7. Control of labor costs, piece rate.—These con siderations, no doubt, have had great influence in ex tending piece-rate methods. If the employer can per suade the workman to do a given piece of work at a definite labor price, the labor cost becomes definite and stable, and will remain so as long as the agree ment holds good. The defects and difficulties of straight piecework methods have been touched upon in Section 5, Chapter VIII, to which reference should be made at this point. These disadvantages are real, and it is apparent that piecework is not universally applicable. There are many lines of manufacture, however, where this method in some form must be used, for best results. Thus, in product consisting of many small parts, and in the manufacture of which the competition is keen, piece rates in some form are essential to stable costs that can be used with assur ance in predicting future performances.
It would appear, at first sight, that there is less probability of such variation in piece-rate costs as ap pear in Figure 24, page 280, which is based on day rate. If, however, different piece rates for the same piece of work are given to different operators, vari ations as wide as these may appear. They often occur where high-priced operators are put to work, in an emergency, on a class of work that is ordinarily per formed by lower-priced men, for the higher-priced men insist upon and obtain a special higher rate.
8. Labor-cost control under advanced wage sys ters.—A careful consideration of the more advanced wage systems described in Sections 7 to 10, Chapter VIII, will show that these systems recognize the gen eral principles just discussed. All of them, except the Taylor differential piece rate, recognize the value of the day rate as a basis of labor reward, but all of them lay stress, also, on the accomplishment of a definite amount of work before extra reward, or bonus, is given. This definite amount is also the minimum amount of output which, in the opinion of the em ployer, the workman should produce, tho, if he pro duces more, he is rewarded accordingly. All of these advanced methods of labor reward, therefore, aim to secure a definite amount of product for a definite amount of pay, and hence embody an essential prin ciple of piecework.
If the workman produces just the minimum amount of work required of him, but does not earn a bonus, the cost per piece is the lowest that the employer can obtain under these systems of pay. If the worker exceeds this minimum and earns a bonus, the cost per piece rises ; but this rise in price is, presumably, more than offset by the decrease in burden due to increased output. Obviously, however, if the minimum is so set
that the worker can greatly exceed it and thus earn large bonuses, the labor cost may vary almost as widely as under day pay. This criticism is sometimes made of the Halsey premium plan, since under it the re quired minimum output is based on day-rate records, which may or may not show what a fair day's work should be.
The criticism of cost records based on daywork, piecework and the Halsey premium plan, made by ad vocates of more advanced methods is, that while these records show what has been done, they fail utterly to show what can be done. In their efforts to establish a more stable relation between labOr reward and labor cost, these advocates have introduced methods that promise to have an influence on costs that will entitle them to special consideration. Only brief mention can be made here of these methods, and only such dis cussion of them will be given as pertains to costs and cost finding.
9. Time-study.—It has long been a practice among progressive managers to try to control labor costs by making preliminary studies of the time required to perform operations. Sometimes this is done by hav ing skilled workmen, who are in the confidence of the employer, make preliminary trials of the job; in some cases this work has been done openly, either in the production department proper, or in special shop laboratories equipped for the purpose. It remained for Mr. F. W. Taylor to systematize and refine methods of observation, with a view to the general solution of the problem of determining how long a given piece of work should take.' Under these more refined methods, the time re quired to perform each detail of a given operation is taken with a stop-watch, by trained observers, and carefully recorded. Observations are made of many repetitions of each detail operation, as performed by several competent operators, and the recorded "unit times" are used as a basis for establishing a standard of performance from which other similar performances may be predicted, either in whole or in part. Allow ance must be made, of course, for fatigue and rest and many data are already available on this point.
It will appear at once that there are limitations to this method, particularly when the number of pieces to be produced is small, but it is obvious that as a mode of approaching labor-cost control it is a great advance over old empirical methods. Without doubt, time study is destined to occupy a prominent place in in dustrial management, where refined costs are a factor.