. T o retain quality under group incentives, it has been necessary to put in more inspection. Protection

of

Employees

20. N e w and inexperienced employees g o i n g in are given graduated allowances, the length o f time d e p e n d i n g on the nature o f work in each group. T h e group is credited both with the output and w i t h the total hours allowed to the n e w employees. 2 1 . A n allowance is made f o r idle time f o r w h i c h the management is responsible by crediting a certain number o f hours to the group. 22. O v e r t i m e is considered the same as regular work.

APPENDIX

D

145

23. No written guarantee. Employees are paid at least as much as they had previously earned on their old hourly basis. 24. Guarantee task time for about six months. 25. Substituted group payment for day work. 26. Formerly used Wennerlund curve; now add 1 % bonus to the baserate for each 1% gain over 1 0 0 ; or subtract 1 % of base-rate earnings for each 1 % the group efficiency is below 1 0 0 % .

146

GROUP NATIONAL

Composition of the

CASH

REGISTER

INCENTIVES COMPANY,

DAYTON,

OHIO

Group

1 . Individual piece work seems p r e f e r a b l e on non-continuous work ( p u n c h presses), but the group has advantages w h e r e the workers run several machines ( 4 to 8 screw m a c h i n e s ) . 2. W h e n the same group makes d i f f e r e n t products, they are p o o l e d . 3. P r e f e r s gangs o f 1 0 to 15 employees. 4 . G a n g s vary f r o m 2 to 80. 5. A r e a should cover one shop floor o n l y , except in the shipping department. 6 . H e l p e r s , trucks, clerks, j o b setters, and adjusters are i n c l u d e d in the groups. 7 . G r o u p piece work is applied to indirect labor ( f o u n d r y labor, stockkeepers, department truckers, shipping, etc., inspectors, j o b setters).

Basis of

Extro-Comfensation

8. Simple, compound, and pooled units are used, d e p e n d i n g upon the nature o f the w o r k . 9. T h e shipping, receiving, and stock storage groups cover one pay-point each. Some groups have t w o or three points. 10. Inspection department is responsible f o r the counting o f the w o r k . 1 1 . P e r f o r m a n c e reports are issued to the m e n w e e k l y . 1 2 . G r o u p piece work is distributed according to base-rate earnings duri n g the week. Basis o f hours and individual rate. 1 3 . Foreman sets the r a t e s — u s i n g time study i n f o r m a t i o n ; he O . K . ' s task times w h i c h are set by time study.

Results Obtained 1 4 . T o t a l e m p l o y e e earnings are approximately 1 4 0 % o f base rates w h i c h are relatively l o w . Earnings are as h i g h as c o m m u n i t y w a g e standards. 1 5 . Inventory was reduced materially. 1 6 . A little saving has resulted in the clerical cost of figuring the p a y r o l l . 1 7 . D i r e c t labor cost reduced w h e r e day work was f o r m e r l y used, but not to any great extent w h e r e it replaced individual piece work. 1 8 . T h e principal gain f r o m group piece work has been in r e d u c i n g the indirect labor, such as helpers, truckers, clerks, j o b setters, and adjusters. 1 9 . Q u a l i t y is better in m a n y cases.

Protection of Employees 20. A n allowance is made f o r the l e a r n i n g period o f n e w employees. 2 1 . A l l o w day work f o r idle time w h e n it is beyond group's control. 22. A l l o w o n e - h a l f o f base rate f o r overtime work, plus regular g r o u p earnings. 2 3 . M e m b e r s o f the g r o u p are given guaranteed rates graduated accord-

APPENDIX

D

147

i n g to their individual skill, speed, responsibilities, and the relative value to the other members. " I n d i v i d u a l rates are a d j u s t e d as needed." 2 4 . T a s k times are guaranteed f o r one y e a r ; they are usually checked and a d j u s t e d every t w o years. 2 5 . G r o u p piece work substituted f o r day work and individual piece work. 2 6 . G r o u p piece work is used. N o . o f pieces X group piece rate =» group earnings. G r o u p earning - r - group base wage = bonus factor. I n d i v i d u a l base wage X bonus f a c t o r = · individual earnings.

GROUP

148

PACKARD MOTOR

INCENTIVES

CAR COMPANY, DETROIT,

MICH.

Composition of the Group 1. O n non-progressive w o r k , dissimilar operations are grouped t o g e t h e r . 2. W h e n the same g r o u p makes d i f f e r e n t products, t h e y are p o o l e d . 3. G r o u p s o f a p p r o x i m a t e l y 1 2 5 p r e f e r r e d . 4. H a s tried groups o f 6 to 6 0 0 . 5· 6. F o r e m e n and job-setters w h o are d i r e c t l y connected w i t h g r o u p are i n c l u d e d in the bonus. 7 . G r o u p p a y m e n t is applied to truckers in enamel department, and inspectors on electrical e q u i p m e n t . A bonus f o r inspectors was unsuccessful.

Basii of

Extra-Compensation

8. 9. 10. 11. 12.

S i m p l e and pooled units are used. W o r k is counted at exits o f d e p a r t m e n t s — p o i n t o f final inspection. Inspection department is responsible f o r the accuracy o f the count. M e n learn bonus each m o r n i n g f o r day b e f o r e yesterday. Bonus is usually paid as a percentage o f the worker's base salary f o r the t i m e spent on bonus w o r k . 1 3 . F o r e m e n set i n d i v i d u a l r a t e — s u b j e c t to control o f average base rate in b u d g e t .

Results

Obtained

1 4 . T o t a l e m p l o y e e earnings are 1 2 0 % o f base rates. 1 5 . I n v e n t o r y was reduced by group incentive. 1 6 . G r o u p p a y m e n t has caused saving in clerical cost o f ( 1 1 5 employees reduced to 4 6 ) . 1 7 . D i r e c t labor cost reduced about 2 0 % . 1 8 . Indirect labor cost r e d u c e d . 1 9 . Q u a l i t y has been improved by g r o u p p a y m e n t .

Protection

of

figuring

payroll

Employees

20. A l l o w a n c e s are made f o r n e w employees in exceptional cases only. 2 1 . I d l e time taken care o f by delay a l l o w a n c e s ; no provision except in cases like water-main break. 2 2 . Pay t i m e and h a l f - t i m e f o r overtime, but no bonus f o r premium time. 2 3 . D a y rates are guaranteed. 2 4 . P o l i c y n e v e r to change task time unless m e t h o d changes. 2 5 . G r o u p p a y m e n t substituted f o r another system w h i c h involved much clerical w o r k . 26. O n e per cent bonus is paid f o r each I % starting point (usually 8 0 % ) .

gain in efficiency over the

APPENDIX S W I F T AND

Composition

of

the

COMPANY,

149

D CHICAGO,

III.

G rouf

1. O n non-progressive w o r k , dissimilar operations are grouped in a f e w instances, but not as a rule. 2. W h e n the same group makes d i f f e r e n t products, t h e y are p o o l e d . 3. G r o u p s of 5 to 8 p r e f e r r e d . 4. H a s tried groups as large as 4 5 . 5. In cases of lard m a n u f a c t u r i n g , groups are on five floors o f a building. 6. T r u c k e r s and set-up men are i n c l u d e d in bonus. F o r e m e n are paid on different basis f o r supervising, but i f t h e y work part t i m e in the g a n g they are i n c l u d e d in the g a n g payment f o r that time o n l y . 7. D i r e c t standards have been d e v e l o p e d f o r janitors, clerks, scalers, etc. Basis of

Extra-Comfensation

8. T h e Β is the unit o f measurement. 9. W o r k is counted at one point in each department. 10. Checkers, under supervision o f the standards department, are responsible f o r the accuracy o f the count, but f o r e m e n v e r i f y and initial the sheets. 1 1 . P e r f o r m a n c e reports are issued each day at noon covering work up to close o f previous day. 1 2 . Bonus is usually paid as a percentage o f the worker's base salary f o r the time spent on bonus w o r k . 13. F o r e m e n have n o part in the setting-up o f the rate or task time. Results

Obtained

14. T o t a l employee earnings are about 1 1 8 % o f base rates. 15· 16. G r o u p payment has not caused saving in clerical cost o f figuring payroll. 1 7 . H a d reduction in direct labor cost about 1 2 % net a f t e r m a i n t a i n i n g the system. 18. Indirect labor cost reduced. 19. In general, quality has been improved by group p a y m e n t . Protection

of

Emfloyees

20. A l l o w a n c e made in case o f skilled employees in groups o n l y . No unskilled or semi-skilled h e l p or any individual applications are given any a l l o w a n c e . 2 1 . " M e t h o d and e q u i p m e n t " a l l o w a n c e is g i v e n . 22. N o change in bonus rate f o r o v e r t i m e . 23. G u a r a n t e e regular h o u r l y rate. 24. G u a r a n t e e task times as l o n g as the operation remains unchanged. 25. Substituted g r o u p p a y m e n t f o r day w o r k , 26. Bedeaux system.

GROUP

150 TIMKEN

ROLLER

INCENTIVES

BEARING COMPANY, COLUMBUS,

OHIO

Composition of the Group 1 . O n l y the progressive work is on group payment. 2. W h e n different operations are performed in one department, products are pooled. 3 . Gangs of 2 0 to 5 0 preferred. 4 . Has groups in the automatic screw room of

1 5 to 1 0 0

men.

5· 6. Truckers in assembly department, repair men, set-up men, sub-foremen participate in bonus in all departments. 7. Use piece work on handling; group payment f o r sweeping. differential day rates f o r inspectors in groups of two.

Basis of

and Use

Extra-Compensation

8. Simple units are used. 9. Four counting stations in plant. Worker's count is taken with overall check. 1 0 . Inspection department is responsible f o r the accuracy of the count. 1 1 . Performance reports issued to men within 24. hours. 1 2 . G r o u p earnings are distributed evenly, except in automatics department where different base rates ( 7 0 - 8 0 ^ ) are used. 1 3 . Foremen assist in setting rate and task in automatics department.

Results Obtained 14. 15. 16. 17.

T o t a l employee earnings are 1 1 0 % to 1 4 0 % of base rates. N o reduction in inventory. Found saving in clerical cost of figuring payroll with group payment. N o reduction in direct labor cost, f o r group task gives same labor cost as previous piece rate. 1 8 . Self-training, and exchange of information helps supervision and puts more emphasis on it. 1 9 . G r o u p payment has caused no change in quality.

Protection of

Employees

20. Company carries new employees f o r two weeks, but does not give output to group; had trouble with gang wanting new men. 2 1 . D a y work plus bonus is paid if idle time is not over five hours a cay. 2 2 . Regular time is paid f o r overtime. 2 3 . Pay base rate if gang fails to make bonus. 24. Task times guaranteed formally. 2 5 . Substituted group payment f o r all piece work. 26. Bonus equals 1 % of base rate f o r each 1 % gain in efficiency c e r starting point ( 6 0 % in one department, 8 0 % in another).

APPENDIX WARNER

Composition of the

AND S W A S E T C O M P A N Y ,

D CLEVELAND,

OHIO

Group

1 . On non-progressive work, operations are grouped if there is community of interest. 2. When the same group makes different products, they are not pooled. 3. Small groups of 6 to 20 preferred. 4· 5. Preferable close together, or on same lot of machines. 6. Foremen are on a group bonus of their own. Truckers and set-up men are not included in group payment. 7. Has not applied group payment to work that is altogether indirect labor. Basis of

Extra-Compensation

8. Simple units are used. 9. Work is counted at completion of machine or sub-assembly (control boi, etc.) 1 0 . Inspection department is responsible for counting the quantity of work done. 1 1 . After inspection, copy of inspection ticket showing number of pieces accepted together with standard time per piece and total actual hours is delivered to workman. 1 2 . Group earnings are distributed on basis of time worked without regard to differences in skill. 1 3 . Foremen assist in setting rate and task time. Results 14. 15. 16. 17. 18. 19.

Obtained

Total employee earnings are 1 2 0 % to 1 2 5 % of guaranteed base rates. N o reduction in inventory. Groups not large enough to make a clerical saving evident. Direct labor cost reduced. Found no reduction in indirect labor cost. Group payment has caused no noticeable change in quality.

Protection

of

Employees

20. Employees are moved from jobs on individual incentive; no allowance is made. 2 1 . Men are placed on day work in case of idle time. 22. Straight time is paid for overtime. 2 3 . Guarantee day rates. 24. When a standard time is set on an operation, company guarantees that the time will not be changed unless there is a change in tooling or design. 25. Group payment substituted f o r standard bonus system, or individual premium system. 26. One per cent bonus for each 1 % gain in efficiency over 7 5 .

152 WESTERN

GROUP ELECTRIC

COMPANY,

INCENTIVES HAWTHORNE

WORKS,

CHICAGO,

III.

Composition of the Grouf 1 . On non-progressive work, dissimilar operations are not grouped together as a general thing, because we have found that if they are, the efficiency of the individual operator is lowered by the lack o f "community interest" in the work, and consequently the performance of the group is reduced. 2. In some cases, different products are pooled on work, such as screw machine and plating operations, where group effort can be more equitably measured than that of individuals. Different products are also pooled where miscellaneous parts and apparatus with small yearly requirements are manufactured, or where special work is handled on a complete job basis. 3. A group of 1 5 to 25 operators is preferable in departments where the size of the group can be determined arbitrarily. T h e size of a payroll group depends largely on the layout of the department and the nature of the work. In assembly departments, where the work is progressive, it is economical to establish a gang of such size as to reduce counting and inspection operations to a safe minimum. In some cases, functional groups of this kind include an entire department. 4. W e have tried group payment between the limits of 2 and 4 0 0 employees. 5. W e have no set limits f o r the area over which a group can work. W e believe that the area covered by a group should be as compact as possible. In some cases, as in trucking or maintenance work, the nature of the work makes it necessary f o r the group to operate over a very large area. On productive work, however, our practice is to have all members of an incentive group in one room. 6. Supervisors, truckers, and set-up men who are directly connected with a gang are included in the group payment. 7. Incentives are applied to such indirect operations as window washing, cleaning, stockkeeping, plant maintenance, and office work of a routine or mechanical nature. Basis of

Extra-Compensation

8. Simple, compound, and pooled units are used for varying circumstances. 9. It is the usual practice to count work only when the last operation performed by the group has been completed. 10. T h e production branch is responsible f o r counting the product, and each day a portion of the work of the counters is spot-checked. 1 1 . T h e employees are informed of their efficiency each week. Each operator makes a daily report of his output on a card which also shows the expected hourly output or " b o g e y . " " B o g e y " represents the output of a skilled operator and a given percentage of it denotes the production necessary to maintain the average incentive

APPENDIX

D

153

earnings o f the g a n g . T h e p e r f o r m a n c e o f each operator is charted in comparison w i t h " b o g e y " each w e e k , and the cause o f any operator f a l l i n g v e r y f a r b e l o w the average " b o g e y " p e r centage is sought and corrected. T h e summarized performance charts, s h o w i n g each operator's p e r f o r m a n c e d u r i n g the y e a r in comparison w i t h standard p e r f o r m a n c e , are used as a basis f o r s e m i annual rate revisions. 1 2 . T h e incentive earnings are pro-rated a m o n g the w o r k m e n on the basis o f t h e i r various h o u r l y rates a n d actual hours w o r k e d . 1 3 . T h e f o r e m a n , w i t h the a p p r o v a l o f his superiors, m a y raise the h o u r l y rate o f a w o r k m a n at r e g u l a r semi-annual periods, but is l i m i t e d by the rate ranges f o r each class o f w o r k . H e has n o direct part in setting the task time.

Results Obtained 1 4 . T o t a l e m p l o y e e earnings are a p p r o x i m a t e l y 1 5 0 % o f the base rate. 1 5 . T h e r e h a v e been reductions in i n v e n t o r y in recent years, but the degree to w h i c h these m a y be attributed to g r o u p incentives is i n d e t e r m i n a t e since other means h a v e also been e m p l o y e d , such as s c h e d u l i n g economic lot sizes a n d the introduction o f straight l i n e manufacture. 1 6 . G r o u p incentives have p r o v e d m o r e economical f r o m a c l e r i c a l a n d p a y r o l l standpoint than i n d i v i d u a l incentives. 1 7 . I t is a p o l i c y o f this c o m p a n y to r e t u r n to the e m p l o y e e s the f u l l labor saving resulting f r o m increased efficiency, w i t h the result that unit labor costs u n d e r incentives are p r a c t i c a l l y constant. T h e direct labor cost o f w o r k c h a n g e d f r o m day w o r k to incentives has, o f course, been r e d u c e d . 1 8 . T h e r e has been a reduction in the cost o f indirect labor. 1 9 . T h e r e has been no apparent decrease o f q u a l i t y u n d e r g r o u p incentives. T h e g r o u p usually receives c r e d i t f o r good parts o n l y , a n d the operators are p r o b a b l y m o r e c a r e f u l than t h e y w o u l d be on i n d i v i d u a l incentive. It is true that operators on i n d i v i d u a l i n centive are paid o n l y f o r g o o d parts, but the cost o f spoiled w o r k to the operator is o n l y the loss o f his o w n t i m e , w h e r e a s in a g r o u p each operator realizes that other operations w i l l be p e r f o r m e d b y m e m b e r s o f his g r o u p a n d that incorrect w o r k w i l l waste t h e i r t i m e as w e l l as his o w n .

Protection of 20.

Beginners

Employees d o not participate

t w o weeks.

After

in the g r o u p ' s e a r n i n g s

that an a l l o w a n c e

is m a d e

in

f o r the the

first

incentive

rates to compensate the g a n g f o r losses sustained w h i l e n e w

em-

ployees are being g i v e n f u r t h e r t r a i n i n g . 2 1 . A l l o w a n c e s are made f o r i d l e t i m e or p r o d u c t i o n lost in the f a i l u r e in m a n a g e m e n t to maintain standards.

I n periods o f n o r m a l a c t i v i t y ,

the group is credited w i t h the h o u r l y rate o f an i d l e operator, a n d t h e earnings o f the g a n g are a f f e c t e d v e r y l i t t l e b y such p r o c e d u r e

15+

GROUP

INCENTIVES

because the amount of such lost time is small. In periods of rapid expansion, however, when production facilities are over-taxed, the earnings of some of the groups may drop below their normal levels, due to a considerable amount of day work charged on account of breakdowns, or to a loss in group efficiency caused by crowded working conditions and an abnormal number of new and inefficient employees. In such cases, it is the policy of the company to make an allowance to the group to restore earnings to a satisfactory level. 2 2 . An allowance of one-half the hourly rate f o r week-day overtime and the f u l l hourly rate f o r Sunday and holiday overtime is added to the group earnings f o r the total hours worked. 2 3 . T h e hourly rate of each operator is guaranteed. 24. T h e incentive rates are guaranteed against reduction indefinitely, as long as the method of manufacture remains unchanged. 2 5 . W e have substituted group payment f o r individual piece work in a f e w cases, but have usually applied it to operations which were f o r m e r l y performed on a day-work basis. 26. Only the straight line system of remuneration (like piece work) is used. In setting incentive rates, the value of standard output is calculated at the basic value of each class of work, and incentive earnings are directly proportional to output throughout the entire efficiency range.

APPENDIX WESTINGHOUSE

ELECTRIC

&

MANUFACTURING BURGH,

Composition

of the

155

D COMPANY,

EAST

PITTS-

PA.

Group

1 . G r o u p bonus used first on progressive w o r k ; now extended to dissimilar operations. 2 . P a y of group may be based on variety of work. 3 . P r e f e r s groups of less than 1 5 , except on progressive assembly, where 4.0 may be successfully used. 4 . Has tried groups of 2 to 4 0 ; average number is 8 to 1 0 . N o t more than twelve groups contain over 20. 5. Area over which the same group can work depends on amount of supervision required. Sometimes successful over territory of entire works (auto truck and industrial railway transportation, and w i n d o w cleaning). 6 . A n y non-salaried workers ( i n c l u d i n g group leaders) included in bonus. 7 . H a s applied group payment to indirect labor (maintenance work, storeroom activities, packers, craters, material handlers, laboring crews, tool and die making, transportation, and trades-training). Basii of

Extra-Compensation

8. Simple or pooled units are used. 9. Forty-seven points distributed throughout the works. 1 0 . G r o u p leader makes out shipping report which must be verified by a checker or shipper not participating in the earnings of the group. 1 1 . P e r f o r m a n c e reports are issued twice monthly. 1 2 . G r o u p earnings are distributed among workers in proportion to time spent in group X high hourly rate. ( E a c h worker has two rates, one of which is 1 2 % higher than the other.) 1 3 . Foreman is a part to establishing base rates, but acts only in an advisory capacity in the determination o f the time allowance. Results

Obtained

H· 15. 16. 17. 18.

Inventory was reduced by group incentive. G r o u p payment has reduced the clerical cost of figuring the payroll. Direct labor cost has been reduced approximately 5 0 % . Noticeable reduction in salaried supervision required, but not in inspection. T r u c k i n g considered as direct labor. 1 9 . A l t h o u g h incentive would seem to encourage carelessness, highest quality is maintained because workmen are penalized f o r scrap. Protection

of

Employees

2 0 . Has standard procedure f o r groups regulating instruction period, group participation, and supervision rate. 2 1 . I f no work is available f o r several hours, men are sent home. A l -

156

22.

23. 24.. 25. 26.

GROUP

INCENTIVES

lowances are made f o r small delays, and are charged to shop expense ("waiting on j o b , " " w a i t i n g f o r machine to be r e p a i r e d " ) Overtime bonus equivalent to half the workman's hourly day rate (whole day rate on Sundays and holidays) is allowed f o r every hour worked in addition to regular standard time earnings. Guarantee minimum hourly rates. Task times are guaranteed indefinitely unless method, material, or equipment is changed. G r o u p payment has been substituted in many cases f o r the individual method. When 1 0 0 % efficient, employee receives the product of the allowed time and a rate (high rate) approximately 1 1 % higher than his day-work rate.

Standard Time Plan I f group makes out = time. I f group falls down =

day-work rate X elapsed time X

112%

X

allowed

day-work rate.

APPENDIX WHITE

Composition

D

MOTOR COMPANY, CLEVELAND,

157 OHIO

of the G rouf

1. Dissimilar operations, i f carried out in connection w i t h a definitely organized, progressive flow of material are included in group payment. 2. W h e n the same group makes d i f f e r e n t products, they are pooled. 3. Size o f gang is not the controlling factor, but rather the routing, layout, and convenient arrangement of equipment and tools operated by employees in the gang. 4. Has tried groups between 2 or 3 to 3 0 ; in the case of maintenance, groups of 100 have been tried. 5. Area depends on the class o f work and conveying equipment, and in cases of productive operations, a one hundred man maintenance g a n g operates over many areas. 6. In some cases, the foremen, clerks, janitors, and inspectors connected w i t h the groups are included in bonus.

7· Basis of

Extra-Comfensation

8. Simple or compound units are used. It is undesirable to pool to any extent. 9. Pay-points depend on the geographical relation o f departments. 10. Payroll department is responsible for accuracy of count. 1 1 . Performance reports are issued daily. 1 2 . Bonus is based on the weighted proportionate time o f each employee to the total of the group. 1 3 . Foremen have no direct part in the setting of the rates and the task times. Results 14. 15. 16. 17. 18. 19.

Obtained

T o t a l employee earnings average about 1 2 0 % of base rates. Inventory was reduced. Considerable saving in clerical cost of figuring payroll. D i r e c t labor cost reduced. Indirect labor cost reduced. Q u a l i t y improved.

Protection

of

Employees

20. N e w employees are added to the group slowly a f t e r proper selection. 2 1 . N o allowance made f o r idle time. 22. Efficiencies based on actual hours divided into standard—overtime hours being included in the total actual hours worked f o r a period. 23. Job classes determine the hourly base rate, and the efficiency determines the bonus earned, i f any, although average j o b efficiencies o f 9 5 % are regularly maintained f o r a grand average. 24. Task times are guaranteed as long as the method, equipment,

and

158

GROUP

INCENTIVES

conditions o f the j o b remain unchanged. Guarantee is plainly printed on every bonus chart issued. 2 5 . G r o u p payment substituted f o r day work, premium, and piece w o r k . 26. Parkhurst Differential Bonus is used. 1 1 This digest of the gToup incentive methods in the White Motor Company was prepared by Mr. F. A . Parkhurst, New York City.

APPENDIX

W H I T I N G CORPORATION, H A R V E T ,

Composition

159

D III.

of the Group

1. 2. 3. 4. 5. 6.

O n non-progressive work, dissimilar operations are g r o u p e d . W h e n the same g r o u p makes d i f f e r e n t products, they are p o o l e d . G r o u p s of 15 to 2 0 p r e f e r r e d . G r o u p s vary f r o m 2 to 50. M e m b e r s of g r o u p should be in sight of each o t h e r . Supervisors are usually paid u n d e r a separate plan w h i c h reflects t h e results of the g a n g bonus together w i t h other items of controllable expense. 7. A b o u t 7 ; % of indirect labor is covered by group bonus, and an a d d i t i o n a l 1 0 % by some f o r m of incentive other than g r o u p .

Basis of

Extra-Compensation

8. 7 5 % and

work measured in simple units, 1 5 % 1 0 % is p o o l e d .

>n c o m p o u n d

units;

9· 10. Cost, accounting, a n d bonus d e p a r t m e n t s or any other d e p a r t m e n t w h i c h makes up a regular set of company records. 11. I n some d e p a r t m e n t s , reports are issued d a i l y ; in others, t h r e e times a w e e k ; in some weekly, and in some, m o n t h l y . 12. Bonus is usually paid as a percentage of t h e worker's base salary f o r t h e t i m e spent on bonus work. 13. Supervisor assists in setting rates, but is checked to insure i m partiality.

Results

Obtained

14. T o t a l employee earnings about 1 2 0 % of base rates. 15. R e d u c t i o n cannot be attributed t o g r o u p incentives. 16. Bonus in the payroll d e p a r t m e n t has reduced clerical i n g payrolls, but present p a y m e n t plan has not been t h a t saving. 17. D i r e c t labor cost r e d u c e d . 18. Small reduction in n u m b e r and cost of supervisors, but effective. M u c h larger reduction in cost of general 19. " S e t - u p s are p l a n n e d to control quality, a n d p r o d u c t in t h e p a s t . "

Protection of

cost of figurresponsible f o r

t h e y are m o r e indirect labor. is better than

Employees

20. C h a r g e gang w i t h that portion of t i m e of n e w employee represented by his efficiency. L e n g t h of l e a r n i n g period d e t e r m i n e d by comp l e x i t y of work a n d t h e ability of t h e operator. 2 1 . I f delays are f a u l t of m a n a g e m e n t outside of t h e d e p a r t m e n t , allowances are m a d e ; if f a u l t of t h e g r o u p itself, they are charged against that d e p a r t m e n t ' s bonus. 22. C o m p a n y pays t i m e a n d half f o r overtime, but bonus is paid on straight t i m e o n l y .

160

GROUP

INCENTIVES

2 3 . Guarantee that group w i l l receive minimum base rate. 24. " M o r a l agreement to be f a i r " ; management is guided by judgment. 2 5 . G r o u p payment was substituted f o r day work, and in a f e w cases f o r piece work in the f o u n d r y . 26. In most plans, Halsey 5 0 - 5 0 G r o u p Premium. For control set-ups, o f t e n use the Rowan plan, either in its regular or modified f o r m .

APPENDIX

D

161

W I L S O N AND C O M P A N Y , C H I C A G O ,

III.

Composition of the Grouf 1 . O n non-progressive w o r k , dissimilar operations are g r o u p e d 2. 3. 4. 5.

6.

7.

(loading

and trucking g a n g s ) . E a r n i n g s are based on production o f entire d a y , regardless o f kind o f product. E a c h kind has separate standard. Groups of 1 5 preferred. G r o u p p a y m e n t s u c c e s s f u l l y a p p l i e d to gangs v a r y i n g f r o m 3 to 4 0 . H a s f o u n d groups to operate s a t i s f a c t o r i l y w h e n members work in m a n y sections o f plant (car l o a d i n g and gangs trucking between departments). T r u c k e r s and set-up men participate in earnings o f g r o u p , but supervisors are compensated u n d e r an indirect bonus based on efficiency of productive labor. A l l indirect labor except elevator operators, m a i n t e n a n c e workers, and attendants are on incentive.

Basis of

Extra-Compensation

8. 9· 1 0 . P r o d u c i n g department is responsible f o r c o u n t i n g the work done. 1 1 . P e r f o r m a n c e reports (bonus b u l l e t i n s ) are posted d a i l y . 1 2 . A m o u n t o f i n d i v i d u a l bonus d e t e r m i n e d by p e r cent o f gain m u l t i p l i e d by occupational base rate o f each i n d i v i d u a l in that g r o u p . 1 3 . F o r e m e n do not have any part in establishing r a t e s — d o n e by time study department.

Results Obtained 1 4 . T o t a l e m p l o y e e earnings are a p p r o x i m a t e l y

120%

of

base

rates.

15· 16. Group

payment

caused

saving

in clerica!

cost o f

figuring

payroll

(average cost o f $ . 1 0 per e m p l o y e e per w e e k ) . 17.

Reduction of approximately 2 5 %

1 8 . Reduction

in indirect

by g r o u p 19. Quality

about

are

by

budgeting,

not

incentive.

improved by q u a l i t y and supervision

Protection of 20. Tasks

in direct labor cost.

labor cost brought

incentives.

Employees relatively

unskilled—therefore

no

difficulty w i t h

intro-

duction of n e w e m p l o y e e s . 21.

D a y - w o r k allowances m a d e f o r idle t i m e through f a u l t o f

company.

O t h e r losses are d e d u c t e d f r o m the bonus hours. 22. T i m e

and h a l f - t i m e f o r all t i m e over a 1 0 - h o u r day or f o r hours

worked

in excess o f

a 54-hour minimum

week.

2 3 . Occupational base rates are g u a r a n t e e d to operators as w e l l as a 4 0 hour minimum

week.

162

GROUP

INCENTIVES

24. Task times are guaranteed; changes effected only upon a change in method, product, or process. 2 5 . Substituted group payment f o r individual piece work. 26. 1 0 0 % return to the workmen for all gains over standard. N o d i f ferential or curve employed.

APPENDIX AN AUTOMOBILE

D

163

COMPANY

Composition of the Grouf 1. 2. When the same group makes different products, they are pooled. 3. Policy to have one group f o r each department, and operators in group are classified A - B - C , according to nature of work performed. 4 . Has tried groups of 1 0 to 4 5 0 . 5· 6. Supervisors, truckers, and set-up men are paid day work. 7. Bonus plan is not used f o r indirect labor.

Basis of

Extra-Compensation

8. Simple units are used. 91 0 . Production record department is responsible the count. 1 1 . Performance reports are issued weekly. 12. 1 3 . Foremen classify the operators.

for

the accuracy

of

Results Obtained H· 15. 16. 17. 18.

Inventory was reduced by group incentive. G r o u p payment caused saving in clerical cost of Direct labor cost reduced. Indirect labor cost reduced.

figuring

payroll.

1 9 . Quality not improved noticeably; work must pass inspection.

Protection of

Employees

20. N e w men are placed in low class and move up as they become efficient. 2 1 . When necessary, allowances are made to bring earnings up to base rate. 2 2 . Overtime is not considered in figuring piece work earnings. 2 3 . T h e r e is no guarantee of a minimum rate. 2 4 . Task times are not guaranteed. 2 5 . G r o u p payment substituted f o r individual piece work. 26. Classes are given different percentages on basis of actual hours worked by group. T h e total actual hours are divided into total piecework earnings to find the base rate f o r each department, and the different classes receive their percentages on these base rates.

BIBLIOGRAPHY American Management Association publications: Extra Financial Incentives for Supervisors and Indirect Labor, Production Executives' Series, N o . 64, 1 9 2 8 . Extra Incentive Wage Plans, Production Executives' Series, N o . 24, 1925· Extra Incentive Wage Plans, Production Executives' Series, N o . 2 1 , 1925. [Covering methods of Edison Electric Appliance Co., Inc., M i e h l e Printing Press & M a n u f a c t u r i n g Co., Westinghouse Electric & M a n u f a c t u r i n g Co., White Sewing Machine Co., and White Motor C o . ] Financial Incentives for Employees, 1 9 2 3 . G r o u p versus Individual Incentives, Production Executives' Series, No. 73, 1928. ANDERSON, ARTHUR G . , Industrial Engineering and Factory Management, T h e Ronald Press Company, N e w York, 1 9 2 8 . ARLIN, H . W., T h e Standard T i m e W a g e System o f the Westinghouse Electric & M a n u f a c t u r i n g Company, American Management Association, Production Executives' Series, N o . 1 0 , 1 9 2 5 . BASSETT, CHARLES E., " A p p l y i n g the Bonus System to Diversified Operations," Industrial Management, January 1 9 2 4 . BECK, EARL, Q u a l i t y Incentives, Production Executives' Series, N o . 6 7 , 1928.

BIGELOW, CARLE M . , President, Bigelow, Kent, Willard & Company, Inc. Incentives for Workers and Executives and T h e i r Use in the T r a i n i n g of N e w Personnel, American Management Association— Management Review, September 1 9 2 8 . BLOOMFIELD, DANIEL, Financial Incentives f o r Employees and Executives, T h e H . W . Wilson Company, N e w York, 1 9 2 3 . BOWIE, JAMES Α., Sharing Profits with Employees, Sir Isaac Pitman & Sons, Ltd., Bath, E n g l a n d , 1 9 2 2 . BREY, E . E . , " T h e H u m a n Factors o f Wage Incentives" (Society of Industrial Engineers, 1 9 2 9 ) . BRINKMAN, E . E . , industrial engineer, H o l e p r o o f Hosiery Company, Extra Financial Incentives for Supervisors, American Management Association, Production Executives' Series, N o . 48, 1 9 2 6 . BRINKMAN, E . E . , Extra Incentive Wage Plans for Stock Keepers, Stock Handlers, L o a d i n g and U n l o a d i n g Gangs, et al., American M a n a g e ment Association, Production Executives' Series, N o . 2 3 , 1 9 2 5 . CHASE, STUART, M e n and Machines, T h e Macmillan Company, N e w York, 1 9 2 9 . 165

GROUP

166

INCENTIVES

CORLETT, W . D., Premium and Piece Work Payment Plan, National M e t a l Trades Association, November 192 z. Department of Industrial Relations, "Task and Bonus Plans in Chicago Printing Plants," Compiled f o r the Members of U n i t e d Typothetse of America, J u l y 1921. HACKETT, J . D., Labor Management, D . Appleton and Company, N e w York, 1929. HASSELHORN, WALTER C., " C h a n g i n g Piece Work to Bonus Reduced Labor Cost and Increased Earnings," M a n u f a c t u r i n g Industries, December 1927. HASSELHORN, WALTER C., " G r o u p Bonus Payments," Food Industries, August 1929. HOLMES, S. S., assistant works manager, Hawthorne Works of the Western Electric Company, Inc., "Extra Incentive Wage Plans," American Management Association, Production Executives' Series, N o . 17,

1925. HOSFORD, W . F., "Western Electric Group Bonus M e t h o d s , " M a n u f a c turing Industries, August 1928. JANSEN, R . E., general dispatcher, Plant Transportation Department, Westinghouse Electric and M a n u f a c t u r i n g Company, East Pittsburgh Works, "Incentives Cut H a n d l i n g Costs 9 % to 5 0 % , " M a n u f a c t u r ing Industries, October and November 1928. KIFT, D . B., general superintendent, Edison Electric Appliance C o m pany, " H o w Group Bonus Aids the Superintendent," M a n u f a c t u r ing Industries, October 1928. KIFT, D . B., " 8 0 % Cost Reduction T h r o u g h Group Bonus," M a n u f a c turing Industries, J u l y 1928. LANSBURCH, RICHARD H . , "Industrial Management," J o h n Wiley & Sons, Inc., N e w York, 1928. LEWISOHN, SAM Α., " T h e N e w Leadership in Industry," E. P. D u t t o n & Co., 1926. LITTLE, Ε . H . , industrial engineer, Central Planning Department, U n i t e d States Rubber Company, "Some Considerations in Installing a Salary Administration P l a n , " American Management Association, Office Executives' Series, No. 27, 1927. LOWRY,

STEWART

M.,

MAYNARD,

HAROLD

B.,

STECEMERTEN,

G.

J.,

" T i m e and Motion Study and Formulas f o r Wage Incentives," M c G r a w - H i l l Book Company, N e w York, 1927. LUNDY, ROBERT R., " T h e Weekly G r o u p Piece Work System," A m e r i can Management Association, Personnel, February 1929. LYTLE, CHARLES W . , Wage Incentive Methods, Ronald Press, 1929. LYTLE, CHARLES W . , director of industrial cooperation, N e w York University, "A Mathematical Analysis of Compensation Plans," A m e r ican Management Association, Special Paper N o . 9, 1925. LYTLE, CHARLES W . , "Classification of Extra Financial Incentives," American Management Association, Marketing Executives' Series, N o . 51, 1927. MAYNARD, H A R O L D B . , a n d S T E G E M E R T E N , G . J . , " T h e

Group

System

BIBLIOGRAPHY

167

of Wage Payment," Industrial Management, February and M a r c h 1926. MERRICK, DWICHT V., N e w York, " T i m e Studies for Rate Setting," Engineering Magazine Company, 1919. National Metal Trades Association, " M e t h o d s of Wage P a y m e n t , " by Committee on Industrial Relations, Chicago, 111., 1928. PERKINS, H . G., "Extra Incentive Wage Plan for Groups in the Chrysler Motor Corporation," American Management Association, Production Executives' Series, No. 16, 1925. PRESGRAVE, R., "Study of the Advantages and Disadvantages of Piece Work U n d e r the Group System," Textile World, April 21, 1928. SANDERS, T . H . , "Wage Systems—An Appraisal," Harvard Business Review, October 1926. SMITH, ELLIOTT DUNLAP, D e n n i s o n M a n u f a c t u r i n g C o m p a n y a n d

Har-

vard University, "Financial Incentives—An Inseparable Part of the Task of Management," Bulletin of the Taylor Society, J u n e 1927. STILES, JAMES F., comptroller, Abbott Laboratories, North Chicago, 111., " W e Pay Our Workers to Keep Production Flowing," Factory and Industrial Management, May 1928. SYLVESTER, L. Α., staff member, Stevenson, Harrison and Jordan, " W h e n Should Incentives Be C h a n g e d ? " M a n u f a c t u r i n g Industries, May 1928. THREADGOLD, FRED. F., superintendent, Hibbard, Spencer, Bartlett and Company, "Maintaining Full Production Output with T w o - t h i r d s the Labor Force," M a n u f a c t u r i n g Industries, April 1928. TUTTLE, W . R., Edison Electric Appliance Co., " G r o u p Incentives—A Study in Compensation Policies," Factory and Industrial Management, January 1928. WHISLER, R. F., rate and time study department, National Cash Register Company, Dayton, Ohio, "Uses and Limitations of G r o u p Incentives," Factory and Industrial Management, July 1929. WOLF, ROBERT B., Discussion of Financial Incentives, Bulletin of the Taylor Society, June 1927.

INDEX Abbott Laboratories, 34, 37, 78, 129 Administrative problems, 1 3 , 39, 46 Advantages of expressing task in time, 51 · · Advantages of group incentive payment, 10, 98 Aetna Life Insurance Company, 22 Amalgamated Clothing Workers of America, 94 Amount of incentive, 8, 19, 76 Announcements of plans to employees, Antidote to effects of mechanization and sub-division of labor, 98 Antidote to monotony, 101 Area, effect of, 35 Armstrong Cork Company, 6 ; Assumptions on which calculations are based, 62 Atlantic Refining Company, 24, 35, 36, 67, 82, 84, 130 Average worker, 7, 106 Base rates, 9 assignment of, 19 grading according to skill and difficulty, 1 1 6 , 1 1 7 Basis for paying extra-compensation, 13 Bedeaux Point System, 49, 5 1 , 60, 63, 64, 65 Bonus, see Payment plans Bonus curve, selection of, 16, 56 Brey, E . E., 76 Chandler & Price Company, 50 Chase, Stuart, 100 Chicago Screw Company, 33 Chevrolet Company, 30, 33, 35, 37, 4 I , 54, 55, 83, 85, 86, 87, 132 Chrysler Corporation, 3 1 , 32, 50, S S , 83 Clerical work, effect on, 122 Coatesville Boiler Works, 41, 55 announcement of plan to employees, 125 Community of interest, 3 1 Comparison of actual results with task, Composition of the group, 1 1 , 3 1 Control of operations: effect on, 1 1 0 mechanical, 1 1 1 through paper devices, 1 1 0 Conveyors, introduction of, i n , 1 1 2 Counting of work, 54, 55

Delays, 20, 83, 84 Delco Products Corporation, 32, 4 I , 83, . 133 Dennison, H. S., 102 Determination of earnings, 18 Diebold Safe & Lock Company, 87 Difficulties created by the work, 21 encountered in the installation, 20 inherent in the incentive plan, 24 with time study, 22, 23, 43 with workers, 25 Direct labor, 4, 30 Distribution of earnings, 18, 57 of earnings under group bonus, 79 gang piece work earnings, 77 Division of labor savings, 91 Dodge Brothers Corporation, 34, 3 5 , 37, 55, 78, 83 Earnings, effect on employee, 90 Eberhard Manufacturing Company, 3 1 , 33, 34, 35, 37, 4.1,55, 78, 80, 84 Edison Electric Appliance Company, 3 1 , 33, 34, 35, 36, 37, 4°, 5°, 55, 65, 85, 87, 135 Emerson Efficiency Plan, 48, 56, 59, 63 64, 65, 67 Employee representation, 94 Employees, selection and training o f , 114,115 Endicott-Johnson Company, 37 Engineering problems, see Research problems Expert worker, see Skilled employee Fatigue, 95Corporation, 30, 41, 55, 136 Frigidaire Gantt Task and Bonus Plan, 58, 63, 64 General Electric Company, 3 1 , 3 7 , 52, 53, 55, 65, 83, 84, 87, 137 General Motors Corporation, 33, 48, 50, 67, 86 Gilbreth micro-motion, 16, 43, 104 Goodrich Co., B. F., 139 Group incentive, 8 Group leader, 12, 35, 1 1 3 Guaranteed earnings, 19, 76, 83 Guaranteed task times, see Protection of employees Halsey Premium Plan, 47, 48, 57, 65, 75 Haynes Manit Plan, 49, 51

170

INDEX

Hibbard, Spencer, Bartlett & Company, 36, 37, 83 Holeproof Hosiery Company, 37, 4 1 , 50, 67 140 Hoover Company, 6, 31, 35, 41, 53, 55, 82, 87, 141 Incentive payment, 8 Indirect labor, $ inclusion in group, 35, 107 Individual incentives, m , 1 1 4 Inspection, 1 8 , 34 Inventory, effect on, 1 1 2 J o b classification, 1 1 6 , 117 Keeping task times up-to-date, J2 Labor cost, effect on, 10,120-123 Labor standards, 22, 42, 107 Labor troubles, see Difficulties with workers Ladies' Garment Workers of Cleveland, 94 Lay-offs, prevention of, 86 Lincoln National L i f e Insurance Company, 38, 41, J4, 83 M a c y & C o m p a n y , Inc., R . H . , 38, 42, 142 Manufacturing cycle, 33 Marmon Motor C a r C o m p a n y , 36, 54 Mathematical comparison of wage payment plans, 57 Maximum efficiency, 7, 13, 1 5 , 106 M a y o , Elton, 95, 98 Measurement of results, 1 8 , 53 Methods of expressing task, 17, 49 Methods of making payments, 79 Methods of raising efficiency, 47, 48, 49 Miehle Printing Press & Manufacturing Company, 41, 54, 65, 81 Milwaukee Electric R a i l w a y & Light Company, 41 Mohawk Carpet Mills, 31, 80 Mueller Company, 1 4 4 announcement of plan to employees, 1 2 4 Myers, C . S . , 100 Nashua Gummed & Coated Paper Company, 37 National Cash Register Company, 24, 25, 26, 32, 86, 146 New employees, 20, 117 introduction of, 85 Non-financial incentives, 118 Operation of incentive plan, 1 4 Overtime, 20, 87

Packard Motor C a r Company, 30, 33 34, 36, 37, 54, 55, 69, 82, 84, 87 H» Par, see Maximum efficiency Payment plans, 58-62 Pay-point, 33 Per cent efficiency, 8 Performance reports, 17, 53, 108 Perkins, H . G . , 75 Personnel activities, 114 Philosophies of group and individual incentives, 28 Piece work, 58 Plumb, Inc., Fayette R . , 50 Pound, Arthur, 98 Precision of measurement, 1 5 Premium, see Payment plans Present performance, determination o f , 15 Production control, see Control of operations Promotion, 117 Protection of employees, 20 — — against factors beyond their control, 83 against increasing difficulty of task (rate cutting), 20, 81 against introduction of new employees, 85 Quality, effect on, 128-162 Questionnaire, 128 R a t e cutting, see Protection of employees Relation of general task level to present performance and maximum efficiency, 46 Research problems, 13, 39, 42 Rest periods, 97 Restriction of output, 28 Results, effects of group incentives on: clerical cost, 122 direct labor, 120 earnings of employees, 88, 90 efficiency, 120 indirect labor, 1 2 1 inventory, 122 quality, 128-162 security of jobs, 93 supervision, 121 training time of new employees, 121 Security of jobs under all forms of incentive, 92 Security of j o b s , effects on, 93 Size of group, 1 1 , 30 Skilled employee, 7 Smith Corporation, A . O., 33, 41, 50 Social effects of group incentives, 3, 26

INDEX Standard Time Plan, 61, 63, 64, 65, 69, 7« Standardization of conditions, 7, 14, 15, 104, 107 Supervision, 1 1 3 , 121 Supervisors, inclusion in group, 35 Swift & Company, 3 1 , 33, 34, 35, 53, 84, 8$, 149 Task level, 7, 13, 17, 46, 56, 106 selection of, 17 Taylor, F. W., 19, 76, 98 Tennessee Eastman Corporation, 4I, 54, 55 ™ ' 83 Thorne, Florence C., 27 Time allowed, see Task level Time constants, 44 Time standards, see Labor standards Time-study technique, 16, 42 Timken Roller Bearing Company, 3 1 , 32. 35. 38, 50, 5 ι , 54, 55, 69, 78 81, 84, 85, 86, 87, 150

171

Training of employees, 121 Types of labor to which group incentives are applied, 4, 12 Units of work, 39 Vemon, H. M., 96 Wages, effect on, 88 Warner & Swasey Company, 30, 3 1 , 71, 81,84, 151 Wennerlund, Ε. K., 24, 48, 50 Wennerlund Bonus Plan, 48, 56, 57, 59, 63, 64, 65, 67 Western Electric Company, 30, 32, 36, jo, 78, 81, 84, 152 Westinghouse Electric & Manufacturing Company, 30, 32, 35, 38, 51, 54,69,84,91,155 White Motor Company, 157 Whiting Corporation, 159 Williams, Whiting, 101 Wilson & Company, 38, 161