Preview

INTERNATIONAL LABOUR OFFICE

HIGHER PRODUCTIVITY
IN MANUFACTURING INDUSTRIES

GENEVA
1954

STUDIES AND REPORTS
New Series, No. 38

PUBLISHED BY THE INTERNATIONAL LABOUR OFFICE
GENEVA, SWITZERLAND

Published in the United Kingdom for the INTERNATIONAL
by Staples Press Limited, London

PRINTED BY KUNDIG, GENEVA, SWITZERLAND

LABOUR OFFICE

CONTENTS
Page
INTRODUCTION

PART I
PRODUCTIVITY AND THE ENVIRONMENT
CHAPTER I : The Meaning and Importance of Productivity
The Meaning of Productivity
Productivity and Welfare

7 '
7
11

CHAPTER I I : Attitudes of Management and Workers

The Psychological Climate
Industrial Relations and Co-operation for Higher Productivity .
The Distribution of the Benefits of Higher Productivity . . . .
Productivity and Economic Security
Measures to Maintain a High General Level of Employment .
Measures to Reduce the Displacement of Labour and Assist
the Re-employment of Displaced Workers
Measures to Protect the Standards of Living of Unemployed
Workers
Productivity and Job Satisfaction
CHAPTER I I I : Economic and Institutional Factors Affecting Productivity
The Size of Markets
The Level of Economic Activity
The Mobility of Resources
The Degree of Competition
The Quality and Availability of Materials
The Availability of Capital and Credit
Taxation
Educational and Training Facilities
Industrial Research and Exchange of Information

15
23
24
31
37
38
40
42
43
43
45
47
49
50
52
52
54
58

PART II
PRODUCTIVITY WITHIN THE UNDERTAKING
CHAPTER IV: Plant and Equipment

The Amount of Capital per Worker
Materials-Handling
Power-Driven Hand Tools
Maintenance
Plant Layout

65
72
74
75
76

HIGHISR PRODUCTIVITY IN MANUFACTURING INDUSTRIES
Page

CHAPTER V: Organisation and Control of Production

Management and Administration
Production Planning and Control
Costing and Budgetary Control
Simplification, Standardisation and Specialisation
Design
Work Study
Price Policy and Salesmanship

79
80
82
85
91
92
95

CHAPTER V I : Personnel Policy

Labour Management Co-operation
Employment Policy
Selection and Placement
Vocational Training
Training for Higher Management
Training of Scientists, Engineers and Technicians
Training of Supervisors
Training for Skilled Workers
Training for Operatives
Induction Courses
Special Training Programmes
Upgrading and Promotion
Supervision
Work Study, Work Simplification and Job Satisfaction
The Servicing of Skilled Workers
Wage Policy
Payment by Results
The Structure of Wage Rates
Hours of Work
Number of Shifts
Physical Working Conditions and Welfare Facilities
Industrial Safety and Health
Absenteeism and Labour Turnover

. . . .

99
110
116
119
120
122
122
124
127
129
130
132
134
136
144
145
145
152
153
154
158
163
167

PART III
PRACTICAL METHODS OF INCREASING PRODUCTIVITY
CHAPTER V I I : Conclusions of the Meeting of Experts on Productivity
in Manufacturing Industries
Introduction
General Considerations
Measures to Promote Productivity within Undertakings
Organisation and Control of Production
Personnel Policy
Plant and Equipment
INDEX

175
176
178
181
181
183
188
191

INTRODUCTION

Practical methods of increasing productivity in manufacturing
industries were discussed by a meeting of experts held under the
auspices of the I.L.O. in December 1952. The experts, who are
listed in Chapter VII, attended the meeting in their capacity as
experts and not as representatives of particular groups or interests ;
but, in order to ensure the presence of men thoroughly familiar
with the points of view of governments, employers and workers,
they were drawn from government or independent circles, employers' circles and workers' circles in countries in which manufacturing industry is highly developed or is in process of rapid
development.
The meeting unanimously adopted a statement of conclusions
which has since been considered by the Governing Body of the
I.L.O. With a view to ensuring that these conclusions receive the
widest possible circulation among all whose initiative and cooperation can contribute to raising productivity the Governing
Body authorised their communication to governments, with the
request that they be brought to the attention of employers' and
workers' organisations, productivity centres and other interested
bodies ; it also authorised their communication to the International
Labour Conference (at its 36th Session in June 1953), to intergovernmental organisations concerned with raising productivity
and to the International Committee of Scientific Management.
These conclusions are reproduced as Part III of the present
report.
To assist the meeting in its deliberations the International
Labour Office had prepared a report entitled Practical Methods of
Increasing Productivity in Manufacturing Industries, which has not
been published. The experts also had before them a published
I.L.O. report entitled Factors Affecting Productivity in the Metal
Trades, which had been prepared for the Metal Trades Committee
of the I.L.O.1 Parts I and II of the present report are based, in
the main, on the unpublished report prepared for the meeting of
1

Metal Trades Committee, Fourth Session, Report III (Geneva, 1952).

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

experts. Substantial new material has, however, been added and
in revising the original text the Office has had the benefit of the
views and comments of the experts on the two reports submitted
to them. The Office would like to acknowledge its indebtedness
to the experts, without, however, attributing to them responsibility
for anything that is said in Parts I and II of the present report.
These parts of the report are arranged as follows. Part I
deals with general conditions affecting productivity. Chapter I
discusses briefly the concept of productivity and its relation to
welfare. Chapters II and III discuss certain psychological, economic and institutional factors influencing the general environment
within which industry works.
While it is important to do everything possible to bring about
and to maintain a psychological and economic climate which
favours the: rapid growth of productivity, it is in individual establishments that this growth has actually to take place. Part II
accordingly deals with steps which can be taken to raise productivity within individual establishments. A good deal of space and
emphasis is devoted to questions which are of special interest and
concern to workers and to the I.L.O. Chapter IV is concerned
with plant and equipment, Chapter V with the organisation and
control of production and Chapter VI with personnel policy.
The report thus lists and discusses a large number of factors
all of which appear to have some influence on industrial productivity. It has, however, little to say about the relative importance
of these different factors, which is bound to vary from country
to country and from industry to industry. This is a matter on
which it is dangerous to generalise. As some indication of factors
which have proved to be important, it may however be noted
that the following are mentioned as factors responsible for high
productivity in the United States in more than half of the 58 team
reports of the Anglo-American Council on Productivity: a spirit
of competition (33), extensive use of mechanical aids (43), economic handling of materials (33), good lay-out of factories, offices
and stores (30), modern methods of costing (36), production
planning and control (36), work study (33), progressive attitude
of management (30), and appreciation by workpeople of the need
for higher productivity (43).
American leadership in the field of productivity 1 and the
1
The productivity of labour in United States manufacturing industries
appears commonly to be from two to five times as great as in Europe and
many times a.s great as in underdeveloped countries.

INTRODUCTION

possibility that lessons learnt in the United States may fruitfully
be applied elsewhere, with due regard to differences in underlying
conditions, account for the fact that more space is devoted in
this report to experience in the United States than would normally
be devoted in an international report to the experience of any one
country.
The distinction between the factors discussed in Part I and in
Part II corresponds to a distinction between " external " and
" internal " factors affecting productivity drawn by Mr. Graham
Hutton in his recent book, We Too Can Prosper.1 And, as
Mr. Hutton points out, the two sets of factors interact ; a company
will react to external factors in various internal ways. Nor is this
all. Effective internal action can make a powerful impact, through
its example and its consequences, upon the external environment.
While this report is especially concerned with problems of
raising productivity in manufacturing industries, and while all its
illustrations are drawn from this field, much of it is equally applicable to other fields of economic activity. This is especially true
of Part I, but is scarcely less true of much that is said in Part II.
All types of economic activity—industry of all kinds, agriculture,
office work, even domestic work—can become more efficient
through the application of certain common basic principles.
To speak and write about productivity is worth while only if
it leads to action. But action on matters affecting so many
different interests commonly requires agreement. The principal
significance of the meeting of experts whose conclusions are reproduced in Part III lies perhaps in the proof it gave that men
of knowledge and goodwill from different countries, with different
backgrounds, different experience and different approaches to the
question, can reach the same conclusions on problems that have
so many controversial aspects. The present report is published
in the hope that it may help to carry a stage further the very
necessary process of reaching agreement on what needs to be
done in order to raise productivity in manufacturing industries
and elsewhere.

London, Allen and Unwin, 1953, p. 8.

PART I
PRODUCTIVITY AND THE ENVIRONMENT

CHAPTER I
THE MEANING AND IMPORTANCE OF PRODUCTIVITY
T H E M E A N I N G OF " PRODUCTIVITY "

Few words are made to do more work at the present time than
" productivity ". It is formally defined as the ratio between the
"output" of wealth produced and the "input" of resources used
up in the process of production. But this definition is formal
only ; it lacks content until " output " and " input " have been
defined. Each of these terms can be defined in many different
ways, none of which is necessarily the " right " one. Different
definitions are legitimate, and indeed necessary, for different purposes. This has the inconvenient result that two people both
talking about productivity may be talking about quite different
things.
In a broad and fundamental sense the problem of increasing
productivity may be said to be the problem of making more
efficient use of all types of resources in employment—of using
them to produce as many goods and services as possible at the
lowest possible real cost. This implies a broad definition of both
output and input. The concept of output will include all goods
and services which satisfy wants—not only industrial and agricultural products but the services of doctors, teachers, those engaged
in shops, offices, transport undertakings and other " service industries ". Input, when " productivity " is used in this broad and
fundamental sense, will mean the efforts and sacrifices of all those
who contribute to production.
This, however, is a somewhat abstract concept; and it is
statistically unmeasurable, since the efforts and sacrifices involved
in production are varied and impossible to add together.1
1

Even if, in the last analysis, all efforts and sacrifices involved in production can be reduced to labour and " waiting " (somebody has to " wait"
or defer consumption every time labour which could have been used to produce consumers' goods is devoted instead to capital formation), this still
leaves the problem of adding units of labour to units of " waiting ". There
[Footnote continued overleaf.]

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

It is possible, by relating output (in the broad sense defined
above) to the input of a particular factor of production—labour,
land or capital—to arrive at a concept which is, if one is willing
to make some rather arbitrary assumptions, statistically measurable
and which may be called the productivity of that factor of production. While the concepts of the productivity of land and of
capital equipment are very important for certain purposes, the
concept of the productivity of labour has received the lion's share
of attention in recent times—so much so that it has been suggested
that " when the word productivity is used without further qualification, the productivity of labour is understood ".1 The productivity of labour in an economy as a whole is the ratio of total
output to total labour input; the productivity of labour in e.
particular industry or plant is the ratio of the output of that
industry or plant to labour input in the industry or plant.
It is scarcely necessary to say that to speak of the productivity
of labour is not to emphasise the efforts to be made by labour, but
the importance of making an efficient use of the services of labour.
In the expression
output of wealth
input of labour

it is the numerator that one wants to increase, not the denominator.
Employers, workers, and governments can all play their part in
increasing output, and the use of the term " productivity of labour "
are, of course, great difficulties also in adding together the heterogeneous goods

and services of which total output consists. This can be done, though with
no more than an approximation to accuracy, by adding together their money
values, corrected as far as possible for changes in prices (see I.L.O.: Methods
of Labour Productivity Statistics, Studies and Reports, New Series, No. 18
(Geneva, 1951), especially pp. 75-77); and it might be suggested that a similar
procedure should be adopted for aggregating inputs. On the input side,
however, a problem arises as to how profit should be treated. In so far as
profit is a reward for enterprise or risk-bearing which would not have been
forthcoming but for the hope or expectation that profits would be earned, it
is as much a necessary cost of production as wages or interest. In view of
their residual nature there is, however, no sense in treating total profits
actually earned in any period as a measure of the amount of enterprise furnished during that period. If all profits are treated as costs, the total value
of input will by definition equal the total value of output. If, on the other
hand, all profits are excluded from costs, the total value of input will fall
short of the total value of output by the amount of profits earned, and the
output/input ratio will be a measure not of physical productivity but of
profitability. And there is no means of knowing what proportion of profits
actually earned should be treated as costs. Another difficulty in the way
of arriving at any meaningful aggregate of inputs is the fact that the rate
of interest, influenced as it is by monetary and banking policy, is a thoroughly
artificial " price " for the use of capital or the service of " waiting ".
1

ORGANISATION FOR EUROPEAN ECONOMIC CO-OPERATION:

of Productivity (Paris, 1950), p. 4.

Terminology

THE MEANING AND IMPORTANCE OF PRODUCTIVITY

in no way implies that what workers can do to increase output is
more important than what employers and governments can do.
Still less does it carry any suggestion of a desire to exploit labour
—quite the reverse. It shows a concern not for higher output at
all costs but for higher output in relation to labour input.
This concept of the productivity of labour, though in some ways
of less fundamental significance than the concept of the ratio of output to the input of resources in general, is a relatively simple concept
in that the difficulties of adding together unlike things are reduced
if we relate output to labour input alone.1 Moreover, this concept
is of special interest if one is thinking of the economy as a whole
and of the contribution that higher productivity can make to
social progress.2 Provided those in employment remain a constant
fraction of the total population, an increase in the productivity of
labour in an economy as a whole means an increase in the amount
of wealth produced per head of population.3 The concept of the
productivity of labour is also of considerable importance

connection with wage policies.
Though the input of labour is a simpler concept than the input
of resources in general, even the input of labour may be thought
of in different ways. If it is taken to mean the amount of effort
put in by workers, it follows that an increase in output produced at
the cost of correspondingly greater effort will not be regarded as an
increase in labour productivity. The amount of effort put in is,
however, an exceedingly difficult concept to measure. For statistical purposes it is usually necessary to fall back, as a measure of
effort, on man-hours, man-days, man-weeks or man-years. For
certain other purposes, too, it may be useful to think of labour input
as the amount of time rather than the amount of effort devoted
to working. For example, output per man-hour or per man-week
in the economy as a whole has a close connection with the question
1
Even so, there remain the problems of expressing different kinds of
labour in homogeneous units.
2
It should, however, be borne in mind that the most labour-saving
methods of production are not necessarily the most economical, even for an
economy as a whole, if they demand heavy capital investment, i.e., much
"waiting". The labour devoted to capital formation is of course included
in the input of labour if one is thinking of the productivity of labour in an
economy as a whole; but different methods of producing the same output
utilise different amounts of capital and therefore require different amounts
of "waiting ".
3
Considering not the world as a whole but a single country, the amount
of wealth produced in any year (which, given the size of the labour force,
depends upon the average productivity of labour) has, however, to be adjusted
to take account of payments to or from other countries, before it can be
identified with the amount of wealth becoming available for use in that year.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

of how far average hourly or weekly wages can be raised without
giving rise to cost inflation.
But though the productivity of labour (however the input of
labour is defined and measured) is of considerable significance in
relation to an economy as a whole, it is much less significant, and
may even be seriously misleading, to relate the output of a particular
establishment, industry, or sector of the economy to the input of
labour in that establishment, industry, or sector. For the productivity of the labour engaged in any particular establishment *
may be increased by purchasing components or partly processed
materials instead of raw materials from elsewhere, or by installing
capital equipment which may be thought of as " embodying "
labour from elsewhere in the economy (as a farmer may increase
his output by using a tractor); in other words, not all the labour
which should properly be regarded as having contributed to the
output of a particular establishment 1 is in fact counted. In principle, this difficulty may be overcome by relating labour input not
to the gross output but to the net output of an establishment or
industry, i.e., to the value added (at constant prices) to materials,
components and semi-finished products purchased from elsewhere;
but allowance would also have to be made for depreciation of
capital equipment.2 The practical difficulties of measuring net
output are, however, usually even greater than those of measuring
gross output, and allowances for capital depreciation are bound
to be arbitrary.
Although, for certain purposes, it is sometimes important to
focus attention on the productivity of labour, there are then dangers
in doing so. There is not only the danger of being misunderstood
and being thought to place undue emphasis upon what can be done
by workers to increase production. There is also the danger of
giving insufficient attention to problems of what can be done to
increase production by making a more efficient use of other factors
of production. In industries where labour costs are low in comparison with material costs and capital costs, attention may need
to be given primarily to economising materials or fuel or to making
better use of machines. In underdeveloped countries, especially,
the shortage of capital and land and the abundance of labour are
often such as to make it more important to increase output per
machine or per acre of land than to increase output per worker.
1
2

Or industry, or sector of the economy.
Cf. Jean DAYRE: Productivité, mesure du progrès (Paris, Société auxiliaire
de diffusion des éditions de productivité, 1952), especially Chapter V i l i .

THE MEANING AND IMPORTANCE OF PRODUCTIVITY

For purposes of the present study, then, the problem of productivity will be thought of in the broader sense as the problem
of utilising as efficiently as possible all types of resources in use.
To readers who have got into the way of thinking of " productivity "
solely in terms of the productivity of labour, the scope of this
report might seem more properly defined by some such term as
" productive efficiency in manufacturing industries ".
PRODUCTIVITY AND WELFARE

Higher productivity is not an end in itself but a means of
promoting social progress and strengthening the economic foundations of human well-being.
The resources needed for raising the standards of living of the
less well-to-do sections of the community may be made available
in any country—
(1) by devoting to this purpose—and especially to wages and
social services—a larger proportion of the national output of
wealth; and
(2) by enlarging the national output of wealth—
(a) by promoting a higher level of employment (where there is
less than full employment); and
(b) by promoting higher productivity, or a larger output per unit
of resources already in employment.
There are reasons for devoting special attention at the present
time to the contribution which higher productivity can make to
economic and social welfare. In most countries the mitigation of
extremes of wealth and poverty is already an accepted goal of
social policy. This goal is not always pursued very wholeheartedly, and there are many countries in which much more could
probably be done to bring about a fairer distribution of wealth.
The extent to which welfare can be increased by cutting the cake
of the national income into more equal slices is however limited
both by the size of the cake (which is in many countries much
too small) and also, probably, by the need for maintaining adequate
incentives to work, save, lend and undertake the risks of business
enterprise.
In many developed countries there is little scope at present for
increasing production by raising the level of employment. But in

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

some of them, and in many underdeveloped countries, present
levels of unemployment and underemployment are such as to offer
a substantial opportunity for expansion of output by setting
unemployed or underemployed resources to work.
What can be done to increase economic welfare by redistributing
income and by securing higher levels of employment, though
important, is subject to limits which have been more nearly
approached in some countries than in others. What can be done
by increasing productivity is not limited in the same way. While
higher productivity is likely to make only a gradual impact on
the total output of wealth, and is certainly no panacea, so far as
can be seen opportunities for improving methods of production
are likely to continue indefinitely. Higher productivity is important in all circumstances; in the circumstances of many countries
today it is the most important, though not the only, way to
higher living standards.
But higher productivity, though essential for economic and
social welfare, is not enough. Higher productivity creates the
means and opportunity for improving the standard of living of
workers, as of all other sections of the community; but it does
not automatically and inevitably do so, at least in the short run.
In general and in the long run, it is true, there is a good deal of
evidence that the standard of living of workers is fairly closely
related to the level and growth of productivity. It is in countries
with the highest productivity of labour that workers' standards
of living are highest. And there appears to be no tendency in the
long run for unemployment to be highest in countries in which
technological progress has brought about the most rapid increases
in productivity.
Any programme to raise productivity must, however, take
account of workers' fears (a) of working themselves out of a job,
and (b) that employers will get all the benefits from higher productivity. To ignore these fears would be to invite failure. In
the short run technological improvements may lead to unemployment in particular plants and industries, though they will usually
at the same time create new opportunities for employment elsewhere. And though in the long run real wages do rise with
increases in labour productivity, in the short run there appears to
be no clear tendency for real or money wages to move up or down
in accordance with changes in productivity from year to year.
Many workers also fear that higher productivity may be sought
by methods which involve speeding up the rate of work, increasing

THE MEANING AND IMPORTANCE OF PRODUCTIVITY

workloads or in other ways impairing working conditions or
reducing the satisfaction which workers get out of their work.
It is, therefore, of the utmost importance that action to raise
productivity should be accompanied by appropriate employment
policies, by appropriate policies to ensure that the benefits from
higher productivity are fairly distributed through higher wages or
lower prices, or both, and by safeguards to ensure satisfactory
working conditions. Such measures are essential in order to
ensure that increases in productivity are rapidly translated into
improvements in economic and social welfare, but they are to be
regarded not so much as measures which should accompany action
to raise productivity but rather as integral parts of programmes
to raise productivity; for, unless workers are reassured on these
points, their indispensable co-operation cannot be expected.
No less important are questions of industrial and human
relations a—especially the role of labour, at the national, industrial
and plant level, in the implementation of programmes for higher
productivity. The co-operation of workers cannot be expected
unless they are consulted and, if possible, enabled in some way
genuinely to participate in such programmes. Joint consultation
is important for the contribution it can make to removing the
fears and misgivings regarding higher productivity which have
been mentioned above. It is important also for its own sake, as
a recognition of what is due to workers as human beings, and as
a means of giving them a greater interest in the undertaking in
which they work and of encouraging them to co-operate with
management in measures applied to raise productivity. Emphasis
needs to be placed, however, not only on the importance of consultation and co-operation with labour but also on the fact that
it is management which is responsible for the operation of an
undertaking and for the decisions involved in discharging this
responsibility.
The problems of social and economic policy and industrial and
human relations that need to be solved if a rapid growth in pro1

To stress the importance of good " human relations " in industry is not
to suggest that employers should display a paternalistic or benevolent attitude.
It is to stress the importance (apart from formal machinery for labour-management co-operation suggested by the term " industrial relations ") of a good
day-to-day relationship between all the people (workers, supervisors and
members of the management) working together in a particular undertaking.
See I.L.O. : Human Relations in Metal Working Plants, Report II, Metal
Trades Committee, Fourth Session (Geneva, 1952) and the resolution on
human relations adopted at the Fourth Session of the I.L.O. Metal Trades
Committee. (Industry and Labour, Vol. VIII, No. 6, 15 Sep. 1952, p. 266.)
2

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

ductivity is to be achieved, and if this is to be translated quickly
into improvements in social conditions, are almost certainly more
formidable than the problems of industrial engineering. At least
they are more controversial. Moreover, many problems which
seem at first sight mainly technical or economic have in fact a
very large psychological element.1 Even on these controversial
questions, however, there would seem to be a considerable measure
of common ground between far-sighted employers, workers and
governments.. It is in the common interests of employers, workers
and governments to seek to define and extend the area of agreement, and to find fair and workable solutions to these problems
—solutions which need not, of course, be the same in all circumstances and in all undertakings. Until such solutions are found,
psychological obstacles will continue to impede technical progress,
which could be extremely rapid if apathy, mistrust and suspicion
could be overcome. The next chapter is accordingly devoted to
a more detailed examination of these problems, and this report
as a whole devotes a great deal more space to what may be
described as human factors affecting productivity than to technical
factors.

1
Cf. the following passage from The Times, 23 June 1952: " I t is almost
fair to say that at this stage re-equipment and improvement of machinery
are not primarily technical problems. They depend first on training in proper
methods of work study, secondly, on applying them in such a way as to
break down the worker's psychological abhorrence of the man with the stopwatch, and thirdly, on negotiating the redistribution of workers—-which may
mean anything from another machine a man to a second shift. . . . At every
level, success or failure in winning labour's confidence are paramount; and
they seem to vary widely." (Quoted by HUTTON, op. cit., p. 216.)

CHAPTER II

ATTITUDES OF MANAGEMENT AND WORKERS
T H E PSYCHOLOGICAL CLIMATE

Opinions differ regarding the importance t o be attached to
psychological factors affecting productivity. The view which
regards productivity as depending almost entirely upon the amount
of capital employed and the productive techniques used is apt to
take for granted a willingness to accept changes and to adopt
new and improved techniques which is certainly not found in all
societies.
. . . In many human societies ways of doing things remain
unchanged for centuries and departures from established procedures
are either forbidden by law or impeded by a superstitious adherence to
custom. An attitude which accepts the desirability and the practicability of technological change is an essential prerequisite to progress.1
Much can be done to improve the psychological climate in
individual undertakings even if the generally prevailing climate of
opinion in a country does not provide a favourable environment.
Such efforts are, however, likely to be much more successful if
generally prevailing attitudes favour innovation and if managements and workers take pride not only in their standards of quality
and craftsmanship b u t also in their output.
This kind of attitude appears to be more widespread in the
United States of America than in most other countries.
The one factor which more than any other has made for the high
productivity of the U.S. is the attitude of its people towards work.
Management and workers take an intense interest in output and efficiency.2
This quotation might have come from the report of almost any of
the productivity teams from European countries which have
1

NATIONAL ASSOCIATION OF MANUFACTURERS: Productivity—Gauge

Economic Performance, Economic Policy Division Series, No. 53 (New York,
1952), p. 6.
2

ANGLO-AMERICAN

COUNCIL

ON PRODUCTIVITY:

Letterpress

Printing

(London, 1951), p. 6. (In subsequent footnotes the Council is referred to by
its initials, A.A.C.P.)

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

recently visited the United States. The United Kingdom steelfounding productivity team, for example, believed that " the
fundamental causes " of high productivity are " mainly psychological " 1 , and regarded technical and organisational factors as
the means through which a fundamental psychological drive
toward high productivity found expression. The team reported
thatFirst, last, and all the time, managements are actuated by the
belief that high rates of production are essential to individual and
collective success. First, last, and all the time, workers at the bench,
at the machine and in the offices subscribe to that same belief.2
These favourable attitudes towards productivity in the United
States are no doubt due in large measure to the emphasis
that is placed upon competition in the American way of life,
and to the strength of United States trade unions, which
are, in general, confident of their power to secure for workers
a reasonable share in the benefits of higher productivity. The
productivity-consciousness which is described in productivityteam reports is reflected also in collective bargaining provisions
in a large number of United States industries 3 , and is evi1

A.A.C.P.: Steel Founding (London, 1949), p. 1.
Ibid., p. 29. Among numerous other reports which emphasise the
favourable psychological climate prevailing in the United States as a factor
making for high productivity, mention may be made of the reports of teams
from the French machine tools industry and the Netherlands lithographic
2

industry.

See ASSOCIATION FRANÇAISE POUR L'ACCROISSEMENT DE LA PRO-

DUCTIVITÉ: Mission aux Etats-Unis de l'industrie de la machine-outil (Paris,
1951), pp. 28-29; CONTACTGROEP OPVOERING PRODUCTIVITEIT: Nederlandse

Lithografen in Amerika (with a summary in English), p. 99.
3

See UNITED STATES DEPARTMENT OF LABOR, Bureau of Labor Statistics:

Collective Bargaining Provisions: Union-Management Cooperation, Plant
Efficiency, and Technological Change, Bulletin No. 908-10 (Washington, 1949).
The following are some of many examples of collective bargaining provisions
reflecting a high degree of productivity-consciousness:
" The union recognizes the need for improved methods and increased
output to make goods available at lower costs, and agrees to cooperate
with the company in suggesting and introducing methods for increasing
production, and in educating its members on the needs of such methods,
changes, and improvements. " (p. 5.)
" It is recognized mutually by the union and the company that increased
wages must be offset by increased productivity in order that the company
may be kept in such a competitive position to enable it to provide the
employees with high wages and an improved plane of living. " (p. 7.)
" The company has the right to determine job procedure and methods
and to put in technological improvements and the union will cooperate
in any work to improve plant operations. " (p. 36.)
" The union pledges itself to encourage efficient operation to maintain
production at its highest level, and that it will not interfere or oppose the
introduction of modern methods and machinery. " (p. 36.)

ATTITUDES OF MANAGEMENT AND WORKERS

dently a major factor making for high productivity in the United
States. 1
Many of the most important advantages possessed by the
United States in the field of productivity (such as the size of
markets and the degree of mechanisation of production) cannot
be matched in other countries, a t least for many years to come.
There is, however, no physical reason why a climate of opinion
as favourable to productivity as that which prevails in the United
States should not be created in other countries where higher
productivity is in fact much more urgently needed.
The first step towards creating a psychological climate favourable to productivity is an understanding of the importance of
increased productivity in the common interests of employers,
workers and consumers. This in turn requires the establishment
of confidence that the gains from higher productivity will be fairly
divided. It seems to be generally recognised in all sections of
United States society that it is only because their productivity
is high that Americans are able to enjoy a high standard of living.
Great efforts have been made in many countries in recent years
to promote productivity-consciousness. These efforts include the
sending of productivity missions to other countries and especially
to the United States, the publication of productivity-team reports,
publicity campaigns by members of teams on their return to their
own countries, the organisation of special training courses and
conferences, the establishment of national productivity centres,
and the publication of journals devoted to productivity. In
Eastern European countries " Socialist work competition " movements have been organised, with the aim of promoting rivalry and
competition between individuals, teams and groups of workers,
and stimulating the sense that each has a significant part to play
in the progress of the industry in which he works and in building
up the national economy. The trade union movements in the
1

Even in the United States it is certain that the energy and quality of
management vary a great deal from one undertaking to another, and it is
doubtful whether productivity-consciousness and a spirit of enthusiastic
co-operation by workers in the introduction of new methods and machinery
are as universal as an incautious reader of the series of productivity-team
reports might suppose. For evidence that attitudes less favourable to productivity are also widespread see W. CAMPBELL BALFOUR: "Productivity and
the Worker", in British Journal of Sociology, Vol. IV, No. 3, Sep. 1953,
pp. 257 ff. There are also collective bargaining provisions forbidding,
restricting or regulating the use of specified tools, equipment or appliances,
or the introduction of new processes, equipment or machinery (BUREAU OF
LABOR STATISTICS: Bulletin No. 908-10, op. cit., pp. 36 ft.).

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

various countries are closely identified with these work competitions
and have special responsibilities with regard to them.
Conditions of full or nearly full employment in many countries,
coupled with labour shortages in many important industries and
with balance-of-payments difficulties, have helped to bring about
in recent years a wider understanding of the basic fact that standards of living do depend upon levels of productivity. But, if
this is more widely understood than it has been in the past, it has
probably still not become part of the thinking of the ordinary
man and woman in most countries.
Nor is it enough to be persuaded t h a t higher productivity is
in itself a good thing. It is also necessary to be convinced t h a t
productivity is more desirable t h a n certain other things t h a t are
also desired and t h a t may have to be sacrificed to it. Some very
pertinent questions were asked in the steel-founding productivity
report quoted above. Similar questions should perhaps be asked
and answered in other industries besides steel founding, and in
other countries besides the United Kingdom. The questions
were—
Is higher productivity really desired [in the industry] ?
Over what features in the . . . industrial system does the desire
for high productivity take preference ?
Is high productivity more important than the organisation and
customs of the trade association ?
Is high productivity to be sacrificed so as to retain intact the existing
methods of the employers' organisations ?
Are trade union practices, built up over the years before the present
economic dangers, to remain unaltered, at the expense of high productivity ? l
An unwillingness to give up accepted ways of doing things,
and a consequent resistance to change, is one of the most universal
of human characteristics, and action to promote productivity
cannot be effective unless it is based on an understanding of the
reasons for the inertia or resistance t h a t is so frequently encountered among managements, workers and all other sections of
society.
Energy and a receptiveness to new ideas on the part of management are of cardinal importance. If management lacks these
qualities, there is little t h a t workers for their part can do to raise
productivity. If these qualities of management are lacking, it
may be because managements lack training and familiarity with
Steel Founding, op. cit., p. 35.

ATTITUDES OF MANAGEMENT AND WORKERS

better methods. Or there may be a fear on the part of managements that co-operation with workers or governments in programmes to raise productivity will involve interference in the
running of their businesses. Or the administrative structure
within the undertaking may be such as to stifle enterprise. A
number of productivity teams have drawn attention to the emphasis
that is laid in American industrial administration on (a) the clear
definition of responsibilities and (b) the delegation of authority.
. . . As the individual manager, whatever his level, knows his
responsibilities and the limits of his power, he feels a freedom and a
confidence that let him get on with the job. This
is one of the main
reasons for the vigour of American management.1
Or, again, managements may be reluctant to give up the ease and
security which they may associate with time-honoured methods
and procedures, and with marketing arrangements which blunt
the edge of competition. New capital and enterprise are often
kept out of fields where they could be productively employed—
kept out by means of monopolistic practices and restrictive devices,
open or secret, resorted to by established firms in such fields. To
exclude new men, new methods and new ideas in the interests of
established producers in any field is to inhibit progress and to
check the growth of productivity.
The attitude of management can be strongly influenced by the
adoption of appropriate governmental policies in regard to raw
material supplies, availability of capital, taxation, foreign trade
and the regulation and control of monopolistic practices—policies
which will encourage and reward a spirit of enterprise. Though
such policies may greatly affect the psychological climate, they
are, in themselves, matters of economics rather than of psychology,
and can more appropriately be discussed in the next chapter.
The leadership that can be given by the more enterprising managements in any industry is also of great importance. Restrictive
business practices cannot always be controlled by government
regulation alone; much depends upon the willingness of employers
and their organisations to adopt progressive policies. And a few
enterprising managements in any industry can do a great deal to
improve the quality of management throughout the industry not
only by compelling their competitors to become more efficient on
pain of losing business but also by their example, by encouraging
A.A.C.P.: Management Accounting (London, 1950), p. 8.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

joint industrial research and exchange of information between
firms, and in other ways1.
Energy and a receptiveness to new ideas on the part of management need to be matched by a willingness on the part of workers
to accept new methods of production, even if these lead to some
displacement of labour, and to abandon any restrictive practices
they may have sought to maintain in the past. Particular trade
unions in particular countries have been and are charged with
impairing productivity by restraints on technological improvements in processes and machinery ; by insisting upon rules requiring
the performance of unnecessary work or the hiring of unnecessary
men; by imposing restrictions upon job content, incentive systems,
disciplinary measures, allocation of work, the use of prefabricated
products or components, hiring and firing and sometimes promotion and demotion. Such allegations are not always well founded
and not always free from malice. Trade unions have often had
imputed to them the responsibility for restrictive practices whose
roots lie deep in human nature and which have long preceded the
organisation of workers into unions. But no unbiased observer
will maintain that allegations of this kind are always without
foundation.
In cases where there is some foundation for such allegations
it is important to examine and understand the reasons underlying
the attitudes and behaviour complained of. Union attitudes and
behaviour towards measures to raise productivity vary enormously
not only from one country to another but from one union to
another within the same country. Among the factors which
influence the attitudes and behaviour of trade unions are—
(1) The historical experience of the union itself.
Generally speaking, a record of struggle against the management is
not conducive to a spirit of co-operation on the part of the Union,
because, whenever a conciliating move is contemplated, someone will
stand up and bring back the bitter memories and experience of the past.
For that very reason the old traditional industries have often a greater
handicap than the new industries. This is especially true in regard to
old but contracting industries which have a long record of unemployment and low wages in the past.2
(2) The attitude and behaviour of employers.
(3) The extent to which union members are satisfied with
1
2

Cf. pp. 58 ft. below.
F. ZWEIG: Productivity and Trade Unions (Oxford, Basil Blackwell,
1951), pp. 26-27.

ATTITUDES OF MANAGEMENT AND WORKERS

wages and conditions in the undertaking or industry. A sense of
grievance is readily translated into a set of restrictive attitudes.
(4) The nature and size of the union, and in particular whether
it is a craft union or an industrial union. A small local union
defending a small section of craftsmen has a tendency to be more
restrictive in outlook and practice than a big national mixed
union. In the United States—
Industrial trade unions have accepted the principle of the inevitability of industrial change. They came into being with a distinct
sympathy for change. Even during the thirties, in the midst of widespread unemployment, leaders voiced their conviction that industrial
progress was inevitable and could bring general benefits if workers
are protected from having to
carry the brunt of the costs of change and
could share in the benefits.1
(5) Relations with other unions. Some restrictive practices,
especially in regard to demarcation lines and upgrading, are
directed not against employers but against other unions.
(6) The situation of the labour market. Memories and fears
of unemployment are probably the most prolific of all sources of
restrictive practices. Trade unions realise very clearly that technological progress and higher productivity may entail costs as well
as gains. These costs include: (a) the erosion of individual skills
and experience; (b) the need for some workers to change their
jobs and perhaps their places of residence; and (c) the fact that
some individuals may never be able to make the changes required.
More and more, however, trade unions are realising that it is
not technological progress as such which is the enemy but rather
the danger of an unfair distribution of the gains and costs of
technological progress. More and more, instead of allowing fear
of the costs of technological progress to serve as a pretext for
opposition to changes that raise productivity, they are accepting
the need for higher productivity, welcoming the opportunities it
holds out for improved living standards, and addressing themselves
to the task of negotiating with employers reasonable safeguards for
the interests of workers.2 A document on " Prices, Wages and
Productivity " adopted by the General Council of the International
1
S. BARKIN : " Trade Union Attitudes and their Effect upon Productivity ", in Industrial Productivity (Madison, Wisconsin, Industrial Relations
Research Association, 1951), p. 115.
2
While these statements appear to be true of the majority of trade unions,
it must be remembered that the Communist trade unions, which are powerful
in certain Western European countries, are, in principle, opposed to co-operation with employers for the purpose of increasing productivity in non-Com-

[Footnote continued

overleaf.]

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Confederation of Free Trade Unions in July 1952 contains the
following paragraph:
In view of the favourable conditions which rising productivity
creates for improvements in living standards, trade unions will usually
agree to or «ven foster the introduction of better methods, provided that
the wage and employment interests of the workers are adequately protected. If they can be assured that the workers will share in benefits
of higher productivity, trade unions will be prepared to co-operate in
finding scope for improvements and to take part in joint consultation
with a view to the introduction of improvements in technique and organisation. Intimate knowledge of production processes, gained in
practical everyday experience of the workers, may often be a source of
valuable suggestions for gains in productivity. This source may be
made available through joint production committees and similar bodies,
but only in an atmosphere of good industrial relations.
As has been said in Chapter I, if workers are to co-operate in
a drive to raise productivity and to abandon any restrictive
practices they may have regarded as safeguards in the past, they
will want, first, explanations, consultation and an opportunity for
some degree of participation in the application of measures designed
to raise productivity; secondly, a reasonable share in the benefits
resulting from higher productivity; thirdly, safeguards to protect,
so far as possible, their economic security; and, fourthly, safeguards
in connection with workloads and work methods.
In so far as these are matters for action within individual
establishments, they will be discussed in later parts of this report.
In respect of each of these matters, however, there are general
considerations t h a t need to be borne in mind, and steps t h a t may
be taken at higher levels, too, and these will be discussed in the
remaining parts of this chapter.
munist countries. Certain non-Communist trade unions, too, believing that
workers have thus far received little or nothing in return for their co-operation, have in recent months taken up a position notably less favourable to
joint efforts to raise productivity. For example, the Third Congress of the
French Confédération Générale du Travail—Force Oneriere, held in Paris
in November 1952, decided to withdraw its representatives from the Trade
Union Productivity Study and Research Centre (see p. 138 below), and
from all other bodies outside the Confederation that failed to give certain
guarantees. This action did not, however, reflect opposition in principle to
joint efforts to promote higher productivity. A resolution adopted by the
conference declared that increased productivity, a decisive factor in which
was the improvement of wages and hours and conditions of work, should
benefit both workers and consumers ; schemes for enabling employees to share
in the benefits of increased productivity should be agreed upon by employers'
and workers' organisations; and in each undertaking the conditions for the
award of productivity bonuses should form the subject of a special clause,
to be included in the collective agreement applicable in that undertaking
in a manner to be decided on by the employers' and workers' organisations
concerned. (Industry and Labour, Vol. IX, No. 3, 1 Feb. 1953, p. 110.)

ATTITUDES OF MANAGEMENT AND WORKERS

INDUSTRIAL RELATIONS AND CO-OPERATION
FOR

H I G H E R PRODUCTIVITY

It is within individual undertakings that there is normally the
greatest scope for joint consultation and effective co-operation on
matters connected with productivity. But where it is possible
and appropriate to do so there are advantages in discussing at the
level of the industry, or sometimes at regional levels, such matters
as arrangements for sharing the benefits of higher productivity
and the safeguards to be applied for the well-being of workers and
the continuing efficiency of the undertakings in the industry, since
such discussions may make possible some degree of uniformity
in the application throughout an industry of measures designed to
raise productivity.
Consultation at the level of the industry, and even at the
national level, is especially important in connection with the
problems of establishing new industries and planning and carrying
out the modernisation or re-equipment of those in existence,
since the employment opportunities and job security of workers
in particular undertakings and places may in such cases depend
largely upon decisions taken in the course of planning at higher
levels. It is also important that representatives of employers and
workers should be consulted by governments on questions of
national policy affecting productivity.
National productivity centres, with expert staffs under the
control of boards of directors or committees on which employers
and workers as well as governments are represented, are playing
an increasingly important part in programmes to raise productivity.
Such centres have been established in a large number of European
countries and elsewhere. Some of them operate as part of the
normal administration of government; more usually, however,
they function as independent or semi-independent bodies free
from many of the restraints usually imposed upon government
agencies. Their secretariats consist of carefully selected experts in
the different fields of industrial and labour practice. Staffs range
in size from less than ten to more than 60, excluding members of
advisory committees. It has been suggested t h a t efforts should be
made to establish productivity and development centres in as
many underdeveloped countries as possible. 1
1

UNITED

N A T I O N S : Methods

to Increase

World

Productivity,

Working

Paper by the Secretary-General, roneoed document E/2265, 24 June 1952;
[Footnote continued overleaf.]

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Governments have also taken a responsibility for encouraging
the growth of labour-management co-operation within individual
undertakings. In some 20 countries legislation now prescribes the
establishment of works committees or similar machinery for labourmanagement co-operation in all industrial undertakings employing
more than a certain number of workers.1 Opinions differ regarding
the wisdom of attempts to impose by legislation the outward
forms of co-operation in cases where the essential spirit of cooperation may be lacking.2 Whatever the merits of compulsory
legislation on the subject, however, there is general agreement
that the advice and assistance of government officials versed in
the techniques of such co-operation can be of great value to undertakings desiring to establish machinery for joint consultation and
co-operation, but lacking experience in this field.
THE DISTRIBUTION OF THE BENEFITS
OF HIGHER PRODUCTIVITY 3

The attitude of workers towards higher productivity, like
that of everybody else, depends greatly upon what they expect
to get out of it. Everybody agrees that workers as a whole should
share in the benefits of higher productivity, and it is evident, at
least in the more highly developed countries, that they have in
fact done so. How large this share should be and what form it
should take are, however, controversial questions.
What constitutes an equitable share for workers in the benefits
of higher productivity depends upon particular circumstances.
Canons of equity are subjective and there is little that can usefully
be said on the subject in general terms. Most people would,
however, probably agree with the following propositions :
(a) Workers should in general be compensated for any
additional efforts or sacrifices (greater speed of work or night
and the Resolution on Methods to Increase World Productivity adopted by
the Economic and Social Council at its 14th Session, 10 July 1952, roneoed
document E/2301. The Government of India has requested technical assistance from the I.L.O. in setting up a national productivity centre and the
Government of Egypt has requested similar assistance in setting up a national
productivity and vocational training centre. Arrangements are being made
to carry out these projects.
1
See I.L.O. : Co-operation in Industry, Studies and Reports, New Series,
No.2 26 (Geneva, 1951), pp. 52 ff.
Cf. pp. 101 ff. below.
3
See I.L.O.: Report of the Director-General (World Labour Report 1953)
(Geneva, 1953), pp. 73-78.

ATTITUDES OF MANAGEMENT AND WORKERS

shifts, for example) which they may make to achieve higher
productivity.
(b) It is not, however, primarily by calling upon workers
to make greater efforts that productivity can be increased, and
provided that workers are compensated for any increased efforts or
sacrifices which may sometimes be required, they appear to have,
over and above this, no claim in equity to receive a larger share of
the benefits of higher productivity than other people in the same
income group.
(c) As national incomes increase through higher productivity,
there is a strong case in equity for an increase in the proportion
of total income as well as in the absolute amount of income which
goes to the less prosperous sections of the community, whether
they be workers, small-scale independent producers, salary earners
or pensioners.
Apart from considerations of equity, there are considerations
regarding the efficiency and stability of the economic system that
must also be taken into account. In the interests of efficient
production it is important, for workers no less than for other
sections of the community, that the returns on capital invested
should be sufficient to induce an adequate rate of capital formation.
This is especially important for workers in countries—-including
underdeveloped countries—where a shortage of capital restricts
opportunities for employment.
As regards the stability of the economic system, it should be
recognised that in the ordinary way the increment of income
resulting from higher productivity in any one year is likely to
represent only a small proportion of the total income available
for distribution in that year. The stability of the economic system
as a whole is therefore not likely to be greatly affected by the way
in which this increment of income is distributed, except in cases
where increases in productivity are rapid and sustained. It may
however be pointed out that those with smaller incomes than the
average, having more unfulfilled desires and needs, tend to spend
a larger-than-average proportion of their incomes, i.e., have a
relatively high propensity to consume. Since most workers fall
into this category, the distribution to workers of a large share of
the benefits of higher productivity will be a factor making for a
high rate of spending on consumers' goods and services in the
economy as a whole. At a time when aggregate demand needs
stimulating in order to provide an outlet for all the goods and

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

services produced this is likely to have a healthy effect on the
stability of the economic system. When, however, there is already
too much money chasing too few goods it is liable to give rise
to unhealthy inflationary pressure. Even if there is no threat of
inflation, the state of the economy may seem to require an
expansion of investment rather than of consumption.
If it is felt that equity requires that workers should receive a
larger share of the benefits of higher productivity than can immediately be distributed to them without unduly curtailing investment or without giving rise to unhealthy inflationary pressure,
consideration may be given to the possibility of granting them
benefits that do not make an immediate demand upon resources—
" forced savings " or titles to newly created capital assets.1
No less controversial than the question of the size of the workers' share in the benefits of higher productivity is the question of
the form which this share should take. This is not only a question
of the choice between higher money wages on the one hand and
lower prices for consumers' goods on the other. A part of the
increased wealth yielded by higher productivity may, in many
cases, reasonably take the form of social services and better working
conditions; or, where appropriate, of a reduction in normal hours
of work. It is well known that in the more highly developed
countries working hours have tended to become shorter as productivity has increased.
Special interest attaches to the question of how far the share
of workers in the benefits of higher productivity should take the
form of higher money wages and how far of lower prices for consumers' goods.
The claims of the so-called " fixed income " groups to share in
the benefits of higher productivity constitute a strong argument
for allowing productivity gains to be distributed at least partly
in the form oí lower prices, unless special efforts are made to ensure
that salaries and pensions, at least in the lower ranges, rise at
about the same rate as money wages. This argument, based on
considerations of equity, is supported by another invoking economic efficiency. It is argued that, if higher productivity is
translated into lower costs and lower prices, the competitive
position of the undertaking, the industry or the country concerned
will be strengthened. This will be particularly important in any
1
See A. VEKMEULEN : " Collective Profit-Sharing ", in International Labour
Review, Vol. LXVII, No. 6, June 1953, pp. 495-519.

ATTITUDES OF MANAGEMENT AND WORKERS

country whose balance-of-payments position is such that it needs
to export more in order to meet its import bill.
While the force of these arguments in certain circumstances
cannot be denied, other arguments can be used to support the
view that in a free enterprise economy, in normal circumstances,
stable prices and rising money wages are preferable to falling
prices and stable money wages.1 Among the arguments in support
of this point of view are the following:
(1) Falling prices increase the burden of debt, i.e., increase
the amount of real wealth transferred with every pound or franc
paid as interest to bond-holders. This is an important consideration both for governments and for business.
(2) If higher productivity is reflected chiefly in falling prices
and if, as is to be expected, productivity increases faster in some
countries than in others, price levels in the different countries will
tend to get out of alignment, and the countries in which productivity increases least will tend to find their currencies overvalued.
Policies aiming at approximate stability of national price levels,
different rates of increase in productivity being reflected in different
rates of increase in money earnings, may make it easier to maintain
a state of balance in international payments.2
(3) At any one time some industries are expanding and need
more labour, while others are contracting and need less labour.
Wage disparities between industries may play an important part
in attracting labour to the industries where it can be used to the
greatest advantage, since expanding industries commonly offer
higher wages than contracting industries. Average money wages
in the economy as a whole can be kept stable only if wage increases
in some industries are balanced by wage reductions in others.
1
See, e.g., John C. DAVIS and Thomas K. HITCH: "Wages and Productivity ", in Review of Economics and Statistics (Cambridge, Mass.), Vol. XXXI,
No. 4, Nov. 1949, pp. 292-298.
2
This does not mean that an appropriate wage policy would obviate or
remedy all balance-of-payments difficulties, for some such difficulties are
" real " and not " monetary ", i.e., are liable to arise whatever adjustments
may be made in money incomes and wages. A number of writers regard the
disparity between the rate of increase in productivity achieved in North
America and that which has been achieved by most other countries as the
fundamental cause of the long-term dollar shortage, which in their view is
not adequately explained by the sequence of more or less transitory phenomena
with which it has been entangled—war debts in the 1920s, world depression
and the flight of capital before Hitler in the 1930s, war damage, more war
debts and the cold war in the 1940s and 1950s. For a recent and illuminating
analysis of this problem see J. R. HICKS: " An Inaugural Lecture " in Oxford
Economic Papers (Oxford, Clarendon Press), Vol. 5, No. 2, June 1953, pp. 121 ff.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

But to reduce wages, even if prices are falling, is notoriously
difficult, and is likely to give rise to serious friction, with harmful
effects on the productivity of the workers concerned. If, on the
other hand, the aim of policy is stable prices and rising money
wages, the necessary wage differentials can be created mainly by
raising wages more in some mdustries than in others, and an
important source of friction may be eliminated.
(4) Unless workers receive some increases in money wages
from time to time it will be difficult to convince them that they
are in fact sharing in the benefits of higher productivity. Costof-living index numbers do not always inspire confidence, and an
increase in real income is much more tangible if it takes the form
of an increase in money earnings. Moreover, trade union leaders,
if they are to retain the confidence of their members, must have
something to deliver. They get the credit for increases in money
wages but not for reductions in the cost of living. Nor is this all:
if money earnings are kept stable no individual employer, and
no group of employers in a single industry, can guarantee that
workers will experience a fall in the cost of living. The most an
individual employer can guarantee is that he will reduce the
prices of his own products. This will be of negligible advantage
to his workers unless other employers do likewise, and workers
can have little knowledge or assurance regarding the intentions
of other employers. It follows that, even if workers as a whole
would in fact be equally well off under a policy of stable money
wages, each individual group of workers will feel much more confident of receiving an adequate share of the benefits of higher
productivity, and will probably feel more disposed to co-operate
in efforts to raise productivity, if the policy is one of raising money
wages as productivity increases.
(5) The above arguments against a policy of falling prices and
stable money wages assume that, if money wages are kept stable,
prices will in fact fall. One of the principal arguments in favour
of a policy of encouraging money wages to rise in step with productivity is, however, that, even if money wages do not rise,
prices may not fall, or may not fall sufficiently to give workers
a fair share of the fruits of higher productivity. Competition
often seems inadequate to bring about prompt (or even in
some cases gradual) reductions in prices when costs of production
fall. Trade unions, on the other hand, constitute powerful instruments for raising, in the first place, the money wages of their own

ATTITUDES OF MANAGEMENT AND WORKERS

members and, through this, the general level of wages and salaries.
Since consumers are largely unorganised while workers are organised, it is safer, it is argued, to rely on rising wages than on falling
prices to increase the real purchasing power of consumers and to
secure a wide distribution of the benefits of higher productivity.
To represent the problem as a choice between lower prices or
higher wages does not, according to this way of thinking, pose the
question squarely.
In circumstances in which it is considered desirable that money
wages should rise more or less in step with increases in productivity,
it would seem, however, that wage increases should be related
rather to the rate of growth of labour productivity in the economy
as a whole than to the rate of growth of labour productivity in
particular industries.1 The reason for this is that the scope for
increased productivity is vastly greater in some branches of production than in others, and the extent to which productivity
increases in different industries over a period of time often bears

little or no relation to the relative efforts and sacrifices made by
workers in them. For example, in the United Kingdom between
mid-1948 and mid-1950, while labour productivity in industry as
a whole appears to have increased at the rate of about 6 per cent.
per annum, productivity in the production of vehicles appears to
have increased at the rate of nearly 20 per cent, per annum. While
the efforts of workers in the industry certainly contributed to this
result, the explanation lies chiefly in continuous output and a
smooth flow of materials and components. During this period
the industry experienced the fruition of its post-war reconversion
and was confronted with little need to introduce major changes
of design. In Japan between 1950 and 1951 labour productivity
is estimated to have increased by 22 per cent, in the iron and steel
industry, but to have fallen by 5 per cent, in the production of
cotton yarn. In the United States between 1939 and 1947 output
per man-hour in the rayon industry rose by about 100 per cent.
while in the anthracite coal industry it fell by about 10 per cent.
If wages in each separate industry were to increase in proportion
to increases in productivity in that industry, relative wages in
different industries would soon get badly out of alignment and the
results would be highly inequitable.
1
This is not to say that wages in some industries and occupations should
not rise rather faster than the average while others rise rather more slowly,
provided that such divergences represent movements towards and not away
from a balanced wage structure for the economy as a whole.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

These arguments, though they may help to set the problems
in perspective, do not answer the question: What is labour's
" reasonable share " of the benefits of higher productivity in any
particular case ? Nor do they settle the question of the form
which this share should take. These are clearly questions to which
there are no simple universal answers. Each case must be decided
on its merits, with due regard to general considerations of the kinds
discussed above.
The problem of ensuring that workers receive a just share of
the benefits of higher productivity (whether this share takes the
form of higher wages or lower prices) presents certain special
features in underdeveloped countries. It is in these countries,
where widespread poverty, ignorance, disease and malnutrition
impair the capacity of workers, that it is most important to bring
about an improvement in workers' living standards, principally as
an end in itself but also as a means towards building up a stable
and productive labour force. But it is precisely in these countries,
where labour is usually abundant while capital is scarce and dear,
and where trade union movements are in the early stages of
development, that improvements in workers' standards of living
are least likely to come about spontaneously through competition
or by collective bargaining. In such conditions it seems likely that,
in the absence of special action, the benefits of higher productivity
may not be fully shared by workers.
It would seem, therefore, that in such circumstances governments have special responsibilities (a) to take such steps as
may seem appropriate, through minimum wage legislation, price
control measures, etc., to ensure that workers receive a fair share
of the benefits of higher productivity; and (b) to do all they can,
including the enactment of appropriate legislation, to create conditions favourable to the growth and strengthening of responsible
trade union movements. In this task the governments of underdeveloped countries are handicapped by a number of factors,
including notably their inability to afford the expense of adequate
administrative machinery, and in some cases a shortage of trained
personnel with the administrative experience to enforce legislation
and regulations. It is a characteristic of many underdeveloped
countries that the intentions of the government outstrip the means
at its disposal for giving effect to them. Advanced labour legislation which is not effectively enforced represents a hollow victory
for labour and may do more harm than good by giving rise to false
hopes and subsequent disillusionment and discontent. The impor-

ATTITUDES OF MANAGEMENT AND WORKERS

tance of vigorous measures to enforce legislation and regulations
once adopted cannot be over-emphasised. Technical assistance
can play a valuable part in the training of administrative personnel
and the development of efficient inspection services. The creation
of conditions favourable to the development of trade unionism is
important not only in itself but as an adjunct to the work of
inspection and enforcement. A trade union provides an indispensable channel through which the grievances of workers can be
brought to the notice of those responsible for remedying them.
The importance of workers' education, as a means of enlarging
their understanding of social problems and strengthening trade
union action, cannot be exaggerated.
In many underdeveloped countries governments are themselves
the principal large-scale employers. In others the principal largescale employers are private companies which stand in a special
relationship to governments—for example, oil companies which
have negotiated concessions with governments. These facts provide opportunities for setting and enforcing in the establishments
concerned labour standards that may be difficult as yet to enforce
throughout the economy.1 When the government is itself the
employer, or when government agencies are associated with private
employers, difficulties of inspection and enforcement are usually
much reduced, and it is important that wages and conditions of
employment in large-scale enterprises owned or directed by governments or standing in a special relationship to them should be such
as to serve as a lever for raising labour standards throughout the
economy. This they may do both through the forces of competition and by serving as examples to other employers.
PRODUCTIVITY AND ECONOMIC SECURITY

It is of the utmost importance, in order both to ensure that
increases in productivity do in fact lead quickly to greater economic
and social welfare and to enlist the support of workers for productivity programmes, that everything possible should be done to
combat the unemployment which may in certain cases result from
increases in productivity. It is inevitable that workers who grew
up, or who spent long years of their lives, under the shadow of
the great depression should retain a very real fear of unemploy1
International standards on these matters are contained in the Labour
Clauses (Public Contracts) Convention, 1949, and the Recommendation on
the same subject. See International Labour Conference: Conventions and
Recommendations, 1919-1949 (Geneva, I.L.O., 1949), pp. 837-852.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

ment and should look askance at anything that appears to threaten
the security of their jobs.
Unemployment is a complex phenomenon having various causes.
It can be classified in various ways. Distinctions are often drawn,
for example, between cyclical, seasonal, casual and technological
or structural unemployment. There is no reason to suppose that
measures to promote higher productivity tend in themselves to
increase cyclical or general unemployment attributable to a periodical or clironic deficiency of aggregate demand. Since the war
there has been relatively little unemployment of this kind, and
most people would agree that this type of unemployment, should
it again threaten to become important, would not be a result of
measures taken to raise productivity but of other factors making
for depression, which would be as hard or harder to combat in
an economy with low productivity than in an economy with high
productivity. Nor is there any reason for supposing that higher
productivity tends in general to increase seasonal or casual
unemployment.
But, if it is a fallacy to suppose that higher productivity always
tends to ma.ke for unemployment, it cannot be denied that technological progress does change the nature of employment opportunities
and does from time to time make particular groups of workers
redundant in particular occupations and places. Efforts to speed
up the rate of technological progress may tend to increase the
incidence of technological unemployment of this kind.
It is necessary, however, to distinguish between the effects of
technological improvements on employment in the industry in
which they occur and their effects on employment in general.
Technological changes in an industry may have three possible
adverse effects on employment in that industry : (a) there may be
a decrease in the amount of employment available in the industry
as a whole ; (b) there may be a decrease in the amount of employment avaikble in particular places; (c) there may be a decrease
in the employment opportunities open to particular categories of
workers in the industry. The mere fact that a decrease in employment opportunities for particular workers or in particular places
may be compensated, as far as the industry as a whole is concerned,
by an increase in employment opportunities elsewhere, or for other
categories of workers, will not obviate hardship in particular cases
unless special measures are taken with this end in view.
To distinguish these three sources of possible hardship to workers
is not, of course, to say that it should be the policy of an industry

ATTITUDES OF MANAGEMENT AND WORKERS

in all circumstances to prevent any decrease in employment either
in the industry as a whole or in particular places or for particular
categories of workers. Such changes may at times be necessary
incidents in the progress of an industry and the development of a
country's economy. To try to prevent such changes from ever
occurring would be to try to arrest the economic development of
the country at whatever stage it happened to have reached, which
would be fatal alike to economic progress and to social welfare.
What is important is to ensure that, when technological changes
do lead to a narrowing of employment opportunities under any of
these three heads, steps should be taken to keep to a minimum any
hardship that may be entailed.
Any labour-saving technological change is liable to involve a
decrease in the amount of employment offered in the industry in
which it occurs, unless the demand for the product increases
sufficiently to provide alternative employment for workers whose
services would otherwise be dispensed with. There are, however,
certain reasons why demand may increase sufficiently to prevent
a drop in the numbers employed in the industry.
Take, for example, the case of a labour-saving technological
change in the steel industry.1 In the first place the demand for
steel may increase quite independently of this particular change.
This is likely to be the case, in the short run, during the upward
phase of a trade cycle, and technological changes introduced at
such a time are likely for this reason to cause less hardship than
they would if introduced during a depression. In the longer run,
too, the demand for steel is likely to increase, taking an average
of good years and bad, if the economy as a whole is expanding, i.e.,
if population and income are increasing.
Secondly, the demand for steel may expand as a direct result
of a technological improvement, if that improvement makes it
possible to sell steel more cheaply and thus to tap new sources of
demand. Employment opportunities depend, though to a greater
extent in some industries than in others, on the price policy of the
industry. Even in the case of an industry such as the steel
industry, the demand for whose products has not shown itself
particularly elastic to price changes and has been much more
influenced by the current phase (prosperity or depression) of the
trade cycle, it can scarcely be doubted that, other things being
1

No particular significance attaches to this choice of example. For
" steel ", wherever it occurs in the course of the argument, one may read
" the product of the industry in which the technological improvement occurs ".

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

equal, more will be sold over a period of years at low prices than
would be sold at higher prices. An industry in any one country,
moreover, is commonly exposed, in export markets at least, to
competition from other countries ; and unemployment may result
if its prices are not competitive.
Even if, however, demand does not increase sufficiently to
prevent some fall in the number of man-hours of work available in
the steel industry, it does not follow that there need be unemployment. In the first place it may be possible to maintain the level
of employment by working shorter hours. Irregular short-time
working is, of course, unsatisfactory both for employers and still
more for workers. But a reduction in the length of the normal
working week may in certain circumstances be a reasonable and
satisfactory way of absorbing the effects on employment of technological progress. It was largely in this way that the effects of the
very remarkable technological progress in the United States iron
and steel industry between 1929 and 1939 (notably the introduction
of a considerable number of continuous strip mills dispensing with
a very large amount of labour) were absorbed. The case for a
reduction in normal hours of work has, however, to take account of
effects on costs of production and on the competitive position of
the industry concerned. A lengthening of paid holidays may have
an effect similar to that of a reduction in normal working hours
in spreading a given amount of work over a larger number of
workers.
Secondly, even if there is a fall in the number of workers
employed in the steel industry, there still need not be unemployment in the industry provided that the drop in employment is not
larger than can be absorbed in the ordinary labour turnover.
The substantial number of vacancies arising each year in all
branches of industry through deaths, retirements and voluntary
departures greatly eases the problem of finding jobs for workers
displaced by technological improvements.
We have thus far considered only the effects of technological
progress on employment in the industry in which the progress
occurs. Even if, in our example, there is some reduction in employment in the steel industry, there still need not be any increase in
unemployment in general if employment in other industries expands
sufficiently. This again may happen, for reasons quite independent of technological improvements in the steel industry, if the
general state of trade is improving or the economy as a whole is
expanding. But it may also happen as a direct consequence of

ATTITUDES OF MANAGEMENT AND WORKERS

the technological improvement in the steel industry, if this enables
steel to be sold more cheaply. Since the number of jobs available
in any industry depends partly upon the prices and availability
of the materials and equipment required to set labour to work, a
cheapening of steel is especially likely to stimulate employment in
the steel-using industries. More generally one may say that—
particularly perhaps in underdeveloped countries where unemployment and underemployment of labour can be attributed largely
to the lack, or to the high prices, of co-operant factors of production
—higher productivity in industries producing certain types of
capital goods should help to expand employment opportunities.
But increased employment may not be confined to the steel-using
industries. If consumers are now able to satisfy their requirements for steel more cheaply than before, they will have more to
spend on other things, and the effects on employment of the
cheapening of steel may be diffused widely throughout the
economy.
In examining the effects on employment of a technological
improvement it is, then, a mistake to confine attention to the
particular industry in which the improvement occurs. All this,
however, does not mean that there may not be very serious problems of adapting the supply of labour to changes in the demand
for labour resulting from technological improvements. The existence of new employment opportunities elsewhere is of little help
to workers displaced from particular jobs if they cannot move
or if they lack the training and qualifications required for the new
jobs. Technological progress, especially if it occurs rapidly, may
lead to serious structural maladjustments in the labour market.
The problem of the effects of higher productivity on job security
is especially difficult in countries with a large amount of unemployment and underemployment—and this includes many of the underdeveloped countries.
Where there is a surplus of labour, displaced workers are more
difficult to absorb, and it might seem that policy in such countries
should aim rather at increasing production and employment than
at higher productivity. Certainly, measures taken in such countries to promote higher productivity should form part of a coordinated economic development programme designed to expand
opportunities for employment as well as to raise output. Certainly, too, it would be inappropriate to attempt to adopt, in
countries where labour is abundant and cheap and capital scarce
and dear, the capital-intensive and labour-saving methods of pro-

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

duction which are appropriate in such countries as the United
States and Canada.
. . . Labour-saving technology is not of great value to an economy
which is overpopulated. There the search should be rather for technologies which increase the yield of land per acre, or which enable large
numbers of persons to be employed in secondary industries for a small
expenditure of capital. 1
Surveys of the ratio of capital to labour employed in existing
industries may help to identify the industries in which additional
investment may be expected to create the greatest employment
opportunities, provided that there is a sufficiently large market,
per unit of capital invested. 2
Most of the countries with widespread unemployment or underemployment are, however, faced with the need for reducing costs
of production and improving products so as to expand domestic
and foreign markets and thus achieve higher incomes and more
opportunities for employment; and all of them stand to gain by
making the most effective use of existing equipment and of all
the workers for whom it can provide employment. Higher productivity must, therefore, go hand-in-hand with measures to
expand employment opportunities.
In the Director-General's Report to the 33rd Session of the
International Labour Conference the question was asked: " How
far is security compatible with maximum productivity ? " and the
following answer was suggested:
If " security " is interpreted to mean security that no worker will
ever lose his present job, the two things are quite evidently incompatible.
A highly productive economy is an economy which responds rapidly
and efficiently to changes in needs and in the conditions of supply and
production; in which resources move out of industries and occupations
where they are less productive into others where they are more productive; in which improved techniques of production and management
are grasped and applied as soon as they become known and available.
In short, a highly productive economy is essentially a dynamic economy;
an economy offering security of continued employment for all workers
in their present jobs would be static in the last degree. If, however,
" security " is interpreted to mean confidence that society will continue
to need, and to pay for, the services of all who can contribute to the work
1
UNITED NATIONS, Department of Economic Affairs: Measures for the
Economic Development of Under-Developed Countries, document 1951.II.B.2
(New
York, 1951), p. 7.
2
Cf. G. E. CUMPER: " Labour Productivity and Capital-Labour Ratios in
Jamaican Manufacturing Industry: Their Relation to the Problem of Selective
Industrialization ", in Social and Economic Studies (Jamaica, Institute of
Social and Economic Research, The University College of the West Indies),
Vol. I, No. 1, Feb. 1953, pp. 61-86.

ATTITUDES OF MANAGEMENT AND WORKERS

of production, and will take pains to make sure that those who can no
longer be employed in their present jobs will be fitted to contribute in
other ways, then high productivity and security are not merely not
incompatible 1; security in this sense is a necessary condition for maximum
productivity.
Security in this sense requires three things, namely—
(a) Effective measures to maintain a high general level of
employment; there is widespread agreement that this is primarily
a responsibility of governments.
(b) Measures to keep to a minimum the number of workers
who may lose their jobs and to assist the re-employment of displaced
workers ; this is in large degree a matter for managements in consultation with workers' representatives, but governments also have
a part to play.
(c) Measures to protect the living standards of workers who
may lose their jobs; this is primarily a matter for governments, but
individual undertakings, or an industry as a whole, may be able

to contribute to maintaining the living standards of unemployed
workers by granting severance pay or in other ways.
Measures to Maintain a High General Level of Employment
This is not the place to discuss the content of a " full employment " policy nor the difficulties to which it gives rise. These
matters have been discussed in numerous I.L.O. reports 2 as well
as in other literature. It will suffice here to emphasise, first,
that a policy aimed at maintaining a high general level of employment is not sufficient to ensure that there will be no unemployment
in particular industries, arising out of increased productivity or
shifts in the direction of demand, which can occur even with a
high general level of activity. Such a policy aims at ensuring
that there shall be, in the aggregate, enough jobs; it cannot ensure
that new jobs shall be available in precisely the occupations and
places where workers may lose their present jobs. Secondly,
however, effective measures to prevent general unemployment will
enormously ease the problem of re-absorbing into productive
employment any workers who may lose their jobs in particular
1

I.L.O. : Report of the Director-General, Report I, International Labour
Conference,
33rd Session (Geneva, 1950), pp. 111-112.
2
The latest I.L.O. report which deals with these problems in general
terms is Action Against Unemployment, Studies and Reports, New Series,
No. 20 (Geneva, 1950).

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

industries. As long as there are enough jobs, and provided that
suitable training, retraining and transfer facilities are available,
there is no reason why an unemployed worker who is willing to
undergo training, and if necessary to change his place of residence,
should remain unemployed for long.
Measures to Reduce the Displacement of Labour and
Assist the Re-employment of Displaced Workers
Measures which can be taken by individual managements to
this end are of the utmost importance, and will be discussed later.1
Action at a higher level is, however, also important, and may take
various forms.
Selection of the Industries in Which Productivity Increases
Are to Be Encouraged.
The number of workers for whom new jobs must be available
if unemployment is to be avoided will depend partly upon the
circumstances confronting the particular industries in which
technological improvements occur. In so far as governments,
through national development programmes, capital allocations,
allocation of raw material supplies or in other ways, influence
the relative rates of growth of productivity in different industries,
it seems desirable that, without neglecting the need for structural
changes which may sometimes be unavoidable, they should use
this influence! to ensure that priority is given to the task of raising
productivity in industries where higher productivity is not expected
to lead to a displacement of labour. In selecting such industries
attention should be given both to markets and to raw material
supplies. At times when there is a shortage of materials increased
productivity in the industries using the scarce materials is particularly likely to restrict employment opportunities. Higher productivity in the automobile industry, for example, at a time when
additional supplies of steel are unobtainable, is likely to lead to
unemployment in the automobile industry, whereas higher productivity in the steel industry might not only not lead to unemployment in that industry, but might stimulate employment in the
steel-using industries.
In countries in which handicraft and cottage industries employ
large numbers of persons an increase in productivity in modern
1

See p p . 110 ff. below.

ATTITUDES OF MANAGEMENT AND WORKERS

industries which produce similar products may lead to considerable
unemployment. This will obviously be an important consideration in the minds of those responsible for selecting industries to
which priority is to be given in national programmes for economic
development or drives for higher productivity. Ordinarily the
industries where an increase in productivity promises the greatest
benefits from the point of view of economic development as a
whole will be industries where an increase in output or reduction
in costs or both will provide the resources for expansion of output
and employment in other industries.
Vocational Training

and Retraining

Facilities.

This subject is discussed elsewhere in this report. All t h a t
need be said here is t h a t the occupational mobility of workers and
their adaptability to changes in employment opportunities can be
greatly increased by the provision of adequate training and retraining facilities, and that for the provision of such facilities
governments as well as industry have a responsibility.
Promotion of the Geographical Mobility of Labour.
Workers may sometimes need to change not only their jobs
but also their place of residence. Difficulties encountered in this
connection include—
(a) the natural reluctance of many workers to uproot themselves and break social and family ties;
(b) ignorance of conditions and opportunities existing elsewhere ;
(c) the financial cost of moving; and
(d) a shortage of housing. 1
Methods of meeting these difficulties include—
(1) The provision of as much information as possible to displaced workers regarding both opportunities for employment and
living conditions elsewhere ; the importance of the development of
1

To the physical shortage of housing there is added in a number of
countries at the present time another obstacle to movement arising out of
rent control measures. It is often the case that the occupant of a pre-war
house or apartment pays only a fraction of the rent demanded for new accommodation of the same standard. If a newcomer does find accommodation in
a strange town, it is much more likely to be new and dear than old and cheap,
and the cost of moving is therefore often higher than it would be if rents were
more uniform.

HIGHEH PRODUCTIVITY IN MANUFACTURING INDUSTRIES

nation-wide employment services needs to be stressed in this
connection.
(2) The payment by governments of removal grants to workers
moving to take up employment elsewhere.
(3) Vigorous action to overcome housing shortages; in some
countries a rationalisation of rent control measures might also help.
It may in certain cases be appropriate to organise the international migration of workers, if possible accompanied by their
families. All the difficulties encountered in promoting the geographical mobility of labour within a country are in these cases
likely to be encountered in an enhanced degree, but the problems
to which migration gives rise cannot be discussed in this report.
Measures to Encourage the Development of Alternative
Employment.
This point has to some extent been covered in general terms
by what has; been said about the importance of maintaining full
employment. If an industry or group of industries in which
technological unemployment exists or threatens to appear is
highly localised, there may, however, be a case for special
measures to attract new industries to the workers, instead of
relying entirely on the workers' moving to industries elsewhere.
In the United Kingdom, for example, certain areas have been
selected as development areas and special facilities are granted to
employers establishing factories in these areas.
Measures to Protect the Standards of Living
of Unemployed Workers
The greater the success of measures to maintain a high general
level of employment, and to reduce the numbers and to promote
the re-employment of displaced workers, the less it will be necessary to fall back upon measures to protect the standards of living
of workers unemployed between jobs. Such measures are, however,
an essential counterpart to the measures thus far considered if
productivity is to be increased with a minimum of hardship.
Unemployment Insurance and Relief.
A comprehensive scheme of unemployment insurance or unemployment assistance can play an important part in alleviating
hardship. The cash benefits available as a right under an unem-

ATTITUDES OF MANAGEMENT AND WORKERS

ployment insurance scheme provide unemployed workers with a
partial income to tide them over between jobs, and thus help to
smooth the necessary adjustment of the labour force to the changing
demand for labour. Because of the limited financial resources at
its disposal, unemployment insurance must concern itself principally with temporary or short-term unemployment rather than
large-scale mass unemployment. While designed to apply to all
types of unemployment, irrespective of cause, this branch of social
insurance can be especially effective in combating the effects of
technological unemployment.
The administration of unemployment insurance should be,
and usually is, linked very closely with the employment service
mechanism. Employment exchanges generally serve as the local
agencies of the unemployment insurance scheme. This ensures
that, before benefit is granted, claimants are given such opportunities for suitable work as may exist.
Where there is no national system of unemployment insurance,

or to supplement such a system and to deal with cases which
cannot easily be brought within its framework, a national system
of unemployment assistance or relief is also of the utmost
importance.
While unemployment relief, like unemployment insurance, is
primarily a matter for governments, an industry experiencing
rapid technological progress involving considerable displacement of
labour may in certain cases contribute to funds to be used in the
mitigation of hardship in particular cases.
Severance Pay.
Provision may be made for the payment of dismissal wages
or severance allowances to displaced workers. Normally this will
be a matter for collective bargaining, either on an industry-wide
basis or with individual employers ; and the amount of the severance
allowance, if any, is usually related to length of service. Provision
for severance pay appears to be more common in the United States
than elsewhere, but it is by no means unusual in other countries.
In the United Kingdom, for example, the National Goal Board
supplements for six months the unemployment pay of men made
redundant by colliery reorganisation. The General Rules for the
Modernisation of the Textile Industry in Mexico, which came into
effect in February 1951, provide for a graded scale of compensation
to dismissed workers. Severance pay has much to recommend it,
though it would be bad for the flexibility and productivity of an

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

economy if industry's liability for severance pay were to become
so heavy as to constitute an inducement to retain redundant
workers in employment.1
PRODUCTIVITY AND JOB SATISFACTION

Consultation between governments, employers and workers,
a fair distribution of the benefits of higher productivity, and
effective action against unemployment will provide most of the
conditions needed for ensuring that higher productivity does in
fact lead to greater economic and social welfare, and will go far
towards creating a psychological climate favourable to higher
productivity. Such a climate will not prevail, however, if higher
productivity is sought, or if workers have reason to fear that it
may be sought, by methods which reduce the satisfaction they
derive from their jobs—in particular by methods which require of
workers greater speed or intensity of work than they can perform
without strain, danger to health, or undue fatigue, or which simplify and break down jobs which formerly called for skill and
responsibility into a series of simple routine operations which have
no interest or meaning for workers.
To safeguard the interests of workers on these points is essentially a matter for labour-management co-operation within individual undertakings 2 ; but these are among the problems which,
as suggested! above, may sometimes be usefully discussed also at
higher levels with a view to securing agreement upon general principles to be applied in individual undertakings.

1
2

See p . 115 below.
See p p . 136 ff. below

CHAPTER III
ECONOMIC AND INSTITUTIONAL FACTORS
AFFECTING PRODUCTIVITY

A list of economic and institutional factors affecting productivity could be spun out almost indefinitely. The present
chapter aims to do no more than comment briefly on some of the
more important of these factors.
THE SIZE OF MARKETS

The size of the market for a product influences in a variety of
different ways the productivity of the resources engaged in making
it. It affects, for example, the amount of capital equipment that
can profitably be installed ; the size of plants ; the extent to which
advantage can be taken of the possibilities of simplification,
standardisation and specialisation; and the degree of utilisation of
capacity.
It is true that a relatively small national market shared between
a relatively small number of firms may in many ways afford about
as much scope to the individual firm as a larger national market
shared between a larger number of firms. There are, however, at
least two ways in which it will not do so.
In the first place, when the national market is small, producers
are likely to have less scope for specialising in the efficient production of a relatively few standard lines. In the second place they
will themselves constitute a smaller market for the services of
outside specialists or specialist firms. They are likely to have to
do for themselves a number of things which, if they were producing
for a larger market and were therefore part of a larger industry,
could be more economically and efficiently done for them. As
Mr. Graham Hutton has pointed out—
. . . the " buying-out " of components—and even of specialised services,
like local transport, maintenance of machinery and plant (or parts
thereof), and even of research and management-training—is quite
usual in America, because the size and scope of industrial operations
in that vast market make such independent specialised services

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

profitable. It is dubious if such ancillary trades could ever pay in
Switzerland, Denmark, Sweden or Belgium. . . .
In Western Europe the nearest approximation to the American ancillary trades, serving ordinary industries, is a multiplicity of special (and
probably costly) departments owned and run by the larger enterprises
themselves. Thus, there is to some extent both duplication and1
unnecessary maintenance of partly idle facilities in European countries.
In reports of the Anglo-American Council on Productivity and
in other studies the large size of the American market is mentioned
repeatedly among the factors which contribute to the high level
of productivity in the United States. Few British foundries,
for example, receive the large orders that enable United States
foundries, serving a market ten times as big, to mechanise the
production even of large castings. And it is probable that the
small size of the home market, in the case, e.g., of the Benelux
countries or of Austria, has made it more difficult for these countries to develop efficient heavy industries.2
Greater freedom of international trade enlarges national
markets. The hope that advantages comparable to those enjoyed
by producers in the United States may ultimately be obtained
by Europe ari producers is one of the principal motives underlying
the efforts that are being made to integrate more closely the
economies of the Western European countries. In Eastern
Europe, too, the Council of Mutual Aid is taking steps to dovetail
the economic plans of the various countries.
It is true that a world afflicted by balance-of-payments difficulties and divided into hard and soft currency areas is a world
in which it is particularly difficult to move towards greater freedom
of trade. But the need for higher productivity makes it essential
to scrutinise with the utmost care any movement in the direction
of greater economic autarchy—any decision, that is to say, which
reduces the scope for international specialisation and division of
labour. The desirability of expanding and stabilising international trade, if full advantage is to be taken of opportunities to
raise productivity, was one of the most constantly recurring
themes in a debate on productivity which took place at the 36th
Session of the International Labour Conference in 1953.
1
2

We Too Can Prosper, op. cit., pp. 89 and 90.
See, for example, statements by the Belgian foundries and forging and
stamping productivity teams which visited the United States, in: Bulletin
hebdomadaire d'information et de liaison, published by the Fédération des
entreprises de l'industrie des fabrications métalliques (FABRIMÉTAL), No. 250,
9 Apr. 1951, p. 271, and No. 255, 14 May 1951, p. 389.

ECONOMIC AND INSTITUTIONAL FACTORS

THE LEVEL OF ECONOMIC ACTIVITY

Productivity is affected not only by the size but by the stability
of markets. Except to the extent that production for stock is
possible, a highly unstable market requires continual changes in
the rate of production.
As compared with a period in which the level of activity is
normal in the sense that resources are utilised about as fully as
they can be without strain or dislocation, a period of depression is
a period not only of low production but of low productivity of
resources in general. This is because input cannot easily be
reduced in proportion to output—at least in the short run. Much
industrial equipment, designed to produce economically at a certain
rate of output, cannot be operated efficiently if it has to be used
at a rate substantially below capacity, such that overhead costs
are not spread over a sufficiently large output. The steel industry
affords a familiar illustration.
Even in a period such as the past eight years, characterised by
a generally high level of demand, there have been many examples
of the harmful effects on productivity of under-utilisation of
capacity in various branches of industry. During the recession
that occurred in a number of countries in 1949 and the early part
of 1950 many industries, especially heavy industries, suffered
from excess capacity. Many consumer-goods industries experienced
a recession in demand and were unable to make full use of their
capacity in 1951 and 1952. This was not only bad for productivity
in itself but also dampened enthusiasm for measures to raise
productivity, which are in general less likely to be welcomed at a
time when it is difficult to dispose of existing output.1
The harmful effects on productivity of a low level of activity,
whether in the economy as a whole or in particular industries,
are to some extent offset by the opportunities which exist for
withdrawing resources from production, i.e., for reducing input
along with output. Moreover, plant which is temporarily or
permanently closed down is likely to consist mainly of relatively
1

Cf., for example, BRITISH PRODUCTIVITY COUNCIL: Review of Pro-

ductivity in the Clothing Industry and Review of Productivity in the Hosiery
Industry (London, 1953). The former report records that in the British
clothing industry there had been a trend towards simplification of production
during the years preceding the trade recession in the latter part of 1951;
during the recession some of the ground previously gained was lost, though
probably only temporarily. During this period orders had to be obtained
wherever possible and the length of runs was unavoidably limited (p. 12).
4

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

old or inefficient plant, and workers who are laid off may include
a high proportion of less efficient workers. (But, to the extent
that resources withdrawn from production in one industry are not
absorbed in other industries, the wastes of unemployment are,
of course, substituted for the wastes of low productivity.) Another
offsetting factor is t h a t in depression profits are hard to come by
and bankruptcies threaten; managements may be compelled to
seek previously neglected opportunities for increasing efficiency.
As the level of activity rises towards normal and prosperity
returns, wastes resulting from the under-utilisation of capacity are
progressively eliminated, but the gain in productivity may be
partly offset by the return to use of plant t h a t is below average
efficiency and perhaps by the engagement ot workers of whom
the same is true.
If the economy moves " from a state of normal prosperity into
a period of forced draught "—as was the case in many countries
during the two world wars—factors tending to reduce efficiency may
come into the ascendant.
Equipment that is badly out of date is brought back into service.
The labor force is augmented by unskilled schoolboys and housewives.
Haste and confusion prevail in industry. Unsatisfactory materials and
supplies have to be substituted for those usually employed. Shortages
of metals prevent business from modernizing its plant and equipment
at the usual rate. Sellers' markets prevail and inefficient producers
in some measure are protected from the consequences of their inefficiency.1
Anything that producers may be able to do to smooth out
fluctuations in the demand for their products is likely to assist
them to maintain a high level of productivity. In so far as such
fluctuations are cyclical in character, however, the responsibility
to maintain a high and stable level of income and employment
rests primarily with governments.
In most countries governments now appropriate and spend a
considerably larger proportion of the national income than they
did before the war. Public authorities have become larger purchasers of the products of various sectors of the economy. As part
of a more general policy designed to maintain full employment
and full use of capacity it is therefore increasingly important t h a t
public authorities should avoid unnecessary irregularity in the
timing and placing of their orders.
Productivity—Gauge of Economic Performance, op. cit., p. 11.

ECONOMIC AND INSTITUTIONAL FACTORS

THE MOBILITY OF RESOURCES

It is not sufficient to ensure that resources are utilised fully
and in technically efficient ways; it is also necessary to ensure
that they are utilised to produce the right things, i.e., in the
industries and occupations where their productivity is greatest.
Even if there is no technical improvement in any single industry,
productivity in an economy as a whole may increase greatly if
resources move out of industries and occupations in which
they are less productive into others in which they are more
productive.1
The case for the greatest possible freedom of international
trade rests upon this fact, for it enables countries to use their
resources for producing the things they are best fitted to produce,
and to import, in return for exports of these, the things they can
least efficiently produce for themselves.

It is generally agreed

that there are advantages in greater international specialisation;
but these advantages can be gained only if each country is willing
to promote a movement of labour, management and materials out
of the industries for which it is relatively ill-adapted and into the
industries for which it is better suited. Such shifts, involving a
loss of profits for some employers and a change of jobs for some
workers, have painful consequences for individuals and special
interests, and may meet with resistance. These consequences
would seem to be a necessary price to be paid for the gains in
productivity that greater freedom of international trade can
bring.
Maximum productivity may also, as has been widely recognised,
require considerable shifting of resources between different industries or services producing for home consumption. There may,
for example, be too many workers in distributive trades or in
entertainment industries and too few in coalmines or other basic
industries. Here, too, necessary shifts may entail hardships for
1
A distinction is sometimes drawn between a " technical " and an
" economic " increase in productivity, the former meaning an increase in
productivity resulting from a technically more efficient utilisation of resources,
given the existing allocation of resources between industries and occupations,
and the latter meaning an increase in average productivity in the economy
as a whole resulting from a shift of resources to industries and occupations
in which they are more productive—for example a shift of resources from
agriculture to industry in an economy in which resources are more productive
in industry than in agriculture. (Cf. Productivity—Gauge of Economic Performance, op. cit., p. 3.)

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

individuals and may meet with resistance. When, in the interests
of productivity, a particular industry should contract, hardship
can be reduced to a minimum only if the entry of displaced resources
into other and more productive fields is made easy. The attitudes
of employers and workers already established in these fields are
of the greatest importance. Established firms in particular fields
may seek by collusive action to exclude competition by newcomers. The entry of new workers may sometimes be resisted if
trade unions take an unreasonable stand on matters affecting, for
example, the duration of training or the definition and demarcation of jobs. It will be widely agreed that, in many countries at
least, the war potential could not have been so fully mobilised and
war production could not have expanded as it did if trade unions
had not. agreed to some relaxation of arrangements and provisions
previously in force. The elasticity that was needed in order to
win a war may be needed also in order to win the battle for higher
productivity. Care may have to be taken to ensure that measures
designed to enhance the security of workers are not applied in
such a way that they impede the flow of labour into the most
productive channels, for they may then defeat their own ends.
A British trade union team which visited the United States in
1949 placed considerable emphasis on the need to encourage labour
mobility and flexibility in order to meet the demands on the
British economy.1
Apart from what employers and workers and their organisations
may do, governments can also do a great deal to promote an
economically desirable mobility 2 of resources—for example by
resisting pressure for the maintenance or imposition of restrictions
on freedom of trade which are not in the best interests of the country
as a whole, by improving national employment services, by pressing
on with workers' housing projects, by improving training and
retraining facilities for displaced workers or workers threatened
with displacement, and by paying removal grants where appropriate.
1

TRADES UNION CONGRESS: Trade Unions and Productivity

(London,

undated), p. 59.
2
The statement that " mobility " of resources is desirable does not, of
course, mean that resources should be in a state of perpetual motion between
places or jobs but only that they should be free and able to move to places
or jobs in which they would be more productive.
The relatively high degree of mobility of resources in the United States
appears to be yet another of the many advantages it possesses in the matter
of productivity.

ECONOMIC AND INSTITUTIONAL FACTORS

THE DEGREE OF COMPETITION

Closely related, as has been seen, to the question of mobility
of resources is that of the degree of freedom of competition which
prevails. " Perfect competition ", in the sense in which this term
has come to be used by economists, does not exist and cannot be
created in manufacturing industry. Because of the advantages
and economies which accrue with experience to firms established
in an industry, there is probably no such thing as real freedom of
entry in an established industry where the scale of production is
considerable. Many manufacturing industries tend to pass, as
they grow, from the hands of the many into a situation in which
they are dominated by a few large firms, even though a large
number of small firms may retain a footing in them.
Competition between a few large firms, though it takes different
forms and has different effects from the perfect competition of the
textbooks, may be as vigorous as competition between many
small firms. It is by no means clear that this form of competition,
though it may be unfavourable to price reductions for existing
models and varieties of products, is unfavourable to technical
innovation. And technical innovation frequently results in
improved models and new varieties of products, often at lower
prices.
There is, however, a danger that cartel arrangements or other
agreements for sharing a market between the firms in an industry
may shelter inefficiency at the expense of consumers. Collusive
price-fixing may have the same result. The policies of governments towards restrictive business practices are a matter of the
greatest importance.
Efforts may be made to prevent the establishment of monopoly
or monopolistic situations by rendering illegal the devices employed
to drive competitors out of the market or to keep them out once
a monopoly has been established; such devices are, however,
often as difficult to identify as they are to control. Or the forms
of monopolistic combinations, such as trusts and holding companies, may be made illegal ; but legislation may be circumvented
by the adoption of new forms of organisation which come within
the letter of the law.1
1
" ...In the struggle of wits between the company lawyer and the courts,
the former is always one trick ahead, and has apparently always one more
card to play when the present trick is trumped." (E. A. G. ROBINSON:
Monopoly (London, Nisbet and Co., Ltd., 1941), p. 179.)

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Measures aimed at preventing monopoly are inappropriate
where economies of scale are so great that big firms drive little
firms to the wall and competition itself ends in monopoly or a
monopolistic situation. Possible methods of regulating (as opposed
to preventing) monopolies include insistence upon greater publicity
of the facts of monopolistic agreements, prices, costs and profits;
the control of prices or profits; or the transfer of a monopoly
from private to public ownership (though this is not in itself
sufficient to ensure that it will be operated in the public
interest).
The most obvious ways in which society can protect itself from
monopolistic exploitation involve acting through the State. But
associations other than the State, e.g., the consumers' co-operative
movement and other large retail buying organisations, may have
an important part to play.1 The consumer's ultimate weapon
against monopoly is his power to take his custom elsewhere, and
he need not always depend upon the State to create an "elsewhere"
to take it to.
THE

Q U A L I T Y AND A V A I L A B I L I T Y

OF MATERIALS

Productivity is greatly affected by the quality of materials.
This was emphasised, for example, by the French electrical construction productivity team, which stated that the castings purchased by United States establishments in the electrical construction industry were much superior to those obtainable in France.
Defects in French castings often appeared only in the course of
fabrication, and French industrialists thus frequently found themselves obliged to reject work that had been almost completed.
Such occurrences were unknown in the United States. French
magnetic sheets were also stated to be of such inferior quality that
they would probably be rejected in the United States. The difficulties experienced by French industrialists in regard to the quality
of materials were attributed to the fact that in France the standards
of quality required were more exacting for finished products than
for raw materials ; the reverse was said to be the case in the United
1
Cf. John Kenneth GALBRAITH: American Capitalism: The Concept of
Countervailing Power (Boston, Mass., Houghton Mifiin, 1952). Mr. Galbraith
tends to attribute the fact that American capitalism has in recent years
shown much greater stability than many people expected to the growth of
power in the hands of consuming organisations, matching that of the large
producing corporations.

ECONOMIC AND INSTITUTIONAL FACTORS

States. 1 The Confederation of Electrical Constructors (Syndicat
général de la construction électrique) has since taken steps to improve
materials used in the electrical construction industry. The team
from the French machine tools industry also commented on the
excellent quality of United States materials. In the British
clothing industry—
Cloth is still being received from the mills incorrectly shrunk; much
time and cloth are wasted in almost every cutting room because of the
numerous flaws in every piece of cloth . . . ; rolls of cloth received are
still of various widths, and sometimes one roll of cloth varies by inches
in width throughout the roll.2
Apart from questions of quality there is also the question of
the availability of materials. Shortages of materials, leading to
interruptions in the flow of work or to recourse to less satisfactory
substitutes, may, as post-war experience so clearly showed in many
countries, have the most disastrous effects on productivity. A survey
of productivity in France carried out by the Economic Co-operation
Administration showed that shortages of materials and the erratic
delivery of supplies in many of the establishments visited served in
many ways to curtail plant efficiency. An inadequate and irregular
flow of materials has been an important cause of low productivity
in the Italian engineering industry since the war.3 Lack of materials was reported to be one of the factors accounting for a 15 per
cent, drop in labour productivity in Danish shipyards in 1947-49
as compared with pre-war levels.4 Such shortages are often due
to factors beyond the control of management, and it is recognised
that the closest co-operation between governments and industry is
necessary in order to minimise their harmful effects.
Another factor is the price of materials. High prices of
materials necessitate the charging of high prices for products ; and
at such prices the lack of orders may prevent the application of
continuous production methods or the full utilisation of capacity.
Italian heavy industry, lacking domestic supplies of basic resources,
charges prices ranging from 30 per cent, to 60 per cent, above world
1

COMMISSARIAT

GÉNÉRAL D U P L A N : Recueil

de documents

relatifs

à la

productivité (Paris, 1949), p p . 34 a n d 35. See also Première mission aux EtatsUnis de la construction électrique (matériel d'équipement),
août-septembre 1949,
(Paris, u n d a t e d ) , p p . 65-68.
2
Review of Productivity in the Clothing Industry, op. cit., p . 13.
3
A. J A C O B O N I : L'Industria
meccanica italiana (Rome, Centro di S t u d i e
P i a n i Technico-Economici, 1949), p . 98.
4
" R o u n d Table Conference of t h e Danish Shipbuilding I n d u s t r y ", in
Bulletin of the International
Metalworkers' Federation, Vol. I l l , No. 1, Mar.
1951, p p . 4 and 5.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

levels for the materials which it supplies to the Italian metal-using
industries, a fact which impairs productivity in those industries.
THE AVAILABILITY OF CAPITAL AND CREDIT

The terms on which long-term capital and shorter-term credits
are available play a big part in determining the speed with which
productivity can be increased by means of capital extensions,
modernisation and re-equipment projects. To the extent that
high rates of interest and onerous credit terms reflect real shortages
of physical capital, the obstacles to progress arise out of basic
economic rather than institutional factors. High rates ot interest
and onerous; credit terms may, however, also be due in part to the
underdeveloped condition of a country's money and capital markets,
such that potential savings run to waste. In underdeveloped
countries in particular both economic and institutional factors
limiting the supply of capital are important in retarding progress.
The more the capital-exporting countries, and institutions such as
the International Bank for Reconstruction and Development, can
do to make capital available in the underdeveloped countries, and
the more the underdeveloped countries themselves can do both to
make productive use of their own savings and to create conditions
which will attract capital from abroad, the more rapidly their
productivity may be expected to increase.
In the more highly developed countries, too, the state of
the capital and money markets varies a great deal from one
country to smother. Mr. Maurice Olivier, president of the National
Association of French Founders (Syndicat général des fondeurs
de France), at a conference organised by the French pattern
castings industry after the return of the industry's team from a
visit to the United States, emphasised the fact that the United
States industry had the benefit of long-term credits at low rates
of interest, while in France such credits were rare and difficult to
obtain.1 In the Italian metal trades, too, where the renewal of
plant and equipment is especially urgent, lack of capital and high
rates of interest are serious obstacles to the growth of productivity.
TAXATION

Taxation may adversely affect productivity in several ways.
In the first place, rates of taxation on business firms may be so heavy
1

L'Usine nouvelle (Paris), 6th year, No. 15, 13 Apr. 1950, p. 5.

ECONOMIC AND INSTITUTIONAL FACTORS

as to leave them either with insufficient means or with little incentive
to undertake new capital investment. This may especially be the
case if the cost of equipment is rising rapidly and if formulae
governing permitted deductions for depreciation do not take
sufficient account of the fact that the replacement or renewal of
capital equipment costs a great deal more than its original construction. Secondly, even if not unduly heavy, taxes may be
assessed in such a way as to discourage productivity: the tax per
horsepower formerly levied on motor cars in the United Kingdom
led to a concentration on the production of low horsepower engines
which was widely considered to have unfortunate effects on the
ability of the British motor car industry to compete in export
markets. Thirdly, if taxation of workers' earnings is so high as to
reduce considerably the increment of income which they may earn
through greater efforts, the extra efforts may not be deemed worth
making and systems of payment by results will have little effect
in p r o m o t i n g g r e a t e r p r o d u c t i v i t y .

This is especially likely t o b e

the case if goods on which to spend such part oí additional earnings
as is retained are in short supply.
Competent observers believe that the high level of taxation in
the United Kingdom, for example, has impaired productivity in at
least some branches of industry.1 It has been suggested that
" a thorough recasting of the taxation system, in order to make
taxes less deterrent to saving, hard work, investment and risk
taking ", is one of the most urgent tasks confronting the British
Government.2 The British non-ferrous metals productivity team
associated the " productivity-consciousness " which it found
throughout the United States industry with " incentive systems
that are more effective in the U.S. because of lower taxation and
adequate supplies of consumer goods . . .". 3 A report by the
French Central Planning Commission (Commissariat général du
plan de modernisation et d'équipement) referred to " the serious
defects in [the French] fiscal system, which is complicated, costly
and ineffective. Numerous taxes constitute real ' internal customs
duties ' which penalise production." 4

1
See, for example, A.A.C.P.: Drop Forging; Internal Combustion
Engines;
and Grey Ironfounding
(London, 1950), p p . 7, 49, and 17 respectively.
2
The Economist (London), 23 May 1953.
8
A.A.C.P.: Non-Ferrous Metals (London, 1951), p . 4.
4
COMMISSARIAT GÉNÉRAL DU PLAN: Programme français pour l'accroissement de la productivité' (Paris, 1949), p. 14.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

EDUCATIONAL AND TRAINING FACILITIES

Among institutional factors affecting productivity, few are
more important than the extent to which the educational and
vocational training facilities available in a country meet the requirements of industry. These include facilities for the training of all
grades of personnel from top management downwards. It is
perhaps in connection with training for higher management and
in the training of scientists, engineers and technicians that industry
is, however, most dependent upon outside institutions.
In many countries the conception of formal training for higher
management is relatively new. Yet its importance can scarcely
be exaggerated. Experience has shown, as one would expect, that
efforts to raise productivity initiated by men in subordinate positions are unlikely to succeed without the understanding, support
and encouragement of top management. It is important that
higher management should have a thorough knowledge and understanding not only of the best methods of organising production
but of how these are likely to affect the worker at the bench.
It seems clear that the knowledge, skill and enthusiasm displayed by American higher management are important factors
making for high productivity in the United States. While these
qualities in American management are no doubt partly products of
the general American environment and way of life, it seems
certain that they also owe a good deal to the emphasis which is
placed in the United States upon training for management.
Problems; of training for higher management arise both in
universities and technical colleges and within industry itself.
While in many countries university graduates still go largely into
the professions, there is a growing tendency, particularly in the
United States, to employ university graduates in industry. This
seems clearly to be a source of strength to American management,
and is to be encouraged in other countries.
Jealous of their academic standards and conscious of the difference between academic and vocational education, many of the older
universities have, however, been slow to offer training aimed
specifically at equipping students for business careers. Realisation
of the growing complexity of business and administrative problems
as subjects for study and of the possibilities of teaching such
subjects not merely as vocational skills but in a scientific spirit is,
however, mcdifying this attitude. This is especially true in the

ECONOMIC AND INSTITUTIONAL

FACTORS

United States, where in 1950 there were over 600 institutions
offering degree courses in business and commerce and more first
degrees were granted in these subjects than in any other.1 In
addition, administrative studies are included in many other liberal
arts and technological courses. On the other hand, almost every
business course includes a substantial element of liberal arts
subjects. A high proportion of the large number of students
taking science and engineering courses also make their careers in
industry.
The ability of American universities and colleges to provide
courses that are recognised by industry as providing valuable
training in management owes much to the close contact which is
maintained between the universities and industry 2, to the financial
support which the universities receive from industry, and to the
fact that university staff members are permitted, and indeed encouraged, to do part-time work in business. This reduces the inequality
between académie and business rates of remuneration. Also, a
teacher of business subjects is likely to be both a better teacher and
more up to date if he keeps in close touch with the practical aspects
of business.
Scientists, engineers and technicians have a key role to play
in raising productivity. If it is top management which disposes,
it is in large measure they who propose. Top management can
seek in a general way to create conditions favourable to higher
productivity and can give direction, encouragement and support
to those whose work it is to introduce and apply the techniques
needed for raising productivity; but it is the scientists and
engineers on the staff of an undertaking, or outside experts
whose services may be hired on a temporary basis, who command the knowledge and techniques needed for ascertaining
how, in any particular situation, productivity can be increased,
for making specific proposals and for planning in detail what should
be done. Productivity therefore depends greatly upon the
1
3

A.A.C.P.: Education for Management (London, 1951), p. 19.
"Business and the universities work very closely together and this is a
major factor in the success of training for administration. The points of
contact are many, and everywhere there is evidence of mutual understanding
and helpfulness. There is also close co-operation between the trade unions
and the universities which run courses for their officers." (Ibid., pp. 19-20.)
A Netherlands study group which investigated methods of " management
development " in the United States was equally impressed by the part played
by American universities in the training of higher business executives. (See
CONTACTGROEP OPVOERING PRODUCTIVITEIT: Wie volgt ons op ? (The Hague,

1952), Chapter IV, pp. 35-44, and English summary, pp. 51-56.)

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

initiative, resourcefulness and fertility in ideas of industrial
scientists, engineers and technicians.
It is important in all countries t h a t a substantial proportion of
scientifically trained men should be employed in industry. Degrees
in science and engineering are not, however, designed primarily to
equip their holders for careers in manufacturing industry. If
scientific knowledge is to be effectively utilised and applied in
industrial production it is believed t h a t there is a need in many
countries for more training in applied science.
The need for expanding facilities for training in industrial
engineering and production engineering is of special importance.
Industrial engineering has for many years been a field of study in
a few American colleges; in recent years it has attracted great
interest and. the number of courses in the subject has increased
rapidly.
There is considerable variation in the content of industrial engineering courses, hut the usual pattern is one in which advanced engineering
design and theory are replaced by such subjects as industrial economics,
work analysis, industrial statistics, and personnel and labour relations. . . . l
Over 4,000 degrees were granted in this field in 1950, including
some 900 higher degrees. Outside the United States, too, growing
attention is being devoted to this kind of training.
The training of work study technicians is also of fundamental
importance. A recent British report recommends, among other
things, that—
(1) Every industrial manager should make it his job to study more
closely the results that can be achieved from a wider application of
work study and, in particular, the benefits obtainable from better
training in the subject.
(3) Industry should be responsible for making known to local
educational institutions the need for courses in work study, so that the
number of courses set up in each area will be sufficient to meet industry's
requirements.
(4) Local technical colleges and other educational and training
bodies should., in conjunction with the professional institutions concerned, ensure that the courses provided are of the kind industry
needs. . . .
(7) It should be the aim of industry that all men practising work
study should successfully complete a course at least as comprehensive
as the one outlined in the syllabus [recommended by the authors].
1

A.A.C.P.: Universities and Industry (London, 1951), p. 8.

ECONOMIC AND INSTITUTIONAL FACTORS

(8) The examination standards for these courses should be laid
down in consultation with the professional institutions concerned, as
well as with industry.
(12) Once the proposed syllabus is established and accepted by
the relevant institutions, these should jointly approach the Ministry of
Education to seek an endorsement for the qualification connected with
the course.1
A fairly detailed syllabus has been devised and recommended
by the authors. 2 It includes method and motion study, work
measurement, the application of time standards, the organisation
and administration of work study departments, human aspects of
work study, and incentives and job evaluation. It is not suggested
that this syllabus should be regarded as setting a rigid pattern.
It is recognised that adaptations and modifications will be desirable
to suit particular conditions, but it is felt that, unless the syllabus
is covered generally and interpreted liberally with sufficient
practical work, the training will not provide an adequate background for responsibility. A course based on this syllabus would
probably require 100 hours of lecturing, another 100 hours of
tutorial work and a considerable number of hours devoted to study
work under actual operating conditions. As a full-time course it
should be spread over at least three months, or as a part-time
course over two years.
It is not only in connection with the training of executives,
scientists and technicians that industry needs the co-operation of
outside institutions. Apprentices and others undergoing training
for skilled occupations are commonly required to attend courses at
technical colleges. And apart from the facilities provided by
educational institutions there is often a need for training facilities
which, especially for small firms, can be provided efficiently only
through action on the part of an industry as a whole. The vocational training of the various categories of workers, though it raises
problems calling for action outside as well as within individual
undertakings, can more conveniently be discussed in a later
chapter. 3 There is, however, one general point that should be
made here. Vocational training should seek to meet the needs of
the future as well as of the present. This requires foresight in
1
JOINT COMMITTEE OF THE INSTITUTE OF COST AND WORKS ACCOUNTANTS
AND THE INSTITUTION OF PRODUCTION ENGINEERS: Measurement of Pro-

ductivity—Work
Study, Application and Training (London, 1952), pp. 52-53.
2
Ibid.,
pp.
38-45.
3
See pp. 119 ff. below.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

estimating future requirements for different categories of workers
and different kinds of skill. National employment services should
have the closest possible contacts with industry on the one hand and
with vocational training establishments on the other, and should
be in a position to collect and analyse such statistical and other data
as will make possible reliable surveys of trends in the employment
situation, on which estimates of future requirements for different
kinds of skill can be based.

INDUSTRIAL RESEARCH AND EXCHANGE OF INFORMATION

Other important factors affecting industrial productivity are
the facilities that exist for industrial research, the extent to which
the results of such research are disseminated in a form in which
they can be utilised and the extent to which they are in fact utilised.
Many productivity teams have drawn attention to the important part played by industrial research in promoting productivity
in the United States. There is no evidence that basic scientific
and technical knowledge is more advanced in the United States
than in Europe, but there is evidence that such knowledge is, in
general, more effectively utilised and applied in industrial production.
There is also evidence that European industrialists are becoming
more conscious of the importance of research. In the United
Kingdom there are now some 40 grant-aided industrial research
organisations. A number of them have been founded only recently ;
others have greatly expanded their activities within the last few
years. A recent development in France was the establishment at
the beginning of 1952 of a research centre for raising productivity
in the men's clothing industry (Centre d'études pour Vaccroissement
de la productivité de la confection masculine). Its main functions
are to give technical assistance and production engineering assistance to the industry, to maintain a statistical and economic service,
to study markets, and to be a source of general information on
types of machines and qualities of cloth. It has issued a detailed
review of types of machines available for different jobs.
It is important in all countries that every effort should be made
to encourage both basic and applied research, whether by individual
firms, industrial research associations, independent research
institutes, government departments, or at universities. Government-aided research may be particularly important in helping to

ECONOMIC AND INSTITUTIONAL FACTORS

meet the needs of small firms and of most establishments in underdeveloped countries.
Organised labour, as well as employers, has in recent years
taken a growing interest in the problem of promoting industrial
research. In the United Kingdom, for example, some trade
unions subscribe to the funds of industrial research associations
and there is trade union representation on a number of these associations, including those dealing with footwear, printing and cotton.1
Attention needs to be devoted also to the problem of disseminating research findings. In the report of the French Central
Planning Commission already mentioned the lack of liaison between
scientific research and industry was said to be prejudicial both to
research and to the practical application of new processes and
techniques. The lack of technical centres in a country in which
small and medium-sized establishments predominate was said to
render difficult the exchange of technical information and the
spread of new techniques.2
The extent to which, and the speed with which, industry makes
practical use of research findings are likely to depend a good deal
upon the number of scientifically trained men in industry.3 The
fewer there are of these the more important it is that the significance
of research findings should be explained, and results disseminated,
in language which is not unduly technical.
In the United Kingdom the steel founding productivity team
reported that—
The urgent need for effective research on steel founding problems in
Britain is now fully recognised, and need not be stressed here. What
ought to be stressed is the paramount importance of having the right
type of man to convey to the steel founders themselves what is already
known, as well as the results of4 researches and precise recommendations
for their practical application.
This emphasis is echoed in a number of other productivity-team
reports. The same team reported that the Steel Founders' Society
of America, at whose instance the bulk of American research into
1
" Workers' Attitude to Productivity ", in The Times Review of Industry,
May 1952, p. 10.
2
Programme français pour l'accroissement de la productivité, op. cit., p. 13.
3
In a study of industrial research in Switzerland it is reported that " the
ability and speed with which new scientific and technical knowledge, whether
discovered inside Switzerland or abroad, is harnessed to the service of its
industry is undoubtedly due in large measure to the strong cadre of universitytrained scientists and technologists in, or associated with, Swiss firms ".
(Ronald S. EDWARDS and Charles LA ROCHE: Industrial Research in Switzerland. Its Institutional and Economic Background (London, Pitman and Sons,
1950), pp. 72-73.)
4
Steel Founding, op. cit., p. 40.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

problems connected with steel castings is carried out, makes a
point of putting the results of research into simple language and
getting them into the hands of the men on the job. In this task
the technical and trade press has an important part to play.
It is not only new research findings that need to be more widely
disseminated. There is usually, in any industry, a wide spread
between the level of productivity in the most efficient and the least
efficient establishments. This is usually true within a country, and
still more as between one country and another. A levelling up of
productivity in the more backward establishments towards standards achieved in the more progressive ones would greatly raise
average productivity in an industry as a whole. Ignorance on the
part of the less efficient undertakings even of methods and techniques which are well known and have already proved their worth
in the more: efficient undertakings, though by no means the only
reason, is an important reason for the great differences in productivity that are found to exist.
Ways arid means of dealing with this difficulty and encouraging
the fruitful exchange and dissemination of information include the
organisation of visits to other plants and establishments, in the
same country or in other countries. The numerous visits of productivity teams sponsored by the Economic Co-operation Administration and the agencies which have succeeded it have been the
most familiar form of expression given to this idea in recent years.
It is desirable to include workers as well as managers and technicians
in such teams, so that workers can participate in the formulation
of recommendations and in the work of publicity and education
that should follow such visits if they are to yield their full results.
A difficulty sometimes encountered in connection with the
organisation of such visits, and also in connection with other
techniques for promoting the exchange of information, is the
reluctance of manufacturers to reveal trade secrets. Many of the
European productivity teams that have recently visited the United
States were impressed by the freedom with which information is
commonly exchanged even between competing firms in United
States industry, and contrasted this with the greater secrecy which
tends to prevail in their own countries.1 The attitude of many
1

Cf., for example, A.A.C.P.: Simplification in Industry (London, 1949),
p. 10: " W e l'ound a greater readiness amongst American manufacturers to
share their technical knowledge and to discuss production methods with
other manufacturers, whether competitors or not, than is general in the
United Kingdom. It is their conviction that all derive great benefit from
this interchange, and no one loses."

ECONOMIC AND INSTITUTIONAL FACTORS

European industrialists towards the exchange of information
appears, however, to be undergoing a slow transformation. The
Netherlands Government, for example, has reported that not only
is better use now being made in Netherlands industry of the
technical knowledge and experience of other countries but greater
co-ordination of the knowledge, experience and initiative available
within the country is also being achieved. Industrial firms which
were formerly highly secretive about their production methods are
reported to be gradually realising the benefits of the exchange and
pooling of techniques and to be less reluctant to co-operate with one
another in this respect.1 A French manufacturer of electric motors, who was selling his products at a price 17 per cent, below
that of his competitors, recently invited them to go through his
plant and observe his operations.
The organisation of demonstration projects and national and
international conferences and meetings are other methods of
disseminating more widely the knowledge of good industrial
practice.
Several productivity teams have referred to the important part
played by the technical and trade press in the United States in
disseminating information about productivity. In some countries,

however, it would appear that the technical press does not fully
exploit its opportunities. In a recent survey by the Economic
Co-operation Administration of productivity in France it was
stated that existing trade and technical periodicals were designed
for the highly qualified engineer only and were of too restricted a
circulation to be generally effective. It is believed that a reorientation and enlargement of industrial journals could do much to
stimulate a vigorous productivity effort.
Much can be done, too, to promote a valuable exchange of
information by national productivity centres which, besides acting
as clearing houses for information and providing technical advice
and services to industry, may also play an important role in coordinating research in the field of productivity and providing
international contacts. Such centres, as has been said, have now
been set up in a large number of European countries, and in some
other countries, and it has been suggested that consideration should
be given to the establishment of similar centres in underdeveloped
countries, which might well combine work on general problems of
1
De Productivité^
in Nederland, Overdruk van een Nota
Staatsdrukkerij- en Uitgeverijbedrijf, 1951), p p . 33 fï.

(The

Hague,

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

economic development with work specifically designed to promote
higher productivity. The difficulty that many underdeveloped
countries lack qualified personnel to staff such centres could be met,
in part at least, through technical assistance, experts training local
personnel to carry on their work after the completion of their
missions1, and local personnel acquiring training also through
technical assistance fellowships tenable in advanced industrial
countries.

1
I.L.O. Technical Assistance experts have, for example, worked in close
co-operation with the staff of the Israeli Institute of Productivity. They
have at the same time assisted the Institute with projects on which it was
engaged and devoted a good deal of time to technical seminars and other
forms of training for the staff.

PART II
PRODUCTIVITY WITHIN THE UNDERTAKING

CHAPTER IV
PLANT AND EQUIPMENT
While it is important to do everything possible to bring about
and to maintain an environment which, psychologically and economically, favours higher productivity in manufacturing industries,
it is within individual undertakings that productivity has actually
to be raised.
There is general agreement that primary responsibility for
action to raise productivity in individual establishments rests with
management, but that the active co-operation of workers and
their representatives is indispensable. Success in obtaining the
co-operation of workers in measures to raise productivity is itself
a test of the quality of management, but depends also upon trade
union leadership.
Higher productivity in industrial establishments calls for
action in various fields, three of the most important of which may
be distinguished, not without some overlapping, under the headings :
plant and equipment, organisation and control of production, and
personnel policy. The present chapter is concerned with action
under the first of these headings ; the other two will be dealt with
successively in the next two chapters.
THE AMOUNT OF CAPITAL PER WORKER

Probably no single factor has a more important effect on the
productivity of labour than the amount of capital employed in
conjunction with labour. " To get real, appreciable, material progress, capital is the first priority. That is a common ground . . .
between Moscow, Belgrade, Chicago, London, Delhi and Pékin." x
The more capital-intensive methods of production in the industrially developed countries account in large part for the enormous
difference between the productivity of labour there and in underdeveloped countries. The greater mechanisation of industry in
1

HUTTON: We Too Can Prosper, op. cit., p. 26.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

the United States largely accounts for the superior productivity
of labour in the United States as compared with Europe.
Motive power per worker, expressed in terms of horsepower
or kilowatts, affords an index, though a very imperfect one, of
the amount of capital per head used in production.1
In the United States—
The gain in output per man-hour in manufacturing since 1899 appears
to have been related fairly closely to increased use of power per worker. . . . Manufacturing output has corresponded roughly to the product of an installed-horsepower index and the length of the work week.2
Dr. Rostas has shown that—
. . . the ratio of horsepower per worker in the U.K. and the U.S.
bears the same relation as the ratio of output per worker in the U.K. and
the U.S.; i.e., broadly speaking, output per worker is double in the U.S.
and horsepower per worker is also double. Also the higher rate of
increase in horsepower per worker in the U.S. runs
parallel with the
higher rate of increase in output per worker. . . . 3
The article in the Economic Bulletin for Europe mentioned above
confirms the importance of the amount of capital per head as a
factor affecting the productivity of labour. A study of censuses
of

production

(mostly

for

pre-war

years)

European

countries and the United States showed that there is a close relationship between horsepower per head and the value of net output
per head in manufacturing—in countries where horsepower per
worker is high, over-all net output per worker also tends to be
high.4
Findings such as these suggest the question whether differences
in the amount of capital per head are not indeed so important as
factors accounting for observed differences in the productivity of
labour as to leave little more to be accounted for and to deprive
other factors of any considerable importance. The facts do not,
1
For discussions of the adequacy of such an index see " Motive Power in
European Industry ", in Economic Bulletin for Europe, Vol. 3, No. 1, First
Quarter, 1951, pp. 24-40; and L. ROSTAS: Comparative Productivity in British
and American Industry, National Institute of Economic and Social Research,
Occasional Papers, No. XIII (Cambridge University Press, 1948), pp. 15-16.
2
C E . YOUNG: "Application and Problems of Productivity D a t a " , in
Journal of the American Statistical Association (Washington), Vol. XLI, No. 236,
Dec. 1946, p. 421.
3
ROSTAS, op. cit., p. 52. Dr. Rostas's comparisons are based on pre-war
figures, but studies relating to the post-war period, undertaken by the AngloAmerican Council on Productivity, confirm that the amounts both of electric
power per industrial worker and of horsepower per operative are two or three
times as great in the United States as in the United Kingdom. (Cf. A.A.C.P.:
Report of the Second Session, London, Mar.-Apr. 1949, p. 6.)
4
" Motive Power in European Industry ", op. cit., p. 24.

PLANT AND EQUIPMENT

however, support the view that differences in the amount of capital
per head, important as they unquestionably are, are the only
important factors affecting labour productivity. The conclusions
quoted relate to manufacturing industry in general and are based
upon broad averages of horsepower per worker and of output per
worker in a considerable number of separate industries. In the
process of averaging, cases in which relatively high output per
worker is associated with relatively little horsepower per worker
tend to cancel out cases in which relatively low output per worker
is associated with relatively high horsepower per worker. A
study of the relationship between output per worker and horsepower per worker in individual industries reveals a variegated
picture. Rostas computed indices for 28 industries both of the
ratio of horsepower per worker in the United States as compared
with the United Kingdom and of output per worker in the two
countries; he found that in six of them there appeared to be a
close inter-relationship between the two indices in the sense that
in the United States x times the British horsepower per worker
was associated with x times the British output per worker; on the
other hand there were 14 industries in which the United States
employed disproportionately more horsepower per worker in
order to achieve a higher output per worker 1, and eight industries
in which the United States lead in productivity was disproportionately greater than its superiority in horsepower per worker.2
Rostas consequently insisted that " no great importance should
therefore be attached to the fact that in the [over-all] U.K./U.S.
comparison the ratio of productivity corresponds to the ratio of
horsepower per worker ".3
In the study published in the Economic Bulletin for Europe the
relationships between output per worker and horsepower per
worker obtaining in individual industries are not shown. The
over-all comparisons, while confirming that high output per worker
tends in general to be associated with a high level of horsepower
per worker, still left a good deal to be explained by other factors.
For example the value of net output per head in Ireland was
found to be about double that in Finland though horsepower per
head in Ireland was only about half that in Finland—this despite
1
In two of these industries—cement and fish curing—output per worker
was actually higher in the United Kingdom, though much more horsepower
per worker was employed in the United States.
2

ROSTAS, op. cit., pp. 53-54 and 69-70.

Ibid., p. 53.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

the fact that actual amounts of horsepower were replaced by
" standardised " figures designed to eliminate the effects of differences in the industrial structure of different countries, i.e., of
differences in the proportion of workers employed in industries
using much and little capital respectively.1
Studies of the relationship between output per worker and
horsepower per worker thus appear to confirm the common-sense
judgments that a worker helped by machines will normally produce more than a worker operating with little or no machinery;
that the amount of capital per worker is one of the most important
factors affecting the level of labour productivity; but that differences in the amount of capital per worker are not sufficient to
account for observed differences in labour productivity, and that
other factors also have an important influence upon this.
Moreover, the importance of methods of increasing productivity
without additional capital investment becomes all the greater
when one reflects that there is nothing especially significant or
meritorious about achieving the maximum productivity of labour
alone in any particular establishment or industry (since this can
be done by methods which, from the point of view of the economy
as a whole, involve a disproportionate and excessive increase in
the " input " of other factors of production), and that what is
chiefly important is to make the most efficient use of all resources
taken together. This means that capital and labour should
be combined in different proportions in different countries, in
such a way as to take account of differences in the degree of
scarcity of these two factors. It may, however, be agreed that
even from the point of view of this more fundamental objective (making the most efficient use of resources in general rather
than maximising the productivity of labour in particular) capital
investment is often not carried as far as it should be.
Differences in the quality, size, type and efficiency of capital
equipment from one plant to another are quite as important in
their effects on productivity as differences in the actual amount
of equipment per worker. Indeed, since capital equipment cannot
be measured in terms of homogeneous physical units, it is difficult
to separate the notion of quantity from the notion of quality.
Difficulties encountered in connection with the installation of
new machinery or equipment include the following:
(1) The necessary capital goods may not be available. This
1

" Motive Power in E u r o p e a n I n d u s t r y ", op. cit., p p . 29-31.

PLANT AND EQUIPMENT

may apply not only to large machines but also to lesser equipment such as power-driven hand tools. High productivity is as
much a cause as a consequence of the availability of machine
power. Only a nation whose productivity is already high can
add rapidly to its supply of machinery.
This is a problem very likely to be encountered by manufacturers who have to import the capital equipment they require.
In some cases there may be room for more initiative by potential
domestic suppliers of equipment, and this might be encouraged
by means of surveys of requirements aimed at establishing the
size of the domestic market for such equipment.
Manufacturers in underdeveloped countries encounter certain
special difficulties arising from the fact t h a t most manufacturing
equipment originates in the larger industrial nations and is usually
designed for the production conditions prevailing in these countries. The size of markets, raw materials used, the size of plants,
operating conditions and maintenance arrangements may all be
different in underdeveloped countries from those for which the
kinds of equipment normally available have been designed.
Production experience in a number of underdeveloped countries has
frequently revealed that local conditions do not suit the optimum
operation of such machinery, and the need has often been expressed for
the development of equipment and factory plans adapted to the special
conditions of these countries. In some cases it has even occurred that
natural resources are untapped because new types of industrial plant
need to be specially developed. Since most small countries cannot
afford the cost of expensive original development work and have neither
the engineering staffs nor the volume of production needed to originate
satisfactory substitutes, international co-operation could be extremely
helpful in this sphere.1
(2) The market may not be large enough to enable amortisation and depreciation charges to be spread over a sufficient number
of units of output to warrant investment in expensive equipment.
Here two cases need to be distinguished—
(a) The domestic market, supplemented by any other markets
to which access is available, may be too small to support even
one undertaking of the technically optimum size (e.g., in a small
and poor country setting up an integrated steel works); but on
the whole this case seems likely to occur rather seldom. .
(b) The market may be large enough to support one or more
undertakings of the technically optimum size, but may, in fact,
1
UNITED
pp. 9-10.

N A T I O N S : Methods

to Increase

World

Productivity,

op. cit.,

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

be shared among a considerable number of smaller undertakings,
none of which has a large enough share of the market to warrant
additional capital investment of an expensive kind.
In the first case, there will be no remedy, given the existing
state of technique, short of an increase in demand. The existence
of the second case is evidence of imperfect competition—otherwise the more efficient undertakings would undersell the others,
encroach upon their share of the market and in that way obtain
the additional sales they need. In such cases, therefore, action
against the devices by which competition is restrained—price
maintenance agreements, quotas, cartel arrangements, etc.—may
promote efficiency. Such action may be taken either by the more
enterprising undertakings themselves or by governments.
In neither case need the size of the market be accepted as
given. Action may be taken to increase demand both by reducing
prices and by means of vigorous salesmanship.
(3) Methods of production may not be sufficiently standardised
to warrant investment in additional capital equipment. While
the size of the market limits the opportunities for specialisation
and standardisation, much may often be done within any given
market situation to take fuller advantage of these opportunities.
(4) More generous allowances for depreciation and obsolescence,
and a reduction in rates of taxation on profits, especially where
these are very high, would ease the problem of manufacturers for
whom equipment is physically available b u t financially out of
reach. So also would any steps that could be taken to make loan
capital and share capital available on easier terms.
(5) Even when the equipment they require is available and
could be afforded, manufacturers may not always know what is
the best equipment to select for their particular purposes. This is
perhaps especially likely to be the case in underdeveloped countries.
The development of improved forms of new equipment is very
rapid. Unfortunately, knowledge of such new and superior types
spreads slowly throughout the world, and in many cases new investment
is made in obsolete types or models because of an imperfect knowledge
in the field. Moreover, sometimes because of established practice and
familiarity with the use of single-purpose or manually operated tools
with low-speed operation, an industrial undertaking building a new
plant may deliberately avoid the use of more efficient machinery.
This widespread tendency is extremely costly in terms of loss of potential
productivity, since the purchase of low-efficiency machines may freeze
productivity levels for a number of years. 1
1

Methods to Increase World Productivity, op. cit., p. 11.

PLANT AND EQUIPMENT

While this is true and important, it is worth repeating that,
given the very different ratios prevailing between the prices of
capital and labour in highly developed countries and underdeveloped countries respectively, the capital-intensive and laboursaving methods of production that are appropriate in highly
developed countries will not necessarily be appropriate in underdeveloped countries. The importance of adapting equipment and
techniques to local conditions, so as to ensure full utilisation of
local resources, cannot be over-emphasised.
(6) Difficulties may be encountered in persuading workers to
accept new machinery, or to accept a reduction in the labour
complement attached to the machinery. Since the whole superiority of one machine over another may lie precisely in the fact
that, by reducing the amount of work to be done, it enables a
worker to look after the machine with less assistance, or to look
after more machines, success or failure in securing the co-operation
of labour will be of paramount importance. This problem in
industrial relations will be discussed in Chapter VI. Full consultation with workers, advance notification of expected displacements
and agreed procedures for dealing with displaced labour are highly
desirable.
The full advantages of mechanisation will not be secured,
especially in a country in which industrial development is at an
early stage and capital equipment is scarce, unless mechanisation
takes place as part of a sound investment plan for the development of the economy as a whole.
Too frequently . . . plant modernisation is undertaken in the
complete absence of long-range plans, and new equipment is bought
in a " hit or miss " manner to satisfy current needs. Unrelated items
are often procured which cannot be successfully integrated with other
equipment in later years. A more efficient procedure would involve
thorough studies of the limitations of present equipment, and the direction of new purchases in a manner which, over a given period, would
accelerate the transition towards fully integrated facilities. The need
for technical guidance in this important sector of investment is particularly great in underdeveloped countries and might be met at least in
part by consulting engineering services associated with the work of a
national productivity and developmental centre. 1
Problems of integrating the capacities of different types of
equipment arise not only at the national or industrial level but
also at the level of the plant. In installing new equipment close
Methods to Increase World Productivity, op. cit., p. 12.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

attention must be paid to the development and maintenance of
a correct balance in the productive capacities of different departments in order to avoid bottlenecks.

MATERIALS-HANDLING

In many factories 50 tons of materials are lifted, moved,
loaded, unloaded, reloaded, etc., for every ton of finished product
produced.1 Handling costs may amount to anything from 15 per
cent, to 85 per cent, of total production costs. Here is a large
and fruitful field for economies, which may be achieved (a) through
carefully planned layout, ensuring a proper sequence of operations, and (b) through mechanisation.2 It would appear that in
many industries the modernisation of equipment should often
start with the mechanisation of materials-handling.
Four principles of good materials-handling, quoted in the
report of the Anglo-American Council on Productivity team which
investigated this problem, are—
(1) Eliminate manual handling wherever possible; (2) avoid
re-handling; (3) use equipment that sets a uniform pace; (4) palletise and use unit loads.3
In some cases the installation of equipment to give effect to
these principles may require complete reorganisation and heavy
capital investment, and may be impossible in the short run; in
other cases there may be opportunities for increasing productivity
considerably by more effectively utilising equipment that is
already available or that can be procured at relatively little cost.
The materials-handling productivity team believed that " a steady
uninterrupted flow of materials to and from each workman will
on the average raise productivity by at least 15 per cent., using
existing productive machine equipment ".4
1
The productivity team from the French pattern-casting industry quoted
a figure of 100 tons of materials handled for every ton of good castings produced,
and stated that they had seen United States foundries in which only one-fifth
as much labour was required as in France for receiving and storing materials
[Recueil de documents relatifs à la productivité, op. cit., p. 41).
2
A survey of labour productivity in the production of pig iron in Japan
gives as one of the major reasons for the relatively large number of manhours required per ton in Japan, as compared with the United States and the
United Kingdom, the fact that the internal transport of fuel and raw materials
is only partly mechanised (Asahi Shimbun (Tokyo), 27 May, 1953).
3
A.A.C.P.: Materials Handling in Industry (London, 1950), p. 6.
4
Ibid., p. 5.

PLANT AND EQUIPMENT

This team found that the best materials-handling equipment
observed in the United States consisted mainly of variations on
the hoists, cranes and conveyors well known in Europe. What
was striking about them was how ingeniously they had been
worked into the materials-handling plan. A similar point is made
in the reports of several productivity teams which investigated
particular branches of industry.
The British steel-founding productivity team, for example,
reported that in United States foundries the wheelbarrow was
almost extinct, much of the barrow work being done by fork trucks.
Roller conveyors were used not only for transporting boxes and
moulds, as in the United Kingdom, but also for such purposes as
moving heavily laden skips across parts of the floor out of reach
of the crane. An alternative to roller conveyors was the wheeled
skid, on which several moulds could be placed. The most striking
point observed in the use of gantry cranes was the speed at which
they work.

In hoist, traverse and travel they move much faster

than is usual in the United Kingdom. Magnets are used to a
much greater extent, and a most effective time-saving technique
is that of " snatching " the casting with the magnet. Strident
hooters keep the way clear under the crane path, and the absence
of any attendant to guide the magnet to the castings ensures
freedom from injury when castings spin themselves out of the first
grasp of the magnet. Wall travelling cranes are also used in
some foundries, and jib cranes are more plentifully installed than
in British foundries.1
In the United States drop-forging industry—
Mechanical handling is an important factor in high productivity.
The American dictum is not to put anything on the floor, as somebody
must be paid to pick it up. In the large plants elaborate conveyors are
used, but even in the smallest shops, where little mechanical handling
was in evidence,
the intelligent use of wheelbarrows saved much time
and cost.2
The Belgian forging and stamping productivity team which
recently visited the United States was equally impressed by the
importance of the contribution made by well organised handling
arrangements to productivity in American forges and recommended
this matter to the attention of Belgian industrialists.3
1
2
3

Steel Founding, op. cit., pp. 15-16.
A.A.C.P.: Drop Forging (London, 1950), p. 8.
FABRIMÉTAL: Bulletin hebdomadaire d'information et de liaison (Brussels),
No. 255, 14 May 1951, p. 388.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

The British metal valves productivity team regarded as most
important their recommendation to " mechanise more extensively
the handling of valves and components ".1 They stated t h a t the
United States valve industry was far ahead of the British industry
in effective handling of materials.
A good deal of attention has been devoted in Europe in the
last few years to questions of materials-handling and internal
transport. A Dutch report, for example, reviewing the progress
made in t h e Netherlands recently in achieving higher productivity,
states t h a t " the majority of improvements have been in the field
of internal transport ". 2

P O W E R - D R I V E N HAND TOOLS

Much may sometimes be done to increase productivity by the
use of inexpensive equipment such as power-driven hand tools.
These have the double advantage of both saving time and reducing
fatigue. The British materials-handling productivity team reported that—
Enquiries were made about the time saved by the use of powerdriven tools. All plant managers agreed that it was considerable.
From many instances we quote three.
(a) On an assembly where seven 3/16-inch diameter screws had
previously been driven by hand with a " Yankee " type screwdriver,
the introduction of a power screwdriver made a saving of 48 per cent, in
time.
(b) A machine operator had to tighten four 1/2 inch diameter bolts
on a work-holding fixture, the screws being slackened off at the completion of the operation. The use of a pneumatic impact wrench resulted
in a time saving of 45 per cent, and reduced operator fatigue.
(c) On another assembly for electrical connections, plugs were
driven into sockets by a small pneumatic hammer fitted with a tool for
easy and quick insertion of the plug connector and its electric lead.
This operation was formerly done by hand and was slow and difficult.
With the pneumatic hammer the job was speeded up 65 per cent, and
operator fatigue practically eliminated. . . .
We are convinced that a wider and more intensive employment
in British factories of electric and pneumatic power-driven hand tools
would help to increase productivity and reduce physical effort to a
minimum. The maintenance facilities of tool, plant 3 and building
departments would also be improved and costs reduced.
1
2

A.A.C.P.: Steel, Iron and Non-ferrous Valves (London, 1951), p. 3.
CONTACTGROEPOPVOERING PRODUCTIVITEIT: CO.P. Bulletin (The Hague),

Nos. 14 and 15, p. 1.
3
Materials Handling in Industry, op. cit., pp. 33 and 37.

PLANT AND EQUIPMENT

The French electrical construction team was impressed by the
part played by mechanised hand tools, particularly in the manufacture of light products, in the United States electrical construction industry. These small tools are not expensive in the United
States, and the high cost of labour makes their utilisation all the
more advantageous. The team added t h a t it would be very
difficult to obtain such tools in France; either they are not made
or they are too dear. 1 The team from the French pattern-casting
industry likewise found the widespread use of electrically driven
hand tools to be one of the factors making for high productivity
in United States foundries.

MAINTENANCE

The importance of careful maintenance of machinery, and
especially of preventive maintenance, is stressed in many of the
reports of the Anglo-American Council on Productivity, and in
the reports of teams from other countries, for example those
from the French electrical construction and machine-tools industries.
One example, from the British drop-forging report, will suffice—
American maintenance is carried out on the principle that " a stitch
in time saves nine ". Machines are overhauled at definite intervals,
and though some of the plant seen was over 20 years old its condition
was good. Breakdowns are regarded as unavoidable but a distinctive
feature of American practice is that an adequate labour force makes
quick replacement from an ample stock of spares. It is recommended
that maintenance be improved in England and that increased stocks of
spares be carried wherever there is need for frequent replacement.2
Well planned maintenance schedules and specialisation of maintenance functions are important. If, however, maintenance work
is carried out exclusively under the orders of maintenance engineers or maintenance supervisors, there may be unnecessary delays
in attending to or forestalling breakdowns. In some large undertakings good results have been obtained by decentralising maintenance personnel, integrating them in the production services and
leaving them subject to directives from the maintenance engineers
on technical matters only.
Special problems of maintenance may arise in underdeveloped
countries owing to the shortage of skilled labour and the fact t h a t
the labour force in general may have had little experience in
1
2

Recueil de documents relatifs à la productivité,
Drop Forging, op. cit., p . 8.

op. cit., p p . 35 and 4 1 .

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

handling machines. In small establishments maintenance may
sometimes be carried out, at least in part, by ordinary production
workers; in such cases it is extremely important that they should
receive adequate instruction and supervision in this work.
In some countries and in some industries producers of machine
tools might make an important contribution to higher productivity
by developing maintenance services especially for the benefit of
small user factories which are not easily able to maintain their
machines as they should.
PLANT LAYOUT

The importance of plant layout in connection with the economical handling of materials has already been emphasised. Good
layout can not only eliminate needless transport and handling
when work passes from one department to another; it can also
facilitate within each department a synchronised flow of materials
or parts so that each machine and each worker is fully employed
and each operation dovetails with the next.
While an ideal layout generally requires appropriately designed
buildings and may therefore be unattainable without extensive
alterations or new premises, a good deal may often be done within
existing premises to rationalise the flow of materials and semifinished products. For example, in United States diesel locomotive
plants—
. . . there is no hesitation in re-grouping machines, equipment or
work stations in order to achieve the minimum of movement and the
greatest concentration of effort. It was generally observed that machine
tools and equipment are rarely made permanent either by securing to
floors or coupling to1 power supply. This practice is, of course, not
unknown in Britain.
As an example of the handicaps imposed by bad layout, and
of what may be done to circumvent them, the following passage
may be quoted from the report of the British steel-founding productivity team:
Many of the steel foundries in Britain have grown haphazard into
a jumble of buildings in which it is difficult to follow the sequence of
operations, let alone design an even flow of work. It is a long-term
matter to reconstruct them, but the choice is surely clear—either they
are put into more efficient form, or they come under the hammer pre1

A.A.C.P.: Diesel Locomotives (London, 1950), p. 39.

PLANT AND EQUIPMENT

pared for the inefficient. That it will be a slow business getting the
new layout into shape is all the more reason for starting now. The
problem becomes no easier by waiting.
Long-term policies, however, will not give quick enough effects.
Even within existing shops methods of production of steel castings can
be made easier by rearranging the work. There is a common practice
in jobbing foundries of allowing a moulder to do his work all over a
certain area. He moves from job to job, and every move means that
his requirements must be brought to a different place. American
practice and the best practice in Britain puts even jobbing work on the
production line to the extent that the moulder and his supplies have a
fixed location, where work moves to him for completion, and away from
him to the next stage. (This, of course, applies to small and mediumsize work only.) Similarly, in other departments of the foundry, rearrangement of machinery and workbenches can reduce the amount of
handling to be done, and simple means can be devised to reduce the
unnecessary handling which is incurred because castings are piled on the
floor and must later be put into skips for removal farther along the line
of production. 1

Steel Founding,

op. cit., p . 37.

CHAPTER V
ORGAJMSATION AND CONTROL OF PRODUCTION

Most of the measures discussed in this and the next chapter
provide opportunities for raising productivity with little or no
additional capital investment. To those who believe that higher
productivity is mainly a matter of installing more and better
machines, such measures may seem to be of relatively minor
importance. If one is thinking of the productivity of labour alone,
increasing the amount of capital per worker is no doubt one of the
most important of all ways of raising productivity, but even from
this point of view it would be a mistake to neglect what can be
done by other means. For one thing, the shortage of capital in
many countries (including some which cannot be described as
underdeveloped) is so acute that the question of what can be done
to raise productivity without additional capital is of special practical
importance. For another, the scope for raising labour productivity
by such means appears to be much greater than is often believed,
particularly perhaps in underdeveloped countries. A recent
survey of labour productivity in the cotton textile industry in five
Latin American countries—Brazil, Chile, Ecuador, Mexico and
Peru—divided the causes of low productivity of labour into two
main groups, namely: (a) causes which could only be eliminated
by modernisation of machinery and enlargement of the mills ; and
(b) causes which could be remedied by administrative action, i.e.,
by making a more efficient use of existing equipment. The authors
came to the conclusion that for the five countries as a whole the
two groups of causes were about equally important, and that for
two countries (Brazil and Ecuador) the latter group of causes was
the more important. 1
This conclusion is of interest because it shows that what has been
termed the " backwardness " of the Latin American textile industry
1
UNITED NATIONS, Department of Economic Affairs: Labour Productivity
of the Cotton Textile Industry in Five Latin-American Countries, document 1951.II.G.2 (New York, 1951), p. 5. This report is reviewed at some
length in the International Labour Review, Vol. LXVI, No. 2, Aug. 1952,
p. 154.

ORGANISATION AND CONTROL OF PRODUCTION

and has been generally attributed entirely to equipment, is partly due
to the lack of organization and administration in the mills, although
these conditions . . . do not depend merely on the will, or on the
administrative capacity, of the manufacturers.
Professor I. B. W. Berenschot, however, who draws a similar
distinction between technical measures (which usually require
substantial capital investment) and organisational measures for
increasing productivity, believes that, in general, the first are about
three times as important as the second in increasing productivity.1
The importance of methods of increasing productivity without
additional investment becomes all the greater when one thinks in
terms not of labour productivity alone but of making the most
efficient use of all resources taken together. In underdeveloped
countries especially, lack of capital and abundant labour often
make it more important to increase output per machine or per
unit of capital than output per worker.
MANAGEMENT AND ADMINISTRATION

The quality of management affects productivity in a great
number of different ways ; ". . . while material progress is affected
by numerous circumstances, it is fertility in resource and imaginative enterprise which lie at its root ".2 Progressive management
will seek continuously to improve upon and not merely to imitate
techniques and installations in use elsewhere.
Nearly all the Anglo-American Council on Productivity reports
pay tribute to the quality, skill and enthusiasm of management in
the United States, and remark on the technical knowledge, familiarity with problems of production and informality displayed by
the higher levels of management. This they felt made for a better
team spirit in the plants and also accounted for the high respect
accorded to management by the manual workers. " The most
significant factor in America leading to high production at low
cost ", in the opinion of the management accounting team, " is
efficient management ".3 A team of British trade union officials
concluded that " efficient management set the pace of productivity
in American industry—not because of altruistic belief in social
progress, but from necessity ".*
1
Prae-Adviezen voor de Vereniging voor de Staathuishoudkunde (The Hague,
Martinus
Nijhoff, 1951), p. 9.
2
G. C. ALLEN: "Economic Progress, Retrospect and Prospect", in
Economic Journal (London), Vol. LX, No. 239, Sep. 1950, p. 469.
3
Management Accounting, op. cit., p. 14.
4
Trade Unions and Productivity, op. cit., p. 51.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Every aspect of the work of an undertaking is, of course, under
the control of the management (or of the directors where there is
a separation between management and direction). Suffice it to
say here that features of United States management that have
attracted the special attention of visiting productivity teams,
and which they have commended to the notice of managements in
their own countries as factors making for high productivity,
include the trouble taken in United States industry to educate,
train and develop management officials of all ranks ; the high degree
of devolution of authority and responsibility; the fact that
foremen and supervisors are generally regarded as belonging to
the ranks of management and remunerated accordingly; the clear
definition of jobs and responsibilities; the general willingness to
exchange information and " know-how " even among competing
companies; the readiness to try out new ideas; the attention
given to the planning of production; the effective way in which
management uses the services of accountants and controllers;
and the importance attached to salesmanship and to the dovetailing of the work of the sales department with that of the
planning and production departments.
PRODUCTION PLANNING AND CONTROL

The planning and control of production are of course essential
in order to ensure that delivery dates are met, that materials and
components are available when and where they are required, and
that workers and machines are neither overloaded nor left idle.
Better planning of production schedules may, among other advantages, help to reduce irregularities in production and employment
arising from seasonal and other fluctuations in demand. Better
production control can do much to eliminate imperfections in
materials, implements and machines, which may have adverse
effects on productivity out of proportion to their intrinsic importance.1
The actual techniques of planning and control adopted must
depend upon the size of the undertaking and the type of work
carried on in it. A number of productivity teams have commented
on the care and effort commonly devoted to production planning
in United States industry, and have recommended that more attention be devoted to this matter in their own countries. The British
lithographic printing team, for example, reported that—
1

Cf. p. 143 below.

ORGANISATION AND CONTROL OF PRODUCTION

A system for scheduling production and control of the work-flow
is a development which pays for itself in better use of man-power and
equipment, simplification of overseers' duties, better understanding of
the job by the workers, prevention of over-manning, reduction of overtime and of rush work. It is impossible to work out a system in the
abstract because it must be built on operating conditions in individual
factories; once formed it will require continual adjustment. . . .
Recommended that production control systems be studied and
developed, bearing in mind that:
(a) Control techniques must return in increased efficiency more
than their cost of installation and operation.
(b) Rigid control systems will not generally work well. Responsible operating personnel must be ready to make adjustments to meet
changes in the day-to-day situation. 1
Methods of planning used in sections of the United States
electrical manufacturing industry are described as follows in the
report of another British team:
In order to plan in outline their manufacturing programme some
months ahead, most of the concerns visited rely on statistics based on
sales forecasts for each of the many classes of product they may manufacture. The forecasts are prepared by the appropriate sales divisions
and related to past experience and the productive capacity of the
manufacturing departments.
The planned production levels for each class of product for the given
period ahead are compared with the corresponding levels of the period
just completed and expressed as ratios by which to vary the re-ordering
levels of components, sub-assemblies and finished stock. The levels
are also used to indicate a suitable policy on labour recruitment, labour
transfers and redundancy.
As to more detailed production planning, it is common practice to
keep an up-to-date record of the load of work outstanding in each
assembly section for the purpose of reviewing promised completion
dates and plant and labour distribution. . . . a
Important as it is to plan and control production, some systems
of production control appear, however, to be unnecessarily complicated and expensive. It is desirable that the number of forms
and records be kept to a minimum, and that as little clerical work
as possible be called for from foremen, so t h a t they can concentrate
on production.
Where a production planning department exists, its relations
with line superintendents and foremen sometimes give rise to
friction. Such difficulties may be reduced by a clear definition of
responsibilities, and by ensuring that production planning personnel have not only adequate technical knowledge but ample
1
2

A.A.C.P.: Lithographic Printing (London, 1951), p . 20.
I d e m : Electric Motor Control Gear (London, 1950), p . 34.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

experience of the practical problems t h a t arise in the day-to-day
operation of a factory. If foremen and supervisors are relieved
of all responsibility for planning, and are left with no other function
than t o supervise the execution of plans laid down for them, not
only may production plans prove to be too rigid to meet unforeseen
circumstances b u t the status and responsibilities of foremen and
supervisors may suffer and they may have difficulty in getting the
best work out of those working under them. The British Institute
of Management has recommended t h a t " the foreman . . . be
left with flexibility of method so as to get the best out of his shops ",1
While there must be adequate control, so t h a t those in responsible positions know what is going on, a general danger associated with undue reliance upon rules and controls, not merely in
the field of production planning but in all fields of management and
administration, is indicated by W. F. Whyte in the following
words :
There seems to be a tendency in some organisations to seek to get
results from the establishment of an elaborate set of controls. Men
in the organisational hierarchy devise detailed directives and reporting
systems, while specialised functionaries are provided to check up on
performance and enforce the rules. This emphasis upon controls and
rules leads people in subordinate positions to spend a large part of
their time in giving the appearance of conforming to rules and directives,
and avoiding censure of their superiors. It takes attention away from
the production problems the manager faces in his immediate working
environment. The executive who can shift the emphasis off controls
toward the means of developing co-operative relations will thereby
enable people down the line to do a more effective production job. 8

COSTING AND BUDGETARY CONTROL

A number of productivity teams have emphasised the importance of the contribution that cost accounting can make to the
efficiency of management, particularly if costs are compared at
regular intervals not merely with the past b u t with budget forecasts based upon standards of performance. Such comparisons
show up failings and shortcomings, suggest action t h a t m a y be
taken to correct them, and afford important guidance in planning
for the future. The British management accounting productivity
team recommended that " management, in considering the future
1

B R I T I S H I N S T I T U T E OF M A N A G E M E N T : Production

Control

in the

Small

Factory (London, 1951), p . 8.
2
W . F . W H Y T E : " O r g a n i s a t i o n a n d Motivation of M a n a g e m e n t " , in
Industrial Productivity,
o p . cit., p . 108.

ORGANISATION AND CONTROL OF PRODUCTION

and preparing plans, should make the fullest use of budgeting and
forecasting, based on accounting and costing data "- 1
Costing and budgetary control may also facilitate the delegation
of authority and responsibility. If targets can be set in respect
of work under the charge of subordinate members of the management team, and if performance can be regularly compared with
the targets, higher management may more confidently leave
routine matters to subordinates, intervening only if something
goes wrong. Another recommendation of the British management
accounting productivity team was that—
. . . top management should make use of standards of performance
and of accounting control techniques to enable it to decentralize responsibility, and that all standards of performance should be agreed
with those who are to work them. 1
Costing may also serve to promote " cost consciousness " at all
levels of the undertaking. In United States plants visited by the
British drop-forging productivity team—
The man in the shop was frequently informed of the cost of the tools
he was using and of the running overheads of his machine, so that he
took an interest in trying out new ideas to reduce costs. Moreover he
realized that the difference between his piece rates and the selling
prices of the forgings was not all profit to the company. . . . 2
Accurate cost accounting, if it is reflected in selling prices, may
also serve to discourage special orders when a closely similar
product is available, and to concentrate demand upon a narrower
range of types and varieties.
Yet another, though incidental, advantage of cost accounting
is that suitable systems can often be extended at little expense to
yield measurements of labour productivity. The output figures
required for productivity statistics can in many cases be arrived
at automatically by suitable arrangements of the cost accounts;
man-hour figures can be obtained as a by-product of the pay-roll
analysis required for the cost accounts. 3
In United States industry in general, the financial accounting
and costing functions are strongly represented at top executive
level.
The main differences between cost accounting in America and
Europe lie not in the accounting techniques but in the purpose for
1

Management Accounting, op. cit., p . 16.
Drop-Forging,
op. cit., p. 46.
3
Cf. A.A.C.P. : Productivity
Measurement
1950), p . 25.
3

in British

Industry

(London,

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

which cost accounting is used, the extent to "which standards and
budgets are used and the widespread demand of management for cost
accounting services to meet its need.1
Both managements and accountants realise that the primary
purpose of accounting and costing should be to guide management
in planning for the future. The interpretative function of accounting has accordingly been developed to a high level and the purely
recording function relegated to a subordinate position. 2 This is
reflected in the evolution, characteristic of United States industry
but not as yet of European industry, of the office of controller, to
whom the ciief accountant is subordinate, and who is responsible
not only for the speedy and accurate production of cost reports
and financial statements but for the interpretation of these figures.
The controller's department is looked upon as an essential service
to p r o d u c t i o n . . . . From top management to foremen and chargehands there is little fear of figures and there is a marked ability to
absorb information from tabular or graphical form. . . . Each man
is expected to do his job and to meet his budget, or else have a very
good explanation. . . . The actual techniques used to obtain the
accounting and costing information are not new, but the application of
the technical principles and the speed and service which the controller
gives to the management are outstanding and impressive.8
The O.E.E.C. report which has already been quoted recommended that in Europe the conception of controllership should be
encouraged.
A costing system, like many other techniques to aid management, is a good servant but a bad master. Too much form-filling
and paper work, resulting in the provision of cost figures too
detailed to be readily digested and acted upon, may be as bad as
no costing. This is a danger to which some productivity teams
have drawn attention. 4 A relatively small number of concise
routine cost reports, supplemented from time to time as occasion
may demand, by special investigations into other aspects of costs,
are likely to meet the requirements of management better than
voluminous and detailed statements produced as a matter of
routine.
The requirements of different levels of management are of
course different, senior management being more concerned with
1
O . E . E . C : Cost Accounting
and Productivity.
Cost Accounting in the U.S.A. (Paris, 1952), p . 77.
2

Cf.

ASSOCIATION

FRANÇAISE

POUR

The Use and Practice of

L'ACCROISSEMENT

PRODUC-

TIVITÉ : La comptabilité—Mesure
et facteur de productivité, r e p o r t of a F r e n c h
mission of acccunting experts in the United States (Paris, 1952).
3
Management Accounting,
op. cit., p p . 10, 11 and 15.
4
Cf., for example, Diesel Locomotives, op. cit., p . 3 1 .

ORGANISATION AND CONTBOL OF PRODUCTION

forecasting, planning for the future and setting targets, and other
levels more with day-to-day action. In reporting to the different
levels of management, there are advantages in conveying information regarding costs in terms of the units which are most significant
for the particular levels concerned. In reports designed for foremen, for example, cost information may be expressed in units of
time or materials rather than money.
SIMPLIFICATION, STANDARDISATION AND SPECIALISATION

Very important economies of operation can often be achieved
by cutting down the range and variety of articles produced. As
has already been said, the scope for taking advantage of these
economies will depend in large measure upon the size and nature
ot the market, and any action that can be taken to enlarge the
market and to reduce the variety demanded will help. But within
any given market situation it may still be true that opportunities
for simplification, standardisation and specialisation are not being
fully exploited.
The terms " simplification ", " standardisation " and " specialisation " are often used to mean much the same thing; although
distinct, the three concepts are in fact closely related. The
following definitions may be quoted:
Simplification is the deliberate reduction of variety of manufacture,
whether of component or end-product. Specialisation denotes the
concentration of a factory or production unit on a very narrow range of
products—the consequence of simplification pressed to the limit.
Standardisation, a term often used as an alternative to simplification,
is here taken to mean organised agreement upon and definition of
performance, quality, composition, dimensions, method of manufacture
or testing of a product. For example, if a motor-car manufacturer
were to decide to reduce his range of models from, say, ten to three, that
would be simplification. The decision to make certain parts of the
cars common and interchangeable would be standardisation. The
supplier of sparking plugs would probably be making only that one
product, and that would be specialisation.1
The process of simplification will thus necessarily involve greater
specialisation in production, in the sense of concentration upon the
production of a narrower range of products. It may or may not
be associated with the definition and application of standards.
But after simplification has been carried out there is often an
1
The Economist, 29 Dec. 1951, pp. 1593-1594. These definitions are
identical in content with those used in Simplification in Industry, op. cit.,
p. 2.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

opportunity for the standardisation of the resultant range. Conversely, when standardisation of products is being considered it may
become evident t h a t some degree of simplification is needed.
The advantages which may be derived from reduction in
variety have been summarised as follows i1
To
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

the producer:
Longer runs with fewer changes on the production line.
Reduced tooling and set-up time.
Possibilities of increased mechanisation and special-purpose plant.
Easier training of operatives.
Simpler and cheaper inspection.
Less capital invested in idle plant, tools and space.
Reduction of stocks of materials, components, and end-products.
Reduced call on drawing office and design staff for special orders,
leaving them free for work on new designs or improvements.
Simpler clerical and administrative work.
Easier service and maintenance.
Concentration of sales and advertising effort on a narrower range.
And, hence, increased productivity, leading to reduction in costs
and prices and to increased sales.

To the user:
1. Lower price for a given quality or performance.
2. Reduced variety and level of stocks at all distribution points.
3. Readier availability.
4. Improved service and maintenance facilities.
The British productivity team which studied simplification in
American industry came to the following conclusions:
As a result of our visit to the United States we are convinced that
one of the main reasons for the high productivity and low cost which are
characteristics of industry there is the ruthless elimination of unnecessary
variety and the resultant concentration of manufacturing resources.
Simplification and standardisation have been developed by some
sections of industry and by some individual firms in the United Kingdom.
We believe that those who have done most will be the first to assert that
much more can and should be done.
No doubt there are a few industries in which the scope for simplification and standardisation is small, but we are satisfied that such are the
exceptions rather than the rule. For British industry in general we are
convinced thcit there is great scope for raising productivity and lowering
1

Simplification in Industry, op. cit., p. 1. See also: MUTUAL SECURITY
(formerly E.G.A.), Productivity and Technical Assistance Division:
Increasing Productivity thru Simplification, Standardization, Specialization
(Washington 25, D.C., revised Nov. 1951).

AGENCY

ORGANISATION AND CONTROL OF PRODUCTION

costs by more general adoption of the policies which have proved so
successful in the United States. 1
In a later report the same team stated that subsequent discussions with representatives of British industry had strengthened
their conviction that " simplification is one of the main means of
raising productivity and lowering cost ". 2
The following examples of gains in productivity achieved in
various branches of United States and British industry as a
result of reduction in variety are quoted from reports of the AngloAmerican Council on Productivity.
A prominent manufacturer of radio . . . receiving sets . . . had
in pre-war times listed 160 models, some of which were produced in as
low a quantity as 2,000 spread over six months, and an order for 50,000
was considered very large. Consequently a constant change of factory
and work layout was necessary, with repeated rearrangements in training
procedure and inevitable administrative complications. The post-war
policy had been to concentrate production on some 15 models, of
which five used the same chassis in different cabinets. This made
possible the production of a better receiver at the pre-war price level in
spite of great increases in material and labour costs. Uninterrupted
production runs of 250,000 for a single type were now usual. . . .
At one of the largest plants manufacturing diesel-electric locomotives,
we were shown once more the advantages conferred by drastic simplification in design and types. During the years 1939 to 1945 material costs
in the plant had increased by 41 per cent, and labour costs by 111 per
cent., but savings gained on the production line had balanced the
increases and the cost of the finished article had not risen. By 1949
material costs were some 110 per cent, above those of 10 years earlier,
while price to the user had risen by less than 25 per cent. The management expressed the conviction that simplification had been a prime factor
in keeping down the final selling p r i c e s . . . .
In the production of domestic irons [a] company had, before the
Second World War, 19 types, some of which were listed merely to have
an article competing with a similar type produced by some other maker.
In the post-war programme there were four varieties using only two
types of sole plate, thermostat and shell. The effect had been to keep
the post-war price down to 14 per cent, over the pre-war level, though
material costs had doubled and wages rates had risen by two-thirds.
As a result total sales had doubled and the length of run of each type
had considerably increased. Many operations which previously had
been carried out by hand could now be mechanised because of the larger
quantities produced. The range of electric fans had been reduced
from 250 in 1940 to some 50 in 1948, and it was intended to reduce this
number much further. It was estimated that the full effect of the
simplification programme would reduce direct labour costs by one-half
and indirect labour costs by two-thirds.3
1
2
3

Simplification
in Industry, op. cit., p. 11.
A.A.G.P.: Simplification
in British Industry (London, 1950), p . 1.
Simplification
in Industry, op. cit., p p . 6-8.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

The above examples are taken from the United States. Similar
advantages have been obtained in the United Kingdom. The
following is a striking example:
One of the largest manufacturers of gas cookers has recently made
a drastic simplification of the range of cookers produced, with dramatic
effect upon production costs and wages. The range of cookers has
been reduced from 33 different types, sizes and finishes to one type only
in a single finish, with four hot-plate arrangements as the only variants.
Such striking concentration has an important bearing on costs and prices
and the company is now able to produce and sell this model 32 per cent.
below the price of a cooker of similar size and finish previously manufactured. This has been achieved in spite of a general tendency for
prices to harden. . . . At the same time the average earnings of
individual workers have risen by as much as 15 per cent, largely through
better concentration of effort and reduction of the number of changes of
work. . . . The over-all production of cookers has risen by 165 per
cent., while the number of employees has risen by less than 32 per cent.1
According to another report—
. . . where clothing companies in Britain have concentrated on a
limited range of designs they have gained in productive output. As a
result of simplification, stream-lined production methods and layouts
become workable and clearly advantageous. 2
The Executive Committee of the German Federation of Trade
Unions considers a drastic reduction in the range of types of goods
produced to be the most important measure of rationalisation in
Western Germany. 3 In Eastern European countries—for example
in the engineering industry in Czechoslovakia 4 —standardisation
of products appears to have been used to a notable extent to
improve the productivity of labour.
In a Dutch report the following examples of potential economies
from simplification and standardisation are given. In the Netherlands and some other countries paint is sold by weight. Since the
specific gravity of various kinds of paint is different, cans must be
produced in a great number of sizes. If agreement could be
reached to sell the product by volume, considerable savings could
be made in the production as well as the storage of cans. Substantial savings could also be made if the system of measures for readymade clothes were standardised so t h a t final alterations would no
1
2
3

Simplification in British Industry, op. cit., pp. 11 and 12.
A Review of Productivity in the Clothing Industry, op. cit., p. 12.
Hans VOM: HOFF: Die gewerkschaftlichen Aufgaben in der Wirtschaft,
document for the Second Ordinary Congress of the German Federation of
Trade Unions (1952), p. 16.
4
Cf. UNITED NATIONS, Economic Commission for Europe: Economic
Survey of Europe since the War, document 1953.U.E.4 (Geneva, 1953), p. 202.

ORGANISATION AND CONTROL OF PRODUCTION

longer be required on the present scale. In the public sector
savings could be made if the transport companies of various
municipalities ordered a standardised type of motor bus and if
dustbins were standardised. Great importance attaches also to
standardisation in the construction of dwellings. The report
stated that the Government was attempting to promote standardisation in all these and other cases.1
The United States automobile industry affords excellent
examples of economies resulting from simplification, standardisation and specialisation. In the European motor industry, too,
much progress has been made since before the war, both in simplifying and standardising components and in reducing the variety
of models. It has, however, been asked whether the European
motor industry is sufficiently specialised in view of the long and
growing lead of the United States ; and the view has been expressed
that—
It seems likely in the long run that Europe will not be able to meet
United States competition in the field of large standard cars, nor will she
be able easily to compete effectively in her own particular field, that
of small and medium-sized cars, if so many types continue to be produced ;
if, in fact, there is not more specialisation between plants and thus
between countries.2
A more recent study has suggested that great economies in
production and a big increase in the demand for European motor
vehicles might be expected to follow a policy of concentrating
production primarily on three types of passenger motors, namely:
a really small, cheap popular car; a larger, more rugged vehicle,
also simple and economical to run, and capable of tackling primitive
roads; and a large, mass-produced car, directly competitive with
the standard American car in the Chevrolet or even the Buick
category. It is not suggested that three such models should be
produced at the expense of sacrificing the whole existing range of
European models, but that such a policy could be successful only if a
radical reduction were made in the number of other types produced.3
The extent to which advantage can and should be taken of
the economies resulting from simplification and standardisation,
which make mass production methods possible, varies of course
from country to country and from one branch of industry to
1
2

De Productivités in Nederland, op. cit., pp. 39-40.
UNITED NATIONS, Economic Commission for Europe: A General Survey
of the European Engineering Industry, roneoed document E/EGE/125,
E/ECE/IM/56 (Geneva, 1951), p. 106.
B
Idem : The European Steel Industry and the Wide-Strip Mill, document
1953.II.E.6 (Geneva, 1953), p. 59.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

another. These methods are probably least applicable to the
circumstances of a country such as Switzerland which, with a small
population and poor natural resources, must produce largely for
export and must meet the individual requirements of a large
number of different export markets. The Swiss engineering
industry, for example, has achieved and maintained a reputation
second to none, and continues to meet the competition of industries
much more favourably situated, by concentrating on high quality
rather than on low cost, and by seeking to manufacture products
which are preferred by customers because of their particular
properties and advantages. In other countries, too, certain firms
find continued scope for their policy of seeking out pockets of
demand for high-quality goods of a specialised character. The
demand for such goods is, however, limited.
Many of the difficulties of taking advantage of the economies
of simplification, standardisation and specialisation arise from the
fact that consumers want, or are believed to want, variety. This
may make it risky to put all one's eggs in one basket. A firm which
concentrates on the production of one product or a narrow range
of products to the exclusion of all else, and whose equipment is
designed for this sole purpose, may purchase technical efficiency
at the cost of loss of flexibility and adaptability to changes in
tastes or market conditions. A production policy that would give
the best results in a perfectly stable and assured market may not
give the best results in the conditions of uncertainty actually
prevailing.
Much depends upon the nature of the product concerned and
on the demand for it. For many goods, especially consumers'
goods, there are excellent reasons for demanding wide variety.
However, it ¡should be remembered first that, especially in a large
national market, specialisation and standardisation in production
are not incompatible with the maintenance of a wide variety for
consumers, for different undertakings may specialise in the production of different varieties. Secondly, a single undertaking, even
without narrowing the range of its end-products, may yet find scope
for considerably increased simplification and standardisation of
components, equipment and processes. Thirdly, producers might
often find it worth while to devote special sales efforts to persuading
customers not merely to buy more but also to concentrate their
demand on a narrower range of products.1
i Cf. p p . 96-97 below.

ORGANISATION AND CONTROL OF PRODUCTION

DESIGN

Technical problems of design, which vary enormously from
one branch of industry to another, are outside the scope of
this report, but it goes without saying that designers may make
an important contribution to higher productivity. Simplification
of design figures among the steps recently taken to increase
productivity by firms in a number of industries.
No less important than the purely technical problems of design
are the administrative problems of ensuring close co-operation
between the sales, design and production departments. It is for
the sales department to assess the range of consumers' requirements in the field in which the firm competes or intends to compete ;
and it is the job of the designers, in close collaboration with the
production department, to cover that range with the fewest possible
models. Since production difficulties can often be greatly reduced
by design which takes account of shop problems from the beginning,
it seems desirable, wherever possible, that a production engineer
should be attached to the design office in an advisory or liaison
capacity.
It is essential to concentrate upon the essentials, and to resist any
compromise upon them, but to be ready to sacrifice every element
of
design which is inessential in order to conform to standards.1
It is also important that design and planning staff should be
kept informed of the cost of the various equipment and materials
used, so that they may be better able to devise the most economical
methods and tool designs.
There may sometimes be scope for closer co-operation with
users when products are being designed. Such co-operation may
often result in modifications in design which reduce costs and
prices. Close co-operation with users is perhaps especially important in designing machine tools, and in some countries it may
be that more machine-tool designers should visit user factories and
find out at first hand what problems are encountered in running
the machines.
Finally, just as in a well-run plant there are target dates for
production stages, so there should be target dates for design and
pre-production stages.
1

Steel Founding,

op. cit., p . 39.

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

WORK STUDY

Work study, as it has been developed in certain countries,
comprises two complementary techniques, namely: (a) method
study (the detailed analysis of present or proposed methods of
production); and (b) work measurement (the detailed assessment
of the work content of a defined task). Both techniques can make
important contributions to higher productivity.1 Method study
can lead to improvements in the layout of factories and workplaces and in the design of equipment, to a better working environment, simplification of work and reduction in fatigue, and can
thus result in better utilisation of materials, equipment and
manpower. Work measurement can lead to improved planning and
control of production and to more efficient manning of plant; can
provide indices of labour performance ; and can serve as a basis for
control of labour costs and, in appropriate conditions, for systems
of payment by results.
The basic procedure of method study has been analysed as
follows 2 :
select the work to be studied;
record all the relevant facts of the present (or proposed) method;
examine those facts critically and in ordered sequence;
develop the most practical, economic and effective method, having
regard to all contingent circumstances;
install that method as standard practice; and
maintain that standard practice by regular routine checks.
Work measurement follows on from method study. It is
obviously a waste of time to measure the work content of a job
until one is certain that the method is satisfactory, unless the work
content is a major factor in determining the method.
1
In a recent report on progress in the cotton spinning and doubling
industries in the United Kingdom, it is stated that the Cotton Board and the
technical colleges have done invaluable service in teaching the application
of work study methods; the number of mills using these methods has risen
from 84 in 1949 to 141 in 1952 and now represents about 30 per cent, of the
total. In one mill work study is reported to have led to an increase of 30 percent. in productivity in the card room and the ring room, with a decrease of
14 per cent, in carding costs and 10 per cent, in spinning costs. Cf. A.A.C.P.:
Cotton Faces the Future (London, 1952). The British clothing industry, too,
is making greater use of work study techniques. The Clothing Development
Council has organised a work study course, with very successful results, to
provide intensive training for works managers and factory managers in the
industry. (Cf. A Review of Productivity in the Clothing Industry, op. cit., p. 9.)
2

BRITISH INSTITUTE or MANAGEMENT: Work Study, Production Manage-

ment Series, No. 2 (London, 1951), p. 13.

ORGANISATION AND CONTROL OF PRODUCTION

It is unfortunate that many people have come to believe that the
sole object of Work Measurement is to provide a basis for incentive
schemes. It is true that Work Measurement forms the best known basis
for financial incentive schemes, but the first objective of Work Measurement is the more efficient manning of plant and the improvement of
planning and control. This has become increasingly the practice in
the United States. 1
Ways in which work measurement may contribute to more
efficient production are indicated in the following passage by a
German writer:
The analysis of job content used for the purpose of job evaluation
may also lead to improvements in and rationalisation of production.
Jobs which are found to require great physical efforts may be simplified
or slightly changed so that less effort is required and higher performances
attained. Jobs which are found to require a high degree of skill and a
great deal of training may in certain conditions be mechanised or
simplified so that valuable craftsmanship becomes available for other
tasks. 2
The basic technique of work measurement is time study.
If the proper procedure for Time Study . . . is followed strictly,
few difficulties should arise in its application to repetitive work. Unfortunately a technique is one thing and the way it is applied is another;
consequently Time Study has in some instances earned itself a bad
name, due entirely to the slipshod and sometimes dishonest manner in
which it has been applied. Time Studies cannot be made in a hurry. . . .
The keys to satisfactory Time Studies are thoroughness, patience and
honesty—thoroughness in taking every contingency into account, patience
in carrying out long studies and honesty in the handling of results.3
Time study is limited in the main to repetitive work; other
means have to be found for determining the work content of nonrepetitive work. These include the techniques of " synthesis from
elemental data " and " analytical estimating ". These techniques
are described in the British Institute of Management publication
from which the above quotations are taken.
1
Work Studi/, op. cit., p. 11. Cf. also Internal Combustion Engines, op.
cit., p. 10: " The principle of standard work measurement is one of the most
important tools of American management. The performance of each worker,
whether on piece-work or day work, and whether working alone or in a group,
is compared daily with the standard time allowed for the job. Failure to make
standard time immediately shows up defective tools, deviation from correct
methods, defective material, etc. Some plants divide such causes into
three categories: man, machine or material."
2
Josef WIBBE: Entwicklung, Verfahren und Probleme der Arbeitsbewertung
(Munich,
1953), p. 120.
3
Work Study, op. cit., p. 17. For a good account of the kinds of grievance
that most commonly arise from the incorrect use of work measurement
techniques see Samuel G. YULKE : " Incentive and Work Standard Grievances ",
in Production Policies for Increased Output, Production Series, No. 169
(New York, American Management Association, 1947), pp. 27-36.
7

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Difficulties in.the way of making the best use of work study
techniques in industry are partly economic, partly technical and
partly psychological.
First, thorough work study may be a somewhat costly matter,
and manufacturers may not be convinced that the results will
justify the outlay. Another difficulty which is at least partly
economic is that in most countries, especially underdeveloped
countries, persons with the qualifications necessary for undertaking
work study are not available in sufficient numbers. Technical
assistance to underdeveloped countries and special training
programmes may go some way towards meeting this difficulty.1
Secondly, it cannot be claimed that the technical problems
encountered in work study, and especially in work measurement,
have all been satisfactorily solved.2 Time study is the most
satisfactory method of work measurement, but even time study is
by no means a perfectly objective technique for measuring the
work content of a job. There are subjective elements in the
rating of individual workers and also in the fatigue and other
allowances included in the standard time. Two different time
study engineers may reach different results on the basis of the
observation

of identical

workers

under

identical

conditions.

Results may differ still more if they are based on observations
of different workers. It is claimed, however, that suitable training
for time study engineers makes it possible to reduce such differences
to narrow margins.
For a proper appreciation of the limitations and the usefulness
of work measurement, further research, and a widespread comparison and testing of standards arrived at by different engineers and
by different procedures are needed. Such research is continuously
proceeding, and it is to be expected that, even though perfectly
objective techniques for measuring the work content of a job may
never be found, further progress will be made in overcoming
technical difficulties. Already, provided it is carried out with a
proper awareness of its limitations, time study is an exceedingly
useful technique and can be expected to become increasingly
useful in the future.
Even more important than the economic and technical difficulties in the way of making the best use of work study are the
1
2

See pp. 130-132 below.
See, for example, T. A. RYAN: "Fatigue and Effort in Relation to
Standards of Performance and Systems of Payment ", in International Labour
Review, Vol. LXV, No. 1, Jan. 1952, pp. 44-63.

ORGANISATION AND CONTROL OF PRODUCTION

psychological difficulties. These can, however, more appropriately be discussed in the next chapter.
PRICE POLICY AND SALESMANSHIP

It has been said that many of the factors affecting industrial
productivity—for example, the amount of capital per worker, the
size of plants, the scope for simplification and standardisation, and
the degree of utilisation of capacity—are themselves largely
influenced by the size and nature of the market. This is not to
say, however, that they are wholly determined by market factors.
Even in prevailing market conditions there may often be opportunities for increasing productivity by installing additional capital
equipment, enlarging the scale of operations, maintaining more
regular work schedules, or reducing the variety of products.
More important, perhaps, is the fact that no enterprising establishment is content to accept the size and nature of its market as
unalterable. The size of a market depends partly upon the prices
at which goods are sold. It is an interesting question how far the
high degree of mechanisation and specialisation in United States
industry is a consequence and how far it is a cause of the large size
of the United States market. The history of the United States
automobile industry affords a classic illustration of how, if goods
can be placed on the market more cheaply, new sources of demand
may be tapped, and of how this in turn may enable production to
take place in greater volume, with attendant economies due to
greater machine utilisation, longer runs and more effective use of
labour. Less study appears to have been given to the question of
how specialisation has developed in the United States than to the
ways in which it is applied.
The size of the market for a firm or an industry depends not
only on price but also on salesmanship; and salesmanship and
marketing techniques undoubtedly have a very important part to
play in increasing productivity. It is frequently possible to persuade customers not merely to buy more but to concentrate their
demand on a narrower range of products. The authors of the
report on simplification in industry already cited stress the importance of market surveys in helping producers to reduce variety
without sacrificing goodwill. They do not believe that simplification means inadequate choice for the consumer. They point out
that greater concentration by a given producer on a narrower range
of types need not imply less total variety. Each producer is free

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

to decide his own selection of products, and the existence of a
sufficient demand for a particular article will ensure its supply.
We found no reason to suppose that the consumer in the United
States is opposed to the policy of simplification. On the contrary, we
believe that the consumer appreciates and expects
the advantages of
lower cost and greater availability so obtained.1
They found no evidence either for the belief that quantity
production lowers quality—rather the reverse.
The report on simplification in British industry refers to the
fact that salesmen frequently press for additional lines as a means
of expanding sales, with the result that the sales and production
departments pull in opposite directions. This genuine difficulty
can be solved, the report suggests, only if the integration of sales
and production policies becomes more generally a major concern
of top management.
The authors of these reports believe that much needless variety
is encouraged by inaccurate costing and that more accuracy in this
respect, reflected in selling prices, would provide a most powerful
stimulus towards eliminating superfluity. They commend the
policy, apparently more common in the United States than in the
United Kingdom, of discouraging special orders by means of stiff
price differentials. Other productivity teams, too, considered
that more use might be made of price differentials to attract large
orders.2 Other incentives besides price differentials, such as
rapid delivery, efficient servicing and availability of spare parts,
may be offered to induce customers to accept standard lines.
The task of persuading customers to abandon irrational preferences for variety and to concentrate their demand upon a
standard range of products is of course more difficult for a firm
or industry producing largely for export than for firms producing
predominantly for home consumption ; and it may well be impossible
to simplify and standardise production to the same degree in the
former case as in the latter. The greater relative importance of
production for export in the United Kingdom, Switzerland and
many other European countries is undoubtedly one of the reasons
why, in many fields, the process of simplification has gone less
far than in the United States. While production for export must
take account of the varying requirements of different export
markets there may, however, still be scope for giving foreign
1

Simplification
in Industry, op. cit., p . 9.
2 Cf., for example, Steel Founding, o p . cit., p . 39.

ORGANISATION AND CONTROL OF PRODUCTION

buyers substantial incentives to accept standard lines, and for
salesmanship to persuade them to do so. It is claimed that—
. . . Education of the consumer to accept a restricted range of
products, though a very difficult task, is worth while. It is generally
agreed that in many fields there is opportunity for further progress.1
There may also be scope for increasing productivity by persuading customers, by means of salesmanship and financial
incentives, to smooth out seasonal fluctuations in demand which
prevent the maximum utilisation of capacity.

1
Simplification in British Industry, op. cit., p. 7. Mr. James Silberman,
of the United States Bureau of Labor Statistics, is reported to have said,
after visiting 120 French industrial establishments, that " the problem of
' educating the customer ' remains to be tackled from the beginning in France.
In Europe ' educating the customer ' is unknown. In the United States
this is done; it is difficult, but the results already obtained justify the efforts
needed. " (Quoted in L'Usine nouvelle, Year 6, No. 46, 16 Nov. 1950, p. 21.)

CHAPTER VI
PERSONNEL POLICY
This chapter discusses various matters concerning labour and
its utilisation, including labour-management co-operation, employment policy, selection and placement, vocational training, upgrading and promotion, supervision, work study and work simplification, the servicing of skilled workers, wage policy, hours of
work, the number of shifts, working conditions and welfare facilities, industrial safety and health, absenteeism and labour turnover.
The successful application in an undertaking of policies in
these matters making for the highest attainable levels of productivity does not depend only upon the " psychological climate "—the
general attitude of management and workers. It depends also,
and more specifically, upon those who are responsible for personnel
administration and personnel relations in the undertaking. In a
small shop the individual employer can deal directly with his
employees ; but with the growing size and complexity of industrial
undertakings, personnel services or departments become necessary
for dealing with a variety of matters within the framework of
the general policy of the management.
In many countries there is an evident need for qualified personnel officers who are equipped by training and experience to
advise in the formation of the personnel policy of an undertaking,
to secure understanding and application of that policy at all
levels of the organisation and to be responsible for the appropriate
executive duties arising therefrom. In large-scale undertakings
the organisation of a personnel service or department, staffed by
full-time employees trained and specialised in personnel matters,
merits careful attention.
Specific problems of personnel administration are discussed as
they arise in connection with the various matters dealt with in
this chapter. Here it will suffice to make one general point. The
importance of a clear definition of functions and responsibilities
is nowhere greater than in the relations between the personnel
service or department and other departments in the undertaking.

PERSONNEL POLICY

The definition of responsibilities, and day-to-day working relations with other departments, should be such as to enable the
personnel service or department to exercise fully its responsibilities
concerning working conditions, employment procedures, welfare
services and other personnel questions.
LABOUR-MANAGEMENT CO-OPERATION X

It is generally agreed that efforts to promote higher productivity
in an undertaking will make little headway without the co-operation
of workers.
Various steps may be taken to elicit such co-operation. The
least far-reaching of these steps is that workers and their representatives should be given adequate information about the firm
and especially about any changes that the management proposes
to introduce, and that the reasons for such changes should be
explained. A variety of media of communication are available,
including informal personal contacts, meetings, charts, display
posters, house magazines, booklets, pamphlets and letters; many
companies have found foremen and union representatives to be
the most effective means of communication for most purposes,
since they can provide the least artificial and the most informal
and personal channels.
One-way communication, however, suffers from the disadvantages that information provided is not always understood
unless it is discussed and misunderstandings are cleared up, and
secondly that the workers are merely informed of what is going
on without being given any opportunity to formulate views and
comments. There is a growing realisation that channels of communication, if they are to serve their purpose effectively, must
carry two-way traffic, orders and explanations going down the
ranks while information, grievances and opinions come back by
some agreed procedure. Only in this way can the individual
worker be made to feel that he counts.
How to get effective two-way communication is a problem
that each undertaking must solve in the light of its own particular circumstances. Often no new machinery will need to be
1
See Co-operation in Industry, op. cit., which contains an extensive
bibliography. Also Human Relations in Metal Working Plants, op. cit.; and
E. DAYA: " Human Relations in Industry", in International Labour Review,
Vol. LXV, No. 5, May 1952, pp. 578-599.

100

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

created. Special machinery for labour-management co-operation
is not widespread in the United States 1, but the various productivity-team reports give the impression that in most branches of
United States industry there are effective two-way communications and a good deal of freedom of expression through the unions
and through informal personal contacts at all levels. The British
Cotton Spinning team, for example, reported that—
The principle is widely accepted that every employee is entitled
to know what the firm is doing, why the firm is doing it and how the
firm is doing it. . . . Various ways are adopted to meet this requirement. . . . In nearly every mill we visited, however, some definite
provision is made for the natural desire of the worker to know what
is going on. The management believes that this makes for better
work and a greater feeling of responsibility.2
Individual workers can be given further opportunities for
self-expression and participation by means of suggestion schemes.
Schemes under which workers are encouraged to make suggestions and are rewarded for valuable ones are widely applied
in United States industries and are coming to be more widely
adopted elsewhere. They play an important part, for example, in
the current programme for raising productivity in French foundries, and have been adopted in most establishments in the French
electrical construction industry, where they are reported to have
led in certain cases to very original solutions. 3
Suggestion schemes are also widespread in Germany and
Switzerland.* A German writer has suggested the following principles for a successful suggestion scheme: show examples of
significant improvements in productivity through better work
methods; remember the importance which the worker attaches
to his own suggestions and reply immediately after he sends them
in; have a joint committee judge the ideas and, when they are
found acceptable, fix the reward; hand the reward to the
1
See E. DALE : Greater Productivity through Labor-Management Cooperation (New York, American Management Association, 1949); and
P. W A H N E : Les syndicats aux Etats-Unis, Cahiers de la Fondation nationale
des sciences politiques, No. 22 (Paris, Armand Colin, 1951), pp. 144-145.
2
A.A.C.P.: Cotton Spinning (London, 1950), p. 16.
3

ASSOCIATION FRANÇAISE POUR L'ACCROISSEMENT DE LA PRODUCTIVITÉ:

La productivité en action dans la construction électrique (Paris, 1951), pp. 9
and 11 ff.
4
For an account of experience in the Robert Bosch Works see " Mitdenken
lohnt sich ", in Bosch-Zünder (published by Robert Bosch G.m.b.H.), March,
1950, pp. 37 ff. Cf. also Werner PETER: Das Vorschlagswesen (Berne, 1946).
Both cited in L. H. Adolph GECK: Soziale Betriebsführung (Essen, W. Girardet,
2nd ed., 1952), p. 224.

PERSONNEL POLICY

101

worker with some ceremony and give wide publicity to sucessful
suggestions.1
Where industrial relations are bad, workers may be deterred
from putting forward suggestions because they do not wish to
be regarded as trying to curry favour with the management, or
there may be a poor response as a result of general apathy, or
suggestion boxes may become receptacles for more or less trivial
grievances. Like other devices for labour-management co-operation,
suggestion schemes work well in the right atmosphere and badly
in the wrong one. Rewards for suggestions which save considerable
sums of money should be sustantial and, in the case of suggestions
which are rejected, it is important to take the trouble to explain
why they cannot be adopted. It is reported that in certain French
foundries it has been agreed that small rewards will be paid for
any serious suggestions even if they cannot be adopted.
Another form of worker participation to which growing attention has been given in recent years is that workers' representatives
may be given the opportunity to participate in the technical
processes of time and motion study and rate fixing.2
The kinds of co-operation thus far discussed do not necessarily
require the setting up of formal joint machinery. The establishment of such machinery may however be the best way of ensuring
regular two-way communications, handling suggestion schemes
and developing other forms of co-operation. In many countries
there has been in recent years a remarkable growth of special
machinery—works committees or councils, joint production committees, labour-management committees, etc.—for consultation
and co-operation between workers and management in the undertaking.
The basic purpose of such machinery is to secure full recognition of the importance of the human element in industry, to make
workers feel that they count as individuals and to give them a
greater interest in the general operation of their undertaking.
A second purpose is to promote higher productivity. These two
purposes are closely related, since one of the most important
factors affecting productivity is the atmosphere in the undertaking. In 1952 the International Labour Conference stated that
" . . . consultation and co-operation on a basis of mutual con1
Heinz O. HEYER: Arbeitsvereinfachung. Methoden zur Produktivitätssteigerung durch innerbetriebliche Zusammenarbeit (Heidelberg, Quelle und
Meyer, 1952), pp. 73 ff.
2
See below, pp. 137-139.

102

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

fidence render an essential contribution to the efficiency and
productivity of an undertaking . . . ".1
Such machinery provides opportunities for discussion of questions concerning improvements in methods of production, industrial safety and hygiene, welfare facilities, the best utilisation of
working time, reduction of absenteeism, economising raw materials, etc. Sometimes, as in Norway and Sweden, committees have
been set up for the purpose of associating representatives of the
workers with the rationalisation of production and with time and
motion studies.
It is too soon to attempt to pass a general judgment on the
success of works committees and similar machinery.2 Results
obtained vary greatly, not so much from country to country as
from one undertaking to another.3
In countries where works committees have been set up under
compulsory legislation the intentions of the legislators are sometimes defeated by the passive or negative attitude of those directly
concerned. It is all very well for the law to prescribe collaboration,
but it is obvious that if employers and workers have different
views regarding the forms their collaboration should take, or
regarding the principle of collaboration itself, any consultative
machinery is liable to be largely ineffective.
In France for example it is widely recognised 4 that if a number
of committees have been less active than they might have been,
given the powers conferred upon them by law, the explanation
is to be found in certain cases in the attitude of some employers
who, having in no way desired the establishment of works committees, have simply submitted to an experiment which they
1
Resolution concerning Consultation and Co-operation between Employers
and Workers at the Level of the Undertaking, adopted by the International
Labour Conference, 35th Session, Geneva, 1952. Official Bulletin, Vol. XXXV,
No. 2, 15 Aug. 1952, pp. 94-96.
2
In what fellows, the term " works committee " is used in a comprehensive
sense to describe any joint committee or council whose primary purpose is
the promotion of co-operation between employers and workers at the level
of the undertaking.
3
For example, of 40 Belgian undertakings which had established works
committees (conseils d'entreprise) before it became a legal obligation to do
so, 12 indicated, in reply to a questionnaire from the Federation of Belgian
Industries, that these had led to higher productivity, 17 that they had led
to improvements in morale, 19 that they had led to co-operation in the form
of suggestions, and 18 that they had led to improvements in relations between

management and workers. See FÉDÉRATION DES INDUSTRIES BELGES: Reali-

sations sociales dans l'industrie belge (Brussels, 1950), p. 50.
4
Cf. "L'expérience des comités d'entreprises", in Droit social (Paris),
Year 15, No. 1, Jan. 1952, pp. 14-33; No. 2, Feb. 1952, pp. 92-104; and No. 3,
Mar. 1952, pp. 163-179.

PERSONNEL POLICY

103

could not avoid. But it must be recognised also that such an
attitude would probably have been encountered less frequently
among employers if attempts had not sometimes been made by
workers to misuse works committees for political purposes. Discussion is doomed to futility or worse when it starts from a basis
of fundamental disagreement and lack of confidence.
Though a number of committees have achieved little, and in
some cases perhaps nothing, it would however be quite wrong to
conclude that the establishment of works committees has been
a failure in France. Based on information provided by inspectors
of labour, especially in the most highly industrialised areas, the
view has been expressed that—
. . . the results obtained are far from negligible and are capable of
growth. An optimistic view may, in fact, validly be based on the
efficacy already attained by some committees and on the value of
what has on the whole been achieved.1
The French Ministry of Labour has found that many committees
" which do not fully exercise their legal prerogatives give evidence
nevertheless of considerable activity " and that a number of
others " are assuming fully and in a satisfactory way the whole
of their functions, are proceeding to the study of important technical problems and are thus contributing to the establishment of
a spirit of co-operation ".2
Positive results have thus already been obtained. The fact
that legislation is not entirely effective should not obscure the
results to which it has contributed. It seems that these positive
results have been achieved to the extent that the intentions of
the legislators have been faithfully respected by employers and
workers, and in cases where works committees have been able
to function in the spirit in which they were intended to do so.
Their success has, for the most part, depended upon the goodwill
of the two parties.
In other countries, too (e.g., Israel where joint productivity
committees in firms employing more than 50 workers have been
in existence since 1951) it is reported that such committees
have had encouraging effects in increasing productivity.
In the Scandinavian countries, although individual opinions
may vary, it is generally agreed that works committees are an
excellent means of ensuring co-operation and improving produc1
" L'activité des comités d'entreprises depuis 1950 ", in Revue française
du travail (Paris), Year 6, Nos. 10-12, Oct.-Dec. 1951, p. 523.
2
Ibid., pp. 521-522.

104

HIGHKR PRODUCTIVITY IN MANUFACTURING INDUSTRIES

tion, and that they have achieved definite results.1 Emphasis is
laid upon the obligation of managements to supply information
to the works committees concerning the economic and technical
problems confronting the undertakings. In Norway and Sweden,
in accordance with time study agreements, workers' representatives
participate in measures taken to rationalise production.
In the United Kingdom, the annual report for 1952 of the
Ministry of Labour and National Service 2 says that, while during
the year under review the Ministry continued to encourage the
development of joint consultation, few new joint committees
were set up, others which had been in existence for some time
ceased to function, and a large number were " apparently functioning in a somewhat desultory fashion ". In the view of the Ministry,
however, this does not indicate any lack of progress, but rather
a change in. emphasis. Greater attention is now being paid by
many firms to less formal methods of consultation through discussion groups, regular management meetings including supervisors, and conferences of the whole staff.
Western Germany and the Netherlands are other countries in
which a great deal of attention has been paid recently to the
problem of creating and maintaining a good psychological climate
in the undertaking. In Germany research is being devoted to
what is called the sociology of the plant, with the aim of recasting
the relationship between labour and management on the basis
of the consciousness that both are members of the same productive
community rather than antagonists, or at best partners with their
own separate economic interests.3
Heyer recommends the following principles in dealing with
people in the plant:
Keep yourself under control and never get excited. Give your
men opportunities to earn praise and recognition. If criticism is neces1
This was the view of a meeting of Danish, Finnish, Norwegian and
Swedish employers, manual workers, and salaried employees held in Stockholm in November 1950. (Cf. Co-operation in Industry, op. cit., pp. 45-52.)
See also Föreiagsnämnderna, No. 2, Aug. 1953, pp. 1-13, for a survey,
from the trade union point of view, of the activities of works committees
in Sweden in 1952, with statistics of the number of committees in existence
in various industries, the frequency of meetings, and the number of committees in each industry considered by worker members to have dealt satisfactorily with such matters as the provision of adequate information to
workers, suggestion schemes and problems of redundancy.
2
London, H.M. Stationery Office, Cmd. 8893, 1953, p. 123.
8
See, for example, GECK, op. cit.; and Ernst MICHEL: Sozialgeschichte der
industriellen Arbeitswelt, ihrer Krisenformen und Gestaltungsversuche (Frankfurt
am Main, Josef Knecht, 3rd ed., 1953).

PERSONNEL POLICY

105

sary, make it tactfully and mention positive achievements, too. Humour
makes all situations easier. Listen attentively to your people so as to
understand what they really want. Explain the work to be done in
such a way that you can be certain that you have been understood.
Consider the interests of your men not halfheartedly but as fully as
your own.1
Experience in a number of countries confirms the conclusion that the atmosphere and spirit of industrial relations
in the undertaking are more important than any single device,
procedure or technique for promoting labour-management cooperation. If there is a basic desire to co-operate, appropriate
machinery to give effect to this desire will generally be worked
out in response to the needs felt; when the basic feeling is one of
mistrust, the most carefully designed machinery for co-operation
will have no driving force behind it and may even create new
points of friction. Because a particular procedure or piece of
machinery works well in one undertaking, that is no reason for
assuming t h a t it will give good results if reproduced in another,
where the basic conditions for its success may be lacking. As one
employer has written—
The first condition of success concerns the attitude of the higher
Management.
Unless Management is imbued with respect for its people as human
beings and with a genuine desire to carry them with it, institutions
and procedures will prove sterile.
Facilities for consultation should be approached not as concessions
but as opportunities—opportunities to get at what their people are
thinking and to put over the problems and point of view of Management. If the spirit is right the rest is a matter of organisation and
procedure.2
It is, however, not only on the part of management that the
right spirit is important. This spirit will be lacking unless workers
who participate in joint machinery combine a strong sense of
responsibility towards those whom they represent with a regard
for the well-being of the establishment in which they work.
To say that a spirit of co-operation is more important than
methods and procedures is not, however, to say t h a t vague feelings
of goodwill are all that is needed ; for a spirit of co-operation t h a t
does not find expression in practical action is not likely to endure.
Even where there is a sincere desire on the part of employers
and workers to collaborate through works committees, and where
1

HEYER, op. cit., pp. 25-26.

C. G. RENOLD : Joint Consultation over Thirty Years. A Case Study
(London, Allen and Unwin, 1950), p. 120.

106

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

such committees have been set up as a result of voluntary agreements or in conformity with legal requirements willingly and fully
accepted, the work of such committees raises a number of problems,
and care should be taken to avoid certain mistakes. Points that
need to be borne in mind include the following:
(1) Trade union organisations have in the past often been
opposed to the establishment of works committees, fearing that
these, while not independent of the employer, would nevertheless
compete with the trade union for the allegiance of the workers.
It is therefore important to establish a clear understanding regarding the respective fields of action of the works committee on the
one hand and the trade union on the other, and to secure the
support of the trade union for the works committee, so that the
trade union does not feel that an attempt is being made to bypass it.
(2) It is equally important that a works committee should
have the support of the workers and other staff in the undertaking
itself. Workers often show some indifference towards these committees; often, for example, many workers do not take the trouble
to participate in the election of members of the committees.

There may be various reasons for this lack of interest: many
workers, not having understood clearly the role and function of
the works committee, may have conceived exaggerated hopes at
the time of its establishment and may quickly lose interest in an
organ which does not appear to them to have achieved any definite
improvement in wages or working conditions; works committees
often encounter considerable difficulties in keeping the personnel
informed about their work; or again, if regulations provide that
trade unions shall have not merely the right to present candidates
for election to the committees but a monopoly of this right, it may
happen that non-union personnel take little interest in them.
These difficulties can be met in part by giving the works committee
a real job to do, and by taking trouble to ensure that all personnel
have as clear an understanding as possible of what this job is,
and are kep't as fully acquainted as possible with what the works
committee is doing. One way of maintaining interest in a works
committee is to have a " public gallery " to which a limited
number of non-members are invited, though they do not take part
in the discussion. This can also serve as a useful training for potential members of the committee by giving them an insight into the
procedure a:id conduct of meetings.

PERSONNEL POLICY

107

(3) Both employers and workers may lack experience in the
techniques of joint consultation. Furthermore, workers' representatives may be so lacking in knowledge and understanding
of production problems as to make joint consultation and discussions largely futile. These difficulties are perhaps likely to be
especially serious in underdeveloped countries. Both difficulties
may be met, in part at least, by appropriate training. The latter
difficulty will also call for frankness on the part of management
in explaining what its problems are and providing enough information to enable workers' representatives to form realistic views
about them. In the United Kingdom in 1949 there were complaints
t h a t consultation was not fully effective in the nationalised industries, but was sometimes merely a name given to a channel of
information and instructions from the management. The Trades
Union Congress decided to press for more training for employers
and employees in joint consultation, the Ministry of Labour
conducted propaganda on the subject, and the British Institute
of Management supplied workers' representatives with information on production subjects.
In general, trade unions have been quick to realise the importance of training worker delegates, and have sponsored a variety
of measures to this end—including the publication of special
reviews and pamphlets, and the organisation of courses, conferences and study groups for delegates. In France it is reported
that—
The necessity for this action on the part of workers' organisations
has in some cases been so well understood that collective agreements
take account of it. They provide that the time devoted to courses
or study groups organised by the trade unions or local federations
shall be considered as time devoted to the exercise of the functions
of a member of the works committee and shall be remunerated in the
same way. Such courses are organised once a month; those concerned
are free to attend them during working hours; on their return they
present a statement from the trade union organisation certifying that
they have in fact participated in the training organised for them.
Such agreements have been in force for several years, especially in the
textile industry at Roubaix and Tourcoing, and for bank employees
at Lille. Their application gives rise to no difficulty.1
The Norwegian Federation of Trade Unions decided in 1952 to
launch a training programme with a view to making clear the
aims of the trade union movement, explaining the reasons why it
supports efforts to raise productivity, and qualifying members
1

" L'expérience des comités d'entreprises ", op. cit., p. 103.

108

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

for more effective participation in the work of production committees. T.W.I. (Training Within Industry) methods were used,
and eleven specially trained instructors have for over nine months
devoted all their time to conducting courses for shop stewards and
production committee members. In practically every country,
however, much remains to be done by way of training worker
members of works committees, and efforts to this end need to be
pursued vigorously. One difficulty is that regulations sometimes
provide for unduly frequent elections and the same delegates are
not always re-elected.
(4) It is important to give special attention to the position
of foremen and supervisors. If the approach comes from top
management to the rank and file of the workers, and meetings
are in effect meetings between top management on the one hand
and union representatives, shop stewards or other leaders of the
rank and file on the other, those who are in immediate charge
of the men and women represented on the committee may feel
themselves by-passed. They may find works committee members
going over their heads to the higher management and may even
learn of management decisions from men working under them
before the information has reached them officially.
How these difficulties are to be met must depend upon the
nature and structure of each individual undertaking. Adequate
representation for the foremen and superintendent grades on the
works committee is important. Regularising the procedures for
consultation will help.1 If the rights and privileges of worker
members of the committee are defined by agreement, and comings
and goings and consultations are confined to certain known individuals, occasions, places and methods, foremen and superintendents know better where they stand, and their duties as regards
discipline are clarified. If meetings are reduced to regular scheduled
occasions and are only handled on prepared agendas, surprise
and emergencies are eliminated and time is given for prior consultation with foremen and other grades of management concerned.
Rules may provide that the first approach to management on a
question concerning a particular department should be to the
superintendent of that department. If, on a question concerning
more than one department, or the undertaking as a whole, the
entire body of foremen or superintendents are too numerous to
be consulted in advance by management, a reorganisation of the
1

Cf. RENOLD, op. cit., p.

102.

PERSONNEL POLICY

109

chain of authority may help—for example, a grouping of superintendents under a limited number of senior superintendents who
can be consulted and who can in turn keep the superintendents
reporting to them fully aware of what is going on.
(5) Since negotiations regarding wages, hours and conditions
of work are normally the responsibility of the trade union and not
of the works committee, some difficulty may be encountered in
giving a works committee a sense that it has an important job
to do and a real contribution to make. Again frankness on the
part of management in providing information, and a willingness
to give the works committee real problems to handle, seem to be
the answer to this difficulty. In a British firm with a good record
of labour-management co-operation over 30 years it is stated
that—
At an early stage the production programme for the forthcoming
four weeks was laid before the Joint Meeting, with a statement of its
effect on employment ; where relevant to the programme, some information about market prospects would be added. The performance in
comparison with the past programme was given, and causes for discrepancies explained and discussed. Information about new processes
or departmental reorganisation was given with particular reference to
the effect on numbers and classes of workers. The introduction of new
machines was notified well in advance so that any repercussions, such
as the grade of operator to be employed, could be considered. General
developments such as structural changes in the main organisation,
the undertaking of new kinds of work, the acquisition of new establishments, were also notified, with full explanations. Information was
given on the creation of new posts and on appointments and promotions
in management grades. . . . No information having a direct bearing
on the daily life of the establishment was withheld.1
The author adds that—
The management has no doubt about the beneficial effects of
imparting this kind of information, but the real nature of the benefit
may not be obvious. It does not lie so much in the creation of an active
interest or positive co-operation on the part of the worker as in a general
sense of confidence and stability. This seems to arise from the fact
that everyone knows where he stands and what his rights and obligations are, coupled with the confidence that no changes will be sprung
on him unawares. Changes are, of course, the inevitable accompaniment
of progress but, however good in itself an innovation may be, it is
always disturbing to the people affected. But give those people warning
in advance—long enough in advance to permit discussion in a calm
atmosphere—and the change, if sound, will be accepted. . . . The
golden rule for successful joint consultation is to get a question on to
the table whilst the situation is still fluid and before positions have
been taken up. 2

R E N O L D , op.

Ibid., p p . 116-117.

cit.,

116.

110

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

(6) Works committees can be prevented from becoming mere
channels for the ventilation of more or less petty grievances if
other machinery is provided for dealing with these quickly and
effectively. Ease of access to the employment or personnel department is important in this connection.
Whatever the difficulties encountered, there can be no doubt
t h a t in many countries more consultation and co-operation, formal
or informal, between managements and workers in industry, and
more scope for genuine participation by workers in programmes
to raise productivity, are required if all that can be done to raise
productivity is to be done. What Hutton has said of the United
Kingdom is also true of many other countries.
. . . The reforms, improvements, and changes needed—in principles
and practices, in manners and methods, in activities and attitudes—are
far-going. They represent a break with the accumulated rigidities and
encumbrances of many decades. For this reason they are unlikely to
be applied on the scale needed unless they are both devised and applied
co-operatively by both sides of industry. 1
Experience of human nature suggests, and a number of studies
have confirmed, that to present people with the facts, to lecture,
persuade and cajole, is much less effective as a way of changing
human attitudes and behaviour than to put people in a situation
where they are called upon to make a group decision and to accept
responsibility for it.
EMPLOYMENT POLICY

If workers are to co-operate in measures to raise productivity
it is essential t h a t they should have confidence t h a t everything
possible is being done to prevent technological improvements from
giving rise to unemployment. Action to this end is therefore one
of the most important matters for labour-management consultation at the level of the plant as well as at higher levels. The
action to be taken will normally be a matter for discussion with
trade unions, though the problems involved may also be considered
by works committees.
In Chapiter II a distinction was drawn between (a) measures
to maintain a high general level of employment, (b) measures to
reduce displacement of labour and to assist the re-employment
of unemployed workers, and (c) measures to protect the living
standards of unemployed workers.
1

H U T T O N , op.

cit.,

181.

PERSONNEL POLICY

111

Action to maintain a high general level of employment is primarily a responsibility of governments. So, for the most part,
are measures (such as unemployment insurance or assistance) to
protect the living standards of workers unemployed between jobs;
but the granting of severance pay by individual firms may make
an important contribution to this end, and in some industries
funds have been set up for the relief of workers who lose their
jobs as a result of technological improvements. This has been
done, for example, in certain branches of the United Kingdom steel
industry 1, and has been recommended at a meeting convened by
the French Trade Union Productivity Centre.2
It is, however, through measures to reduce the displacement of
labour and to assist the re-employment of unemployed workers
that the managements of individual undertakings can make their
most important contribution to the task of reconciling higher
productivity with the maintenance of economic security for workers.3
The problem of maintaining the level of employment in an
undertaking in which an increase in labour productivity has made
it possible to produce the same output with a smaller labour
force is not merely a matter of personnel policy. It calls for
united efforts on the part of all or most departments in the undertaking. If employment is to be maintained, sales must be expanded
and the sales department, therefore, has an important role to play.
Besides more vigorous sales efforts, price reductions may be necessary, and the design, production and other departments may be
called upon to make special efforts to reduce costs.
Because combined efforts by a number of departments are
necessary, it is important that top management should provide
leadership and direction and should ensure that this poblem
receives attention commensurate with its importance. In three
United States companies well known for providing steady work—
1

I.L.O. : Technological Improvements in the Iron and Steel Industry and
Their Effects on Employment, Report III, Iron and Steel Committee, Third
Session (Geneva, 1949), p. 101.
2

CENTRE INTERSYNDICAL D'ÉTUDES ET DE RECHERCHES DE PRODUCTI-

VITÉ : Productivité mais... plein emploi et niveau de vie (Paris, undated), p. 168.
The conclusions reached at this meeting are summarised in Industry and
Labour, Vol. IX, Nos. 11-12, 1 and 15 June 1953, pp. 351-352.
3
Attention is drawn in this connection to the conclusions concerning
Practical Measures Enabling Individual Undertakings to Alleviate the Immediate Social Effects of Dismissals of Staff, adopted by the I.L.O. Advisory
Committee on Management at its Third Session (Geneva, 1938), in I.L.O.:
The International Labour Code 1951, Vol. I I : Appendices (Geneva, 1952),
pp. 164-170. With reference to salaried and technical employees, see the
resolution adopted by the Advisory Committee on Salaried Employees at
its Fourth Session (Geneva, 1936), ibid., pp. 230-231.

112

HIGHISR PRODUCTIVITY IN MANUFACTURING INDUSTRIES

the Proctor and Gamble Company, the Nunn-Bush Shoe Company
and Geo. A. Hormel and Co.—the programme for stabilising
employment was sponsored with evangelistic zeal by the top man.
" Real progress in stabilization can be made only if management
attacks this problem with the same determination and ingenuity
which it applies to other problems of the business." 1
It is desirable, however, that some officer with a narrower
range of preoccupations than top management should be responsible, under top management, for leading a company's programme
for maintaining employment; and it will, in many undertakings,
be the personnel manager who is best fitted to do this. He will
be personally involved in any unavoidable layoff of workers
and will often be more conscious than any other management
official of the need for measures to stabilise employment.
He can point out to his colleagues the magnitude of the problem, keep them informed of how other companies have met it,
arrange meetings of departmental heads at which problems can
be discussed, and in general strive for the maximum co-operation
between all departments in developing a satisfactory programme.
One important matter in which he may need the co-operation
of the production and other departments concerns the period of
notice that can be given to workers and their representatives in
advance of expected displacements of labour. The problem of
absorbing displaced workers can often be greatly eased if such
notification can be given some time in advance. This will be
possible only if the changes resulting in the displacement of labour
are themselves planned adequately in advance. Erratic movements in demand may be difficult to foresee and provide against,
but changes in production techniques and equipment normally
have to be planned well in advance. A long period of notice enables
the workers affected to make plans for their future ; it enables the
union to gauge the effect of the new process or machines on its
members, in terms not only of employment but of workload,
earnings, security adjustments, physical conditions of work and
the like; and it also enables the government agencies concerned,
particularly the employment service, to take action to counteract
individual unemployment.
Another matter which calls for co-operation between a number
of departments is the timing and speed of changes. If a series of
1
Charles G. GIBBONS: Stabilization of Employment is Good Management
(Kalamazoo, Michigan, The W. E. Upjohn Institute for Community Research,
1953), pp. 2-8.

PERSONNEL POLICY

113

labour-saving innovations can be introduced over a period of time
instead of being bunched closely together, their effects on employment are likely to be much more easily absorbed. Normal labour
turnover, and any expansion that may be taking place either in
the economy as a whole or in other departments of the firm, will
both ease the problem of maintaining employment.
The level of employment in an undertaking after the installation of technological improvements will depend chiefly on outside
circumstances and the action of departments other than the personnel department. But even if there has to be a reduction in the
numbers employed in some departments, or in an undertaking as
a whole, this will not always mean that workers need be laid off;
and it will be the responsibility of the personnel department to
ensure that only in the very last resort are workers laid off as a
result of measures taken to raise productivity.
The scope for reabsorption of displaced workers within the
undertaking can be increased, in the first place, by suspending or
slowing down normal recruiting some time in advance of the introduction of a change that is going to displace a number of workers.
It can be increased, secondly, by taking full advantage of existing
or potential opportunities for transferring workers from one department to another.
Experience has shown that, if a program of transfer is to be successful, the following conditions must be met:
(1) Employees must be versatile in the sense that they either have
skills to perform several different jobs or have the ability to learn those
skills easily.
(2) A study should be made of the jobs in the factory to determine
which ones are similar enough to make transfer of employees feasible.
(3) Employees must be willing to accept transfer and must cooperate in learning the new work.
(4) There must be a satisfactory training program for each job.
(5) Seniority provisions in union contracts have to be flexible enough
to permit transfer from one job to another and from one department to
another.
(6) A policy regarding pay for transferred employees must be
worked out and accepted by the employees.
In spite of the difficulties to be overcome in working out a program
of transfer, the efforts of many companies have been successful.1
In some cases employers can go further and give a guarantee
that no workers will be dismissed as a result of particular measures
1

GIBBONS, op. cit., pp.

7-8.

114

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

taken to raise productivity.1 Whether such a guarantee is possible will depend largely upon circumstances outside the control of
employers—the nature and size of their market, the availability
of raw materials, the rate of labour turnover, etc.—but it will
depend also partly upon such factors as the vigour of managements'
sales efforts, how far managements plan ahead, and what steps are
taken to suspend normal recruiting, to arrange transfers and to
provide training and retraining facilities. Wherever such a guarantee can be given, it will evidently be a factor of the greatest
importance in influencing the attitudes of workers towards a drive
for higher productivity.2
Finally, if despite all efforts a certain number of wo rkers have to
be dismissed, management may do its best to find alternative
employment for them, preferably in the same area.3 This will be
especially important in countries and areas in which a recognised
employment service is not highly developed or fully utilised.
The importance of careful study and planning of the best
methods of dealing with the problems of redundancy, and of
communicating to the workers the results of such studies and the
plans proposed, was emphasised at a meeting convened by the
French Trade Union Productivity Centre in May 1952.*
Besides the measures thus far discussed there are a number
that must in general be regarded as inferior substitutes for other
means of dealing with the problem of technological unemployment.
They may, however, sometimes serve a useful purpose in special
cases or as provisional or emergency measures.
They include, first, short-time work and work-sharing. While
a reduction in the length of the normal working week, as has already
been suggested, may constitute—in suitable circumstances and
within limits—a reasonable and satisfactory way of absorbing the
1

Such a guarantee was given by French foundries participating in the
experiment described on p. 130 below. Undertakings participating in a
somewhat similar experiment in the French men's clothing industry have
given a guarantee that no staff will be dismissed as a result of increased
productivity for an initial trial period of 12 months.
8
Cf. HEYER, op. cit., p. 30: " T h e assurance that nobody will be dismissed as a result of the scheme is of particular importance. Right from the
beginning it must be made clear what is going to happen to those who may
become redundant. In no case should they stay in their reorganised department. When looking for new occupations for these men we should first
think of tasks and problems which were being held in abeyance."
3
This has, for example, been recommended by the President of the
National Council of French Employers; see Georges VILLIBRS: " Les exigences
de la productivité ", in Bulletin du C.N.P.F. (Paris), Year 6, No. 87, 5 Nov.
1952, p. 2.
4

Productivité

mais. . ,, op. cit., p . 168.

PERSONNEL POLICY

115

effects on employment of technological gains, erratic short-time
working and work-sharing are unsatisfactory for employers and
still more so for workers. They may, however, be preferable to
the dismissal of a part of the labour force, if opportunities for
regular employment are expected shortly to revive.
Secondly, employers may be required, either by law or under
collective agreements, to retain in their employment, for a time at
least, workers whom they would otherwise have dismissed; or
they may do this voluntarily. As has already been suggested, it is
of the utmost importance that employers should do all in their
power—by planning ahead, suspending normal recruiting, etc.—
to find other jobs for displaced workers, and that when there are
reasonable prospects that all displaced workers can be usefully
absorbed a guarantee should be given that no workers will be
dismissed as a result of specific measures to raise productivity.
But action to avoid redundancy is one thing; to retain on the
payroll workers who are in fact redundant is another.

In Italy

the freedom of employers to dismiss workers was limited during
the years immediately after the war by a system of blocking
dismissals, which was brought into force as an emergency measure
in February 1945. This system is, however, no longer effectively
in force. In the United States and other countries clauses prohibiting the dismissal of permanent or regular employees as a
result of mechanisation are to be found in collective agreements
in some industries.1 Since, however, the entire benefit to society
of a technological improvement may lie precisely in the fact that
it enables a given volume of production to be achieved with less
labour and by fewer workers, a prohibition on dismissals may
make the change not worth introducing, and a provision of this
kind may amount in effect to a veto on technological progress.
Moreover, the effect on the morale of the whole labour force of the
retention in employment of workers who know they are not needed
and yet cannot be dismissed may be very harmful.2 If other steps
are taken to look after the interests of displaced workers, it is
doubtful whether employers can reasonably be asked to agree to
arrangements of this kind.
Thirdly—a matter which relates rather to the prevention of
hardship than to the prevention of unemployment—it is sometimes contended that special provision should be made by industry
1

See, for example, UNITED STATES DEPARTMENT OF LABOR: Collective

Bargaining Provisions...,
2

op. cit., p. 48.

Cf. JACOBONI, op. cit., p. 103.

116

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

for supplementing the earnings of displaced workers who have had
to accept lower-paid jobs as an alternative to unemployment.
On British Railways, for example, arrangements exist for the
reab sorption of employees made redundant by schemes for raising
efficiency, and they continue to receive their former wages for up
to a year if they have had to accept work in a lower grade. Compensation schemes have also been introduced with some success
by progressive engineering firms.1 For a limited time, especially
if there are reasonable prospects that the workers concerned may
in their new jobs rise quickly to grades not inferior to those from
which they were displaced, there is a good deal to be said for this.
The anomaly of paying different rates for the same job may,
however, give rise to difficulties; and the longer such special
subventions are continued the more difficult it becomes, from the
point of view of society as a whole, to justify the continuing additional cost of production they entail.
SELECTION AND PLACEMENT

If an employee is to do his best work and to receive the fullest
satisfaction from his job, it is clearly important that he should be
employed on work for which he is physically and psychologically
suited, and that he should " fit in " with the group with which he
works. Trouble taken in the selection and placement of personnel
at all levels, and more especially at the higher levels, is likely to
be well worth while.
Vocational guidance or employment counselling approaches
this problem from the point of view of the individual, and asks
what jobs he is best suited for. The Recommendation concerning vocational guidance (No. 87) adopted by the International
Labour Conference in 1949 sets forth a number of principles
regarding the organisation of vocational guidance services.2
While the responsibility for organising such services rests primarily with public authorities, representative organisations of
employers and workers can make an important contribution to
their successful functioning. The Netherlands and the United
Kingdom aie among the countries at present devoting special
attention to the problem of extending and improving vocational
guidance services.
1
2

See " Workers' Attitude to Productivity ", op. cit., p. 11.
Conventions and Recommendations, 1919-1949, op. cit., pp. 898-907.

PERSONNEL POLICY

117

Improved techniques for the selection and placement of personnel approach the same problem from the point of view of the
job, the aim being to find persons suited to its requirements. Such
techniques may not only save employers money by helping to
avoid placing persons in work for which they are not suited but
may also supplement vocational guidance services in discovering
aptitudes and talents in individuals which might otherwise have
remained unrecognised.
The technique of the planned interview, designed both to assess
an applicant's capacities and to give him a satisfactory introduction
to the firm, has already proved its worth and is being more widely
adopted in industry in many countries, though, especially among
smaller firms, it would seem that its importance is still insufficiently
appreciated. It is a common practice for the initial interview
always to be carried out by the personnel department in firms
where there is one.
More controversial and less widely adopted is the practice
of testing personnel for mechanical aptitudes and emotional
characteristics. This, too, is being done on a growing scale 1
and with excellent results in some cases, but it is still regarded
with scepticism in certain quarters. Certainly a great deal remains to be learned about the most appropriate kinds of test
and the conclusions that can legitimately be drawn from the
results.
On the whole, it can be said that management is increasingly
receptive to the use of improved techniques for selection and
placement. Difficulties encountered on the part of management
appear to arise largely from lack of suitably qualified personnel
and lack of facilities for applying tests. These difficulties are
naturally greatest in small firms. Advisory services and training
facilities placed at the disposal of industry by public authorities or
national institutes can go a long way towards overcoming them.
It is understood that in a number of industries in the United
1
It is reported, for example, that in the selection of supervisors in the
United States " wide use is made of psychological tests, particularly for
mental ability and aptitude, other tests being still largely in the experimental
stage". (A.A.C.P.: Training of Supervisors (London, 1951), p. 1.) In the
same report it is recommended that in the United Kingdom " the use of
intelligence and other tests as aids in the selection process should be developed
experimentally, provided that the administration and interpretation of these
tests is in the hands of qualified persons and takes account of the results of
further research " (p. 36). A South African rubber factory has introduced a
system of aptitude testing for Africans who apply for jobs, and it is found
that those who pass the tests can as a rule be relied upon to produce a satisfactory output.

118

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

States * frequent use is made of the assistance offered by the state
labour service in applying to prospective employees tests devised
by the Occupation Analysis and Industrial Service Division of the
United States Employment Service. In the United Kingdom the
National Institute of Industrial Psychology has organised oneweek courses in different parts of the country for training in interviewing and testing procedures.
The attitude of trade unions and workers generally towards
improved techniques for selection and placement appears to be
distinctly less favourable than that of management. A number
of difficulties and objections are encountered on the trade union
side.
Thus it is very usual and natural for firms to give a preference
in taking on new workers to applicants sponsored by existing
employees, and to workers who have formerly been in the service
of the firm. This is likely to strengthen the ties between the
workers and the firm, but may be difficult to combine with a policy
of selecting new workers on the results of interviews and tests.
An attempt to substitute scientific selection techniques for less
formal procedures adopted in the past may encounter resistance
from workers who feel that they are threatened with the loss of
traditional prerogatives. Again, attempts to adopt scientific
placement techniques may come up against seniority rules or
informal traditional procedures regarding upgrading and lay-offs,
by which workers set great store. The very term " scientific ",
used in connection with selection and placement techniques,
suggests to many workers an inhuman and mechanical approach
to what is essentially a human problem.
Difficulties arising out of the attitudes of trade unions and
workers are more likely to be overcome if management understands the reasons for these attitudes and can demonstrate that its
approach to these problems is not a mechanical one, and if workers
are given full explanations of what management is trying to do.
Management and workers have a common interest in reducing
the number of square pegs in round holes. It is precisely
because human beings are not machines that it is worth taking
trouble to find out what kind of work they can do best. If the
problems are approached in this spirit, and if it is known that
management makes every effort to find suitable jobs for former
1
For example, the hosiery and knitwear industry.
and Knitwear (London, 1951), p. 42.

See A.A.C.P.: Hosiery

PERSONNEL POLICY

119

employees and for applicants sponsored by known and trusted
workers, management can go a long way towards meeting the
objections which workers sometimes have to the adoption of
improved techniques of selection and placement. On the other
hand, any mistrust workers may have for such techniques will be
strengthened if they are used only for the selection and placement
of workers and not in the filling of managerial posts. Nepotism
in managerial appointments may sometimes be an important cause
of inefficiency and low productivity.
VOCATIONAL TRAINING

The importance of vocational training as a means of promoting
higher productivity has long been recognised. It received a new
emphasis in many countries during the war and early post-war
years when shortages of labour and conversion and reconversion
programmes necessitated the use of inexperienced labour on a large

scale. The harmful effects on productivity of inadequate training
may not be limited to reducing the quantity and impairing the
quality of the output of the individual worker. For it is a characteristic of modern industry, with its growing specialisation of functions, that there is an increasing need for co-ordinating and integrating the work of the individual with that of the group or team ;
it follows that one poorly trained individual can impair the productivity of a whole group.
A highly productive economy is a dynamic economy ; it responds
rapidly and efficiently to changes in demand and in conditions of
supply, and promptly incorporates new and improved techniques
of production. It follows that emphasis needs to be placed in
vocational training on adaptability and versatility. Systems of
basic training should not be unduly specialised; they should aim
at imparting general information and cultivating general interests
and abilities of value in a variety of actual working conditions;
and they should be supplemented and completed by other types
of training designed to develop specialised skills and to facilitate
the promotion of workers to positions of greater responsibility and,
when necessary, their adaptation to the changing needs of industry.
Vocational training requirements for industry include training
for higher management; training of scientists, engineers and technicians; training of supervisors; training for skilled workers;
training for operatives; and induction courses for all categories of
new employees. Apart from normal training requirements for all

120

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

these categories of persons there may also be a need for special
training for selected persons in techniques for raising productivity.
It will be convenient to take up each of these matters separately.
Training for Higher Management
" American experience has shown that productivity and education for management are closely related." 1 The British productivity team that made this statement "was deeply impressed by
the steps taken by American business to educate, train and develop
its future business leaders . . . ".2
Problems of management training that require action outside the individual undertakings have been discussed in an earlier
chapter. There is general agreement, however, that skill in management cannot be taught by theoretical studies alone and that management training programmes in industry are also needed. " What
ever provision is made for the education of the recruit before he
enters business, the larger part of his training for executive responsibility takes place within business itself." 3 While there is
still some scepticism of the value both of formal education before
entering business and of planned schemes for developing managerial
ability in business, there has recently been a marked tendency in
the United States to adopt carefully prepared programmes for
executive development. The lead has been taken by large corporations, but enthusiasm for this procedure is also widespread
among medium-sized and smaller companies. Methods used
include visits to other companies, the organisation of technical
meetings and management conferences, distribution of reading
lists and management bulletins, group meetings, job rotation,
attendance at advanced management courses at universities,
committee assignments, and even multiple management plans
(the appointment of junior boards which are given responsibility
for handling certain problems).4
1
2
3
4

Education for Management, op. cit., p. 20.
Ibid., p. 18.
Ibid., p. 16.
See Company Programs of Executive Development, Studies in Personnel
Policy, No. 107 (New York, National Industrial Conference Board, 1950);
Education for Management, op. cit., pp. 16-18; and Earl G. Planty: " Executive
Training and Development ", in Proceedings, Annual Fall Conference on
Principles, Methods and Techniques for Increasing Productivity, Reducing
Costs and Improving Human Relations, edited by Robert B. Ross (New York,
Society for the Advancement of Management, 1950), pp. 17-21. See also
Wie volgt ons op ?, op. cit., which emphasises the need for advanced management training and contains a number of recommendations of interest to
other countries besides the Netherlands.

PERSONNEL POLICY

121

Programmes for the training and development of executives
should be based upon an assessment of future requirements. Some
United States companies use a method which has been described
as " personnel inventory control ". Members of the staff are
classified into those promotable immediately, others who are likely
to be ready for promotion after more experience or specific training,
and yet others who are unlikely to be promotable at all; and a time
schedule of replacements required is set up with detailed specifications of technical skills, personal qualities and experience necessary.
It is claimed t h a t such information makes it possible to plan a
company's true training requirements far more accurately than in
the past and to organise facilities accordingly. On the other hand,
the schématisation involved has certain dangers.
The system assumes that it is possible to draft a scheme of functions
more or less independently of the persons who must " fill " them. A
second assumption is that the executive can be conceived as being a
complex of properties which one has simply to compare with the requirements of the job. . . . But in doing this one is apt to overlook the
subtle relations existing at the top of any organisation where, moreover,
the functions are more often adjusted to the available persons and their
characteristics than the other way round.1
In most countries there is room for further study of the problem
of executive training. This is one of the questions t h a t is engaging
the attention of the Organisation for European Economic Cooperation. In India efforts are being made by the Central Ministries of Commerce and Education to establish an Administrative
Staff College and a National Institute of Management. A Planning Committee composed of leading industrialists and educationalists has been set up for the purpose. An Institute of Management has already been established in Bangalore and consideration is being given to the establishment of an international Institute
of Management for Asia and the Far East.
Where it is considered desirable to employ a larger number of
trained men, and especially of university graduates, in industry,
problems frequently arise regarding the level at which they are
to be taken into employment and their relations with non-graduate
employees who look for promotion from the ranks and who may
feel t h a t a policy of employing university graduates blocks their
chances. It is reported that in the United States—
Management, the employee and the business schools accept the
principle that students, whatever their degrees, have to start at the
1

Wie volgt ons op ?, op. cit., p p . 22 ff.

122

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

bottom when they enter industry and are in competition with recruits
without university training but with years of practical experience.1
Yet, while many American graduates start by being trained as
foremen or lower on the production side, they do not in the ordinary
way remain in such positions. Their promotion is commonly more
rapid than that of others and " it is now generally held that promotion beyond the foreman level is increasingly difficult for men who
have not acquired a college education . . . ".2
There is no easy solution to the problem of reconciling the
growing need for highly trained men in industry with the need for
keeping open the avenues of promotion from the ranks. Much
can be done to meet this difficulty, however, by increasing the
opportunities and facilities for part-time training for industrial
employees so as to enable men with practical experience to acquire
theoretical knowledge and technical skills. In this connection,
too, it is important to cultivate close relations between industry
and the universities.
Training of Scientists, Engineers and Technicians
This subject also has been discussed in an earlier chapter.
While basic training in science and engineering must be provided
in universities and technical colleges, a good deal can be done in
individual undertakings by means of special training programmes
to bring knowledge of techniques for raising productivity to those
who can use them—and this includes trade union officials and
workers' representatives as well as management officials. Some
examples are given below of special training programmes of this
kind.3 It is also important that firms should be willing to make
satisfactory arrangements for taking in trainees (for example, in
engineering or work study) and for enabling them to acquire, as
part of their training, a knowledge of actual working conditions.
Training of Supervisors

There is no doubt that good supervision is a key factor in
bringing about higher productivity, and that the training of super1
2
8
4

Education for Management, op. cit., p. 15.
Universities and Industry, op. cit., p. 17.
See pp. 130-132 below.
For brief accounts of the discussions and conclusions reached by two
European meetings of experts on the training of supervisors, see Industry and
Labour, Vol. I, No. 12, 15 June 1949, pp. 458-460, and Vol. V, No. 12,
15 June 1951, pp. 450-453.

PERSONNEL POLICY

123

visors can play an important part in improving the quality of
supervision. It appears that more attention is devoted to the
training of supervisors in the United States than in most other
countries. A British productivity team found that, in the United
States, industry treats the selection and training of supervisors as
a matter of high policy affecting all members of management,
from company president downwards; that " . . . the range and
thoroughness of supervisor training in the U.S. surpass corresponding activity in Britain " ; and that " . . . in spite of their keen
cost-consciousness all the large companies we visited were
spending substantial sums of money on supervisor training and
obviously believed strongly in its beneficial effect on productive
efficiency ". 1
The duties of supervisors usually fall into three groups—
technical duties, administrative duties and human relations.
Many experts believe that primary importance should be accorded
to training in human relations. This, it is stated, predominates
in United States supervisor training schemes, the approach being
always practical. Work study, communications (including effective
speech and report writing), costing and budgetary control, and
conference leadership, are other subjects commonly found in
training programmes.
Difficulties encountered in improving the training of supervisors
include the problem of finding the necessary time, funds and
personnel, as well as lack of knowledge of the best way to organise
such training. These difficulties are the greater if supervisor
training is regarded (as it should be) not as a job to be accomplished
once and for all, but rather as a continuing process. An outstanding feature of supervisor training programmes in United States
industry is their continuous and progressive character based on
weekly or monthly sessions in working hours. The difficulties are
likely to be greatest for small firms. With a view to meeting
them, it seems desirable to set up central bodies responsible for
promoting in each industry those methods of supervisor training
that are considered most effective. It seems desirable also
to strengthen contacts between industry and outside educational and professional institutions, which should be in a position to provide full-time and part-time courses and advisory
services, thus facilitating a considerable expansion in supervisor
training.
1

Training

of Supervisors,

op. cit., p p . 1-2.

124

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Training for Skilled Workers
One of the methods most usually adopted for the training of
skilled workers is apprenticeship. Practical difficulties sometimes
encountered in attempts to improve the quality of training provided
for skilled workers and to ensure that a sufficient number are
trained include the following:
(1) An individual employer, and especially a small employer,
has not always a sufficiently wide range of work and equipment to
give apprentices an all-round training and practice in every aspect
of their cralt. This difficulty can sometimes be met by arranging
for apprentices to be indentured not to an individual employer but
to a group of employers, serving part of their time with each in
turn. The practice, common in the United States, particularly
in the building industry, of indenturing an apprentice to the local
joint apprenticeship committee has been favourably commented
on by a British productivity team.1 Besides being used to ensure
that the apprentice receives a properly balanced training, this
practice strengthens the control exercised by the apprenticeship
committee over conditions of apprenticeship.
(2) Even if they undertake the necessary range of work and
possess the necessary equipment, in the absence of appropriate
regulations employers do not always take the trouble to ensure
that apprentices actually receive an all-round training. Indeed,
cases have come to light in which employers have tended to regard
apprentices as cheap labour, keeping them on a fairly narrow range
of production operations instead of providing them with diverse
experience. The remedy for this difficulty is to be sought through
adequate regulation and supervision of apprenticeship conditions.
The difnculty will not arise where the content of apprenticeship
training courses is laid down and the number of hours to be spent
by the apprentice in various departments and on various processes
is prescribed. This is often done by apprenticeship committees
on which both employers and workers are represented. Adequate
machinery for inspection and enforcement should be provided.
(3) Apprenticeship training nearly always includes both
theoretical instruction (commonly given in technical colleges or
trade schools) and actual workshop training; but the theoretical
and the practical elements in training are sometimes not suffix

A.A.C.P.: Training of Operatives (London, 1951), p. 43.

PERSONNEL POLICY

125

ciently co-ordinated. Indeed, attendance of classes at technical
colleges appears sometimes to be regarded by apprentices as a
mere formality, having little relevance to their practical training.
It may be that in a number of countries the quality of instruction
provided in the classrooms has suffered since the war as a result of
the shortage of skilled and qualified men and of the fact that
salaries offered at technical colleges and trade schools may compare
unfavourably with what a good man can earn in industry. When
this is the case it may be desirable to take steps to improve the
salaries of classroom instructors. For the rest, the remedy appears
to lie in a strengthening of the contacts between industry on the
one hand, and the technical colleges and trade schools on the
other. The British team which studied the training of operatives
in the United States reported that—
It was evident in every state visited that most vocational and
technical schools have a much more effective liaison with local industries
t h a n is usual in Britain.

The active interest of industry seems to be

promoted by a fuller realisation of the importance to it of sound vocational teaching in the schools than is general in this country. Good
co-operation is also due to a very alert attitude on the part of the principals and staffs in the schools. . . . The policy of keeping the administration of vocational training in the hands of practical people clearly
operated to1 the advantage of industry and impressed the Team very
favourably.
(4) It is essential that those whose job is to instruct, even if
only for part of their time, should have had some training in the
art of imparting knowledge. Without such training only a man
with unusual natural gifts will make a good instructor, however
good a craftsman he may be. The T.W.I. 2 job instruction course
and other similar techniques can play a valuable part in assisting
firms to overcome a shortage of men qualified to instruct apprentices. Even in educational establishments instructors in practical
subjects are not always required to have taken courses in teaching
methods. The team whose report has just been quoted was
favourably impressed by the fact that this is commonly insisted
upon in the United States.
(5) If apprenticeship is to serve the purpose of providing an
adequate supply of skilled workers, it is important that the period
of apprenticeship should not be needlessly long. For otherwise,
not only may potential apprentices be deterred from signing on
1
2

Training of Operatives, op. cit., p. 42.
Training Within Industry.

126

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

but an urgent shortage of skilled labour will not be overcome as
quickly as it could be.
The proper length of the period of apprenticeship for any craft
is a difficult and controversial question. Trade unions are frequently opposed to suggestions that apprenticeship should be
shortened. There will be general agreement that this should not
be done at the cost of impairing the efficiency of the journeyman
who has served his time. There may often, however, be room for
impartial examination of the question whether a shorter period
of improved instruction cannot fit a man equally well for the
work he will have to do. It is believed that trade unions (and
especially craft unions) are sometimes influenced in their attitudes
towards the length of apprenticeship not only by the desire to
maintain standards of craftsmanship but also by the desire to
safeguard the craftsman who has served his time against the
danger of a possible over-supply of a certain type of skill and a
consequent risk of unemployment. It cannot be expected that
such fears on the part of trade unions will be entirely overcome
until governments and managements can convince workers that
they have effective policies for maintaining full employment.
Where they have felt that the interests of their members are
adequately safeguarded, trade unions have however often been
willing to review periods of apprenticeship and to agree to reductions or, recognising that some apprentices learn more quickly
than others, to accept arrangements under which apprentices
showing special promise can take trade tests at an earlier stage
than usual, and if successful can be admitted as journeymen after
having served less than the usual term of apprenticeship. It
would appear that more might be done in this way to adapt the
period of apprenticeship to the requirements of individual apprentices without relaxing standards of craftsmanship. The American
practice of awarding credits to apprentices for work at vocational
schools, which may enable an apprentice to shorten the period
of his shop training considerably, appears to have much to recommend it.
(6) Related to the question of the duration of apprenticeship
is the question of the maximum age of admission. Insistence
that only those below a certain age may be admitted to apprenticeship may also be regarded by craft unions as a means of safeguarding the interests of their members. One of the most noticeable features of the United States system is its flexibility in regard
to the upper age of candidates. Instead of the skilled man being

PERSONNEL POLICY

127

set apart from the rest of the labour force from the outset by
entering industry as an apprentice, a very large proportion of
those who ultimately become skilled appear to enter industry
in the lowest grades and to work their way up as vacancies occur,
being accepted for apprenticeship, if they show promise, sometimes
after years of experience on unskilled and semi-skilled work.
Men can become apprentices up to even the age of 35 and are not
expected to begin before they are 18. This gives great flexibility and
avoids the stultifying effect of the over-rigid practice in Britain where
entry into apprenticeship above the age of 16 is unusual.1
The British team which reported thus felt
question of age limits and periods of training for
be re-examined very carefully by all industries,
that compulsory National Service has become a
of British life ".1

strongly that the
apprentices should
" particularly now
permanent feature

(7) Another related problem is the question whether all work
which is considered to be skilled and to require the employment
of workers who have completed an apprenticeship or equivalent
training does in fact require such thorough training. Undoubtedly,
with improvements in machinery and equipment and with the
increase in the scale of production which permits the subdivision
and simplification of operations, semi-skilled labour is in many
fields being employed on work which was formerly the preserve
of the craftsman. This raises a number of difficult questions.2
But if changes in equipment and techniques tend to reduce the
demand for some kinds of skill, they offer new opportunities for the
exercise of other skills—those of electricians, maintenance men,
pattern-makers and others—and may create new openings for
foremen and supervisors. The broader the substructure of basic
training upon which specialised skills are founded, the easier it
will be for the skilled labour force to adapt itself to changes in the
proportions in which specific skills are demanded.
Training for Operatives
The notion that the best way of carrying out unskilled or semiskilled operations can be learned on the job with only casual
assistance from more experienced workers dies hard. It is, however, more and more widely recognised that the time required to
1
2

Training of Operatives, op. cit., p. 43.
See pp. 139-144 below.

128

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

learn a job can be shortened, the number of failures reduced, and
the process of learning converted into a more satisfying experience,
if adequate instruction is provided. Either instruction may be
provided on the job from the start, or it may begin in a special
training room equipped so far as possible with replicas of the tools
and machines that the trainee will use on the job when he has
become proficient enough.
A firm in which arrangements for the training of operative
labour have in the past been casual and haphazard may encounter
a number of practical difficulties in trying to improve the instruction given to this class of labour. To combine a production
job with systematic instruction for new workers is seldom easy.
When the amount of instruction to be given regularly in any
department is sufficient to warrant the appointment of one or more
full-time instructors, this may often be the best course to adopt.
Management is, however, sometimes reluctant to take good men
off production work, and the job of a full-time trainer or instructor
sometimes carries neither the prestige nor the pay it deserves.
Again, as has already been said, even if the instructor is himself
a good worikman, he will not necessarily be a good instructor.
The T.W.I, job instruction course and similar techniques have
recently been widely used with good results in improving the
quality of instruction in industry.
It is, however, often not practicable to entrust the job of
training operatives to full-time instructors. Productivity team
reports published by the Anglo-American Council on Productivity,
which now cover a wide range of United States industries, make
it clear that even in the United States, where firms and departments are often larger than in other countries, and where
more attention appears to be devoted to the training of operatives
than is common in most other countries, a very large proportion
of the work of training new operatives is carried out by workers
who are themselves engaged on production jobs. The primary
responsibility for instruction then rests with the foreman or supervisor; but he often has to delegate much of the actual instructing
to other members of his team. Care may have to be taken to ensure
that those to whom this work falls do not suffer in pay or prestige
by comparison with other workers who are able to devote themselves entirely to production. They may also need some training
in the art of instructing.
The view is sometimes expressed that there is one best way of
carrying out every operation, that this best way can be ascertained

PERSONNEL POLICY

129

by means of motion study, and that once it has been ascertained
every operative should be taught to do the job in this way and in
no other. This view appears to take insufficient account of the
differences between one worker and another. It is true that
training and instruction can assist an operative to adopt a rhythmical sequence of movements and to eliminate unnecessary movements, but it would seem to be a mistake to insist upon a completely
standardised sequence of movements.
Induction Courses
It is important that a new worker's first impression of his
firm should be a favourable one. It is also important, if he is to
have any sense of being a member of a team, that, whatever his
grade or rank, he should be given some understanding of the
structure and organisation of the firm, what it makes and what it
does, and how his work fits in with that of other sections and
departments. This is all the more important in a large concern,
in which a new employee might otherwise feel that he is regarded
as a mere cog in a gigantic, impersonal machine. To meet these
requirements and to remedy in part the lack of day-to-day personal
contact between employer and worker, which has been lost in
modern large-scale industry, growing attention is being devoted to
the organisation of brief induction courses for new employees.
It appears preferable not to attempt to crowd too many new
experiences into the first few days, but rather to spread induction
courses over a certain period of time.
Induction courses which are allowed to degenerate into a
perfunctory routine serve little purpose; but if management sees
in such courses a real opportunity for enlarging the horizons and
interests of new workers and associating them more closely with
the firm, the time and trouble devoted to such courses will be well
spent. Elaborate arrangements will seldom be necessary, and the
more informal the atmosphere in which such instruction can be
given, the more successful it is likely to be.
The British team which studied the training of operatives in
the United States reported that—
The process of welcoming new workers, introducing them to the
plant and giving them an appreciation of where they fit in to the industry
is apparently often done most thoroughly in American firms. It seems
likely that this has a good though unmeasurable effect on production. . . .*
1

Training of Operatives, op. cit., p. 44.

130

HIGHE:R P R O D U C T I V I T Y I N M A N U F A C T U R I N G

INDUSTRIES

Special Training Programmes
Normal training courses and facilities provided for all categories of employees should draw attention to the importance of
higher productivity and stimulate a desire to find better ways of
doing things. It may, however, be desirable, especially in countries, industries or undertakings where modern techniques for
raising productivity are unfamiliar, to supplement ordinary
training by special courses designed to train selected individuals
in the particular techniques they need for initiating or taking part
in programmes to raise productivity.
A number of industries in a number of countries have in recent
years launched special programmes providing training in the
techniques of higher productivity—often as a result of visits by
productivity teams to the United States. One such programme
is that adopted by the National Association of French Founders.
According to a recent article 1 , for the ten foundries participating
in the experiment total annual savings of more than 150 million
francs can be attributed to improvements introduced, or to be
introduced, as a result of the experiment, and workers' earnings
have increased. A further 20 undertakings began a similar experiment in June 1953. The article cited also contains accounts of the
preliminary phases of special programmes adopted to raise productivity in the French men's clothing and footwear industries,
and among administrative and military supply contractors.
As further examples of special training programmes designed
to increase productivity, mention may be made of courses organised
by I.L.O. technical assistance experts in Israel and India.
In Israel groups of about ten factories have been invited by
the Israeli Institute of Productivity to select two persons (one in
a management post and one worker) to attend a training course
on time study and methods improvement. The first two weeks
are devoted to intensive class and laboratory work. The teams
then return to their respective factories and select a production
process for improvement and time study. Six weeks are allotted
for this assignment. Institute engineers visit the trainees throughout the course, and assist them in solving problems and over1

René RICHARD: "Productivity and the Trade Unions in France", in
International Labour Review, Vol. LXVIII, No. 3, Sep. 1953, pp. 279-302.
See also Roger CHRISTA: " Une expérience du syndicat général des fondeurs
de France ", in L'Usine nouvelle, 19 July 1951, pp. 5-6; and idem: " L'Opération productivité dans la fonderie ", in Productivité française, No. 5, May 1952,
pp. 7-9.

'»

PERSONNEL POLICY

131

coming difficulties. At the end of this period the teams reassemble,
each team reporting on what it has accomplished and how it has
arrived at the improvements.
As will be seen, the objective of the programme is to provide
factories—mostly small ones which could not afford to hire production engineers—with at least two people on their pay-roll who
have some training and experience in techniques for increasing
productivity. The Institute remains in touch with the work of the
trainees after the end of the course. It organises evening meetings
twice a month in Haifa and Tel-Aviv at which lectures are given
and ex-trainees discuss and analyse projects on which they are
engaged. Firms employing ex-trainees are regularly visited by
Institute engineers, who give further help and instruction if
required.
Up to April 1953 four such courses had been held, attended by
88 trainees from 46 firms. Further courses are in progress. A
report on the activities of the Israeli Institute of Productivity for
the year ending in April 1953 states that this programme has been
" very successful ", and gives examples of increases in productivity
achieved in a number of firms as a result of it.
An intensive six months' course for work study or production
technicians has also been organised. Of the first 30 people to take
this course, about half were sponsored and had their fees (and
salaries) paid by the firms that employ them. Others had their
fees paid by the Government in return for an undertaking to work
for two years after completing the course either for the Institute
itself or for firms to which the Institute might assign them. The
organisation of similar courses might prove to be of great value
in other underdeveloped countries, for the needs of industry for
the services of employees having an adequate grounding in the
techniques of work study are too great to be met entirely by the
training and employment of qualified production engineers, which
would be both too slow and too costly.
The I.L.O. expert who organised these courses, in co-operation
with the director and staff of the Israeli Institute of Productivity,
has also provided more advanced training for the staff of the
Institute and certain members of the staff of the General Federation of Labour, to constitute a pool of instructors or trainers for
training factory personnel. A training manual has also been
prepared.
In India brief training courses in productivity study techniques
have been given to a number of management officials and labour

132

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

representatives from textile mills and engineering establishments.
Most of the trainees were then made responsible for work studies
in their own factories, at first with the assistance and guidance of
the I.L.O. experts.
These are examples of special training programmes designed
to enable selected individuals to apply particular techniques for
raising productivity. In undertakings or industries where programmes for raising productivity are being applied, other kinds of
special training programmes may be needed—namely, programmes
designed to enable workers to adapt their skills to changes in
production techniques or equipment. When such changes give
rise to redundancy, or threaten to do so, it has already been suggested that accelerated training or retraining courses may be needed
either to enable displaced workers to fill vacancies in existing
processes, or because technological improvements often create new
employment opportunities in new kinds of jobs and, provided
adequate training facilities are available, may in certain cases open
up opportunities for promotion.
UPGRADING AND PROMOTION

If a worker is to do his best work and to be encouraged to fit
himself for more responsibility, it is important that he should feel
he has a fair chance of promotion on merit. Few will deny that
the continuing effectiveness of an organisation depends to a considerable degree upon the extent to which promotions are based
upon ability.
The two main obstacles likely to be encountered in applying
this principle are the difficulty of reconciling the claims of seniority
and of ability as criteria for promotion; and the difficulty of
recognising ability.
These two difficulties are not unrelated. If ability were something which could be objectively determined, the case for seniority
rules, by which trade unions often set great store, would be greatly
weakened. As things are, such rules provide a safeguard against
1
See, on this subject, I.L.O. : Vocational Training and Promotion in the
Metal Trades, Metal Trades Committee, Third Session (Geneva, 1949); and
Vocational Training and Promotion in the Iron and Steel Industry, Iron and
Steel Committee, Fourth Session (Geneva, 1952). See also the Resolutions
on Vocational Training and Promotion adopted by the I.L.O. Metal Trades
Committee and Iron and Steel Committee at their Third and Fourth Sessions
respectively (Official Bulletin, Vol. XXXII, No. 4, 15 Dec. 1949, pp. 257-260,
and Vol. XXXV, No. 3, 20 Dec. 1952, pp. 170-172, respectively).

PERSONNEL POLICY

133

favouritism and the dissatisfaction and lowering of plant morale
which favouritism is likely to entail. They may also serve to discourage labour turnover (though even from this point of view
their effects on productivity are not wholly good, since in some
situations more and not less mobility of labour is required).
The two major disadvantages of seniority rules, to be set
against these advantages, are that they may result in the promotion or upgrading of unsuitable workers and, secondly, that they
may keep down ambitious and able younger men. The first of
these disadvantages can be largely overcome if it is understood
that seniority carries with it not a right to promotion but a right
to be tried out in a higher grade job when a vacancy occurs, with
automatic relegation to the previous grade in the event of a failure
to make good in the new grade after a reasonable period of time,
say 60 days. This is a widespread practice in United States
industry. It does not, however, go far to meet the claims for rapid
promotion of the able younger men. Greater flexibility can be
introduced if agreement can be reached that in the determination
of " seniority " weight should be given to attainments and performance as well as years of service. It is also desirable from the
point of view of flexibility that the unit within which seniority
counts for promotion should be as broad as possible, so that a
man deserving promotion should not necessarily have to wait for
a vacancy in his own department.
It is normally only up to a certain grade that promotion 1 is
based on seniority (subject to ability to do the job), management
being free to select employees for promotion beyond this grade
on the basis of ability alone.
" Ability " is often spoken of as though it were something
that could easily be recognised. Technical knowledge and performance can to some extent be tested, but the ability to get
along with and handle people, and initiative and imagination,
are much more elusive qualities. Only by carefully reviewing an
employee's record, and by exposing him to situations in which
these qualities are called for, is it possible to ascertain whether he
possesses them. A number of productivity teams have commented
on the trouble taken in United States industry to spot and develop
talent in all ranks of workers and employees.
1
A distinction is often drawn between " promotion " and " upgrading ",
" promotion " meaning promotion to or within the ranks of management and
" upgrading " meaning promotion below the ranks of management. " Upgrading " in this sense is often covered by seniority rules while " promotion " is not.

134

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Often the ability requisite for promotion can only be acquired
through training. The provision of adequate training facilities is
therefore a. necessary part of a sound policy regarding promotion.
If employees are carefully selected and appropriately trained, it
should be possible to offer managerial vacancies to men already
in the firm. " Managements ", it has been recommended, " should
have an agreed policy of promotion which should be known to the
employees, so that each man can gauge the possibilities of promotion and should know what will be required of him if he is to be
considered for promotion to specified positions." *•
SUPERVISION

Recent research has emphasised the importance of the supervisor-subordinate or leader-group relationship as a factor affecting
productivity.2 Special attention has been devoted to the role
of the foreman or first-level supervisor. There is some evidence,
based on studies made in a number of different industries, that
the supervisors who get the best results, in terms both of productivity and of the satisfaction felt by members of their groups,
tend to be those who—
(a) are recognised as being able to provide leadership and as
possessing superior planning ability;
(b) do not attempt to supervise too closely, but leave scope
for individual initiative;
(c) are " employee-oriented ", at least in the sense of having
a real interest in the workers and their motivations; and
(d) are able to create an esprit de corps in the section or
work group..
Many oí' the difficulties of encouraging and developing these
qualities among supervisors can be met by means of the careful
selection and training of supervisors, the importance of which has
already been emphasised. But this is not enough to ensure good
supervision.
A problem that arises in some countries is the difficulty of
kindling in a sufficient number of workers the ambition to rise to
1
2

Lithographic Printing, op. cit., p. 55.
See, for example, D. KATZ and R. KAHN: "Human Organization and
Worker Motivation ", in Industrial Productivity, op. cit., pp. 146 if., and the
sources there cited.

135

PERSONNEL POLICY

supervisory status. When such ambition is lacking, the reason,
it would seem, is often that the pay and status accorded to foremen
and lower-ranking supervisors are inadequate. 1 The same reasons
that cause a shortage of suitable candidates for supervisory posts
may be responsible for dissatisfaction and a sense of frustration
among existing foremen and supervisors. There is a tendency in
many industries to adopt new organisational methods that have
the effect of changing, and in some respects undermining, the
traditional status and responsibilities of foremen. 2 With growing
reliance upon specialist staff there has been a tendency to transfer
prerogatives which formerly belonged to foremen to specialised
departments, such as the recruiting and training services, the
safety department, the welfare services and the planning department. When, in addition, as has sometimes happened, new
machinery for labour-management co-operation has been set up
which by-passes the foreman, it is small wonder that such remarks
as : " What is there left for me to do ? " ; " They have taken all
our authority away" ; or " I am nothing but a letter-box" are
sometimes heard from foremen.
It should be added t h a t more recently there have been signs
in a number of industries and countries of a welcome swing of the
pendulum and a tendency to emphasise once more, in practice as
well as in precept, the importance of maintaining the authority and
responsibility of foremen. Where a foreman has little scope for
the exercise of initiative and responsibility, this may have bad
effects in various ways on the productivity of those working under
him. As has been pointed out above, there is some evidence t h a t
supervisors who supervise too closely tend to get poorer results
than those who leave more to the initiative of their men. But
there is evidence, too, that the first-line supervisor tends to give
to his men the same kind of supervision as he receives from his
superiors—that " the style of supervision which is characteristic
of first-level supervisors reflects in considerable degree the organisational climate which exists at higher levels in the management
1
Several of the A.A.C.P. productivity teams draw attention to this
problem as it confronts various branches of British industry. The Cotton
Yarn Doubling Team, for example, considered that " there is an urgent
need to improve the status of inside managers and overlookers. Until this
is done there is little incentive for people inside the mill to equip themselves
for such responsibilities, or for technically trained people to enter the industry.
A shortage of suitably equipped personnel may well be a serious problem in
the coming years." (A.A.C.P.: Cotton Yarn Doubling (London, 1950), p. 49.)
This problem is also acute in certain industries in Belgium, France and Italy.
2

Cf. Human

Relations

in Metal Working

Plants,

op. cit., p p . 62-63.

136

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

hierarchy ".1 Again, if the foreman feels cramped in the exercise
of his responsibilities he will be handicapped in his efforts to provide
effective leadership and to encourage a sense of pride in the work
group.
The foreman who is given so little freedom or authority by his
supervisors that he is unable to exert a meaningful influence on the
environment in which he and his employees function will be ineffective
in dealing with employees, regardless of his human relations skills.2
These considerations lend weight to the following recommendations of a British productivity team :
If supervision is to play its full part in promoting productivity,
then all supervisors (above the level of working charge-hands, leading
hands or setters, etc.) should be regarded as responsible members of
the management team. This means that they should be carefully
selected and trained, should be consulted and kept well informed about
company policy and procedures and should be given adequate status
and prospects of promotion by merit. . . .
There should be greater decentralisation of responsibility and
authority to the various levels of line management and supervision,
right down to the first-line supervisor. The first-line supervisor should
be recruited with this aim in view and should be encouraged to regard
himself as far as possible as a " manager of his own business ". . . .
The function of specialist, service and staff departments should
be to provide advice and assistance in consultation with line management at all levels rather than to impose procedures and methods.
It is important that supervisors should be instructed how to make the
best possible use of these departments. . . .
The line of executive authority down to the first-line supervisor
should be maintained as the chief channel of communication in both
directions. . . .
If the supervisor is to fill his role effectively and if men and women
of suitable calibre are to be attracted to a supervisory career, the conditions and prospects of that career must be adequate. This means a
sufficient salary margin above operative earnings at the first-line level,
appropriate increases for higher levels and good promotion possibilities.
The supervisor should enjoy full managerial privileges as regards
holidays, sickness benefit and retirement grants. 3
W O R K STUDY, W O R K SIMPLIFICATION AND " J O B SATISFACTION "

The contribution t h a t work study can make to higher productivity has already been emphasised. 4 Certain aspects of
1

2
3
4

KATZ and

KAHN, op. cit., p.

158.

Ibid., p. 159.
Training of Supervisors, op. cit., p. 35.
See pp. 9Í! ff. above.

PERSONNEL POLICY

137

work study which give rise to problems of personnel policy were,
however, deferred for consideration in this chapter. Two problems
will be considered here—first, the resistance sometimes encountered
on the part of workers to the techniques of work study, and especially work measurement; and, secondly, the boredom and loss
of satisfaction of workers if work simplification, as a result of work
study, is carried too far.
The mistrust and resistance sometimes shown by workers towards the application of work study techniques, and especially techniques of work measurement, may be a legacy of faulty application
of these techniques in the past. If method study has been used
to break down and over-simplify work to the point where it loses
interest and meaning for the workers; if work measurement has
been used to set rates that have not been accepted by the workers
as fair ; if either or both techniques have been regarded as attempts
on the part of management to speed up the work without due
regard for the health and safety of workers or without giving
them adequate compensation for increased efforts; then resistance
is likely to be especially strong. The fact that techniques of work
measurement are not entirely objective is another reason for
mistrust.
The response of workers to attempts on the part of management
to introduce or extend work study techniques is likely to depend
partly on their past experience of such techniques and partly on
the quality of industrial relations in the undertaking. All that
has been said in earlier chapters about the attitudes of employers
and workers towards higher productivity is relevant in this connection. It is important that management should explain its
plans fully and give opportunities for workers to express their
views; that there should be confidence that the benefits resulting
from work study will be fairly distributed ; and that every attempt
should be made to agree upon procedures for protecting the
interests of workers who may be displaced or regraded in the
course of changes introduced as a result of work study.
If industrial relations are poor, a sincere attempt to improve
them may have to be made before any worth-while results can be
expected from work study. When industrial relations are good,
difficulties regarding work study and changes resulting from it
can usually be resolved if employers have a good case for the
changes they propose, particularly if workers' representatives are
given an opportunity to participate in the technical processes of
work study and especially of work measurement. What form this

138

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

participation should take is a matter for negotiation. Unions
will, however, commonly prefer that union time study men should
have the right to check times and rates set by management rather
than that they should take joint responsibility for the times or
rates set. If they help to set the original rates they will be subject
to criticism, just as management is, whenever a rate is too
tight. On the other hand, when they secure a change through
grievance procedures they demonstrate the benefits of the
union to the workers. If no opportunities for workers' participation are given, workers may well be reluctant to accept
on trust the results of studies undertaken by or on behalf of
management.
One obvious difficulty is that effective participation in work of
this kind requires technical qualifications that the ordinary workers'
representative does not possess. The International Confederation
of Free Trade Unions has expressed the view that " trade unions
should have the right to check all times and rates; for this, if
appropriate!, they should train their own technicians ".1 A number
of United States trade unions have established engineering and
research departments, and train officials in the techniques of time
and motion, study and rate-fixing so as to enable them to check
the times and rates fixed by management. In countries where
unions are financially less strong than in the United States they
may be able to provide jointly for the training of a certain number of
officials in these techniques. In PVance such training courses are
provided by the Trade Union Productivity Study and Research
Centre. In the United Kingdom a team of trade union officials
who visited the United States has recommended that the large
unions and federations should train and employ their own production engineers to study work loads and employers' plans for
reorganisation, and that the Trades Union Congress should train
or employ similar experts for the use of small unions.2 A number
of British trade unions, and the T.U.C., have taken steps to carry
out these recommendations. Some unions, indeed, were already
providing such training. The T.U.C. has initiated courses in
production and management techniques and their industrial and
trade union implications, and a number of trade unions have
arranged for selected national officers to undergo periods of training
1

UNITED NATIONS, Economic and Social Council: Labour Productivity,
Manpower, Prices and Wages, roneoed document E/C.2/330, 26 May 1952,
P- 2 2
Trade Unions and Productivity, op. cit., p. 60.

PERSONNEL

POLICY

139

with firms of industrial consultants.1 In the Scandinavian countries, too, a great deal of emphasis is placed upon the training of
trade union officials in work study techniques. This is indeed a
matter to which the trade union movement throughout the world
is giving increasing attention.
Employers frequently co-operate in providing such training
for union officials. The British Institute of Management has
recommended that, in order to win the confidence of employees
at all levels, an employees' representative should be trained in
time study techniques in all cases where they are used, and should
be authorised to check any times arrived at by the management's
time study engineers.2 A committee was set up in 1951 to organise
trade union co-operation with the British Institute of Management,
to which some 25 unions subscribe. Through publications and
conferences this Institute has contributed much to the education
of trade unionists in production subjects.
Work study does not always lead t o simplification of the work

of the individual worker; its principal results may be improvements in plant layout, production control or materials-handling.
Conversely there may be cases where work is simplified without
any prior systematic work study.3 Work study and work simplification do, however, very commonly go together. The most
practical, economic and effective method of doing a job, as determined by work study, will very often be a method that simplifies
the work of the individual worker. Where such simplification
takes the form of improvements in the arrangement of the work
post or other changes eliminating unnecessary movements and
reducing fatigue without impairing the interest and satisfaction
derived from the work, it may make an important contribution
to higher productivity 4 and may be welcomed by workers—at
1

The National Union of Boot and Shoe Operatives and the Amalgamated
Weavers' Association were among the first unions to have officers trained
by industrial consultants. They reported good results and the T.U.C.
recommended that other unions should follow this lead.
2

BRITISH INSTITUTE OP MANAGEMENT: Wage Incentive Schemes, Personnel

Management Series, No. 3 (London, 1950), p. 7.
3
Workers themselves are often able to improve and simplify their own
methods of work. They can be encouraged to do so, as has already been
mentioned, by means of suggestion schemes and by creating a psychological
climate favourable to higher productivity.
4
"Work simplification has an important bearing on higher productivity;
. . . Recommended that management investigate suggestions for simplified
methods, particularly from those directly responsible for the operation under
review." (Lithographic Printing, op. cit., p. 19.) " Motion study should
be used more widely to reduce unnecessary movements by operators, and
so avoid fatigue, and as an aid to more efficient arrangement of work."
(A.A.C.P. : Pharmaceuticals (London, 1951), p. 12.)

140

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

least after they have had time to get used to the initial change.
A number of cases have been reported, however, in which
work simplification has been carried so far as to defeat its own
purpose of raising productivity by depriving the work of all interest
or meaning for individual workers. In a well-known British
study, the results of a considerable number of tests were summarised
as follows:
Complete uniformity in manual repetitive work is generally less
productive and leads to greater irregularity in the rate of working
than a reasonable degree of variety, which is also preferred by the
workers. . . -1
An example may be taken from a more recent United States study
of a plant engaged in the manufacture of plastic raincoats. In
the department where the raincoats were assembled, work simplification had been carried to great lengths, so that one girl would
cement the two pieces for the back, another would put on the
sleeves, a third would attach the collar, and so on. Management
decided to experiment by changing the organisation of the work
to have each girl assemble a complete raincoat from materials
delivered to her bench. The results were gratifying both in productivity and morale, since the girls not only produced more but
said that they found the work more enjoyable. Whyte comments
as follows on this experience:
Management will do well to balance the anticipated advantages
[from the breaking down of jobs into simple processes] with the possible
losses in morale among employees who find that they are doing a monotonous and apparently meaningless job.
Furthermore, this scientific management approach tends to divide
the plant into two classes of people; the experts who plan, organise and
lay out the work, and the human automatons who follow orders and
do the work. A good deal of research shows that productivity and
morale are both higher when employees have an opportunity to influence
the way in which the work gets done.
This standardisation and specialisation approach tends to put
management in the position of making and enforcing the rules. It
makes impossible the sort of collaborative activity which seems to
build good morale and good production in the work force.2
1
S. WYATT and J. A. FRASER: The Comparative Effects of Variety and
Uniformity ir,. Work, Medical Research Council, Industrial Fatigue Research
Board, Report No. 52 (London, H.M. Stationery Office, 1928), p. 3. Irregularity in the rate of working is, of course, not possible on a moving
assembly line since, whatever the worker may feel, he must as a rule work at
the same pace. Even in this case, however, satisfaction or the lack of it may
be indirectly related to output by affecting absenteeism and turnover, and
possibly in some cases work stoppages.
2
W. F. WHYTE : " Organization and Motivation of Management ", in
Industrial Productivity, op. cit., pp. 97-98.

PERSONNEL POLICY

141

It appears t h a t the intrinsic nature of the work, and the satisfaction t h a t workers get out of it, are more important factors
affecting morale and productivity than employers sometimes
realise. In a nation-wide poll in the United States 3,000 employees
and several hundred employers were asked to rate in order of
importance eight factors affecting morale. Employers p u t fair
pay at the head of the list and credit for work done seventh.
Workers p u t credit for work done first, interesting work second
and fair p a y third. 1
Katz, summarising the significance of a number of studies in
morale and motivation, has remarked—
Though these specific studies do not really establish the fact that
wages and security are less important than other factors, they are in
agreement with general findings in the field that point to the significance of the work itself, the recognition given the workers, and the
social satisfactions obtained from personal associates. . . .
The central fact about the outcome of studies of worker morale
is that they do not corroborate the general philosophy of management
that emphasises the importance of external rewards. Workers like
jobs that give them a chance to display their skill and to show their
worth, and they place considerable value upon being a member of a
congenial work group. . . .
People are more effectively motivated when they are given some
degree of freedom in the way in which they do their work than when
every action is prescribed in advance. They do better when some degree
of decision-making about their jobs is possible than when all decisions
are made for them. They respond more adequately when they are
treated as personalities rather than as cogs in a machine. In short,
if the ego motivations of self-determination, of self-expression, of a
sense of personal worth can be tapped, the individual can be more
effectively energised.2
There is no one solution to the problems raised b y the inevitably
repetitive nature of many jobs in modern industry. Some workers suffer more from monotony than others, and the selection
and placement of workers on the basis of psychological tests may
help. For the rest, answers may be sought, it has been suggested,
along three different lines 3 —
(1) Through changes in work organisation. Drucker has
discussed this point and has suggested in effect t h a t work simplifi1

R. UHRBROCK: "Attitudes of 4,430 Employees", in Journal of Social

Psychology, 1934, No. 5, pp. 365-377.

Cited by KATZ and KAHN, op. cit.,

p. 155.
2
D. KATZ: Morale and Motivation in Industry, roneoed document (Survey
Research Center, University of Michigan, 1949), pp. 5, 7 and 9.
3
C. R. WALKER: "Adjustment, Individual and Social, to Technological
Change ", in Industrial Productivity, op. cit., pp. 207 ff.
10

142

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

cation has gone too far when it completely precludes any participation by workers in organising their own jobs.
To. . . [the industrial engineer] the human being is the more
productive, the more thoroughly his work has been set up and laid out
for him.
The social scientist lays stress on man's need to participate. He
therefore concludes that the human being is the more productive and
the more efficient, the more he himself designs and lays out his own
work.
The solution of this conflict seems to lie in the approach to the
problem of the individual and the g r o u p . . . . It would seem to follow...
that the spot to apply scientific management is not perhaps the work
of the individual but the work of the group. It would also follow that
the place where the individual should be given and can be given participation in the decisions regarding his own work is the group. The
work of the group, in other words, should be set up by scientific management and on industrial engineering standards. But within the group
there should be considerable latitude to enable the members to organise
the work their own way. 1
Walker quotes an example of the practical application of
this idea, with favourable results, as follows:
In a truck assembly plant, certain sub-assembly lines have been
so organised that the men work in teams of four, each team directing
itself to assembling a certain section of the body. Any one of the four
jobs on the team would be boring if continuously performed by one
worker, especially if he were in no functional relation with anyone
around him. As organised in this plant, however, each man is a member
of a team. Each helps the others on specific operations, and all rotate
between jobs. Finally, the system of rotation is up to the individual
team. Some teams " change around " twice a day, some once a week.
Management reports that this work arrangement has resulted in higher
production than any other. The union to which all the men belong
has no objection to the arrangement.2
(2) Through enlargement of the job content. It is often
supposed that the engineering principles of mass production
make it virtually impossible to provide workers with anything
but over-simplified tasks, demanding little or no skill, interest
and responsibility. It is true t h a t the technique of breaking
down jobs into their simplest constituent elements is a sound
tool of industrial engineering; but it does not follow that a worker
can learn and execute efficiently only a very small number of
basic motions. It is often possible to recombine the elements
1
Peter DRUCKER: "The Human Being in Industrial Production", in
Proceedings : Fifth Annual Time Study and Methods Conference, sponsored by
the Society for the Advancement of Management and the American Society
of Mechanical Engineers, New York City, Apr. 1950, p. 71. Cited by WALKER,
op. cit., p. 201.
2

WALKER, op. cit., p.

207.

PERSONNEL POLICY

143

of the work to be done in such a way as to enlarge the content
of the job and give it more interest and meaning for the worker.
In a certain typewriter plant, workers were recently given jobs
requiring four to five times as long a time-cycle as formerly, together
with added skill and responsibility. The workers insist that they
would never go back to the simpler jobs they had formerly held.
In the machinery division of a large business-machines manufacturing
plant, the jobs of operators have been " enlarged " to include the duties
of set-up men and inspectors. The company reports higher morale,
and a great saving in rejects. A survey shows the men prefer the
enlarged jobs.
On the assembly line of a bottling concern, workers, instead of
remaining stationary as the line moves past them and performing one
job only, move up the line and
perform several jobs, with good results
both in morale and output.1
It is true that other studies have shown that workers accustomed
to uniformity in the methods and conditions of work are often
reluctant to change to a more varied form of procedure. Baldamus 2
suggests that this may be related to a desire to conserve conditions in which they have been accustomed to develop a " working
mood ", which he describes, drawing on his own experience of
repetitive factory work, as a mildly pleasant state of mind in
which work proceeds steadily without a conscious effort of will.3
" It is no contradiction ", he adds, " that experiments with ' variety
in work ' have on the whole been positive as regards contentment
and output ; the point is that the benefits of more varied work . . .
only appear after a period of adjustment, that is, after the very
changeover has become part of an established working mood." 4
One reason for a preference for " longer-cycle " jobs may be
that it requires more effort of will to start a new cycle, or to join
two cycles, than to complete a cycle already started. A cycle,
once started, may be thought of as possessing a certain momentum
which, as it were, carries the worker along with it. It is known
from various studies on repetitive work that subdividing a large
number of articles or components into smaller groups helps to
diminish the feeling of tedium. The explanation may be that a
desire to complete a batch exerts a " pull " or " traction " similar
to the " traction " exerted by a single longer-cycle job.
1

WALKER, op. cit.,

208.

W. BALDAMUS: Incentives and Work Analysis (Birmingham, 1951),
p. 27.
3
He also suggests that minor imperfections in materials, machines or
tools, because they disrupt or prevent the establishment of a " working
mood ", may have adverse effects on contentment and output that are
out of proportion to their intrinsic importance.
4

BALDAMUS, op. cit., p.

27.

144

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

(3) Through more mechanisation. It is, at first sight, paradoxical to suggest t h a t some of the harmful effects of over-simplification of work can be met by yet more mechanisation. Yet it
appears that—
From the standpoint of the average worker, adjustment to a job
which is so " mechanical " that it can " be done without thinking "
is far easier than adjustment to a job which requires continuous but
superficial mental attention. If the attention required is attention in
depth, calling upon skill, judgment and experience, a job may become
satisfying and absorbing. It is the jobs which require high surface
attention but little or no skill or experience, however, that present the
most difficult problems of adjustment. One answer then, as Wyatt
and Fraser and later Mayo have pointed out, is to increase the degree
of mechanisation till the operator can literally do the job without
thinking, and release his mind for conversation with his fellow workers
or for thinking his own thoughts. 1
The Director-General of the I.L.O., in his Report to the 36th
International Labour Conference, said that—
If intelligence and imagination are used, I do not believe that there
is any reason why measures to raise productivity through simplification
of operations should be associated with a loss of the satisfaction which
workers derive from their jobs. For most people, indeed, knowledge
that their services are being effectively utilised, and that they are not
being made to waste time and effort as a result of faulty organisation,
is in itself a considerable source of satisfaction.2
THE

SERVICING OF SKILLED W O R K E R S

One advantage of work study to which special attention may
be drawn is t h a t it shows up, and indicates how best to eliminate,
a widespread source of waste and inefficiency that is especially
important whenever there is a shortage of skilled labour—namely,
the waste t h a t occurs when a skilled man has to spend a considerable
part of his time on work for which his special skills are not required.
The better ;' servicing " of skilled workers is mentioned time and
again in productivity team reports as an important factor contributing to higher productivity in the United States.
The team representing the British steel founding industry, for
example, reported t h a t in United States steel foundries—
. . . skill, once acquired, is not wasted. A man who is deemed capable
of ramming facing sand is not required to waste his time fetching it;
1

WALKER, op. cit., p. 209.

Op. cit., p. 87.

PERSONNEL POLICY

145

a skilled closer on an intricate job has the job so organised for him that
every core, chill and chaplet is ready to hand as he requires it. 1
The team went on to recommend that, in the United Kingdom,
" an overhaul of shop management methods is desirable, especially
paying attention to the efficient servicing of skilled men " . 2
Similarly the pressed metal productivity team reported that
in the United States—
A skilled man may be supplied with materials mechanically, or,
where that is not possible, he is " serviced " by one or more labourers,
who also remove the finished work.3
This team recommended that—
The labour of skilled men and, correspondingly, the time of the
machines should not be wasted by operators doing jobs other than
operating machines. Where necessary, service to the operators should
be supplied either mechanically or manually.4
The grey-ironfounding team reported that—
In the usual moulding operations of some jobbing foundries in
Britain the skilled moulder very often does not spend more than half
of his time in the actual production of moulds; the other half is spent
in general labouring, conveying of moulds to the floor, pouring and
knocking out, etc. . . . One of the reasons for the higher production
in the foundries of the United States was evident in the majority of
the 24 foundries visited. They have realised that this work can be done
more expeditiously and economically by lower-rated labour, with the
judicious addition of mechanical appliances together with adequate
available power.5
The drop-forging team insisted that—
. . . the hammer man (or press operator), who alone can obtain
maximum utilisation of every blow, should be so serviced that he
performs no unproductive work. He must not be limited by having
to perform the ancillary operations of fetching bars or pieces from the
furnace, passing forgings for clipping and so on. These operations are
better performed by a helper or by mechanical handling devices.8
W A G E POLICY

Payment by Results
The earnings of individual workers or groups of workers may
be related to individual or group output, provided t h a t this can
be measured, by means of individual or group systems of payment
1
2
3
4
6
6

Steel Founding, op. cit., p . 12.
Ibid., p . 39.
A.A.C.P.: Pressed Metal (London, 1950), p . 44.
Ibid., p . 5 1 .
Grey Ironfounding,
op. cit., p . 5.
Drop Forging, op. cit., p . 7.

146

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

by results. Such systems have been discussed at length in another
recent I.L.O. report 1 , a chapter of which reproduces the conclusions of a tripartite meeting of experts on this subject convened
by the I.L.O. in 1951. It will be sufficient here to draw attention
to a few points of major importance.
In the first place, there is evide rice from a number of industries
and countries that payment by results is often associated with
relatively high productivity.2 Examples are given in the report
just referred to. In addition, examples of productivity (or rather
of man-hours expended per unit of product—i.e., the inverse of
productivity) in certain United States industries are to be found
in studies by the U.S. Bureau of Labor Statistics. In the machine
tools industry, indices of unit labour requirements for firms
classified according to the system of wage payment in use
showed that establishments employing some type of incentive
system experienced much more favourable productivity trends
during virtually the whole period 1939 to 1947 than did those
paying wages on a time-rate basis. The comparison is shown in
the following table:
UNITED STATES: INDICES OF UNIT LABOUR REQUIREMENTS
IN THE PRODUCTION OF SELECTED TYPES OF MACHINE TOOLS,
BY TYPE OF WAGE PAYMENT PLAN
(1939 =
Wage payment plan

1940

1941

100)
1942

1943

1944

1945

1946

1947

Total factory
man-hours
Incentive
I 95
97
98
96
102
H o u r l y wage . . . . | 101
105
96

98
116

100
124

99
140

106
133

Incentive
H o u r l y wage . . . .

Direct labour
I 98 I 95 I
| 112 | 100 |

man-hours
91 I 85 I 84
98 | 91 | 110

84
116

84
133

90
129

Incentive. . .
Hourly wage .

Indirect labour man-hours
94 100 104 106 111
100 107 118 104 129

112
143

109
157

116
143

Source: UNITED STATES DEPARTMENT OF LABOR, Bureau of Labor Statistics: Trends
in Man-Hows Exvended per Unit: Selected Types of Machine Tools, 1939 to 1947 (Washington, 1948), p. 18. (Reasons for the trends revealed are discussed in I.L.O.: Factors Affecting
Productivity in the Metal Trades, op. cit., p. 17.)
1
I . L . O . : Payment by Results, Studies and R e p o r t s , N e w Series, No. 27
(Geneva, 1951).
2
In cases where p a y m e n t b y results and high p r o d u c t i v i t y are found
together, it cannot be assumed t h a t high p r o d u c t i v i t y is necessarily a result
of t h e incentive wage p l a n . I t m a y be t h a t b o t h are results of one or more
o t h e r factors; for e x a m p l e , more efficient a n d alert m a n a g e m e n t , b e t t e r
l a b o u r - m a n a g e m e n t relations, or b e t t e r organisation of t h e work.

PERSONNEL POLICY

147

In the same way, in the industry producing household electrical
appliances, firms with an hourly wage system experienced a 15 per
cent, increase in total factory unit labour requirements between
1939 and 1947, while firms with an incentive plan experienced
a 14 per cent, drop.1
Systems of payment by results are, however, not likely to
yield advantages on balance unless certain conditions are fulfilled.
The most important of these conditions would appear to be, first,
that before the introduction of such a system everything possible
should have been done to improve and standardise methods of
production; second, that the system should be fair; third, that
it should be reasonably simple; and fourth, that good relations
should prevail between the management and workers concerned,
and that the workers should have confidence in the scheme.
If a system of payment by results is introduced before the
possibilities of improving methods of production, tooling, layout,
etc., have been thoroughly explored and, wherever possible,
acted upon, all sorts of difficulties which could have been avoided
are likely to be encountered. Changes that should have been
made before the system was introduced will have to be made
afterwards. They may give rise to long and difficult negotiations, and needlessly frequent changes are likely to undermine
confidence in any scheme.
The fairness of any system of payment by results will depend
largely upon the accuracy with which it is possible to measure
the " work content " of a job. Where this cannot be done accurately, so that piece-rates or bonuses have to be fixed in an arbitrary
fashion, there is great danger that the results will be seriously
inequitable as between different categories of workers and that
this will lead to rate-cutting, or to go-slow tactics on the part of
some workers in order to avoid rate-cutting, or at least to general
dissatisfaction. The accurate measurement of the work content
of a job commonly requires time studies, which have already
been discussed. In the case of a small firm, or in a jobbing shop,
where the employment of experienced time-study engineers is
not justified, the times allowed will have to be very carefully
estimated by someone thoroughly familiar with the work.
Besides being fair, systems of payment by results should be
simple enough to enable a worker to calculate without difficulty
1

UNITED STATES DEPARTMENT OF LABOR, Bureau of Labor Statistics:

Trends in Man-Hours Expended per Unit: Household Electrical Appliances,
1939 to 1947 (Washington, 1950), p. 31.

148

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

what is due to him. There appears to be widespread agreement
that, where payment by results is adopted, the more directly
and quickly payment can be related to output the better. Some
British employers with experience of systems of payment by
results are convinced that, if a system is complicated, the fact
that it may be perfectly fair will not make it effective; whereas
so long as it is simple it may be effective even if slightly inequitable.1 Added force is also given to wage incentive schemes if
the practice is adopted of making up bonus records promptly
and keeping workers informed from day to day of the bonus
earned.
A reasonable degree of fairness and simplicity is necessary if
workers are to have confidence in a system of payment by results.
Such confidence can be greatly strengthened if, in addition, as
was recommended by the meeting of experts to which reference
has already been made, workers are taken into the confidence
of management from the outset and if all the features of a proposed
scheme, and the reasons for introducing it, are carefully explained
to them in advance. The meeting of experts suggested that
provision should be made for workers' representatives to participate in tt.e introduction of such a system. Participation may
take the form of sharing in the timing of jobs, in fixing production
standards and in setting rates 2 ; or of collaboration in the establishment of appropriate safeguards.
Among the safeguards which it would seem generally desirable
to include in any scheme of payment by results 3 are the following:
(a) There should be a trial period, during which any necessary
changes may be agreed upon between management and the workers' representatives before a system is finally applied.
(b) Thereafter, rate modification should only occur for agreed
reasons such as changes in job content, equipment or methods of
organisation, or the correction of clerical errors.
(c) Workers should be guaranteed minimum earnings for any
period in which output is affected by causes beyond their control.
1

P. W. S. ANDREWS and Elizabeth BRUNNER: "Productivity and the

Business Man ", in Oxford Economic Papers, Vol. 2, No. 2, June 1950, pp. 219220.
2
As has teen suggested above (pp. 137-138) workers' representatives
will often prefer to be given facilities for checking rates and times fixed by
management rather than accept joint responsibility for fixing them.
3
For a more complete treatment of this subject see Payment by Results,
op. cit., Chapter VII.

PERSONNEL POLICY

149

(d) The safety and health of workers should be adequately
protected.
(e) Quality should be safeguarded.
Group incentive plans may have advantages over individual
incentive plans, particularly in three types of situation—
(1) conveyor work, where operators cannot produce any more
work than is passed to them by the operators preceding them in
the production line;
(2) other work where the quality and handling of one operation
can greatly affect the subsequent operation; and
(3) work of such a varied nature, both as to kind and quantity,
as to make individual measurement impracticable or excessively
expensive.
Group incentives may promote team spirit among workers, the
group tending to assume responsibility for the efficiency of its
members. On the other hand the reverse may also happen,
particularly if the group is too large. Discontent instead of team
spirit may arise if some members of the group resent having to
" carry " others whom they consider less efficient.
It often happens that the introduction or revision of a system
of payment by results is accompanied by other changes, which
themselves affect productivity; for instance, a new effort may be
made to secure the co-operation of labour, new machinery or
methods may have to be introduced, new arrangements may be
necessary to secure a smoother flow of materials or greater continuity of operations, etc. Productivity gains may be attributable
to these accompanying changes as much as or more than to the
new incentives that a system of payment by results gives to workers.
Direct payment by results appears to be less widespread in
United States industry than in a number of European countries
(though other incentives, such as opportunities for promotion to
well-paid jobs, team approbation and team spirit, are probably
stronger).1 It is, however, a common practice in American
industry to fix standards of output expected of workers and to
dispense with the services of workers who after a time do not
attain these standards. An element of incentive can thus be
combined with payment by time.
1

Cf.

HUTTON, op. cit., pp. 166

ft.

150

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

A general question arising in connection with all varieties of
systems of payment by results as ordinarily understood is whether
it is right that payment should be related exclusively to the
quantity of work produced. Many other qualities which go to
make the best type of worker may be overlooked if quantity of
work is regarded as the sole criterion of an efficient employee.
In both the United States and the United Kingdom there
appears to be a growing body of thought in favour of a type of
bonus scheme known as " merit rating " or the " individual assessment " bonus scheme.1 This is based on a careful assessment of
each worker at set intervals (three or six months) in regard to
his output, quality of work, timekeeping, general ability, cooperation with supervisors and fellow-workers, and other factors.
Points may also be awarded for the unpleasant or difficult nature
of the work,, Each of the qualities selected is allotted a number
of points and weighted in accordance with its relative importance.
The total of points awarded to each employee is converted into a
weekly cash payment to be added to the standard rate. The
assessment remains effective until the next review period, thus
ensuring steadiness of earnings by the individual over the period.
Opportunity is taken at the time of the assessment to point out
to the worker the qualities in which he is weak and to encourage
him to improve them before the next assessment period. Assessments are carried out initially by the charge-hand in consultation
with the foreman in charge, and checked by the departmental
superintendent or manager and finally by the general manager.
One advantage of this type of scheme is that it can sometimes
be used to tidy up a complex wage structure which includes a
variety of grade rates, lieu rates, dirt money, etc. All these can
be covered by the assessment but, where the cash value of this
amounts to less than the plus rates previously paid, it is usual to
maintain the previous bonus for a fixed period or until it is earned by
an improved assessment. Another advantage is that movements
from one job to another are greatly facilitated, since no changes in
individual earnings are involved. Management may also have more
incentive to introduce improved methods when this can be done
without necessitating changes in basic rates or standard times.
Whatever the attractions of a scheme of this kind in principle,
it is evident that its successful operation in practice calls for the
x

Cf. Wage Incentive Schemes, op. cit., pp. 13-15; also A. F. STEWART:
" Merit-Rating Incentive Schemes ", in International Labour Reveifv, Vol. LXV,
No. 4, Apr. 1952, pp. 442-461.

PERSONNEL

POLICY

151

very highest degree of confidence on the part of workers in the
fairness and objectivity of supervisors and management. Where
such confidence prevails, it is claimed for the scheme that it possesses
high incentive value, not only to improve the quantity of work
but also to develop the other qualities on which the assessment
is based. Merit-rating schemes have been introduced by a number
of firms in the British printing industry, for example, and among
companies investigated increases in labour productivity ranging
up to 10 per cent, are reported to have resulted from their adoption.1
Trade unions in the United States however appear to be fairly
solidly opposed to merit-rating schemes, believing that they
involve too great a risk of abuse and favouritism, and place too
much power in the hands of foremen. It is clear that " merit
rating should only be adopted where management has determined
to spend the substantial time necessary to ensure careful training
of assessors and equitable assessments ".2
When individual or group output is not easily measurable, or
when there are other obstacles to the operation of schemes based
on payment by results, which link earnings directly to output,
profit-sharing schemes may be employed.3 Or these may be
employed in conjunction with systems of wage payment which
link workers' earnings directly to their output. The idea of profitsharing has always found many adherents in Germany.4 Profits,
of course, depend upon other factors—market conditions, price
fluctuations and so on—besides productivity. For this reason,
and because the group is often too large and the individual share
in profits too small and too long-delayed to serve as an effective
incentive to higher output, profit-sharing schemes should not be
regarded primarily as a method of inducing workers to put forth
greater efforts. The main value of successful profit-sharing schemes
seems to lie in the contributions they may make towards a spirit
of collaboration and a sense of partnership between employers and
workers in an undertaking in which they have a common interest.
1

BRITISH PRODUCTIVITY COUNCIL : A Review of Productivity in the Printing

Industry (London, 1953), p. 12.
2

STEWART, op. cit., p. 461.

See P . S. NARASIMHAN: "Profit Sharing: A Review", in International
Labour Review, Vol. LXII, No. 6, Dec. 1950, pp. 469-499.
4
Cf., for example, Otto DEBATIN: Gewinnbeteiligung der Arbeitnehmer.
Bedeutung und Möglichkeit (Stuttgart, J. Fink, 1951). For a critical examination of profit-sharing by a trade union writer see Egon TUCHTFELDT:
"Zur Problematik der Gewinnbeteiligung", in Gewerkschaftliche Monatshefte,
Vol. I, No. 6, June 1950, pp. 259-266. See also Hans JENNY: Die Gewinnbeteiligung der Arbeitnehmer (Zurich and St. Gall, Polygraphischer Verlag, 1950),
which gives examples of experience with profit-sharing in Switzerland.

152

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

The Structure of Wage Rates
Subject to the payment of adequate rates to the lowest-paid
workers, it seems desirable in the interests of productivity that the
structure of wage rates, and in particular the difference between
skilled and unskilled rates and that between skilled rates and the
remuneration of foremen and supervisors, should be such as to
give workers every incentive to improve their qualifications.
The need to combat inflation and at the same time to maintain
minimum standards for the lowest-paid workers in the face of
rising costs of living appears to have led in a number of countries
to a narrowing of differentials between skilled and unskilled wage
rates in recent years.1 While wage differentials provide only
one among a number of incentives to acquire skill, the narrowing
of differentials has given rise to a certain amount of concern;
this is illustrated in the following extract from a letter to The
Economist by an executive in a British engineering company:
. . . The difference in pay between unskilled, semi-skilled and
skilled labour is now so narrow that there is little incentive to serve
apprenticeships as was the practice 15 to 20 years ago. This results in
an increasing difficulty in obtaining skilled labour, and a tendency for
mediocrity to spread throughout industry. The only way to keep up
the quality of output is to employ more administrative
and executive
staff with a consequent rise in overhead costs.2
A Belgian productivity team has reported that in United States
foundries there is a greater difference than in Belgium between
skilled and unskilled wage rates, and that this is certainly one
cause of the desire to learn shown by American workers and their
sons.3
Job evaluation, applied with the co-operation and approval of
the workers concerned, has in many cases played an important
part in establishing an equitable wage structure which encourages
workers to improve their skill. The purposes of job evaluation
are: (a) to describe and assess the value of all jobs in a plant by
systematic, standardised procedures; and thus (b) as far as possible to prevent anomalies in the earnings of the different categories
1
Cf. I.L.O.:: Wages: General Report, Report VI (a), International Labour
Conference, 31st Session, San Francisco, 1948 (Geneva, 1948), pp. 94-96;

and UNITED NATIONS: Economic Bulletin for Europe, Vol. 2, No. 2, Second

Quarter, 1950, p. 57.
2
The Economist, 21 Apr. 1951, p. 913.
8
FABRIMÉTAL: Productivité des U.S.A. dans l'industrie de la fonderie de
fer (Brussels, 1952), p. 64.

PERSONNEL POLICY

153

of workers.1 A recent survey by the Dartnell Corporation of
Chicago found that in the majority of cases studied job evaluation
had, among other effects, improved industrial relations, lowered
unit costs and increased productivity.2
HOURS OF WORK

Moderate increases in the hours typically worked in peacetime (at least in the more highly industrialised countries) would
often result in an increase in total output. Unless, however,
workers had previously been working well within their capacity,
output per man-hour would tend to fall off.3 Measured in
terms of output per man-year, productivity would in these
cases increase; measured in terms of output per man-hour it
would decrease.
Even if we are chiefly concerned with output per man-year,
longer hours of work are still, in normal circumstances, of questionable advantage. Against any gain in the form of higher weekly
output has to be set the loss of satisfaction resulting from loss of
leisure. Workers' health may suffer from increased fatigue and
strain, and absenteeism and work injuries may increase.4 If
longer hours take the form of an increase in normal weekly hours,
this represents a deterioration in workers' conditions to which
trade unions cannot normally be expected to agree, though there
might occasionally be room for negotiations aimed at combining
a moderate increase in normal hours with a rise in basic rates of
pay. In the more usual case where longer hours take the form
of increased overtime, unit labour costs go up. It is true that the
advantages of fuller utilisation of capacity and the spreading of
overhead costs over a larger output may prevent a rise in total
costs per unit; but much, if not all, of the financial advantage of
working longer hours may be lost.
On the whole, except in occasional cases where hours of work
are for one reason or another unusually short, and in cases of
1
For a fuller discussion of job evaluation see Payment by Results, op. cit.,
pp. 41-45, and the works there cited.
2
Gf. THE DARTNELL CORPORATION: Job Evaluation Methods and Procedures, Report No. 605 (Chicago, 1951), pp. 5-8 and 96-100.
3

Cf. UNITED STATES DEPARTMENT OF LABOR, Bureau of Labor Statistics:

Hours
of Work and Output, Bulletin No. 917 (Washington, D.C., 1948).
4
Wartime experience in a number of countries, including the United
Kingdom and the United States, shows that an increase in accidents, injuries
and absenteeism often accompanies excessively long work schedules. Such
schedules may increase output for short periods of emergency, but over
extended periods Nature takes its revenge.

154

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

emergency when increased output is needed at almost any price,
it would seem that an increase in hours of work as a means of
promoting higher productivity will seldom be justified. The
International Confederation of Free Trade Unions has expressed
the view that " overtime . . . should only be introduced, subject
to an agreement with the trade union concerned, when all other
practicable means have been exhausted ".x
Though in advanced industrial countries normal hours of work
in manufacturing industries today are probably seldom, if ever,
longer than those which would yield the maximum output per
week, this may not always be true in underdeveloped countries,
where a reduction of actual daily or weekly hours of work might
sometimes increase not only hourly but also weekly output.
Better organisation of working schedules, and appropriate rest
periods, may sometimes help to improve productivity even if total
daily or weekly hours are unchanged.
NUMBER OF SHIFTS

Machinery and equipment are becoming more and more important in production, and in many branches of industry the pace of
invention, or the rapidity with which consumers' tastes and fashions
change, is such that expensive machines are liable to rapid obsolescence. In these circumstances it is important that the fixed
overhead costs of obsolescence and depreciation should be reduced
to the minimum cost per unit of output by increasing so far as
possible the output of each machine. One of the advantages of
longer hours of work is that they enable machinery and equipment
to be more* fully utilised. This advantage can sometimes be
secured in a much greater degree, without lengthening hours of
work, by substituting two or three shifts for a single shift. In
particular, by concentrating work on the most up-to-date equipment
in existing factories, employers would in many cases be able to
scrap old and out-of-date plant without having to face the problem
of replacing it by new plant, which in many countries has been
difficult to obtain since the war. As a result, more space
would be available in existing factories and this would facilitate
replanning on more efficient lines. There would also be less need
for the erection of additional buildings; and the financing of
re-equipment from within the business, now so difficult in many
Labour Productivity,

Manpower,

Prices and Wages, op. cit., p . 5.

PERSONNEL POLICY

155

countries because of the combination of high prices of machinery
and high rates of taxation, would be facilitated. Another important advantage from the national point of view is that shift working
would effect a considerable spreading of electric power loads.
The economies resulting from more efficient utilisation of capital
equipment would make it possible in many cases to offer workers
either higher wages or shorter hours or both.1
It appears to be much more usual to work two or three shifts
in the United States, notwithstanding the comparative abundance
of capital equipment there, than in most other countries. Among
United States industries in which, according to productivity team
reports, two or three shifts are either the usual practice or are
commonly resorted to when necessary, without opposition from
the workers or unions, are the pressed metals industry; the electrical manufacturing industry; the internal combustion engines
industry; the wrought non-ferrous metals industry; the brushes
industry; the cakes and biscuits industry; the cotton spinning,
weaving and yarn-doubling industries; the hosiery industry;
letterpress printing; lithographic printing; the packed foods
industry; pharmaceuticals; and the industry making rigid boxes
and cartons. Some of the productivity teams recommended
greater use of shift working in their own countries.2
In the United Kingdom, an investigating committee recently
recognised a number of advantages in the system of double dayshift working and concluded that " the facts adduced in the evidence
presented to us . . . prove, we think, that the wider use of the
double day-shift in industry is undoubtedly capable of making
an important contribution to the well-being of the country ".3
Hutton believes that the limited degree to which shift work is
resorted to in Britain may contain " much of the explanation for
the long lag in British productivity during the past twenty-five
to thirty years ".4 The National Joint Advisory Council has had
under consideration the desirability of extending double day-shift
1

Cf. P . Sargant FLORENCE: Labour (London, Hutchinson's University

Library, undated), pp. 62 ff. ; and MINISTRY OF LABOUR AND NATIONAL

SERVICE: Report of the Committee on Double Day-Shift Working (London,
H.M. Stationery Office, Cmd. 7147, 1947).
2
Cf., for example, Letterpress Printing, op. cit., p. 22, and Lithographic
Printing, op. cit., p. 19. I t was later reported that there has recently been
some increase in double-shift working, especially in lithographic printing, in
the United Kingdom, and that as a result at least one company has been able
to dispose of old machinery and to concentrate on up-to-date machines (A
Review of Productivity in the Printing Industry, op. cit., p. 15).
3
Report of the Committee on Double Day-Shift Working, op. cit., p . 25.
* We Too Can Prosper, op. cit., p. 108.

156

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

working in British industry as a practical means of contributing
to increased production and lower production costs. It has
invited the Minister of Labour and National Service to approach
employers and workers in selected industries where there may be
scope for an extension of the system.1
Obstacles liable to be encountered if an attempt is made to
increase the number of shifts worked include, on the employers'
side, certain difficulties of organisation and supervision. There
may, for example, be difficulties in fixing responsibility for the
care of machines or for faulty workmanship. But such obstacles
appear to have been satisfactorily overcome in a large number of
United States industries, and should not be insuperable elsewhere.
From the workers' point of view, too, shared responsibility for
a machine or for a particular piece of work may give rise to difficulties, especially where incentive systems of wage payment are
in use and where a particular job is done partly in one shift and
partly in another.
More serious from the workers' point of view are the physiological and psychological difficulties of adjusting their routines
of living—mealtimes, hours of sleep, recreation and work—to a
changed timetable.
Night work is not merely inconvenient and disagreeable but
involves some risks to health, particularly through insomnia and
fatigue. Workers rarely find favourable conditions for recuperating from the fatigue of nightwork. Overcrowded housing, noisy
surroundings and the demands of household routines are all disturbing influences on those who must rest during the day.
In addition, changes in eating habits may lead to gastric
troubles, and the limitation of contacts with friends and acquaintances, the difficulty of obtaining recreation and entertainment
at unusual hours, the impossibility of participating in beneficial
activities, such as evening courses, etc., are all negative factors
producing discontent and restlessness, which in turn aggravate the
physical and nervous troubles.
When night shifts are worked, different views are held as to
whether shifts should be rotated at long or at short intervals. According to one view, it is better to avoid the repeated disturbances caused
by frequent rotations and to keep workers on night shift for a spell
of some weeks or months in the hope of enabling them to make a
1
See Ministry of Labour Gazette (London), Vol. LXI, No. 8, Aug. 1953,
pp. 266-267.

PERSONNEL POLICY

157

satisfactory adjustment to night work. According to another
view, so many factors militate against a satisfactory adjustment
that a long spell of night work is likely to induce cumulative fatigue,
and rotation should be as frequent as possible. There is evidence
that different workers react in different ways, but further research
might well be carried out to establish which type of régime suits
the majority of workers better.
In industries where continuous operation is not necessary many
of the advantages of shift working can be secured without night
work by utilising the double day-shift system—two seven-hour or
eight-hour shifts between the hours of 6 a.m. and 11 p.m. Not
all, but many of the most serious inconveniences and disadvantages
to workers can in this way be avoided. It is true that both the
early start of the morning shift and the late finish of the afternoon
shift may make for loss of sleep. On the other hand the possibility
of shorter hours of work, greater leisure during the day with
greater opportunities for fresh air and exercise, and the opportunity

of a long break at the week-end are favourable to health. In the
United Kingdom such statistical evidence as exists, though it is
not conclusive, does not show a higher rate of sickness absenteeism
on the double day-shift system than on ordinary day working.1
Workers accustomed only to normal day work will often be
reluctant to adopt shift working even in the form of the double
day-shift. But there is some evidence that workers' objections
to this system are objections rather to the initial changes in habits
and ways of life necessitated by a switch to a two-shift system
than to continuing features of the system once they have got used
to it. The United Kingdom Committee on Double Day-Shift
Working quoted certain witnesses as saying that workpeople on
the double day-shift system were in fact reluctant to change back
to ordinary day work* ; and in the United States, where the system
is much more familiar, it appears to be accepted as a normal part
of the life of industrial communities.
If a shift system is introduced against the wishes of the workers,
many of its potential advantages will undoubtedly be lost. If
workers are asked to co-operate in the introduction or extension
of such a system, it is important, in the first place, that the reasons
for introducing the system should be fully explained to them and a
fair account given of its advantages and disadvantages; secondly,
that workers should share in the advantages through higher
1

Report of the Committee on Double Day-Shift Working, op. cit., p. 15.

158

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

wages or shorter hours or both; and thirdly, that with a view to
minimising the disadvantages special attention should be devoted
to welfare and transport arrangements for workers.
There are in addition certain things which the community as
a whole, as distinct from the employer, may be able to do to facilitate adjustments to shift working. Such adjustments are easier
in a community in which shift working is usual than in one in which
it is not. They could in some countries be facilitated by appropriate changes in the hours at which shops, cinemas and restaurants
are open and public transport operates.

PHYSICAL W O R K I N G CONDITIONS
AND W E L F A R E

FACILITIES

Good working conditions and welfare facilities are not only
valued for their own sake, but may also promote productivity
through their effects both on the physical well-being and on the
psychological attitudes of workers.
It is a truism that " work satisfaction " encourages higher productivity, but it is not always appreciated that it also makes it easier for
management to introduce changes to secure higher productivity still.
Research workers have found—and this is the key to the whole problem—that operatives, shop stewards, and local union officials alike
will accept time and motion study, relax rules limiting the number of
machines to a worker, allow redeployment of labour, welcome mechanical
aids, agree to upgrading of unskilled employees to semi-skilled operations . . . in a " good " factory or workplace. In a " bad " one their
attitude can be quite the reverse and regular restrictive practices,
backed by the unions, are supplemented from time to time when grievances arise by unofficial go-slow tactics and other hindrances on production. 1
A " good " or " bad " workplace in the above quotation means
a workplace which is good or bad in terms not only of physical
working conditions and welfare amenities but also in terms of
industrial relations. Good working conditions and welfare amenities that reflect real concern by management for the requirements
of workers as human beings can, however, go a long way towards
creating good industrial relations.
The first responsibility of management in regard to working
conditions and amenities is to ensure that the requirements of
Factories Acts, national insurance legislation and other statutory
provisions relating to conditions of work are completely satisfied.
1

" Workers' Attitude to Productivity ", op. cit., p. 11.

PERSONNEL POLICY

159

But since legislation can impose only minimum requirements,
management has also the responsibility of providing such additional
amenities as may be necessary in any particular undertaking to
ensure that the health and well-being of workers are adequately
safeguarded.
In certain countries, particularly underdeveloped countries, it
may be felt that the minimum requirements prescribed by law are
not sufficiently rigorous or that the scope of their application is
not sufficiently general. Attempts to tighten up legal minimum
requirements, or to extend the scope of their application, encounter
in many countries difficulties due to the absence of adequate
factory inspection services, for which both funds and trained
personnel may be lacking. Technical assistance may help countries
to overcome the latter deficiency.
No attempt can be made in this report to discuss individually
all the topics coming under the heading of working conditions and
welfare facilities. So far as physical working conditions are concerned, cleanliness, heating, lighting, ventilation, avoidance of
excessive noise, and the provision of adequate space are important.
So also are washing facilities and cloakrooms. It is true that
many or most human beings appear capable of adapting themselves to physical conditions they at first find disagreeable or
distressing (so that, for example, a veteran iron smelter does not
complain of excessive heat and a press operator is used to intense
noise). This does not however mean that adverse physical conditions are unimportant from the point of view either of job satisfaction or of productivity. It is a common experience, for example,
that rates of labour turnover and transfer tend to be high, though
chiefly, it seems among workers with short periods of service, in
departments where the physical environment is unpleasant.1
Since industrial workers spend about half their waking hours
in factories, it is also worth taking trouble to make the working
environment as attractive as possible. It is hard to imagine a
sharper contrast than that between the typical drab, dark, smokeridden nineteenth century factory and the model factory of the
twentieth century, light and airy, with attractive interior colour
schemes, in well-laid-out grounds with lawns, trees and flower
1
Cf. BALDAMUS, op. cit., pp. 18-21 and the sources there cited. Dr. Baldamus does however suggest that the human capacity for adaptation is such
that the effects of physical working conditions on workers' incentives to effort
are comparatively small. He is not concerned with their effects on workers'
capacity to work.

160

HIGH15R PRODUCTIVITY IN MANUFACTURING INDUSTRIES

beds. The model factory is not yet typical, but it sets standards
that more and more factories are approaching. A number of
studies suggest that a cheerful working environment makes, as one
would expect, for greater contentment and in some cases for higher
productivity than drab surroundings.
Welfare facilities, ranging from rest pauses, rest rooms, refreshment facilities (including canteens), medical services, supply
schemes, educational and recreational activities, to housing,
pension schemes and other benefits, may all play a part in building
up team spirit in the undertaking and a stable, contented and productive labour force. Not all these amenities are, of course,
needed in all undertakings. Much depends upon the adequacy
of the community services provided. In underdeveloped countries,
or in remote parts of more highly developed countries, a special
responsibility may rest upon industry to provide amenities that
are elsewhere provided through community services.
Special mention may be made of the importance of providing
factory canteens in countries where general standards of nutrition
are low. It is probable that malnutrition is an important cause
of low productivity of labour in underdeveloped countries and
among certain sections of the population in more highly developed
countries. A nutritional survey conducted in 1947 among male
African employees in a South African rubber factory came to the
conclusion that—
The high incidence of lesions of malnutrition indicates that most of
the workers are in a sub-optimal state of health, which would be expected
to have a detrimental effect on their general efficiency as factory workers.
Many of the lesions are such as develop over long periods of time and
probably date from childhood. The cause of malnutrition of the men
cannot be clearly defined, though the home surveys undertaken in the
case of a few of the men show a high incidence of inadequate diets. It
is suggested that these men have since childhood lived on the wrong type
of diet . . . and with little or no subsequent improvement
in their diet
are continuing to suffer from the ill-elfects thereof.1
The difficulties encountered in providing welfare services are
partly technical, partly economic and financial, and partly administrative.
As the mere enumeration of the services and amenities listed
above shows, the technical problems that may be encountered in
adapting the principles of good working conditions and welfare
facilities to the requirements and possibilities of individual under1
UNIVERSITY OF NATAL, Department of Economics: The African Factory
Worker (Cape Town, Oxford University Press, 1950), p. 176.

PERSONNEL POLICY

161

takings are too numerous to be discussed in this report. This is a
field in which technical assistance to underdeveloped countries maybe of value and in which, within more highly developed countries,
conferences and exchanges of views and information between
firms may enable some firms to learn much from others.
As regards economic and financial difficulties it may simply be
pointed out that the relationship between industrial welfare and
productivity is at best an indirect one ; and that many, though not
all, of the services and amenities listed above are costly to provide *
and cannot be expected to pay for themselves in the short run,
and sometimes not even in the long run, through higher productivity. A problem arises, therefore, regarding the degree of priority
to be given to improvements in working conditions and welfare
facilities as compared, for example, with increases in wages,
reductions in the prices of goods produced, increased investment
in productive equipment, or increases in distributed profits or
reserves. Such priorities can only be settled in the light of individual circumstances. It is reasonable that some part of the gain
to society from higher productivity should take the form of better
working conditions in the industries and undertakings where
productivity increases. So long as further expenditure on improving working conditions and amenities facilitates the actual work
for the worker or makes for a more satisfactory social life for the
group, such expenditure seems entitled to a high priority; beyond
a certain point, however, it becomes somewhat extravagant, and
higher wages would probably be preferred.2
Given the amount available for spending on welfare and amenities, problems also arise regarding the relative importance of
different types of welfare services. These problems are more
likely to be solved in a manner acceptable to workers if welfare
services are financed out of funds that workers' representatives
have some responsibility for administering.
This leads to the question of administrative difficulties. When
welfare services have been introduced, it has not always been
recognised as desirable to associate the workers themselves with
the administration of such services. Indeed, to some people the
1

There are, however, important services of which this is not true: for
example, a canteen can pay for itself, apart from the capital outlay; and a
contributory holiday fund may serve a useful purpose even if the company
makes
no financial contribution.
2
One undesirable consequence of a wage freeze is that it may encourage
competition between employers to take such forms as the provision of more
and more luxurious washrooms.

162

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

very term " welfare " has a paternalistic sound. Yet participation
by workers' representatives in the administration of welfare
services, through membership of appropriate committees, not
only gives workers a say in matters of direct concern to them but
can also serve as a valuable training, helping workers' leaders to
acquire an understanding of administrative problems and a realistic
and responsible outlook which may, in turn, assist them to understand the point of view of management and to co-operate effectively
with it on other matters more directly related to the achievement
of higher productivity. The French law on works committees
deals at length with their functions regarding welfare services.
A pamphlet issued by the British Institute of Personnel Management suggests that—
It is a fundamental principle that employees should have the right
to elect representatives who, jointly with the management, share the
responsibility of administering services which are run for their benefit....
Both in the administration of funds and in the running of social or
recreational schemes, management should want to recognise the interests
of the employees and obtain decisions which are the result of joint
representation round the committee table.1
This would seem to be important not only in the more highly
developed countries but also in underdeveloped countries, where
there is an urgent need to increase the number of workers with the
kind of training and the qualities of leadership that can be acquired
through such participation. The resolution concerning the promotion of facilities for workers' welfare in Asian countries unanimously adopted at the I.L.O. Asian Regional Conference held in
Ceylon in 1950 recognised that—
The workers should have the right to co-operate in the administration of the welfare facilities provided in or in connection with undertakings by such means as representation on welfare 2committees or other
bodies whose functions include this responsibility.
Administrative difficulties may often be eased by appointing
welfare officers, whose duties range from responsibility for the
supervision and co-ordination of most welfare services in the
undertaking to dealing with purely personal and family problems.
1

B. J. COEEN and M. M. TOWY-EVANS : Working Conditions and Employees'

Services (London, 1950), pp. 6-7. The importance of administering welfare
services in cooperation with representatives of the workers concerned was
recognised in the resolution concerning welfare facilities for workers adopted
by the International Labour Conference at its 30th Session in 1947 (Cf. Official
Bulletin, Vol. XXX, No. 1, 31 July 1947, p. 74).
2
Industry and Labour, Vol. I l l , No. 7, 1 Apr. 1950, p . 247.

PERSONNEL POLICY

163

The appointment of a welfare officer seems not only to provide a
useful link between management and workers on all welfare matters,
but also to introduce a personal touch, which can sometimes be
of greater importance than formal arrangements, however well
organised and managed they may be.
As a means of informing workers of progress and developments
in the undertaking, stimulating their interest in such developments,
providing a permanent record of the welfare services and benefits
available and fostering interest in social and recreational activities,
the usefulness of works magazines and similar news services, in
addition to any other channels of communication that may be
used, would seem to have been proved.
INDUSTRIAL SAFETY AND HEALTH

The promotion of safety and health is an end in itself; but it is
also an important means to higher productivity.
Industrial accidents not only cause suffering but also impede
production; many accidents cause lifelong suffering and have
catastrophic effects on production. In modern industry, with its
expensive equipment and carefully planned flow of operations, a

serious accident is extremely costly—it damages equipment, stops
work and may take workers out of production for a long time, if
not for ever. Moreover, some accidents that result in only minor
injuries, or no injury at all, can be very harmful to production.
The sum total of injuries to persons, damage to property and economic loss to communities caused by industrial accidents is enormous,
but at the same time very largely avoidable.
The protection of the worker against injury arising out of his
employment is not, however, a simple matter. While the broad
principles of accident prevention may be the same for all industries
and all countries, the detailed practical application of these principles varies enormously from industry to industry, and may vary
considerably from country to country. Factory industries, steel
works, sawmills, cotton mills and chemical works, to mention only
a few, all have problems quite their own. Differences in national
conditions introduce further complications in the promotion of
accident prevention in the various industries. Techniques must
be adapted to mentality, climate and educational level, etc. ; and
measures that are advisable in some conditions may not be so in
others. Even in a single industry the amount and complexity of
technical equipment to be made safe may be very considerable.

164

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

Voluminous codes of safety regulations have been issued for steam
plant, electrical installations and woodworking machinery, for
example. Fire prevention, machine tools, hoisting appliances,
gas cylinders, and explosive and inflammable substances are also
the subjects of many detailed regulations.1
In recent years the human element in accident causation has
received increasing attention, and has been found to be even more
complex, and perhaps even more important, than any other.
Some means of dealing with it are seen in the thousands of works
safety organisations now in existence, in works medical services,
in psychological research institutions, safety training institutions,
safety education courses, safety propaganda activities and so
forth.
The problems of accident prevention in industry fall into three
broad classes, which may be called technical, psychological and
medical. Examples of technical problems are those involved in
the design and construction of factory premises, the safeguarding
of machinery and other factory equipment, the devising of precautions against harmful gases and dusts, and the safeguarding of
electrical installations.
Psychological problems, which have more recently come to the
fore, are those directly concerned with the human element in
accident causation and include education and training in safe
habits of work, and also in supervision and management; psychological methods of vocational guidance and selection; and means
of dealing with the workers' mental and emotional troubles. It
may seem a far cry from the safeguarding of shafting to the treatment of neuroses, but the relationship between neuroses and
accidents is neither imaginary nor negligible. Some years ago the
Medical Research Council of the United Kingdom reached the
disquieting conclusion that some 10 per cent, of factory workers
suffer from definite and disabling neurotic illness and that a
further 20 per cent, suffer from minor forms of neurosis 2 ; it is
well known that persons who are ill are more liable to accidents
than those who are well.
Medical methods of accident prevention aim, among other
things, at eliminating the physically unfit from occupations unsuit1
Attention is drawn in this connection to I.L.O.: Model Code of Safety
Regulations for Industrial Establishments for the Guidance of Governments and
Industry (Geneva, 1949).
2

MEDICAL RESEARCH COUNCIL, Industrial Health Research Board: The

Incidence of Neurosis among Factory Workers, Report No. 90 (London,
H.M. Stationery Office, 1947).

PERSONNEL POLICY

165

able and therefore particularly dangerous for them—and for their
workmates.
The means employed in different countries to grapple with
these three types of problem x may be classified as follows :
(1) legislation—the laying down of enforceable rules concerning the design, construction, maintenance, inspection, testing and
operation of industrial equipment, duties of employers and workers,
training, first aid, etc.;
(2) standardisation—the laying down of official, semi-official
or voluntary rules for the safe construction of certain industrial
equipment, personal protective devices, etc. ;
(3) inspection—the means of ensuring that official rules are
obeyed ;
(4) technical research—the investigation of the qualities of
harmful materials, study of machine guards, testing of respiratory
protective devices, investigation of the most suitable materials
and designs for hoisting ropes and other hoisting equipment, etc. ;
(5) medical research—the investigation of the physical characteristics conducive to accidents, etc. ;
(6) psychological research—the investigation of the psychological characteristics conducive to accidents, etc.;
(7) statistical research—to ascertain what kinds of accidents
occur, in what numbers, to what types of people, from what
causes, etc. ;
(8) education—the teaching of safety in engineering colleges,
trade schools, apprentices' courses, etc.;
(9) training—the instruction of workers, and especially new
workers, in safe practices, etc.;
(10) propaganda—a kind of education, but more in the nature
of an emotional appeal than systematic instruction;
(11) insurance—the application of financial stimuli to promote
accident prevention.
The machinery employed to apply these techniques is complex :
it usually includes both governmental and private agencies; and
it is linked vertically from the individual factory to a national
1

For an account of the manner in which several of the most highly industrialised countries are tackling the work of accident prevention in industry,
see I.L.O. : The Law and Practice Relating to Safety in Factories (Montreal,
1949).

166

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

organisation for a single industry, and horizontally from factory
to factory in the same district and from industry to industry in
national or large regional areas.
The extensive treatment given to safety questions in practically
all the reports of the Anglo-American Council on Productivity is
a measure! of the importance of industrial safety in relation to
productivity. It was a common experience of these teams that,
whereas legal safety regulations (relating, for example, to the
guarding of machines) were more advanced in the United Kingdom
than in the United States, more was done in the United States
to promote " safety consciousness ", to educate workers in the
particular hazards of their jobs and thus to get them to accept
responsibility for avoiding accidents.
This difference between American and British practice is well
illustrated in the following passage from the report of the pressed
metal productivity team :
The American approach to the problem of safe working in press
plants is fundamentally different from our own. The greatest emphasis
is on making the operator safety conscious, and training is almost
entirely directed to that end. Safety regulations exist and vary from
state to state, but in no case are they as clearly defined or as stringent
in their requirements as in Britain. . . .

In m a n y plants there is a

Safety Committee which meets regularly to promote safety in the plant,
and, in particular, the safe handling of stock and equipment. A great
amount of safety propaganda is undertaken, and the rudiments of
safety are usually imparted to new operators before they are allowed to
work under production conditions. . . . All this operator training and
propaganda is effective. For example, in one large plant visited the
bulletin board showed 273 consecutive days of working, including
2,300,000 man-hours, without a single " lost-time " accident.1
It is clearly desirable t h a t vigorous measures to promote
safety should be regarded as an essential part of any programme
to raise productivity. Experience has shown t h a t the attitude of
top management towards accident prevention is of the highest
importance, and that little real or lasting success can be expected
unless the interest of management is genuinely active and sustained.
In order to co-ordinate and focus responsibility for safety work it
has been found desirable in undertakings of sufficient size to appoint
a full-time safety officer and in smaller undertakings to designate
an officer to assume responsibility for safety work and regularly
to devote a part of his time to discharging this duty. An important
part of the work of such an officer is to promote " safety conscious1
Pressed Metal, op. cit., pp. 48-49. Gf. also A.A.C.P.: The British Pressed
Metal Industry (London, 1953), pp. 21-22.

PERSONNEL POLICY

167

ness " throughout the undertaking by all available means; in this
task workers' representatives, through membership of works
safety committees and in other ways, can play an extremely
important part. The organisation of safety competitions between
departments and undertakings has proved a valuable means of
stimulating and maintaining the interest of workers in safety
precautions.
Ill-health, like industrial accidents, is another factor that keeps
productivity far below the levels it might attain. It is the cause
of a large amount of absenteeism, and in addition adversely affects
the output of a number of workers who are not so ill as to remain
away from work.
The health of industrial workers, like that of other sections of
the community, depends largely upon general standards of nutrition
and upon the adequacy of public health services, but it also depends
upon their conditions of work. The protection of the health of
workers in their places of employment was discussed at the
36th Session of the International Labour Conference in 1953. The
Conference adopted a Recommendation on the subject which
urged, inter alia, that national laws or regulations should contain
special provisions regarding the medical examination of workers
employed in occupations involving special risks to their health,
and should require the notification of cases and suspected cases of
occupational diseases. It was also recommended that first-aid
and emergency treatment in case of accident, occupational disease,
poisoning or indisposition should be provided in places of employment. A number of technical measures to be taken by competent
authorities or by employers to control risks to the health of workers
at the workplace were also recommended.
ABSENTEEISM AND LABOUR TURNOVER

High rates of absenteeism and labour turnover involve heavy
costs for industry and are in some plants a major cause of low
productivity. It is true that when wages do not have to be paid
to an absentee the loss of his or her output may appear to be offset.
This appearance is deceptive, however, for in modern industry the
overhead costs of idle equipment and unused services of salaried
staff are heavy. There is also the disruption of teamwork, which
may, in assembly industries, reduce output by more than an
absentee's normal contribution.1
1

Gf. FLORENCE, op. cit., p. 38.

168

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

If workers who leave are not immediately replaced, their
departure involves costs similar to those of absenteeism. Even
if they are immediately replaced, the firm still encounters costs of
training newcomers and probably also of low output, spoiling of
materials and imperfect participation in teamwork during the
period of training. 1
The action required to control absenteeism and labour turnover
falls into three stages. First, with a view to determining the
magnitude of the problems, a distinction must be drawn between
voluntary and involuntary absenteeism and labour turnover;
secondly, the causes of voluntary absenteeism and labour turnover
must be investigated; and, thirdly, there is the question of what
can be done to remove these causes.
In order to determine the magnitude of the problems it is
essential to keep records distinguishing the reasons for absenteeism
and labour turnover. The value of such records would be much
increased if standardised definitions and procedures were agreed
upon, so as to permit accurate inter-firm, inter-industry and international comparisons.2
Absenteeism (which is usually taken to mean only absence at a
time when workers would normally be expected to be present, and
which therefore does not include vacations or absences due to
accidents in the plant or other company reasons) m a y be divided
into certified sickness absence 3 , uncertified sickness absence 3 ,
absence due to domestic responsibilities, absence due to unintentional lateness, and voluntary absenteeism. Labour turnover
may be divided into turnover resulting from deaths, retirements,
1
Up to a point, labour turnover indicates the mobility between places
and jobs that is so essential to an efficient economy. But labour turnover
may rise far above this point. That this may happen in centrally planned
as well as in private-enterprise economies is shown by the fact that in the
U.S.S.R., whe:a unemployment had been overcome, excessive labour turnover
emerged and controls and penalties had to be imposed on " quitting ". (Cf.
Alexander BAYKOV: The Development of the Soviet Economic System, National
Institute of Economic and Social Research, Economic and Social Studies V
(Cambridge University Press, 1950), pp. 361 ff.) In Czechoslovakia, also,
high2 rates of labour turnover have been deprecated in official statements.
One technical hitch that often arises in comparing records is due to
variations in the number of days a worker can be absent without showing
cause before his name is taken off the books. In firms where this period is
long, the apparent rate of absenteeism is inflated. Professor Sargant Florence
suggests that " possibly a week should be the limit after which workers giving
no satisfactory reasons, such as sickness, would normally be considered to
have left and to be a case of ' labour turnover ' " (op. cit., p. 38).
3
Including absence due to accidents outside the plant. Absence due to
accidents in the plant is also sometimes regarded as a form of absenteeism.
As has been ss.id, there is no standard terminology in this field.

PERSONNEL POLICY

169

layoffs due to reduction of staff, discharges and voluntary separations. While there may sometimes be scope for action to reduce
the incidence of involuntary absenteeism and involuntary turnover
(improved physical working conditions and health services may,
for example, reduce sickness rates) it is voluntary absenteeism and
voluntary separations that constitute the essence of the problem
to be discussed in this section.
Investigation of the reasons for these phenomena is facilitated
if records are kept in such a way that the total figures both for
voluntary absenteeism and for voluntary separations can be broken
down without too much trouble according to the age, sex, marital
status, length of service, department, occupation and wages of
the workers. Comparisons of rates of voluntary absenteeism and
voluntary separations among workers grouped under the above
headings will often be illuminating.
Where rates of voluntary absenteeism or of voluntary separations are unsatisfactory, the reasons may be economic (e.g.,
dissatisfaction with wages), or institutional (e.g., dissatisfaction
with the industrial or human relations in the plant or the type of
supervision provided), or occupational (dissatisfaction with the
actual nature of the work). While measures to improve human
relations in the undertaking and to enlist the co-operation of workers
in checking high rates of absenteeism and turnover have often
yielded good results, three recent studies by the Faculty of Commerce and Social Science in the University of Birmingham suggest
that occupational factors are a good deal more important than has
commonly been thought. 1
The true reasons for absence and voluntary separations are
often difficult to get at. Further light may be thrown on the
extent of and reasons for voluntary absenteeism by comparing
absentee rates on different days of the week. In two English
companies such a comparison showed a very striking pattern of
variation characterised by high absenteeism on Mondays and a
general fall of absentee rates throughout the week towards Friday.
This pattern was repeated throughout the year, except at holiday
times.2 It has been suggested that where a pattern of this kind is
found the absentee rate on the day of best attendance, though it
1
BALDAMUS, op. cit.; J. LONG: Labour Turnover under Full Employment;
and2 H. BEHREND: Absence under Full Employment; all published in 1951.
BEHREND, op. cit., pp. 42 ff. and 127. Over the period covered by the
study there was practically no unemployment. Data for two factories in
Germany, where there was unemployment, showed no evidence of Monday
absenteeism.

170

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

may contain some voluntary absenteeism, represents a realistic
approach to the concept of a practically attainable minimum
absentee rate. 1
In the study in which this suggestion is made a " Blue Monday "
index was calculated for two companies, showing the number of
deficient attendances on Mondays as compared with Fridays. The
weekly attendance pattern and the " Blue Monday " index were
found to vary considerably for different occupations, departments
and factories. It is stated that—
Monday absenteeism appears to be a phenomenon of general social
incidence in many English factories. It is characteristic not only of
individual but of group behaviour. In many departments the " Blue
Monday " pattern was shown by more than 25 per cent, of the workers,
and in no case was a high "2Blue Monday " index due to the action of
only one or two individuals.
No close relationship could be discovered between the " Blue
Monday " index and working conditions, size of departments,
physical effort required, wages or age. Supervision appeared to
be only a secondary factor, the type of work being the prime determinant of the " Blue Monday " index. It is stated that this
index " appeared to vary with the psychological strain involved in
the operation, rising as the strain increased ".2 Further research
into methods of measuring the psychological strain involved in
different operations is, however, required. The strength or
weakness of the " traction " experienced 3 appears to be one important element influencing the degree of psychological strain. There
is, however, no reason to emphasise this element to the exclusion
of others. More generally, Behrend suggests that " if Monday
absenteeism is a sign of attitude to work, workers with a ' Blue
Monday ' attendance pattern can be identified as workers with an
unfavourable attitude to work, and causes of dissatisfaction can
be discovered by interviewing these workers ".2
High rates of voluntary labour turnover have often been
regarded as evidence of poor-quality management. The Birmingham studies suggest that this is an incomplete explanation. Investigations in two companies point to the existence of a connection
between the psychological strain involved in different kinds of
1

2
3

BEHREND, op. cit., p. 46.

Ibid., p. 129.
That is to say, the sense of being drawn or pulled along by the inertia
inherent in a particular activity. See p. 143 above.

PERSONNEL POLICY

171

work and the rate not only of voluntary absenteeism but also of
labour turnover among different categories of workers.1
The evidence collected so far is sufficient to advance the statement
that type of work is of greater importance to the study of the human
factor in industry than has been thought recently. As to labour turnover
in particular, it is clear now that any investigation which does not pay
attention to occupational differences remains essentially incomplete.
But this does not mean that the conventional efficiency-hypothesis
must be discarded altogether. It is still possible, and even likely, that
a residual factor, " efficiency of personnel management ", remains as a
separate determinant of turnover. However, if this is to be assessed
accurately, it will be necessary to compare series of identical or similar
jobs, in respect of turnover, in different factorie and departments.2
Until the reasons for high rates of voluntary absenteeism or
turnover have been discovered, action designed to reduce such
rates is bound to be of a hit-or-miss character. Once the reasons
have been discovered the appropriate line of action will often
suggest itself. The reasons will not, of course, be the same in all
cases; but, if the conclusions to which the Birmingham studies
point are accepted, it seems that it would often be worth while for
managements suffering from high rates of voluntary absenteeism
or turnover to go to a good deal of trouble to ascertain what features
of the work done in the undertaking are particularly disliked, and
to devise adjustments that would, so far as possible, eliminate or

modify these features.

B A L D A M U S , op. cit.,

Ibid., p . 69.

pp.

ft.

PART III

PRACTICAL METHODS OF INCREASING
PRODUCTIVITY

CHAPTER VII

CONCLUSIONS OF THE MEETING OF EXPERTS
ON PRODUCTIVITY IN MANUFACTURING INDUSTRIES
The Meeting of Experts on Productivity in Manufacturing
Industries already referred to in the present study was held under
the auspices of the I.L.O. in Geneva in December 1952. It included
16 experts from 13 countries 1 and was also attended by representatives of the Governing Body of the International Labour Office,
a representative of the United Nations and observers from the
Organisation for European Economic Co-operation, the International Committee of Scientific Management, the International
Confederation of Free Trade Unions, the International Federation
of Christian Trade Unions and the International Federation of
Business and Professional Women.
The Meeting unanimously adopted the conclusions set out
below.
1

The following experts attended the meeting:
Mr. Erik BENGTSON (Sweden): Formerly Managing Director, Boliden Mining
Company.
Dr. J. A. BERGER (Netherlands): Chairman, National Committee on Methods
of Increasing Productivity; Chairman, Board of Conciliators.
Mr. Emile BOURSIER (France): Secretary-General, Union of Metallurgical and
Mining Industries.
Mr. W. F. BRAZENER (United Kingdom): Managing Director, The Mint,
Birmingham, Ltd.
Dr. P. H. COOK (Australia): Assistant Secretary (Employment), Department
of Labour and National Service; author of The Productivity Team Technique (Tavistock Institute of Human Relations); Lecturer in Industrial
Administration, University of Melbourne.
Mr. J. CRAWFORD (United Kingdom) : President of the National Union of Boot
and Shoe Operatives.
Mr. C. P. DAVE (Pakistan) : Assistant General Secretary, All-Pakistan Confederation of Labour.
Mr. R. FAUPL (United States): International Representative, International
Association of Machinists; Labour Member of Special Panel on Incentive
Regulations for Increased Productivity; alternate Labour Member on the
Review and Appeals Committee of the Wage Stabilization Board.
Mr. John C. GEBHART (United States) : Director of Research, National Association of Manufacturers; Chairman of the Business Research Advisory
Committee to the Bureau of Labor Statistics of the U.S. Department of
Labor.
[Footnote continued overleaf.]

176

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

INTRODUCTION

1. In the broadest sense, the problem of raising productivity
is the problem of making more efficient use of resources in general
—of using them to produce as much wealth as possible at the lowest
possible real cost.
2. Higher productivity provides opportunities for raising the
general standard of living, including opportunities for—
(a) larger supplies both of consumer goods and of capital goods
at lower costs and lower prices;
(b) higher real earnings;
(c) improvements in working and living conditions, including
shorter hours of work; and
(d) in general, a strengthening of the economic foundations of
human well-being.
3. In order to ensure that higher productivity does in fact
lead to higher standards of living, it is of the utmost importance—
(a) That the benefits of higher productivity should be equitably distributed among capital, labour and consumers.
(b) That the demand for goods and services should be maintained at a sufficiently high level and that adequate measures should
be taken to prevent higher productivity from leading to unemployment. In countries where employment opportunities are limited
by scarcity of capital, special attention needs to be devoted to the
problem of ensuring an adequate rate of capital formation.
Dr. George V. HAYTHORNE (Canada) : Director, Economics and Research
Branch, Department of Labour; Chairman, Interdepartmental Committee
on the Measurement and Analysis of Productivity.
Dr. H. KNOLLE (Federal Republic of Germany): Ministry of Labour.
Mr. Werner RASMUSSEN (Denmark): Danish Productivity Council; Danish
Representative on the Productivity and Applied Research Committee of
the O.E.E.C.
Mr. René RICHARD (France): Member of the Economic Council; Director of
the French National Productivity Committee and of the French Association
for the Increase of Productivity; Founder President of the Trade Union
Productivity Study and Research Centre ; Secretary-General of the National
Federation of Engineers and Senior Supervisory Staff (Fédération nationale
des ingénieurs et cadres supérieurs de la C.G.T. - Force ouvrière - F.N.I.C. F.O.).
Mr. S. SFORSÎN (Brazil): President of the Union of Master Craftsmen and
Supervisors in the Spinning and Weaving Industry of the state of Säo
Paulo; Teacher and Head of the Advanced Technical Training School for
Spinners and Weavers belonging to the Union.
Mr. R. M. SHAH (India) : Controller of Stores, Bombay Electric Supply and
Transport Undertakings; formerly industrial and business consultant.
Mr. Alfred WALTHER (Switzerland) : Engineer; Professor of Business Economics
in the University of Berne.
Dr. HAYTHORNE served as Chairman of the Meeting.

CONCLUSIONS OF THE MEETING OF EXPERTS

177

These are matters both of social justice and of economic necessity ; failure to distribute widely the benefits of higher productivity
and to maintain demand and employment would mean that the
conditions for continuing increases in productivity would not exist.
4. It is also of the greatest importance that there should be a
free and strong trade union movement within a régime which
ensures fullest freedom for the exercise by it of collective bargaining rights on an equal footing with employers and/or their organisations.
5. The achievement of higher productivity calls for action on
the part of governments, employers and workers. Governments
have a responsibility for creating conditions favourable to higher
productivity by promoting a balanced programme of economic
development, and by adopting appropriate economic and social
policies concerning such matters as foreign trade, capital formation,
monopolistic practices, the assurance of adequate supplies of raw
materials, monetary and fiscal conditions, the development of
efficient employment services, health, housing, scientific research
and education. While primary responsibility for action to raise
productivity in individual undertakings rests with management,
the active co-operation of workers and their representatives is
indispensable. Success in obtaining the co-operation of workers in
measures to raise productivity is itself a test of the quality of
management, but depends also upon trade union leadership.
6. Action designed to raise productivity may encounter resistance to change on the part of any or all of the various groups
working in an undertaking. Such resistance is one of the major
problems in the field of productivity, and action to overcome it
must be based on a careful examination of the particular situation
and an understanding of the reasons for such resistance.
7. For the purpose of this statement of conclusions, the term
" productivity " is used throughout to signify the ratio between
output and input in a plant, an industry or an economy as a whole.
This ratio can be expressed in terms of different input factors, such
as labour, capital or raw material. For several reasons, including
greater availability of manpower data, labour (man-hours, man-days
or man-years) is frequently used as the denominator in this ratio.
Although it has limitations, this ratio has much value for practical
purposes. But the changes in productivity revealed by this ratio
may be, and often are, influenced by changes in machinery, equipment, plant organisation and raw materials, as well as by changes
in the quantity and quality of labour. It is highly important in
analysing productivity changes to keep all such factors in mind,
since they all affect final cost figures.
8. Statistical measurements and comparisons of productivity
can be of great value as pointers to the action that may need to
be taken in order to raise productivity in particular plants or

178

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

industries, and attention is drawn to the desirability of developing
and making use of uniform techniques for the measurement of
productivity.
9. Conditions vary greatly from country to country, from
industry to industry and from plant to plant. While the conclusions which follow therefore apply in varying degrees in different
circumstances, it is important that in every case all practicable
action should be taken to raise productivity.
GENERAL CONSIDERATIONS

10. Higher productivity calls for concerted efforts on the
part of members of all groups engaged directly or indirectly in
production. Such efforts may require in some cases far-reaching
changes in the attitudes of all concerned. Full co-operation on
the part of all groups can be expected only in a society which
accepts principles of social justice, and in which it is recognised
that the fundamental purpose of industry is to serve the needs
of society eis a whole.
11. Where machinery exists for co-operation between employers
and workers, it should be used to the fullest possible extent for
the purposes of promoting higher productivity. Where such
machinery does not exist in a given industry, consideration should
be given to its establishment at the national, regional or plant
level.
12. Where it is possible and appropriate to do so, there are
advantages in discussing at the level of the industry, or at regional
levels, such matters as arrangements for the sharing of the results
of increased productivity and the safeguards to be applied for the
well-being of workers and the continuing efficiency of the undertakings in the industry, since such discussions may make possible some measure of uniformity in the application throughout
an industry of techniques for raising productivity.
13. In order that, wherever possible, measures taken to promote higher productivity shall have the support and understanding of workers and their representatives, appropriate arrangements
should be made at the level of the undertaking, by which—
(a) if general principles have been discussed at the level of the
industry or at the regional level, as envisaged in paragraph 12
above, their application in the particular undertaking should be
examined, and opportunity should be given for detailed explanation,
comments and suggestions;
(b) where no machinery exists at the industry or regional level,
matters such as those envisaged in paragraph 12 above should be
examined, explained and discussed at the plant level.
14. Representatives of employers and workers and/or their
organisations should be consulted by governments on national

CONCLUSIONS OF THE MEETING OF EXPERTS

179

policies designed to promote higher productivity. Consideration
should be given to setting up national productivity centres or
similar organisations, where none yet exist, to serve as centres of
information and research, and in certain circumstances to coordinate national efforts to promote higher productivity; these
should be under the control of boards or committees on which
employers' and workers' organisations are equally represented.
Co-operation between national productivity centres or productivity
committees on matters of common interest should also be encouraged. Where it is appropriate, consideration should be given to
the establishment of joint committees, or centres for research
and information, for the promotion of productivity in individual
industries.
15. The share of workers in the benefits of higher productivity
may take the form in part of higher wages, in part of lower prices
for the goods produced, and in part of better working conditions,
including shorter hours, social services, and workers' housing.
Increases in wages and improvements in working conditions made
possible by higher productivity should be determined, wherever
possible, by collective agreements. The manner in which the
increased wealth yielded by higher productivity is devoted to
providing these various benefits will depend upon the varying
circumstances of different countries. While the workers directly
connected with increases in productivity should benefit, consideration should also be given to workers in other industries where an
increase in productivity may at the moment not be possible to
the same extent. Social equity demands that consideration should
also be given to industrial and social groups who may for various
reasons not be in a position to press their claims. Such groups
include supervisory, technical and other staff.
16. In taking measures to increase productivity in his undertaking the employer should take into account as far as is practicable the human problems raised by technological change.
17. It is desirable that government research and operating
agencies in the labour field should have the closest possible contacts both with industry and with vocational and other training
establishments, and should be in a position to collect and analyse
such statistical and other data as will make possible reliable
studies of trends in the employment situation on which estimates
of available supplies of manpower, of future requirements for
different kinds of skill, and of the need for labour mobility can be
based.
18. Improvements in equipment and techniques change the
nature of employment opportunities and may make it necessary
for some workers to change their jobs. Measures to increase productivity should therefore be accompanied by measures to protect
the interests of any workers who may lose their jobs or be threatened
with loss of jobs. In particular—

180

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

(a) Governments should accept continuing responsibility for
the implementation of policies designed to maintain high and
stable levels of employment.
(b) Measures should be taken, in accordance, where possible,
with agreed procedures, to keep to a minimum the number of
workers who may lose their jobs and to assist the re-employment
of displaced workers. Such measures should include—
(i) Advance planning by employers of changes in industrial
processes or equipment, and advance notification of displacements expected to result therefrom. Consideration
should also be given to reducing or suspending new recruitment with a view to retaining redundant workers until
sufficient jobs become available for them as the result of
normal labour turnover.
(ii) The granting by employers of preference to displaced
workers in the filling of vacancies, with due regard to
efficiency, good conduct and seniority.
(iii) The provision, where appropriate, of vocational guidance,
training and retraining facilities.
(iv) Improvements, where necessary, in employment service
organisation, designed to ensure that information regarding suitable vacancies is promptly made available to all
who need such information.
(v) Measures to promote the geographical mobility of labour,
such as, where appropriate, removal grants and programmes for the construction of workers' houses.
(c) Measures should be taken through unemployment insurance
schemes or in other ways to protect the living standards of workers
who may lose their jobs.
19. Although considerable progress has been made in recent
years, there is an urgent need for further experiment, investigation and research into the influence of the various factors affecting productivity. This work may be undertaken, according to
circumstances, on an international, national, industry or plant
basis, and may require close collaboration between people drawn
from variouii backgrounds and scientific disciplines. Irrespective
of the auspices under which such research is conducted, it should
be planned with the full co-operation of representatives of both
employers' and workers' organisations. This co-operation should
facilitate the acceptance and application of the results of research.
20. In order that the most effective means of increasing productivity should be made widely known and applied where practicable, it is essential that there should be a free exchange of information between countries, industries and undertakings. In addition
to the use of the usual media of communication—newspapers,
periodicals and other publications, films, filmstrips, etc.—the
increasing practice of exchanging information by means of personal

CONCLUSIONS OF THE MEETING OF EXPERTS

181

contacts should be encouraged. Attention is drawn particularly
to the value of study visits of groups or teams representative of
the undertaking, industry or country concerned.
21. In countries which are underdeveloped either economically
or in terms of industrial relations, considerable help in the introduction of techniques for raising productivity, including many of those
referred to in this statement of conclusions, can be given by the
International Labour Organisation, other specialised agencies and
the United Nations under the provisions of their Expanded Programme of Technical Assistance. It is accordingly recommended that
in seeking to increase productivity in their manufacturing industries, those countries should make the fullest use of this assistance.
MEASURES TO PROMOTE PRODUCTIVITY
WITHIN UNDERTAKINGS

22. Subject to what has been said above concerning action by
governments and action at the level of the industry, the raising
of productivity depends primarily on action taken at the level of
the undertaking.
23. Primary responsibility for action to raise productivity in
individual undertakings rests with management.
24. No effort to increase productivity can succeed without
good relations between management and the workers concerned
and their representatives, and measures should be taken by them
to promote such relations.
25. Increased productivity in the undertaking calls for action
in three main fields—
organisation and control of production;
personnel policy; and
plant and equipment.
The action to be taken in these fields will vary in accordance with
the economic position of the undertaking. Even when it is not
possible to make substantial changes in equipment, it will always
be possible to use fully and efficiently the means available, on the
one hand, for the continuous improvement of organisation and
methods and, on the other hand, for the active participation of
all personnel in efforts to increase productivity.
Organisation and Control of Production
26. Every effort should be made to achieve a greater degree of—
(a) simplification : the process of reducing the number of types
and varieties of product made;
(b) standardisation: the process of organising agreement on (1)
a standard for a particular product, range of products, or procedure,

182

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

and (2) the application of that standard; a standard is a definition
with reference to performance, quality, composition, dimensions
or method of manufacture or testing;
(c) specialisation: the devoting of particular productive
resources exclusively to the manufacture of a narrow range of
products.1
27. The raising of productivity requires an examination of the
general organisation of the undertaking and a clear definition of
the lines of authority and responsibility. The advantages of
adopting a form of organisation which permits specialisation of
functions, together with adequate co-ordination, have been recognised increasingly in large establishments and organisations.
28. Attention should be given to work-study techniques,
including method study and work measurement, as a means of
improving the organisation of work and simplifying processes and, in
suitable cases, as a basis for systems of payment by results. Care
should be exercised in interpreting the results obtained by these
techniques. The agreement and participation of workers are
essential for the successful application of such techniques.
29. Careful attention should be devoted to production planning and control in order (a) to ensure that materials and component parts are available when and where they are required;
(b) to reduce as much as possible the time when machines are idle;
and (c) to ensure that workers are neither overworked nor left idle.
30. In applying work study and production control every effort
should be made to simplify works processes and thereby to effect
economies in. labour, equipment and materials.
31. Design and planning staff should be kept
cost and performance of the various items of
materials used, so that they may be better able to
economical methods and tool designs. There is
closer co-operation with users when products are

informed of the
equipment and
devise the most
often scope for
being designed.

32. There should be the closest co-operation and interchange
of information between the departments responsible for design,
planning and production, in order to establish maximum efficiency
in labour utilisation and plant installation.
33. In many undertakings it will be found highly advantageous
to establish a development department. This should have constantly in mind the possibility of improvements in plant design and
operation. It should co-ordinate any suggestions and ideas for
improving works processes. It has special opportunities in the
fields of machine control and the flow of material through the
undertaking.
1

Cf. Simplification

in Industry,

o p . cit., p . 2.

CONCLUSIONS OF THE MEETING OF EXPERTS

183

34. Careful attention should be devoted to costing and budgetary controls designed to provide management with (a) accurate
information about unit costs ; (b) the means to control expenditure
properly and to correct failings and shortcomings by comparing
results actually achieved with budget forecasts; and (c) guidance
in planning for the future.
35. Special attention should be given to raw materials and to
marketing policies. In particular, reorganisation of the methods
of distribution and a study of markets may be necessary in order
to ensure an outlet for increased production.
36. Undertakings can operate at optimum efficiency only when
regular work schedules can be maintained. The following points
are emphasised:
(a) Governmental policies designed to maintain high and
stable levels of income and employment can play an important
part in promoting a fuller utilisation of capacity.
(b) It is of the highest importance that public authorities should
avoid unnecessary irregularity in the timing and placing of their
orders.
(c) Manufacturers may sometimes be able, through marketing
policies or price differentials, or in other ways, to reduce seasonal
and other fluctuations in the demand for their products.
(d) Better planning of production schedules may also help to
reduce irregularities in production arising from seasonal and other
fluctuations.
37. In cases where adequate markets exist, where supplies of
materials and of labour are sufficient and where overhead costs
represent a substantial proportion of total costs of production, the
possibilities of increasing production by working a larger number
of shifts should be studied.
38. In the establishment of new plants or branches, careful
consideration should be given to the relative advantages, from the
point of view of productivity, of alternative localities. Factors
requiring attention include the availability of different kinds of
labour, transport, power and raw materials. In some countries
regional or national planning makes an important contribution to
a sound and balanced location of industry.
Personnel Policy
39. In order to improve the application by executive and
supervisory staff of sound policies and efficient techniques concerning personnel matters within an undertaking, management should
consider the appointment of qualified personnel officers and, where
the size of the undertaking permits, the organising of personnel
departments or services.

184

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

40. With a view to ensuring that the most effective use is
made of the services of all members of the working force in the
establishment and that employees are engaged on jobs which they
can perform efficiently and with satisfaction to themselves, attention should be given by management to improving the methods
used for the selection and placement of members of the undertaking
and the follow-up procedures designed to review their progress and
adjustment to their jobs.
41. The practice of giving brief induction courses or orientation
courses to new employees in industry, designed to give them an
understanding of the undertaking in which they work and of their
own place in it, is spreading and is to be commended.
42. Foremen and supervisors can make specially important
contributions to higher productivity. They constitute the principal
link between higher management, scientists and engineers on the
one hand and operatives on the other. It is of fundamental
importance that they should be kept informed of, should understand and should be able to explain the policies and programmes
of higher management. Steps should be taken to ensure that they
are carefully selected and are fully represented, either directly or
through their organisations, in any machinery which is established
in the undertaking.
43. In order to ensure that skilled workers are not required
to spend any considerable proportion of their time on work for
which their special skills are not required, attention should be
given to the possibility of servicing such workers more effectively,
whether by mechanical means or by providing more unskilled
assistance.
44. Wherever there is a shortage of skilled labour, attention
should be given to the proper training of skilled workers through
apprenticeship or other bona fide training programmes and to the
possibility of simplifying work methods with a view to increasing
the proportion of work which can be done by semi-skilled operative
labour. At the same time opportunities should be provided for
non-skilled workers to acquire the skills needed for the performance
of such operations.
45. Education and vocational training can make a major
contribution to higher productivity. Special attention is drawn to
the following points:
(a) The organisation of educational and vocational training
activities requires foresight in estimating both present and future
trends in requirements for different categories of workers and
different kinds of skill.
(b) Management's capacity to discharge its responsibilities for
raising productivity can be increased by means of appropriate
training designed to promote " productivity consciousness " based

CONCLUSIONS OF THE MEETING OF EXPERTS

185

on a thorough understanding of the basic principles and the social
objectives and implications of techniques for raising productivity.
(c) Much of the initiative for making specific proposals and for
applying specific measures for raising productivity must come
from scientists, engineers, technicians and industrial relations and
personnel officers employed in industry. There is an acute shortage
of persons trained in the principles and techniques of industrial
engineering and organisation, and a great need for expanding
facilities for their training. In this connection universities and
technical colleges can make an important contribution and should,
where necessary in order to meet this need, introduce or expand
courses in industrial organisation and industrial engineering.
(d) There is growing recognition of the cardinal importance of
adequate training for foremen and supervisors not only in their
technical and administrative duties but also, and perhaps especially,
in the principles of human relations, since it is of the highest importance that there should be mutual confidence and friendly relations
between supervisors and their personnel.
(e) Systems of basic training for skilled workers should not be
unduly specialised. They should aim at imparting general information and cultivating general interests and abilities of value in a
variety of actual working conditions. Systems of basic training
should be supplemented and completed by other types of training
designed to develop specialised skills and to facilitate the promotion
of workers to positions of greater responsibility and skill.
(f) The necessity for training semi-skilled workers, as distinct
from skilled workers, is more and more widely recognised. Experience has shown that the time required to learn a job can often be
shortened, the number of failures reduced and the process of learning converted into a more satisfying experience if adequate instruction for semi-skilled workers is provided.
(g) Special training programmes may be needed in undertakings or industries where measures to raise productivity are in
process of application, in order to enable workers to adapt their
skills to changes in production techniques or equipment or to
facilitate the re-employment of displaced workers or workers
threatened with displacement.
(h) It may be desirable, particularly for establishments which
are not familiar with modern techniques for increasing productivity,
to put into operation programmes to increase productivity which
require training in these techniques in the first place for supervisory
personnel and subsequently for all personnel; for this purpose it
will be necessary to give special training to selected members of the
supervisory personnel who will be responsible for the programme.
It is important that the action of those responsible for such programmes be effectively supported by management. It is recommended
that such programmes be co-ordinated at the industrial or regional
level. Use may be made in this connection of the centres or other
similar agencies referred to in paragraph 14, where these exist.

186

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

(i) Where industrial consultants are employed in an undertaking to introduce work-study or industrial engineering principles, or
where such techniques are to be introduced by the industrial
engineering department of the firm, the advantages of training a
workers' representative from the outset of the work-study process
should be given the most favourable consideration as a further
guarantee that workers' interests will be protected. This practice
is common in some countries and industries; the firm concerned
maintains the normal earnings of the workers' representative.
46. Training Within Industry, commonly known as T.W.I.,
has proved of great practical value in many undertakings. It is
recommended that all undertakings should adopt some system of
this nature, adapted to the conditions of each country, with special
emphasis on the development of job simplification.
47. The introduction and development of industrial engineering
is not regarded as a substitute for the normal process of wage
negotiation between trade unions and management at the plant,
regional or industry level. It is therefore emphasised that trade
unions should, where practicable, have fully trained personnel
on their staff capable of exercising the function of negotiation as
experts independent of management.
48. Procedures and practices regarding promotion and upgrading should be such as to give workers full opportunities of access
to higher grades and to encourage them to put forth their best
efforts. These procedures and practices should be known to every
employee and made manifest by both example and precept.
Opportunities for applying for such positions as charge-hand,
assistant foreman or foreman should be publicised within the
undertaking before recourse is had to outside recruitment. Some
undertakings have found it appropriate to hold open competitions
for these and other positions. In considering qualifications for
upgrading, consideration should be given to the abilities to appreciate human values and maintain good relationships with fellow
workers.
49. In view of the fact that in all industries methods and
systems of remuneration have a great influence on output and
on productivity, particular attention should be given to such
methods and systems. The Meeting did not discuss in detail the
question of payment by results, this subject having been dealt
with by the Meeting of Experts on Systems of Payment by Results
convened by the International Labour Organisation in April 1951.
Attention is drawn to the statement of General Principles concerning the use of systems of payment by results adopted at
this earlier Meeting, which is reproduced as an appendix to
the present document.1
1
This statement has not been reproduced here but may be referred to in
Payment by Results, op. cit., Chapter VIII; also Industry and Labour, Vol. VI,
No. 7, 1 Oct. 1951, pp. 270-275.

CONCLUSIONS OF THE MEETING OF EXPERTS

187

50. In the determination of wages, attention should be given
to the desirability, subject to the payment of adequate remuneration to the lower-paid workers, of maintaining such differentials
between the wages of supervisory, skilled, semi-skilled and unskilled workers as will provide them with adequate incentives.
51. Attention should be paid to the desirability of making
the system of wage payment as simple as possible and of explaining it clearly; it is important in the interests of higher productivity that workers should understand the system in use, and should
be able to check their own production and wages.
52. In addition to other incentives which may be provided to
encourage higher productivity, it may be desirable to provide
special incentives for the saving of materials.
53. The knowledge and experience which workers have of
actual working conditions, of materials, equipment and handling,
are of great value. Full advantage should be taken of this knowledge and experience. Favourable consideration should be given
to the institution of suggestion schemes under which suitable
payments are made, having a reasonable relation to the benefit
accruing to the undertaking as a result of suggestions received.
Valuable results have been obtained by associating suggestion
schemes with programmes for training workers in methods of
increasing productivity and by encouraging them to formulate
suggestions on specified points.
54. Attention should be given to the importance of good physical working conditions—plant layout, cleanliness, tidiness, lighting, heating, ventilation, etc.—and of welfare facilities in the
building up of a contented, stable and efficient labour force. Where
no adequate provision for consultation and co-operation between
employers and workers on welfare matters exists, either through
legislation or through collective agreements, measures should be
taken to provide for such consultation and co-operation.
55. Vigorous measures to promote safety and health should be
regarded as an essential part of any programme to raise productivity. In plants of sufficient size there should be a full-time
safety officer; in smaller plants there should be an officer who,
as a recognised part of his duties, assumes responsibility for safety
work and regularly devotes a part of his time to discharging this
responsibility. Efforts should be made to promote " safety consciousness " and safe working methods throughout the plant by
all available means, and workers' representatives should participate in such efforts.
56. While the foregoing suggestions cover women workers as
well as men, special consideration should be given to the specific
problems concerning women workers, in order, inter alia, to promote an efficient distribution of the labour force and to afford—

188

HIGHER PRODUCTIVITY IN MANUFACTURING INDUSTRIES

(a) to all women workers the opportunity of performing efficient service suitable to their aptitude and ability;
(b) to women workers with domestic responsibilities, conditions
of employment which facilitate the performance of their domestic
obligations.
Special measures may in certain cases be necessary in such fields
as social services, health, welfare, selection and training.
Plant and Equipment
57. Management should have constantly in mind the question
of whether the installation of new capital equipment is needed
or whether satisfactory improvement can be effected by modification of existing equipment or improvisation.
58. In plants where machinery is inadequate or obsolete a
high priority should be given to the task of extending and modernising mechanical equipment. Great care should be devoted to the
selection of equipment of the type most appropriate for the purpose in hand and to the adaptation of equipment and techniques
to local conditions so as to promote the best use of available capital
in combination with the full utilisation of other resources. In this
connection, liaison between manufacturers using machinery and
those who make it offers substantial scope for raising productivity.
59. Efficient handling of materials is an important factor in
raising productivity. Economies in this field may be achieved
through (a) carefully planned layout, ensuring a proper sequence
of operations, and (b) mechanisation of handling to the maximum
degree practicable. There is considerable scope for ingenuity in
using the available material-handling equipment to the best
advantage. The modernisation of equipment should often start in
this field.
60. There is often considerable scope for saving labour at
relatively little expense through the mechanisation of auxiliary
equipment, for example, the use of powered hand tools.
61. Special care should be devoted to the maintenance of
machinery, emphasis being placed on preventive maintenance.
There should be well-planned maintenance schedules and specialisation of maintenance functions. In some large undertakings good
results have been obtained by decentralising maintenance staff,
integrating it in the production services, and leaving maintenance
workers subject to directives from the maintenance engineers on
technical matters only.
62. Higher productivity requires the development and the
maintaining of a correct balance in the productive capacities of
different departments in order to avoid bottlenecks.

INDEX

INDEX
A
Absenteeism, 167-171
Accidents, prevention of, 163-167, 187
Accounting, 82-85
Administration
and
co-ordination,
79-80, 82, 91, 96
Allen, G. C , 79
Andrews, P. W. S., 148
Anglo-American Council on Productivity, 2, 15, 16, 19, 44, 53, 55, 56, 60,
66, 72-77, 79, 81, 83, 87, 95, 96, 100,
117, 122, 123, 124, 128, 135, 145, 166
Apprenticeship [see Vocational training: Skilled workers)
Aptitude tests [see Psychological tests)
Austria, 44

B
Balance of payments, 44
Baldamus, W., 143, 159, 169
Balfour, W.C., 17
Barkin, S., 21
Baykov, A., 168
Behrend, H., 169, 170
Belgium :
Fédération des entreprises de l'industrie des fabrications métalliques
(FABRIMÉTAL), 44, 73,

152

Fédération des industries belges, 102
Benefits from higher productivity (see
Productivity)
Benelux countries, 44
Berenschot, I. B. W., 79
"Blue Monday," 169-171
Bonuses (see Incentives)
Bosch-Zünder, 100
Brazil, 78
Brunner, E., 148
Budgetary control, 82, 84, 183

c
Capital :
Availability of, 52, 70-71
Equipment, 62-72, 78, 95, 154 ft., 182
Shortage of, 78
Chile, 78
Christa, R., 130
Cohen, B. J., 162
Collective bargaining, 16, 30, 177, 186
Competition, 2, 16, 49-50, 70

Conditions of work, 12-13, 22, 158-160,
178, 187
Consumers' co-operative movement, 50
Contactgroep Opvoering Productiviteit,
16, 55, 74
Controller, 84
Costing and budgetary control, 82-85,
183
Cost of living, 26-29
Costs, 7, 28, 176, 183
Cumper, G. E., 36
Czechoslovakia, 88

D
Dale, E., 100
Dartnell Corporation, 153
Davis, J. C , 27
Daya, E., 99
Dayre, J., 10
Debatin, O., 151
Denmark, 51, 104
Depreciation, 10, 70
Depression, 45-46
Distribution of benefits arising from
higher productivity (see Productivity)
Drucker, P., 142

E
Eastern Europe, integration of national economic programmes, 44
Economic Co-operation Administration, 51, 60, 61, 86
Economic development, 33, 177
Economist, The, 53, 85, 152
Ecuador, 78
Educational establishments (co-operation with industry), 54-58, 121-122,
179
Edwards, R. S., 59
Egypt, National Productivity and Vocational Training Centre, 24
Employment:
Level of, 18, 21, 37-38, 46, 110-113,
180, 183
Policy within individual undertakings, 110-116
Security of, 12, 37-42, 113-115
Services, 39-40, 58, 179-180
Exchange of information, 58, 60-61, 70,
180

192

INDEX

Factors of production, 7-11
Finland, 67
Florence, P. S., 155, 167-168
Foremen, 108109, 128, 184
France :
Association française pour l'accroissement de la productivité, 16, 84,
100
Centre d'études pour l'accroissement
de la productivité dans la confection
masculine. 58
Centre intersyndical d'études et de
recherches de productivité, 21-22,
111, 114, 138
Commissariat général du plan de
modernisation et d'équipement, 5051, 53, 59
Confédération générale du travailForce ouvrière, 22
Electrical construction industry, 5051, 75
Iron pattern castings industry, 52,
72, 114
Labour-management
co-operation,
100-104
Machine tools industry, 50-51
Ministry of Labour, 103
Productivity in, 50-51, 61
Syndicat général des fondeurs de
France, 52, 129
Taxation, 53
Trade unions, 107
Works committees, 102-103, 107
Fraser, J. A., 140
Full employment {see Employment,
level of)

Incentives, 22, 146, 147, 186
India:
National Institute of Management,
121
National Productivity Centre, 214
Technical assistance by the I.L.O.
in, 24, 131-132
Induction courses, 129
Industrial organisation, 13-14, 65, 7879, 185, 186
Information (see Exchange of information)
International Bank for Reconstruction
and Development, 52
International Committee of Scientific
Management, 1, 175
International Confederation of Free
Trade Unions, 21-22, 138, 154, 175
International Federation of Business
and Professional Women, 175
International Federation of Christian
Trade Unions, 175
International Labour Organisation:
Conventions, Recommendations and
resolutions, 31, 101-102, 116, 167
Reports of the Director-General
of the I.L.O., 24, 36-37, 144
Technical assistance in raising productivity, 24, 62, 94, 130-132, 181
Ireland, 67
Israel:
Institute of Productivity, 62,130-131
Joint productivity committees, 104
Technical assistance by the I.L.O.
in, 62, 130-131
Italy, 51-52, 115

G
Galbraith, F. K., 50
Geek, L. H. A., 100, 104
Germany :
Federation of Trade Unions, 88
Labour-management co-operation in,
100, 104
Profit-sharing, 151
Gibbons, C. C, 112-113

H
Health (see Safety and health)
Heavy industry, 45, 51
Heyer, H. O., 101, 105, 114
Hicks, J. R., 27
Hitch, T. K., 27
Hoff, H. vom, 88
Hours of work, 26, 34, 153-154
Housing, 39, 1/9
Human relations in industry, 13-14,
71, 99-110, 129, 137-138
Hutton, G., 3, 14, 43-44, 65, 110, 149,
155

J
Jacoboni, A., 51, 115
Japan, 29, 72
Jenny, H., 151
Job content, 142-143
Job evaluation, 152
Joint consultation, 13, 23-25, 101, 107,
109-110

K
Kahn, R., 134-136
Katz, D., 134-136, 141

L
Labour-management co-operation, 13,
23-24, 99-110, 151, 161-163, 177
Labour-saving methods of production,
9-10, 36, 71
Labour turnover, 167-171
La Roche, C , 59
Long, J., 169
Luxembourg, 44

193

INDEX

M
Maintenance, 75-76, 188
Management, 18-20, 79-80, 104-107,
111, 118-123, 177, 184-185
Manpower:
Forecasting needs for, 57-58, 184
Mobility of, 39-40, 119, 133, 180
Marketing (see Sales policy)
Size of, 43-44, 69-70, 89, 95
Surveys, 95, 183
Materials, 50-52, 182
Materials-handling, 72-74, 188
Mechanisation, 44, 72-74, 144, 188
Mexico, 41, 78
Michel, E., 104
Migration, 40
Monopoly (see Restrictive practices)
Mutual Security Agency (see also Economic Co-operation Administration),
86

N
Narasimhan, P. S., 151
Netherlands, 55, 61, 88, 104, 117, 120
Nightwork, 156-157
Norway, 102, 104, 107
Notice, period of, 112

0
Olivier, M., 52
Organisation for European Economic
Co-operation, 8, 84, 174

P
Payment by results (see Wages)
Personnel:
Departments or services, 98,112-113,
183
Inventory control, 121
Peru, 78
Peter, W., 100
Placement, 112, 116-119
Planning (see also Administration and
co-ordination), 80-82, 108, 114, 180,
183
Planty, E. G., 120
Price policy, 95-97
Productivity :
Definition and measurement of, 7-11,
177-178
Distribution of benefits of higher productivity, 13, 17, 22, 24-31, 137,
161, 176
Of labour, 8-10, 153
National centres, 23-24, 61-62, 111,
114, 179
Programmes for increasing, 13, 14,
19, 38, 110, 130-132, 166, 185, 186

Profit-sharing, 151
Promotion, 132-134, 186
Psychological climate, 14-22, 42, 101105, 109, 116, 118, 151, 158
Psychological tests, 117-118, 141

R
Renold, C. G., 105, 108-109
Repetitive work, 42, 93, 140-143
Research, industrial, 19-20, 58-62, 180
Resistance to change, 18
Resources :
Mobility of, 47-48
Rational utilisation of, 68, 79
Responsibility, definition and delegation of, 19, 80, 135-136
Restrictive practices, 19-20, 48-49
Richard, R., 130
Robinson, E. A. G., 49
Rostas, L., 66-67
Ryan, T. A., 94
S
Safety and health (see also Accidents),
153, 156, 163-167, 187
Sales policy, 95-97, 183
Servicing of skilled workers, 144-145,
184
Severance pay, 41-42
Shifts, number of, 154-158, 183
Simplification, 43, 85-97, 127, 139-142,
181, 184
Socialist work competition, 17
Specialisation, 43-44, 70, 85, 89, 95,
181-182
Stability, economic, 25, 45, 46
Standardisation, 70, 85-86, 88-90, 181
Standards of living, 12, 18, 21-22, 4042, 110-111, 176, 180
State intervention, 19, 23-24, 48-50,
58-59, 111, 117-118, 177
Statistics of productivity, 7-8, 177-179
Stewart, A. F., 150, 151
Suggestion schemes, 100-101, 187
Sweden, 102, 104
Switzerland, 59, 90, 100

T
Taxation, 52-53
Technical assistance (see International
Labour Organisation)
Technological progress, 13, 21, 32-36,
178-179
Towy-Evans, M. M., 162
Trade unions, 16-18, 20-22, 48, 100,
106-109, 126, 138-139, 151, 155, 158,
177, 186
Tuchtfeldt, E., 151

194

INDEX

u
Uhrbrock, R., 141
Underdeveloped countries, 10-12, 23,
30-31, 35-36, 69, 75-76, 78-79, 94,
131, 159, 161, 181
Unemployment:
Insurance, 40-41, 111, 180
Kinds of, 32, 110
Technological, 12, 32, 179
Union of South Africa, 117, 160
United Kingdom:
Amalgamated Weavers Association,
139
Apprenticeship, 125, 127
Automobile industry, 53
British Institute of Management, 82,
92, 139
British Prod activity Council, 45,151
Clothing industry, 51, 92
Development areas, 40
Industrial research, 58
Joint Committee of the Institute of
Cost and Works Accountants and
the Institution of Production Engineers, 56-57
Labour-management
co-operation,
104, 106
Lithographic industry, 80-81, 155
Medical Research Council, 164
Ministry of Labour and National Service, 104, 155-156
National Institute of Industrial Psychology, 1:17-118
National Union of Boot and Shoe
Operatives, 139
Severance pay, 41
Steel foundries, 16, 18, 44, 59, 76-77
Taxation, 53
Trades Union Congress, 48, 79, 107,
138-139
Vocational training and guidance,
56-57, 117
United Nations, 23, 69-71, 78, 175
Economic and Social Council, 24,138
Economic Commission for Europe,
66, 68, 88-89
United States:
Automobile industry 89, 95
Collective agreements, 16, 17, 115
Department of Labor, Bureau of
Labor Statistics, 16, 17, 115, 146,
147, 153
Drop-forging industry, 73, 75
Employment ¡service, 118
Foundries, 52
Industrial research, 58
Labour-management
co-operation,
100, 129
Labour-saving production methods,
36
Maintenance of equipment, 75

Materials, 51
Materials-handling, 73
National Association of Manufacturers, 15, 46-47
National
Industrial
Conference
Board, 120
Severance pay, 41
Steel Founders' Society of America,
59
Technological progress, 34
Trade unions, 16-17, 21, 138
Vocational training and education,
54-56, 120-130
Universities (see Educational establishments)

V
Vermeulen, A., 26
Villiers, G., 114
Vocational guidance, 116-119
Vocational training, 54-58, 119-132,
184-186
Duration of, 48, 125
Engineers and technicians, 55-58,
122, 185
Foremen and supervisors, 122-123,
185
Management, 54-55,120-122,184-185
Operatives, 127-129, 185
Retraining programmes, 48, 119-120,
132
Skilled workers, 124-127, 185
Special programmes, 130-132, 185
Training within industry, 122, 124125, 127-128, 186

w
Wages, 27-29, 31,145-153,176,186-187
Payment by results, 145-151
Structure of wage rates, 152-153
Waline, P., 100
Walker, C. R., 141-144
Welfare, 11-12, 26, 31-32, 158-163, 178179
Whyte, W. F., 82, 140
Wibbe, J., 93
Work:
Conditions of (see Conditions of work)
Hours of (see Hours of work)
Repetitive (see Repetitive work)
Satisfaction from, 12-13, 42, 134,
140-144, 153, 156-160, 184
Short-time work and work-sharing,
114-115
Workers, displaced, 33, 38-40, 110-111,
180
Works committees, 24, 101-104, 107110
Work study, 56-57, 92-95,136-140,182,
186
Analytical estimating, 93

195

INDEX
Method study, 92, 128-129, 137-138,
182
Synthesis from elemental data, 93
Time study, 93-94, 138
Training of technicians, 56-57, 94,
186
Work measurement, 92-94, 137-138,
W y a l f s . , 140

Young, C. E., 66
Yulke, S. G., 93

Z
Zwei

Publications of the International Labour

Indigenous

Office

Peoples

Studies and Reports, New Series, No. 35
A very comprehensive study of indigenous workers in independent countries in North and South America, Asia, Australia and
New Zealand. It describes how they live, the food they eat, the
clothes they wear, the work they do, their houses, their health and
education and shows clearly that with few exceptions the standard
of living of aborigines is extremely low. A description is given of
the steps which are being taken by the governments concerned,
religious missions and other private organisations and by international organisations to integrate the indigenous peoples into the
economic life of each country and to improve their living and
working conditions. The study is supplemented with tables, maps
and photographs.
CONTENTS

CHAPTER I
CHAPTER II

Part I. Preliminary Definitions and Data
The Definition of " Indigenous ".
Numbers, Types and Geographical Distribution.
Part II. Living Conditions

CHAPTER III

Food.

CHAPTER IV

Housing.

CHAPTER V
General Health Problems.
CHAPTER VI Alcoholism and Cocaism in South America.
CHAPTER VII Illiteracy and Education.
Part III. The Place of Indigenous Workers in the Economy
CHAPTER VIII Occupations.
CHAPTER I X The Agrarian System and Conditions of Work.
CHAPTER X
Vocational Training and the Protection of Handicrafts.
Part IV. National and International Action
CHAPTER XI Social and Economic Policy of Governments.
CHAPTER XII International Action.
xviii+628 pages

Price: $4; 24s.