CHAPTER IX

INCENTIVES

DEFINITION OF INCENTIVE.--An "incentive" is defined by the Century Dictionary as "that which moves the mind or stirs the passions; that which incites or tends to incite to action; motive, spur." Synonyms--"impulse, stimulus, incitement, encouragement, goad."

IMPORTANCE OF THE INCENTIVE.--The part that the incentive plays in the doing of all work is enormous. This is true in learning, and also in the performance of work which is the result of this learning: manual work and mental work as well. The business man finishing his work early that he may go to the baseball game; the boy at school rushing through his arithmetic that he may not be kept after school; the piece-worker, the amount of whose day's pay depends upon the quantity and quality he can produce; the student of a foreign language preparing for a trip abroad,--these all illustrate the importance of the incentive as an element in the amount which is to be accomplished.

TWO KINDS OF INCENTIVES.--The incentive may be of two kinds: it may be first of all, a return, definite or indefinite, which is to be received when a certain portion of the work is done, or it may be an incentive due to the working conditions themselves. The latter case is exemplified where two people are engaged in the same sort of work and start in to race one another to see who can accomplish the most, who can finish the fixed amount in the shortest space of time, or who can produce the best quality. The incentive may be in the form of some definite aim or goal which is understood by the worker himself, or it may be in some natural instinct which is roused by the work, either consciously to the worker, or consciously to the man who is assigning the work, or consciously to both, or consciously to neither one. In any of these cases it is a natural instinct that is being appealed to and that induces the man to do more work, whether he sees any material reward for that work or not.

DEFINITIONS OF TWO TYPES.--We may call the incentive which utilizes the natural instinct, "direct incentive," and the incentive which utilizes these secondarily, through some set reward or punishment, "indirect incentive." This, at first sight, may seem a contradictory use of terms--it may seem that the reward would be the most direct of incentives; yet a moment's thought will cause one to realize that all the reward can possibly do is to arouse in the individual a natural instinct which will lead him to increase his work.

INDIRECT INCENTIVES INCLUDE TWO CLASSES.--We will discuss the indirect incentives first as, contrary to the usual use of the word "indirect," they are most easy to estimate and to describe. They divide themselves into two classes, reward and punishment.

DEFINITION OF REWARD.--Reward is defined by the Century Dictionary as--"return, recompense, the fruit of one's labor or works; profit," with synonyms, "pay, compensation, remuneration, requital and retribution." Note particularly the word "retribution," for it is this aspect of reward, that is, the just outcome of one's act, that makes the reward justly include punishment. The word "reward" exactly expresses what management would wish to be understood by the incentive that it gives its men to increase their work.

DEFINITION OF PUNISHMENT.--The word "punishment" is defined as--"pain, suffering, loss, confinement, or other penalty inflicted on a person for a crime or offense by the authority to which the offender is subject," with synonyms, "chastisement, correction, discipline."

The word punishment, as will be noted later, is most unfortunate when applied to what Scientific Management would mean by a penalty, though this word also is unfortunate; but, in the first place, there is no better word to cover the general meaning; and in the second place, the idea of pain and suffering, which Scientific Management aims to and does eliminate, is present in some of the older forms of management Therefore the word punishment must stand.

REWARDS AND PUNISHMENTS RESULT IN ACTION.--There can be no doubt that a reward is an incentive. There may well be doubt as to whether a punishment is an incentive to action or not. This, however, is only at first glance, and the whole thing rests on the meaning of the word "action." To be active is certainly the opposite of being at rest. This being true, punishment is just as surely an incentive to action as is reward. The man who is punished in every case will be led to some sort of action. Whether this really results in an increase of output or not simply determines whether the punishment is a scientifically prescribed punishment or not. If the punishment is of such a nature that the output ceases because of it, or that it incites the man punished against the general good, then it does not in any wise cease to be an active thing, but it is simply a wrong, and unscientifically assigned punishment, that acts in a detrimental way.

SOLDIERING ALONE CUTS DOWN ACTIVITY.--It is interesting to note that the greatest cause for cutting down output is related more closely to a reward than a punishment. Under such managements as provide no adequate reward for all, and no adequate assurance that all can receive extra rewards permanently without a cut in the rate, it may be advisable, for the worker's best interests, to limit output in order to keep the wages, or reward, up, and soldiering results. The evils of soldiering will be discussed more at length under the "Systems of Pay." It is plain, however, here that soldiering is the result of a cutting down of action, and it is self-evident that anything which cuts down action is harmful, not only to the individual himself, but to society at large.

NATURE OF REWARDS AND PUNISHMENTS.--Under all types of management, the principal rewards consist of promotion and pay, pay being a broad word used here to include regular wages, a bonus, shorter hours, other forms of remuneration or recompense; anything which can be given to the man who does the work to benefit him and increase his desire to continue doing the work. Punishments may be negative, that is, they may simply take the form of no reward; or they may be positive, that is, they may include fines, discharge, assignment to less remunerative or less desirable work, or any other thing which can be given to the man to show him that he has not done what is expected of him and, in theory at least, to lead him to do better.

NATURE OF DIRECT INCENTIVES.--Direct incentives will be such native reaction as ambition, pride and pugnacity; will be love of racing, love of play; love of personal recognition; will be the outcome of self-confidence and interest, and so on.

THE REWARD UNDER TRADITIONAL MANAGEMENT UNSTANDARDIZED.--As with all other discussions of any part or form of Traditional Management, the discussion of the incentive under Traditional Management is vague from the very nature of the subject. "Traditional" stands for vagueness and for variation, for the lack of standardization, for the lack of definiteness in knowledge, in process, in results. The rewards under Traditional Management, as under all types of management, are promotion and pay. It must be an almost unthinkably poor system of management, even under Traditional Management, which did not attempt to provide for some sort of promotion of the man who did the most and best work; but the lack of standardization of conditions, of instructions, of the work itself, and of reward, makes it almost impossible not only to give the reward, but even to determine who deserves the reward. Under Traditional Management, the reward need not be positive, that is, it might simply consist in the negation of some previously existing disadvantage. It need not be predetermined. It might be nothing definite. It might not be so set ahead that the man might look forward to it. In other words it might simply be the outcome of the good, and in no wise the incentive for the good. It need not necessarily be personal. It could be shared with a group, or gang, and lose all feeling of personality. It need not be a fixed reward or a fixed performance; in fact, if the management were Traditional it would be almost impossible that it would be a fixed reward. It might not be an assured reward, and in most cases it was not a prompt reward. These fixed adjectives describe the reward of Scientific Management--positive, predetermined, personal, fixed, assured and prompt. A few of these might apply, or none might apply to the reward under Traditional Management.

REWARD A PRIZE WON BY ONE ONLY.--If this reward, whether promotion or pay, was given to someone under Traditional Management, this usually meant that others thereby lost it; it was in the nature of a prize which one only could attain, and which the others, therefore, would lose, and such a lost prize is, to the average man, for the time at least, a dampener on action. The rewarding of the winner, to the loss of all of the losers, has been met by the workmen getting together secretly, and selecting the winners for a week or more ahead, thus getting the same reward out of the employer without the extra effort.

PUNISHMENT UNDER TRADITIONAL MANAGEMENT WRONG IN THEORY.--The punishment, under Traditional Management, was usually much more than negative punishment; that is to say, the man who was punished usually received much more than simply the negative return of getting no reward. The days of bodily punishment have long passed, yet the account of the beatings given to the galley slaves and to other workers in the past are too vividly described in authentic accounts to be lost from memory. To-day, under Traditional Management, punishment consists of

1. fines, which are usually simply a cutting down of wages, the part deducted remaining with the company, 2. discharge, or 3. assignment to less pleasant or less desirable work.

This assignment is done on an unscientific basis, the man being simply put at something which he dislikes, with no regard as to whether his efficiency at that particular work will be high or not.

RESULTS ARE UNFORTUNATE.--The punishment, under Traditional Management, is usually meted out by the foreman, simply as one of his many duties. He is apt to be so personally interested, and perhaps involved, in the case that his punishment will satisfy some wrong notions, impulse of anger, hate, or envy in him, and will arouse a feeling of shame or wounded pride, or unappreciation, in the man to whom punishment is awarded.

DIRECT INCENTIVES NOT SCIENTIFICALLY UTILIZED.--As for what we have called direct incentive, the love of racing was often used under Traditional Management through Athletic Contests, the faults in these being that the men were not properly studied, so that they could be properly assigned and grouped; care was not always exercised that hate should not be the result of the contest; the contest was not always conducted according to the rules of clean sport; the men slighted quality in hastening the work, and the results of the athletic contests were not so written down as to be thereafter utilized. Love of play may have been developed unconsciously, but was certainly not often studied, Love of personal recognition was probably often utilized, but in no scientific way. Neither was there anything in Traditional Management to develop self-confidence, or to arouse and maintain interest in any set fashion. Naturally, if the man were in a work which he particularly liked, which under Traditional Management was a matter of luck, he would be more or less interested in it, but there was no scientific way of arousing or holding his interest. Under Traditional Management, a man might take pride in his work, as did many of the old bricklayers and masons, who would set themselves apart after hours if necessary, lock themselves in, and cut bricks for a complicated arch or fancy pattern, but such pride was in no way fostered through the efforts of the management. Pugnacity was aroused, but it might have an evil effect as well as a good, so far as the management had any control. Ambition, in the same way, might be stimulated, and might not. There is absolutely nothing under Traditional Management to prevent a man being ambitious, gratifying his pride, and gratifying his pugnacity in a right way, and at the same time being interested in his work, but there was nothing under Traditional Management which provided for definite and exact methods for encouraging these good qualities, seeing that they developed in a proper channel, and scientifically utilizing the outcome again and again.

PAY FOR PERFORMANCE PROVIDED FOR BY TRANSITORY MANAGEMENT.--Under Transitory Management, as soon as practicable, one bonus is paid for doing work according to the method prescribed. As standardization takes place, the second bonus for completing the task in the time set can be paid. As each element of Scientific Management is introduced, incentives become more apparent, more powerful, and more assured.

DIRECT INCENTIVES MORE SKILLFULLY USED.--With the separating of output, and recording of output separately, love of personal recognition grew, self-confidence grew, interest in one's work grew. The Athletic Contest is so conducted that love of speed, love of play, and love of competition are encouraged, the worker constantly feeling that he can indulge in these, as he is assured of "fair play."

INCENTIVES UNDER SCIENTIFIC MANAGEMENT CONSTRUCTIVE.--It is most important, psychologically and ethically, that it be understood that Scientific Management is not in any sense a destructive power. That only is eliminated that is harmful, or wasteful, or futile; everything that is good is conserved, and is utilized as much as it has ever been before, often much more than it has ever been utilized. The constructive force, under Scientific Management, is one of its great life principles. This is brought out very plainly in considering incentives under Scientific Management. With the scientifically determined wage, and the more direct and more sure plan of promotion, comes no discard of the well-grounded incentives of older types of management. The value of a fine personality in all who are to be imitated is not forgotten; the importance of using all natural stimuli to healthful activity is appreciated. Scientific Management uses all these, in so far as they can be used to the best outcome for workers and work, and supplements them by such scientifically derived additions as could never have been derived under the older types.

CHARACTERISTICS OF THE REWARD.--Rewards, under Scientific Management are--

(a) positive; that is to say, the reward must be a definite, positive gain to the man, and not simply a taking away of some thing which may have been a drawback. (b) predetermined; that is to say, before the man begins to work it must be determined exactly what reward he is to get for doing the work. (c) personal; that is, individual, a reward for that

## particular man for that particular work.

(d) fixed, unchanged. He must get exactly what it has been determined beforehand that he shall get. (e) assured; that is to say, there must be provision made for this reward before the man begins to work, so that he may be positive that he will get the reward if he does the work. The record of the organization must be that rewards have always been paid in the past, therefore probably will be in the future. (f) the reward must be prompt; that is to say, as soon as the work has been done, the man must get the reward. This promptness applies to the announcement of the reward; that is to say, the man must know at once that he has gotten the reward, and also to the receipt of the reward by the man.

POSITIVE REWARD AROUSES INTEREST AND HOLDS ATTENTION.--The benefit of the positive reward is that it arouses and holds attention. A fine example of a reward that is not positive is that type of "welfare work" which consists of simply providing the worker with such surroundings as will enable him to work decently and without actual discomfort. The worker, naturally, feels that such surroundings are his right, and in no sense a reward and incentive to added activity. The reward must actually offer to the worker something which he has a right to expect only if he earns it; something which will be a positive addition to his life.

PREDETERMINED REWARD CONCENTRATES ATTENTION.--The predetermined reward allows both manager and man to concentrate their minds upon the work. There is no shifting of the attention, while the worker wonders what the reward that he is to receive will be. It is also a strong factor for industrial peace, and for all the extra activities which will come when industrial conditions are peaceful.

PERSONAL REWARD CONSERVES INDIVIDUALITY.--The personal reward is a strong incentive toward initiative, towards the desire to make the most of one's individuality. It is an aid toward the feeling of personal recognition. From this personal reward come all the benefits which have been considered under individuality.[1]

FIXED REWARD ELIMINATES WASTE TIME.--The fact that the reward is fixed is a great eliminator of waste to the man and to the manager both. Not only does the man concentrate better under the fixed reward, but the reward, being fixed, need not be determined anew, over and over again; that is to say, every time that that kind of work is done, simultaneous with the arising of the work comes the reward that is to be paid for it. All the time that would be given to determining the reward, satisfying the men and arguing the case, is saved and utilized.

ASSURED REWARD AIDS CONCENTRATION.--The assured reward leads to concentration,--even perhaps more so than the fact that the reward is determined. In case the man was not sure that he would get the reward in the end, he would naturally spend a great deal of time wondering whether he would or not. Moreover, no immediate good fortune counts for much as an incentive if there is a prospect of bad luck following in the immediate future.

NEED FOR PROMPTNESS VARIES.--The need for promptness of the reward varies. If the reward is to be given to a man of an elementary type of mind, the reward must be immediately announced and must be actually given very promptly, as it is impossible for anyone of such a type of intellect to look forward very far.[2] A man of a high type of intellectual development is able to wait a longer time for his reward, and the element of promptness, while

## acting somewhat as an incentive, is not so necessary.

Under Scientific Management, with the ordinary type of worker on manual work, it has been found most satisfactory to pay the reward every day, or at the end of the week, and to announce the score of output as often as every hour. This not only satisfies the longing of the normal mind to know exactly where it stands, but also lends a fresh impetus to repeat the high record. There is also, through the prompt reward, the elimination of time wasted in wondering what the result will be, and in allaying suspense. Suspense is not a stimulus to great activity, as anyone who has waited for the result of a doubtful examination can testify, it being almost impossible to concentrate the mind on any other work until one knows whether the work which has been done has been completed satisfactorily or not.

PROMPTNESS ALWAYS AN ADDED INCENTIVE.--There are many kinds of life work and modes of living so terrible as to make one shudder at the thoughts of the certain sickness, death, or disaster that are almost absolutely sure to follow such a vocation. Men continue to work for those wages that lead positively to certain death, because of the immediateness of the sufficient wages, or reward. This takes their attention from their ultimate end. Much more money would be required if payment were postponed, say, five years after the act, to obtain the services of the air-man, or the worker subject to the poisoning of some branches of the lead and mercury industries.

If the prompt reward is incentive enough to make men forget danger and threatened death, how much more efficient is it in increasing output where there is no such danger.

IMMEDIATE REWARD NOT ALWAYS PREFERABLE.--There are cases where the prompt reward is not to be preferred, because the delayed reward will be greater, or will be available to more people Such is the case with the reward that comes from unrestricted output.

For example,--the immediacy of the temporarily increased reward caused by restricting output has often led the combinations of working men to such restriction, with an ultimate loss of reward to worker, to employer, and to the consumer.

REWARDS POSSIBLE OF ATTAINMENT BY ALL.--Every man working under Scientific Management has a chance to win a reward. This means not only that the man has a "square deal," for the man may have a square deal under Traditional Management in that he may have a fair chance to try for all existing rewards. There is more than this under Scientific Management. By the very nature of the plan itself, the rewards are possible of achievement by all; any one man, by winning, in no way diminishes the chances of the others.

REWARDS OF MANAGEMENT RESEMBLE REWARDS OF WORKERS.--So far the emphasis, in the discussion of reward, has been on the reward as given to the worker, and his feeling toward it. The reward to the management is just as sure. It lies in the increased output and therefore the possibility of lower costs and of greater financial gain. It is as positive; it is as predetermined, because before the reward to the men is fixed the management realizes what proportion that reward will bear to the entire undertaking, and exactly what profits can be obtained. It is a fundamental of Scientific Management that the management shall be able to prophesy the outputs ahead. It will certainly be as personal, if the management side is as thoroughly systematized as is the managed; it will be as fixed and as assured, and it certainly is as prompt, as the cost records can be arranged to come to the management every day, if that is desired.

RESULTS OF SUCH REWARDS.--There are three other advantages to management which might well be added here. First, that a reward such as this attracts the best men to the work; second, that the reward, and the stability of it, indicates the stability of the entire institution, and thus raises its standing in the eyes of the community as well as in its own eyes; and third, that it leads the entire organization, both managed and managing, to look favorably at all standardization. The standardized reward is sure to be attractive to all members. As soon as it is realized that the reason that it is attractive is because it is _standardized_, the entire subject of standardization rises in the estimation of every one, and the introduction of standards can be carried on more rapidly, and with greater success.

REWARDS DIVIDED INTO PROMOTION AND PAY.--Rewards may be divided into two kinds; first, promotion and, second, pay. Under Scientific Management promotion is assured for every man and, as has been said, this promotion does not thereby hold back others from having the same sort of promotion. There is an ample place, under Scientific Management, for every man to advance.[3] Not only is the promotion sure, thus giving the man absolute assurance that he will advance as his work is satisfactory, but it is also gradual.[4] The promotion must be by degrees, otherwise the workers may get discouraged, from finding their promotion has come faster than has their ability to achieve, and the lack of attention, due to being discouraged, may be contagious. It is, therefore, of vital importance that the worker be properly selected, in order that, in his advancement and promotion, he shall be able to achieve his task after having been put at the new work. He must be advanced and promoted in a definite line of gradual development, in accordance with a fully conceived plan. This should be worked out and set down in writing as a definite plan, similar to the plan on the instruction card of one of his tasks.

PROMOTION MAY BE TO PLACES WITHIN OR WITHOUT THE BUSINESS.--In many lines of business, the business itself offers ample opportunity for promoting all men who can "make good" as rapidly as they can prepare themselves for positions over others, and for advancement; but under Scientific Management provision is made even in case the business does not offer such opportunities.[5] This is done by the management finding places outside their own organization for the men who are so trained that they can be advanced.

SUCH PROMOTION ATTRACTS WORKERS.--While at first glance it might seem a most unfortunate thing for the management to have to let its men go, and while, as Dr. Taylor says, it is unfortunate for a business to get the reputation of being nothing but a training school, on the other hand, it has a very salutary effect upon the men to know that their employers are so disinterestedly interested in them that they will provide for their future, even at the risk of the individual business at which they have started having to lose their services. This will not only, as Dr. Taylor makes clear, stimulate many men in the establishment whose men go on to take the places of those who are promoted, but will also be a great inducement to other men to come into a place that they feel is unselfish and generous.

SUBDIVISIONS OF "PAY."--Under "Pay" we have included eight headings:

1. Wages 2. Bonus 3. Shorter hours 4. Prizes other than money 5. Extra knowledge 6. Method of attack 7. Good opinion of others 8. Professional standing.

RELATION BETWEEN WAGES AND BONUS.--Wages and bonus are closely related. By wages we mean a fixed sum, or minimum hourly rate, that the man gets in any case for his time, and by bonus we mean additional money that he receives for achievement of method, quantity or quality. Both might very properly be included under wages, or under money received for the work, or opportunities for receiving money for work, as the case might be. In the discussion of the different ways of paying wages under Scientific Management, there will be no attempt to discuss the economic value of the various means; the different methods will simply be stated, and the psychological significance will be, as far as possible, given.

Before discussing the various kinds of wages advised by the experts in Scientific Management, it is well to pause a moment to name the various sorts of methods of compensation recognized by authorities. David F. Schloss in his "Method of Industrial Remuneration" divides all possible ways of gaining remuneration into three--

1. the different kinds of wages 1. time wage 2. piece wage 3. task wage 4. progressive wage 5. collective piece wage 6. collective task wage 7. collective progressive wage 8. contract work 9. coöperative work

with

2. profit sharing, and 3. industrial coöperation. These are defined and discussed at length in his book in a lucid and simple manner.

It is only necessary to quote him here as to the relationship between these different forms, where he says, page 11,--"The two leading forms of industrial remuneration under the Wages System are time wages, and piece wages. Intermediate between these principal forms, stands that known as task wage, while supplemental to these two named methods, we find those various systems which will here be designated by the name of Progressive Wages."[6]

DAY WORK NEVER SCIENTIFIC.--The simplest of all systems, says Dr. Taylor in "A Piece Rate System," paragraph 10, in discussing the various forms of compensation "is the Day Work plan, in which the employés are divided into certain classes, and a standard rate of wages is paid to each class of men," He adds--"The men are paid according to the position which they fill, and not according to their individual character, energy, skill and reliability," The psychological objection to day work is that it does not arouse interest or effort or hold attention, nor does it inspire to memorizing or to learning.

It will be apparent that there is no inducement whatever for the man to do more than just enough to retain his job, for he in no wise shares in the reward for an extra effort, which goes entirely to his employer. "Reward," in this case, is usually simply a living wage,--enough to inspire the man, if he needs the money enough to work to hold his position, but not enough to incite him to any extra effort.

It is true that, in actual practice, through the foreman or some man in authority, the workers on day work may be "speeded up" to a point where they will do a great deal of work; the foreman being inspired, of course, by a reward for the extra output, but, as Dr. Taylor says, paragraph 17--"A Piece Rate System," this sort of speeding up is absolutely lacking in self-sustaining power. The moment that this rewarded foreman is removed, the work will again fall down. Therefore, day wage has almost no place in ultimate, scientifically managed work.

PIECE WORK PROVIDES PAY IN PROPORTION TO WORK DONE.--Piece Work is the opposite of time work, in that under it the man is paid not for the time he spends at the work, but for the amount of work which he accomplishes. Under this system, as long as the man is paid a proper piece rate, and a rate high enough to keep him interested, he will have great inducements to work. He will have a chance to develop individuality, a chance for competition, a chance for personal recognition. His love of reasonable racing will be cultivated. His love of play may be cultivated.

All of these incentives arise because the man feels that his sense of justice is being considered; that if the task is properly laid out, and the price per piece is properly determined, he is given a "square deal" in being allowed to accomplish as great an amount of work as he can, with the assurance that his reward will be promptly coming to him.

DANGER OF RATE BEING CUT.--Piece work becomes objectionable only when the rate is cut. The moment the rate is cut the first time, the man begins to wonder whether it is going to be cut again, and his attention is distracted from the work by his debating this question constantly. At best, his attention wanders from one subject to the other, and back again. It cannot be concentrated on his work. After the rate has been cut once or twice,--and it is sure to be cut unless it has been set from scientifically derived elementary time units,--the man loses his entire confidence in the stability of the rate, and, naturally, when he loses this confidence, his work is done more slowly, due to lack of further enthusiasm. On the contrary, as long as it is to his advantage to do the work and he is sure that his reward will be prompt, and that he will always get the price that has been determined as right by him and by the employers for his work, he can do this work easily in the time set. As soon as he feels that he will not get it, he will naturally begin to do less, as it will be not only to his personal advantage to do as little as possible, but also very much to the advantage of his fellows, for whom the rate will also be cut.

TASK WAGE CONTAINS NO INCENTIVE TO ADDITIONAL WORK.--What Schloss calls the Task Wage would, as he well says, be the intermediate between time or day wage and piece wage; that is, it would be the assigning of a definite amount of work to be done in definite time, and to be paid for by a definite sum. If the task were set scientifically, and the time scientifically determined, as it must naturally be for a scientific task, and the wage adequate for that work, there would seem to be nothing about this form of remuneration which could be a cause of dissatisfaction to the worker. Naturally, however, there would be absolutely no chance for him to desire to go any faster than the time set, or to accomplish any more work in the time set than that which he was obliged to, in that he could not possibly get anything for the extra work done.

WORTH OF PREVIOUS METHODS IN THE HANDLING.--It will be noted in the discussion of the three types of compensation so far discussed, that there is nothing in them that renders them unscientific. Any one of the three may be used, and doubtless all are used, on works which are attempting to operate under Scientific Management. Whether they really are scientific methods of compensation or not, is determined by the way that they are handled. Certainly, however, all that any of these three can expect to do is to convince the man that he is being treated justly; that is to say, if he knows what sort of a contract he is entering into, the contract is perfectly fair, provided that the management keeps its part of the contract, pays the agreed-upon wage.

In proceeding, instead of following the order of Schloss we will follow the order, at least for a time, of Dr. Taylor In "A Piece Rate System"; this for two reasons:

First, for the reason that the "Piece Rate System" is later than Schloss' book, Schloss being 1891, and the "Piece Rate" being 1895; in the second place that we are following the Scientific Management side in distinction to the general economic side, laid down by Schloss. There is, however, nothing in our plan of discussion here to prevent one's following fairly closely in the Schloss also.

THE GAIN-SHARING PLAN.--We take up, then, the Gain-sharing Plan which was invented by Mr. Henry R. Towne and used by him with success in the Yale & Towne works. This is described in a paper read before the American Society of Mechanical Engineers, in professional paper No. 341, in 1888 and also in the Premium Plan, Mr. Halsey's modification of it, described by him in a paper entitled the "Premium Plan of Paying for Labor," American Society of Mechanical Engineers, 1891, Paper 449. In this, in describing the Profit-sharing Plan, Mr. Halsey says--"Under it, in addition to regular wages, the employés were offered a certain percentage of the final profits of the business. It thus divides the savings due to increased production between employer and employé."

OBJECTIONS TO THIS PLAN.--We note here the objection to this plan: First,--"The workmen are given a share in what they do not earn; second, the workmen share regardless of individual deserts; third, the promised rewards are remote; fourth, the plan makes no provision for bad years; fifth, the workmen have no means of knowing if the agreement is carried out." Without discussing any farther whether these are worded exactly as all who have tried the plan might have found them, we may take these on Mr. Halsey's authority and discuss the psychology of them. If the workmen are given a share in what they do not earn, they have absolutely no feeling that they are being treated justly. This extra reward which is given to them, if in the nature of a present, might much better be a present out and out. If it has no scientific relation to what they have gotten, if the workmen share regardless of individual deserts, this, as Dr. Taylor says, paragraph 27 in the "Piece Rate System," is the most serious defect of all, in that it does not allow for recognition of the personal merits of each workman. If the rewards are remote, the interest is diminished. If the plan makes no provision for bad years, it cannot be self-perpetuating. If the workmen have no means of knowing if the agreement will be carried out or not, they will be constantly wondering whether it is being carried out or not, and their attention will wander.

THE PREMIUM PLAN.--The Premium Plan is thus described by Mr. Halsey--"The time required to do a given piece of work is determined from previous experience, and the workman, in addition to his usual daily wages, is offered a premium for every hour by which he reduces that time on future work, the amount of the premium being less than his rate of wages. Making the hourly premium less than the hourly wages is the foundation stone upon which rest all the merits of the system."

DR. TAYLOR'S DESCRIPTION OF THIS PLAN.--Dr. Taylor comments upon this plan as follows:

"The Towne-Halsey plan consists in recording the quickest time in which a job has been done, and fixing this as a standard. If the workman succeeds in doing the job in a shorter time, he is still paid his same wages per hour for the time he works on the job, and, in addition, is given a premium for having worked faster, consisting of from one-quarter to one-half the difference between the wages earned and the wages originally paid when the job was done in standard time," Dr. Taylor's discussion of this plan will be found in "Shop Management," paragraphs 79 to 91.

Psychologically, the defect of this system undoubtedly is that it does not rest upon accurate scientific time study, therefore neither management nor men can predict accurately what is going to happen. Not being able to predict, they are unable to devote their entire attention to the work in hand, and the result cannot be as satisfactory as under an assigned task, based upon time study. The discussion of this is so thorough in Dr. Taylor's work, and in Mr. Halsey's work, that it is unnecessary to introduce more here.

PROFIT-SHARING.--Before turning to the methods of compensation which are based upon the task, it might be well to introduce here mention of "Coöperation," or "Profit-sharing," which, in its extreme form, usually means the sharing of the profits from the business as a whole, among the men who do the work. This is further discussed by Schloss, and also by Dr. Taylor in paragraphs 32 to 35, in "A Piece Rate System"; also in "Shop Management," quoting from the "Piece Rate System," paragraphs 73 to 77.

OBJECTIONS TO PROFIT-SHARING.--The objections, Dr. Taylor says, to coöperation are, first in the fact that no form of coöperation has been devised in which each individual is allowed free scope for his personal ambition; second, in the remoteness of the reward; third, in the unequitable division of the profits. If each individual is not allowed free scope, one sees at once that the entire advantage of individuality, and of personal recognition, is omitted. If the reward is remote, we recognize that its power diminishes very rapidly; and if there cannot be equitable division of the profits, not only will the men ultimately not be satisfied, but they will, after a short time, not even be satisfied while they are working, because their minds will constantly be distracted by the fact that the division will probably not be equitable, and also by the fact that they will be trying to plan ways in which they can get their proper share. Thus, not only in the ultimate outcome, but also during the entire process, the work will slow up necessarily, because the men can have no assurance either that the work itself, or the output, have been scientifically determined.

SCIENTIFIC MANAGEMENT EMBODIES VALUABLE ELEMENTS OF PROFIT-SHARING.--Scientific Management embodies the valuable elements of profit-sharing, namely, the idea of coöperation, and the idea that the workers should share in the profit.

That the latter of these two is properly emphasized by Scientific Management is not always understood by the workers. When a worker is enabled to make three or four times as much output in a day as he has been accustomed to, he may think that he is not getting his full share of the "spoils" of increased efficiency, unless he gets a proportionately increased rate of pay. It should, therefore, be early made clear to him that the saving has been caused by the actions of the management, quite as much as by the increased efforts for productivity of the men. Furthermore, a part of the savings must go to pay for the extra cost of maintaining the standard conditions that make such output possible. The necessary planners and teachers usually are sufficient as object-lessons to convince the workers of the necessity of not giving all the extra savings to the workers.

It is realized that approximately one third of the extra profits from the savings must go to the employer, about one third to the employés, and the remainder for maintaining the system and carrying out further investigations.

This once understood, the satisfaction that results from a coöperative, profit-sharing type of management will be enjoyed.

The five methods of compensation which are to follow are all based upon the task, as laid down by Dr. Taylor; that is to say, upon time study, and an exact knowledge by the man, and the employers, of how much work can be done.

DIFFERENTIAL RATE PIECE WORK THE ULTIMATE FORM OF COMPENSATION.-- Dr. Taylor's method of compensation, which is acknowledged by all thoroughly grounded in Scientific Management to be the ultimate form of compensation where it can be used, is called Differential Rate Piece Work. It is described in "A Piece Rate System," paragraphs 50 to 52, as follows:--

"This consists, briefly, in paying a higher price per piece, or per unit, or per job, if the work is done in the shortest possible time and without imperfection, than is paid if the work takes a longer time or is imperfectly done. To illustrate--suppose 20 units, or pieces, to be the largest amount of work of a certain kind that can be done in a day. Under the differential rate system, if a workman finishes 20 pieces per day, and all of these pieces are perfect, he receives, say, 15 cents per piece, making his pay for the day 15 times 20 = $3.00. If, however, he works too slowly and turns out only, say 19 pieces, then instead of receiving 15 cents per piece he gets only 12 cents per piece, making his pay for the day 12x19= $2.28, instead of $3.00 per day. If he succeeds in finishing 20 pieces--some of which are imperfect--then he should receive a still lower rate of pay, say 10¢ or 5¢ per piece, according to circumstances, making his pay for the day $2.00 or only $1.00, instead of $3.00."

ADVANTAGES OF THIS SYSTEM.--This system is founded upon knowledge that for a large reward men will do a large amount of work. The small compensation for a small amount of work--and under this system the minimum compensation is a little below the regular day's work--may lead men to exert themselves to accomplish more work. This system appeals to the justice of the men, in that it is more nearly an exact ratio of pay to endeavor.

TASK WORK WITH A BONUS.--The Task work with Bonus system of compensation, which is the invention of Mr. H.L. Gantt, is explained in "A Bonus System of Rewarding Labor," paper 923, read before the American Society of Mechanical Engineers, December, 1901, by Mr. Gantt. This system is there described as follows:--

"If the man follows his instructions and accomplishes all the work laid out for him as constituting his proper task for the day, he is paid a definite bonus in addition to the day rate which he always gets. If, however, at the end of the day he has failed to accomplish all of the work laid out, he does not get his bonus, but simply his day rate." This system of compensation is explained more fully in