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 THE LIBRARY 
 
 OF THE 
 
 NEW YORK STATE SCHOOL 
 
 OF 
 
 INDUSTRIAL AND LABOR 
 
 RELATIONS 
 
 AT 
 
 CORNELL UNIVERSITY 
 
Cornell University 
 Library 
 
 The original of tliis book is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924002589517 
 
WHEN THE WORKMEN 
 HELP YOU MANAGE 
 
 BY 
 
 WILLIAM R. BASSET 
 
 CORNELL UNIVERSITY 
 
 NEW YORK 
 
 THE CENTURY CO. 
 
 1919 
 
Copyright, 1919, by 
 The Century Co. 
 
 CopytiEbt, 1919, by 
 A. W. Shaw Company 
 
 Copyright, 1919, by 
 Miller, Franklin, Basset and Compaht 
 
 Copyiieht, 1919, by 
 Bppicibncy Company 
 
 Published, October, 1919 
 
HD^6 
 FOREWORD 
 
 We are not now asked by labor to find ways to 
 pay higher wages through shorter hours. That 
 is only one small phase of the employer- 
 employee situation. What we are now really 
 asked (although not always in precise words) 
 is to devise some method by which the very 
 wage system can be saved. It is a challenge to 
 show that capital has a function. 
 
 The fullest justification would be to show that 
 the individual is better off under a wage than 
 under any other system — that he is not a mere 
 machine but a part of industry equal in dignity 
 to any other part. 
 
 I hold that capital can be justified — if only 
 it is intelligent. 
 
 Through some years past, as a result of my 
 own and my organization's experiences in a 
 thousand and a half industrial plants, I have 
 been steadily drawn to the conclusion that the 
 man is bigger than the machine — that the best of 
 industry cannot be brought out until the right 
 relation is discovered between the employer and 
 
vi FOEEWOED 
 
 the employee. By right relation I denote one 
 which permits both parties to express them- 
 selves in their work, to make satisfactory and 
 continuons profits on the clean basis of bargain 
 and sale, without paternalism in any form and 
 without the intervention of any outside agency. 
 
 My experience teaches me that no one rule or 
 system is properly applicable to every indus- 
 trial unit but that a method can always be 
 worked out provided the situation is scien- 
 tifically studied and digested. 
 
 The principles do not change; the applica- 
 tions always change. It is the principles which 
 are most important. In the within pages I have 
 developed the principles from experience and 
 then given a number of specific cases of their 
 entirely successful application. 
 
 Most of the chapters herein have previously 
 appeared in pamphlet form and they have been 
 correlated in a book because the demand for the 
 pamphlets seemed to indicate a very general 
 approval of my thought. 
 
 WiujAM E. Basset. 
 
CONTENTS 
 
 CHAPTEB PAGE 
 
 I The New Basis op Industry .... 3 
 
 II Skillpuij Management vs. Welpakb 
 
 Work 28 
 
 III Have We Reached the Limit op Wages ? 52 
 
 IV Harnessing the Creative Instinct . . 76 
 V Making the Workman Proud op His Job 95 
 
 VI When the Workmen Help to Manage . 116 
 
 VII Providing Steady Jobs for Your Men . 138 
 
 VIII Preserving the Wage System . . . 156 
 
 IX Why Profit-Sharing Fails .... 176 
 
 X Striking the Balance Betvveen Capital 
 
 AND Labor 198 
 
 XI The System op Representation . . . 219 
 
 XII In Conclusion 244 
 
WHEN THE WORKMEN HELP 
 YOU MANAGE 
 
WHEN THE WORKMEN HELP 
 YOU MANAGE 
 
 CHAPTEE I 
 
 THE NEW BASIS OF INDUSTEY 
 
 OxTB big problem to-day is the fitting together 
 of employer and employee upon a new basis of 
 complete cooperation, so that industry may 
 realize its possibilities and its participants may 
 each have a fair share of present profit and 
 future opportunity. Upon the human factor 
 hangs the future of American industry. 
 
 Charles M. Schwab has given public warning ; 
 so has Edward A. Filene. Our great bankers 
 have sensed the new order more quickly than the 
 strictly industrial men ; Charles H. Sabin, presi- 
 dent of the Guaranty Trust Company of New 
 York, said in an interview for Forbes' s Maga- 
 zine: 
 
 "The game of life will be played differently. 
 . . . There will be a levelling process ; workers 
 will demand and receive a larger share of the 
 
 3 
 
4 When the Workmen Help Yoio Manage 
 
 comforts and good things of life. ... To my 
 mind, it is only fair that our laboring people, 
 our artisans, our farmers, and our small busi- 
 ness men should receive an increasing share of 
 the good things of life. ... In the interest of 
 these very people, entirely apart from what is 
 usually called the capitalistic class, it is highly 
 essential that the changes which bring about 
 these desirable results be rightly guided and 
 that they proceed along sound economic lines. 
 Otherwise we shall have revolution, anarchy, 
 and loss and suffering all along the line without 
 compensation to any one." 
 
 The Guaranty Trust Company is the second 
 largest financial institution in the country, and 
 its president is not an iconoclast. He has seen 
 the rise of the Labor party in England, the vast 
 increase in the importance of labor unions in 
 this country (an increase now at a point where, 
 if the unions become political and fuse with the 
 Socialists, they will hold the balance of pov/er), 
 and the general world trend toward democracy. 
 
 The vast movement that began in Eussia and 
 there reached such absurd lengths, reaches all 
 over the world. There is a stirring everywhere 
 of the worker ; it springs from an initial desire 
 on his part to have recognition. But, once 
 started, it quickly topples over into a desire to 
 
The New Basis of Industry 5 
 
 rule to the exclusion of all other classes. And 
 to any one who has made a long and close study 
 of labor in industry it must be apparent that 
 our own industrial relations are not in such 
 form, nor are the employers mentally prepared, 
 to meet the changing point of view of the work- 
 man. 
 
 I heard a fairly large employer remark at the 
 close of the war: "The boys will come back 
 from France thoroughly disciplined and ready 
 to work. The work here will seem easy after 
 what they have gone through, and their disci- 
 pline will make them ready and willing to take 
 orders. We shall have no more strikes." 
 
 That man was living in yesterday; he be- 
 longed to that class who clamor for wages to be 
 reduced and industry to go back to the old basis 
 of "hiring and firing" wherein the owner is the 
 exclusive boss and the worker is supposed to be 
 glad to be alive. The delusion would be amus- 
 ing were it not likely to result so seriously for 
 many creditors and stockholders; for the busi- 
 ness that preserves those tenets will be able, at 
 the best, to survive only a few stormy years. 
 
 These two propositions can be taken as abso- 
 lute: 
 
 (1) If wages are unnaturally depressed re- 
 gardless of the cost of living, we shall have a 
 
6 When the Workmen Help You Manage 
 
 series of anarehistio strikes — regular Bolshevik 
 class wars — that wiU paralyze industry and per- 
 haps destroy it. 
 
 (2) If there is a period approaching that of 
 1914, when hundreds of thousands were unem- 
 ployed, state socialism will come in at once, and 
 the state will have to support the unemployed. 
 
 In either event, both the employers and the 
 employees will lose. But there is a clear way 
 ahead if the industries provide themselves with 
 markets that will absorb full time during twelve 
 months of the year, and so arrange work and 
 wages that every man will have a chance to 
 express himself in his work and to earn wages 
 that not only satisfy him according to his abil- 
 ity, but that also promise material increases 
 without end as he progresses in ability. 
 
 Full-time production and working relations 
 satisfactory to all parties are to be had by those 
 who, with open minds, seek them. They are not 
 among the impossibilities. But to attain them 
 we must discard many old ideas and go forward 
 with open minds. 
 
 The solution of the labor problem is not a 
 thing by itself, but reaches into every branch of 
 an industry. The variety and complementary 
 natures of the lines made, the overcoming of 
 seasonal production, the extension into foreign 
 
The New Basis of Industry 7i 
 
 and other markets, all may be forced upon the 
 owner by the single consideration of procuring 
 and keeping together a stable human institution 
 throughout the year. 
 
 There are some great lessons which the war 
 has taught us with respect to workmen. The 
 first is that money alone will not hold men. The 
 factories paying the highest wages had excep- 
 tionally large turnovers ; a steel plant that paid 
 high wages and large bonuses had nearly the 
 largest turnover in the country; the shipyards 
 paid well ; but in the largest of them, in spite of 
 all the well-known "labor methods" being in 
 force, the workers came and went so rapidly 
 that a foreman seldom knew who would work 
 for him on any day. A teacher of riveters in 
 this plant said in despair that he no sooner had 
 a man well taught than he left. 
 
 We have also learned that speeding up neither 
 helps production in the long run nor holds men. 
 The riveters of the Emergency Fleet Corpora- 
 tion, spurred on by Mr. Schwab's personality 
 and the offers of rewards, made startling rec- 
 ords for a time ; but then they fell back and the 
 average dropped even below a rather low stand- 
 ard. The spurts had reactions which showed 
 that they did not pay. 
 
 I have noticed this in every branch of indus- 
 
8 When the Workmen Help You Manage 
 
 try — you can speed men up for a time, but the 
 steady worker will eventually prove more valu- 
 able than the man who can only spurt ; that man 
 will either lay off altogether when his spurt is 
 done or he will relax to subnormal for weeks. 
 
 We have also learned — and this is most im- 
 portant — that pride in work will do more than 
 employment "methods" or pampering; in those 
 shops possessing a feeling that employer and 
 employee were all one in working for the win- 
 ning of the war and there was no suspicion of 
 undue profits on the part of the employer, the 
 labor turnovers were comparatively small and 
 the production per man comparatively large. 
 
 This yearning for recognition of work, for 
 recognition of the dignity of labor in terms 
 other than money, is further shown by the prog- 
 ress of strikes. Formerly most of the strikes 
 were on the subject of wages, because wages are 
 the easiest way of expressing dissatisfaction — 
 money is the supposed universal cure-all. But 
 when the workers got all the money they could 
 ask for, they began to strike for union recogni- 
 tion — and union recognition is only another way 
 of asserting independence ; of saying that they 
 desire a place in industry equal in dignity to 
 that of the employer, that they want a recog- 
 nized position. Broadly viewed, the whole 
 
The New Basis of Industry 9 
 
 union movement is a struggle to obtain a recog- 
 nized place in society. 
 
 We are apt to forget what unions are, because 
 of the attitude of the business agents and the 
 demagogues who do so much to obscure the real 
 purpose of unionism. The unions have had a 
 hard battle, and, like individuals with a sense of 
 insecurity in their social positions, they are 
 prone to overdo things. But unionism really 
 arose as a protest on the part of the workmen 
 in mass against the loss in dignity of labor that 
 the introduction of steam and the division of 
 labor caused. 
 
 The movement is a perfectly natural one, and, 
 though it often does and often will take wrong 
 tacks and be destructive instead of construc- 
 tive, the true orientation will obtain when the 
 worker does find' his true position of dignity. 
 The employer did not take away that position in 
 the first instance, but he can remodel industry 
 to restore it — ^not by going backward but by 
 going forward. The unions are results and not 
 causes, and they will, willy-nilly, become en- 
 tirely constructive once the causes that brought 
 them into being are removed. This is clearly 
 shown by the inability of the unions ' leaders to 
 control their men after all ordinary demands 
 have been met. Then they strike simply out of 
 
10 When the Workmen Help You Manage 
 
 dissatisfaction with work and usually without 
 knowing why they are dissatisfied. Employers 
 attribute their actions to pure "cussedness." 
 
 The Government and the union leaders sol- 
 emnly, and with entire good faith on both sides, 
 covenanted in 1917 to preserve the pre-war 
 status of industry for the period of the war. 
 They did not preserve it ; there were more than 
 three thousand strikes during the war, and there 
 are going to be more. The basic eight-hour day 
 has been generally established. Most of the 
 employers who used to be at war with the unions 
 have made their peace or have seen their prop- 
 erties taken over by the Government. Prac- 
 tically all of the old differences between labor 
 and capital — that is, hours and wages — were 
 settled for the time being on government work. 
 On top of big wage increases many, perhaps 
 most, employers, of their own free will, put in 
 bonus systems, profit-sharing schemes, or other 
 devices to stimulate production and interest. 
 And up to date only a small percentage of the 
 plans based solely upon giving the worker more 
 money for his labor has increased his interest or 
 quieted his boiling discontent. None of the 
 plans will permanently quiet him. One of the 
 largest employers said : 
 
 "We can make all the agreements that we 
 
The Neto Bams of Industry 11 
 
 want to have a labor peace ; if we make enougli 
 of these agreements we may accentuate the 
 white paper shortage — and nothing more. We 
 are simply agreeing that natural forces shall 
 cease. We are just baying at the moon." 
 
 President Wilson's Mediation Commission, 
 after making an intelligent study of conditions 
 in a fairly large number of localities, reached 
 the conclusion that industrial unrest is prima- 
 rily due to the lack of a healthy understanding 
 between the parties to industry — ^between the 
 employer and the employee. That there is no 
 general understanding is due to several causes. 
 
 There are few American workmen. It is rare 
 indeed to find a native-born American at a ma- 
 chine in a big industrial plant. We find the 
 American-bom on farms, in offices, acting as 
 foremen or superintendents, or engaged in a 
 small way in individual enterprises. Mr. Gom- 
 pers, the President of the American Federation 
 of Labor and the leader of laboring men gen- 
 erally, was born in England, Even, the first 
 generation of the immigrant prefers the white 
 collar. A member of a draft board during the 
 war commented on the fact that the registrants 
 who were foreign born commonly had trades, 
 but that the American born were clerks. 
 
 The American workman is a political myth. 
 
12 When the Workmen Help You Manage 
 
 He is as rare as tlie allegorical figure marcliing 
 bravely to work wearing a square cardboard 
 cap and carrying a full dinner-pail. The big 
 majority of the workers are American citizens, 
 but a very considerable portion of them do not 
 speak English. They are, generally speaking, 
 loyal, but in a Platonic, international way. 
 There are other things in their lives that mean 
 more to them than being Americans. 
 
 The American with a public-school education 
 left industry because being a workman is no 
 longer dignified. Steam and subdivision of 
 labor changed the status. A machine used to be 
 a tool in the hands of a man ; now the man is an 
 assistant to a machine. The Taylor System 
 of Scientific Management aims so to symphonize 
 the machine and the man that the man will be as 
 dependable and automatic as the machine. 
 
 Take a machinist. The machinist used to be 
 an all-round man who could use a lathe or a 
 drill-press, or do practically anything in metal. 
 Give him time enough and he could build a loco- 
 motive or a ship. If he was working for any 
 one, he had always before him the opportunity 
 to start a little machine-shop of his own. But 
 to-day, outside of tool- and die-makers and re- 
 pair men, there are few machinists. No one 
 man builds all or even the smallest part of an 
 
The New Basis of Industry 13 
 
 automobile. Instead of general machinists, one 
 finds a series of skilled machine assistants, men 
 who semi-antomatically feed in bits of metal. 
 What is the result? These men lose their indi- 
 viduality. They can not work alone ; they must 
 work in conjunction with a machine. 
 
 Being an assistant to a machine is not a posi- 
 tion of particular interest. American boys do 
 not take to it. But this did not make much dif- 
 ference as long as there were plenty of foreign- 
 ers streaming into the country, ready to do any- 
 thing. 
 
 The machine was, for the time, paramount, and 
 the idea was to have enough machines so that 
 production might go along almost without hu- 
 man aid. The machines were supposed to turn 
 out so much a day, but they did not do it; also 
 a deal of imperfect work came through. 
 
 One day a factory-owner awoke to the acute 
 realization that men were important; that it 
 was just as essential to have good men as good 
 machines ; that, although some machines might 
 be automatic, a factory was not. He began to 
 reckon with the human element. It was then 
 that we began to hear of labor turnover — that 
 is, the number of men who are hired each year 
 in order to maintain a definite working force. 
 
 Nobody had kept any statistics. When these 
 
14 Wh^n the Workmen Help You Manage 
 
 were kept they were iUuminative. Some estab- 
 lisliments discovered that they were hiring three 
 thousand people a year in order to maintain an 
 average working force of a thousand. They 
 further discovered that it cost money to break 
 in new people ; that when a man left or was fired 
 his employer lost from thirty dollars to five 
 hundred because it cost that much to break in a 
 new operator. American industry produced 
 only a fraction of its potential output solely be- 
 cause workers would not stay on the job. 
 
 Long-headed employers were quick to recog- 
 nize that the worker as a human machine had 
 scarcely more interest in the product than had 
 the inanimate machine. Some thought that the 
 interest might be held by money, and therefore 
 they paid men, not for the time they spent in 
 the factory, but for the work that they did — ^by 
 the number of pieces turned out — or else they 
 provided some other kind ojf a wage incentive. 
 Others tried to draw interest, if not to the fac- 
 tory then about the factory, by providing better 
 living conditions, recreational opportunities, 
 medical assistance, and a great number of other 
 things that go under the general head of "wel- 
 fare work." Judge Gary, the chief executive 
 of the United States Steel Corporation, noted 
 
The New Bads of IndvMry 15 
 
 the changing conditions, and he stated this prin- 
 ciple : 
 
 "There is no way of permanently settling any 
 great question involving the welfare of human- 
 kind except on the basis of right and justice. " 
 
 He felt that if he could not interest the work- 
 ers in the work, still he might interest them in 
 the results, as partners. He evolved a stock- 
 purchasing plan for employees back in 1903. 
 To-day employees of the Steel Corporation hold 
 stock to the value of nearly nine million dollars. 
 Many other employers followed the lead. 
 
 Such profit-sharing is splendid in conception ; 
 it is the thought of the employer and employee 
 working together on the job and sharing the 
 fruits of good work. But a large corporation 
 does not arrive at its profits by any such direct 
 method ; their calculation is very complex, and 
 many factors, over most of which the worker 
 has no control, enter into their make-up. The 
 eventual connection between the day's work and 
 the year's dividends is even less dramatic than 
 the relation between the tax stamp on a package 
 of tobacco and the coupon on a Liberty Bond. 
 
 In addition, the average workman can not buy 
 enough stock to make the dividends an impor- 
 tant part of the year's income, and, even if it 
 
16 When the Workmen Help You Manage 
 
 were large enough, it is doubtful if the worker 
 who grasped finance suflSciently to understand 
 dividends would long remain a worker. The 
 purchase of stock by workers is splendid as a 
 thrift movement which will encourage fore- 
 handed views on life, but it has nothing to do 
 with the day's work or with a real proprietary 
 interest in an employee 's work. 
 
 Moreover, the stock-purchasing plan for 
 workers does not make for the democratic inter- 
 est, because the workers, as such, are rarely 
 represented on the Board of Directors which 
 determines the expediency of dividends. It is 
 not easy to explain the passing or cutting of 
 dividends to the ordinary investing stockholder, 
 but human expression has not yet reached the 
 point where such action can be made clear to 
 the worker who has done his work well and 
 bought his stock with the fixed idea that it would 
 return more interest than the savings bank. 
 
 As yet I know of no corporation — at least, of 
 any size — in which the majority of the stock or 
 even a "working majority" is held by the em- 
 ployees. 
 
 Companies that did not care to risk the pass- 
 ing of stock control, and feeling that anyhow 
 the employees were mainly interested in money, 
 have evolved profit-sharing plans — by which 
 
The New Basis of Industry 17 
 
 a percentage of earnings was distributed pro 
 rata to the men on the pay-roll. 
 
 Welfare work, stock ownership, profit-sharing 
 — all are in the way of sharing the fruits of in- 
 dustry with the worker in order to attract and 
 hold his interest and thus gain his cooperation. 
 But they have not accomplished all the results 
 that were hoped for. Welfare work has been 
 confused with "uplift," and workers — in com- 
 mon with most other people — ^bitterly resent be- 
 ing ' ' uplifted ' ' by main force. The profit-shar- 
 ing plans have the objection that workers gener- 
 ally do not understand the process by which 
 profits are made and do not connect them with 
 the actual work that they happen to be doing. 
 The bonus payments for work accomplished do 
 stimulate production, but at the same time they 
 transfer the interest from the work to the 
 money, and a man is apt to consider that only 
 the amount of work is important and not the 
 quality. None of these plans has yet touched 
 the real point at issue — the changing of the 
 status of the worker so that he can express indi- 
 viduality and thus have the same sort of interest 
 as he would have if he were working for himself. 
 
 The American worker — the old-time mechanic 
 — ^passed from big business quickly; the for- 
 eigner, glad to gain a livelihood, accepted the 
 
18 When the Workmen Help You Manage 
 
 conditions without question as long as he re- 
 tained his old-world ideals; but now he too is 
 asking for something more than work and 
 wages. The urge for a position, for a job as an 
 intelligent human being, is wholly natural when 
 one analyzes the course of industrial progress. 
 To work day in and day out without interest, to 
 gain only a sustenance, is not living; having had 
 a taste of better things, the workers now want 
 more of them — to acquire something of the 
 status of employers. 
 
 The British Labor party has expressed its 
 desire for recognition in its now celebrated plat- 
 form, a copy of which should be in the hands of 
 every American employer : 
 
 "What the Labor Party looks to is a genu- 
 inely scientific reorganization of the nation's 
 industry, no longer deflected by individual profi- 
 teering, on the basis of the common ownership 
 of the means of production ; the equitable shar- 
 ing of the proceeds among all those who partici- 
 pate in any capacity, and only among these ; and 
 the adoption, in particular services and occupa- 
 tions, of those systems and methods of adminis- 
 tration and control that may be found, in prac- 
 tice, best to pronlote the public interest." 
 
 A very few years ago — in fact, at any time 
 before the war — talk such as the above would 
 
The New Basis of Industry 19 
 
 have been dismissed as visionary and socialistic. 
 But we have seen our own country go, for the 
 purposes of war, upon a basis of socialism. 
 The public control of prices and financing, the 
 ■taking over of the means of communication, and 
 the heavy taxation are all socialistic in the ex- 
 treme. They amount to a national pooling of 
 lives and property — ^the rights of individuals 
 cease to be paramount and give way to the right 
 of the nation. What we should have thought 
 socialistic in 1914 is now commonplace ; we are 
 adopting socialistic principles in business every 
 day, though divorcing them from the name of 
 socialism. 
 
 The American worker is not socialistic in the 
 same sense as the European. The American 
 Federation of Labor is against socialism as 
 such, but it does stand, and with it most of the 
 unaffiliated workers, for many of the principles 
 set forth in the program of the British Labor 
 party, which is frankly socialistic. 
 
 The aims of neither the British nor the Amer- 
 ican labor people end with wages, working con- 
 ditions, and hours. They embrace complete so- 
 cial programs which will give the workep an 
 opportunity to express his individuality. The 
 fear of the employer is that this expression will 
 mean the suppression of profitable industry. 
 
20 When the Workmen Help You Manage 
 
 Should not the employer, on the contrary, wel- 
 come any change in the industrial relation? 
 For will not the advantages to be gained 
 through cooperation of the human element be so 
 great as to overcome the undoubtedly higher 
 costs in other directions? 
 
 American employers everywhere recognize 
 that their relations with labor are not satisfac- 
 tory. It is trite to say that the human waste is 
 the greatest of all. The unthinking blame that 
 condition on labor; the thinking look over their 
 own houses to see if the difficulties may not be 
 mutual. I have generally found that the 
 troubles are of mutual origin — although in the 
 larger establishments neither employer nor em- 
 ployee could put his finger upon the origin. 
 For instance, most piece rates are unscientifi- 
 cally fixed and compensate without an exact 
 regard for the labor expended. Eates that are 
 too high or rates that are too low lead alike to 
 dissatisfaction ; for the worker will loaf to cover 
 up the high rates or grumble at the amount of 
 work he must do with the low rates; in both 
 cases his sense of fairness is hurt. 
 
 I recall a factory where the labor turnover 
 was abnormally high. The figures showed that 
 just two departments were above normal; and 
 they were so high as to affect the rate for the 
 
The New Basis of Industry 21 
 
 whole plant. The men who quit those depart- 
 naents said without exception that they left be- 
 cause the foremen were fond of petty tyrannies. 
 The foreman or superintendent who has risen 
 from the ranks is always the hardest man to 
 work for, and in these cases they had taken 
 great delight in hazing men on the slightest 
 offense. 
 
 These conditions had not been known to the 
 management, and the result was that an ex- 
 tremely fair-minded owner had been blamed for 
 injustices in which he had no part and which 
 were quite foreign to his nature. When those 
 foremen were removed, the labor turnover 
 dropped, and consequently the costs of produc- 
 tion. For it had been the high cost of produc- 
 tion that had drawn attention to the labor turn- 
 over. 
 
 In another shop a department was abnor- 
 mally low in its production, or, to put it another 
 way, abnormally high in its cost. A study of 
 conditions showed that the men were giving 
 forth only a fraction of their effort and spent a 
 deal of time in bickering among themselves. It 
 developed that they were of several races, reli- 
 gions, and politics, and they carried these differ- 
 ences into the shop. The solution was to sepa- 
 rate them into gangs of approximately similar 
 
22 When the Workmen Help You Manage 
 
 tastes ; and by such a simple adjustment the pro- 
 duction increased nearly fifty per cent. 
 
 I have given these cases only to demonstrate 
 how much it matters whether the men are happy 
 or dissatisfied — that a man is not simply a 
 "hand,^' but a human being, and that it is money 
 out of pocket to consider labor as a collection of 
 individuals who can be hired and fired, jumbled 
 together, or otherwise treated much the same as 
 low-grade, non-perishable merchandise. 
 
 On the other hand, it is just about as wasteful 
 to treat the workingman as if he were some 
 especially fine merchandise, to be kept in show- 
 cases and carefully dusted from time to time — 
 which seems to be the object of welfare work of 
 the paternal order. A worker does not appre- 
 ciate having his affairs ordered for him ; that is 
 a sacrifice of independence, and the result is 
 harmful, no matter how good an employer 's in- 
 tentions may be. There should be no confusing 
 of charity and business, and there need be none. 
 
 If we take medical inspection and clean, safe 
 shops as simply good business, both from the 
 standpoint of the compensation laws and of pro- 
 duction, they are welcomed by the men. In- 
 creased educational facilities and the like are 
 also welcomed, although it is an open question 
 whether, except for special training, efforts in 
 
The New Basis of Industry 23 
 
 this direction are not better made witli the whole 
 community rather than the company in view. 
 But the "taking an interest" kind of welfare, 
 the welfare work that presupposes that the la- 
 boring man is a fallen animal and should be 
 uplifted, is everywhere productive of more 
 harm than good ; if it is not resented, it is be- 
 cause the working force has become docile. No 
 live employer wants a time-serving, docile 
 force. The will to cause trouble is exactly the 
 win which, exerted constructively, makes for 
 success. 
 
 In all of the above I have taken the worker as 
 an impersonal being, or a personal being crav- 
 ing creature comforts alone, and the employer 
 as representing capital and seeking to develop 
 it by the hired services of the worker. I haTe 
 taken that view because it is the usual one, and 
 because it serves to illustrate that the real dif- 
 ference between employer and employee is in 
 point of view. If they can have the same point 
 of view they can both work for success in the 
 same establishment and along exactly the same 
 lines, and each receive the proper mental and 
 financial nourishment for ambition. We can 
 solve our problems by discarding money as the 
 universal common denominator and replacing it 
 with natural expression of instinctive desires — 
 
24 When the Workmen Help You Manage 
 
 that is, by bringing in a measure of democracy 
 to replace autocracy. 
 
 Let me explain. I have found that workers 
 can not be held at monotonous work which they 
 do not understand; no amount of money will 
 keep active-minded men for any length of time at 
 such tasks if any opportunity elsewhere offers. 
 And it is active-minded men who are needed. 
 Under the German system the workers are mere 
 automatons with direction from above. The re- 
 pressive influences of this system are shown by 
 the fact that the German nation has, since the 
 system got under way, contributed practically 
 no new ideas to manufacture or science. Ger- 
 mans have taken the initiative away from the 
 many, put it among the few, and as a result their 
 industries have generated no new thoughts. 
 German practice, except in things military, has 
 been taken from other countries. Germany 
 simply dammed up the initiative of the people. 
 Have our industrial processes been tending to- 
 ward the same ideals — toward the submissive 
 rather than the independent workman? 
 
 Every employer knows that he could not for 
 long be prosperous if he repressed or had re- 
 pressed every desire to put himself into his 
 business. He does not care how long he works, 
 if only he can have the satisfaction of seeing 
 
The Nets) Basis of Iindustry 25 
 
 his desires bear fruit. The workingman has 
 exactly these same desires, and if they can not 
 find expression in making his own job better, 
 they will break out in some other form. The 
 energy and brains that might as well go into 
 business for the betterment of all may find a 
 destructive outlet inside or outside the plant. 
 The whole movement for democracy throughout 
 the world is only an effort to express desires — 
 desires that every one of us has in some form 
 or other. 
 
 Directors of industry have two courses before 
 them : they can fight the desire of the working- 
 man for recognition and representation on an 
 equal plane as a component part of industry, or 
 they can all combine to hitch their desires in 
 double harness and put into business the will 
 and brain of every individual — for every indi- 
 vidual has a will and brain even if long disuse 
 makes him act as if he had none. 
 
 But is such expression practical? Employ- 
 ers are apt to think of the participation of 
 workers in the control of industry as taking 
 something away, simply because they are accus- 
 tomed to think they must always make money 
 at the expense of some one else. Yet it takes 
 only a moment's thought to discover that profit- 
 able business is not built in such fashion, but by 
 
26 When the Workmen Help You Manage 
 
 making or selling something upon which others 
 can make money, either through use or resale. 
 
 The view of selling as "sticking" somebody 
 with something has passed out except among 
 old-clothes dealers. Only a few business men 
 have realized that the same rule holds true as 
 well inside as outside of the shop, and that the 
 most profitable manufacturing is that which re- 
 acts in like measure to the profit of all who are 
 engaged in it. 
 
 Wages, for instance, are never absolutely high 
 or low. They are high if they do not return a 
 profit to him who pays them; they are low if 
 they return too much profit. "We know that a 
 man who throws himself into his work as if he 
 were doing it for himself is, given skill, a good 
 investment at almost any price. Would not, 
 then, the development of mutual work between 
 employer and employee bring in so much talent 
 now latent, and get rid of so much of the super- 
 vision now thought necessary as to insure profit- 
 able engagement for all the parties to industry? 
 
 Just as an illustration, the British Labor 
 party insists in its platform upon the centraliza- 
 tion and cheapening of electric power in order 
 to eliminate the wastes of power. Imagine pri- 
 vate owners asking for such monopolies ! Yet 
 
The New Basis of Industry 27 
 
 that is simply the thought of industrial engi- 
 neering applied in a big way. 
 
 The management that now sets about giving 
 thought in a big way to bringing out the possi- 
 bilities of its plant and human resources is the 
 only management that can survive. We are 
 just entering upon our international career as 
 an industrial nation, and in the world competi- 
 tion our employers can well begin to make plans 
 for manufacturing upon a mutual basis with 
 their employees — of organizing in such manner 
 that injustice or curbing of legitimate expres- 
 sion is impossible. For it is to be remembered 
 that, in any war between capital and labor, capi- 
 tal is bound to lose even if it gains a technical 
 victory. Is it wise to invite such a war, when it 
 can be avoided and both parties find themselves 
 better off for their concessions? 
 
CHAPTER II 
 
 SKILPtTL MANAGEMENT VS. WBLFAEB WORK 
 
 The commonest approacli to the labor prob- 
 lem is from the social angle. One sees every- 
 where a quickening in the activities of those 
 who always look at a human being as something 
 to be morally and physically bettered, at what- 
 ever cost — and made happy according to rule. 
 If the individual does not happen to attain hap- 
 piness according to rule, that is only the per- 
 versity of the individual. Surrounding people 
 with good influences, and all that sort of thing, 
 gained a wonderful impetus during the war ; for 
 in the massed soldiery the uplifters had victims 
 who could not get away : they might squirm, and 
 the more degenerate might even curse, but they 
 could not get away. 
 
 Welfare work had a large place in the govern- 
 ment employment undertakings. The people 
 must be taught to play, so the <theory ran — and 
 not iafrequently they learned more about play 
 than work. A strong trend has developed, 
 through numerous amateur reconstruction com- 
 
 28 
 
Skilful Management vs. Welfare Work 29 
 
 mittees, to attempt to develop a new social 
 structure, based not at all upon giving each man 
 what he is entitled to, but upon surrounding 
 him, whether or no, with the comforts of life — 
 to make him contented. 
 
 Somehow, I am reminded that the ideal fac- 
 tory organization, under this concept of labor 
 organization, might be able proudly to para- 
 phrase the well-known advertisement of "milk 
 from contented cows." 
 
 The present thought in some quarters is that 
 the great thing is to give a man a job and then 
 keep him happy. 
 
 Jobs are not "given." Without an economic 
 reason, they can not exist. Their existence de- 
 pends, not upon the good will of the employer 
 or the "happiness" of the employed, but upon 
 the continuous output of a well-made product 
 that the public buys. Hence, systems of em- 
 ployment bureaus do not solve anything. By 
 making labor easily available they put a pre- 
 mium upon seasonal manufacture, and in that 
 respect hinder the scientific development of 
 commercial activity, while at the same time giv- 
 ing encouragement to the worker's Wanderlust. 
 
 If you adopt the German system of requiring 
 workers to carry cards on which the employer 
 writes the man's qualifications, and the reason 
 
30 When the Workmen Help You Manage 
 
 he left or was fired from a job, then you get 
 somewhere in employment agencies — for then 
 you can place men who are out of work for a 
 good reason and not merely because they hap- 
 pen to want a trip. But so to stamp a man with 
 his qualifications is wholly un-American. If 
 you want to make employment agencies func- 
 tion, you must add to them the highly objec- 
 tionable features of a black-list for bad em- 
 ployees and state supervision of bad employers. 
 
 In the same objectionable category fall the 
 efforts to attain proper employment relations 
 through employment departments which keep a 
 record of the health of the workers, and see to 
 it by periodical examinations that a fair aver- 
 age of health is maintained — sometimes by fir- 
 ing the unhealthy, or again by nursing them 
 back to health. A statistical employment bu- 
 reau in a plant is a great aid; it will show 
 whether a department is having too great a 
 labor turnover, and will thus prompt investi- 
 gation ; and it should also call attention to the 
 real cost of hiring and firing men. But, essen- 
 tially, such a bureau is a post-mortem affair: it 
 does not prevent the disease. 
 
 A nearer approach to constructive work is the 
 sorting of applicants in order to get them into 
 the right jobs. But the job is more often at 
 
Skilful Management vs. Welfare Work 31 
 
 fault than the man. One can not assume that 
 the joh is perfect and that the sole question is 
 fitting the man to that job. "Well-fitted harness 
 does not make a good horse, although ill-fitting 
 harness may lose the value of a good horse. 
 
 The handing of a sop to a worker is not a new 
 idea. The present thought is often to dull his 
 sensibilities by creature comforts. The older 
 thought was cruder, although probably more ef- 
 ficacious: it took the ground that a man gave 
 less trouble if he were continually soaked, just 
 short of the saturation point, with liquor. Ben- 
 jamin Franklin somewhere in his writings tells 
 of how the printers with whom he worked had 
 beer at such short intervals during the day that 
 they were always slightly mellow and always 
 (and this was more important, from the employ- 
 er's view-point) in need of money for more 
 drink. England would never have been able to 
 pay the wages that obtained in her industrial 
 districts had it not been that the people through 
 drink lost all desire for better living. The 
 newer welfare work seeks, under various spe- 
 cious guises, to dull pulsating individuality, not 
 by drink, but by diversions of various sorts. 
 
 In the first chapter I touched upon these 
 phases; but I am here again parading them 
 because I want to bring out my point, that the 
 
32 When the Workmen Help You Manage 
 
 nice functioning of capital and labor is not at 
 all a social but is instead a management prob- 
 lem. Efficient labor rests upon the stimulation 
 of the creative faculty through proper work ar- 
 rangements; efficient capital rests upon the 
 stimulation of the reproductive faculty through 
 proper planning. The efficient functioning of 
 the two in unison rests upon the steady balance 
 in adequate respective remunerations. 
 
 These matters are managerial and not at all 
 social; they connote interdependence and not 
 dependence. As soon as the interdependent re- 
 lation is destroyed and either labor or capital 
 becomes dependent the one on the other, then we 
 have an eleemosynary condition which deadens. 
 For instance, I shall show in Chapter IX that 
 profit-sharing in its ordinary meaning is a giv- 
 ing and not a sharing, and hence it is not to be 
 expected that it will produce the only results 
 that are worth while in manufacturing for 
 profit, or which have in them any permanency — 
 the more economical engagement of work and 
 labor, so that sales prices may be reduced and 
 both capital and labor benefit. 
 
 The moneys that are spent in gifts, under the 
 guise of profit-sharing, might better be spent in 
 plant improvement or in method bettering, so 
 that both the employees and the employer may 
 
Skilful Management vs. Welfare Work 83 
 
 earn more. A stable condition is the result of 
 unceasing progress in the way of better method- 
 izing, and not in sitting down in a circle and 
 dividing up what happens to be in hand. 
 
 "Keconstruction" threatens to become as re- 
 pelling a word as "efficiency." Some one has 
 well said: "The war has carried us to the 
 depths; let us build from the depths." But in 
 the building it is not necessary to abandon all 
 that has gone before and to treat the past his- 
 tory of industry as a shedt from which the writ- 
 ing has been erased. We must subscribe either 
 to a balanced relation between capital and labor 
 or to some such creed as this : 
 
 * ' The capitalist mode of production is based 
 upon the divorce of the majority of the people 
 from the instruments of production. Society is 
 thus diyided into two opposite classes — the capi- 
 talist and his sleeping partners ; and the work- 
 ing class, possessing nothing but its labor 
 power. This social division widens with every 
 advance in machinery; and while capital stead- 
 ily accumulates into fewer hands, there is a con- 
 stantly growing insecurity of livelihood for the 
 majority of the wage-earners, and a steady 
 physical and mental deterioration among the 
 poverty-stricken of the populatio^. Then d^- 
 yelops the Qlas? W9,r," 
 
84 When the Workmen Help You Manage 
 
 We must grant that the interests of the em- 
 ployer and the employed are opposite, just as 
 the interests of the buyer and seller are oppo- 
 site. But here iu America we have long since 
 got over the old idea that a sale is a matter of 
 mutual recrimination. The seller no longer 
 pleads his poverty in extenuation of his price, 
 and neither does the buyer consider it essential 
 to caU in the aid of his pet anti-cheat deities. 
 The larger the sale the easier it is to arrive at 
 terms. Turning to the sphere of employment, 
 one finds that very high-priced men are hired 
 on a level plane; in fact, the very highest sal- 
 aries are arranged and paid with the greatest of 
 good feeling, although the salary in question (as 
 wages in the bulk always do) may exceed the 
 proprietor's own earnings from the enterprise. 
 Why, then, must it be otherwise when the sal- 
 ary decreases into mere wage 1 
 
 It need not be otherwise. Again taking a les- 
 son from merchandising, we find that the most 
 progressive sellers make it their business to 
 see that their buyers make money out of what 
 they buy — ^they try to make certain that there 
 will be a mutuality of benefit, even if there can 
 not be a mutuality of interest. The best sellers 
 will go to any length, they will revamp all their 
 
Skilful Management vs. Welfare Work 35 
 
 metliods, to carry through the principle that 
 lasting trade depends upon mutual benefit. 
 
 The salesman who "talks" any one into buy- 
 ing is no longer considered an asset; and the 
 employer who hopes to get the most economical 
 labor results by mere talking, and not by a pol- 
 icy of mutual benefit, will find himself without 
 good labor as quickly as such a salesman will 
 find himself without good customers. 
 
 The balance between the wages of capital and 
 the wages of labor is not static, but is contin- 
 ually and rightfully in the direction of reducing 
 the percentage wage and increasing the gross. 
 The capitalist makes less per sale, but makes 
 more sales; the worker makes less per article, 
 but makes more articles. Such is the scientific 
 method of conducting business. The other and 
 more common method is to jack up wages and 
 the selling price without any compensating efiS- 
 ciency — ^which starts the vicious circle of unrest 
 by raising the cost of living and making what- 
 ever wages are paid unsatisfactory. 
 
 The longer-headed labor men have seen that 
 wages can not be put up in real buying power if 
 prices also go up, and W. L. George, in what he 
 calls "Labor's Armistice Terms to the Eich," 
 says; 
 
36 When the Workmen Help. You Manage 
 
 "It is no use settling strikes by tricking us — 
 namely, by raising prices equally with, wages; 
 our increases must come off profit." 
 
 And another has said : 
 
 "Save he serve, no man may rule." 
 
 Mr. George is something of a demagogue and 
 is aiming at the eventual destruction of capital. 
 The second quotation hits nearer the mark — 
 that unless a real service be rendered, the em- 
 ployer-capitalist is not entitled to direct his cap- 
 ital. The service is to the worker and to the 
 public, and, lest it be thought that I have got 
 off the track and am heading in the direction of 
 business as a philanthropy, let me say at once 
 that it is in serving the worker and the public 
 that capital finds its greatest and most enduring 
 profits. 
 
 It is, then, the skilful manoeuvering of capital 
 that is back of the whole labor problem. Which 
 is only another way of saying "management" — 
 for management means much more than ' ' order- 
 ing about." It means the exact relating of the 
 various parts of a business, so that there is no 
 waste of effort or money — that all of the effort 
 and all of the money go into the product. 
 
 One is apt to take up labor as something that 
 is apart from finance. There is no obvious con- 
 nection between, say, the credit department an*! 
 
Skilful Management vs. Welfare Work 37, 
 
 the foundry. Yet, if the credit granting is too 
 loose, the bad debt loss will be so high that sal- 
 aries and -wages all around must be depressed in 
 order to meet competitors who do not have ros- 
 ters of bad debts ; or, again, the credits may be 
 too tight and thereby business lost and the turn- 
 over of the capital slackened, which again finds 
 its reflection in the costs of production. If the 
 whole organization is planned to minimize the 
 amount of capital represented by goods in proc- 
 ess and to accelerate the period of turnover, — 
 and such is the plan of scientific business, — then 
 any department may be so slack as to cause the 
 engagement of unnecessary working capital or 
 the prolongation of the period of turnover. 
 
 I have many times found this principle of 
 interrelation neglected because the head execu- 
 tive happened to have been trained in only one 
 side of the business. If he has worked up from 
 a salesman he may think that selling is the whole 
 thing and regard the factory as a machine that 
 grinds out articles for his people to sell ; if he 
 has been brought up on the factory side, he may 
 regard the selling organization as a nuisance 
 and insist that customers take, not what they 
 may want, but what is easiest to manufacture. 
 
 Here is an instance of the salesman-executive 
 type. I examined a certain plant, and was 
 
38 When the Workmen Help You Manage 
 
 struck by an atmosphere of extraordinary slop- 
 piness and fitfulness. The workers used their 
 hands and their feet, but apparently reserved 
 their heads for purposes other than work. I 
 noticed a cutting-off lathe running on heavy 
 work. Near one end was a puddle of water and 
 a broken oil-can, while scattered about were sev- 
 eral burnt tools. The water pump was not in 
 order, so the operator used the oil to prime it, 
 but before he could get the cap back a quantity 
 of water always spurted out on the floor. 
 When the puddle of water got too big, he quit 
 using the pump for a while and risked burning 
 the tools — or cut down the speed. 
 
 It was discovered by a time study that the 
 worker actually spent fifteen per cent, of his 
 time fooling with the pump. Take fifteen per 
 cent, of that man's wage, add the shop burden, 
 and you will have a very fair annual sum. 
 
 In another part of the shop was a modern 
 grinding-machine, but it was still in its crate, 
 and had been there for five months, because, as 
 the superintendent explained: "We keep only 
 one man busy about half the time on that sort 
 of work, and it is no use setting up the machine 
 until more work comes along. ' ' There was either 
 a loss of capital through the purchase of a use- 
 less tool, or a waste of labor in using a man a 
 
Skilful Management vs. Welfare Work 89 
 
 half day or so on an operation that should take 
 less than that time. 
 
 In another department, in a facing operation, 
 it was found that the addition of an inexpensive 
 jig would not only increase the output thirty- 
 eight per cent., but would overcome a sheer 
 waste of twenty-five per cent, of the forgings 
 that were regularly spoiled in process through 
 the faulty jig. 
 
 What was the cause of all this disorganiza- 
 tion, which not only showed itself in bad work, 
 but also in a high labor turnover and a general 
 dissatisfaction with wages, to say nothing of 
 the unnecessarily high production cost ? 
 
 Executive personnel. 
 
 The president bad started as a salesman, then 
 had gone on to sales-manager, vice-president, 
 and finally to chief executive. He knew nothing 
 of fabrication, and intensely disliked being 
 bothered with it; therefore he put in a biiffer 
 between himself and the factory in the person of 
 an assistant who had also grown up through the 
 sales force and who had the same ideas as his 
 superior. He overruled the production depart- 
 ment and insisted that sales orders rule. Eco- 
 nomical runs were broken up to satisfy custom- 
 ers ' whims for specials ; orders were put aside 
 that samples might be made, even though the 
 
40 When the Workmen Help You Manage 
 
 samples were not needed; materials were bor- 
 rowed ruthlessly from nearly finished orders to 
 rush something through for an especially fa- 
 vored customer, and often the original jobs were 
 not completed for months. 
 
 Those executives had no appreciation at all 
 of the value of good factory management. 
 Hence they did not get good factory manage- 
 ment, and of course they had a very large labor 
 turnover and frequent strikes. Whenever a 
 strike for higher wages or shorter hours came 
 on, the president, without investigation into the 
 merits, always showed a "firm hand." He 
 railed at the perversity of the men, and swore 
 that he would see the place ruined before he 
 submitted to extortion. Then, as orders began 
 to mount up and customers pressed for delivery, 
 he grumbled with less fervor, and finally, when 
 the pressure from the outside became unbear- 
 able, he called in the factory superintendent and 
 told him to make the best compromise with the 
 men that he could get. The president's strike 
 procedure never varied. He always considered 
 the wages excessive and the demands unjust, 
 but he really never knew a single figure of the 
 actual cost of wages. This man did not really 
 have a labor problem at all — although he com- 
 
Skilful Management vs. Welfare Work 41 
 
 plained that he had: his problem was purely- 
 personal. 
 
 Unfortunately, there are not a few such exec- 
 utives all over the world. Mr. J. H. Thomas, 
 conmienting on the English situation, said: 
 "What has been the course of events during the 
 recent strikes? Negotiations have taken place, 
 then a rupture has occurred, a strike has fol- 
 lowed, and immediately the workers have ob- 
 tained all they asked. Either they were entitled 
 to their demands before they struck, or they cer- 
 tainly were not entitled to them after the strike. 
 You can not govern the country unless you are 
 firm, and you have no right to be firm before 
 you are just. These continual capitulations to 
 brute force have resulted in the workers feeling 
 that the only way to secure justice is to strike." 
 
 Take another case. A factory was crowded 
 with orders, and the executives thought that 
 they needed a large addition to capital in order 
 to increase facilities. But they could not get 
 the capital because their earnings were low. 
 The workers were restless and wanted more 
 money, which, in the state of the. earnings, the 
 executives did not see their way clear to grant. 
 On examination of the factory, I discovered that 
 the average capital turnover took eighty days. 
 
42 When the Workmen Help You Manage 
 
 TMs seemed excessive in view of the simplicity 
 of the operations and the ease with which raw 
 materials might be had. A careful system of 
 planning, which included the elimination of use- 
 less stocks, reduced that turnover period to 
 forty-five days. The company took on the new 
 business and is now earning twice the former 
 profit on the same capital and paying satisfac- 
 tory wages. Yet if it had increased its capital 
 it would probably have been wrecked by labor 
 troubles. 
 
 Take still another case. A knitting-mill fol- 
 lowed the usual custom of routing goods through 
 the factory in case lots for custodiers. When a 
 lot arrived at the finished-goods room, it could 
 seldom be shipped because of the *' rejects"; 
 then special lots had to be sent through the mill 
 to fill out the order. In the meantime the cus- 
 tomer fumed and the firm lost the advantage of 
 a quick turnover ; incomplete orders often hung 
 up thirty days in the shipping-room. 
 
 It was a simple matter to plan a stock-room 
 program in accord with the size demands as 
 shown by the records, and to fill orders on requi- 
 sition from the stock-room. The production 
 was planned according to those needs. That 
 company's labor troubles were readily traceable 
 to the needless loss in undelivered goods, which 
 
Skilful Management vs. Welfare Work 43 
 
 made them imagine that higher wages were an 
 impossibility, 
 
 I might give many more of these incidents, 
 but the above will sufficiently demonstrate how 
 inadequate is any treatment of the labor prob- 
 lem which assumes that it is something of itself 
 and is not made up of the diversified activities 
 of a business. The labor conditions may fre- 
 quently arise from ineptness of management. 
 
 It requires some delicacy to approach this 
 phase of labor, but there are times when the 
 avoidance of facts is a disservice. Labor is pri- 
 marily a management problem, and that busi- 
 ness which is most scientifically run has the best 
 foundation for building permanently flexible 
 labor relations. Having the facts in hand, a 
 bargain may be arrived at in which there is an 
 equality of advantage. More inequalities arise 
 from ignorance than from malice. 
 
 Going back to the respective payments of 
 capital and labor, we know that capital in manu- 
 facturing is commonly paid only for what it 
 does. (Except that where the material content 
 of the finished product is high, capital sometimes 
 receives an increment through the advance in 
 price of materials, but it also stands the chance 
 of losing by a decline in materials, and in the 
 average business the two about stand off.) 
 
44 When the Workmen Help You Manage 
 
 Why not, then, pay labor its wage exclusively 
 on what it earns? — in other words, pay exclu- 
 sively on the basis of unit production? 
 
 We might pay on a time basis, with a specifi- 
 cation of what must be done during that time ; 
 or on a piece basis, with a minimum of accom- 
 plishment. The time, in both cases, is a vital 
 factor, for it is the time that the article takes 
 in the shop which determines the amount of 
 overhead cost that is absorbed. 
 
 But in industry the demand for the services 
 of the worker depends upon the demand for the 
 product, which means that the wage rate has an 
 outside factor, not under the influence of either 
 party, which may cause any wage to be unfair 
 either to the worker or to the owner. The 
 OAvner loses on the time rate when work is fall- 
 ing off, and the worker loses on the piece rate 
 when he has not enough to keep him going 
 through the whole day or week. 
 
 I never advocate in advance any particular 
 method of payment, because, without knowing 
 all of the facts in the case and making a com- 
 plete study of conditions, it is quite impossible 
 to say that this or that system of payment will 
 produce the fairest results. 
 
 It is bad for an employer to have underpaid 
 men; it is equally bad to have men who are 
 
Skilful Management vs. Welfare Work 45 
 
 rushing through work in order to make a high 
 piece score. But is there not some way in which 
 the several advantages of these two modes may 
 be combined, to the benefit of both employer and 
 employee ? 
 
 Good work involving the creative faculty can 
 not be expected until a living wage is guaran- 
 teed. Straight piece rates do not guarantee a 
 living wage. Is it not, then, approaching a solu- 
 tion first to pay a living wage, and to start the 
 additional remuneration when a certain stand- 
 ard has been attained — to make the piece rates 
 something that is superimposed upon the gradu- 
 ated living wage? And, further, is it going too 
 far in the present thought that capital owes a 
 duty to labor to guarantee that wage during 
 good conduct? 
 
 Let us see. When machinery stops working, 
 every possible care is taken to insure it against 
 depreciation. The idle time is often used ad- 
 vantageously in making a thorough overhauling 
 that will tend to prolong its life. No factory- 
 owner ever stints on the lubricant for a fine 
 machine : he would not let it go to rack and ruin 
 just because it cost a little money to keep up 
 repairs. But labor has been put in a different 
 case. When it ceases to work-^not because it 
 does not desire to work, but because the man- 
 
46 When the Workmen Help You Manage 
 
 agement has not been skilled enough to provide 
 work — it is supposed to care for itself and main- 
 tain its future ability to work as best it may. 
 Cutting down the pay-roll because of lack of 
 work is supposed to be, a measure of economy, 
 but it is often a most doubtful economy, for 
 several reasons. 
 
 If the worker knows that as soon as his work 
 is done he will be laid off, he will spin out that 
 work to the greatest possible extent, piling up 
 overhead charges on the owner; he will regard 
 his mere presence in the shop as a reason for 
 wages. If he is on piece rates, he will combine 
 with his fellows, as in England, to raise rates 
 and limit production. For if lengthening the 
 work period means money in pocket to the 
 worker, he will stretch out that work period by 
 all methods; and it is entirely natural that he 
 should. 
 
 And, finally, while a man is laid off how will 
 he support his physical well-being unless his 
 wages while working have been so high as to 
 give a margin that will hold over the idle pe- 
 riod? 
 
 I can state with confidence that the abuse of 
 machinery, the waste of materials and power, 
 and the various overhead charges that result 
 from spianing out work in order to maintain a 
 
Skilful Management vs. Welfare Work 47 
 
 full-time wage, would go a long way toward 
 maintaining the extra wages bill that would 
 accrue were he kept on the pay-roll during times 
 of poor business. The remainder would be 
 more than covered by the increased efficiency of 
 the worker under conditions of security and 
 plenty. 
 
 It is entirely reasonable, and in keeping 
 with the wage system, to pay the worker for 
 the quantity and quality of production. Quan- 
 tity and quality do not connote profit, but if 
 the disposing side of the business can not make 
 a profit when it receives a sufficient quantity 
 of good articles at a fair price, then something 
 is wrong with the design or with the methods 
 of disposal — and with neither of these phases 
 has the worker anything at all to do. It is true 
 that the worker, exercising his creative instinct, 
 will undoubtedly suggest betterments of design; 
 but usually these betterments go to facilitating 
 production rather than to facilitating sales, for 
 the worker can know the sales demand only by 
 chance. 
 
 The exact method of payment must depend 
 upon circumstances as long as the guaranteed 
 minimum exists — and it is to be expected that 
 in some cases the guaranteed minimum may 
 have to be the standard union rate for the work. 
 
48 When the Workmen Help You Manage 
 
 The pay may be based on the work of the in- 
 dividual, or of the department, or of the pro- 
 ductive section as a whole, according to the 
 nature of the work and the size of the estab- 
 lishment. It may take the form of a bonus on 
 quality, which is commonly far better than a 
 bonus on production. It may go on the job 
 basis — a fixed time being set for a certain task, 
 which time is longer than a fairly good man 
 should take, and then the premium calculated 
 from the time saved. There are innumerable 
 ways and means of arriving at a fair basis, 
 but all of them have these principles in common : 
 
 (1) Extreme simplicity, so that the details 
 may readily be understood by every worker; 
 any element of doubt as to fairness (arising 
 perhaps only from lack of understanding) will 
 kill cooperation. 
 
 (2) It must be obvious that the reward is 
 the result of effort and skill, and the reward 
 must follow with such swiftness in its increase 
 of earnings that the effort and the reward will 
 be in effect synonymous. A remote reward 
 kills sustained effort. 
 
 (3) The method must be thoroughly sold to 
 the people; and if the method can not be sold 
 
Skilful Management vs. Welfare Work 49 
 
 it is bad, no matter how many points of merit 
 in it may appeal to the scientific mind. 
 
 (4) The initial rates should be fixed in con- 
 junction with an elected committee of those 
 affected, and the basis should be a scientific 
 time study, every point of which is understood 
 and approved by that committee. 
 
 (5) The initial rates should be regarded as 
 experimental, and all rates should always be 
 open to easy revision, by and with the approval 
 of the committee on rates. 
 
 (6) The foremen or other officers directly in 
 contact with the job should have nothing to do 
 with rate-fixing or rate-changing, and com- 
 plaints against rates should be handed to the 
 committee and not to the foremen. The fore- 
 men are directors of work and not of wages. 
 
 An observance of the above principles will 
 go far toward overcoming the chronic hostility 
 to measuring pay by effort. That hostility 
 arises either from unfair rates or from lack of 
 knowledge of how the rates are arrived at. It 
 is a hostility that is to be reckoned with, for 
 a true balance between the wages of capital 
 and the wages of labor is not to be had unless 
 both sides are fair. Fairness is not a matter 
 
fiO When the Workmen Help You Manage 
 
 of courtesy, bnt of equal opportunity to known 
 facts. It is not without reason that almost 
 every gathering of workers condemns effort 
 payment; that nearly all trade unions are on 
 record against the mode; that the first act of 
 the Soldiers' and Workers' Committees, which 
 sprang up all over Germany at the time of the 
 revolution, was nearly always to pass .laws pro- 
 hibiting piece payment. 
 
 But the real objections are not at all to the 
 mode. The workers object to the concrete ap- 
 plication, and the application is commonly so 
 objectionable that the mode itself is made the 
 target. You will find any number of workmen 
 who insist that scientific rate-fi:xing is only a 
 device to wear out the worker for the benefit of 
 the capitalist. The same sort of objection has 
 met every effort to better manufacturing. 
 
 The application of power to weaving caused 
 riots. Why? Because the workers believed 
 that the mechanical devices would be used to 
 take away what they thought to be their only 
 source of livelihood. And it is a fact that many 
 machines have been eagerly welcomed as devices 
 to get ahead of the workers ; scientific planning 
 has undoubtedly been used at times for that 
 very purpose. The worker's opposition is not 
 without reason: he has a basis of justice 
 
Skilful Management vs. Welfare Work 61 
 
 founded upon possible sporadic cases of injus- 
 tice. 
 
 Words backed by facts cure injustice, "Words 
 backed by sentiment make it more smarting. 
 
 The worker is better off to-day than he was a 
 century ago, because of the improvements in the 
 methods of industry. He is not so well off as 
 he should be, and must be, if industry is to pro- 
 gress. Is it not more reasonable to suppose 
 that this betterment can be attained through 
 learning to use what we already have ? My own 
 observation of industry teaches me that we are 
 only on the threshold of industry as a science. 
 To-day we are but opportunists in industry ; we 
 grab here and grab there, and success is meas- 
 ured by the amount that sticks to the grabbing 
 fingers. 
 
CHAPTER III 
 
 HAVE WE BEACHED THE LIMIT OP WAGES? 
 
 Standaedization is good in its field. But 
 in standardization lies the greatest danger to 
 American business and prosperity; for, unless 
 our standards are flexible and constantly open 
 to proper revision, we may awake one fine morn- 
 ing to discover that we have standardized 
 stupidly. You can not rigidly standardize intel- 
 ligence — that is active — ^but you can easily 
 standardize stupidity, for that is static. Busi- 
 ness has standardized stupidity in dealing with 
 those who work for wages. 
 
 Look at a few cases. I found one owner 
 deeply troubled because he could not afford to 
 pay as much a day to the gang on the receiving 
 platform of his warehouse as a railroad near by 
 was doing ; and the railroad was taking the men. 
 He employed thirty-three men at day rates, 
 and, under conditions as they were, could not 
 do with less; hence he could not increase the 
 wage without putting it in the sales price. 
 
 52 
 
Have We Reached the Limit of Wages? 53 
 
 Investigation disclosed that the laborers 
 never walked faster than one and three quarter 
 miles an hour, and that they spent a deal of 
 time loafing while the foreman's back was 
 turned. By putting the men on a piece-rate 
 basis calculated at a three-mile-an-hour pace, 
 this problem solved itself. The present gang 
 numbers eighteen, and are so well paid that they 
 stay on the job. The owner has saved money 
 and the men are making money. But because 
 that owner saw only one way of doing the work 
 — the way honored by time — he could not see 
 how wages might be bettered. 
 
 Here is another case. Custom had fixed the 
 proper gangs for large concrete mixers, such 
 as are used in road work, at twenty-one men. 
 But the point that struck me was that the 
 twenty-one men were not always doing the same 
 kind of work. Sometimes there were three 
 sand shovelers and again only two ; there might 
 be seven spreaders here and only five in an- 
 other place. 
 
 A careful study of the various operations 
 originated a plan by which the machine could 
 be served by four less men without having any 
 of them work a bit harder than before. The re- 
 sults were better than those obtained with the 
 larger gang. A contractor with seventeen men 
 
54 When the Workmen Help You Manage 
 
 in a gang could certainly afford to pay better 
 wages than the man who thought he had to have 
 twenty-one. And I am not sure now that fewer 
 than seventeen might not be used! 
 
 In both these cases the employer had settled 
 in his own mind that he had to have a certain 
 number of men on the job. When a wage prob- 
 lem arose, neither owner could think of anything 
 but paying out more money to the same number 
 of men for the same work that they did before. 
 Why? They were intelligent employers, but 
 they had standardized certain operations in 
 their minds and thought the standards were in- 
 violate. They had not thought of wages in 
 terms of service, because they had become ac- 
 customed to thinking of wages only as money 
 paid out and not as cooperative service re- 
 turned. 
 
 Every one realizes after only a moment of 
 thought that the real basis of wages is service 
 rendered and that this service is measured by 
 the price of the product. Suppose two men, 
 each receiving two dollars a day, turn out to- 
 gether a product that sells for eight dollars. If 
 one man can turn out that same product in a 
 day he is worth at least four dollars. The de- 
 creased amount of overhead expense that he 
 will accumulate, as against the two men, will 
 
Have We Reached the Ldmit of Wages? 55 
 
 permit the owner to sell at less than eight dol- 
 lars, and, thus increasing his sales, to make 
 larger annual profits by speeding the turnover 
 of capital. 
 
 This is the simplest possible demonstration 
 that wages are profitably paid for service rather 
 than for men, and that the wage limit is the 
 value of the service. It is conclusive — ^but it is 
 not accepted. Everywhere you hear employers 
 and employees clamoring about the amount of 
 wages — neither one likes the rates — ^with a 
 pleasing disregard for the factor that eventu- 
 ally determines wages : the service to the public. 
 Nowhere in business is blank stupidity so rig- 
 idly standardized as in wages. Take some of 
 the controlling dogma of wage payment : 
 
 "I pay the market rate of wages; what more 
 can I do?" 
 
 How many manufacturers have said that with 
 conscious pride 1 I have heard some thousands 
 make the statement. On its face it seems fair 
 and sufiScient. But is there a market rate for 
 wages? The unions appear to agree with the 
 employer that there is ; they commonly differ on 
 the quotation. The unions paradoxically de- 
 clare that labor is not a commodity, and then 
 go on to fix union rates as if labor were a com- 
 modity — as if the workers in a trade were as 
 
56 When the Workmen Help You Manage 
 
 alike as two pigs of iron. Wliat is the market 
 rate and wlio makes it? 
 
 The "market rate" is now only a cant phrase 
 in merchandising. There is no market rate in 
 commodities, in spite of market quotations. 
 You find prices quoted for the staples, such as 
 cotton, wheat, and the like; hut when you go 
 to buy for particular uses you discover that by 
 paying more than the quoted rate you will get 
 an especially good quality or brand which will 
 save money in the end by being suited to your 
 exact needs. The best purchasing agents sel- 
 dom buy goods at the market price; they buy 
 that which will give the best service — the largest 
 return for the money without regard to the 
 initial outlay. Price is neither a purchasing 
 nor a sales argument among long-headed busi- 
 ness men. 
 
 Suppose a salesman had this little talk: "I 
 can offer you these goods at the market price ; 
 they are no better and no worse than my com- 
 petitor's, and I can not do better than he does 
 on delivery or credit terms. I have nothing to 
 offer you that he has not. You get no advan- 
 tage of any kind in buying from me, and I know 
 no reason why you should buy from me." 
 
 How long would that salesman hold his job? 
 Is there any conceivable reason for employing 
 
Have We Reached the Limit of Wagesf 57 
 
 such a man? And yet, how does that action 
 differ from that of the employer who offers the 
 market price to labor? Or the worker who of- 
 fers himself for hire at the market price? 
 
 The whole trend of modern business is against 
 making a product that will merely join the herd 
 of similar products, and is toward making some- 
 thing that will stand out — something that will 
 be different and better than the others. But 
 wage methods have not caught up with mer- 
 chandising, and they will not until the old ideas 
 of master and servant are abandoned and busi- 
 ness is considered as a democratic, mutual enter- 
 prise. 
 
 A delusion closely akin to the "market rate" 
 is that somebody — some higher power — "fixes" 
 wages, and hence the rate is something to rail 
 at. Nobody fixes wages. They fix themselves 
 through the cost of living. In times past they 
 have been too low, and they are probably too 
 low to-day, in spite of the fact that most em- 
 ployers think them outrageously high. The 
 manual worker's wage has never given him a 
 sufficient margin of surplus to support and edu- 
 cate a large family or to provide against his own 
 old age. 
 
 It must be remembered that the working life 
 of the manual laborer is comparatively short. 
 
58 When the Workmen Help You Manage 
 
 The bank president is in his prime at sixty, but 
 at that age the worker is in his dotage. If it is 
 right and just for the bank president to be able 
 to retire with a competency at sixty, it is right 
 and just for that manual worker, who is as ef- 
 ficient in his way as the banker, to be able to re- 
 tire comfortably when he too reaches the age 
 when his services are no longer salable. As it 
 now stands, the aged worker commonly ends' his 
 days on the bounty of his children, or, in some 
 countries, takes an old-age pension. 
 
 The wage surplus over living expenses to-day 
 is, in some lines, considerable — especially in oc- 
 cupations of danger ; but, on the average, wages 
 have not much more than kept pace with the in- 
 creased cost of living. It is the hope of the 
 longer-headed leaders of labor constantly to 
 hold advances due to increased cost of living, 
 and then, .by increased production, to lower the 
 cost of living and consequently increase the 
 wage-earner's net surplus. 
 
 Wages go up because of inflation or the excess 
 of demand over supply, both of which reasons 
 are closely related. They are always too high 
 in war work, because that work is generally 
 done in such a hurry and with so little planning 
 (that no facilities are offered for any one to earn 
 a wage. In many plants the men spend a deal 
 
Have We Reached the Limit of Wages? 59 
 
 of their time hunting for some one to tell them 
 what to do. 
 
 The mushroom industries of war fade away, 
 and with them the jobs at very excessive wages. 
 The higher rate of war, with some adjustments, 
 can quickly be converted into a low rate if the 
 methods of production are changed to suit the 
 wage instead of attempting to change the wage 
 to suit the production. Of course, wages de- 
 cline if production is inefficient — just as a man 
 has no expense if he does no business — ^but that 
 is not the direction of progress. 
 
 The men in this country who declaim most 
 loudly against high wages are those whose man- 
 ufacturing methods are most at fault — ^who are 
 themselves backward. The man who has made 
 the most noise in recent years about wages has 
 the worst arranged and most wasteful shop I 
 have ever seen. He is as stubborn in resisting 
 improvements as he is in wages; I know that 
 from bitter experience. He seems to hold that 
 the end of industry is to promote strikes and 
 not to produce marketable products. 
 
 The law of supply and demand — a law that 
 operates around and above us — raises wages. 
 They rise ii;regularly. It takes a little time for 
 the cost of living to catch all wages, and in the 
 meantime the worker gets a taste of economic 
 
60 When the Workmen Help You Manage 
 
 surplus. Then, when the cost of living does 
 catch up, he wants another raise. And so the 
 process goes merrily on until the particular de- 
 mand that has caused all the disturbance ceases. 
 Until then, wages and the cost of living chase 
 themselves around in a circle. When the whis- 
 tle blows to stop the gaime, some trades and 
 localities are ahead of the high cost of living 
 and others are behind. Then matters proceed 
 to adjust themselves, but with most of the work- 
 ers having somewhat improved their net stand- 
 ing. This is the way that the worker has risen 
 from a mere serf to the status of a human being 
 — with some small excursions into violence in 
 an attempt to expedite matters. 
 
 Strikes never raise wages. If the wages are 
 already high enough, the strike fails ; if too low, 
 it wins. But, in either case, it is some force out- 
 side that has really settled the matter. In the 
 present day it is the union and not the individ- 
 ual worker that assumes the responsibility of 
 holding the increases ; but the only rate they can 
 hold is that which can be paid by the least effi- 
 cient manufacturer. Hence it is only the inef- 
 ficient manufacturer who bewails the size of his 
 pay-roll. The efficient employer should pray 
 for wages so high that his less efficient competi- 
 tor will go out of business. 
 
f 
 
 Have We 'Reached the Limit of Wages? 61 
 
 Another current dogma is that any given 
 product can afford to have only a certain 
 amount of wage included in its cost, and that the 
 wage must always be a fixed percentage of the 
 sales price. Hences, if wages do go up, so do 
 the sales prices. This dogma is common to both 
 employer and employee; it finds expression in 
 many ways. It does not take into account the 
 service of a man ; it holds that his service value 
 is fixed and inviolate, and that there is some- 
 thing sacred about pre-war or pre-any other pe- 
 riod wages and that we should revert to them 
 with all speed. 
 
 Back in 1912 wages were considered too high. 
 They have always been "too high." If we 
 could find records of conversations among em- 
 ployers in the days when a wage of a penny a 
 day was quite general, doubtless they would 
 reveal a universal discontent over the extraor- 
 dinary expense of labor! "It is simply un- 
 thinkable that a mere worker should earn sev- 
 enty-five dollars a week, ' ' says the short-sighted 
 modern employer. 
 
 The great objection of employees to piece- 
 work is that a fair rate will be changed simply 
 because the superintendent declares: "Those 
 fellows are making too much money. ' ' We find 
 densely serious thinkers pronouncing that it is 
 
62 When the Workmen Help You Manage 
 
 not good for workers to earn too much money 
 — they buy pianos and make all sorts of silly 
 purchases ! And all of this rests solely on the 
 theory that there is a divinely ordained limit 
 to the production that a dollar in wage can 
 effect ; which, in turn, has its foundation in the 
 notion that we really know all that there is to 
 be known about manufacturing, selling, and dis- 
 tributing. 
 
 As a matter of fact, any very successful busi- 
 ness man will tell you that he has gone only far 
 enough to realize that what he does not know 
 infinitely transcends what he does know. I can 
 say with entire confidence that not one out of 
 every thousand manufacturers knows what rela- 
 tion wages have to the cost of the finished prod- 
 uct. The manufacturer who does know his 
 facts seldom talks about high wages. We can 
 ascertain exact costs, but we do not yet know 
 enough to fix the limit of a man's wage, for 
 we do not know the capacity of the human 
 being. 
 
 It quite often happens that salesmen are pen- 
 alized by low commissions, workmen by low 
 wages, and stockholders by passed dividends, 
 simply because the executives do not know 
 what they are doing, but unfortunately think 
 that they know. Before it is possible to esti- 
 
Have We Reached the Limit of Wages? 63 
 
 mate what wages can be paid, it is necessary to 
 know costs in every department of a business, 
 and in detail. I say advisedly "what wages 
 can be paid," for in the world movement for 
 democracy it is becoming more and more appar- 
 ent that the owner must prove that he has a 
 right to ownership by demonstrating that men 
 working with him are better off than in individ- 
 ual enterprise. The question now is "how 
 much" and not "how little" can be devoted to 
 wages. 
 
 Take a case in point. My engineering staff 
 examined a large manufacturing concern a few 
 years ago, and discovered that the particular 
 product they pushed, and on which they prided 
 themselves, was sold at a loss. The only reason 
 the company came out on the right side of the 
 ledger at the end of the year was that some of 
 the subsidiary products, which they sold reluc- 
 tantly and only because they thought they had 
 to, yielded handsome profits. How could that 
 concern say that its wages were too high or too 
 low, when it did not know the costs of what it 
 offered for sale ? Yet it was doing a gross busi- 
 ness of many millions a year, had numerous 
 branches, and was supposed to be one of the 
 soundest companies in the trade. 
 
 An investigation in the paper trade some 
 
64 When the Workmen Help You Manage 
 
 years ago showed that, with practically all the 
 factories paying the same wage scales, and 
 buying their raw materials at about the same 
 prices, the costs of completed stock varied 
 widely. Some concerns were making money at 
 rates that meant only losses for others. Al- 
 though labor is not the greatest cost in paper- 
 making, yet it is large enough to be a serious 
 factor, and one would at first impression think 
 that flat wage rates would have meant approxi- 
 mately uniform costs. 
 
 The first step in any wage consideration, and 
 the first step toward the new idea in business, 
 is to get the real values on wages. We all know 
 that cheap labor is not cheap ; paid cotton-pick- 
 ers have proved cheaper than slaves — although 
 it took a long time so to convince the South, be- 
 cause they never reckoned the expense of idle 
 slaves. In any operation in which the material 
 costs are high as compared with the labor costs, 
 the highest possible pay is the cheapest if it re- 
 sults in savings of material, or in a fine product, 
 or ia both. In the grades of production where 
 labor is the big factor, high wages are economi- 
 cal if the wastes of human power can be cut to 
 a minimum. Wages are measured solely in 
 terms of production. It is the part of the em- 
 ployer to see that facilities for production are 
 
Have We Reached the Limit of Wages? 65 
 
 given, and then it is Ms right to demand that 
 they be taken advantage of. 
 
 It is not what one pays a man that counts — ^it 
 is what he does. 
 
 Before the war the sailors on the Great 
 Lakes had higher wages than anywhere in the 
 world, and yet the cost per ton mile of freight 
 on the lakes was cheaper than anywhere in the 
 world — ^because the boats and the docks were 
 built to give the largest possible turnovers in 
 cargoes. 
 
 Some manufacturers have sensed that the 
 amount of wages is not an absolute figure, and 
 they have installed bonus systems or other wage 
 incentives. Sometimes these work and some- 
 times they do not. But if the premium does act 
 as an incentive, then it is very common for the 
 employer to cut the rate until it is just a bit 
 higher than the elusive market rate. Or, again, 
 the premium may not increase production. 
 
 I recall one firm that fixed a rate of one and 
 one half cents a piece for all pieces over one 
 hundred ; the daily rate was three cents a piece 
 on the standard of one hundred. The workers 
 quickly saw that to earn a dollar after they had 
 passed the hundred mark required just twice 
 as much work as before, and they did not exert 
 themselves. I suggested that they keep the rate 
 
66 When the Workmen Help You Manage 
 
 of three dollars for the first hundred, but pay 
 six dollars a hundred for the excess. As a re- 
 sult the production increased thirty-five per 
 cent. ; and, although the rate was really higher, 
 the men making an average of forty-one cents an 
 hour as against a former thirty cents, the les- 
 sened overhead charge made a net decrease of 
 five per cent, in the cost — and that without tak- 
 ing into account the lowering of labor turnover 
 by gaining a better and more satisfied class of 
 men. 
 
 Or again it may be that a little skill and fore- 
 sight wiU cut out wastes that will absorb in- 
 creased wages. 
 
 Take what would seem to be a small matter. 
 The Government ordered certain classes of 
 underwear to be baled instead of being packed 
 in the usual wooden cases. The size of the 
 burlap and paper was specified as thirty-six 
 inches by fifty inches, in order that the coverings 
 might be used again. There is quite a differ- 
 ence in the bulk of a bale of size thirty-fours 
 as compared with a bale of forty-fours. The 
 foreman of the packing-room found that the 
 standard made a tight fit for the larger sizes, 
 and he ordered all the burlap to be cut fifty-five 
 inches long. The additional length was really 
 needed for the large bales, but it was mere waste 
 
Have We Reached the Limit of Wages? 67 
 
 on the smaller ; by cutting the coverings in two 
 sizes that five inches of burlap which had been 
 wasted on part of the product saved twelve dol- 
 lars and sixty cents a day, or three thousand, 
 seven hundred and eighty dollars a year ! 
 
 In every phase of the knitting industry the 
 wastes are great because of the almost universal 
 habit of cutting rates when an employee earns 
 more than the foreman thinks should be earned. 
 A girl who can earn sixteen dollars a week on a 
 piece rate is far more valuable than one who 
 can earn only twelve dollars, because of the less 
 overhead that the speedier girl takes ; but, com- 
 monly, an operator with the dexterity to turn 
 out as much in five days as the average can in 
 six will quit at Friday noon in order not to be 
 a party to lowering rates. Thus, because of the 
 dogma that a knitter should not earn more than 
 a certain amount, the employee loses wages, the 
 employer loses business, and the public pays 
 too much for its knit goods. 
 
 A low piece rate, like a low wage, has the 
 backfire of increased waste of material which 
 often more than overcomes the saving in wages. 
 I found that the rates in the galvanizing de- 
 partment of a large Eastern plant had been set 
 with the thought that a man could make a fair 
 day's pay only by forcing to the limit. The 
 
68 When the Workmen Help You Manage 
 
 workers did force, and they got production ; but 
 in order to make their quotas they pulled the 
 pieces out of the galvanizing bath very quickly 
 and with a thicker deposit of metal than was 
 necessary. The best galvanizing is done rather 
 slowly. We raised the rates twenty per cent. ; 
 the men took more time at their work, and the 
 labor cost per piece was higher. But so much 
 spelter was saved by the more careful dipping 
 that the department cost the company twelve 
 thousand dollars a year less than it had before. 
 They saved money by eliminating the waste of 
 hasty work. 
 
 I have taken the employer's usual approach 
 to wages in an effort to show that wages are 
 seldom what they seem to be, and one must have 
 a very thorough and scientific knowledge of a 
 business to be able to say that wages are high 
 or low. The fact that they have repeatedly 
 been raised does not mean that they are high, 
 nor does the fact that they have been lowered 
 mean that they are low. They are high if they 
 do not return value ; they are low, regardless of 
 their total expression in dollars, if they do re- 
 turn value. 
 
 There is no reason in the world that a com- 
 mon worker should not make one hundred and 
 fifty dollars a week — if he does th,at much work. 
 
Have We Beached the Limit of Wages? 69 
 
 And it is the combined fault of the employer and 
 the employee if he does not do that much work. 
 But the fault of neither is chronic. If both re- 
 gard a wage increase as something to add to 
 cost, and not as a step toward cheapening the 
 product, then the raise is wrong. Eaising hu- 
 man costs to save eventual costs sounds para- 
 doxical, but that is the trend of scientific indus- 
 try, and marks the passage of the worker from 
 slave to fellow-artisan and of the owner from 
 blind to enlightened manufacturing. 
 
 That is not a fanciful progression ; neither is 
 it the opening for a homily on rigid scientific 
 management. It is merely the result of hu- 
 man management in which both the employer 
 and the employee take the view that their sep- 
 arate prosperities depend upon turning out a 
 good product at a low cost. 
 
 It is really almost impossible to survey even 
 the commonest operation without discovering 
 that it is not only costing too much, but that 
 no one is benefiting from the increased cost. 
 The workers are not being paid as much as 
 they should earn, the owner is paying too much, 
 and the public is being mulcted in the final cost. 
 
 Three gangs of hand-truckers were working 
 at a large Eastern factory. They were sup- 
 posed to be working at the very limit, and fre- 
 
70 When the Workmen Help You Manage 
 
 quently put in overtime. Their wages were 
 low because the work required no particular 
 skill; it was generally supposed that a contem- 
 plated increase of business would require still 
 another gang to be taken on. I offered a much 
 higher rate, based on a study of the actual 
 performance, provided that two gangs did all 
 the work. The men turned to with a will, and 
 two gangs are now not only attending to what 
 the three gangs formerly did, but also have so 
 increased their capacity as to absorb the in- 
 creased volume. 
 
 They discovered for themselves that only one 
 man is necessary to a truck where formerly they 
 insisted that the hauling was really too much for 
 two men! The workers are getting thirty-six 
 per cent, more money than they did before, but 
 the company is paying twenty-one and seven 
 tenths per cent, less for the total service. 
 
 For the handling of metal under heat a com- 
 pany had always used squads of six men, each 
 of whom performed a certain operation at fixed 
 intervals. By a study of the job it seemed that 
 four trained men were enough. By changing 
 the old method of work (which simply involved 
 having two men take three steps each), four men 
 to a squad proved to be quite sufficient. The 
 company saved forty-eight men a day, or thirty- 
 
Have We Reached the Limit of Wages? 71 
 
 five thousand dollars a year, under the new 
 formation — and this simply by using some of 
 the capacity latent in the force. 
 
 In another factory, because the tools were in- 
 conveniently arranged, the employer was pay- 
 ing sixty per cent, of his total pay-roll for time 
 spent in moving about to get things. He 
 thought that he was hiring men for work; he 
 was in fact paying for pedestrian endurance. 
 And everybody lost on the deal. 
 
 I have cited these cases, and I might cite many 
 more, merely to show that the important thing 
 is not the wage paid but the return on wages, 
 and that the return on wages is not an absolute 
 figure but depends upon how the individuals 
 grasp the job on hand. Neither employer nor 
 employee can get the maximum service unless 
 the minds of both are centered upon the single 
 object of service instead of upon the nearest dol- 
 lar. 
 
 Nearly everything depends upon the approach 
 ^nd the amount that the individual has to say 
 about his own placing. If any management at- 
 tempts to effect savings in which it alone will 
 benefit, it wiU and ought to fail. The reason 
 that many plans involving personnel reductions 
 fail is that the employer tries to reap the whole 
 benefit. 
 
72 When the Workmen Help You Manage 
 
 The master coimnoiily approaches labor-sav- 
 ing with the thought that thereby he can get 
 the better of the workmen — in fact, this is the 
 strongest argument an industrial engineer can 
 offer. The worker sees in doing the work with 
 fewer men the figure of the grasping employer- 
 capitalist trying to squeeze out more money. 
 Both the worker and the owner imagine that 
 there is only so much business in the whole 
 world. The worker wants to spread the busi- 
 ness thin, so that he can always have a job; the 
 owner wants to get all of that business for him- 
 self by brute force. Neither recognizes that 
 bettering service creates buyers, or, to put it 
 another way, that every wage increase which is 
 not added to the cost of production brings into 
 play a new purchasing power that flows through 
 every channel of business. When a maker of 
 locomotives finds a way to make them cheaper 
 by paying higher wages, he at once sets in mo- 
 tion an added demand for goods which eventu- 
 ally makes the railroads buy more locomotives. 
 
 The interests of the employer and the worker 
 are really mutual, and it is the part of the em- 
 ployer to make that fact known in more than 
 words. It is quite useless for him to talk about 
 mutual interest and then take no steps to study 
 how that interest can be cultivated. It is not 
 
Save We Reached the Limit of Wages? ^^ 
 
 showing an interest in employees toploftily to 
 raise wages and then add them to the price of 
 the product ; that is only a prelude to eventually 
 reduced business. 
 
 The only way in which mutuality can be es- 
 tablished is to take the workers into actual con- 
 fidence and conference through their own elected 
 agents. Give to them a part in the management 
 of the affairs in which they are most intimately 
 concerned — hours, wages, and conditions of 
 work. We all know that driving will not attain 
 the same results as leading. You can force a 
 man to work hard because he needs the money, 
 but you can not thus give him a bellow interest 
 with you. You may make a dog pull a cart by 
 dangling a bit of meat always before his nose — 
 but that dog will not perforce love either you or 
 the cart. If he is a regular dog, he will shake 
 himself and "light out" the moment after he 
 swallows the meat. 
 
 But how are you going to persuade a man to 
 work with you if his union says that a certain 
 number of men are necessary for a job, and 
 that it must be done in only one way, and that 
 no man shall be permitted to turn out more than 
 a fixed amount within a stated period? The 
 unions are wrong in stifling better methods of 
 work; they are wrong in putting the so-called 
 
74 When the Workmen Help You Manaje 
 
 anti-efficiency laws through in many states. 
 
 Thomas A. Edison was quite right when he 
 said, "The worst enemy of the worker is an in- 
 efficiently run shop." But the unions have a 
 measure of right in their fears : they know that 
 the employer is not always after better methods 
 for the benefit of either the worker or the public. 
 He wants increased returns; and, because he 
 wiU not express the increased efficiency in lower 
 prices to the public and higher wages to the 
 men, the unions know that thereby no additional 
 markets are created and that the economies 
 really do mean less work for the wage-earner. 
 They are no more and no less short-sighted than 
 the employer. 
 
 A mutuality of effort is attainable. Once 
 attained, the reason for the opposition of the 
 worker is removed, and then wages may be 
 based upon the service rendered and the value 
 of that service can be measured according to the 
 respective contributions of the employer and the 
 employee, and a balance struck satisfactory to 
 each. This involves not so much a reorganiza- 
 tion of business as a change of mind regarding 
 the objects of business. When the worker can 
 help fix his own limit on wages, he will have a 
 measure of joint proprietorship. The cure for 
 irresponsibility is more, not less, responsibility. 
 
Have We Reached the Limit of Wages? 75 
 
 When a man Works for himself, the only limit 
 to his remuneration is his ability. That same 
 principle can be applied in large business. 
 
 And if any one thinks that it is not worth 
 while to talk seriously about wages and that 
 things will shortly be going along in the same 
 old way, with more workers than work, let him 
 reflect upon these three facts : 
 
 (1) When all the present workers are redis- 
 tributed, we shall have barely enough to man 
 industry. 
 
 (2) We shall not receive great yearly drafts 
 of foreigners, who before the war made the 
 supply adequate. 
 
 (3) As industry increases — and it must — we 
 shall need more men, and we have nowhere from 
 which to draw them. 
 
CHAPTER IV 
 
 HAJBNESSING THE CKEATIVB INSTINCT 
 
 Almost invariably I have found that when in 
 plant management the emphasis is put upon 
 quality production, the quantity also rises, but 
 that when the request is only for quantity, the 
 quality decreases. There are, of course, excep- 
 tions, as to any rule ; but it is a curious fact that 
 the average workman, being pressed solely for 
 quality, will commonly attain a larger produc- 
 tion than when he is pressed solely for quantity. 
 I say this is a curious fact. It is so only on first 
 impression. 
 
 One would imagine that a man, being 
 spurred on to attain a certain output and de- 
 voting himself entirely to output, would natur- 
 ally do more work .than if he were asked, not to 
 attain any certain output, but to give himself up 
 wholly to the making of perfect articles. This 
 first impression, however, neglects to take into 
 consideration that human trait which is of su- 
 preme importance not only in industry but also 
 
 76 
 
Harnessing the Creative Instinct 77 
 
 throughout the entirety of life — the creative in- 
 stinct. 
 
 "Creative instinct" has a formidably erudite 
 sound. It brings to mind an impractical discus- 
 sion of psychological traits, and seems to lead 
 away from the brass tacks that make up the 
 business of profit. But it is by recognizing hu- 
 man reactions that we can develop industrial 
 relations. The modem factory-owner considers 
 himself ill equipped if he has not a laboratory 
 in which experts study the properties of mate- 
 rials. An automobile manufacturer would not 
 think of using steel without a most exhaustive 
 study of what that steel would do under any and 
 all circumstances. Why, then, should the study 
 of human reactions be considered out of place in 
 industry? 
 
 Is it not merely for the same reason that 
 caused the staid and conservative manufacturer 
 of a couple of decades ago to dub all laboratory 
 experimentation as sheer tomfoolery? The 
 staid and conservative manufacturer installed 
 laboratories and testing processes when he 
 found that the less staid and conservative manu- 
 facturer who had all these things was getting 
 the business. The factory-owner who to-day 
 refuses to take into account that there is in his 
 business a human element worthy of the closest 
 
78 When the Workmen Help You Manage 
 
 study will shortly find himself in exactly the 
 condition of the man who declared that in- 
 vestigation of the properties of materials was 
 rot. 
 
 We have gone far in the study of materials. 
 We have progressed enough to have an inkling 
 of how small our actual knowledge is, as com- 
 pared with the knowledge that we may some day 
 have. But where the man is concerned our 
 absolute knowledge is practically nil, and conse- 
 quently industry is to-day lop-sided. Mechani- 
 cal engineering, for instance, gives but little 
 attention to the fact that machines and mate- 
 rials are used by men. Industrial engineering 
 does recognize that men are a not unnecessary 
 portion of factory equipment ; but its narrower 
 aim has been to make the men just as much like 
 machines as possible. 
 
 We would not think of making a casting with- 
 out a profound knowledge of how the metal was 
 going to act in the mold and afterward; but 
 every day we make industrial molds with only 
 the most casual attention to what is going to 
 happen to the human being when we attempt 
 to pour the man into them. The trouble is that 
 the human being usually will pour. If there is 
 a sufficient supply of what we are pleased to 
 call labor, there are precious few arrangements 
 
Harnessing the Creative Instinct 79 
 
 that are too obnoxious for the man who, at the 
 moment, desperately needs a job. But there is 
 an antipodal distinction between filling a factory 
 with men and getting a working force. 
 
 Sometimes, while watching the river of em- 
 ployees bubbling through the large modem in- 
 dustrial institution, one might imagine that in- 
 dustrial requirements were satisfied by keeping 
 a steady flow of men through every job in every 
 department. During the period of war work 
 one might well have likened the procession of 
 workers to some vast pilgrimage, pausing for a 
 moment or two at shrines represented by fac- 
 tories. As far as the shipyards and powder 
 plants were concerned, the workers simply came 
 right in, turned around, and walked right out 
 again. 
 
 It is easy to put all this shifting and changing 
 down to human perversity — to term it a mad 
 scramble for the dollar, and say that it is per- 
 fectly natural that the scramble should be thick- 
 est where there are most dollars. That is the 
 superficial, unthinking view. Job-changing is 
 unnatural ; the normal man likes to be interested 
 in something. 
 
 The workman who will loaf with consummate 
 skill during the day may, at night, work very 
 hard upon a doll's house for his little girl, lav- 
 
80 When the Workmen Help iFou Manage 
 
 ishing upon it all the tender care of craftsman- 
 ship. He has no interest in his daily task, but 
 he has a deep interest in the home job that he 
 has set for himself. Is this the fault of the 
 man or of the job? Why should he be inter- 
 ested in one and not in the other? Both are 
 work, and the second will not bring a financial 
 reward. 
 
 The difference is that in the factory job he 
 probably does not know what he is doing; he is 
 simply going through a monotonous routine and 
 doing certain work because he is told to do it, 
 and without an idea of just what part he plays 
 in the final product, what his relative impor- 
 tance is, or what is the value of that with which 
 he is working. He has no measure of personal 
 responsibility in the factory as high as that of 
 the machine he operates. There is nothing to 
 draw out of him the natural and fundamental 
 instinct of creation. 
 
 But when he is building the doll's house the 
 situation is different. He is making something 
 of his own. It will reflect credit or discredit 
 upon him, according to the skill that he puts 
 into it. He knows the cost of everything that 
 enters, because the money for the material 
 comes out of his own pocket. He will spend 
 whatever is necessary to achieve the result that 
 
Harnessing the Creative Instinct 81 
 
 he desires — but not a penny more. He is ful- 
 filling the ideal of creative work. 
 
 In our ignorance of the importance of the 
 human element in industry, we have thought 
 that we might substitute something for this cre- 
 ative instinct — something made of metal and 
 propelled by power. We have evolved ma- 
 chines that are infinitely more accurate than the 
 human hand, and some of them are so nearly 
 automatic as seemingly to be attended with a 
 minimum of human skill. 
 
 We have come to think of them as machines 
 rather than as enlarged tools, and to forget 
 that, no matter how perfect a machine may be, 
 it will not turn out a perfect product unless fed 
 with the right material, kept in order, and oper- 
 ated at the correct speed. The most highly 
 automatic machine is no better than a dull chisel 
 in the hands of a carpenter, unless the operator 
 feels that he is the master of that machine — that 
 it is his tool, and that it will do as his skill di- 
 rects. If he has the sense of mastery, he can 
 not take the attitude that it is no business of 
 his how the machine is working, and this finds 
 its immediate reflection in the reduction of idle 
 machine hours, repair costs, and spoiled mer- 
 chandise. 
 
 In one mill I recall that the spiiming- Jennys 
 
82 When the Workmen Help You Manage 
 
 were idle as much as fifteen per cent, of the 
 time, simply because the whole responsibility 
 for the operation of the department had been 
 put upon the shoulders of the foreman, and he 
 had so many other things to do that he had 
 neglected to keep the automatic stops in repair. 
 Putting and keeping the machine in repair, on 
 the responsibility of the operator, decreased the 
 idle time to seven per cent, and increased pro- 
 duction eight per cent. — without taking into ac- 
 count the saving on goods through the elimina- 
 tion of rejects. 
 
 In a factory making automobile parts the idle 
 machine hours amounted to thirty-six per cent, 
 on certain machines, which were the "neck of the 
 bottle" in the production scheme. 
 
 Before I investigated conditions here, the 
 owners had planned to increase the number. 
 An analysis of the idle time showed that four- 
 teen per cent, of it was due to changing dies, ten 
 per cent, to material shortages, seven per cent, 
 to breakdowns, three per cent, to labor shortage, 
 and two per cent, to miscellaneous items. 
 
 Those machines had not been used as tools. 
 The men had simply let the machines operate as 
 such until a particular job was finished, and then 
 they shut them down and changed dies for the 
 new job. It is but a slight exaggeration of the 
 
Harnessing the Creative Instinct 83 
 
 real situation to say that the foremen and work- 
 ers attended the machines. 
 
 The change was very simple. It involved 
 merely a change in view-point — considering the 
 machine in relation to the work, which meant 
 providing dies and material beforehand and 
 seeing that they were ready when needed. This 
 is the prevision of the master of the machine, 
 as opposed to the machine as the master. 
 
 In this particular instance the suggestion of 
 mastery came from above, by the way of an in- 
 dustrial engineer; but the reason that a per- 
 fectly obvious change had not been made from 
 below was that none of the people in the depart- 
 ment had any idea of their own relation to the 
 entire process of production — they merely went 
 through the motions that the machines asked of 
 them. 
 
 No matter how close is the supervision of 
 machines from above, the best results can not 
 be had unless the men below also supervise. 
 Complete and efl&cacious supervision springs 
 from below. A man expending true creative 
 forces supervises himself; therefore, is not the 
 best of all supervision that which stimulates 
 these creative forces? 
 
 The instinct to create is only one out of many 
 that go to make up a human being, and if we 
 
84 When the Workmen Help You Manage 
 
 are to have the real cooperation — ^not merely the 
 services — of a whole human being, the condi- 
 tions of work plainly must be such as to satisfy, 
 in so far as possible, these instincts. 
 
 Translating this into material phraseology, 
 the best realization of the human being is io be 
 had only when his composition is taken into ac- 
 count, just as the laboratory teaches us that the 
 finest properties of special steels are to be ad- 
 vantaged only when care is taken to avoid cer- 
 tain practices in fabrication. It was thought 
 that anthracite coal would not bum until an 
 accident demonstrated that the trouble was not 
 with the hard coal but with treating it as soft 
 coal. 
 
 When you analyze the success of certain em- 
 ployers in dealing with their people, you will be 
 struck with the fact that they unwittingly, 
 through innate knowledge of human nature, 
 satisfy the instincts of workers. Other employ- 
 ers, without this personal quality, can not gain 
 labor harmony. 
 
 What are the instincts, and how are they to be 
 satisfied? If industry satisfies or provides the 
 means for the satisfaction of the instincts, it is 
 bound to be successful. Otherwise it can not 
 be. 
 
 The first instinct is to preserve family and 
 
Harnessing the Creative Instinct 85 
 
 self, and this is expressed in tlie demand for at 
 least a living wage. Wages are by no means 
 the solution of industrial troubles, but without 
 living wages there can be nothing else than 
 trouble. "Wages come first, but not in the sense 
 that anything can be bought at a price. Loyal 
 service can not be bought. The wage that I 
 have in mind is a base wage and is calculated on 
 the cost of living. 
 
 The parental instinct is a very powerful one. 
 The men and women who will not first of all 
 care for their children form such a small per- 
 centage of mankind that they need not be con- 
 sidered in any general discussion. When the 
 high cost of living rises the family is threatened 
 with destruction, and naturally the proper sort 
 of parent, who is also the proper sort of work- 
 man, must have his wages increased to meet the 
 decrease in the purchasing power of the dollar. 
 
 After passing the point of sustenance, the 
 worker, just as does every one else, wants some- 
 thing of the good things of life. Below that 
 point, however, nothing can be expected in the 
 way of work and cooperation; for when the 
 struggle for mere existence is uppermost there 
 can be no time to think of work other than as so 
 many dollars. 
 
 The argument for a living wage is unanswer- 
 
86 When the Workmen Help You Manage 
 
 able, and it is quite useless to discuss industrial 
 relations unless the minimum wage that a man 
 or woman can earn is enough to support life in 
 a degree of comfort ; if that wage is not paid the 
 discussion of relations properly belongs to the 
 psychology of slavery. 
 
 The living wage is measured, not by the 
 amount paid in any one week, but by the amount 
 paid throughout the year; for the worker, it 
 may be remarked, can not" go into winter quar- 
 ters, like a bear, and live on nothing for a few 
 months. Therefore the payment of a living 
 wage — the satisfaction of the instinct for mere 
 self-preservation — at once involves the year's 
 planning by the employer. 
 
 It is the custom in many factories to regard 
 production as purely seasonal and to expect to 
 shut down through at least a small part of the 
 year. Why, then, should the owners of these 
 factories be surprised when their workers ask 
 for large wages during the busy periods ? They 
 would be quite without economic sense if they 
 did not ; for, even if the employer considers it no 
 business of his how the men get through the 
 slack period, it is most emphatically the busi- 
 ness of the men themselves. 
 
 Most of the demands made by workmen for 
 excessive wages during the war period was due 
 
Harnessing the Creative Instinct 87 
 
 to the idea, everywhere current, that the work 
 was of short duration and that after the war 
 there would be no work for anybody. Owners 
 calculated their own prices on that basis, but 
 they were amazed when the employees did like- 
 wise. 
 
 The matter of twelve months' outlet for pro- 
 duction is an essential in well-regulated indus- 
 try, and forms a part of the living wage prelimi- 
 nary. In a later chapter I discuss the ways and 
 means of obtaining such production and give 
 concrete examples ; but here it is enough to say 
 that I have yet to see the business that can not 
 either be continued through the whole year, or 
 be organized to take on another seasonal prod- 
 uct, so that the full force can be used through 
 the whole year. 
 
 After having fixed the living wage as a mini- 
 mum, we come into the field of remuneration 
 where the creative instinct can be spurred on to 
 make more and more money for the three par- 
 ties to industry— the employer, the employee, 
 and the public. It is here that the fitness of 
 the man can be recognized. Contrary to gen- 
 eral belief, this is not opposed to the tenets of 
 the unions, which some think are committed to 
 equal pay regardless of ability. 
 
 Before a recent meeting of the Labor Adjust- 
 
88 When the Workmen Help You Manage 
 
 men Board a union representative was asked: 
 
 "Do you feel that pay or wages should be 
 dependent in anyway upon the fitness of the 
 man who gets the wages?" 
 
 Answered the union oflScer: "Above the 
 minimum I do. I believe the union should 
 establish a minimum wage, according to the 
 circumstances of living; but it is entirely op- 
 tional with the employer to grade his men ac- 
 cording to their value above that scale." 
 
 We can, then, take it as settled fact that one 
 need not waste time searching for better work, 
 or for cooperation, or for any of the things that 
 go to make relations in industry better, unless 
 the base wage — the wage that any one who is 
 willing to work can earn — at least covers the 
 cost of living through the full year. 
 
 And, naturally, this involves hiring and firing. 
 Indiscriminate firing for petty causes by angry 
 foremen will undo the best of policies promul- 
 gated by the management, for the effect is pre- 
 cisely the same as laying ofif men because of 
 seasonal production. I have found that many 
 demands for what seemed to be exorbitant 
 wages rested solely upon the fact that the fore- 
 men thought it was good discipline to put the 
 ' ' fear of God " into them by frequent and abusive 
 firing. In one large plant where the production 
 
Harnessing the Creative Instinct 89 
 
 of a department had fallen, an investigation 
 showed that the tactics of the foreman were 
 wholly responsible : he had considered it part of 
 his duty to fire a man or two each day, whether 
 or not an offense had been committed. 
 
 It will have been apparent by this time that 
 the foundation upon which the instincts of good 
 workmanship rest is made up largely of things 
 that the workers themselves are in the best posi- 
 tion to supply. The single point that is exclu- 
 sively for the management is the provision of 
 work the year round. In the other affairs the 
 workers are in a position to satisfy themselves 
 as none others can. 
 
 It is for these reasons that a measure of self- 
 government in a factory produces results that 
 seem out of all proportion in the comparatively 
 few changes which such government really 
 brings. One man who has experimented with 
 forms of self-government in factories through 
 many years goes so far as to state these four 
 propositions : 
 
 "(1) That wages alone are not enough to 
 hold men and to induce them to do their best 
 work. 
 
 "(2) That, in addition to wages sufficiently 
 large to permit workers to live comfortably, 
 
90 When the Workmen Help You Manage 
 
 they must have some interest in the work apart 
 from the money return — a pride of product, 
 something akin to the old pride of craftsman- 
 ship. They must have ideals. 
 
 "(3) That these ideals and consequent inter- 
 est may be created by giving to the workers a 
 share in the government of the factory, in so 
 far as it touches themselves, and ample political 
 machinery managed by them to insure a univer- 
 sal 'square deal' — that is, they must create for 
 themselves under supervision a kind of indus- 
 trial democracy. 
 
 " (4) That work interest can not be had un- 
 der mere quantity production, because that is of 
 itself destructive of ideals. Quality must come 
 first. Then quantity will care for itself. ' ' 
 
 Sidney Webb, the English authority upon 
 many industrial matters, has this to say along 
 the same lines (he is speaking of English in- 
 dustry) : 
 
 "You must not dream of taking a single step 
 in the direction of scientific management until 
 it has been very elaborately explained to, and 
 discussed by, not only the particular men with 
 whom you are going to experiment, but also by 
 the whole workshop. It will, if you handle it 
 
Harnessing the Creative Instinct 91 
 
 with any competence, be a matter of intense in- 
 terest to them. 
 
 "You must talk to them both publicly and 
 privately, with magic-lantern slides and experi- 
 mental demonstrations, answering endless ques- 
 tions and patiently meeting what seem to you 
 frivolous objections. The workshop committee 
 or the shop stewards will naturally be the first 
 people to be consulted. 
 
 "Eemember, it is the men's working lives 
 (not your own life) that you are proposing to 
 alter, and their craft (not yours) that you may 
 seem to be going to destroy. You will be mak- 
 ing a ruinous blunder, fatal to the maximum 
 efficiency of the works, if you content yourself 
 with bribing, by high rates, bonuses, or rewards, 
 just the few individual men whom you propose 
 to put on the new system, whilst leaving the 
 opinion of the rest of the staff sullenly adverse. 
 The others will not be appeased merely by the 
 fact that a few selected men are making 'good 
 money'! 
 
 "And you must, of course, make it clear in 
 some way, to your own men as well as to the 
 trade-union concerned, that what you are pro- 
 posing to introduce will not merely pay the first 
 lot of selected workmen, and not merely the 
 
92 When the Workmen Help You Manage 
 
 present generation, but also will have a good 
 influence on the prospects of the whole staflf, 
 and will not have any adverse effect on the 
 standard rate, now or hereafter. Unless you 
 can demonstrate this — ^unless you in some way 
 automatically protect the piece-work rates from 
 being 'cut' at some future time — possibly by 
 some future manager — ^you will be met (and in 
 the national interest you ought to be met) with 
 unrelenting opposition ; and, if you impose the 
 change by force or by individual bribery, you 
 will inevitably encounter the reprisals of 'ca'- 
 canny.' "^ 
 
 Shop representation goes into many phases 
 of industry other than wages, and, in fact, after 
 the first few meetings wages form an unimpor- 
 tant part of the business of the meetings be- 
 cause of the feeling that the wages as paid are 
 just or the representatives would recommend 
 changes. Frequently, when an employer pays 
 a bonus or raises wages, he only serves to prove 
 to the men what they had already thought: 
 "The old man could have paid higher wages 
 long ago, and he's been skinnin' us all this 
 time. ' ' 
 
 1 Ca'cammy: A word, probably of Scotch derivation, used to 
 denote what is sometimes called "the strike on the job," or 
 the "silent strike." 
 
Harnessing the Creative Instinct 93 
 
 But it is different when the workers get the 
 facts for themselves. Therefore, taking my 
 own experience and the experience of many 
 others as a guide, I can say that the question of 
 base Kving wages can seldom be settled by the 
 employer alone; for, no matter what wage he 
 pays, it will seem small to men who regard him, 
 rightly or wrongly, as profiteering out of their 
 services. One may rail about the injustice of 
 such views, but is it not far more sensible to 
 accept the facts and apply a remedy based on 
 what is, instead of on what you think ought to 
 be? 
 
 In representation are satisfied the instincts of 
 self-preservation, of possession, and of asser- 
 tiveness ; and all of these find expression in more 
 intelligent work, and in that attitude of working 
 with, which is so powerful, when attained, that 
 the organization which has it can do almost any- 
 thing. All of these things combine to make the 
 employee feel that the work is his work and 
 that out of it he will get the benefit he deserves 
 in the degree that he deserves. 
 
 But the employer instantly rejoins: "Is not 
 my business mine, to do with as I like? If I 
 give representation, do I not iu effect say that 
 people who have nothing at stake can run it for 
 me?" 
 
94 When the Workmen Help You Manage 
 
 In the bigger view no business is a personal 
 asset to do with as one likes. But that is be- 
 side the question, for what we are now consider- 
 ing is making business a success. It is the 
 right of every man to ruin his fortunes if he 
 likes. But it is not my thought to help in that 
 process. 
 
CHAPTER V 
 
 MAKING THE "WOEKMAN PKOUD OP HIS JOB 
 
 The creative instinct — whioh makes work a 
 pleasure — ^is by no means dead in American in- 
 dustry. But, except in a few plants, it exists 
 rather by accident than by design, because the 
 idea that there is such a thing as the instinct to 
 create is laughed away as impractical by many 
 plant managers. Most of us are very backward 
 in the study of the human equation, and there- 
 fore don't realize that by stimulating the crea- 
 tive instinct we can solve, to a great degree, the 
 so-called labor problem. 
 
 Take the accidental development. A large 
 saw-works in this country prides itself upon 
 the quality of its saws. The business ideals 
 have come down from father to son through 
 about a century; they would rather shut up shop 
 than make an imperfect saw. The founder was 
 an expert saw-maker, and his ideals have lived 
 through the generations. All of his direct de- 
 scendants are saw-makers. With one excep- 
 tion, the company has never had an officer out of 
 
 95 
 
96 When the Workmen Help You Manage 
 
 the family, and every one of the oflScers has 
 served an apprenticeship of from five to ten 
 years in the shops — and this in spite of the fact 
 that to-day the family fortunes run into the mil- 
 lions. 
 
 That company has practically no casual work- 
 ers and no labor turnover. Just as son suc- 
 ceeds father in management, so son succeeds 
 father in the shops. You can find three genera- 
 tions of the same family in that shop. They are 
 proud to work there. 
 
 But this company has none of the modem 
 ideas of labor management. They have no 
 labor experts, no welfare work, and they do not 
 pay as high wages as many other shops. Why, 
 then, are these jobs so sought after? Why is 
 there no department for hiring and firing? 
 Why should the fact of a man leaving (and they 
 employ about thirty-five hundred men) be so 
 notable as to demand the personal attention of 
 the president? 
 
 Simply because there has been developed a 
 pride in work which holds the interest: those 
 men want to make good saws, and they consider 
 the making of good saws as the biggest thing 
 they can do. If a saw is turned back on final 
 inspection, they want to know why — for that is 
 a reflection upon their ability as saw-makers. 
 
Making the Workman Proud of His Job 97, 
 
 They are treated fairly and paid fairly; they 
 know that is so, because most of them know the 
 officers and call them by the first name, because 
 they have worked in the,eame shop and possibly 
 at the same bench. There has never been a 
 strike. When the war drove up prices, the 
 company increased wages according to the in- 
 crease in the cost of living, and did so without 
 being asked. It pays through fifty-two weeks 
 in the year. 
 
 When a man gets into trouble, some member 
 of the company wiU probably hunt him up and 
 offer him what money he needs — on a purely 
 personal basis, just as any other friend who 
 happened to be in funds would do. There 
 is no investigation, no note-signiag. When 
 a man gets too old to work, he retires on a 
 pension or takes a supernumerary job about 
 the place. There is no pension system and no 
 formality; everything is done m a matter-of- 
 fact way without the company taking pains to 
 show that it is a good employer or the employee 
 feeling that he is getting anything more than 
 he deserves. 
 
 Of course, this ideal situation is not to be 
 achieved by the ordinary company, which has 
 not the years of traditions and the continuity of 
 management behind it ; but if we reduce the case 
 
98 When the Workmen Help You Manage 
 
 to its elements, these personal factors are not 
 quite so important as at first they seem to be. 
 Others may consciously put into practice just as 
 successfully the principles that in the saw-works 
 more or less xmconsciously came into being. 
 Look at these principles in the light of what we 
 know of the psychology of the workers : 
 
 (1) The workers are relieved of economic 
 fear by being paid the year round; they are 
 advanced on merit and retired on pension at the 
 end of their working days. 
 
 (2) The wages they receive are neither high 
 nor low, but are on a fair basis of performance ; 
 likewise, the working conditions are above the 
 average, but not in any way what might be 
 called "fancy." The men are satisfied with 
 both wages and working conditions because they 
 have the individual right to go straight to the 
 officers if the wages do not satisfy them and to 
 talk over amounts on a man-to-man basis. 
 They are content with working conditions be- 
 cause they have seen the owners and the sons 
 of the owners working for years under exactly 
 the same conditions. 
 
 (3) The wages and the conditions of work 
 being disposed of, they are free to exert creative 
 effort. They must exhibit craftsmanship, and 
 
Making the Workman Proud of His Job 99 
 
 they do exhibit it: First, because they share 
 the company standard that bad work is a dis- 
 grace. Second, because they have all been 
 trained through every department of the works, 
 and, although the task they finally remain at is 
 a repetitive one, they know the exact relation of 
 what they do to the quality of the finished saw. 
 Third, because of their familiarity with the 
 whole institution and the interchange between 
 them and the owners, they know the cost of the 
 material with which they work and hence do not 
 waste it. 
 
 Such are the elements of good work generally, 
 and they are not peculiar to individuals or im- 
 possible, of attainment in any factory or office, 
 if only they are borne in mind and the organiza- 
 tion directed toward their achievement. Con- 
 versely, the elements of bad work are : 
 
 (1) A sense of economic insecurity — low or 
 high, unsteady wages, and frequent firing. 
 
 (2) Arbitrary setting of wages and imposing 
 of penalties. It makes little difference in re- 
 sult whether the arbitrary actions are just or 
 unjust. 
 
 (3) Lack of a standard of product. 
 
 (4) Lack of knowledge of the place, and the 
 
100 When the Workmen Help You Manage 
 
 effect of the particular operation in the whole 
 scheme of fabrication. 
 
 (5) Lack of knowledge of the cost of the ma- 
 terial that is being used. 
 
 In the factory with intricate subdivision of 
 labor and standardization of operations (and it 
 is, as a rule, in such factories that labor turn- 
 over is the highest) one seldom finds the least 
 recognition of the above principles, and there- 
 fore it is not surprising that the workers come 
 to think of their jobs as a kind of servitude, to 
 be borne only until freedom is offered. 
 
 An officer of one of the international unions 
 has this to say of his own experience : 
 
 "Is it not true that the industrial evolution 
 which has brought the trusts into existence has 
 been the means of eliminating the 'human touch' 
 in industry? During the days of small indus- 
 trial plants, the employer and the employee, of 
 course, were really fellow workmen. At the 
 present time, however, the employee has per- 
 haps never seen any of the stockholders of the 
 industrial plant where he is employed. . . . 
 
 "When I worked in the factories, which I did 
 from the age of twelve to twenty-five, one of the 
 things I found the most dissatisfaction with was 
 the deadening sameness of the work. I never 
 
Making the Workman Provd of His Job 101 
 
 remember a time, when working in the factories, 
 that I became so interested in my work that I 
 did not long for quitting time to come. After 
 leaving factory work I got a job with a building 
 contractor. As I became more proficient as a 
 carpenter, I have time and again been put doing 
 certain work that was more or less creative, in 
 which I became so interested that I paid no 
 attention to quitting time and have worked for 
 two or three hours after the time when I might 
 have quit work. There is joy in creative work. ' ' 
 
 That letter was written to Mr. E. B. Wolf, 
 who has made a very extensive study of the cre- 
 ative faculty of men. In a paper read before 
 the meeting of the A. S. M. E. in December, 
 1918, he gave these conclusions : 
 
 "Production means creation, and the indus- 
 trial creative function in man is a mental proc- 
 ess and lies in his intelligent adaptation of 
 means to ends. It is useless, therefore, to look 
 for real creative work unless the workman has 
 a chance to think and to plan ; any other work- 
 ing environment either fails to attract or ac- 
 tually repels the workman, and, as a conse- 
 quence, offers no incentive to increased effort. 
 Work which does not call for thoughtful reflec- 
 tion and which uses only muscular effort tends 
 to draw man down to the level of the brute and 
 
102 When the Workmen Help You Manage 
 
 makes for industrial irresponsibility and conse- 
 quent social disorganzation. The unthinking 
 man can not be a responsible man." 
 
 The distinguished investigator, Helen Marot, 
 in her book upon creative work says : ' ' All pro- 
 ductive force is artificially sustained which is 
 not dependent on men's desire to do creative 
 work." 
 
 Look into your own case. Most of us have at 
 one time or another had work to do that did not 
 require creative effort. Perhaps you will think 
 of motions repeated over and over in a gymna- 
 sium, or perhaps you will think back to the day 
 when you had a cord or two of wood to saw. A 
 task to be done that calls forth no ingenuity, 
 simply muscular effort, is never interesting. It 
 is done if it must be, but quitting time is always 
 welcome. 
 
 In other words, men are listless and indiffer- 
 ent — leaving when and as they like — only be- 
 cause the work holds no interest for them ; it is 
 not theirs and they have no part in it. How, 
 then, can they be given an interest? 
 
 First, they can not be given an interest 
 through any set of tricks or superficial improve- 
 ments. A bird in a gilded cage is just as un- 
 happy as a bird in a rusty cage. That is why 
 welfare work so often fails. 
 
Making the Workman Provd of His Job 103 
 
 That which is fundamental is absolute 
 straightforwardness in every relation between 
 the owner's representatives and the employees. 
 The slightest suspicion that they are being 
 "handed something soft" destroys the atmos- 
 phere of mutual purpose without which work 
 can not be interesting. The pay must be ade- 
 quate; that I have already touched upon and 
 will take up more fully farther on. And, finally, 
 it is necessary that the company itself should 
 have a pride of product, with standards that 
 are Insisted upon. Without work-pride at the 
 top, there can be none at the bottom. 
 
 With such an approach, it is easy to interest 
 the employees by giving them a measure of 
 autonomy in such matters as affect them — 
 wages, hours, inspections, conditions of work, 
 and all penalties. This may be done in several 
 ways, and is best accomplished a step at a time. 
 The best plan is to be arrived at only by close 
 study, and it would be most unwise to adopt any- 
 thing ia the nature of a system or to stand or 
 fall upon the results of a completely arranged 
 plan. Human relations are fluid, and they are 
 not to be regulated by hard-and-fast plans. 
 
 In some instances an association of the em- 
 ployees, with an elected president and officers, 
 has been most successful in settling all disputes 
 
104 When the Workmen Help You Manage 
 
 and promoting order and company spirit. A 
 somewhat simpler method is the shop conamit- 
 tee, elected by the workers to act as representa- 
 tives to the company and to hear and decide all 
 disputes. Another plan which has had great 
 success is to organize the workers on the lines 
 of the United States Government : the executive 
 oflScers become the Cabinet, the foreman and de- 
 partment heads are the Senate, and the House 
 of Representatives is elected by the workers 
 according to departments. 
 
 In all of these plans the meetings are held dur- 
 ing work hours and on company time. Any plans 
 that provide for meetings outside of company 
 time usually fail, for workers are not yet trained 
 to the point where they will give up leisure to 
 the consideration of company business. Prob- 
 ably at some later stage of development this will 
 come about, for the men will not then distin- 
 guish between their own and the company's 
 time ; but, since we are dealing with facts and 
 not with untried ideas, we must face them. 
 
 The time spent, however, is far from lost. 
 Judging by results, most employers could afford 
 to pay triple rates for the good accomplished 
 by the men at these meetings. In them they 
 discover what the company is aiming at, what 
 are the trials and what the rewards. In short, 
 
Making the Workman Proud of His Job lOS 
 
 they become in a way co-managers, and with 
 responsibility naturally comes knowledge ; they 
 partake of the ideals, and spread those ideals to 
 their fellows. If the employer does not happen 
 to have ideals — ^why, that is another matter. 
 
 Having a constructive end in view, the work 
 takes on a different character — ^it becomes some- 
 thing to be done well and not something to spin 
 out for the money that is in it. The men are 
 anxious to know the best way to do their work; 
 every artisan is anxious to improve himself — 
 the number who attend night schools or take 
 correspondence courses proves that. When 
 improvements in ways and means are suggested 
 for the discussion of their representatives, then 
 that which is called "scientific management" 
 takes on a new aspect. Usually it is not scien- 
 tific; it becomes truly scientific when it works 
 with and by the individual. 
 
 In one shop in the Middle West where there 
 is a large measure of self-government, the em- 
 ployees voted to retain an expert, and later they 
 posted a sign announcing that they were all 
 "eflBcieney engineers" themselves! Acting on 
 that principle, they have each studied their job 
 in the light of the best practice ; and as a result 
 that factory, with an actual decrease in the num- 
 ber of men working and without additions to 
 
106 When the Workmen Help You Manage 
 
 equipment, has more than doubled its output. 
 
 Boys and men will spend hours in the study 
 and practice of new formations and tricks in 
 baseball and football because they have the will 
 to win; they will do exactly the same thing in 
 the shop if they have the will to succeed, and 
 will welcome the industrial engineer with all the 
 eagerness that a college team welcomes its foot- 
 ball coach. 
 
 They find interest in new methods. There 
 are few more engrossing studies than the time 
 and manner of motions. I have seldom met 
 with a workman who, knowing what it was all 
 about, did not have intelligent pointers to offer 
 while he followed the timing operations ; but to 
 the worker who does not understand, and who 
 feels that his best interests are opposed to those 
 of the management, a time study is but the 
 measurement for a uniform in which to bury his 
 individuality, and he puts a decided "reverse 
 English" on his cooperation. 
 
 There is no mystery in a time study: it is 
 made for the purpose of discovering which mo- 
 tions are essential and which are not. In the 
 long run the worker and the manufacturer are 
 paid only for essential motions; these are the 
 only ones that result in production. Unessen- 
 tial motions show some day in the company bal- 
 
Making the Workman Proud of His Job 107 
 
 ance sheet, just as padded expense accounts 
 some day show in tlie salesman's record; there 
 is no dodging them. Waste always shows up 
 in the end. 
 
 The ideal industrial management situation is 
 one in which the outsider comes in only to give 
 a newer viewpoint and to teach from out of his 
 broader experience. His object should be to 
 teach, and when he goes he should be able to 
 leave behind him pupils who are fit to teach 
 others. A really good man will instal little ; he 
 will rather suggest to willing pupils who will do 
 the installing themselves. A good artist trav- 
 els across the seas to gain the criticism of a 
 master; a good worker will be just as eager to 
 have outside criticism, and if he is not eager, it 
 is probably because he does not understand the 
 true significance of it all — ^he has not been let 
 into a share of the enterprise. By ''share" is 
 not always meant a share of the profits, though, 
 in some fashion, that is ultimately desirable. 
 
 To let him into such a share he must know 
 exactly what he is doing and what relation he 
 bears to the finished product. Standardization 
 up to a point has come to stay ; there is no turn- 
 ing backward to individual handicraftsmanship ; 
 but there is a way possible to hunianize stand- 
 ardized work. 
 
108 When the Workmen Help You Manage 
 
 One of the steps is to let a man know the cost 
 of what he is doing and to give him an incentive 
 to keep down that cost to the lowest point con- 
 sistent with good work. When one foreman 
 was given a sheet showing the cost of the sup- 
 plies consumed each month, he cut down the 
 total from four hundred dollars to two hundred 
 and fifty dollars a month — things had been 
 wasted simply because no one knew what they 
 were worth. 
 
 In one factory repair charges formed a very 
 considerable part of the overhead expense; re- 
 pairs were done leisurely and with much "sol- 
 diering." A monthly cost sheet showed the 
 foreman beyond question that this wasted time 
 increased the overhead burden of his own de- 
 partment and brought the departmental costs 
 up to an unnecessarily high figure. 
 
 The foreman had not previously realized that 
 all these apparently little wastes had to be 
 charged somewhere; but when those expense 
 sheets began to come around to him at the end 
 of every month the repair bills were more than 
 halved. 
 
 Employers do not always realize that waste of 
 supplies and materials frequently springs from 
 an astounding lack of knowledge of what they 
 are worth. 
 
Making the Workman Proud of His Job 109 
 
 Sometimes the values are brought home by, 
 in effect, selling the material to the workers at 
 a price that permits them to make money if 
 economy is used, but which will cut into their 
 own money if they are wasteful. Take a cer- 
 tain gang of men who were soldering tin cans. 
 Solder is expensive ; yet these men "slobbered" 
 it about to such an extent that they were using 
 from eleven to nineteen ounces ^per hundred 
 cans. Experiments showed that the correct 
 amount should be something like five and one 
 half ounces. The men concerned were con- 
 sulted and a deal made by which they would 
 share in the value of the solder saved. 
 
 Now these men are turning out more cans a 
 day than they did before, and they average from 
 three to seven ounces of solder for one hundred 
 cans. The saving per man is about five hundred 
 dollars a year — ^which is only another example 
 of how cooperation between employer and em- 
 ployee makes money for both of them. The 
 same plan has worked with equal success in 
 operations involving the use of sandpaper, silk 
 thread in a sewing-room, ink in a printing-shop, 
 ribbon on hats, brass wire in electrical work, 
 and so on. 
 
 A somewhat more elaborate idea is to give a 
 foreman daily cost sheets on the work, together 
 
110 When the Workmen Help You Manage 
 
 with comparisons showing what the work has 
 previously cost. The workers are intensely in- 
 terested in these costs — more especially if they 
 are put in graphic f«orm — and will make a game 
 out of beating former cost records. In one 
 paper-mill repair costs were more than cut in 
 half by this method, and in a shipbuilding plant 
 where chaos had formerly been supreme and 
 costs running amuck, this simple sharing of 
 knowledge brought down operations to a work- 
 manlike basis — and, what is more, reduced the 
 labor turnover marvelously. 
 
 I have spoken of the saving in dollars due to 
 the worker's knowledge of cost; but that saving 
 is really not at all the most important feature — 
 although, unfortunately, it is the phase that 
 might appeal first to the employer. The big 
 thing about cost knowledge is that it takes the 
 nonotony away from work and makes each oper- 
 ation, or series of operations, a subject for the 
 exercise of intelligence. 
 
 The saving of money is simply one of the in- 
 evitable results of stimulating the spirit of real 
 workmanship. A good worker never wastes; 
 by the same token, the man who makes a point 
 of not wasting becomes a real worker. 
 
 Knowing the costs is a step in the direction of 
 becoming master of the job — that is, of the ma- 
 
Making the Workman Proud of His Job 111 
 
 chine and tlie material. In comparatively sim- 
 ple manufacturing it may be that the only steps 
 required for the other operations in the factory 
 are so few that any worker knows his relation 
 to the whole. But most manufacturing has so 
 many and such varied processes that the indi- 
 vidual worker does not know what kind of a link 
 he is in the chain of fabrication. 
 
 To show him is a very difficult problem where 
 the subdivision of labor is great, or where he 
 deals with forces rather than tools — as when he 
 uses heat. In every job of that sort the workfer 
 needs some record of quality or uniformity 
 which can satisfy the creative spirit that the 
 work itself can not satisfy. Each job requires 
 special treatment, but the same principles run 
 through all. You will note that I say ' ' quality ' ' 
 or "uniformity" record. A quantity record is 
 worse than useless, because production alone is 
 not a stimulus to good workmanship, but is in 
 fact opposed to it ; for it springs from a desire 
 to make money and not from a desire to do good 
 work. 
 
 A concrete example of what quality records 
 mean is also given by Mr. E. B. Wolf out of his 
 experience in wood-pulp paper-making in sev- 
 eral factories. An important operation is the 
 "cooking" of the pulp, and the uniformity of 
 
112 When the Workmen Help You Manage 
 
 the product depends to a very large degree upon 
 the * ' cooking ' ' control. The work had formerly- 
 been governed by rule of thumb. It was mo- 
 notonous and the workmen's interest see min gly 
 could not be enlisted in it. 
 
 Mr. Wolf arranged that weight and moisture 
 tests be taken frequently and the results for 
 each squad plotted and kept on continuous exhi- 
 bition near the machines. The men could not 
 see what they were doing by watching the ma- 
 chine, but the graph showed them exactly what 
 they were doing. In the first month, taking 
 the standard as one hundred, they averaged 
 from seventy-one per cent, to eighty per cent. ; 
 but in less than six months they were hit- 
 ting ninety per cent, and had made a large in- 
 crease in the quantity of product. The pulp of 
 that mill rose from a poor grade to a special 
 standard of its own. That increase in quality 
 was made without financial incentive of any 
 kind ; the incentive came from the stimulation of 
 the desire to do good work. 
 
 That is one method; it is not the only way. 
 A large manufacturer of velvets was troubled 
 with * ' seconds " ; at times half a million dollars 
 was tied up in goods that contained weaving 
 defects that unfitted them for first-grade sale. 
 He put the question up to the employees them- 
 
Making the Workman Proud of His Job 113 
 
 selves-7-they were organized on the representa- 
 tive system. 
 
 The men appointed committees to investigate. 
 They made tests themselves, and they retained 
 experts from outside to make other tests. 
 From time to time, they told of their work in 
 mass meetings and received criticisms and sug- 
 gestions. 
 
 Soon that whole factory was after ' ' seconds. ' ' 
 They improved machinery, insisted on cleanli- 
 ness, and finally changed the weavers from a 
 quantity rate to a quality. They have now all 
 but cut out "seconds," and under the quality 
 rate the weavers are not only making more 
 money than before, but they say they are mak- 
 ing it with less effort than when they tried solely 
 for quantity. But the quantity has also in- 
 creased ! I have through my associates secured 
 very similar results by the use of similar meth- 
 ods in a plant making linoleum. 
 
 Kecognition of individuality through the 
 opening up of the way to knowledge is the main- 
 spring of creative effort. I have not attempted 
 to sketch anything that approaches a system for 
 stimulating creative effort, because there can be 
 no one all-accomplishing system, and any one 
 who imagines that a ready-made plan can be 
 bought and put into operation forthwith is cer- 
 
114 When the Workmen Help You Manage 
 
 tain of disappointment. Human nature is not 
 adjusted in any such summary fashion; one 
 must study each situation and then solve it ac- 
 cording to principles. 
 
 The management of the human factor in in- 
 dustry is so great and comprehensive a study 
 that it can not be dismissed — as some would dis- 
 miss it — by hiring a welfare worker or a per- 
 sonnel manager or by adopting some quick and 
 easy system. The subject demands close exec- 
 utive study, undertaken with an open mind and 
 a keen desire to get at the facts. It is not a 
 topic on which one can dogmatize, for as yet our 
 knowledge is empirical. But as to its impor- 
 tance let me quote the statement of an executive 
 who has successfully stimulated the creative in- 
 stinct in his employees : 
 
 "It was found that the happiness or unhap- 
 piness of the worker proceeded out of the work 
 he was doing. Hitherto it had been thought 
 that his happiness or unhappiness depended 
 upon the amount of pay he received for his 
 work. It had been tacitly assumed that, how- 
 ever degrading or brutalizing the work itself 
 might be, it could be ennobled by the amount of 
 money paid for doing it. This was now shown 
 to be a mistake. 
 
 "Work of a certain order, work which exer- 
 
Making the Workman Proud of His J oh 115 
 
 oised and developed the better faculties of a 
 man, his imagination, his power of thought, his 
 emotion, was a source of felicity; work of a 
 purely mechanical kind, which exercised the 
 hand but not the mind, was a source of misery. 
 Wages, money, in no way affect the question, 
 for they do not alter the character of the work 
 itself." 
 
 That is not an overstatement of the principle. 
 
CHAPTER VI 
 
 WHEN THE WORKMEN HELP TO MANAGB 
 
 "Let the hands run the place? You don't 
 kaow my crowd. The first thing they would do 
 would be to vote themselves higher wages ; the 
 second would be to vote still more wages, and 
 the next would be to vote to abolish work. The 
 Russians have nothing on the kind of people we 
 have around here ! ' ' 
 
 That is the reaction of many employers to the 
 suggestion that their workmen be given a voice 
 in the management of the business ; and it is a 
 perfectly natural reaction. It is the employer's 
 money or his friend's money that is at stake, 
 so why should those who have nothing to lose 
 have a hand in the spending? But this experi- 
 ment has been made in twenty or more concerns 
 in this country with startlingly good results. 
 
 To-day in America neither the owners nor 
 workers are, generally speaking, ready for an 
 entirely new relation. The workers are quite as 
 suspicious as the owners — and that is saying a 
 good deal. 
 
 116 
 
When the Workmen Help 117 
 
 On the whole, the workers are more opposed 
 to the idea than are the employers, for the fol- 
 lowing reasons. Those who have socialistic 
 leanings are convinced that the duty of the 
 worker is to destroy capital and the wage sys- 
 tem; although that view is not quite so preva- 
 lent here as in England. Others feel that the 
 natural relation is one of bargain and sale 
 through collective units, and they fear that mu- 
 tuality will destroy the unions and, in time, rob 
 the worker of the victories he has won. 
 
 The employers fear that mutual control will 
 do just what the workers fear it will not do — 
 and that is, destroy capital. Just at the pres- 
 ent moment many employers have nightmares 
 in which wild-eyed Bolsheviki stalk. To those 
 employers who are afraid that a worker 's gov- 
 ernment in the plant will play ducks and drakes 
 with the sacred investment let me commend this 
 warning by a radical English labor man: 
 
 "Besides chaos there will be deceitful kind- 
 ness, and wherever there is kindness in the re- 
 lations of Labor and Capital National Guilds- 
 men should go warily; . . . the capitalists are 
 busily at work securing the foundations of a new 
 type of wage-slavery. They have discovered, 
 to quote the words of Mr. Dudley Docker, that 
 'it is to the interest of all employers to make 
 
118 When the Workmen Help You Manage 
 
 their workpeople happy.' Their methods are 
 obvious. They intend to buy off the leaders, 
 and through them the led, by the offer of a very, 
 very junior partnership in industry. 
 
 "Through Industrial Parliaments, through 
 bogus workshop control, . . . through joint 
 compaittees of every conceivable kind, and, 
 above all, through fairly high wages and com- 
 parative security, the employers are trying to 
 keep down the hostility between Labor and Cap- 
 ital to them so deplorable, to us so just. ... To 
 be kind and to make your workers contented is 
 Capital's proper course, and were I a capital- 
 ist I would go to any lengths, short of surren- 
 dering my business, to produce harmony in my 
 works. And the specifics I would use would be 
 High Wages, Short Hours, Workshop Commit- 
 tees, and Joint Control. As I am not a capital- 
 ist, I hope my advice will not be taken. . . . 
 
 "I believe that it is Labor's duty to make the 
 capitalist unhappy. The more Labor succeeds 
 in this task, the more I shall be pleased. For 
 constant unhappiness kills, and I want Capi- 
 talism to die. Labor should worry neither 
 about what the capitalist ought to do nor about 
 what the State ought to do. Labor should make 
 up its mind what it wants to do — and then 
 doit." 
 
TThen the Workmen Help 119 
 
 That this labor leader should oppose mutual- 
 ity of control as tending toward breaking down 
 the organization of labor is quite justified, for 
 if the worker is so placed that he can secure 
 exact justice in his working hours he will not 
 need union help. Vigilance committees are 
 most useful when orderly government is back- 
 ward, but they disappear when authority be- 
 comes ordered. 
 
 As I see the situation, the eventual effect of 
 joint control of industry will be to break down 
 the distinction of capital as master and labor 
 as servant, and to establish in its place equality 
 of opportunity. 
 
 It is to-day generally recognized that no com- 
 pany can be managed by one man if the best 
 results are to he achieved. Hiring and firing, 
 exact salaries, and other indicia of economic 
 dependence have to-day dropped out of the 
 higher reaches of industry, for the single rea- 
 son that they do not produce results. 
 
 What mutuality does in the executive branch 
 of industry it does in the working section, and 
 the tendency will be more and more to recognize 
 that capital and labor are apart equally impo- 
 tent, and hence that neither is entitled to more 
 respect than the other. 
 
 But we are concerned with eventual effects 
 
120 When the Workmen Help You Manage 
 
 only in so far as we need to know something of 
 the terminus of the road down which we start; 
 we are more intimately concerned right now 
 with what is the present effect of joint control 
 and what may be expected of it. 
 
 This control, it is well to bear in mind, is only 
 a means to an end and not the end itself ; the end 
 is to acquire an atmosphere that will permit cre- 
 ative work by freeing the intelligence and the 
 persons of the workers from repressive control. 
 I do not use the word ' ' repressive ' ' in any invid- 
 ious sense as meaning "downtrodden" or "op- 
 pressed," but to denote the condition of the 
 worker under modern shop management. 
 Through no fault of his and through no fault 
 of the employer, the modem shop organiza- 
 tion does not permit of individual expression 
 in the work or the development of individuality 
 in the workmen. 
 
 Very astute employers keep sharp watch for 
 bright workers and speedily lift them into ex- 
 ecutive positions. 
 
 It is these "capable" men who come to the 
 front in any self-government scheme; they are 
 natural leaders and they hold leadership ac- 
 cording to ability. They are equally potent 
 for construction or destruction. When given 
 power, do they destroy or construct? 
 
When the Workmen Help 121 
 
 That is the question that bothers the em- 
 ployer who would like to do something to better 
 relations, but who is timid about risking any- 
 thing in particular. 
 
 Let 's see how one experiment in democratic 
 government of business worked out. In the 
 Filene Store, in Boston, the Cooperative Asso- 
 ciation to all intents and purposes regulates 
 wages, hours, and conditions of work. The em- 
 ployees act through committees, the most im- 
 portant of which is the Arbitration Committee, 
 which sits as a court to hear disputes between 
 employees and the store. 
 
 The members are all employees, elected by 
 secret ballot, and before them come the com- 
 plainant and the respondent, both represented 
 by counsel selected from the employees; they 
 hear testimony and then render decisions. 
 Taking the whole record of cases over the years 
 that the plan has been in force, it will be found 
 that the decisions against the store and the 
 decisions in favor of the store are about equal. 
 
 When the Filene management asked the em- 
 ployees to nominate a certain number of their 
 fellows from whom directors of the company 
 might be chosen, the first selections were of the 
 firebrand or "hot-air artist" type; but, after a 
 year or two, the employees found that such men 
 
122 When the Workmen Help You Manage 
 
 talked much and did little, and they then turned 
 to men of the character that the existing di- 
 rectors would themselves have chosen. 
 
 In all the years of the Filene plan, the em- 
 ployees have never once attempted to take an 
 unfair advantage or to try anything that might 
 be termed a "hold-up." The corporation man- 
 agers have absolute confidence in the integrity 
 and judgment of their employees. 
 
 Edward A. Filene ascribes much of the suc- 
 cess of the adventure to the fact that the line of 
 demarcation between employers' and employ- 
 ees' authority is hazy. There are no "No tres- 
 pass" signs; no subject is forbidden to the em- 
 ployees' association for discussion; and, be- 
 cause there are no limits, there has been no 
 trouble with trespassing. The store people in- 
 vestigate the finances through a conunittee, and 
 have made some excellent reconxmendations 
 which the company has adopted. 
 
 But there has never been a clash of authority, 
 and it seems most unlikely that there ever can 
 be. And as to the intelligence with which finan- 
 cial problems are met, I may say that the em- 
 ployees, in presenting the financial statement to 
 their constituents, adopted a simplified arrange- 
 ment which the executives found so much clearer 
 
When the Workmen Help 123 
 
 than their own that they adopted the same ar- 
 rangement ! 
 
 I personally know the facts or have had inves- 
 tigated perhaps a score of instances where ex- 
 ceptionally wide powers of authority have been 
 granted to workers, and I have yet to learn of a 
 single instance where that authority has been 
 abused or has been used for any other purpose 
 than advancing the best interests of both the 
 company and the workers considered as a whole. 
 
 Sometimes groups of workers do try to put 
 over higher wages than they deserve, but they 
 seldom try this more than once, for the workers ' 
 committees investigate such appeals carefully 
 with the aid of testimony that would not be 
 available for the employer, and they decide on 
 the facts. If the appeal is unjust they do not 
 hesitate to say so in their decision, and, where 
 such a turn-down by the employer would mean 
 a strike, the workers will accept the findings of 
 their own committees without question. 
 
 Their efforts are by no means all in the direc- 
 tion of raising wages ; a number of cases are on 
 record where they have reduced rates because 
 improved methods made the old rates too high ; 
 these reductions have been usually at the behest 
 of the men and not of the company. How does 
 
124 When the Workmen Help You Manage 
 
 it happen that members of a union almost al- 
 ways make exorbitant demands for wages, and 
 that the same men acting in a shop committee 
 do not make excessive demands? It does not 
 seem logical; is this a Dr. Jekyll and Mr. Hyde 
 act? Do they receive the faith of a new dis- 
 pensation overnight? 
 
 It is perfectly true that men forming a union 
 committee will indorse the action of a union 
 business agent in demanding wages which they 
 know the company can not pay, and they will 
 take exquisite joy in adding petty, irritating 
 demands apparently just for the sake of making 
 them. It is also perfectly true that those same 
 men, sitting as a shop committee with full re- 
 sponsibility, will as a rule quickly arrive at a 
 just wage and will dismiss every irrelevant de- 
 mand. 
 
 And the reason is this. "While acting for the 
 union they are against the shop and trying to 
 drive the best possible bargain. They do not 
 care whether the shop goes on or goes down; 
 they aro d 'niing with a natural enemy and at 
 arm's length. They are not interested in how 
 the company manages — that is the company's 
 affair. But take these same men in a shop com- 
 mittee. They are charged with administering 
 exact justice between the men and the company, 
 
When the Workmen Help 125 
 
 and because they have that responsibility, they 
 will dismiss every consideration that might tend 
 to its avoidance. A few men will be found who 
 will toady to the company, but they are com- 
 paratively rare — about as rare as those who will 
 toady to the men. 
 
 The result of my observations is that workers 
 under responsibility act just about as other peo- 
 ple do, and they are neither more nor less hon- 
 est than the average human being picked at ran- 
 dom — and, unless one has a mind to change the 
 world, that is about all that can be expected of 
 anybody. It is a good enough average, any- 
 way. Most executives are content if their 
 boards of directors measure up to such stand- 
 ards. 
 
 We are inclined to regard all this mutuality 
 of shop management as something revolution- 
 ary and fraught with unknown evils. Presum- 
 ably we have been trying out the theories of 
 representative government for some time in this 
 country — to be exact, since about 1776 — and we 
 are quite committed to it both in theory and in 
 practice. We do not fear the votes of our em- 
 ployees in state and national affairs, and in fact 
 would think that the country was going to the 
 dogs if universal suffrage were withdrawn. 
 Then why should a factory-owner fear the same 
 
126 When the Workmen Help You Manage 
 
 sort of government in his factory? For no rea- 
 son in the world except that he does not know 
 what it holds; he merely fears the unknown. 
 
 Practically speaking, experience shows that it 
 is not advisable to introduce autonomy all at 
 once. It is better to go a step at a time, for 
 the simple reason that drastic changes are up- 
 setting. Neither employer nor employee is 
 quite ready to go the whole distance from the 
 very outset, and to put in an entirely new foun- 
 dation would be to run the risk of failure from 
 severe business indigestion through lack of as- 
 similation. 
 
 It is well, I find, to start with a single com- 
 mittee to adjust some particular trouble, and 
 then, keeping that committee standing, grad- 
 ually to enlarge its powers until the time comes 
 for another committee. The whole Filene plan 
 grew out of a dispute with a girl cashier over a 
 shortage for which she claimed that she was not 
 responsible. She said that any fair-minded 
 outsider would agree with her, and |;he store 
 manager took her at her word and selected an 
 umpire. The umpire sustained the girl; and 
 from that incidental beginning grew the whole 
 of the plan that is in force to-day. 
 
 It is not necessary and it is not advisable, 
 
When the Workmen Help 127 
 
 unless a company is face to face "with an emer- 
 gency such as a strike, to do more than cut cor- 
 ners at the very start; and then gradually a 
 system which exactly fits that shop will develop 
 in good time. 
 
 That plan is strongest which has the great- 
 est elasticity; therefore the design should be 
 laid out in bold, free strokes and not in detail. 
 Definitions of powers, exact procedures, and the 
 minute regulations should form no part of the 
 eventual constitution or other instrument which 
 may be adopted. It is really better to follow 
 the British example and make the constitution 
 consist of the body of the laws and resolutions 
 which are, from time to time, passed. An exact 
 definition of a power strikes some bumptious 
 human chord that makes exceeding that limita- 
 tion the only act worth while ! 
 
 Therefore it is seldom well to "blue-print" 
 the plan or to issue a rule book or otherwise 
 spread out. The executives will have to run the 
 risk of having their ideas termed loose and un- 
 scientific, and also may cringe before complete 
 "plans" and "systems"; but, for all that and in 
 spite of all that, the controlling idea should be 
 to conform to existing human nature and not 
 to change human nature forthwith after the 
 
128 When the Workmen Help You Manage 
 
 manner of reformers. A lot of good ideas have 
 been lost in the haste of their attempted appli- 
 cation. 
 
 Where and how to start an installation de- 
 pends entirely upon circumstances. If. a dis- 
 pute happens to be on, make that dispute the 
 subject for the first committee, and take that 
 opportunity to say that this committee is but 
 the beginning and that you hope a more com- 
 plete working relation can be evolved out of the 
 experience. Then ask the employees to elect 
 representatives to confer with the executives on 
 important matters, and through those represent- 
 atives work out the sort of organization that 
 seems to fit. Most shop committees will wel- 
 come good suggestions, and it can be taken al- 
 most as an axiom that a suggestion which a com- 
 mittee refuses to adopt is not a good one, and 
 that the executives can deem themselves lucky 
 that it did not become a rule. 
 
 As the organization grows, most of the both- 
 ersome details of shop management can be 
 handed over to the representatives — ^matters of 
 inspection, hours and conditions of work, man- 
 ner of payment of wages, shop rules, welfare 
 work, and, finally and by degrees, the fix;ing of 
 wages. 
 
 Putting wages aside for the moment, examine 
 
When the Workmen Help 129 
 
 into the working of representative bodies on 
 shop rules and discipline. Many managers in- 
 sist on large books of rules, and the enforcement 
 of these rules causes no end of resentment, 
 which reflects itself in bad work. In practically 
 every plant where the men are represented in 
 the management, shop discipline and rules have 
 been put upon an honor system. The rules 
 that serve no good end are cut out, and a few 
 broad, essential principles are lived up to as a 
 matter of honor. 
 
 For instance, most shops have trouble in get- 
 ting the men at their places ready to work when 
 the whistle blows, and in having them stay there 
 until the quitting whistle. In the majority of 
 shops the stream of workers starts out of the 
 gates within ten seconds after the whistle, which 
 means, of course, that the men have taken time 
 by the forelock and made ready well in advance. 
 
 In one shop the workers' committee merely 
 posted a notice to the effect that men who did 
 not spend the full time at their work would be 
 considered as in opposition to the best interests 
 of the mass of the employed. Thereafter not a 
 worker was late in starting or early in quitting, 
 excepting of course for unavoidable causes. 
 Moral force is dif5Scult to resist. 
 
 In another plant a committee maintains moijii- 
 
130 When the Workmen Help You Manage 
 
 tors of its own, and the names of offenders 
 against discipline are posted. Sometimes the 
 committees have imposed penalties ; but in gen- 
 eral the experience is that money penalties have 
 not the same effect as moral ones. Moral 
 forces are seldom at the command of the com- 
 pany management, but they form 'the strongest 
 weapon of the shop committee. 
 
 Hours of labor are frequently subjects for 
 dispute. It does seem impossible that any one 
 should accomplish as much in eight hours as in 
 twelve, but in many lines of work this is true 
 nevertheless. In one eight-hour day a man will 
 hardly do as much as in one twelve-hour day, 
 but he frequently will do more in a month of 
 eight-hour days than in a month of twelve-hour 
 ones, for the reason that the eight hours will 
 permit him to keep the vigor that means con- 
 centration. 
 
 Workers themselves are not agreed upon the 
 length of the working day. The basic eight- 
 hour day is not a time but a wage matter, and 
 violates the principle of short hours of concen- 
 trated work. All of the committees I know 
 have discussed hours as affecting their own 
 work, with the result that they eventually cut 
 down to eight hours, without overtime, except- 
 ing in cases of necessity. More often than not 
 
When the Workmen Help 131 
 
 they then tarn out more work than under the 
 ten- or twelve-hour plan. 
 
 In each instance the cutting of the day has 
 been gradual, and because the length of the day 
 vitally affects piece workers each cut is small 
 and is made the subject of study. If the day 
 happens to be eleven hours, they will usually 
 first cut to ten and then tabulate results. If 
 they find that as much work is being done as 
 before they will try another cut; and so on 
 until the day seems to suit. With each cut they 
 put it up to the workers to decide how they shall 
 work, and they let every one know that the suc- 
 cess of the cut depends upon the actions of the 
 people themselves. With this approach, the 
 workers usually find where they have been wast- 
 ing time under the old hours, and jack them- 
 selves up for the new schedule. 
 
 Another committee that marks a long step 
 forward is the efficiency committee. The very 
 word "efficiency" is anathema to the worker, 
 because he associates it with grinding, wearing 
 force that means more dollars for the owner 
 and a broken constitution for him. True effi- 
 ciency, of course, means nothing of the sort; it 
 means the utilization of the waste time and mo- 
 tion, and is an addition to the power of the 
 worker. Only through the workers' own gov- 
 
182 When the Workmen Help You Manage 
 
 ernment can the best efficiency results be ob- 
 tained, and by enlisting their intelligent help 
 the subject can be made of absorbing interest. 
 
 The work of industrial or efficiency engi- 
 neers has often been hampered by the lack of 
 cooperation on the part of those affected — 'the 
 natural feeling of resentment against being 
 forced to change established practices without 
 knowing the reason why, and the suspicion that 
 the new ways may be soul-deadening. 
 
 I dismiss, for the moment, the equally natural 
 suspicion that the efficiency engineer is a crank ; 
 so many charlatans have found clients or vic- 
 tims that the name "efficiency" has become in- 
 vidious in the extreme. I prefer the term "in- 
 dustrial engineer," and instead of "efficiency 
 practice" prefer to present the subject as a 
 simplification of existing practices — the lopping 
 off of the unnecessary things. If one presents 
 better industrial practice in this fashion, then 
 it takes on a new and comprehensible meaning 
 to the worker, and he will evidence the same 
 interest in it that he does in the saving of ma- 
 terial and other phases that go to the mastering 
 of a job. 
 
 The efficiency committee will not only make 
 smooth the path to better methods, but through 
 suggestion systems and investigations of their 
 
When the Workmen Help 133 
 
 own will often do more toward real economy of 
 operation than it is possible for any profes- 
 sional engineer to do. In one plant the men 
 have themselves re-designed nearly every ma- 
 chine in the place, with astounding results in 
 the way of production, quality, and lowering of 
 sales price, with an increase of wages to the 
 men and profits to the company. In another 
 factory, within six months from the time the 
 workers were given a voice in the management, 
 they devised more improved machinery than 
 had been known in that particular industry 
 within twenty years. 
 
 Shop committees are far better equipped to 
 deal with union matters than are employers. 
 "We all like to dodge the fact that unions exist; 
 we like to close our eyes to the fact that they 
 are growing and "that no manager can to-day 
 say: "I refuse to recognize unions as such; I 
 will deal only with men on the pay-roll." 
 Unions are here and to stay, and they grow 
 steadily more powerful. It is for the employ- 
 ers to take them as aids to progress or as antag- 
 onists. 
 
 Meeting them as antagonists, fights and more 
 fights are bound to occur, and each fight leaves 
 the corporation combatant weaker. But there 
 can be no antagonism when the corporation rep- 
 
134 When the Workmen Help You Manage 
 
 resentatives appointed to deal with union affairs 
 are themselves union men, elected by the body 
 of the workers to preserve their own best inter- 
 ests. 
 
 Take several specific cases. A strike was or- 
 dered in the garment trade in a Middle Western 
 city, and every factory but one closed. In that 
 one factory the committee (and all its members 
 were union men) stated that it would not be 
 right to penalize their fellows and employers 
 for the sins of others, and they refused to strike 
 — and also preserved their union standing. In 
 an iron-working shop, the mass meeting called 
 by the committee to consider the union demands 
 for a closed shop voted against closure — and 
 the chairman of that meeting was president of 
 the local union. 
 
 Unions do not all want to fight. A few union 
 business agents think that their own jobs de- 
 pend upon the amount of trouble they can stir 
 up, but, generally speaking, union workers do 
 not differ from other workers unless they are 
 smarting under a sense of injustice, and then, 
 just like other people, they do want to get back 
 at the boss. The union tenets of closed shop, 
 limitation of output, regulation of hours, and 
 the fixing of wages are all part of an economic 
 defensive that need not be and is not maintained 
 
When the Workmen Help 135 
 
 when the reasons for it vanish. And under au- 
 tonomous works ' control the reasons do vanish. 
 
 And now for wages. In a previous chapter I 
 have spoken of the limits of wages, and reached 
 the conclusion that wages are only high or low 
 according to the amount of production they rep- 
 resent. EflSciency and wages are bound to- 
 gether. "Workers oppose better methods in 
 piece-rate work, because better methods usually 
 mean lower rates — ^they see the boss getting 
 more for his money. Therefore they will ' ' sol- 
 dier" when rates are being fixed, and they com- 
 monly make the whole rate question a kind of 
 "hide-and-seek" affair. 
 
 This is the big problem that wage committees 
 solve. They banish the arbitrary fixing or 
 changing of rates and insist upon just rates that 
 will return wages commensurate with effort. 
 They will raise or they will lower rates, but al- 
 ways with an eye to the results; they will not 
 lower because a man is making too much money, 
 but they will lower if he is making more money 
 than the amount of skill and effort that he ex- 
 pends deserves. 
 
 If Smith makes just a living wage at a cer- 
 tain rate and is a fair average workman, while 
 Brown, who is exceptionally skilful and fast, 
 m,akes high pay, a committee is not likely to 
 
136 When the Workmen Help You Manage 
 
 insist tliat the rate be cut to the point where 
 Brown can just make a living and Smith will 
 have to leave or starve. I have considerable 
 confidence that wage committees will, with rare 
 exceptions, adjust wages and rates more scien- 
 tifically and with greater justice and satisfac- 
 tion to both employees and employer than is pos- 
 sible for employers working through foremen or 
 superintendents. 
 
 I have not spoken of the composition of com- 
 mittees or control bodies. Ought they to be ap- 
 pointed or elected? Ought they to have repre- 
 sentatives of the company, or ought they to be 
 made up solely from the workers ? Here again 
 circumstances control and developments gov- 
 ern ; it will not do to lay down rules. In some 
 cases, particularly in small shops, monthly mass 
 meetings can do most of the work and hear the 
 reports of committees of their own appoint- 
 ment; in other cases more elaborate election 
 and representation machinery is quite neces- 
 sary, and there may be cases where joint 
 committees can be appointed. But in general 
 I would suggest that the best results will be 
 had from committees that are elected by the 
 workers or appointed by bodies elected by them 
 and then given complete responsibility — reserv- 
 ing to the executives the right of confirmation. 
 
When the Workmen Help 137 
 
 The "whole thought is toward spurring on tlie 
 freedom of intellect which will promote the cre- 
 ative faculty. The democratic control is only a 
 step toward realizing that freedom. We in the 
 United States seldom have recourse to the 
 courts ; we seldom have reason to claim the pro- 
 tection of the Bill of Eights ; but we should feel 
 mightily oppressed if any of these rights were 
 taken away. 
 
 It is quite the same with shop autonomy. In 
 the beginning the very novelty causes a lot of 
 litigation of various kinds, and complaints are 
 made from the joy of having the opportunity to 
 make a complaint ; but that novelty soon wears 
 off. Then things run smoothly and the number 
 of cases rapidly decreases ; most complaints are 
 settled at once and without recourse to the judi- 
 cial machinery — it is the sense of fairness that 
 is the big moving feature, and not the exercise 
 of the powers. 
 
 Workers in shop self-government do not act 
 very differently from the rest of us under na- 
 tional self-government. 
 
CHAPTER VII 
 
 PROVIDING STEADY JOBS FOE YOUB MEN 
 
 Ai/THOUGH perhaps no one is under the neces- 
 sity of living, even a workman, if he is to live 
 for long, must eat the year round. And to eat 
 he must work. 
 
 Continuous employment is a most important 
 element in handling labor to the greatest advan- 
 tage. But apparently it is seldom realized. 
 
 A seasonal business is invariably a poorly run 
 business. I have never yet seen a business that 
 could not be put on a year-round production 
 with profitable results. 
 
 Seasonal production is more or less the reflec- 
 tion of the American habit of taking things as 
 they come. We are, in many industries, just 
 getting to the point where we no longer can, 
 because of a large margin of profit, be satisfied 
 to take preventable losses. 
 
 When we reflect on the economic waste of 
 operating a plant to capacity for half the year 
 and then letting it stand idle for the other half, 
 the practice is properly classed as a vice. like 
 
 138 
 
Providing Steady Jobs for Your Men 189 
 
 all business vices, this one has bad effects on 
 the profits, the most outstanding being : 
 
 (1) That seasonal work increases the selling 
 price by loading the product with the burden of 
 the idle plant hours. Increasing the price de- 
 creases sales. 
 
 (2) By making the term of employment inter- 
 mittent, the workers are made economically in- 
 secure, and hence must give their first attention 
 to money instead of to work. 
 
 Take the first proposition. It is self-evident 
 that, if proper cosits are kept, the expense of an 
 idle plant must somehow be made up by adding 
 it to the selling price of the product. Espe- 
 cially flagrant instances of this may be seen in 
 the immense plants that are sometimes erected 
 to take care of the whole of a seasonal business 
 within a very few weeks. For example, most 
 shoe factories are much larger than any except- 
 ing peak production demands, and many cloth- 
 ing factories come under the same head. 
 
 The sales, with this economic waste added to 
 the price, are bound to be smaller than if the 
 price represented only material and labor costs 
 plus the share of the overhead on a fifty-two- 
 week production basis. It is an economic law 
 
140 When the Workmen Help You Manage 
 
 that the distribution of an article is in inverse 
 proportion to its price. Ford's inexpensive 
 automobile is an example of this. Year-round 
 production is one of the reasons Ford's over- 
 head per unit is small. 
 
 In a seasonal industry labor is almost sure to 
 be inefficient and disorderly. A good workman 
 will not voluntarily take seasonal employment. 
 If forced to do so by the pressure of the grocer 
 and landlord, a few experiences are apt to make 
 a poor workman of him, if not an active anti- 
 capital agitator. 
 
 It is logical to expect that industrial relations 
 are at their worst in the seasonal trades. It is 
 in the building, garment, shoe, silk, and cotton 
 industries that the greatest number of strikes 
 occur. Seasonal labor towns, like Paterson, 
 N. J., and Lawrence, Mass., are usually hotbeds 
 of disorder. Aside from the antagonism 
 aroused in the men by the injustice of being 
 thrown out of work against their will, there is 
 another good reason for this : the men are not 
 with one concern long enough to allow a real in- 
 dustrial relation to take root. 
 
 If the consequences of seasonal production 
 are high prices, with low profits and labor un- 
 rest, then the results of putting a seasonal in- 
 dustry into the year-round class will be : 
 
Providing Steady Jobs for Your Men 141 
 
 (1) To reduce the price of the articles and 
 thus gain greater sales and larger profits 
 through a more frequent turnover of the capital 
 involved. 
 
 (2) To stabilize the labor factor, and, 
 through cooperation, gain a greater return per 
 labor dollar, which in turn will permit the profit- 
 able paying of higher wages and the realization 
 of something of the latent capacity of the 
 workers. 
 
 None of the demands of labor is more stressed 
 chan that work shall be steady through the whole 
 year. The individual employer conducting 
 what he thinks is a seasonal business may dis- 
 miss unemployment as no concern of his; but 
 these social matters are not to be so dismissed. 
 The man who is willing to work has a right to be 
 able to find work ; if work is not to be had, then 
 he has a right to look to the state for support — 
 that is, in our modern conception of society. 
 That support may be given in allowances, as in 
 England, or by the allocation of public improve- 
 ments to dull seasons. It will be given in some 
 manner. Why, then, should an uneconomic 
 manner be chosen? 
 
 It is certainly uneconomic to tax industry to 
 support idleness, or to tax industry to put up 
 
142 When the Workmen Help You Manage 
 
 what will probably be quite unnecessary public 
 buildings and the like, with the stupendous 
 waste that so often accompanies a public under- 
 taking. In either event, the seasonal industry 
 will pay for the unemployed days by an increase 
 in taxation, and that, added to the burden of 
 carrying unproductive buildings and machinery, 
 will all go to increase the cost of the finished 
 product and to restrict its market. The man 
 with a business must take care of unemploy- 
 ment in one way or another; so why not care 
 for it in a manner that will benefit both the 
 worker and himself? 
 
 Aside from the loss occasioned to the em- 
 ployer by the general dissatisfaction of work- 
 men who are economically insecure, seasonal 
 business suffers two other direct and often 
 easily measurable losses. 
 
 A workman needs a certain amount of money 
 in order to live the year round. It is not the 
 daily wage, but the total yearly earning, that in- 
 terests him the most. Therefore, if he must 
 face a period of unemployment, he must get high 
 enough daily wages to allow him to lay up a 
 surplus for idle periods. If you doubt this, 
 compare the wages in seasonal lines with those 
 paid in year-round jobs. Then, too, the bulle- 
 tins of employment agencies are full of such 
 
Providing Steady Jobs for Your Men 143 
 
 comments as "year-round work," "permanent 
 employment, ' ' and so on, showing that workmen 
 are attracted by the hope of permanence. 
 
 This means that men will work for less per 
 day on a year-ronnd job, with a resulting reduc- 
 tion of the unit labor cost of the product. 
 
 The second measurable loss is that occasioned 
 by losing trained men. The seasonal plant sel- 
 dom gets back the men it laid off the preceding 
 season. Nearly any job demands a greater or 
 less training, and few workmen can be trained 
 to do even the simplest operation for less than 
 twenty-five dollars. When, therefore, a trained 
 operator leaves permanently and his successor 
 must be trained, there is a definite loss. 
 
 In several plants that have done away with 
 seasonal lay-offs, it has been found that a 
 marked improvement has occurred in the atti- 
 tude of the men toward the job. A man who 
 knows that in a few months he is going to have 
 to face jobless days is bound to feel, even if he 
 does not say, "If the boss does n't care what 
 happens to me, why should I care what happens 
 to him?" 
 
 He will, in consequence, soldier on the job, be 
 careless with work, tools, and machines, and in 
 general be antagonistic to the employer; and 
 the difference between antagonism and coopera- 
 
144 When the Workmen Help You Manage 
 
 tion is often the difference between loss and 
 profits for the company. Even where profits 
 persist in spite of antagonism, they would be 
 larger if the men were for the company. A man 
 who has to worry over his job or his finances is 
 not in the right frame of mind to do much good 
 work. The wise employer makes sure that his 
 men are financially free from worry. 
 
 Although, most employers will admit that a 
 seasonal business is not the most desirable kind, 
 few will admit that the seasonal element can be 
 avoided. How about the window-screen manu- 
 facturer who overcame six months ' shut-downs 
 by taking on a line of game boards to sell to the 
 Christmas trade ? He thought his business was 
 incurably seasonal, but it was not. 
 
 Therefore let us assume that a seasonal busi- 
 ness is a diseased patient and look about for a 
 cure. There are no absolutely incurable cases 
 — at least, I have never heard of or seen any. 
 But there is no panacea, no patent medicine, 
 which, after shaking the bottle, may be adminis- 
 tered as a cure-all. 
 
 The first step toward solving the problem of 
 providing a year-round market is to know costs 
 with almost absolute exactness through every 
 month of the year ; then one can determine just 
 
Providing Steady Jobs for Your Men 145 
 
 • 
 
 how much, of the burden assessed during -work- 
 ing periods is due to the weeks of idleness. 
 
 That starts one on the way to estimate what 
 the product should cost if manufactured at plant 
 capacity throughout the year — what reduction 
 in price might be brought about by eliminating 
 the wastes of seasonal production, thus perhaps 
 by virtue of a lower price reaching a larger and 
 more regular market. These costs are funda- 
 mental, and unless they are accurate no well 
 reasoned plans can be laid — for those plans can 
 have no higher accuracy than the figures on 
 which they are founded. 
 
 Next in order is a study of the market — its 
 buying power and buying habits. Quite often, 
 seasonal buying is due as much to the seller as 
 to the buyer, and is a relic of the days when the 
 merchant came to town twice a year to "stock 
 up. " When this is true, it is up to the seller to 
 educate the buyer in the advantages to be gained 
 by him. It is not out of the question to change 
 the buying habit of an entire nation. Well con- 
 sidered advertising has done it in many ways 
 already. It should be equally effective in over- 
 coming seasonal tendencies. 
 
 Or, again, it may be that the seller has so lim- 
 ited his territory of sale as to be himself con- 
 
146 When the Workmen Help You Manage 
 
 trolled by the seasons. It is weU to remember 
 that the seasons are not everywhere the same. 
 South of the equator they are exactly opposite 
 to ours. Even in the parts of the northern 
 hemisphere where the seasons correspond 
 closely to those in the United States, foreign 
 markets will often help to smooth out produc- 
 tion peaks, due to the length of time goods must 
 be in transit. In some parts of Russia, for in- 
 stance, climates are nearly identical with those 
 in this country. Goods for those sections, 
 which are purchased by the consumer season- 
 ally, must therefore be shipped from here from 
 two to four months ahead of the season. There- 
 fore, in a business having, say, two production 
 peaks a year, the low points of production could 
 well be filled by manufacturing for the Russian 
 trade. 
 
 Needless to say, Russia has been taken simply 
 IS an example. There are dozens of other coun- 
 tries where this is true. A little geography will 
 not harm any one and especially the sales man- 
 ager. 
 
 In this study should be an estimate of what 
 the market might take out of season if the price 
 were sufficiently attractive, and also an estimate 
 of how far ahead it might be possible to book 
 orders. Those articles in which the cost of the 
 
Providing Steady Jobs for Your Men 147 
 
 raw material is of prime importance, sucli as 
 cotton and woolen goods, do not lend themselves 
 so easily to this sort of planning as do those ar- 
 ticles in which labor is the chief factor. 
 
 Following the examination of the present 
 market comes a study of the possibilities of 
 other markets in the United States and abroad 
 which may act as seasonal outlets to stabilize 
 production — ^not take care of surplus, which is 
 about the only use of foreign markets that we 
 have made to date, but as a part of the year's 
 production program. 
 
 With these facts in hand, one is ready, intelli- 
 gently, to plan. And probably this intensive 
 examination of the business will turn up some 
 surprising facts on the markets that were sup- 
 posed to be good and on the prices that have 
 been charged. Too often prices are permitted 
 to be made by rule-of -thumb competitors, and it 
 may be found that some markets have been sold 
 at a loss. In the interests of full-time produc- 
 tion, it may be advisable to sell in some markets 
 at a loss, because that loss is not so great as the 
 loss due to "shutting down"; but, in any event, 
 the knowledge should be in hand as to whether 
 or not losses are being taken. 
 
 If the price based on a full year's production 
 can be made sufficiently low, then it is up to the 
 
148 When the Workmen Help You Manage 
 
 sales department to get customers to stock 
 ahead and take advantage of the price. The 
 canny retailer of to-day does not stock much 
 ahead, for he knows that quick turns and small 
 profits per turn form the best business basis. 
 
 But the much lower price may attract him ; or, 
 again, a solution may be found in the trade ac- 
 ceptance, which can be used to bring the time of 
 payment for the goods up to the usual period, 
 and, at the same time, let the manufacturer have 
 the use of the money. Acceptances longer than 
 three months are not subject to rediscount in 
 the Federal Reserve Banks, but, following the 
 European practice, long-term acceptances are 
 now being taken as collateral for loans and dis- 
 counted when they enter the three-months' 
 period. 
 
 Another scheme is to cooperate with dealers 
 in putting on sales of goods out of season. This 
 is a particularly desirable method in that it 
 benefits both the buyer and seller by promoting 
 business in dull times. It has been used with 
 great effect by retailers in white goods, furni- 
 ture, and the like; and there is no reason why 
 the same practice can not be extended to many 
 other lines in and outside of retailing. Build- 
 ing, it would seem, offers a partictilarly wide 
 field for bargain days. 
 
Providing Steady Jobs for Your Men 149 
 
 Several manufacturers have, with consider- 
 able success, increased their advertising in the 
 periods when sales are dullest, and cut it down 
 somewhat during the natural periods for buy- 
 ing ; and, following the same principle, the com- 
 missions to agents have been made highest out 
 of season and lowest in season. 
 
 As the quality of a product is improved, less 
 and less difficulty is had with seasonal purchas- 
 ing. A manufacturer in Cleveland, whose shop 
 was controlled to a large degree by the workets, 
 put the question of season up to them, and they 
 concluded that extra quality would make their 
 product sell all the year round. With that 
 thought in mind, they have established so high 
 a standard that the product sells the year round, 
 and it has not since been necessary to lay off a 
 single employee. And they are in the clothing 
 business — which is usually most seasonal. 
 
 Accurate planning by which the demand is 
 distributed over the production year nearly al- 
 ways works wonders. Take this instance of a 
 manufacturer of household specialties. He 
 made about fifteen hundred articles, and, al- 
 though all were staples, they showed a surpris- 
 ing seasonableness in distribution. The de- 
 mand ran approximately thus: first quarter, 
 twenty thousand pounds ; second quarter, eight 
 
150 When the Workmen Help You Manage 
 
 thousand pounds; third quarter, ten thousand 
 pounds ; fourth quarter, thirty thousand pounds. 
 
 Following the demand, therefore, meant al- 
 ternate periods of intensive production and vir- 
 tual shut-down, with all the waste and labor un- 
 rest that such intermittent production entails. 
 This is how my organization stabilized this busi- 
 ness: 
 
 We tabulated the shipments for five years 
 preceding, month by month and item by item. 
 Each article was studied alone, and, wherever 
 the demand was sufiBciently uniform, we estab- 
 lished maximum and minimum reserves — that 
 is, we expressed the sales in terms of so many 
 days ' supply, and scheduled production to keep 
 thirty, forty-five or sixty days ahead, as needed, 
 thus filling up part of the factory's capacity for 
 certain months of the year. This applied only 
 to the articles of fairly uniform demand. The 
 very seasonal goods were on a different basis, 
 and here we deliberately prearranged a distri- 
 bution of production, so that the articles might 
 be made up as they dovetailed into the produc- 
 tion scheme, and yet, when the peak of demand 
 arrived, the stock would be ready to ship. Here 
 is the schedule on a single article : 
 
Providing Steady Jobs for Your Men 151 
 
 Quarters 
 
 1st 2d 3d dtJp 
 
 lbs. lbs. lbs. lbs. 
 
 Past Sales 250 300 175 657 
 
 Monthly schedule of manufacture 375 375 375 300 
 
 Balance after expected shipments 125 75 200 25 
 
 Accumulated reserve 125 200 400 25 
 
 Every item was analyzed in this manner and a 
 program outlined, with the following results : 
 
 Quarters 
 
 1st 2d 3d 4th 
 
 Sales 20,000 8,000 10,000 30,000 
 
 Production 18,000 15,000 15,000 20,000 
 
 Instead of a widely swinging production 
 range from eight thousand to thirty thousand 
 pounds to meet the sales levels, the production 
 varied only from fifteen thousand to twenty 
 thousand pounds, and other articles were so put 
 into production as to keep a practically uni- 
 form factory output during the entire year. 
 
 The disadvantage of this method of planning 
 is that the rate of turnover is somewhat slowed 
 down by the large stock which must of necessity 
 accumulate; but that objection is far from seri- 
 ous when lined up against the "in-and-out" 
 manufacturing year which formerly existed. 
 
 SeUing abroad is, however, the antidote to 
 
152 When the Workmen Help You Manage 
 
 seasonal home buying which holds the largest 
 possibilities, and unless the American manufac- 
 turer takes advantage of the new opportunities 
 he is certain to have difficulties in preserving an 
 even flow of production and therefore of labor. 
 As I have said, year-round production is to be 
 considered, not as a labor aid, but as a step 
 preliminary to even the hope for efficient coop- 
 erative work. 
 
 The scientific method of foreign selling is to 
 fit it into the home schedule, in much the same 
 way as I have just described, to fill the gaps, 
 and then to go after the foreign sales with the 
 production schedule in mind. It will not help 
 matters to have the foreign demand coincide 
 with the home — that will only be increasing the 
 load at the peak, and will aggravate the existing 
 inefficient production. 
 
 The real place for foreign sales is in the duU 
 seasons at home. The manufacturer thus sell- 
 ing is able to fix his costs well in advance, and 
 to go through the year intelligently, instead of 
 having spasms of convulsive activity alternate 
 with semi-comas of lethargy. The main hope 
 of most seasonal businesses lies in overseas dis- 
 tribution, and, with that thought in mind, prices 
 can be made that will be nearly certain to secure 
 the sales. 
 
Providing Steady Jobs for Your Men 153 
 
 In a few businesses — ^perhaps in more than a 
 few — other lines can be taken on, after the man- 
 ner of the coal-dealer who handles ice in the 
 summer-time and thus keeps his motor-trucks 
 engaged. The manufacturer who declines to 
 take on new lines much resembles the bricklayer 
 who, when out of a job, refuses to take up any 
 other wage-earning vocation on the ground that 
 he knows but one trade. 
 
 American manufacturers discovered, among 
 other things, during the war, that their plants 
 and their workmen are capable of making many 
 hitherto unheard-of articles. The tendency of 
 standardization is to lead both the manufac- 
 turer and the worker into the idea that they can 
 make only one article, and that in only one way. 
 War work was a tonic for this purely mental 
 disease. The country has been short of skilled 
 workers, and especially of all-around machine 
 men in other than the special tool-making 
 trades. Now we have a fairly large body of 
 men who, if not skilled, yet are not wedded to a 
 single kind of work. 
 
 These men form the nucleus for such owners 
 as desire to manufacture what might be called 
 a buffer product to keep the factory going when 
 the main or seasonal occupations have gone. It 
 is quite impossible to make rules or even sug- 
 
154 When the Workmen Help You Manage 
 
 gestions for such complementary products, for 
 everything depends upon the nature of the main 
 product and the existing equipment. Some- 
 times a line similar to that already made can 
 be taken on; sometimes the departure will be 
 into very different lines. 
 
 For instance, the packers, partly to use waste 
 materials and partly to preserve an evenness of 
 flow, are not only in all kinds of canned goods, 
 but also in sporting, outfitting, and in many 
 other apparently unconnected branches. The 
 Du Fonts have branched into a dozen or more 
 lines, and in fact nearly all of the very large 
 manufacturers have taken on one or more side 
 products. 
 
 Following out this supplementary and com- 
 plementary field is of most adventurous inter- 
 est, and its study is not only worth while from 
 the continuous-production standpoint, but also 
 for the utilization of the buildings and machin- 
 ery bought for war work. 
 
 Perhaps I have spoken as if the only seasonal 
 business is the one that must shut down its plant 
 entirely at times. That, of course, is not so. 
 The business that has fluctuation enough ever 
 to require men to be laid off because of lack of 
 work, due to other than general depressions, is 
 seasonal. That is, it is either seasonal or 
 
Providing Steady Jobs for Yovr Men 155 
 
 poorly planned, and in either event needs a doc- 
 tor. 
 
 The long and short of it is that this dull period 
 lay-off disease results in economic losses both 
 to the men and to the employer. To the men 
 it is most serious, for their margin between 
 earnings and living is narrower than for the 
 plant-owner. To the men a lay-off is tragedy. 
 To the employer lost profits may or may not 
 be serious. 
 
CHAPTER Vin 
 
 PRESEEVING THE WAGE SYSTEM 
 
 Not wages alone, but the whole wage system, 
 is to-day on trial throughout the world. The 
 test has not yet come in America, but it will 
 come, and we shall have either to reply with an 
 adequate wage system or accept the principles 
 of Marxian socialism with its total abolition of 
 capital and wages. 
 
 What is the wage system? Without going 
 into the maze of phrases that surround most of 
 the definitions, it is this: Capital owns the 
 means of production, while labor operates the 
 means of production. Each must have wages. 
 In modem industry, labor can not own the 
 means of production, but must work for capital 
 — hence the term "wage slavery." Capital is 
 an inert and useless thing without labor. Labor 
 can not exist without capital — ^it must either 
 work for capital or take over the means of pro- 
 duction, thereby destroying capital. 
 
 The opposite of the wage system is commun- 
 
 156 
 
Preserving the Wage System 157 
 
 ism, in which capital is eliminated and labor 
 owns the means of production. 
 
 If the wage system is to survive the coming 
 test, it must be sound and equitable. 
 
 If the wages of both capital and labor are 
 so nicely adjusted that each is better off in union 
 than they would be apart, then the capitalist 
 system — the wage system — is justified. Other- 
 wise it is not. 
 
 The object, then, is to adjust these wages to 
 a nicety, so that the benefits will be mutual — so 
 that each will get its fair share and each will 
 know that it is getting its fair share. There is 
 no innate compatibility between capital and 
 labor; they are bound only by money ties — 
 which, until human nature changes, will be the 
 strongest ties known. If capital can not have 
 a fair share, it wiU not bother to employ itself 
 and will seep away. If labor can not make any 
 money out of capital, it will conclude, with the 
 Bolshevists, that production for profit is a fail- 
 ure and that capital had best be abolished and 
 production for use substituted. 
 
 To be equitable the wage system must guaran- 
 tee to the wage-earner several things. One is 
 year-round employment, which I discussed in 
 the preceding chapter. 
 
 Germany seems to have been the first country 
 
158 When the Workmen Help You Manage 
 
 to get at this root of the trouble. There it has 
 so long been a maxim that capital must provide 
 twelve months of work each year that one no 
 longer thinks of discussing the question — ^it is a 
 settled fact. German factories do not have sea- 
 sons. In the Krupp plant, for instance, between 
 1870 and 1918 the force was never reduced and 
 the works were never shut down. 
 
 And, although munition products formerly 
 made up a steady all-the-year business for 
 Krupp 's, they absorbed only five per -cent, of the 
 weight of the total output, and do not at all ac- 
 count for the fact that the rolling-mills, the 
 forge shop, and the many other departments 
 dealing with peace work, kept their full output, 
 month in and month out. Our own steel works 
 do not do that. 
 
 And the apparently seasonal occupations, 
 such as the woolens, the cottons, and the silks, 
 likewise, in Germany, have managed to preserve 
 their full year of work, either by stocking in dull 
 times or by sending their products into distant 
 foreign markets where the seasons are reversed. 
 German production costs were extremely low, 
 because the idle plant charges did not have to 
 be borne by the working hours, and neither did 
 men have to be paid, while working, for some 
 time when they would not be working. 
 
Preserving the Wage System 159 
 
 The other result is that, due to this principle 
 of mutual obligation of capital and labor, the 
 workman of Germany to-day is not dissatisfied 
 with the wage system, and does not, with a few 
 exceptions, desire to abolish capital. 
 
 Moreover, the German workers have accepted 
 the economic principles that money is only a 
 medium of exchange, and they are perfectly 
 willing to calculate their wages in food-buying 
 power, to have them reduced or raised accord- 
 ing to the purchasing power of the money. Be- 
 cause of this principle, unemployment has al- 
 ways been at a very low figure in Germany. 
 Eecently Essen was much perturbed because it 
 had fifteen thousand unemployed on the streets, 
 whereas in normal times it has no unemploy- 
 ment. Can one imagine Pittsburgh being wor- 
 ried because a mere fifteen thousand people did 
 not have jobs? I think that the Essen figure is 
 below the normal unemployment of any of our 
 larger industrial centers. 
 
 The German employer does not change the 
 size of his force to suit the seasons ; and, since 
 he does not discharge men, they rarely leave of 
 their own accord. Consequently German fac- 
 tories, in normal times, have almost no labor 
 turnover at all, except that arising from illness 
 and death. The majority of German concerns 
 
160 When the Workmen Help You Manage 
 
 consider ten years a low average for a worker 's 
 length of service. If Germany had a high rate 
 of labor turnover, the result would not be so 
 serious as in America because of the great num- 
 ber of skilled workers that is always at com- 
 mand. But, considering the enormous waste of 
 money in the American turnover, is it any won- 
 der that Germany, without as highly developed 
 methods or machinery, can undersell us ? 
 
 The reaction to seasonal work in the seething 
 labor situation of England has been the demand 
 on the part of the unions that work shall con- 
 tinue through the year, and it is to-day accepted 
 as a fact by English employers that wages are a 
 yearly and not a weekly or fortnightly affair. 
 
 The English trades unions are organized on 
 the basis of capital and labor, and the employ- 
 ers see in them the greatest bulwark against the 
 rising tide of communism. The so-called Joint 
 Industrial Councils are the announcement of 
 England's desire to join organized labor and 
 organized capital against the destructive ele- 
 ments. 
 
 These councils are interesting. The provi- 
 sions are for a national council, made up of rep- 
 resentatives of the unions and representatives 
 of the employers ' association. This council will 
 decide all matters that are capable of national 
 
Preserving the Wage System 161 
 
 adjustment. Next below them will be district 
 councils, made up of the representatives of the 
 district union organization and the district em- 
 ployers ' organization. And, finally, in each 
 shop will be a workshop committee, composed of 
 representatives of the employees and of the em- 
 ployer. Thus each industry will have respon- 
 sible bodies for the adjustment of disputes and 
 for the application of rules. The effect will be 
 to create vast guilds, and it is not unlikely that 
 the necessity for uniform rules and procedures 
 will be such as to take away the individuality 
 from enterprise. 
 
 The war proved to most of us that industry 
 can not well be controlled from the top, but that 
 to function to best advantage a large degree of 
 freedom must remain with the individual. The 
 joint industrial councils provide all the evUs 
 that attend the socialization of industry. They 
 suffer from that lack of elasticity, that wooden- 
 ness of effort, and that drab uniformity which 
 characterize, say state-owned railways or pos- 
 tal service. 
 
 And yet, the joint industrial councils are 
 the logical result of the theory that capital and 
 labor are natural competitors, and that it is the 
 business of each to get all that can be had from 
 the other. That is the opinion held in England, 
 
162 When the Workmen Help You Mcmage 
 
 where collective wage bargaining has reached 
 its zenith and it remained only for either capi- 
 tal or labor to vanish. Capital forced down 
 wages or locked out men whenever it saw an 
 advantage to be gained, and labor forced up 
 wages or struck whenever it found the capital 
 particularly needed its services. The indus- 
 trial councils are not so much a truce in this 
 war as the provision for continuous machinery 
 so that the bargaining may go on without the 
 waste of strikes or lockouts. They represent a 
 mutual concession to preserve the wage system. 
 
 Against the wage system are arrayed, and 
 especially in England, a great number of radi- 
 cals who are striving for the overthrow of capi- 
 tal. All of the recent strikes in England— the 
 big Clyde and Belfast strikes, the London dock- 
 ers' strike, the various strikes in the engineer- 
 ing trades and the coal-mines — '^ere primarily 
 directed against capital, and all were without 
 the sanction — and in fact in direct violation — of 
 the orders of the chief union officials. 
 
 These strikes are ostensibly for higher wages 
 and shorter hours, simply because these are 
 arguments that catch the unthinking. For in- 
 stance, they asked for forty hours a week; yet 
 the leaders publicly said that if they got the 
 forty-hour week the next strike would be for 
 
Preserving the Wage System 163 
 
 thirty-six hours, and so on down the line until 
 the employer threw up his hands and said that 
 he could not go on. 
 
 Thus, growing out of the wage system in Eng- 
 land we find two parties: the first would pre- 
 serve the system by elaborate but stifling con- 
 stitutionality ; while the other would destroy it 
 by direct action. Neither course would be wel- 
 come in the United States, and it is therefore 
 the part of the employer here to make the wage 
 system so equitable that it will neither have to 
 be incased in a cage or be the subject of attack. 
 
 Let us see the courses suggested by the oppo- 
 nents of the wage system — ^I am quoting from 
 an English Labor man : 
 
 "More important even than changes of struc- 
 ture are changes of policy. The trades imions 
 must abandon the old definition of their func- 
 tion which explained their existence as neces- 
 sary, 'for the purpose of maintaining or im- 
 proving the conditions of the wage-earner's em- 
 ployment,' and remodel their policy with the 
 aim of becoming 'associations of workers for 
 the purpose of overthrowing the wage system 
 and assuming the control of industry in con- 
 ju/nction with the State.' 
 
 "Such a share in control must develop out of 
 the existing situation, and can not be postponed 
 
164 When the Workmen Help You Manage 
 
 until the structure of industrial unionism is per- 
 fected on the one hand, and all the great indus- 
 tries are nationalized on the other. The unions, 
 then, must be prepared to wring a share in con- 
 trol from the Capitalist, so long as the State 
 continues to tolerate his command over our in- 
 dustrial resources; but such control must be 
 sharply separated from the bare suspicion of 
 partnership. 
 
 ' ' The unions must be adamant to every pro- 
 posal, under whatever name it may be put for- 
 ward, which could lead them to compound the 
 felony of capitalism. The value of every step 
 towards control must be judged by whether it 
 leaves the capitalist weaker and the trade union 
 stronger as an external, autonomous, encroach- 
 ing force. If it does not seem likely to lead to 
 this result, it must be refused. 
 
 "It is clear that 'joint control' may mean 
 control between the unions and the employers, 
 nationally or locally, by means of joint commit- 
 tees, or it may mean 'workshop control' between 
 the employers and the employees and the work- 
 ers in any particular shop. In the latter case 
 it is vital to insist that it shall be participated 
 in by unionists only ; but the trades unions con- 
 cerned must see to it that it is they who enforce 
 the conditions, and not the employers. 
 
Preserving the Wage System 165 
 
 "In general the true policy of Labor is one 
 that insists upon the employer dealing with his 
 workpeople only through the union and not as 
 individuals ; and in this connection it would be 
 well to strive to ensure that, while the worker 
 continues to sell his labor, he shall sell it not 
 individually but collectively, and that payment 
 of the worker shall be made through the union. ' ' 
 
 That is an excellent statement of those who, 
 within the union movement, would pervert it to 
 its own destruction. Those communists outside 
 the unions would by direct action destroy both 
 capital and the unions, and substitute the con- 
 trol of the proletariat. 
 
 I have given so much space to the fundamen- 
 tals of the wage system in order to impress 
 upon the American employer what his problem 
 really is: the offering of real evidence — the 
 evidence of the thing as opposed to the evidence 
 of the word — that the wage system is the best 
 for the community at large. This is the prob- 
 lem squarely and frankly to be faced. And I 
 emphasize this point because there is not lacking 
 a desire to dodge it and to substitute phrases 
 which no one quite understands but which sound 
 rather well. 
 
 Under this head come most of the profit-shar- 
 ing systems that are springing up like weeds all 
 
166 When the Workmen Help You Manage 
 
 over the country — the organization of foremen 
 in committees to give them more power, when as 
 a matter of fact they should usually have less 
 power; and the formation of shop committees 
 that have only the power of messengers. 
 
 These shells of remedies, these shadows of 
 improvements, only imperil the whole wage sys- 
 tem by providing arguments against its flexi- 
 bility. For it must be borne in mind that some 
 of the best brains in the world are now writing 
 and talking against what they call "wage slav- 
 ery. " I am not concerned with the sincerity or 
 the lack of sincerity in those measures which fail 
 to answer the question in issue. I am not much 
 concerned with the fact that an employer desires 
 to benefit his workers; for that is a somewhat 
 xmnatural attitude which usually comes from an 
 excess of paternalism bom of having too much 
 money. 
 
 The only attitude is for the employer to line 
 up on one side and the employees on the other. 
 The first will demand all possible work and the 
 second all possible money, and then they will 
 seek for a definition of the word "possible" and 
 perforce be satisfied for the time being. What 
 I object to in the half -measures is that they lack 
 common sense — they hope to obscure the real 
 issue. The true measure will meet the issue 
 
Preserving the Wage System 167 
 
 and give a true answer, and that answer will 
 give a working basis. 
 
 Profit-sharing does not adjust the relation — 
 it only obscures it by trying to presuppose a 
 relation that does not exist. The fallacies of 
 profit-sharing I will take up in the next chapter ; 
 but now I want only to observe that the wages 
 of capital and the wages of work have nothing 
 in common and they can not be shared — they 
 must be adjusted. 
 
 The fundamental proposition that the wages 
 either of capital or of labor must be derived 
 from work, and only from work, has had a se- 
 vere shock during the war. The governments 
 of the world, but more particularly of England 
 and America, have, by the heedless outpouring 
 of funds derived from borrowing, effectively 
 obscured, in the popular mind, the true deriva- 
 tion of money. 
 
 The Bolshevists say that money is unneces- 
 sary in an ideal society; and they issue it as fast 
 as the printing-presses will work, not under the 
 delusion that they are financing, but with the 
 deliberate intent of proving by the process of 
 inflation that money is of no use, after all. 
 They have so far succeeded that goods, and not 
 money, is the purchasing power in Eussia to- 
 day. 
 
leis When the Workmen Help You Manage 
 
 Our own Government started with a different 
 promise, but it has succeeded in convincing the 
 more ignorant employers and employees that 
 there is somewhere an inexhaustible fund which 
 will provide wages and profits. The soldier has 
 found himself well kept, and has seen millions 
 expended as freely as formerly dollars were 
 spent. The worker has found that his labor, or 
 indeed his mere presence in the immediate 
 neighborhood of work, is worth whatever he 
 chooses to ask ; while the manufacturer has gen- 
 erally discovered, and the exceptions are rare, 
 that it is difficult to uncover a method by which 
 he can lose money on war-time government 
 contracts. 
 
 The socialists say that the State can do all 
 things well, and the governments have tried to 
 prove that, if they could not do all things well, 
 they could at least pay for all things well. 
 
 There is no reason to believe that, with such 
 a vast amount of paper money in the world, 
 prices will lower materially for many years to 
 come ; each war in the past has moved the world 
 to a new price level. We should be foolish to 
 try to get back to pre-war wages or prices. The 
 effort would only promote revolution. What 
 we have to get back to is some relation between 
 capital and labor — not the old relation, but 
 
Preserving the Wage System 169 
 
 some new relation. Otherwise the two will 
 cease to exist as entities. 
 
 The opposition to capital is usually on the 
 ground that it gets more than its fair share. 
 Does it? In banking, money does commonly 
 fetch more than it should be worth and the 
 profits of banks are higher than they should be. 
 Even the Federal Eeserve banks, which are sup- 
 posed to be run at a minimum of profit, can not 
 help earning fairly large dividends. Therefore, 
 to the extent that capital demands two profits — 
 one for its mere presence and the other for its 
 employment in manufacture — ^it is greedy ; and 
 the anti-capitalist agitator is to some extent 
 right. 
 
 But the profits of capital in manufacture are 
 not large in ordinary times, and their elimina- 
 tion would not help the worker. If a company 
 with a capitalization of ten million dollars 
 makes ten per cent, upon its capital, the result- 
 ing million seems very large to the worker ; but 
 if that million dollars were added to the pay- 
 roll of most concerns large enough to earn 
 a million a year in legitimate business, the re- 
 sulting increase in pay would not be very large. 
 If the worker is underpaid he will bitterly re- 
 sent this profit, and rightly. Why not, then, 
 let the worker know how and why the profit 
 
170 When the Workmen Help You Manage 
 
 arises, and exactly what share he has in the 
 making of it? If it then appears that he is 
 underpaid, he should have more money. 
 
 I urge letting the worker know where he 
 stands in the industrial machine. The same 
 process will inform the employer where he 
 stands — for often the employer does not know 
 a great deal more about the process than do 
 his employees, else we should not find small 
 wage raises translated into very large raises in 
 the price of the finished article. 
 
 It will help in the process of mutual education 
 to dramatize the business by means of charts 
 based upon exact figures. I do not usually ad- 
 vocate charts, because they can not go into suf- 
 ficient detail to be of much practical help ; but 
 they do show tendencies and relations, and tell 
 a story that the actual figures can tell only to 
 the expert. These charts should show the cost 
 of materials, the cost of labor, the cost of admin- 
 istration, the cost of selling, and the final profit, 
 with a separation in each of the direct cost and 
 the indirect. 
 
 It will then speedily be shown where econo- 
 mies may be effected. The waste may be in 
 wages that do not represent work, or it may be 
 in too great a shop burden or in too much for 
 administration or selling — or it may be in all of 
 
Preserving the Wage System 171 
 
 these sectors. But, in any event, the working 
 is visualized, and a shop committee elected by 
 the workers can discuss, with intelligence, the 
 exact relations of the business. 
 
 I say a shop committee elected by the work- 
 ers. To appoint a shop committee from the 
 workers, or to appoint a committee of foremen 
 or superintendents, does not get at the trouble 
 at all. The idea is to let the men know what 
 they are doing in the business, and this is not 
 accomplished by a conference of their natural 
 enemies — the foremen. A committee made up 
 of foremen is merely another barrier erected 
 between the top management and the men, and 
 will be a source of unceasing trouble. The 
 "self-government" that finds its sole expres- 
 sion in an assembly of foremen might be likened 
 to a community governed in its ever^ phase by 
 policemen. If a man were arrested in such a 
 community, he would have to go to jail merely 
 to preserve "the honor of the force." 
 
 Since we know that a wage is not a fixed sum 
 of money, but a relation, the full knowledge of 
 the day-to-day working of that relation by the 
 employees themselves is the only method by 
 which they can be convinced of its fairness. 
 The worker generally realizes that five dollars 
 a day is no better now than half that sum was 
 
172 When the Workmen Help You Manage 
 
 before the war; but he does not realize that, by 
 the same token, a company profit of two hundred 
 thousand dollars a year is no better than a for- 
 mer profit of one hundred thousand dollars. 
 
 During the war several large banks were very 
 successful with a plan by which a committee of 
 employees each month set the figure of their 
 wages according to the price index, and it would 
 make for better understanding if the same idea 
 were introduced into factories. If the people 
 themselves fluctuated the wages, and knew why 
 they were doing it, one great source of friction 
 would be removed. And there will be no end of 
 opportunities for friction during the coming 
 long period in which the purchasing power of 
 money will be unsettled. 
 
 And, while it is the greatest possible spur to 
 the men to know that their fate rests largely 
 with themiselves, it is not at all bad for the 
 management also to be put on its mettle, and to 
 be compelled to show results to the men as well 
 as to the stockholders. 
 
 No one who has had experience with represen- 
 tation as opposed to absolutism will ever return 
 to absolutism. One of the best testimonials is 
 that of Sir Albert Stanley, the President of the 
 British Board of Trade, who had an experience 
 of many years in railroad construction in Amer- 
 
Preserving the Wage System 173 
 
 ica. Both of the instances he cites are out of 
 his work in the United States : 
 
 "I was identified with two separate under- 
 takings, one rapidly succeeding the other. 
 Each of these undertakings had in its employ 
 practically the same number of men — roughly 
 speaking, about thirty thousand. One of the 
 undertakings was, I suppose, really the last 
 word in trade unionism. Every single em- 
 ployee was bound to accept membership in the 
 union. The other undertaking was entirely free 
 from that sort of influence. So far as I knew, 
 not a single man identified with it had any con- 
 nection with any trade-union movement. 
 
 "What was my experience of that? 
 
 "In the trade-union undertaking provision 
 was made whereby any grievance could be 
 brought forward and carried right to the very 
 top, for the purpose of adjustment. It fre- 
 quently came to my notice, as manager of that 
 undertaking, that grievances on the part of the 
 men had a real, genuine foundation. It fre- 
 quently came to my notice that some sub-official 
 was not justified by the facts in some action he 
 had taken. As a result of the method which 
 existed, many grievances were remedied. 
 
 "No such machinery, at least adequate and 
 satisfactory machinery, existed in the other un- 
 
174 When the Workmen Help You Manage 
 
 dertaking. If there was any grievance, it lay 
 smouldering beneath the surface and having no 
 opportunity for adjustment. The result con- 
 vinced me that, whether it is done by established 
 trade unions or by securing the cooperation of 
 selected leaders of men,, whatever the system 
 may be, it is absolutely essential for the success- 
 ful conduct of a business in which a large num- 
 ber of men are employed that there should be 
 set up machinery that will secure to the men an 
 opportunity for bringing their grievances for- 
 ward and securing them against punishment on 
 the part of the ofiScials." 
 
 Sir Albert speaks only of the negative side of 
 representation. The positive is even stronger ; 
 for then the creative instinct, which I have 
 discussed in previous chapters, comes into play 
 — the men will not merely sit as a fault-finding 
 body, but as a real constructive force. And as 
 long as they know that they are getting a square 
 deal they will not care how much the employer 
 makes. The average employee is a fair-minded 
 individual, who becomes unfair only when he 
 thinks that he is being treated unfairly. 
 
 But why talk so much about money? Is the 
 paying of money, and then more money, the 
 solution for labor unrest? Not at all. The 
 war has proved that money is not even the big- 
 
Preserving the Wage System 175 
 
 gest factor; for the higher the wages, the 
 greater has been the unrest. But no wage sys- 
 tem can hope to survive unless there is a wage 
 to support it, and unless in addition the recipi- 
 ents of that wage are satisfied that it is a just 
 wage, and that it will increase as they have 
 more labor to give in exchange. Therefore, if 
 we remove the mystery mth which so many like 
 to surround the process of profit-making, we 
 can demonstrate in the open that the wage sys- 
 tem used is the best — the men can demonstrate 
 the fact for themselves. 
 
 If an employer imagines that he can not let 
 his employees know where and how money is 
 made, then he is not prepared to combat, with 
 facts, the arguments of those who oppose the 
 wage system. Indeed, his mystery lends color 
 to their frequently lurid statements and stimu- 
 lates the desire to destroy capital. 
 
 The Russian employer thought that the se- 
 crets of profit-making were too full of import to 
 be exposed to the gaze of mere workers. The 
 workers, thinking otherwise, searched for those 
 secrets with axes. They have not found them. 
 But the employer is guarding his secret either 
 in the grave or in a foreign land. Some one 
 else is guarding his plant. 
 
CHAPTEB IX 
 
 WHY PEOPIT-SHAEING PAILS 
 
 "Peopit-shaeing" is among the most alluring 
 phrases in the language. Because it is so pleas- 
 ant, it is used to describe the promised distribu- 
 tion of variously derived monies presumably 
 in the belief that the worker recipient is the 
 happier for the thought that he is getting money 
 coming and going — that is, first as a worker in 
 the form of wages, and second as a proprietor 
 in the form of dividends. 
 
 I have already touched upon profit-sharing. 
 Now let us see in greater detail whether it is a 
 panacea or an irritant. 
 
 It is of historical interest to know that the 
 first record of profit-sharing is found in the 
 "Metayer system," which, starting some time 
 in the thirteenth century, ran for nearly three 
 centuries in England. Under this plan the 
 landlord (it was an agricultural system) pro- 
 vided the land and one half of the stock; the 
 tenant returned one half of the product. It is 
 
 176 
 
Why Profit-Sharing Fails 177 
 
 of present interest to know that in tlie course of 
 time the tenant thought that he was giving up 
 more than the landlord was entitled to. He be- 
 gan to neglect the land, and finally the system 
 went out of practice. 
 
 It is well to note that this very first record of 
 what is called profit-sharing was a sharing not 
 at all of profits, but of production, with the ten- 
 ant taking the risks and the landlord the pro- 
 duction. Then each cast up his accounts to dis- 
 cover how much of what he got was really profit 
 — although the accounting methods of the time 
 were delightfully simple : that which was paid in 
 was a blessing, and that which was paid out was 
 a misfortune. 
 
 The next historic case is that of Leclaire — a 
 Paris painter and decorator. In 1842 he can- 
 nily calculated that if he could get his people to 
 save on time and material he could add some 
 seventy-six thousand francs to his profits. He 
 proposed to his men that if they made those sav- 
 ings he would give them a share of what would 
 otherwise be his individual profit. They did 
 not like the idea and refused to try it out ; but a 
 couple of years later Leclaire managed to put 
 the scheme into operation, and in the first year 
 divided a dividend of twelve thousand francs. 
 
 In this case the workers were distributed on 
 
178 When the Workmen Help You Manage 
 
 many small jobs all over Paris, and the plan 
 enabled the owner so to curtail supervision that 
 the profits, and hence the dividends, were always 
 fairly large. The staff never exceeded three 
 hundred, and never therefore passed beyond the 
 bounds of personality. Although the dividend 
 was expressed as profits, it was really an econ- 
 omy bonus, and it had so great a vogue that the 
 present owners of the old Leolaire establishment 
 still keep it in operation. 
 
 The Leclaire method differed from the usual 
 profit-sharing plan in that the workers took 
 their money in cash. The owner had no plant 
 upkeep to consider; he had no tools of great 
 value — the workers owned their own tools. His 
 function was merely first to get jobs, and then 
 to finance them, Thq establishment of a re- 
 serve was a purely personal matter, and the 
 items of depreciation and burden were trivial — 
 in fact, as far as I can learn, they did not at all 
 enter into the bookkeeping. The excess of in- 
 come over outgo was profit. 
 
 But, as the idea of giving the worker a share 
 in industry on the capitalistic plane spread, it 
 became more common to distribute some form 
 of stock or co-partnership certificates to them, 
 and then they received dividends on these at a 
 fixed rate or in some proportion to the amounts 
 
Why Profit-Sharing Fails 179 
 
 paid on the stock of those who had invested 
 money. 
 
 It early became apparent that any plan that 
 promised a fixed percentage of the profits pay- 
 able in cash was dangerous, because it did not 
 allow for the building up of a reserve or for the 
 exigencies of business. Out of two hundred 
 and ninety-seven firms that adopted some form 
 of profit distribution or stock participation in 
 England, up to the opening of the war in 1914, 
 only one hundred and thirty-two of the systems 
 are still in existence ; and of these forty-four are 
 gas companies, which operate under a somewhat 
 peculiar plan which I shall presently describe. 
 All other firms either gave up their plana or 
 went out of business from one cause or another. 
 Take a few random notes from a roster of the 
 profit-sharing in England — they are illuminat- 
 ing: 
 
 In 1832 Lord Wallscourt introduced profit- 
 sharing among his workmen, and continued the 
 plan until his death in 1849. His lordship's 
 idea was to reckon every worker as the investor 
 of as much capital as will yield at five per cent, 
 the sum paid to him in wages. 
 
 In 1865 Henry Briggs, Son & Company, col- 
 liery owners in Yorkshire, adopted a profit- 
 sharing scheme under which employees received 
 
180 When the Workmen Help You Manage 
 
 a moiety of excess profits (after ten per cent, 
 dividend had been provided for). Extra 
 bonuses were paid to men who invested in the 
 company's stock. A workmen's committee was 
 formed to advise as to methods of working. A 
 workman director was elected in 1869. The 
 system was abolished in February, 1875, in con- 
 sequence of a wages dispute. 
 
 In 1866 John Curwen, a music printer of 
 Plaistow, adopted a plan by which a moiety of 
 profits over ten per cent, was shared with em- 
 ployees and paid in cash as a bonus on wages. 
 The scheme was abolished in 1872 because 
 profits had fallen and the men demanded an in- 
 crease in wages to compensate them for the loss 
 of their bonus. 
 
 In 1866 the South Buckley Coal & Fire Brick 
 Company directed that shares to the value of 
 ten thousand pounds (nominal) be reserved for 
 their workmen. The company went into liqui- 
 dation before it had earned any profits. 
 
 In 1866 the Cobden Memorial Mills Company, 
 Ltd., of Sabden, Lancaster, reserved one fourth 
 of share capital for the workmen, who w6re 
 promised ' ' one half of the surplus profits above 
 ten per cent." This undertaking was unsuc- 
 cessful and was wound up in 1887. 
 
 In 1866 Fox, Head & Company, iron- workers 
 
Why Profit-Sharing Fails 181 
 
 of Middlesbrough, introduced a kind of profit- 
 sharing which ultimately took the form of a divi- 
 dend to employees of a moiety of all profits over 
 ten per cent. It was abandoned in 1874 because 
 trade unionists were debarred from profit- 
 sharing. 
 
 In 1867 John and Henry Gwynne, engineers, 
 of Hammersmith, agreed to divide among their 
 employees (who were to be non-union men) a 
 cash bonus equal to ten per cent, on profits. 
 This was abandoned as unsatisfactory after 
 three years. 
 
 In 1868 the shareholders of Prices' Patent 
 Candle Company, Ltd., at Battersea, authorized 
 the directors to distribute among employees one 
 third of the profits above a minimum sum fixed 
 by the company. In 1872 the employees de- 
 manded a nine-hours' day, which was conceded, 
 and the profit-sharing scheme was withdrawn. 
 
 In 1872 Troughton & Simms, instrument- 
 makers, of London, tried profit-sharing for one 
 year, and abandoned it because the majority of 
 the employees appeared indifferent to it. 
 
 In 1872 Spottiswoode & Company, printers, of 
 London, adopted a profit-sharing scheme under 
 which half of the surplus profits (over a fixed 
 percentage) were divided among certain em- 
 ployees — an average of three hundred and fifty 
 
182 When the Workmen Help You Manage 
 
 in number. In twelve years nearly twenty thou- 
 sand pounds was distributed. The plan was 
 discontinued in 1883 because profits fell so low, 
 in consequence of a rise in wages and increased 
 competition, that there was no surplus to divide. 
 
 In 1872 J. Gimson, engineers, of Leicester, 
 introduced profit-sharing, but discontinued it in 
 1879, when the profits fell below the minimum. 
 
 Beginning in 1872, W. Hill & Son, bakers, of 
 London, "for some years" paid a cash bonus to 
 its employees out of profits, but found no im- 
 provement in the men, and therefore abandoned 
 the practice. 
 
 In 1873 John Thomasson & Son, cotton spin- 
 ners, of Bolton, gave a cash bonus. In the 
 fourth year following, the bonus was nil. The 
 firm declared that improvement in work was 
 also nil, and abandoned the scheme. 
 
 In 1873 Joshua Hoyle & Sons, cotton weavers, 
 of Bacup, on conversion into a joint stock com- 
 pany, reserved a certain amount of stock as 
 "industrial partnership shares," and advanced 
 money to enable employees to purchase. The 
 scheme was popular in prosperous times, but 
 "with reduced dividends its popularity waned," 
 and in twenty years it had fallen to virtual 
 desuetude. 
 
 In 1874 Charles Rowley & Company, Ltd., 
 
Why Profit-Sharing Fails 183 
 
 carvers and gilders, of Manchester, allowed its 
 employees to take up shares, and paid such an 
 annual bonus on wages as "could be afforded." 
 The system was abandoned in 1876, because 
 many employees "took advantage of a rise in 
 the market price of shares and sold out at a 
 profit." 
 
 The foregoing are characteristic cases of the 
 vicissitudes of profit-sharing enterprises in the 
 course of ordinary business. They are largely 
 taken from the '60 's and 70 's, when England 
 felt the profit-sharing urge. I might give 
 dozens of other cases ; but if considerably more 
 than half of the firms who have taken up the idea 
 abandoned it after a trial of a few years, it 
 seems safe to conclude that it is not a panacea. 
 Of those who have kept on with it, the gas com- 
 panies show the longest life ; but with them the 
 circumstances are exceptional. 
 
 The outstanding example is the South Metro- 
 politan Gas Company, of London. Under an 
 act of Parliament, the company is entitled to 
 pay a dividend of four per cent., and to charge 
 three shillings and onepenny per thousand cubic 
 feet of gas. As an inducement to economy and 
 lower prices, the act further authorizes an 
 additional dividend of two shillings and eight- 
 pence per cent, for each reduction of onepenny 
 
184 When the Workmen Help You Manage 
 
 in the price of gas. That is, the dividends 
 depend upon how cheaply the gas is sold. To 
 help in this economy, the company agrees to pay 
 each employee three quarters per cent, extra 
 for each penny reduction in the gas price. The 
 company has gone as low as elevenpence below 
 the standard price, which means an employee's 
 dividend of eight and one quarter per cent. 
 
 The percentage of bonus has been revised 
 several times, and instead of paying in cash, one 
 half of the bonus is now invested in the stock 
 of the company and receives dividends on the 
 same basis as that of the investing shareholders. 
 The plan has been in operation since 1889, and 
 there has always been a dividend until the war 
 years, when, the price of gas rising to the stand- 
 ard limit, the bonus ceased. The history of the 
 experiment is, therefore, not completed, because 
 no profit-sharing plan can be said to have 
 proved its success until it has passed through a 
 period of " no profits. ' ' But it will be observed 
 that in this case — which is always cited as one 
 of profit-sharing — there is no real profit-shar- 
 ing, but a bonus on economy. The men are not 
 paid because of the profits; neither does the 
 amount depend upon the profits : they are paid 
 for the reduction of costs. 
 
 Another English scheme of considerable note 
 
Why Profit-Sharing Fails 185 
 
 is that of Lever Brothers, the soap-makers of 
 Port Sunlight, where, in addition to very elabo- 
 rate welfare work, the firm has a co-partnership 
 organization. After four years of service, any 
 employee who is above the age of twenty-two 
 years receives an allotment of certificates ac- 
 cording to. a rating of ability. Slackers get 
 nothing, and enthusiastic workers receive ten 
 per cent, or even more. New certificates are al- 
 lotted each year until a maximum of from two 
 hundred pounds to three thousand pounds is 
 held — the limit depending upon the rates of 
 wages. Dividends are paid upon these certifi- 
 cates in shares of the company, and the recipi- 
 ents may either sell these shares in the open 
 market or retain them and receive a five per 
 cent, dividend. If an employee leaves the com- 
 pany his certificates are canceled, unless he re- 
 tires from old age, when he goes upon the pen- 
 sion list and receives five per cent, stock in ex- 
 change. 
 
 The many American plans that are in opera- 
 tion at the present time are variations of the 
 English plans. In some cases the company sets 
 aside a proportion of the profits and pays a 
 bonus in cash ; in others the payment goes into 
 a fund, which is held until a certain date or con- 
 tingency, or which is treated as an interest-bear- 
 
186 When the Workmen Help You Manage 
 
 ing deposit and the interest paid. In most 
 cases there are provisions limiting participa- 
 tion until after a fixed number of years of serv- 
 ice, and also providing for forfeiture. 
 
 It is not unusual for a profit-sharing plan to 
 be in force among the executives of a company, 
 or even among the superintendents,-— I have in 
 mind several cases where the shares of profit 
 annually exceed the salaries, — ^but I do not in- 
 clude these plans because they have nothing to 
 do with profit-sharing as a solution for labor 
 troubles. Neither do I include the provision of 
 facilities for the purchase of stock, as in the 
 case of the United States Steel Company; for 
 this is a matter of thrift promotion through in- 
 vestment, and is not profit-sharing: the man is 
 paid on what he invests, and his interest is not 
 that of the worker, but of the capitalist. 
 
 If you will examine virtually any plan of pay- 
 ment that goes under the name of profit-sharing, 
 you will discover that there is little or nothing 
 of real co-partnership; but, boiled down, the 
 plan resolves itself into a gratuity system or, at 
 the best, a bonus system. The workers who 
 contribute their labor are never on a plane with 
 the stockholders who put in their money. 
 
 The only real profit-sharing plan that has 
 ever come to my notice is one which has been 
 
Why Profit-Sharing Fails 187, 
 
 operating for some years in Germany. The 
 owner of a large optical instrument works willed 
 the entire property to the workers. There are 
 no stockholders at all. The various employees 
 receive wages or salaries according to their 
 abilities, as in any establishment ; but at the end 
 of the year the profits are divided per capita — 
 the general manager gets a large salary, but his 
 share of the annual profits is exactly the same as 
 the office-boy's. That is real profit-sharing and 
 real co-partnership. Yet it is decidedly im- 
 practical for adoption by industry as a whole. 
 
 What I object to in the average profit-sharing 
 plan is a lack of sincerity. Instead of recogniz- 
 ing that capital and labor are different enti- 
 ties, each entitled to a wage, and that the prob- 
 lem is to balance that wage, the profit-sharing 
 plans seek to obscure that relation by saying to 
 the worker: "You are first entitled to a wage 
 as a worker ; and next you are entitled to a wage 
 as a capitalist." 
 
 When the share of the worker is invested in 
 the securities of the company — ^when he buys 
 his way into the company — he does stand as a 
 capitalist; but few human beings care to have 
 their investments forced upon them, and, purely 
 from an iavesting point of view, it would be bet- 
 ter for him to have his surplus in some other 
 
188 When the Workmen Help You Manage 
 
 company rather than to stand or fall entirely 
 upon the progress of his own concern. 
 
 In effect, in instituting the system the em- 
 ployer says to his men : 
 
 "The wage system has failed ; your wages are 
 not large enough. I do not know how to adjust 
 them according to your worth, so I will say that 
 you are responsible for the profits and will pay 
 you a rake-off on them." 
 
 But what the employer generally has in mind 
 is more like this : 
 
 "We are making big profits, and if your at- 
 tention is called to them you will want higher 
 wages. Instead of giving you those wages now, 
 and perhaps running into a period in the future 
 when profits will not be so large, I shall take 
 your mind off the profits by declaring that they 
 are yours as well as mine. I know that they 
 are not, but I must keep you happy and at 
 work." 
 
 As I pointed out in an earlier chapter, nothing 
 is to be gained by dodging the relation of capi- 
 tal and labor. The trade unions dislike all 
 bonus and profit schemes because of this evasive 
 quality, and the only union man whom I have 
 known to favor the idea is the English leader, 
 Mr. J. P. Thomas, and he takes a very different 
 ground from the employer. Mr. Thomas says : 
 
Why Profit-Sharing Fails 189 
 
 "The basic element of profit-sharing is that, 
 first of all, the worker receive at least a stand- 
 ard rate of wages. There should be no question 
 as to that; therefore I do not see why trade 
 unions should be at all opposed to the system. 
 In addition to the wages, the income of the em- 
 ployee is increased by a share in any profit that 
 may accrue. 
 
 "In profit-sharing or co-partnership the capi- 
 talist must yield the right of keeping all the 
 profits for himself. He must not expect that 
 Labor will cease to make demands for high 
 wages, or that it will cease to organize or com- 
 bine or belong to trade unions as freely as it 
 desires. On the other hand, Labor must not 
 expect that Capital will cease to manage, to ad- 
 ministrate, to organize, and functionalize, or 
 generally to conduct business." 
 
 The thought of this leader is that, after re- 
 ceiving the highest possible wages, labor is still 
 entitled to dip into the receipts of capital, re- 
 gardless of right, and probably in the way of 
 granting capital the right to exist. The nub 
 of the whole idea is that labor should have 
 something out of aU the money that is going 
 about. 
 
 But suppose that no money is going about? 
 Take the experience of Mr. Hugo Hirst, the 
 
190 When the Workmen Help You Manage 
 
 chairman and managing director of the General 
 Electric Company in England : 
 
 "I have personally, as far back aa twenty 
 years ago, made my first attempt. My inten- 
 tion was to try it in a modest way, and if suc- 
 cessful to extend it. I failed. In our then 
 existing Articles of Association, I provided that 
 ten per cent, of all profits, after an interest on 
 debenture and preference share capital had 
 been paid, should be given as a bonus to mem- 
 bers of the staff. For three or four years it 
 worked successfully; but it must be borne in 
 mind that during those four years the company 
 showed progressive results. 
 
 "About 1904, through no fault of the manage- 
 ment, staff, or workpeople, a period of depres- 
 sion set in for the electrical industry. The net 
 results of the company receded, with the result 
 that those entitled to bonuses received less. 
 With scarcely any exception, I met with dissatis- 
 faction and grumbling. Every man protested 
 he worked quite as hard, even harder, as the 
 times were diflScult, and each -one assured me 
 that the less favorable results of the company 
 were not due to him, and each made a point that 
 his mode of living, his expenditure, or his hope 
 of saving were calculated on Ihe bonus for that 
 
Why Profit-Sharing Fails 191 
 
 year not being less than that of the previous 
 year. 
 
 "The dissatisfaction and unrest created by 
 the reduced bonus became so apparent that 
 there was only one thing for me to do. I com- 
 pounded the maximum bonus of each man with 
 his salary, and stopped further bonuses to all 
 members who were in receipt of a salary of less 
 than four hundred pounds a year. The man re- 
 ceiving above four hundred pounds per annum 
 I continued to give bonuses, but at no fixed per- 
 centage. The bonus was an amount given a,t the 
 discretion of the directors, in accordance with 
 the result of the particular department in which 
 the employee was working, leveled up or down 
 more or less generously, according to the results 
 of the year as a whole. ' ' 
 
 Take this very able exposition of the essential 
 unsoundness as given by Mr. J. W. Sullivan, of 
 the International Typographical Union : 
 
 * ' Uncertainty is a disturbing factor in profit- 
 sharing — ^uncertain as to whether there ought to 
 be profits from year to year, uncertainty as to 
 what the profits actually may be in any one year, 
 uncertainty on the part of the employees as to 
 the employer revealing his true profits, uncer- 
 tainty as to the settled proprietorship of the es- 
 
192 When the Workmen Help You Manage 
 
 tablishment. In these uncertainties it is seen 
 that the interests and expectations of a force of 
 laborers are constant, — the highest obtainable 
 level in wages, hours, and working conditions, — 
 while the purposes of coming and going employ- 
 ers are variable, including selling out, either at 
 a sacrifice or at a boom profit. 
 
 "In this unsettled profit-sharing there usually 
 can be no hand-in-hand partnership of Labor 
 and Capital. The two interests work strictly 
 apart, each in its accustomed sphere. Capital 
 sees an opportunity, undertakes an enterprise, 
 buys site and plant, decides upon the scale of 
 productions, manages the workshops, watches 
 the markets, pushes sales, enlarges or dimin- 
 ishes the works, runs the risks — in all respects 
 making the mistakes or supplying the strokes of 
 talent that count in management. The indus- 
 trial wage-working employee, while supplying 
 the essential factor of more or less skilled ma- 
 nipulation of matter resulting in concrete pro- 
 duction, projects no effort into the field of plan, 
 production, purchase, and distribution." 
 
 My own observation of profit-sharing exactly 
 coincides in practice with the experience of Mr. 
 Hirst, and my theory with Mr. Sullivan. I 
 have yet to discover any plan that did not fail 
 when the profits ceased to exist, or even whei^ 
 
Why Profit-Sharing Fails 193 
 
 they diminished; and those plans that have 
 operated through many years — and there are 
 such — ^will usually be found to depend upon the 
 continuous success "of some specialty business or 
 upon the personality of the owner. Profit- 
 sharing can not be a panacea, because only 
 twenty per cent, of commercial adventures show 
 a profit. Before one can depend upon profit- 
 sharing to adjust labor trouble, one must be 
 assured of a profit. How many concerns will 
 tie themselves to a plan in which they are bound 
 to guarantee a profit forever and a day? 
 
 If, then, profit-sharing is not a panacea, is it 
 an irritant? 
 
 My own experience is that any periodical pay- 
 ment that is not directly connected with the 
 work in hand is somewhat of a mystery to the 
 average worker. He does not know how or 
 why profits are made. He does not understand 
 how it can be that, after he has done his work 
 well, a drop in the market price of raw material 
 may compel his firm to sell at a price lower than 
 cost. And he will not readily consent to a de- 
 preciation in his own earnings because of this 
 outside happening. *- 
 
 I recall one company that lost money by sell- 
 ing too much in distant markets where the pack- 
 ing and transportation absorbed more than the 
 
194 When the Workmen Help You Manage 
 
 profit on the goods sold. Should the worker 
 who made those goods be penalized for an exec- 
 utive's dearth of accounting acumen? Or why 
 should the worker in an establishment loaded 
 down with too large a mortgage be at a disad- 
 vantage with the man who is employed in a place 
 that has no funded debt? The interest on the 
 debt has to be paid before profits can be calcu- 
 lated. 
 
 Or, again, why should a premium in the way 
 of labor payment be given to the concern that 
 does not set up proper reserves? A company 
 setting up reserves will not be able to distribute 
 as much money as the improvident one — ^but it 
 will last longer. 
 
 The worker takes his share of profits or bonus 
 as an addition to wages, and he fixes his stand- 
 ard of living in accord with the highest rate, 
 making no provision for a lower rate. As long 
 as the rate keeps up, he is content to take the 
 money; but he is bound to be troubled, and 
 hence dissatisfied, when the rate goes down — 
 and if the scheme is honest the rate must fluctu- 
 ate. War years can not last forever. 
 
 When the rate does go down he is fair prey 
 for the agitator; and because he does not under- 
 stand why or how the profits were made, or why 
 
Why Profit-Sharing Fails 195 
 
 or how the losses were incurred, he is ready to 
 believe that he is the victim of some game. 
 
 I take it as axiomatic that any remuneration 
 of a fluctuating character, and derived from a 
 source unknown to tlie recipient, must be a cause 
 of eventual trouble. 
 
 Is it not better to meet the real question 
 squarely? 
 
 We all know that the efficiency of labor is only 
 one of the several factors that go to make up 
 successful business. It is the most important 
 factor in that, if the labor situation is right, it 
 will take some masterly stupidity to lose money. 
 But masterly stupidity exists — and always will 
 exist. 
 
 The worker should be paid, not a share of the 
 earnings of capital, but for his contribution; 
 and he is not entitled to have his contribution 
 lessened or augmented in money value by reason 
 of any force outside of himself. That is, he is 
 to be paid for what he does, and not for what 
 any one else may do for him. If the company 
 dividend is very large, the wages probably are 
 too low. But if that great profit is due solely 
 to exceptional managerial skill, then it is capi- 
 tal, and not labor, that is entitled to the reward. 
 And if labor knows how and why that profit 
 
196 When the Workmen Help You Manage 
 
 was made, it will be content with its reasonable, 
 fair share. 
 
 Because profit-sharing is a term, and not an 
 actuality, it can not satisfy. Any plan that is 
 ill founded in theory is destined to fail in prac- 
 tice, and I have always found that the monetary 
 rewards paid under the guise of profits produce 
 neither the production nor the contentment of 
 money that is frankly paid for what it is. If 
 you pay a man for the quality and quantity of 
 his production, or for the amount that he saves 
 in production, he knows the reason for his 
 money, and he knows that it is up to him to make 
 more. He does his work and he gets his re- 
 ward. He gets the reward so nearly coincident 
 with the work that there is no loss of connection 
 between the two. Before him is something defi- 
 nite — the exact reward that he will have for a 
 certain service to capital. 
 
 But under any scheme of profit-sharing the 
 profits can not rightly be ascertained oftener 
 than quarter-yearly, and are more accurately 
 calculated on an annual basis. Few men can 
 associate their work in January with a payment 
 in the next July or January. There is no incen- 
 tive, in the average worker, to labor hard to- 
 day for some coins that he can not see for six 
 or twelve months and the number of whiclj he 
 
Why Profit-Sharing Fails 197 
 
 can not know iintil then. The company divi- 
 dend and his own work have no connection, and, 
 because of the many other factors entering into 
 that dividend, they can have no dramatic rela- 
 tion. Hence he works without the idea of any 
 extra payment in mind, or, if he does have it in 
 mind, he will soon get it out of mind when he 
 sees his fellows doing poor work and yet expect- 
 ing to get the same extra payment that he gets. 
 The natural impulse is to drift into mediocrity. 
 Under a wage system the results are to be had 
 by adjustment — ^by taking the proper represen- 
 tatives of the workers into confidence and 
 frankly discussing all the facts. In most profit- 
 sharing plans the employer is not fooling the 
 workers; he is fooling himself. The worker 
 will be around for more wages the moment that 
 the share of profits drops — and he will be 
 around in no happy mood. 
 
CHAPTER X 
 
 STRIKING THE BAliANCE BETWEEN CAPITAIi AND 
 ' LABOB 
 
 In an earlier chapter I pointed out the neces- 
 sity of clearly comprehending that a solution of 
 the difficulties between the employer and the 
 employee is to be had only in the scientific en- 
 gagement of capital and labor. 
 
 First let us define "scientific." The science 
 that I mean is the application to the particular 
 set of facts of the knowledge gained by syste- 
 matic observation, experimenting, and reason- 
 ing, and the further coordination and arrange- 
 ment of that knowledge in view of the facts 
 gained in the particular investigation. 
 
 I can not too strongly emphasize that the sci- 
 entific engagement of capital and labor is not 
 the pressing of either of them into some mold 
 already made. The old medical practitioner ex- 
 amined his patient, let forth a torrent of learned 
 gibberish corresponding to the incantation of 
 still earlier times, and then always decided to let 
 some blood. The palaver was whatever he hap- 
 
 198 
 
Balance Between Capital and Labor 199 
 
 pened to liave on his mind at the moment; the 
 remedy was always the same — ^whether the pa- 
 tient had smallpox or gont. The best of the 
 modem practitioners have no jargon and nft. 
 fixed remedies ; they make a most careful diag- 
 nosis with the aid of the laboratory, and then go 
 forward, usually somewhat slowly, to the cor- 
 rection of the specific diseases or derangements 
 indicated. Only the quack prescribes the same 
 remedy for every disease. 
 
 It is the same with the prescriptions for in- 
 dustrial diseases : there are no sovereign reme- 
 dies — there is no one bottle to dose from. In- 
 stead, the remedies are to be applied only as the 
 diagnosis proceeds, and then gently, ever with a 
 readiness to acknowledge a naistake and to make 
 a correction. 
 
 I marvel at the temerity of those who instal a 
 system one month and get out a pamphlet on 
 its perfection during the next month. Adjust- 
 ments of value are not made in any such fashion. 
 Of course, the first distribution of profits is al- 
 ways a success — so is the distribution of Chris- 
 mas turkeys or any other largesse. It takes a 
 genius to achieve unpopularity while in the act 
 of giving something for nothing. 
 
 What we are aiming at is the proper reward- 
 ing and mental stimulation of both capital and 
 
200 When the Workmen Help You Manage 
 
 labor, so that the two may functioii together 
 to the best advantage and exert a maximum of 
 brains and brawn. 
 
 The definition of science and the statement of 
 the object dismiss at once the possibility of hav- 
 ing a rigid plan, and emphasize the desirability 
 of having only a few guiding principles, about 
 which the knowledge gained by investigation is 
 to be grouped. 
 
 Each iadustrial unit has an individuality and 
 a personality, which are to be studied and 
 treated on a purely individual basis. In one 
 town I had as clients four plants, each making 
 precisely the same article; but the varied per- 
 sonalities and traditions of these factories com- 
 pelled me to devise four quite dissimilar plans 
 in order that each company might have the ulti- 
 mate in resource. In the course of time those 
 four plants may come around to more or less the 
 same methods; but had they been forced into 
 identical molds at the outset, each would have 
 lost some features that were worth preserv- 
 ing. 
 
 I am not an advocate of that sort of revolu- 
 tion which overturns the good and the bad to- 
 gether, and neither do I believe in the elimina- 
 tion of individuality through drab uniformity. 
 Most people, for instance, are comfortable in 
 
iBalance Between Capital and Labor 201 
 
 low collars; but there are not a few who like 
 taU collars. It is quite the same with indus- 
 trial organizations. 
 
 Insisting that all wear the same height of col- 
 lar — presumably an average height — merely 
 **means that no one will be quite comfortable. 
 
 In the proper scheme of industry, the vital 
 force of individuality, both in the employer and 
 in the employees, is to be fostered and not 
 curbed. When we curb individuality we also 
 stifle originality, and make for a dead level, such 
 as England was threatened with before the war, 
 on account of the equality notions of the trades 
 unions. 
 
 The principles do not change, but the appli- 
 cation ever varies. The manufacturer who ex- 
 amines into any successful plan in the hope that 
 he can buy something ready made and fit to 
 wear is bound to have his trouble for his pains. 
 It would be a calamity for him to take a ready- 
 made plan, even though it did offer the alluring 
 inducement of being capable of being installed 
 overnight and without further thought. An- 
 other type of individual may examine a plan 
 and dismiss it with the usual "Yes, it seems 
 very good; but my business is different." 
 
 Neither man has the right view. The plan 
 could not be good in toto for the first man, but 
 
202 When the Workmen Help You Manage 
 
 it mil certainly have some features that both 
 men might well study. The real search should 
 be for ideas, and not for plans. The ideas are 
 but clay — raw material for the modeler to spend 
 many hours with. The ordeal of clear, con- 
 structive thought is not to be avoided. 
 
 With this introduction, let me describe two 
 very dissimilar experiments that I now have in 
 process. They are both intentionally being 
 kept plastic, to admit of changes as events seem 
 to require. They wiU serve to illustrate not 
 only the necessarily "catlike" approach, but 
 also how the "labor problem" ramifies through 
 every branch of the enterprise. In each case 
 the fundamental thought is eventually to gain a 
 working arrangement between the men and the 
 company that will seem fair to each. 
 
 The first ease is that of a machine-shop man-u- 
 faoturing automobile transmissions. The cus- 
 tomers are a few large concerns that will take 
 any amount of output, provided the prices are 
 reasonable. This is a clear case of production 
 controlling profit. The contracts cover long pe- 
 riods of time, and altogether it is a production 
 rather than a selling adventure. It is essential 
 at the beginning to determine whether the fac- 
 tory or the selling force controls — ^not for the 
 purpose of rewarding the one and neglecting the 
 
Balance Between Capital and Labor 203 
 
 other, but to discover what is the real motive 
 power. 
 
 An automobile, for instance, is a mixed manu- 
 facturing and selling proposition; you can not 
 continue to sell a poorly made car, but neither 
 can you JBnd a broad market for a first-class car 
 unless it be well sold. Ordinary canned-food 
 products are selling propositions ; the qualities 
 vasy to a great degree, but almost any canner, 
 with the will, can get out a first-class article — it 
 is the manner of selling that brings the sales. 
 
 This plant had the usual run of local labor 
 troubles — high wages and poor performance, a 
 great deal of spoilage, and, consequently, a 
 small profit. The labor turnover was high, but 
 no bad strikes had occurred. 
 
 The problem I faced was : 
 
 (1) To make more money for the owners 
 without raising the price of the product beyond 
 that justified by the current cost of labor and 
 materials. 
 
 (2) To enlist the interest of -the workers so 
 that they would put themselves into the work 
 and realize the first proposition. 
 
 To be perfectly frank, I did not start with any 
 idea of creating an indusitrial Utopia ; there was 
 
204 When the Workmen Help You Manage 
 
 no propelling force other than enlightened self- 
 interest. If the company were to achieve suc- 
 cess, then every person working for it must also 
 achieve success. That is, the company's people 
 must have a good reason for putting their brains 
 into the works. The best reason would be the 
 joining of every person, from president to jan- 
 itor, into a scheme by which not only individual 
 but also community efforts would be rewarded 
 adequately. The adequacy could not be estab- 
 lished by assertion alone, but by the reasoned 
 consent of the majority of those involved. 
 
 A detailed analysis of plant expense over a 
 period showed that the overhead, or shop bur- 
 den, per hour of productive labor was exceed- 
 ingly high. The overhead was high because the 
 efficiency of the productive labor was low. The 
 men were largely on piecework; but there is no 
 greater mistake than to suppose that simply be- 
 cause piece rates are in force the owner is only 
 "paying for what he gets." Unless the rates 
 are well set and the worker knows how to do his 
 work, the owner will be paying for a lot more 
 than he "gets," for the shop burden will be 
 unduly large per unit of production. 
 
 The first step, then, was to ascertain the exact 
 costs per unit of production and the percentage 
 of overhead to the productive labor hour. The 
 
Balance Between Capital and Labor 205 
 
 second was to teacli the men how to do their 
 work. 
 
 My engineers took certain individuals and ex- 
 plained to them exactly what we wanted to do in 
 the way of bettering their ability to make wages. 
 
 Take a typical case. This workman was on a 
 simple assembly, and did an average of four a 
 day, at the rate of eighty cents apiece. We 
 thought that he could as easily do ten a day, and 
 we told him that he could do the ten without 
 additional effort. To him the additional six 
 meant more money. He said he was willing to 
 try. 
 
 We had ten sets of parts placed on his table 
 the next morning. He performed in his usual 
 manner the first three formal operations upon 
 the castings. The fourth operation consisted of 
 drilling four 3/64-inch holes in each casting. 
 He picked up a cas'ting (weight forty pounds), 
 and started over to a drill-press twenty-five 
 feet away. We stopped him, and sent for a 
 portable drill. He had never tried the port- 
 able, through fear of breaking the drills. Our 
 man drilled several holes, and then the workman 
 did likewise — in one quarter of the old time. 
 
 Another operation was the aflSxing of brass 
 locks. This workman had formerly gone to the 
 stock-room for them. We had them brought to 
 
206 When the Workmen Help You Manage 
 
 him, thus saving more time. After each opera- 
 tion the process was talked over and unneces- 
 sary movements eliminated. In spite of the 
 time consumed in explanation, the ten assem- 
 blies were finished and on their way to the 
 paint-shop at five o'clock — although formerly 
 he had just been able to finish the four by five- 
 thirty ! 
 
 This man thought that a new rate of thirty- 
 five cents would be right for the assemblies un- 
 der the improved methods. We made the rate 
 forty c^nts, so that if he made ten a day he 
 would earn eighty cents more than under the 
 old schedule. Within a short time he was aver- 
 aging thirteen a day, and with less effort and 
 fatigue than before — and he was constantly on 
 the lookout for ways further to increase his pro- 
 duction without affecting its quality. 
 
 The overhead cost on this man was forty cents 
 an hour, or four dollars a day. Making four 
 assemblies a day at the eighty-cent rate gave 
 him a wage of three dollars and twenty cents, 
 and a resulting cost to the company of one dollar 
 and eighty cents for each piece. When he made 
 thirteen assemblies a day the burden expense 
 was no greater, but his wages were five dollars 
 and twenty cents, while the cost per assembly 
 
Balance Between Capital and Labor 207 
 
 to the company was only seventy-one cents. 
 This is why intelligently high wages pay. 
 
 My engineers went through the whole factory 
 in this manner, selling our ideas as we went, 
 not forcing them forward, and making sure that 
 no man made more money simply by forcing. 
 The extra money had to be earned by greater 
 skill — ^by eliminating waste, not by merely add- 
 ing brawn. Nothing is to be gained by inducing 
 spurts. 
 
 We did not at the outset take up these mat- 
 ters with shop committees, because the circum- 
 stances were such that the selling of a few men 
 (such as the man I have described) helped to 
 sell the whole force. Had there been opposition 
 we should possibly have worked up through 
 committees ; but it is better to educate the peo- 
 ple and fix rates ahead of the formation of rates 
 committees, so that when those bodies do come 
 into being they will already have a knowledge 
 of rate-fixing and waste elimination. 
 
 Thus far I have discussed the remuneration 
 of the worker as an individual, and have not 
 related him to the company or to his fellows. 
 I am not in favor of making individual compen- 
 sation depend solely upon community effort. 
 If all but two or three of the men in a group are 
 
208 When the Workmen Help You Manage 
 
 diligent, then the indolent will be forced for- 
 ward by joint rewards; but if all but two or 
 three are indolent, then more probably the in- 
 dustrious ones will slack down to the lower level. 
 I am in favor of stimulating both the individual 
 and the group whenever possible, and in this 
 case it was possible. 
 
 Now for the community reward. The indi- 
 vidual can not do his best alone. Materials 
 must flow to him, machines must be cleared, and 
 processes ahead of his must be well performed. 
 If preceding operations are ill done it will take 
 him longer to do his own work. It is not wise 
 to create an antagonism between departments 
 on account of the bonus, and some antagonism is 
 bound to result if one group 's share happens to 
 be cut down because of absences or slackness in 
 another group. This is the ever-present dan- 
 ger in having the community bonus of one de- 
 partment depend wholly upon the work of an- 
 other. You will recall how a volunteer fire com- 
 pany, in the old days, paid more attention to a 
 rival company than it did to the fire. The same 
 sort of thing may happen in the reckless encour- 
 agement of inter-department rivalry. 
 
 The community reward within a department 
 is obviously based on what it accomplishes. 
 The exact measure of that accomplishment is 
 
Balance Between Capital and Labor 209 
 
 the excess of production or quality over the 
 standard. In the factory I am considering the 
 standards were fixed in the course of the rate 
 adjustment, and were thus already in hand. 
 Suppose the individuals of the department so 
 exceed the standard as collectively to earn a 
 bonus of three hundred dollars. The depart- 
 mental pay-roll is one thousand dollars, and the 
 overhead expense is one hundred and fifty per 
 cent, of the pay-roll, or fifteen hundred dollars. 
 To the individually earned bonus the company 
 adds a collective bonus. The overhead does not 
 go up, and the company can easily afford to pay 
 an additional three hundred or six hundred dol- 
 lars in all for the large increase in production — 
 as was demonstrated in the man making the as- 
 semblies. 
 
 It is quite common in sharing a collective 
 bonus to consider only one class. Sometimes 
 only the executives share, while again only the 
 workers share. But no one class alone makes 
 the increases. Why not, then, reward accord- 
 ing to contribution? The workers already have 
 three hundred dollars for themselves ; give them 
 one half of the additional three hundred dollars, 
 and distribute the balance to those whose plan- 
 ning and foresight enabled uninterrupted work 
 to be done. To further inter-department ac- 
 
210 When the Workmen Help You Manage 
 
 tion, I reserve a small part of the administra- 
 tive bonus for the preceding department, be- 
 cause it puts the work through so expeditiously 
 as to permit the second department to function 
 to the limit. Since the succeeding department 
 would also pay a backward-looking bonus, the 
 income and outgo would, roughly, cancel each 
 other. But the principal point is that the so- 
 called non-productive workers in a department, 
 such as the foremen, the booth-men, and the 
 truckers, who make good work possible, should 
 share in the reward. 
 
 Thus all of the departmental people, in one 
 way or another, have had a cash incentive put 
 up to them and the opportunity given to earn, 
 over and above a guaranteed living wage, a sum 
 sizable enough to make effort worth while. The 
 next in line are the forces of general adminis- 
 tration. They too must have a reward, for 
 without their skill and planning the workers 
 could not exert themselves. The more one 
 studies business, the more the fact stands out 
 that the different departments of any concern 
 are very closely related. 
 
 I find it possible to assign many of the sec- 
 tions of the administrative force directly to 
 production divisions. The tool-room, for in- 
 stance, shares in the adroinistrative bonus of 
 
Balance Between Capital and Labor 211 
 
 such departments as it serves, and thus has a 
 direct incentive to see that proper tools, of the 
 right quality, are quickly provided. The ap- 
 portionment of the tool-room is to groups where 
 the battery arrangement exists, and on a per- 
 centage basis where the machines are of various 
 kinds. Whatever the disposal of the machin- 
 ery, some right basis for the share of the tool- 
 room can be easily found. 
 
 The store-room is treated in similar fash- 
 ion, and so on, until finally the only administra- 
 tors not taken into account are the superin- 
 tendent, the central planning department, the 
 cost department, and a few others, comprising 
 all together a trifling proportion of the whole 
 factory force. 
 
 A factory administration may be said to be 
 successful if the subordinate departments are 
 successful, and not otherwise. It is logical to 
 pay them upon the total factory bonus. They 
 get a percentage on the whole bonus earned by 
 the entire factory distributed in proportion to 
 wages; that is, the proportion that each wage 
 bears to the entire administrative wage. 
 
 On the cash side of the wage relation, still an- 
 other factor remains, which is important — the 
 wastage. The particular concern that I am re- 
 viewing does not pay for work that is rejected ; 
 
212 When the Workmen Help You Manage 
 
 bad work, therefore, carries its own penalty in 
 so far as the worker is concerned. And what he 
 loses is a community as well as an individual 
 loss. In another situation it might be desirable 
 to arrange a quality bonus and pay on the qual- 
 ity ; but that does not happen to be the best plan 
 here. 
 
 The mere withholding of pay is not enough. 
 That prevents a loss in actual wages paid, but 
 the overhead goes on just the same, and the com- 
 pany is out the material and the wear and tear 
 on the machinery — the company has gone 
 through all the motions of production and stood 
 most of the expense, but has nothing to show 
 except a damaged and unsalable article. Which 
 brings up the salvage department. 
 
 This department is one in which ingenuity 
 counts to a large degree. If work worth at cost 
 two thousand dollars goes over to the depart, 
 ment and it manages to get one thousand doUara 
 of good product out of it, obviously it is to thfl 
 interest of the company to pay a bonus calcu- 
 lated on the value of the work saved. My staff 
 contrived such a bonus, and further divided it 
 into sections, as in the case of the departmental 
 production bonus, and pays a part to the admin- 
 istrative side exactly as before. 
 
 But one material point remains. The worker 
 
Balance Between Capital and Labor 213 
 
 can save by producing more with less labor and 
 overhead cost per unit. He can also save by 
 the economical use of supplies, such as oil, 
 waste, tool steel, and the like. Our analysis of 
 expense gave data for a normal and for an ab- 
 normal expense, and from these we erected a 
 standard. If the department went below the 
 standard it gets an additional bonus. It makes a 
 difference to the company what the market cost 
 of supplies happens to be, but it is part of the 
 duty of capital to stand the loss on the market 
 as well as to make any profit therefrom — as has 
 been previously pointed out. The workman can 
 not control the market, but he can control his 
 own waste in supplies. His reward for such 
 control is not to be denied. 
 
 Thus far I have described what is little more 
 than the accounting machinery to reward effort. 
 It remains to be seen that the rates and per- 
 centages and bonus awards, as provisionally set 
 during the experimental stage, are not only 
 right, but that those affected by them think that 
 they are right. And here it is that representa- 
 tion counts; for no plan is good unless it has 
 features for insuring continued satisfaction. 
 Eepresentation is the best insurance. 
 
 The point of first conflict is commonly the 
 determination of what is and what is not good 
 
214 When the Workmen Help You Manage 
 
 work — ^^the inspection. Most workers consider 
 inspectors as their natural enemies — as cavilers 
 set up by the management to defraud honest 
 men. The quickest way in which to cure this 
 feeling is to ask the workers in each department 
 to form committees of their own, and to decide 
 disputes for themselves, giving the right to re- 
 move an incompetent inspector and elect an- 
 other. The cases in which they will elect a man 
 who promises to pass bad work are so rare as 
 not to be worth consideration. The men will 
 kick at a representative of the boss, but not at 
 one of their own number. The chief danger is 
 that their appointee will lean backward in an 
 effort not to appear to favor his friends. This 
 contingency is provided for by an appellate 
 committee of the whole works to whom serious 
 differences may be taken. 
 
 Starting with the inspection committees, we 
 have gone forward to committees on rates, on 
 discharges, on complaints, on efficiency, and on 
 absences, and are now working toward a kind of 
 plant congress in which all plant questions may 
 come up. I thoroughly believe that power 
 should be released only as the people are ready 
 for it, and not all at once. The gradual evolu- 
 tion toward the democratic ideal preserves in- 
 
Balance Between Capital and Labor 215 
 
 terest in the progression, and thns makes for 
 success. 
 
 It is too early to say how great is the success 
 in this plant. The exactly set piece rates and 
 the bonus payments have resulted in a wage 
 increase of about forty per cent, to the indi- 
 viduals, and at the same time the production has 
 increased in an even greater proportion. The 
 quality of the goods is better, and their cost is 
 so much lower that the company can, when the 
 time comes, cut its sales price considerably 
 without asking that lower wages or rates be 
 taken. But what is more important is that the 
 labor turnover is negligible, and the men are 
 deeply interested not only in their work but in 
 the general advancement of the company's in- 
 terest. They have a real partnership with the 
 company — one based on work and not on a pass- 
 ing sentiment. I think that they will go far. 
 
 The other installation I set out to describe is 
 also in the experimental stage, and therefore 
 also gives a splendid opportunity for the full 
 play of ideas. It is as different as possible 
 from the machine-shop, and serves to illustrate 
 how perfectly illogical it is to imagine that one 
 kind of system will do for any set of facts. 
 
 This company, which is of fair size, manuf ac- 
 
216 When the Workmen Help You Manage 
 
 tures paints and varnishes. Its trade is sea- 
 sonal, and it has many salesmen and thousands 
 of small accounts. Good paint is good paint. 
 One good variety differs so little in actual merit 
 from another that it is the sales organization, 
 and not the factory, that makes for success. 
 Unless the selling (which includes the advertis- 
 ing) is of the best, the factory product will not 
 be disposed of. 
 
 The quality of the paint is naturally affected 
 by the character of the mixing; but carelessness 
 does not so often take the form of making an 
 inferior paint as of using too much of an expen- 
 sive material. In good planning the quantities 
 to be used should not be left to the mixer, but 
 should be arranged in advance by the chemists 
 or the store-room. In the making of paint it is 
 the material and not the labor cost that is of the 
 highest importance. 
 
 The individual effort is so slight that it is not 
 worth while to work out individual incentives, 
 as in the machine-shop. Instead, my engineers 
 have arranged a collective departmental bonus 
 based upon the standard of production, and an 
 additional bonus based upon the economy of 
 operation. The first bonus is too complicated 
 to be detailed here, because the standards are 
 very numerous and take into consideration the 
 
Balance Between Capital and Labor 217 
 
 size of the orders going through, the kinds of 
 containers, the recoloring, and a number of 
 quasi-technical and technical points. The 
 workers themselves have proved of great help 
 in the setting of these standards, for they have 
 brought to the task their peculiarly expert 
 knowledge. 
 
 A part of the departmental bonus is paid to 
 the administrative divisions, just as in the case 
 of the machine-shop, and is distributed in the 
 same manner. In the machine-shop we have 
 not the problem of seasonal production, but 
 in the paint plant the production is wholly sea- 
 sonal and the cost of the material is so great 
 that the interest upon stored goods amounts to 
 a considerable item. This concern is now stor- 
 ing goods (having adopted the principle that 
 twelve months ' work must be given to the men) , 
 but only time will demonstrate whether this is 
 the best way. It may be found cheaper to pay 
 the men for doing very little during a period in 
 which they will not receive a bonus — for the 
 production will be below the standard. They 
 would, however, get an extra bonus in the busy 
 seasons, and thus their year-round wages would 
 be satisfactory. At no part of the year would 
 they be without at least a living wage. 
 
 Since I am presenting a going experiment and 
 
218 When the Workmen Help You Manage 
 
 not a finished thing, I am frank to say that on 
 this point my mind is open. The workers them- 
 selves and the sales department, acting together, 
 will probably solve the problem. 
 
 Where and how does the sales force fit into 
 the scheme? This will be developed in the next 
 chapter. 
 
CHAPTER XI 
 
 THE SYSTEM OF KEPBESENTATION 
 
 The exact position of the salesman in the in- 
 dustrial relation is anomalous. Until recently 
 far too much stress was laid upon selling, and in 
 some specialties the selling expense was out of 
 all reason. The motor-car industry at first got 
 into the hands of salesmen, and the market was 
 flooded with cars that were made to sell and not 
 to run. 
 
 The former tendency to over-reward sales- 
 men and to neglect factory people is now chang- 
 ing into a tendency to neglect salesmen and 
 pamper the workers. It is far easier to-day to 
 hire a good salesman than to hire a first-class 
 mechanic. Then, too, salesmen have no organ- 
 izations ; they do not strike, and they will often 
 stand an amount of abuse from a sales manager 
 which, if duplicated in the shop, would result in 
 a general walkout. 
 
 The real reason for the neglect of the sales- 
 man is that he became an economic absurdity. 
 Trade was getting to the point where sales man- 
 
 219 
 
220 When the Workmen Help Tou Manage 
 
 agers and advertising agents would state in all 
 seidousness that the entirety of business was 
 selling, and that, given a sufficient appropria- 
 tion and enough "pep," anything might be "put 
 over. ' ' We now know that there must be a mu- 
 tuality in any trade if it is to be continuously 
 worth while — that the article has satisfactorily 
 to meet a need or a desire. Hence the salesman 
 does not have to "put over" anything, but is 
 merely a medium for bringing the producer and 
 the consumer together. Making something "to 
 sell" bears the same relation to real industry 
 that fake oil stock selling does to legitimate 
 finance. 
 
 Our present scheme of distribution is very 
 faulty. There is no reason why an article 
 should double in price between the factory and 
 the ultimate consumer — as the average article 
 does. Therefore, though the position of the 
 salesman is not a settled one, in the present 
 scheme of industry he has a place, and a place 
 of great value. 
 
 The line between selling and manufacturing 
 is not drawn taut. For example, the air-tight 
 ■package for biscuits is both a selling and a man- 
 ufacturing proposition, and so is the sealed con- 
 tainer for ready-to-use handkerchiefs. In 
 paint the consumer at retail will probably buy 
 
The System of Representation 221 
 
 the best advertised and most conveniently 
 packed article. On the other hand, the pur- 
 chase of a milling-machine will be governed by 
 performance rather than by appearance. 
 
 The true duty of the salesmen (and advertis- 
 ing is only the salesman with his talk in print) 
 is to distribute the factory product to the best 
 advantage, by presenting the good points to the 
 largest number of people, and to advise the fac- 
 tory if the product is not meeting needs or 
 desires. As a link between the producer and 
 the consumer the salesman is essential in in- 
 dustry. 
 
 The sales force is not a thing apart and quite 
 unconnected with the factory. The two are 
 supplementary, although, as I pointed out in the 
 preceding article, one may be vastly more im- 
 portant than the other. Their cooperation is 
 essential. Delayed deliveries and defective 
 goods will undo the work of the best salesman, 
 while poor selling will leave the factory with 
 no orders to fill. Again, the salesmen may 
 oversell the factory, and, although this condi- 
 tion may be one of pride to the sales manager, 
 it is disastrous to the company, for the conse- 
 quent delays will make subsequent selling very 
 much harder. 
 
 I know of a president who desired to gain con- 
 
222 When the Workmen Help You Manage 
 
 trol of his company. The opposing forces were 
 centered in the vice-president, who was in 
 charge of production. The president, who was 
 a marvelous salesman, deliberately oversold the 
 factory to such an extent as to enable him daily 
 to protest to the vice-president that the com- 
 pany could not go on unless the productive de- 
 partments became more efficient. Eventually 
 he so harried the vice-.president that he sold his 
 stock and resigned. Then the president read- 
 justed the balance between sales and production. 
 
 In prpgressive companies the production peo- 
 ple are nearly always present at sales conven- 
 tions. That the sales and productive divisions 
 must cooperate is now a recognized principle of 
 good business ; but it is not generally recognized 
 that the best cooperation is to be had by the 
 organization of the salesmen on the plan of rep- 
 resentation, on the same lines as the shop com- 
 mittees, and having the sales committees with a 
 further representation upon the general repre- 
 sentative bodies, which may be created in the 
 evolution of shop autonomy. 
 
 The sales manager who declares that the sales 
 force is the whole thing in the business is often 
 the man who is the readiest to discharge a sales- 
 man ; and there is a race of sales managers who 
 pride themselves upon not keeping "dead ones" 
 
The System of Representation 223 
 
 — a "dead one" being a man wlio does not turn 
 in all the orders he should. In the case of the 
 factory we have seen that slovenly work is usu- 
 ally the result of bad management — ^that the 
 average worker, given a proper financial incen- 
 tive and a proper pride in his work, is a good 
 worker. By the same token, the average sales- 
 man, if given the right incentive and pride in his 
 work, will be a good salesman — perhaps not a 
 star, but suflSciently capable to create a valuable 
 good will for the company. 
 
 How, then, are the salesmen to be brought into 
 the general scheme of remuneration and govern- 
 ment, as described in the preceding article in the 
 case of the machine-shop and the paint factory? 
 Since the machine-shop example was taken be- 
 cause it presented so many production features 
 in strong relief, and not at all for its selling 
 side, it need not be further regarded. But the 
 paint company depended largely upon selling. 
 Its sales problems were immense, and it oper- 
 ated against many strong competitors of na- 
 tional reputation. All paint manufacturers 
 have, in addition, keen local competition — for it 
 does not take much capital to mix paint or var- 
 nish. 
 
 The company sold paint and varnish in many 
 forms and to many different kinds of custom- 
 
224 When the Workmen Help You Manage 
 
 ers; it sold in small containers for the retail 
 trade and in bulk to contractors and industrial 
 plants. The inethod of packing has a consider- 
 able influence upon the price, and the fluctua- 
 tions of the price of raw materials makes the 
 price of the finished product vary almost from 
 day to day. In large sales the price does vary 
 from day to day, and, in making contracts over 
 long periods the company had to calculate 
 against the loss of a rising market — just as does 
 the manufacturer of cotton, belting, or any 
 product that contains so great a proportion of 
 raw material as to make it responsive to the 
 commodity market. Again, varnishes are more 
 profitable than paints. 
 
 With all these facts in mind, the payment of 
 the salesman upon any commission basis calcu- 
 lated on the precise profit of the particular sale 
 was out of the question. The bookkeeping of 
 any such system would be enormous, and the 
 agent's end would not be satisfactory, because 
 his profits would fluctuate. The principle that 
 the reward should be for effort holds here. The 
 risks are those of capital and not of labor — for 
 the salesman is a laborer, even if he does wear a 
 white collar. A straight commission or a bonus 
 upon the dollar amount of sales would be wholly 
 unscientific. The worker is paid upon the de- 
 
The System of Representation 225 
 
 creases that he makes in the cost of production, 
 or, to put it in another way, in the opportunities 
 that he creates for profit. The salesman is to 
 be paid upon the profit that the company makes 
 upon his sales. 
 
 The gross dollar does not represent profit. 
 A line that is very easy to sell may and probably 
 will bring a small profit, while another line will 
 carry a large profit. The company may even 
 •have leaders, which it sells at little or no profit 
 just as "business-getters"; those will be ex- 
 ceedingly easy to sell and, upon a gross percent- 
 age, they will be the grades sold by the man on 
 the road, for they represent to him the largest 
 return for the least expenditure of effort, and 
 in this make his best interest opposed to the 
 best interest of the company. The right way is 
 to make the interests identical, and in the paint 
 company this was done by a point system. 
 
 For instance, a varnish on which the company 
 profit was twenty per cent, carried eight points, 
 while a paint with a twenty-five per cent, profit 
 carried only two points. In all, twenty classes 
 were thus formed. Instead, then, of posting the 
 sales records merely in dollars, they were also 
 posted in points, and the salesmen were paid on 
 point values. Beyond a certain number of 
 points the company could "^ell ?ifford, as in the 
 
226 When the Workmen Help You Manage 
 
 case of the worker going above the standard, to 
 pay a bonus. This, in turn, becomes something 
 in the nature of a sales quota. 
 
 It would be obviously unfair to put the same 
 bonus point in all territories ; for a poor sales- 
 man in a thickly populated section would have 
 no trouble in selling always above the quota, 
 while a good salesman in a sparsely settled ter- 
 ritory would hardly ever be able to attain the 
 quota. In fact, the second territory might have 
 been entered with the expectation of a loss for 
 several years. We therefore set reasonably 
 high, but attainable, standards for the good ter- 
 ritoriete, and give lower figures to the less de- 
 veloped sections, with the understanding that 
 the lower standards are to be raised as those 
 territories become better sold. We try to in- 
 sure that effort and not luck will determine the 
 individual sales incomes. 
 
 The value of points and the fixing of stand- 
 ards are quite as fertile a field for dissatisfac- 
 tioli as the settling of factory job rates and 
 standards, and here it is that representation 
 plays its great part. Instead of the sales man- 
 ager fixing the values and standards at his own 
 discretion, the initial values are set subject to 
 review by an elected committee. A further 
 committee had been elected to adjust all disputes 
 
The System of Representation 227 
 
 other than those conceming rates, and other 
 oommittees will doubtless form as the needs 
 arise. The plan is, not to force committees, but 
 to let them grow out of specific situations. 
 Eventually the sales-people will elect represent- 
 atives to a general legislative body, which will 
 come into being as the representative plan 
 grows. 
 
 In the sales department the men on the road 
 may be considered as the productive labor, and 
 the office people as the unproductive. It is the 
 planning and backing up by the non-sellers that 
 helps the sellers to do their best, and these non- 
 sellers should also have a reward analogous to 
 that shared in by the factory administration. 
 Hence it is planned to pay them a bonus based 
 on a percentage of the bonus earned by the ac- 
 tive salesmen, and thus the interests of the 
 office and of the sales force are made identical. 
 Often a lack of harmony exists between these 
 two branches; but having a common object 
 measured in money tends to promote harmony. 
 
 I have condemned profit-sharing except 
 among those who so managed the capital as to 
 make profits or whose mismanagement pre- 
 vented profits — that is, the president and other 
 high executive officers who have no direct con- 
 nection with any department, but upon whose 
 
228 When the Workmen Help You Manage 
 
 policy the increment to capital depends. These 
 men should share in the profits of the company 
 as such. In both the machine and the paint 
 companies the same plans are being carried out. 
 
 In each case seven per cent, of the net profits 
 are set aside for the stockholders, and then a 
 percentage taken for the executive officers and 
 their personal staffs. This percentage is not 
 fixed, but depends upon the expected earnings 
 of the company, just as' does the dividend on 
 the common stock. The men higher up know 
 the why and how of profits, and are in a very 
 different case from the workers or salesmen; 
 they are the actual managers of capital. I do 
 not favor a fixed percentage of profit for each 
 individual — say fifteen per cent, for the presi- 
 dent, ten per cent, for the vice-president, and so 
 on; for executives are to be rewarded, not for 
 the work they do, but for the success that they 
 achieve, and, no matter what work they have 
 done, they are not entitled to an addition to 
 salary unless they have made money for the 
 company. They are in quite the same position 
 as capital itself. 
 
 Further, the individual percentage system 
 causes an additional cut into capital's profit, 
 with the addition of every new executive. The 
 incentive should be to keep down rather tliaji 
 
The System of Representation 229 
 
 to increase the administration expense, and, if 
 the percentage is taken as a whole and then ap- 
 portioned according to salary, the executive ef- 
 fort wiU be toward keeping down the number of 
 people who must share in the executive profit — 
 incidentally keeping down overhead. A new 
 man will not be taken on unless it is pretty cer- 
 tain that he will add enough to the company 
 profit to cover the share that he will receive 
 from the joint fund. There is small danger 
 that the executives will try to get along with 
 too little assistance. • 
 
 I have outlined two specific plans that are in 
 operation, and that are, to date, entirely success- 
 ful. Both companies are without labor trouble 
 and have gained in production and in profit. 
 All of the members of v both companies are mak- 
 ing more money than they ever did before and 
 more than other people in similar positions. 
 
 "But," some one will object, "these are but 
 experiments. It is my policy never to experi- 
 ment. I leave that to the other fellow, and then 
 cash in on his mistakes. ' ' 
 
 I know that type of intellect very well. Not 
 long since I had the general manager of a com- 
 pany sayto me with conscious pride : 
 
 "I am sixty years old, and it has been my rule 
 never to accept a theory. I never deal with 
 
230 When the Workmen Help Yoti Manage 
 
 anything but facts. I have never tried any- 
 thing until some one else has proved it." 
 
 I am sorry that I had to make the answer 
 which I did, because it hurt, and it is not nice to 
 hurt an old man. I simply had to state the 
 truth. I said : 
 
 "Is not that the reason that your company 
 has been slipping back for the last ten years?" 
 
 At the present time all of us who are in indus- 
 try are trying experiments of one kind or an- 
 other. The most dangerous experiment is to 
 wait around until "things settle down." 
 
 The mind that insists upon all facts and no 
 theories is out of place in the industrial world. 
 Certain fish of positive and non-theoretical na- 
 tures may be caught in cornucopia-shaped nets. 
 They will enter the seeming horn of plenty, and, 
 having a fixed purpose, will not permit the 
 slight impediment of the net to alter a pre- 
 ordained course. They bump and bite at the 
 strands in regular * ' he-man ' ' fashion. It never 
 occurs to them to go back and go around. In- 
 dustry holds plenty of people with these fishlike 
 perspectives. 
 
 Or, again, some one may object: "This is 
 only efficiency engineering dressed up a little." 
 
 It is "efficiency engineering" in the right 
 sense, but not in the common acceptance of the 
 
The System of Representation 231 
 
 term. I share the feeling that an " efficiency- 
 engineer " is a dangerous person, and I have 
 seen the ruins of their work in many sections. 
 The useless card records and filing systems that 
 encumber offices throughout the country would, 
 if sold, go quite far toward paying the war debt. 
 
 Real engineering efficiency is something dif- 
 ferent. It is to be had in ways many of which 
 are so simple as to suggest the "I never thought 
 of that" cartoons. 
 
 For instance, in a certain preserving factory 
 the women were taking the "eyes" out of pine- 
 apples with the same eight-inch knives that they 
 used for the paring — and the executives won- 
 dered why the process was so slow and costly. 
 A short knife for the digging work was all that 
 was needed. 
 
 The engineering department of a works speci- 
 fied that thrust collars were to be made of ma- 
 chinery steel. These collars came through in 
 lots of five hundred and sixty, and they cost 
 $2,247.20 for material and fabrication — the ma- 
 chining was a costly process. The suggestion 
 that castings be tried out started a series of 
 experiments, which demonstrated that the cast- 
 ings had all the necessary strength. A lot made 
 from castings costs but $1,433.60 — clear saving, 
 which it does not take an accountant to estimate. 
 
232 When the Workmen Help You Manage 
 
 Another machine-sliop employed twenty-two 
 men and a foreman in the janitor force. These 
 men were supposed to keep the place clean, but 
 they did not. They roved about the factory, 
 sweeping whenever some foreman complained 
 about the condition of his floor. 
 
 Our engineers divided the factory into areas, 
 and made a study of the time it should take to 
 sweep each area — ^some required more and 
 others less cleaning. Then the areas were ap- 
 portioned to the actual labor involved, and the 
 men in charge were made responsible. If their 
 work was pronounced good by the foremen, they 
 received a bonus of ten per cent. The men, hav- 
 ing an incentive, used their heads as well as 
 their brooms and brushes. Instead of twenty- 
 two men, ten are now doing the work, and, al- 
 though they earn a bonus of one hundred and 
 thirty dollars a month, the cleaning service costs 
 exactly $1,072.50 per month less than formerly. 
 
 Eeal industrial engineering is not made up 
 of forms and records ; it is made up of experi- 
 ence and the application of that experience in a 
 common-sense way. The savings may or may 
 not be spectacular, but the method seldom is. 
 
 Do not let us get away from the thesis. We 
 are trying to find a way to live under the wage 
 system — to find the right balance between the 
 
t^he System of Representation 233 
 
 wages of capital and wages of labor. If we 
 throw away any part of capital or any part of 
 labor, it must come off the wages of one or the 
 other. 
 
 I found a plant which had wholly unnecessary 
 tools to the value of $13,200, and the works man- 
 ager was really somewhat miffed at having the 
 condition called to his attention. But suppose 
 that same manager had hired a youth to drop 
 out of the window a ten-cent piece every minute? 
 He could have given steady work to the young 
 man for about nine months, on an eight-hour 
 schedule, before he had thrown away the same 
 amount of money that he tossed off in tool 
 steel. 
 
 Had that works manager chosen the window 
 way of getting rid of money, he would have been 
 caged as a lunatic. Why should the business 
 control have been so loose as to permit him to 
 waste the money in less obvious fashion? If we 
 waste money we can not have enough profit 
 from industrial operations, and hence either 
 capital or labor is bound to be dissatisfied — 
 for, somehow, the notion always obtains that, if 
 enough money is not being made, it is because 
 the capital charges or the wages are too high. 
 
 Industrial unrest finds its greatest cause in a 
 dissatisfaction with the distribution of the pro- 
 
234 When the Workmen Help You Manage 
 
 ceeds of industry, and it is not possible to ar- 
 range a satisfactory apportionment unless the 
 proceeds are reasonably adequate. The waste- 
 ful business is always the low-wage business. 
 Larger sums to distribute can not come from 
 higher prices to the consumer : they must come 
 from better business methods. And no possible 
 way can be found to adjust the claims of labor, 
 unless the funds for its payment arise from sci- 
 entific business conduct. 
 
 The introduction and maintenance of scien- 
 tific methods is peculiarly the task of capital, 
 but they have often failed in the past because 
 they have been solely for the benefit of capital. 
 Greater skill in the worker has not always 
 meant higher wages for him. 
 
 Why? Simply because he has had no part in 
 the conduct of industry — in the conduct of that 
 part which concerns him. Hence the tendency 
 to resist better methods. Industrial engineer- 
 ing was incomplete in that it did not sufiBciently 
 consider the human factor. (Of course I ex- 
 clude the mere "system" installers.) 
 
 It is to be conceded that we must have lead- 
 ers in industry, and I have no doubt that, if all 
 leadership were wise, the led would be entirely 
 satisfied. Bolshevism does not seek to abolish 
 leadership. In the German industrial order, in- 
 
The System of Be presentation 235 
 
 finite pains were taken in the training of execu- 
 tives, and their conduct had much to do with the 
 sentiment of the German worker generally that 
 he "was getting all that was coming to him." 
 The worker does not feel that way here or in 
 England, because so little attention has been 
 paid to training executives that they are not al- 
 ways efficient leaders. Our executives usually 
 either work their way up, or are dropped in 
 from the top, and in neither case is any special 
 attention given to the mental outlook that the 
 position demands. Therefore exact cost ac- 
 counting is far from being usual, the broader 
 views of costs are infrequent, and much rule-of- 
 thumb direction and regulation goes on. Arbi- 
 trariness is the companion of ignorance, and not 
 infrequently arbitrariness will seek to curry 
 favor here and there by playing favorites. No 
 matter how conscientious may be the men at the 
 very top, it is the men who come into contact 
 with the workers who determine the spirit of 
 the place. 
 
 The petty rules that are made seemingly only 
 for the sake of making rules, the angry firings 
 (often to cover up the work of the foremen), and 
 the haphazard setting of piece rates, all con- 
 tribute to create in the worker an attitude ad- 
 verse to the employer. Take, for instance, this 
 
S86 When the Workmen Help You Manage 
 
 experience with piece rates that was had by a 
 member of my organization who once worked 
 in a machine-shop : 
 
 "There was the matter of piece-work rates. 
 When a new job came along, the foreman tried 
 out a few pieces, and based the rate upon what 
 he considered a fair working speed. If the rate 
 was high, we planned our effort to stretch the 
 job. If we didn't, the rate would be cut. If 
 the rate was low, we raised a howl, and gener- 
 ally got our increase. It was "heads I win; 
 tails you lose." The company always lost. 
 
 "My rate was twenty-seven and one half 
 cents an hour. This was several years ago, and 
 admittedly I make no claim to have been the 
 best machinist. I was very young, and, despite 
 my rapidly increasing technical education, I 
 was 'green' in practice. Yet on many jobs I 
 was able to make forty cents an hour consist- 
 ently and still did a satisfactory job. As a rule, 
 I worked up a 'lead' of from one to three dol- 
 lars, which meant that toward the end of the 
 week, if I did not feel energetic, I could appear 
 busy and eat up the lead. When the lead was 
 gone, it was comparatively simple to work up 
 another. I recall one of my neighbors who at 
 one time worked up a lead of fifteen dollars by 
 prodigious enterprise. Immediately thereafter 
 
The System of Representation 237 
 
 several rates were cut througlioiit the shop. 
 
 "Sometimes I tried to turn in two dollars and 
 eighty-five cents or two dollars and ninety cents 
 as a day's wage, but the job foreman would 
 warn me that, if I did, the rate would be cut. 
 
 "Throughout that immense plant — ^though, 
 of course, to a varying degree in different de- 
 partments — production was throttled. Yet, as 
 I have said, that plant is the presumed leader in 
 its industry. 
 
 "Since that period of servitude, I have taken 
 many rates in many different shops, and have 
 arrived at several conclusions, principal among 
 which is that the average factory head does not 
 know whether his rates are equitable or not, and 
 has not the means easily to find out; that he 
 relies too much upon his foremen's knowledge, 
 which is often superficial ; and that, in nine cases 
 out of ten, tlie company is the sufferer — not be- 
 cause the men are unwilling to work hard and 
 earnestly, but because their production is stifled 
 by the knowledge that the rates are and will 
 continue to be inequitable." 
 
 That experience is characteristi'C. Although 
 scientific engineering may fix right rates, it can 
 not alone convince the workers that those rates 
 are right. The unjust practices are of too long 
 standing for the men to take anything on faith 
 
238 When the Workmen Help You Manage 
 
 in almost any department of manufacturing. 
 Scientific industrial engineering came into tlie 
 shop from the top, and was resisted. It can as 
 well come up from the bottom — that is, by- 
 means of the representative plan that I have 
 sketched in various places, but on which I have 
 never been entirely specific, for the reason that 
 the legislative system should be no more com- 
 plicated than the situation needs. The flexible 
 English Constitution, and not the rigid Ameri- 
 can one, is what the shop needs. 
 
 No representative system will be wholly suc- 
 cessful at first; the men will not welcome it. 
 What they will do is to keep a sharp lookout for 
 "stool pigeons," and then cannily watch the 
 working. The experience of General Disque 
 with the lumbermen of the Northwest is illumi- 
 nating in this connection. 
 
 General Disque was charged by the War De- 
 partment to increase the production of lumber 
 for airplanes to about twenty-five hundred per 
 cent. He found the employers and the laboring 
 people at swords' points. The two had fought 
 for years, and both had taken the occasion of the 
 war to profiteer — the one in prices and the other 
 in wages. A strong anarchistic and I. W. W. 
 element existed, and sabotage was frequent. 
 When the general proposed that the workers 
 
The System of Representation 239 
 
 elect representatives to a meeting with the em- 
 ployers, and that this meeting settle all disputes, 
 the men were skeptical. If General Disque had 
 not previously gained the confidence of his men, 
 they would probably have refused. But they 
 consented to elect delegates, and they selected 
 the men who had positive ideas on these points : 
 
 (1) A fixed determination to discover at the 
 outset whether there was any "nigger in the 
 woodpile" — whether the operators were trying 
 to put something over. 
 
 (2) That they were not free agents, but rep- 
 resentatives, and solely responsible to their con- 
 stituents, with whom they would frequently con- 
 sult. 
 
 (3) That a full year's work must be assured, 
 and that improvements in the industry must be 
 made in order to attain this steady employment. 
 
 It took six months to establish the fairness of 
 the intentions in the minds of the delegates, and 
 the most convincing argument proved to be the 
 insistence by General Disque that the operators 
 have exact cost systems installed, and that all 
 the figures be open to the delegates. The exhi- 
 bition of the cost sheets contradicted the asser- 
 tions of the agitators that the operators were 
 making fabulous sums. 
 
240 When the Workmen Help You Manage 
 
 Another mail of wide experience in industrial 
 matters has never found it necessary to exhibit 
 cost sheets, for the reason that he gives : ' ' The 
 men, once they are convinced that you are play- 
 ing fair, have no interest in what you make — ^if 
 they are making all that they think they 
 should." 
 
 My own experience is that cost sheets are 
 rarely asked for ; but my advice is that the cost 
 records should be exact, and that they should be 
 exhibited if a demand is made. It is my belief 
 that before long the submitting of accounts to 
 the employees will be a matter of course, and 
 that it will then be a great stimulus to better 
 and more economical work. The creative in- 
 stinct is not fully satisfied until it knows all 
 about what it is creating, and, human-like, if 
 any one avenue of information is denied, that 
 and that alone is desired. In the full fairness 
 of purpose, an employer will not care to with- 
 hold any information that his employees desire ; 
 but, at the same time, caution is to be used in 
 bringing up matters before the employees them- 
 selves are ready to comprehend them, or before 
 the machinery of self-rule is in full working 
 order. 
 
 It is not because I am afraid of the actions of 
 the employees that I do not favor an immediate 
 
The System of Representation 241 
 
 sHft to committee government, but merely be- 
 cause large management changes are always 
 provocative of waste, and what we are after is 
 the avoidance of waste. 
 
 In serious situations, undoubtedly the full 
 measure should be giveii at once, for then there 
 is nothing to disturb — the disturbance has al- 
 ready taken place. There are few strikes that 
 can not be settled by the full exhibition of facts 
 and an offer to work out a satisfactory basis 
 together — provided the worker's own investiga- 
 tion of the offer proves to him ite good faith, as 
 in the case of General Disque and the lumber- 
 men. 
 
 The exact machinery of government should 
 be whatever suits the circumstances — the sim- 
 pler always being preferred to the more com- 
 plicated. The chairmen of the various shop 
 committees may constitute the central body, or 
 that body may be elected directly from the de- 
 partments. In no case, however, should the em- 
 ployer have any part in the election of repre- 
 sentatives, and neither should cognizance be 
 taken of any debates held in the committees or 
 assemblies — the right of free speech is to be 
 held sacred. 
 
 It is advisable also that in the workers' as- 
 sembly there should be no foremen or superin- 
 
242 When the Workmen Help You Manage 
 
 tendents, or other higher authorities, who might 
 tend to curb or to punish the free expression of 
 opinion. But, since the foremen and superin- 
 tendents have rights, they too ought to have a 
 committee or assembly, which can act concur- 
 rently with the workers' meetings. 
 
 Over all the executives should, for the pres- 
 ent, retain the right of veto. But I have never 
 known an executive who found it necessary to 
 exercise the veto! Out of some hundreds of 
 oases of quasi-democratic shop government, I 
 have yet to find a radical measure that passed. 
 
 The supervision of foremen is one of the 
 hardest parts of industry. A few foremen are 
 intentionally unjust; a considerable number 
 have gained their places by "pull" and are in- 
 competent. What is to be done with them? It 
 is not right that a departmental foreman should 
 be brought to trial before a committee of his 
 own department, for that inevitably means wire- 
 pulling and politics. The better method is to 
 let the central workers' body and the foremen's 
 meeting appoint a joint committee to investi- 
 gate all complaints against foremen; that joint 
 body should have the power to recommend dis- 
 missal, and the two parent bodies should have 
 the power to dismiss — subject, of course, to the 
 executive veto. 
 
The System of Representation 243 
 
 These several legislative bodies and immerous 
 committees open up a legislative side of indus- 
 try with which the average organization has not 
 officers to deal. There are minutes to be copied 
 and filed, reports and bulletins to be published, 
 and no end of other administrative details too 
 great for any of the working members and for 
 which they are unlikely to have the training and 
 equipment. For this purpose an industrial re- 
 lations secretary is advisable, and care should 
 be taken to avoid the hand-shaking, welfare- 
 worker type. In the Filene store the secretary 
 is elected by the workers, although paid by the 
 corporation. Certainly every precaution is to 
 be taken to avoid the accusation that the secre- 
 tary is a spy of the management. 
 
 In any plan, the management can afford, when 
 any point of organization or power arises, to,, 
 give rather than to withhold, and to avoid 
 rather than to make rules. If workers are 
 merely given a larger cage, they will be almost 
 always pressing at the bars ; but if the bars are 
 taken away, they will give themselves to the 
 work in hand. It is a saving grace of human 
 nature that responsibility breeds conservatism. 
 
CHAPTER XII 
 
 IN CONCLUSION 
 
 Having wandered somewhat deviously here 
 and there among the mazes of that which we 
 call, for want of a better phrase, the relation 
 between capital and labor, what have we found 
 out? 
 
 We know that it does not help the relation to 
 call either capital or labor by names that are 
 softer and less sheer; that capital is capital 
 and labor is labor; that wages are wages and 
 profits are profits. The relation is basically a 
 monetary one, and is social only in the same way 
 that a department-store finds it good business 
 to provide chairs for the visitors, so that, in- 
 stead of going home when tired, they may rest a 
 while and then buy more. I can not too bluntly, 
 too crudely, too brusquely give this aspect of the 
 relation. 
 
 A man goes into business to make money. 
 He hires a man to work for him in order that he, 
 the employer, may make more money, whUe the 
 man who is hired takes the employment, not 
 
 244 
 
In Conclimon 245 
 
 primarily tbat his employer may make more 
 money, but that he may make money himself. 
 From then on the problem becomes, whether 
 these two will make more money together or 
 apart. They may decide that their personal 
 characteristics are so endearing as to be worth 
 more than money. They may decide that their 
 association affords mutual educational or other 
 cultural advantages not to be valued in money. 
 But always the fundamental monetary relation 
 remains — the rest is only embroidery. 
 
 That fundamental relation must remain if the 
 capitalistic system is to endure. 
 
 I prefer to use the most objectionable words, 
 such as "capitalistic system." The phrase is 
 accurate, even though the word "capitalist" has 
 in a degree become odious. We must call things 
 by their right names. In England, for instance, 
 a gentleman will rarely accept a sum of money 
 as compensation for his services; but he will 
 cheerfuUy pocket an honorarium — the fiction 
 being that the services have not been performed 
 for money, but that after they have been per- 
 formed the recipient is so grateful that a purse 
 fairly wells out of him. Such verbal dodgings 
 do not alter the cold facts, but they do confuse 
 our view. And we want a clear vision. 
 
 If one employs and another is employed, in 
 
246 When the Workmen Help You Manage 
 
 that particular relation we have capital and 
 lahor. They are in no sense partners, hut are 
 buyers and sellers. If they are good buyers 
 and sellers, if they are skilful, forehanded, and 
 know each other, they will be associates. They 
 will remain associates just as long as they find 
 their association mutually profitable and agree- 
 able, and no longer. That is the system under 
 which we are living to-day in the United States 
 — the capitalistic system. 
 
 There is another system, in which men do not 
 associate themselves for profit, but are content 
 to labor only for the right to live. They dedi- 
 cate their services upon a general stipulation 
 that they and all their fellows shall receive from 
 a common sources each a like amount of crea- 
 ture comfort. This latter plan, with various 
 backings and fillings and a plaintive desire that 
 it be done neatly and nicely, is socialism. 
 Dropping the circumlocutions, abandoning the 
 hope of having both the penny and the cake, it 
 becomes what we to-day call Bolshevism, simply 
 because the Kussians applied that term to their 
 most direct direct-actionists. 
 
 The first system gets down to production for 
 profit, the second to production for use. The 
 first needs the relation of capital and labor, 
 the second dispenses with that relation. 
 
In Conclusion 247 
 
 If the capitalistic relation is to continue, cap- 
 ital must live, and so must labor. In the past, 
 in many instances, capital has tried to destroy 
 the relations by not paying living wages; but, 
 since there are a great many more people in 
 the group called labor than in the group called 
 capital, and the human body is a wonderfully 
 stalwart thing taken in the mass, capital never 
 did succeed in destroying the relation by getting 
 rid of its servitors through attrition, or, to be 
 more accurate, through malnutrition. Now the 
 shoe is on the other foot, and the people who 
 labor for hire are threatening to destroy capi- 
 tal — ^not by the respectable though wearisome 
 process of starvation, but by the unrespectable 
 but exciting torch and bullet. 
 
 The tide of this battle, to be sure, has been 
 ebbing and flowing through many a year, or at 
 least since the time when gunpowder withdrew 
 from the few the armored mastery of the many. 
 An angry peasant, armed only with a club, had 
 little chance of beating up the excellent steel 
 boiler that concealed his lord and master ; while 
 the lord and master, traveling about in his tank, 
 could dispose of the peasant with equanimity. 
 But, armed with a rifle and seated comfortably 
 in a tree, the peasant might most expeditiously 
 speed his lord and master to kingdom come. 
 
248 When the Workmen Help You Manage 
 
 So now we come to the nub of the matter. 
 The physical force is not with the employer, 
 but with the employee, taking the situation 
 broadly. The ultimate might is with labor and 
 not with capital. 
 
 If capital is to survive, it is because it is good 
 and right and performs a function that gives it 
 a title to life. It will live if it can demonstrate 
 that the worker — the man who has not capital — 
 gets more in association with it than without it. 
 The worker must get not only more money but 
 more dignity of position, more opportunity for 
 self-expression, and a wider scope for creative 
 energy — in short, greater comfort and cultural 
 advantages with than without. That is the 
 labor problem. 
 
 I have pointed this out in foregoing chapters 
 in more concrete form — that is, more concretely 
 in that I have tried to give a specific example at 
 each point of progression. But I am insistent 
 that when one grasps the fundamentals one is 
 not led away from the great throbbing cause by 
 mere embellishments — such as methods of hir- 
 ing and firing, employment policies, welfare 
 work, and the no end of incidentals that are so 
 much easier to grasp than the actual condition 
 in all its coldness. 
 
 Here in America we have not in any large 
 
In Conclusion 249 
 
 degree, as yet, been forced to consider this ques- 
 tion. It is true that the I. W. W. has made 
 large progress, but essentially we in America are 
 on the fringes of the fight. Abroad capital and 
 labor are face to face. In Eussia capital has 
 been destroyed. It is asking what it may do to 
 be saved in Italy, France, Austria-Hungary, 
 and — in a greater degree than is generally 
 known — in England. We may or may not be 
 next called up. That remains largely with us. 
 And thus my somewhat academic prelude gets 
 down to the hard facts, which are not to be 
 dodged. 
 
 I most firmly believe that the capitalist sys- 
 tem is the best, if it is grasped in its entirety — 
 if it is understood, and if it is administered with 
 skill and intelligence. I think it is perfectly 
 possible to balance the relations between the 
 man who works with his money and the man who 
 works with his hands, so that each will be con- 
 tent, not with his share, for that is impossible, 
 but with the fairness of the division, and will be 
 entirely satisfied that, when a dispute arises, it 
 is the detail and not the system that is at fault. 
 
 I think that this end is to be attained not by 
 confusing what each is after, but by a mutually 
 scientific and ever flexible give and take with 
 sufficient safeguards to insure fairness. 
 
250 When the Workmen Help You Manage 
 
 What, then, does capital want, and what does 
 labor want? Capital wants an adequate re- 
 turn upon the money it invests. ''Adequate re- 
 turn" is determined by the circumstance of the 
 particular case, and is a variable factor, depend- 
 ing upon the then purchasing power of money 
 and upon the risk involved. In other words, 
 capital wants to be able to live decently, with a 
 certain amount of leisure and with a certain 
 additional increment to guard it against the 
 hazards of its adventures. Capital is human. 
 
 What does labor want? Nearly the same 
 thing that capital waats. It, too, is human. 
 But it lacks and therefore wants a dignity, a 
 right of expression, and the opportunity (just 
 as does capital) to reap a considerable material 
 reward for exceptional skill or forehandedness. 
 
 It is trite indeed to say that capital is useless 
 without labor, and labor without capital. It 
 is, of course, true; but it is to be remembered 
 that they perform very different functions. 
 Capital provides the materials and implements 
 and the skill of management, which includes the 
 purchasing of the raw product and the disposal 
 of the finished. Labor does the work of trans- 
 formation or fabrication, l^hey are comple- 
 mentary forces. 
 
 In modern systems of manufacture there has 
 
In. Conphtsion 251 
 
 be&n a growing tendency to make the man the 
 attendant of the machine, and to preclude the 
 exercise of individual control or expression. 
 This is to stifle the great creative side of the 
 man — to employ something less than the whole 
 man. 
 
 For instance, what we know as repetitive 
 operations go to make up a considerable part of 
 manufacture, and in some large companies this 
 has been carried so far that a workman not only 
 performs a very small portion of what used to 
 be regarded as a single operation, but so infi- 
 nitely is the work subdivided that it is more than 
 probable that the individual workman does not 
 even know, in more than perhaps a very general 
 way, the eventual destination of the part on 
 which he is working, or exactly what is its func- 
 tion in the finished product. 
 
 His only knowledge of whether or not he is 
 doing his work correctly comes from the accept- 
 ance or rejection of his pieces on inspection. 
 He has no chance whatever to exercise the crea- 
 tive force of craftsmanship. 
 
 Therefore a part of the adjustment of the re- 
 lation — and by no means a small part — ^is the 
 restoring of interest in the work. The work it- 
 self must hold this interest, not merely the sur- 
 roundings ; and it is not at all impossible so to 
 
252 When the Workmen Help You Manage 
 
 order matters that the man may become master 
 of his machine, using it as a great tool, instead 
 of being an undignified subject of the machine. 
 
 It is possible, in most instances, to permit a 
 man to know exactly what he is doing, to let 
 him Know that his part in the scheme of manu- 
 facturing is an essential one — that, although he 
 may be but making a washer, unless this washer 
 is exactly right the entire completed machine 
 may fail properly to function. Further, he may 
 be provided with methods of judging his own 
 record, and, although he can not perhaps exer- 
 cise the full craftsmanship of the days of hand 
 tools, he can attain the mastery of his machine ; 
 and that will be satisfying. 
 
 I recall one old workman who became sin- 
 cerely attached to a heavy planer on which he 
 had worked for many years. He regarded the 
 planer as his own, and he got such surprising 
 results out of it that the management, although 
 they repeatedly planned to scrap the ancient 
 tool, never did so because this workman at- 
 tained as high a production as did other work- 
 men with modern planers. This seems like bad 
 shop practice, and it might well be said that this 
 particular workman would have done better work 
 with a modern planer ; but it so happened that 
 he had amassed a little competency, and he re- 
 
In Conclusion 253 
 
 fused to work excepting on his own beloved 
 machine ! 
 
 An enormous force is neglected when creative 
 craftsmanship is disregarded. I have known 
 men almost without effort to double production 
 simply because their interest was awakened, and 
 cases have come under my observation in which 
 the workers, being deeply interested, were not 
 really very much concerned with the pay that 
 they received. Although it is perfectly feasible 
 so to interest men in their work that they will 
 not bother about their pay, — and it is good so 
 to do, because then the worker is realizing his 
 life in his work, — it is not fair on the part of 
 the management to pay other than the highest 
 possible rate or leave it with the men them- 
 selves to determine whether that rate be fair. 
 That one "can not live by bread alone" is true, 
 but it does not connote that one may be able to 
 live without bread. 
 
 By the stimulation of this creative instinct 
 the way is pointed out to the ideal wage situa- 
 tion in which both a high standard of workman- 
 ship and a high rate of speed will be achieved. 
 These, of necessity, make a high wage economi- 
 cal in cost and result — which is the ideal situa- 
 tion. 
 
 We have heard a great deal about intensive 
 
254 When the Workmen Help You Manage 
 
 production, but intensive production is not to be 
 realized by any force that comes from the out- 
 side. You can not drive a man — ^he is bound to 
 rebel. You can lead a man — ^but the qualities of 
 leadership are rare. The force should come 
 from within, and then the man will work with 
 less fatigue than under any other circumstances. 
 If we take the standard of production as one 
 hundred, I can say that it is impossible to force a 
 man much above fifty, and even then after a few 
 days he will become rebellious and lag, and the 
 quality of the work will suffer. But if the crea- 
 tive power of that man be stimulated, he can 
 almost constantly touch one hundred, appar- 
 ently without the slightest effort. 
 
 Look at this subject of wages. Wages are 
 not all. If only a wage is involved, it is almost 
 certain that the relation will be an unhappy one ; 
 but if the wage be not right the profits of capi- 
 tal and labor will be unevenly balanced and the 
 relation is certain to be an unhappy one. I am 
 confident that as yet we have not realized any- 
 thing even approaching the limit in wages. I 
 do not mean wages in mere dollars, for those 
 values are shifting. But we have not yet so 
 ordered the entire plan of manufacturing or 
 sufficiently utilized the dormant creative in- 
 
In Conclusion 255 
 
 stincts to be able even to visualize the lijnits of 
 per-man production. 
 
 It is an axiom that high wages can not prop- 
 erly be paid unless the efficiency be progressive 
 — that is to say, unless the wages can be raised 
 and at the same time the net cost of the product 
 to the consimier lowered. Any raise in wages 
 that is added to the cost of the product is not a 
 raise at all ; for it must inevitably be reflected 
 in a higher cost of living, and therefore in an- 
 other demand for an even higher wage. Add- 
 ing a wage increase to the cost of the product 
 starts one around the vicious circle to which we 
 have become so accustomed during the war. 
 
 The point, then, is to find a ratio between 
 wages and cost of production that will insure to 
 the worker his proper share and that will insure 
 to the capitalist a product that may be sold at a 
 profit, and at the same time constantly to de- 
 crease in this process the costs, so that the prod- 
 uct may be distributed in increasing volume and 
 the values preserved so that the wages when 
 paid may mean something. 
 
 This is obviously a management problem and 
 not merely a wage problem. It goes to the capi- 
 talization of the company, to the fixed charges, 
 to administrative efficiency, and to proper shop 
 
256 When the Workmen Help You Manage 
 
 management. If more capital is involved than 
 should be, then of course the right return can 
 not be had on it, any more than a grocer could 
 expect to have delivery economy if he was using 
 a splendid limousine instead of a light motor. 
 
 Too high a funded indebtedness falls into the 
 same category, for the interest on that indebted- 
 ness must be charged into the cost of the prod- 
 uct. You can not expect a workman to turn out 
 a low-cost article if that with which he works is 
 loaded with a big mortgage debt. In the same 
 manner, the workman can not function, and 
 capital can not realize its best, if the shop oper- 
 ations or sequence of operations are not planned 
 to attain economy of effort. 
 
 In the view of capital that I have taken, the 
 right return is not to be expected unless the 
 work is planned for the worker. I have else- 
 where noted a shop in which sixty per cent, of 
 the wage, because of faulty tool arrangement, 
 was paid for walking and not for working, and 
 I could cite many more such instances. 
 
 Capital can find its greatest opportunity in so 
 conserving itself that the turnover will be fre- 
 quent — in not keeping any part of itself idle to 
 retard turnover, in so arranging tools and ma- 
 chinery that there will be no waste of effort, and 
 then in recovering waste or by-products in or- 
 
In Conclusion 257 
 
 der further to gain a profit from that which, the 
 individual worker or a small unit would of ne- 
 cessity waste. The large packing firms make 
 their profit, not on the sale of meat, but on the 
 by-products. 
 
 When we speak of the relation of capital and 
 labor, we are talking about a broad economic 
 problem with many, many sides, and are not 
 merely dealing with the incidental determina- 
 tion of what we shall pay this or that individual. 
 
 Turning to wages, this management problem 
 again looms up; for we find at once that the 
 wage to be considered is not that by the day or 
 the week or the month, but by the year, and that 
 permanency of employment — that is, the provi- 
 sion of twelve months' work — is a paramount 
 consideration. 
 
 Many a business considers that its product is 
 seasonal. It considers that a man may be taken 
 on or laid off according to the condition of the 
 business. It does not consider that this man, 
 if the best results are to be had, should be em- 
 ployed during the entire twelve months, and 
 that it is the business of management so to order 
 its planning, its sales area, its articles of manu- 
 facture, and so on, that the worker may be en- 
 gaged constantly. 
 
 It may be pointed out that this feature is no 
 
258 When the Workmen Help You Manage 
 
 less important to capital than it is to labor; 
 for if we work a plant only half or three quar- 
 ters of a year, the product must bear the burden 
 of the whole year, and therefore the overhead 
 during the time of operation will be unduly 
 high. 
 
 One of the functions of capital is to provide 
 for twelve months' employment, and that fact is 
 recognized in almost every industrial country 
 except America. It is one of the secrets of 
 Oerman low-cost production, and it is now rec- 
 ognized in England not so much as a managerial 
 as a social problem in the way of unemployment 
 allowances. Recommendations have recently 
 been made in England for a drastic revision of 
 unempioyment, to the end that when a man ia 
 not working he shall receive an allowance from 
 the State. This allowance must, of course, be 
 raised by taxation, and industry will hardly be 
 able to bear both the burden of taxation and the 
 burden of plant charges on an idle plant. The 
 provision of a full year's work is a sales and ex- 
 ecutive problem of great magnitude, for which 
 no rules are possible. It is a question of each 
 working out his own salvation. 
 
 From what I have previously stated, it might 
 be inferred that the balance in compensation be- 
 tween labor and capital could be arrived at 
 
In Conclimon 259 
 
 through some system of sharing profits ; but a 
 realization of the true relation will, I think, 
 show that profit-isharing is essentially illogical. 
 
 Capital employs, labor is employed. Their 
 combined efforts may not of necessity result in 
 a profit. Profit is a reward for proper capital 
 management. The worker may by his lack of 
 diligence produce an article the cost of which 
 is so high that it can not well be sold at a profit. 
 That is, of course, bad workmanship. But, on 
 the other hand, the worker may deliver to cap- 
 ital a good article at a fair price, and then cap- 
 ital may, by stupidity of management, forfeit 
 the profit. The worker is entitled to pay for 
 his contribution, and for nothing else. Profit 
 depends upon many factors other than the ac- 
 tual work in the shop. To "share" is but to 
 deceive. 
 
 Profit-sharing is riot only illogical, it is also 
 impractical. The average worker, paid long 
 after his performance, as must be the case when 
 profits are "shared," does not associate the 
 work with the money he receives, and so the in- 
 centive to better workmanship is lost. 
 
 There is no common ground upon which 
 profits may be shared between the representa- 
 tives of capital and the representatives of la- 
 bor; but, in most schemes of profit-sharing that 
 
260 When the Workmen Help You Manage 
 
 have come under my observation, what is really 
 distributed is a bonus and not at all a profit. 
 Regarded as a bonus, the money is infinitely 
 more effective if paid in connection with the 
 work done and at the time it is done. 
 
 What, then, is the right way to pay wages? 
 There is no single system ; but, generally speak- 
 ing, an incentive should be provided so that 
 wages may be measured by effort, care being 
 taken not to put the emphasis on quantity to the 
 exclusion of quality, and, by stimulation of the 
 creative instinct, to avoid any possible forcing 
 of a man from the outside. 
 
 I do not favor piece rates ; neither do I favor 
 paying a man solely for the time that he spends 
 in the shop, unless the man be a watchman. It 
 is not his presence, but his work, that counts. 
 
 Piece rates have their proper place, provided 
 those rates are scientifically set by timing, pro- 
 vided the standards are fair, and provided that 
 the incentive is of a definite nature fully under- 
 stood by the worker. I have already sketched 
 these several methods. 
 
 On top of the individual incentive comes a de- 
 partmental incentive, based upon the work of 
 the department as a whole. Thus each man 
 and each department finds that it can and will 
 be paid for what it does, and that payment de- 
 
In Conclusion 261 
 
 pends, not upon any outside force, but solely 
 upon the service of the people themselves. 
 
 However, it is not enough to state fair rates 
 and fair incentives. The men must know that 
 they are fair, and the only way that they can 
 know they are fair is by giving to them the 
 means constantly to review the rates, to settle 
 disputes, and to provide better ways of doing 
 things. 
 
 This is to introduce a very considerable and 
 eventually an entire self-government within the 
 factory. I do not advocate any particular form 
 of self-government, except that it is essential 
 that the men by secret ballot choose their own 
 representatives, that they are encouraged to be 
 constructive and not merely complaint-gather- 
 ers, and that what they do and what they say 
 in their meetings shall be privileged : the man- 
 agement shall not interfere in any way, al- 
 though reserving the power of veto. 
 
 My own idea, drawn from my experience, is 
 that it is not well to begin with too sudden a 
 change from the autocratic to the democratic 
 form of government. (I do not use the word 
 ' ' autocratic ' ' in any invidious sense. ) It is bet- 
 ter gradually to appoint committees as the need 
 arises, and then finally from these committees 
 to work out a representative legislature, just as 
 
262 When the Workmen Help You Manage 
 
 the Government of the United States grew out 
 of the colonial government. 
 
 The first committee that naturally presents 
 itself is one on inspection. This is always a 
 point of clash between the management and the 
 men, and an inspector chosen by a committee, 
 and by it supervised, will give far greater satis- 
 faction both to the management and the men 
 than can possibly an inspector appointed solely 
 by the management. Giving this committee the 
 power to nominate an inspector places with its 
 members at the very beginning a constructive 
 intent, and takes them out of the category of a 
 mere court for the hearing of complaints. Tak- 
 ing the experience of the English shop commit- 
 tees, which are not constructive, I think the 
 forming of any kind of a committee solely to 
 settle disputes will, in the end, do more harm 
 than good. 
 
 Following out the plan, committees may be 
 appointed on efficiency, on economy, and finally 
 on rates and wages. The chief reason that the 
 word "efficiency" has become so detested is 
 that rarely do the men know why the new 
 method offered them is better than the old. 
 They see in "efficient methods" only a greater 
 profit for the employer and greater work for 
 themselves. But if methods are introduced by 
 
In Conclusion 263 
 
 and with, the consent of a committee, if their 
 counsel be taken, if it be made their plan before 
 introduction, then it is bound to succeed. They 
 will then have not only a paternal interest in 
 the plan, but they will also know by the cost 
 sheets before them exactly how this added effi- 
 ciency can be reflected in higher and higher 
 wages. 
 
 Going forward with the consideration of the 
 committees, one naturally finds a necessity for 
 some representative body to which all commit- 
 tees are answerable; and then we further find 
 a necessity for drawing together foremen and 
 superintendents, in order that their brains may 
 be pooled as well as the brains of the workers. 
 Eventually the management wiU find it needs a 
 body of a similar character, and thus we shall 
 have erected an entire system of self-govern- 
 ment. 
 
 I do not advocate this self-government for 
 itself. I am not at all sure that the individual is 
 not as happy under a skilled autocracy as under 
 a democracy. The usual democracy in politics 
 is unskilled. It muddles through. But that 
 which I advocate is a democracy of skill, and I 
 advocate it in order that the men may find an 
 opportunity to express themselves in their 
 work. 
 
264 When the Workmen Help You Manage 
 
 They are not at one with the management in 
 point of compensation. The men and the man- 
 agement draw their compensation from differ- 
 ent quarters. But they can and should be at one 
 in this matter of intent, of desiring to bring 
 about such an order of affairs within the fac- 
 tory that both may receive the highest possible 
 compensation and put into their work the great- 
 est dignity. 
 
 Were it possible to insure men of fairness, 
 and to make each job in itself a full outlet for 
 creative energy, I believe that no form of de- 
 mocracy would be necessary; but all of this is 
 not possible — or, rather, I should say we do not 
 as yet know how to develop the creative faculty 
 for every job, nor- have our managers suf- 
 ficiently advanced in technique to be sure that 
 their decisions as to division of moneys are fair. 
 Therefore we cut right through this by putting 
 the responsibility of fairness on the men them- 
 selves, by giving them the facts ; and, while by 
 this one stroke we eliminate much of the dis- 
 content, we also add dignity to the labor by 
 making it their labor, and permit a fulness of 
 expression, if not in the work itself, in the rea- 
 son for the work. 
 
 There is no fixed plan, no set of rules, only a 
 set of principles ; and, until these principles are 
 
In Conclusion 265 
 
 mastered and applied with skill, it is impossible 
 to say what in any case is most required. These 
 principles are elastic, in a degree. They are, 
 roughly, these : 
 
 (1) Capital and labor are not partners, bi^t 
 are in the position of buyers and sellers. 
 
 (2) Each is to be rewarded for what it does, 
 and for nothing more. 
 
 (3) The dignity of capital is assured; the 
 dignity of labor must be assured. 
 
 (4) The dignity of labor will in part come 
 about through the expression of the creative in- 
 stinct and in part through a participation in con- 
 trol at least of those matters that concern la- 
 bor. 
 
 (5) This participation may take any form 
 that seems suitable to the case; but the essen- 
 tials of the participation are that it be construc- 
 tive and free from managerial interference, al- 
 though subject to managerial veto. 
 
 (6) The reward of labor for its effort should 
 be direct, and associated in time of payment 
 with the work done, and graduated, after a liv- 
 ing wage, upon the quantity or quality of the 
 work done with departmental as well as individ- 
 ual incentives. 
 
 (7) A living wage is to be calculated on the 
 
266 When the Workmen Help You Manage 
 
 annual basis, and the provision of twelve 
 months ' work is an integral part of any scheme. 
 
 (8) The amount of the wage is immaterial. 
 It is the ratio to production that counts, and 
 no raises of wages are to be added into the cost 
 of the finished product, or at least such addi- 
 tions are not to be counted as raises of wages. 
 
 (9) It is the function of capital to provide 
 facilities and plans, so that the worker may earn 
 more with than without capital. Otherwise 
 there is no reason for capital's being. 
 
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