The Engineer as an Economist - Industrial Engineer - Henry Towne and F.W. Taylor

THE ENGINEER AS AN ECONOMIST.

The paper that initiated works management and industrial engineering that has focus on understanding and reducing cost of production,

To insure the best results, the organization of productive labor must be directed and controlled by persons having not only good executive ability, and possessing the practical familiarity of a mechanic or engineer with the goods produced and the processes employed, but having also,  and equally, a practical knowledge of how to observe, record, analyze and compare essential  facts in relation to wages, supplies, expense accounts, and all else that enters into or affects the economy of production and the cost of the product.

Three types of knowledge and ability indicated

- good executive ability,   
- the practical familiarity of a mechanic or engineer with the goods produced and the processes employed, 
- a practical knowledge of how to observe, record, analyze and compare essential facts in  relation to wages, supplies, expense accounts, and all else that enters into or affects the economy of production and the cost of the product.


Full Paper

THE ENGINEER AS AN ECONOMIST. - HENRY TOWNE, STAMFORD, CONN.

1886, ASME Annual Meeting

The monogram of our national initials, which is the symbol for our monetary unit, the dollar, is almost as frequently conjoined to the figures of an engineer's calculations as are the symbols indicating feet, minutes, pounds, or gallons. The final issue of his work, in probably a majority of cases, resolves itself into a question of dollars and cents, of relative or absolute values. This statement, while true in regard to the work of all engineers, applies particularly to that of the mechanical engineer, for the reason that his functions, more frequently than in the case of others, include the executive duties of organizing and superintending the operations of industrial establishments, and of directing the labor of the artisans whose organized efforts yield the fruition of his work.

To insure the best results, the organization of productive labor must be directed and controlled by persons having not only good executive ability, and possessing the practical familiarity of a mechanic or engineer with the goods produced and the processes employed, but having also, and equally, a practical knowledge of how to observe, record, analyze and compare essential facts in relation to wages, supplies, expense accounts, and all else that enters into or affects the economy of production and the cost of the product. There are many good mechanical engineers; — there are also many good " business men ;"— but the two are rarely combined in one person. But this combination of qualities, together with at least some skill as an accountant, either in one person or more, is essential to the successful management of industrial works, and has its highest effectiveness if united in one person, who is thus qualified to supervise, either personally or through assistants, the operations of all departments of a business, and to subordinate each to the harmonious development of the whole.

Engineering has long been conceded a place as one of the modern arts, and has become a well-defined science, with a large and growing literature of its own, and of late years has subdivided itself into numerous and distinct divisions, one of which  is that of mechanical engineering. It will probably not be disputed that the matter of shop management is of equal importance with that of engineering, as affecting the successful conduct of most, if not all, of our great industrial establishments, and that the management of works  has become a matter of such great and far-reaching importance as perhaps to justify its classification also as one of the modern arts. The one is a well-defined science, with a distinct literature, with numerous journals and with many associations for the interchange of experience ; the other is unorganized, is almost without literature,

has no organ or medium for the interchange of experience, and is without association or organization of any kind. A vast amount of accumulated experience in the art of workshop management already exists, but there is no record of it available to the world in general, and each old enterprise is managed more or less in its own way, receiving little benefit from the parallel experience of other similar enterprises, and imparting as little of its own to them ; while each new enterprise, starting  now and with much labor, and usually at much cost for experience, gradually develops a more or less

perfect system of its own, according to the ability of its managers, receiving little benefit or aid from all that may have been done previously by others in precisely the same field of work.

Surely this condition of things is wrong and should be remedied. But the remedy  must not be looked for from those who are " business men" or clerks and accountants only; it should come from those whose training and experience has given them an understanding of both sides (viz. : the mechanical and the clerical) of  the important questions involved. It should originate, therefore, from those who are also engineers, and, for the reasons above indicated, particularly from mechanical engineers. Granting this, why should it not originate from, and be promoted by The American Society of Mechanical Engineers?

To consider this proposition more definitely, let us state the work which requires to be done. The questions to be considered, and which need recording and publication as conducing to discussion

and the dissemination of useful knowledge in this specialty, group themselves under two principal heads, namely: Shop Management, and Shop Accounting. A third head may be named which is sub-

ordinate to, and partly included in each of these, namely: Shop Forms  and Blanks. Under the head of Shop Management fall the questions of organization, responsibility, reports, systems of contract and piece work, and all that relates to the executive management of works, mills and factories. Under the head of Shop Accounting fall the questions of time and wages systems, determination of costs, whether by piece or day-work, the distribution of the various expense accounts, the ascertainment of profits, methods of book-keeping, and all that enters into the system of accounts which relates to the manufacturing departments of a business, and to the determination and record of its results.

There already exists an enormous fund of information relating to such matters, based upon actual and most extensive experience. What is now needed is a medium for the interchange of this experience among those whom it interests and concerns. Probably no better way for this exists than that obtaining in other instances, namely, by the publication of papers and reports, and by meetings

for the discussion of papers and interchange of opinions.

The subject thus outlined, however distinct and apart from the primary functions of this society, is, nevertheless, germane to the interests of most, if not all, of its members. Conceding this, why should not the functions of the society be so enlarged as to embrace this new field of usefulness. This work, if undertaken, may be kept separate and distinct from the present work of the society by organizing a new "section" (which might be designated the " Economic Section''), the scope of which would embrace all papers and discussions relating to the topics herein referred to. The meetings of this section could be held either separately from, or imment to the regular transactions. In this way all interference would be avoided with the primary and chief business of the society, and the attendance at the meetings of the new section would naturally resolve itself into such portion of the

membership as is interested in the objects for which it would be organized.

As a single illustration of the class of subjects to be covered by the discussions and papers of the proposed new section, and of the benefit to be derived therefrom, there may be cited the case of a manufacturing establishment in which there is now in use, in connection with the manufacturing accounts and exclusive of the ordinary commercial accounts, some twenty various forms of special record and account books, and more than one hundred printed forms and blanks. .The primary object to which all of these contribute is the systematic recording of the operations of the different departments of the works, and the computation therefrom of such statistical information as is essential to the efficient management of the business, and especially to increased economy of production. All of these special books and forms have been the outgrowth of experience extending over many years, and represent a large amount of thoughtful planning and intelligent effort at constant development and improvement. The methods thus arrived at would undoubtedly be of great value to others engaged in similar operations, and particularly to persons engaged in organizing and starting new enterprises. It is probable that much, if not all, of the information and experience referred to would be willingly made public through such a channel as is herein suggested, particularly if such action on the part of one firm or corporation would be responded to in like manner by others, so that each member could reasonably expect to receive some equivalent for his contributions by the benefit which he would derive from the experience of others.

In the case of the establishment above referred to, a special system of contract and piece-work has been in operation for some fifteen years, the results from which, in reducing the labor cost on certain products without encroaching upon the earnings of the men engaged, have been quite striking. A few of these results, selected at random, are indicated bv the accompanying diagram (Fig. 191), the diagonal lines on which represent the fluctuations in the labor cost of certain special products during the time covered by the table, the vertical scale representing values.

Undoubtedly a portion of the reductions thus indicated resulted from improved appliances, larger product, and increased experience, but after making due allowance for all of these, there remains a large portion of the reduction which, to the writer's knowledge, is fairly attributable to the operations of the peculiar piece-work system adopted. The details and operations of this system would probably be placed before the society, in due time, through the channel of the proposed new section, should the latter take definite form. Other, and probably much more valuable, information and experience relating to systems of contract and piece-work would doubtless be contributed by other members, and in the aggregate a great amount of information of a most valuable character would thus be made available to the whole membership of the society.

In conclusion, it is suggested that if the plan herein proposed commends itself favorably to the members present at the meeting at which it is presented, the subject had best be referred to a special committee, by whom it can be carefully considered, and by wisdom, if it seems expedient to proceed further, the whole matter can be matured and formulated in an orderly' manner, and thus be so presented at a future meeting as to enable the society then intelligently to act upon the question, and to decide whether or not to adopt the recommendations made by such committee.

{This paper received discussion in connection with two others on germane topics. The discussion is printed at the end of the paper on " The Shop-Order System of Accounts.")