Wages as a Means of Increasing Human Efficiency · Increasing Human Efficiency in Business

WAGES

AS A MEANS OF INCREASING HUMAN EFFICIENCY

FIFTY years ago works on psychology were devoted largely to discussion of ideas and of concepts. To-day the point of emphasis has changed, and we are now paying much attention to a study of ``attitudes.'' It is doubtless important to analyze my ideas or concepts, but it is of much more importance to know my attitudes. It is vital to know how to influence the ideas of others; but to be able to influence their attitudes is of still greater significance.

We all know in a general way what we mean by an attitude, but it is difficult to define or to comprehend it exactly. I have one attitude towards a snake and a totally different one towards my students. If when hunting quail I happen upon a little harmless snake, I find that I respond to the sight in a most absurd manner. Dread and repulsion overcome me. I can hardly restrain myself from killing the snake, even though doing so will frighten the birds I am hunting. I am predisposed to react in a particular way towards a snake. I sustain a particular attitude towards it.

In the presence of my students I find that a spirit of unselfish devotion and a desire to be of assistance are likely to be uppermost. That is to say, I sustain towards my students an attitude of helpfulness, a predisposition to react towards them in such a way that their interests may be furthered. In fact, I find that we all take particular attitudes towards the people we know and towards every task of our lives. These attitudes are very significant, and yet they are often developed by circumstances which made but little apparent impression at the time, or may have been altogether forgotten. I cannot recall, for instance, the experience of my boyhood which developed my present absurd attitude toward harmless snakes.

When witnessing a play, my attitude of suspicion towards a particular character may have been promoted by means of music and color, by means of the total setting of the play, or by some other means which never seemed to catch my attention. These concealed agencies threw me into an attitude of suspicion, even while I was not aware that such a result was being attempted.

This modern conception of psychology teaches us that in influencing others we are not successful until we have influenced their attitudes. Children in school do not draw patriotism from mere information about their country. Patriotism comes with the cultivation of the proper attitude towards one's native land.

_Success or failure in business is caused more by mental attitude even than by mental capacities_.

Nothing but failure can result from the mental attitude which we designate variously as laziness, indifference, indolence, apathy, shiftlessness, and lack of interest. All business successes are due in part to the attitudes which we call industry, perseverance, interest, application, enthusiasm, and diligence.

In any individual, too, these attitudes may not be the same towards different objects and may be subject to very profound changes and developments. A schoolboy is frequently lazy when engaged in the study of grammar, but industrious when at work in manual training. A young man who is an indolent bookkeeper may prove to be an indefatigable salesman. Another who has shown himself apathetic and indifferent in a subordinate position may suddenly wake up when cast upon his own responsibility.

Few men of any intelligence can develop the same degree of interest in each of several tasks. Personally I find that my shiftlessness in regard to some of my work is appalling. Touching my main activities, however, I judge that my industry is above reproach.

The preceding chapters (particularly the chapters on Imitation, Competition, and Loy- alty) were attempts to discover and to present the most effective motives or factors in producing in workers an attitude of industry. Based on a study of psychology and of business, methods were presented which may be utilized with but little expense and yet are effective in awakening instinctive responses in the worker and hence greatly increasing his efficiency. The present chapter will deal with an even more effective means of securing an attitude of industry since it appeals to three of the most fundamental and irresistible of man's instincts.

_With most of us the degree of our laziness or our industry depends partly upon our affinity for the work, but chiefly upon the motives which stimulate us_.

For our ancestors, preservation depended upon their securing the necessary means for food, clothing, and shelter. In the struggle for existence only those individuals and races survived who were able to secure these necessary articles. In climates and regions removed from the tropics only the exceedingly industrious survived. In warm and fertile lands those who were relatively industrious managed to exist. Because of the absence of the necessity for clothing and because of the abundance of available food, races have developed in the tropics which are notoriously lazy. The human race, individually and collectively, works only where and when it is compelled to.

The energetic races, those which have advanced in civilization, live in lands where the struggle for existence has been continuous. Necessity is a hard master, but its rule is indispensable to worthy achievement. The instinct of self-preservation and the industrious attitude are responses which the human race has learned to exercise, in the main, only in case of need. Self-preservation is the first law; where life and personal liberty are dependent upon industry, idleness will not be found. Wealth removes the obligation to toil; hence the poor boy often outdistances his more favored brother.

Individuals work for pay as a means of self-preservation, and unless that is satisfactory other motives have but little weight with them. The needs of the self which preservation demands are continuously increasing. The needs of the American-born laborer are greater than those of the Chinaman. Regardless of this higher standard of living and the ever increasing number of ``necessities,'' the instinct of self-preservation acts in connection with them all.

_Almost without exception the interest of workers centers in the wage. If they could retain their accustomed wage with less effort, they would do so. If the retention and increase depend on individual production, they will respond to the compulsion_.

Every student of psychology recognizes the fact that the wage is more than a means of self-preservation. Man is a distinctly social creature. He has a social self as well as an individual self. His social self demands social approval as much as his individual self demands bread, clothing, and shelter. In our present industrial system this social distinc- tion is most often indicated by means of monetary reward. The laborer not only demands that his toil shall provide the means for self- preservation, but he seeks through his wages the social distinction which he feels to be his due. His desire for increase of wages is often partly, and in some instances mainly, due to his craving for distinction or social approval.

In such instances the wage is to be thought of as something comparable to the score of a ball player. The desire for a high score is sufficient motive to beget the most extreme exertion, even though the reward anticipated is nothing more than a sign of distinction and without any relationship whatever to self- preservation.

In common with some of the lower animals man has an instinct to collect and hoard all sorts of things. This instinct is spoken of in psychology as the hoarding or proprietary instinct. In performing instinctive acts we do so with enthusiasm, but blindly. We take great delight in the performing of the act, even though the ultimate result of the act may be entirely unknown to us. The squirrel collects and stores nuts with great delight and industry. He has no idea of the approaching winter, but gathers the nuts simply because for him it is the most interesting process in his experience.

Most persons display a like instinctive tendency to make collections and hoard articles. This is particularly apparent in collections of such things as canceled postage stamps, discarded buttons, pebbles, sticks, magazines, and other non-useful articles.

When this hoarding instinct is not controlled by reason or checked by other interests, we have the miser. In a less degree, we all share with the miser his hoarding instinct. We all like to collect money just as the squirrel likes to gather nuts. The octogenarian continues to collect money with unabated zeal, even though he be childless. He is probably not aware that he is collecting merely for the pleasure of collecting.

_Since the wage is the means ordinarily employed to awaken in workers the three instincts_ _of self-preservation, of social distinction, and of hoarding, it is not strange that an industrial age should regard it as the chief means of increasing efficiency_.

The employer has not attempted to discover what instincts were appealed to by the wage, or the most economical method of stimulating these instincts. He has not undervalued the wage in securing efficiency, but rather has assumed that the service secured must be in direct proportion to the amount expended.

Such an assumption is not warranted. Of two employers with equal forces and payrolls one may receive much more and better service than the other. It is not a question merely of how much is spent but how wisely it is spent. The wage secures service to the degree in which it awakens these fundamental instincts under consideration.

It is apparent, therefore, that other factors than the amount of money expended in wages are to be considered by every employer. Without increasing the pay roll he may increase the efficiency of his men. The employer who has determined the number of men he needs and the wages he must pay has only begun to solve his labor problem.

In the preparation of the present chapter a large number of business men were interviewed personally or by correspondence.

One of the questions asked was: ``How do you make the most of the wages paid your men?''

As subsidiary to this general question three other questions were asked: ``In paying them do you base the amount to be received by each man upon a fixed salary? By some of the men upon actual output--commissions or piecework rates? By some upon a combination including profit-sharing or bonus?''

The answers to these latter questions were not uniform even among employers engaged apparently in the same business and under very similar conditions. Some reported that all the methods suggested were used in their establishment. Factory hands were employed on piecework or on a premium or bonus basis where conditions permitted; office assistants on fixed salaries; department managers upon a combination including profit sharing. The results reported, however, were far from uniform. The astounding feature was the diversity of opinion among successful managers of employees. By various houses one or more of the systems had been tried under apparently favorable conditions and had been discarded. On the other hand each of the systems was advocated by equally successful business firms.

In judging of the relative merits of fixed salaries as compared with other methods the experiences of individual firms offer no certain data. The relative merits and demerits are best disclosed by a psychological analysis of the manner in which the various devices appeal to the employee's instincts and reason.

_When wages are based on commission, piece rate, or a bonus or premium system, the stimulus to action is constantly present. Every stroke of the hammer, every sale made, every figure added, increases the wage. The wage thus continuously beckons the worker to greater accomplishment_.

All other considerations lose in importance, and the mind becomes focused on output. The worker is blinded to all other motives, and invariably sacrifices quality unless this be guarded by rigid inspection. The piecework or task system thus influences the worker directly and incessantly without regard for the particular instinct to which it may be appealing. Every increase in rate adds directly to the means of self-preservation, of social distinction, and of the accumulation of wealth.

_The worker with a fixed salary or wage does not feel as continuously the goad of his wage. It is less in mind and does not control his attitude toward his work. The man on a fixed salary, therefore, will not produce so much_.

If he be a workman, he may take better care of his tools, keep his output up to a higher standard of quality, prepare himself for more responsible positions. If he be a salesman, he may be more considerate of his customers and hence really more valuable to his employer; he may be more loyal to the house and hence promote the ``team work'' of the organization, and he may because of his more receptive state of mind be preparing himself for much greater usefulness to his house. If he be a superintendent, he may be more thoughtful of his men, or more scrupulous for the future of the business.

Production methods or labor conditions are often such that piecework is impossible. There are many functions and processes which thus far have not been satisfactorily adjusted to task systems; there are others (the inspection service in a factory, for instance) where a premium on increased output would defeat the first purpose of the service. Where results can be accurately measured, however, and the quality of the service can be automatically secured or is not sacrificed by concentration upon quantity, the task system--whether it take the form of piece rates, premiums, or bonus--has such superior psychological advantages that it will probably come more and more into use.

Under the general heading quoted above--

``How do you make the most of the wages paid your employees?''--the following question was asked: ``What special method do you employ to make men satisfied or pleased with their wages?'' The answers were most interesting and instructive. One manager having many thousand men in his organization narrated various methods by which he kept in personal touch with his men, and turned this personal relationship to the advantage of the house.

One illustration will make clear the line he pursued. In the card catalogue of the employees, the birthday of each is noted, the executive recognizing that for the average man this is an anniversary even more important than New Year's.

_If for any reason a member of the organization deserves or requires the executive's personal attention, his birthday may be chosen as the date of the interview. Then whether the man merits an advance for extra good work or needs help to correct a temporary slump in efficiency, the reward or the appeal takes on added meaning_ _because it coincides with a turning point in his life_.

To facilitate the plan, the manager's file of employment cards is arranged, not by initials or departments, but by birthdays. Each workman's name falls under his eye a few days in advance, long enough to secure a report from his foreman, if knowledge is lacking of his progress.

As I entered this manager's office, I met a young man coming out. He had been in the company's employ only a few months and his relations with the organization had not yet been established. Asked for a report, his foreman gave him a good record and recommended a small advance. Imagine the surprise, the instant access of pride and loyalty, the impulse towards greater effort and efficiency, when the young man was called into the manager's office on his birthday, congratulated on his record, and informed that he would start his new year with an advance in wages. Double the advance, if allowed in the usual way, would not have so impressed and satisfied him. The increased wage made its appeal direct to the instinct for social recognition, and hence was very effective.

Such a method does not admit of general application. Practiced in cold blood, it might even be harmful. But in this case, it struck me not as an act of selfish cleverness, but as the expression of a real sympathy and interest which the manager felt for his men. The cleverness lay in the recognition that no man is ever so susceptible to counsel, to appreciation, or to rebuke as on his birthday, when the social self is especially alert.

In other organizations, the effort to extend this factor of human sympathy to each worker and to see that full justice is rendered to him takes the form of a department of promotion and discharge. The head is the direct representative of the ``front office'' and is independent of superintendents and foremen. No man can be ``paid off'' until the facts have been submitted to the consideration of this department. Here also the man may present his case to an unprejudiced and sympathetic arbiter.

_In actual practice the man ``paid off'' is sometimes retained and the foreman, on the evidence of prejudice, bad temper, or other incompetency, is discharged. In consequence every workman knows that his place does not depend upon the whim of his immediate superior, but that faithful service will certainly be recognized_.

Furthermore, this department assumes the task of shifting men from one department to another and thus minimizing the misfits which lower the efficiency of the whole organization. Records of each man's performance are kept, and promotions and discharge are more nearly in accord with facts than would be possible in a large house without some such agency. In too many big establishments the individual feels that he does not count in the crowd and that he is helpless to do anything to advance himself or to protect himself against an antagonistic foreman. In large measure, such a department reduces this feeling and bridges the chasm between the men and the firm.

In its effect on the attitude and efficiency of employees, the method of fixing and ad- justing wages is no less important than the wages themselves. The steady trend of the labor market has been upward and always upward; it is one of the notable achievements of trade and industry that this constant appreciation in the price of man power has been neutralized by increase in the efficiency of its application. This increase in earning capacity has been secured not alone by the development of automatic machinery, but by the division of labor, the subdivision of processes, and the education of workers to accept the new methods, and acquire expert skill in some specialty.

Hardly a generation has passed since one man, or perhaps two working together, built farm wagons, steam engines, and a thousand other articles entire. Now a hundred mechanics or machine tenders may have contributed to either wagon or engine before it reaches the shipping department. Three fourths of these workers are paid piece rates. The substitution of these piece rates for day wages, the striking of a satisfactory balance between production and compensation, and the endless changes in the scale as new parts or faster or simpler processes are invented-- have all been operations in which the tact and man-handling skill of executives have played a significant part.

In the larger organization this knowledge or skill is often supplied by a manager who has ``come up through the ranks'' and has not forgotten his journeyman's dexterity on the way or neglected to keep in touch with improved methods.

_Frequently the advantage of a small industry or trading venture over its larger rivals depends on the owner's mastery of all the processes or conditions involved and his ability to deal with his employees on a personal plane in fixing wages or in establishing the standard day's work_.

In a stove factory where four fifths of the processes are paid by piece rates, it was necessary, not long ago, to fix the remuneration for the assembling of a new type of range. Most of the operations were standard; the workmen and the management differed, however, on what should be paid for the setting and fas- tening of a back piece with seventeen bolts. The men asked fifteen cents a range. When refused, they named twelve cents as an ultimatum. The company was willing neither to pay such a price nor to antagonize the workmen.

The dispute was settled by a demonstration. The superintendent was himself a graduate from the bench and had been an expert workman. The company's contract with the assemblers' union set $4.50 a day as the maximum wage. To prove his contention that even twelve cents was too great a price, he set the back pieces on ten ranges himself, under the eyes of a committee, and proved that at six cents a range he could easily earn the maximum day wage. The price agreed upon was eight cents, little more than half the original demand. Without the demonstration the men would have accepted twelve cents reluctantly.

In the course of the interviews with employers, it became evident that there was agreement on one point--to educate the worker to realize that the house's policy in handling its men gave added value to the sums paid out in wages.

_The shiftless or unskilled man works mainly for the next pay envelope, with little or no regard for the continuity of employment, the possibility of promotion, of pension, of sick or accident benefits, of working conditions, or the like_.

The skilled worker, on the contrary, and the more desirable class of laborers, nearly always rate their wages above or below par, according to the presence or the absence of these contingent benefits or emoluments.

To the average man with a family, the ``steady job'' at fair wages is the first consideration. It appeals more strongly to him than intermittent employment at a much higher rate; while the younger, restless, and less dependable man, both skilled and unskilled, gravitates to the shop where he can command a premium for a little while. Just as managers are always looking for the steady worker, nearly all agree in assuring their employees that faithful and efficient service will be rewarded with continuous employment.

To carry out this policy is sometimes difficult in businesses where demand is seasonal and where a large part of the product must be made to order. Nevertheless, the manager who adjusts his production program to cover the entire year has the choice of the best workers even when other factories offer higher rates. Likewise, the employer who sacrifices his profit in bad years to ``take care of his men'' and hold his organization together recovers his losses when the revival comes.

So deeply rooted is this desire for a ``steady job'' and so generally recognized as an essential of the labor problem that several large industries have developed ``side lines'' to which they can turn their organization during their slack seasons; while others in periods of depression pile up huge stocks of standard products, making heavy investments of capital, for the primary purpose of keeping their men employed.

How such a policy reacts on the wage question, and hence on the efficiency of employees, is shown by an instance which lately fell under my notice. By a long and persistent campaign of education and demonstration, a small ``quality'' house forced a rival ten times as large to adopt the careful processes on which this quality depended. Adopting the small man's methods, the competitor, instead of training its own operatives to the new standards, sought to hire the other man's skilled workers. The premium offered was a thirty per cent advance. It was refused, however. The tempted mechanics, analyzing the rival's proposal, hit on the disloyalty contemplated towards its own employees. They were to be discharged or transferred to other departments to make room for the new men.

Measuring this cold-blooded policy against the consideration, the unfailing effort of their old employer to ``take care of them'' in bad seasons, the workers decided to stick to the smaller company and refuse the advance.

_Next to continuous employment, among methods of increasing the value of wages, is the policy of making promotions from the ranks_.

This practice seems to be commonly ac- cepted as fruitful, although many firms believe it impossible of application in filling some of the higher as well as some of the more technical positions. Where the system is applicable, it acts as a powerful stimulus to the men by adding to their present wages the promise or possibility of better positions and higher pay in the future. It gives assurance of promotion for faithful service much greater than in houses which fill the upper positions from outside sources on the assumption that they thus get ``new blood'' into the business. The men secured from outside may be more skilled or more productive of immediate results than any available in the house organization. By their importation, however, the wages of all the men aspiring to the position have been cheapened. Nor does the evil stop there.

_The assumption is naturally drawn that the same practice is likely to be followed in filling other vacancies. The stimulus to initiative and activity is thus weakened for men in every grade and their wages are shrunk below par_.

The importance which some successful employers attach to this principle of promotion from the ranks is well illustrated by an incident which recently occurred in a large manufacturing establishment organized on a one-man basis. During the president's absence it was decided to open up a new zone of trade for a new product. No one in the organization knew the product and the field, so a new man was put in charge. The work progressed surprisingly well; the enterprise was in every way successful.

When the real head returned, he called his managers together and told them that the new man must be removed and the most deserving man in the regular organization appointed in his place. He was met with the protest that no employee was capable of taking up the work and reminded that the new man had already achieved great success. The president answered that he was willing to lose money in the department for the first year rather than cheapen and disorganize the service by taking away the certainty of promotion and by re- moving the incentive to study and self-development which had increased the efficiency of every ambitious employee.

Innumerable examples of the same principle in promotions could be gleaned from the records of some of the oldest and most progressive houses in the country. In one establishment visited, the quality of whose wares is strenuously guarded, it was discovered that the chemist and metallurgist in charge of the factory laboratory had been lifted out of one of the departments and supplied with the money to take a specialized course in physics, chemistry, and metallurgy. The advertising manager, the factory engineer, and two or three of the foremen had been given leaves of absence to study and fit themselves for the positions to which their talents and inclinations drew them. Even among the workmen there was a fixed basis for advancement towards the better jobs and the higher rates, dependent on satisfactory service and output.

To these major considerations in increasing the worth of wages, those companies which have given the longest attention to the problem add many other inducements.

_An efficient and contented employee has a positive money value to any employer. To hold him and keep him efficient, his personal comfort and needs should be considered in every way not detrimental to the company's interests_.

As nearly as possible, the ideal in factory location and construction is approached. Some industries have removed bodily to country towns, less for the sake of a cheap site than for the purpose of establishing themselves where housing conditions for workers were good, rents low, the cost of living cheaper, and other factors tending to _*add value_ to every dollar paid in wages were present. Direct appeal was made to the intelligence of employees, whose health is part of their capital, by making and keeping working conditions as healthful and sanitary, as little taxing on eyesight and bodily vigor as circumstances and judicious investment of capital allowed. Scores of towns have been built outright, to benefit employees.

In line with this policy are the systems of benefit insurance for accident and sickness maintained and partly supported by many companies; the pension systems which have been adopted within the last few years by some of the greatest and most progressive companies in America; the free medical service, both in case of factory accidents and sickness at home, which other firms provide for employees; and various other activities contributing to the welfare of workers, both during working hours and afterwards.

Employers are coming more and more to see that this is the case and to devote both thought and money to the elimination of conditions which cut wages below par.

_Whatever reduces hazard, discomfort, loss of time, uncertainty, or the cost of living for workers adds value to their wages and is a means of influencing their attitude towards the company_.

Some employers are continually exercised to keep the wages of their men from falling below par. Others are equally solicitous that their men may regard their wages as above par. This classification is a real one and was made plain by some of the interviews referred to above. Thus in answer to the question, ``What special method do you employ to make men satisfied or pleased with their wages?'' one employer immediately put his own interpretation on the question. To him it meant, ``What method do you employ to keep your men from being _*dissatisfied_ with their wages?''

His answer was: ``By paying them somewhere near what they ask or expect. If we don't,'' he added, ``they go out on strike and we have to compromise.''

The majority of successful employers have advanced beyond this negative, defensive attitude and take a positive and aggressive position in dealing with the problem.

_Instead of assuming their work accomplished when the men are not dissatisfied or rebellious, they do not rest until every dollar paid out in wages is above par in its influence upon efficiency_.

Thus in innumerable ways the progressive employer increases the value of all wages he pays by making them appeal to the reason and to the instincts of workers in a way un- dreamed of by less enlightened men. The purpose of wages is to produce a certain psychological effect and to promote the most favorable attitude on the part of the worker. The methods of increasing the purchasing power of money thus spent is one of the most interesting and yet complex problems which the business man has to face.

This chapter shows the psychological ground for the following statements:--

Employees differ in their response to piecework rates and to salaries. Some respond more satisfactorily to one and some to the other.

When the development of men for better positions is of prime importance, the piecework system is not to be adopted. If the quantity of work per unit of wage is of greatest importance, then some form of wage other than fixed salary should be used.

An employee should not be dismissed as hopelessly lazy till he has shown this attitude in more than one department or has failed to respond to different forms of stimulation.

Changes in wages may often be placed under the authority of some person or committee other than the immediate superiors of the employees involved. This authority may be vested in the direct representatives of the executives or in such a committee as would be formed by representatives of the executives and also employees from the different departments of the establishment.

_Payment of wages, so far as possible, should be made to appeal to the instincts for social distinction and for acquisition as well as to the instinct for self-preservation_.

Wages should never be reduced without a tactful and sincere attempt to convince the men of the necessity of such an act.

Increase in wages may well be made a personal matter. Some firms, however, are most successful with a mechanical wage system in which employees know exactly the conditions necessary for an increase in wages.

All work should be thoroughly supervised and inspected so that employees know that good service will be recognized and rewarded.

The policy of filling all positions from the ranks seems growing in favor, since it gives certain hope for advancement and hence greater satisfaction with the present wage.

The wage may well include a tacit insurance for the future. Employees should be assured that so long as they remain faithful to the firm, their work and pay will continue, and that in accident or old age they will be provided for. Accepted thus, the wage secures increased service.