When a competitor discovers the fact that his rival is not keeping close account of costs, he is some times able to purchase the goods more cheaply from the firm which keeps inaccurate cost accounts than to make them himself. It is said that a large depart ment store which had for years done its own printing, finally ceased this branch of work because it discov ered that the printing trade in general kept very in adequate records of its costs. It then adopted the method_of sending for estimates to a large number of printers whenever it had a job which it wished to give out. All of these estimates were to be based upon a printed sample which the store sent to the various printers. The manager was safe in choosing the low est bid submitted, for without fail some of the bids would be below cost.
Under the unsystematized type of management the accounting generally consists of a statement prepared some time after the annual or semi-annual stock-tak ing, and shows the profit and loss, and the assets and liabilities. In most cases, however, such a record is chiefly of historical importance. If the statement is bad, it is too late to remedy the troubles of the previ ous year, because it shows merely the result of that year. If, as is likely to happen where there is little system, the yearly statement is delayed, the record be comes too ancient to be of much use. It frequently happens that firms whose fiscal year ends in January do not know the result of their year's business until six months later, and then only in the form of statements as to profit and loss and assets and liabilities. Some of the information is eighteen months old and it all comes too late to stop any of the leaks.
10. Majority of industries unsystematized.—It is probably safe to say that the great majority of the firms of this country belong to the unsystematized type of management. The prevalence of this type in America is due in a great measure to the large margin which has existed between the cost of production and the selling price. Many firms with a large margin of profit have paid little attention to scientific ac counting; but conditions in this respect are changing and the number of systematized concerns is growing every day.
11. Systematized type of management.—Under the systematized type, the managers are methodical and systematic; each department has been studied and sys tematized until, so far as records go, the firm knows exactly where it stands at all times.
The distinction between the systematized type of management and the unsystematized is seen in the dif ferent emphasis which is put upon the accounting.
Instead of vague reports made once or twice a year, the books of the systematic type of management show the conditions of the business quarterly or monthly, and in much detail. Four new features usually ap pear under this form of management: 1. Reports comparing last year's cost with this year's costs.
These may be made on the basis of a department or of a certain product. 2. There will be costs, showing material and labor value. 3. In addition to the deter mination of these direct costs, there will also appear a practical method whereby overhead charges may be equitably distributed. 4. The results of the business will be periodically put before the manager in a simple but comprehensive table or chart.
12. Cost records highly developed.—The cost rec ords give systematized management a distinct advan tage over the unsystematized types. Correct cost ac counts are relied upon to establish the selling price, and to point out excessive costs and indicate, perhaps, where they may be reduced. Many managers, there fore, believe that when they have a systematized plant they have also an efficient plant. It is just at this point that the advocates of the new scientific manage ment take issue with them. They point out that sys tem helps only one function of management and that even under the best systematized methods many de fects might be discovered pertaining to the system it self which would be eliminated under the efficiency or scientific type of management. These critics point out, for example, that the same general system of ac counting under the systematized type does not extend to the whole plant. To illustrate, the clerical work in the different departments.may not be included in the cost accounting. The close analysis to which the un systematized type of management has been recently subjected has set a new standard of accomplishment before the management. To attain results new methods of management, based upon close analysis, are proposed. As these contrast sharply with the older methods, a new type has been established.
13. Committee system.—One method which is com ing more and more into use is the committee system of management. It is an attempt to apply the same democratic principles of government to factory man agement that are embodied in the national and state governments. The primary idea is to enlist the co operation of the men in the shop in forming plans and offering suggestions for the good of the company. By means of frequent meetings and a thoro airing of opinions an esprit de 6orps and a feeling of responsi bility for the success of the business as a whole are established. In its method this system is the op posite of the military type of management. The committee system is especially well adapted to fur nish a means by which the discontented can give ex pression to their feelings, and affords a valuable aid to the management in locating the cause of any dis affection. Furthermore, it is claimed for this system that it provides a method of overseeing whereby an executive totally ignorant of shop and sales processes is provided with reliable data concerning any weak spots in the production, buying or selling department or in the office.