PERFORfTlRflCE 34 J U L Y / A U G U S T

1976

0 5 2 - C I ' / 5 i SR MEM

Denver Mayor William McNichols (seat­ed), Executive Director Connie Baehm and Assistant Director/Programs John Craig discuss Energysave '76. For addi­tional details see page 8.

I n c o m p a t i b l e /

GOVERNMENT AND BUSINESS Ideas A b o r n i n g :

HOW EVALUATORS GIVE THEM LIFE Ident i ty Factor:

HOW TO RECOGNIZE A SUCCESSFUL IDEA Graph ic Sense:

USE PICTURES TO GET YOUR MESSAGE ACROSS How You Can:

IDENTIFY SUCCESSFUL AND UNSUCCESSFUL FOREMEN Pre l iminary Findings:

SUGGESTION SYSTEMS' IMPACT ON PRODUCTIVITY

O F F I C I A L P U B L I C A T I O N O F T H E :

A B r i g h t e r Tomorrow

ANHOUHCIHG THE 34TH ANNUAL

INTERNATIONAL NASS CONFERENCE

Orlando, Florida September 25-28, 1976

A BRIGHTER TOMORROW

Each one will instruct, entertain, motivate and amuse you...in his own distinctive way!

FOUR GENERAL S E S S I O N S

All delegates will have an opportunity to attend all four general sessions...and you won't want to miss even one.

Allan "Mogy" Mogensen on Work Simplifica­tion. Dr. James C. Bostain on Communication -"Reading and Misreading Each Other."

Dr. Robert Schwarz on Creativity - "Positive Procrastination."

Attorney James Marchand on Legal Safeguards and Protection.

Discover A Brighter Tomorrow — don't miss the 1976 NASS Conference in Orlando, Florida.

The Conference will offer you a special com­bination of wide-ranging educational opportunities plus the recreational and leisure attractions of Orlando and Walt Disney World.

Just look at some of the programs and activities NASS has planned:

TOP KEYNOTE S P E A K E R S

You'll hear three nationally renowned speakers: Dr. James Bender, Dean, College of Business Administration, Aldelphi University; John Kanary, Executive Vice-President, XOCES, Incorporated; and Cavett Robert, President, Robert Associates.

PERFORMANCE

SPECIAL ADDRESSES You'll hear addresses from several very special

civic and business leaders. They'll include a top military official...the CEO of atop corporation...a high-ranking federal government officiaL.and top state officials.

16 WORKSHOPS You'll choose from sixteen workshops, present­

ed by leaders in the suggestion system field and outside experts. Topics will include The Hospital Suggestion System, Startup and Budgeting,-Awards Criteria, Computer Applications, several ••' others.

PLUS The Conference will also feature

* Federal delegates assembly and meetings * Individual consultation sessions * Awards programs

* Chapter Officers and Directors meeting * Gala Reception and banquet

ENJOY ORLANDO You'll also enjoy an unforgettable stay in

Orlando, in the heart of sunny Florida. Conference headquarters will be the exciting new Sheraton Towers. During your free time you can visit fabulous Walt Disney World (just minutes from the hotel), enjoy your favorite sport, or just soak up the Florida sun beside the pool.

REGISTER NOW! If you're in personnel, industrial relations, or

IE...if you're a suggestion system administrator...if you're a consultant...if you're a SAVE, ASPI, or NASS member...then the 1976 Conference is for you!

You can save money by registering before August 30...so return the coupon today.

We'll see you in Orlando!

n Return to:

NATIONAL ASSOCIATION OF SUGGESTION SYSTEMS 435 North Michigan Avenue Chicago, Illinois 60611

FEES:

NASS members Nonmembers Special Interest program

Before 8/30/76

$150 $175 $ 70

After 8/30/76

$165 $190 $ 80

( ) Please send more information

A hotel registration card will be sent to you by NASS.

Name

Organization-

Address.

City

State/Province. • Zip-

A BRIGHTER TOMORROW m i |

o w j

PERFORMANCE 3

EDITORIAL AND

BUSINESS OFFICES Charger Product ions, Inc .

3 4 2 4 9 C a m i n o Capist rano (Box H H ) Capistrano B e a c h , C A 9 2 6 2 4

T e l : (714) 493-2101

E D I T O R I A L D I R E C T O R Robert R. Springer

Charger Product ions, Inc.

A R T D I R E C T O R David C larno

S T A F F A R T I S T S L o r i e Disney

Bill Myers J o h n V i ta le

P R O D U C T I O N C O O R D I N A T O R Wendy L . Wisehart

P R O D U C T I O N A S S I S T A N T S Rusty Springer

Deborah S . Payne J o A n n a S impson

A D V E R T I S I N G D I R E C T O R Robert W. Arsenault

A D V E R T I S I N G M A N A G E R Jock Mahoney

A S P I E D I T O R A lex Petchkurow

Col l ins Radio G r o u p (MS 402 -231 ) Rockwe l l International

1200 N. A l m a Road R ichardson, T X 7 5 0 8 0

S A V E E D I T O R

T o m K i n g , V C S Manager, Cost Improvement

J o y Manufacturing C o m p a n y Mining Machinery Division

F r a n k l i n , PA 1 6 3 2 3 T e l . 8 1 4 / 4 3 7 - 5 7 4 1

N A S S E D I T O R Robert H. Marshall Manager, E m p l o y e e

Motivational Programs E q u i p m e n t Division

Ray theon C o . Boston Post Road

Wayland, MA 0 1 7 7 8 T e l : (617)-358-2 721

E D I T O R I A L A D V I S O R Y B O A R D

p a T O R m m c E VOLUME 6 NUMBER 4 JULY/AUGUST 1976

Official Magazine of the

A M E R I C A N S O C I E T Y FOR P E R F O R M A N C E IMPROVEMENT 790 Broad Street, Newark, New Jersey 07102

and S O C I E T Y OF A M E R I C A N V A L U E E N G I N E E R S

29551 Greenfield Road, Suite 210, Southfield, Michigan 48076

and

N A T I O N A L ASSOCIAT ION O F S U G G E S T I O N S Y S T E M S 435 North Michigan Avenue, Chicago, Illinois 60611

FEATURES:

How To Spot A Successful Idea Roger T. Newton 9 The Evaluator Gives It Life Peter R. Hines 12 A Picture Is Worth A Thousand Words Rand Creasy 14 Preliminary Findings Of A Multi-Variate Analysis of Suggestion Systems'

Impact On Productivity Joseph Short, Brian E. Moore, Francoise Art on 18 Government And Business Robert M. Bleiberg 22 How To Identify Successful And Unsuccessful Foremen Henry Hentz 28

DEPARTMENTS:

Thunder 6 Bits And Barbs 7 Performance Update 8 Performance Trends 17

Kei th A d a m s D S A

Bill Bai ley H I T C O

Jerry K a u f m a n Honeywe l l , Inc.

Robert H. Rossman Kempter -Rossman Int ' l .

Paul M. Bailey Gene Peretti Pac. G a s & E l e c . C o . T h e Boeing C o .

R ichard Brengel U .S . Civ i l Service C o m m i s i o n

Bill Dean Honeywe l l , Inc.

F rank Rees IBM Corporat ion

A n t h o n y T o c c o T R W Mission Mfg.

S U B S C R I P T I O N S — Single Issue $ 2 . Year ly Rates: U . S . and possessions $ 1 2 ; Canada $ 1 2 . 6 0 ; Foreign countr ies $13 .20 . (Make all checks payable in U . S . dollars.) Write for organizational bulk rates.

EDITORIAL POLICY: PERFORMANCE Magazine umbrellas those perform­ance factors which improve the competitive advantage and excellence of American Consumer/Defense products and services for the markets of the world. PERFORMANCE is dedicated, to the effective.exchange of innovative technology and ideas as they relate to quality, reliability, safety, maintain­ability, cost reduction, value engineering, life cycle cost, management im­provement, cost-to-produce, standardization, cost engineering, integrated logistics support, defect prevention, suggestion systems, motivation and productivity.

Contributions in the form of articles, photos, letters to the editor, etc., are welcome. Editorial policy dictates the right to edit or reject any maierial submitted for publication. Views and comments of contributors do not necessarily constitute the endorsement or opinion of the American Society For Performance Improvement, the Society of American Value Knginecrs, the National Association of Suggestion Systems, nor that of the National Pro­perty Management Association.

PERFORMANCE Magazine is published by Charger Productions, Incorpo­rated, 34249 Camino Capistrano, Capistrano Beach, California '>2<>:4. Second class entry at San Clemente, California 92672.

PERFORMANCE

SOCIETY OF AMERICAN V A L U E ENGINEERS 1977 INTERNATIONAL CONFERENCE

29551 GREENFIELD RD. SUITE 210 SOUTHFIELD, MICHIGAN 48076

Ph. (313) 559-4086

June 7, 1976

An Open Letter To Supporters and Practitioners of Value Engineering and. Value Analysis

In 1977, Value Engineering becomes thirty years old.

Thirty years. In the science history of mankind that's just a blink of an eye. But i n thirty years, a lot has happened. From one man's brain has espoused a philosophy (or a technology i f you wish) which has already touched thousands of others. In years to come i t w i l l influence millions.

To see what Value Engineering has done, i s doing, and w i l l be doing i n the next thirty years, be sure to plan on attending the 1977 International Conference i n Dearborn, Michigan. I t ' s time now to mark your calendar.

Thirty years. How many chances w i l l you get i n your lifetime to be i n on the "ground floor" of a new science. I f you would li k e to learn about Value Engineering, or otherwise participate i n our Conference as a speaker, exhibitor or supporter, plan on coming. For information now, don't hesitate to contact us.

Frank Clark Conference General Chairman

FC/nw

MAY 22 - 25,1977 HYATT REGENCY HOTEL DEARBORN, MICHIGAN

PERFORMANCE 5

T H U N D E R

( ° ) a C° )

by TOM KING

Aristotle, a long time ago, identified seven kinds of value: Economic, Political, Social, Religious, Judicial, Aesthetic and Moral. To date, however, value managers have been primarily concerned with one; Economic Value, and the sub-classes within.

And for good reason. Economic Value is concrete, measurable, impacts the profit and loss statement, and en­hances job security; particularly one's own.

But Things Have Changed! I t now appears probable that management will have to

address another value imposing a real constraint on produc­tivity. Call it Moral Value.

M r . Idea says . . .

w—^ [STOP]

WE HAVE A COMPLETE LINE OF PROMOTIONAL MATERIALS FOR SUGGESTION SYSTEMS . . .

i t Powerful posters (4 colors). i t Durable and attractive cabinets, -it Carefully worded suggestion forms. i t Effective employee booklets. i t Unique Award Certificates and other

incentives.

PHONE: 312-232-7213 | PHONE: 3

P. 0. Box 134P — Geneva, III. 60134

Productivity in America is slipping in many areas, stagnating in others, due in part to changing standards of value. Few doubt i t .

Analysts Are Asking: Pride of Workmanship, what has happened to it? Why doesn't Sammy run anymore? The character of the American Work Ethic is being

challenged and it has become the in-thing to badmouth the American industrial effort.

A recent SME publication editorial commented on an alarming upsurge of lawlessness and unconscionable acts within the perimeters of some plants. It told of in-plant robbers, lifting wallets at gunpoint; leaving the victim sans pants in the company john. It told of the uneasiness one feels walking in from the extremities of even well-lit park­ing lots.

Incredible? Yes. Less subtle deterioration is happening also within the

plants in terms of lower output. Subtle, but eventually, deadly.

Counter to this trend, a refreshing thing occurred at the recent SAVE Conference held in Minneapolis. Members and guests were having an awards dinner at the Raddison Inn South and had just completed the main course. Suddenly, the lights went out and it became totally dark. Quietness, then again suddenly the kitchen doors burst open with gusto and a procession of candlelight invaded the hall. .The serving crew entered, dressed in stars and stripes with Uncle Sam - top hat, goatee and a l l - i n the lead. The patriotic procession, guided by candlelight, weaved in and out be­tween the tables to the musical accompaniment of God Bless America. It was very moving. Something that will not soon be forgotten. The crowd, some six hundred strong, stood and finished the drama by strongly singing:

From the Mountains to the Prairies, To the ocean white with foam God Bless America, My home sweet home. Yes, God Bless America, My home sweet home. We need to catch the spirit of that group. We need to

catch the Spirit of 76. We need a principle within. Historically, value managers, engineers and management

in general have confined their attention to the technical arena. They have dealt in certainty and objectivity; they dabbled not in the political or moral arena, except as it impacted on getting things done.

There is good argument for continuing this modus operandi - in the vernacular, keeping our nose in joint. But, conversely, are these not demanding times for involve­ment in those issues which impact on our country, our jobs and our future well:being? Are declining moral standards affecting productivity and, i f so, what can be done about

In this Bicentennial Year, i t is appropriate that we reassess not only where we have been but where we are going as well.

Most of all, we need a principle within.

(NOTE: SA VE editor invites your comments on the issue of whether or not to be involved with moral issues relating to productivity and, if so, what your ideas for Improvement might.be. )\T\

,6 PERFORMANCE

B I T S & B A R B S Canada Value Engineering Manager

We're Northern Telecom, the largest telecommunica­tions manufacturer in North America outside the Bell system, with sales in excess of $1 billion. Right now we have an opening at our progressive, highly innovative Station Apparatus Division for a top flight engineering manager to spearhead-the development of a vendor oriented value engineering function for the Division.

As a member of the purchasing team you will be responsible for the purchase of sophisticated electronic components and devices used in the manufacture of consumer oriented telephone products. You will develop purchasing programs, establish savings targets, and inventory levels, as well as interface with other manufacturing functions in determining requirements for vendor delivery. The position requires an electronic engineering graduate with two to four years experience in value engineering or electronic circuit design, coupled with practical engineering experience in a manufacturing environment.

Salary is commensurate with qualifications and advancement opportunities are excellent. Relocation assistance is available.

Location is London, Ontario. Please send your resume with complete academic and

career qualifications, plus salary history to: G. D . Metcalfe Manager, Manpower Planning, Staffing

& Development Northern Telecom Limited P.O. Box 5155 London, Ontario N6A 4N3

n o r t h e r n

t e l e c o m

THE NEW NAME IN WORLD TELECOMMUNICATIONS. Prior to March 1st 1976, Northern Telecom Limited was known as Northern Electric Company, Limited.

What Pet Idea Or Strategy Works Well For You In Your Work Activity?

INCLUDE PROJECT ENGINEER IN VA WORKSHOPS

The acceptance rate of VA work­shop proposals for further develop­ment and implementation increased dramatically during 1975 from approximately twenty-five percent to seventy-five percent. This very bene­ficial situation occurred when some of the project staff concerned were given credit for the results. We would invite the project engineer to make a presentation to the class. Who better than the project engineer, when a comprehensive data package is required including the objectives of the exercise?

Larry Davis, Staff Engineer Res Div., General Electric

WXY APPROACH In attempting to reduce costs on a

highly engineered, evolutionary item such as a combination wrench, I use a three-way approach. First, a FAST diagram of the functions of a wrench; then a FAST diagram of the existing manufacturing processes; and finally, a cost visibility exercise pinpointing the areas of high cost.

Marvin Wasserman, Value Engr. Pendleton Tool Industries

ASK FOR TRIAL Some ideas are difficult to imple­

ment because of risk consequences or inherent controversy. On these, in­stead of asking for blanket approval, we request only a trial. It's difficult to refuse a mere trial, and the decision maker is not faced with the onus of reversing one's decision in case of failure. I f i t doesn't work, no prestige is lost as it was only a trial.

Dennis Woods TWA

READER ACTION POINT

Your thoughts are invited on the following topic:

Where Should The Value Manager Or SSA Report In The Table Of Organization? Tom King, SA VE editor

E

SUGGESTION ADMINISTRATOR OPPORTUNITY

450-bed health care facility in N.W. Indiana needs bright, aggressive individual to manage well-established suggestion system. Position will provide excellent opportunity to be involved with all departments and functions of the hospital. Undergraduate degree or equivalent, two years' experience in communications and/or incentive or sug­gestion system programs helpful. Starting salary low teens. The experienced candidate would find this a nonentry level position.

Contact; National Association of Sugges­tion Systems, 435 N. Michigan Avenue, Chicago, Illinois 60611, Telephone (312) 644-0075.

POSITION WANTED

Certified Suggestion System administra­tor seeks challenge of setting up new, or revitalizing existing. Suggestion Plan. Five /ears of experience includes originating and managing suggestion and zero defects pro­grams for multiplant company. Has author­ed article published in professional journal, served as a director of the National Associa­tion of Suggestion Systems, and has been an instructor at the Suggestion Systems Administrator's Academy in Evansville, Indiana. Please reply to Box A, National Association of Suggestion Systems, 435 North Michigan Avenue, Chicago, Illinois, 60611.

PERFORMANCE 7

P E R F O R M A N C E U P D A T E P E R F O R M A N C E S U B S C R I B E R S are invited to contribute.

DENVER TO HOST ENERGYSAVE '76 Winterpark Tradeshow, Incorporated, Denver-based

tradeshow management firm, announces that Energysave '76, the first International Manufacturers Energy-Related Products Conference, will be held in Denver, Colorado, October 27-31, 1976. According to Rick Silverburg, one of five partners in the tradeshow company, "Energysave '76 has been created to close the gap between what could be and what is in the development and marketing of energy-efficient products on a massive scale."

Exhibition and attendance is open to major industries, manufacturers, researchers, inventors, designers, buyers and financiers of energy-efficient products. Representatives of solar, wind, nuclear, petroleum, coal, waste recycling and other energy-related industries are expected to attend, either as exhibitors or participants in the technical sessions. For further information contact Constance Baehm, Winter-park Tradeshow, Incorporated, 181 E. 56th Avenue, Suite 201, Denver, Colorado 80216, or call 800/525-6111.

SAVE VE WORKSHOP The Twelfth Annual SAVE Value Engineering Workshop

is scheduled for September 27-October 1, 1976, at the University of Wisconsin, Madison. The program meets the certification requirements for VE training and is designed to provide participants with a working knowledge of value engineering in order to establish a program in their com­panies or to assist with ongoing programs.

All staff members are certified value specialists and two, Robert Crouse and C.W. Doyle, are past presidents of SAVE. Also on the staff are Arthur Mudge, former NASS national chairman; Clive Bebbington, value control coor­dinator, Pratt & Whitney Aircraft of Canada Limited; and Professor Fred Schwarz, a past vice-president of SAVE.

Cost is $325 for SAVE members and $350 for nonmem­bers, which includes lunches, one dinner, manual and text­book. A videotape of all project presentations will be made available on free loan to participants.

For additional information write to Fred C. Schwarz, Executive Development Programs, University of Wisconsin, 432 North Lake Street, Madison, Wisconsin 53706.

DRAINAGE COSTS REDUCED TWENTY PERCENT

K.M. Kirk & Associates of Plantation, Florida, used value engineering to reduce the construction costs of the storm drainage system for a shopping center in Margate, Florida. Instead of settling for the cookbook solution of On-Site and/or Off-Site drainage, the function of the system was evaluated. The new design combined On-Site percolation into the soil, positive outfall drainage and storm water detention, with no undesirable ecological results. The cost of the original drainage design was to be $107,000. Actual cost of the redesigned system was $85,000 plus $3000 for VA services.

CARRIER TUBE REDESIGN A fabricated tube was redesigned by Fulton Industries at

McConnellsburg, Pennsylvania, under the VA program headed by Casimer J. Stach to reduce cost, eliminate a

costly distortion problem and produce a better looking pro­duct. Two identical channels were made from eleven-gauge sheet, two mounting holes were punched in each channel and they were tack welded and then seam welded together. The welding caused the tube to bow and made a heating and drawing operation necessary.

The new design called for two unequal channels; the smaller of which f i t inside the larger to form the fourth side of the tube. All four holes were punched in one piece to cut in half the punching time. Only tack welding was necessary and the bowing was avoided. Total of .826 production hours were removed from each tube and no new tooling was required. In addition, the weld seam was eliminated from the exposed side.

IMPROVED PACKAGING The VA Job Plan was used by Lennox Industries,

Columbus Division, to improve its packaging operation of residential evaporation coils. Through the systematic approach, the problem areas were identified and the high cost portions were narrowed'into manageable tasks.

The project resulted in improved package strength, lower labor costs and justification for a new taping machine. Ron Kelley, value engineer, is hopeful that improved methods of unit identification will be developed also.

PRODUCTIVITY THROUGH INSTRUMENTATION AND CONTROL

The Instrument Society of America's 1976 International Instrumentation-Automation Conference and Exhibit — ISA-76 — will be held October 11-14 in Houston, Texas. The program offers expansive coverage of all fundamental and advanced areas in today's sciences and technologies re­lating to instrumentation and automatic control. ISA-76 is a convenient opportunity for the instrument technician, engineer or scientist to catch up on the state-of-the-art in instrumentation and control systems, and to brush up on overall concepts pertaining to theory and direct applica­tions.

The conference will span four major programming segments: Process Control Technology, Aerospace and Test Technology, Control Engineering Management, and Instru­mentation Technology. Over two hundred technical session papers, workshops, clinics, round table discussions, tutor­ials, short courses, and films will be presented by noted authorities in industry, science and education.

National and international instrumentation and automa­tic control manufacturers will provide four hundred pro­duct displays throughout the four days of the exhibit. Experienced representatives will be on hand for individual consultations.

Registration fee for the full four days of the Conference and Exhibit is $5 for nonmembers and $2 for ISA mem­bers. For additional details write Instrument Society of America, 400 Stanwix Street, Pittsburgh, Pennsylvania 15222. [p]

8 PERFORMANCE

HOW TO SPOT A SUCCESSFUL IDEA

ROGER T. NEWTON, B.A.E., is a graduate f r o m Pennseiaer Poly­technic Institute. He is presently a value engineer with General Electric Company Re-Entry and Environ­mental Systems Division. Newton is a registered professional engineer in New York and has served as systems engineer on many space satellite and R and E re-entry missile projects. He is a frequent participant and guest lecturer in the many VE workshops conducted at General Electric and has lectured at several Engineering Society meetings.

Newton received the Joy Manu­facturing Company A.E. Mudge Award for his work on this technique and subsequent paper in 1975 competi­tion.

By Roger T. Newton

Approved Value Engineering Change Proposals (VECPs) represent a real cost saving to the government, and a real profit plus for the participating company. But extended chasing of ideas that never make it to the final stage represent costly, wasteful effort. A method is presented here that minimizes wasted effort by providing an early indication of the success potential of ideas, thus permitting major effort to be applied only to those ideas having a realistic chance of implementation.

Experience tells us that the full potential of some ideas, and the final failure of others, is not always immediately apparent. At General Electric, RES Division, each new idea is raced through a set of hurdles in a relatively short time to obtain a quite accurate prediction of its winning potential. These hurdles, arranged in a sequential pattern, represent stumbling blocks, any of which can stop a new idea in its tracks so that it never reaches the Probable VECP goal line. Those that do complete the course are spotted as candi­dates for proposals. By logging in every idea, and by testing each one on the hurdle course, we insure that each idea gets a fair trial and that no idea is rejected without a valid reason.

The method has evolved over the years through VE exercises and experience to its present form. As implement­ed in 1975, i t produced a winning record; two of every three ideas that completed the hurdle course resulted in Value Engineering Change Proposals.

The quest for the sure thing is first attacked from the rear; by eliminating those ideas that are definitely not VECP material. In this category are ideas that apply to government contracts not having a VE clause, or to non-participating commercial programs. Also excluded are repeat ideas, and ideas that supplement or can be combined with a previous idea on the same subject. This category typically represents about forty percent of the ideas logged during a given year.

Having passed the first hurdle, the remaining sixty percent of the ideas form the reservoir from which the successful VECPs will come; they are all applicable to a contract having a VE clause, consequently, potential VECPs.

Early Rejection Criteria We subject each idea to a set of Early Rejection Criteria.

There are five valid reasons identified for early rejection of a potential VECP idea. In order of increasing frequency of occurrence, they are: Technical, Get Well, Political, Base Line, and Low Saving.

Each idea is thus run through the VECP Obstacle Course. To survive, each idea must negotiate each Early Rejection Hurdle. A detailed description of the early rejec­tion hurdles follows:

TECHNICAL HURDLE - Very few ideas (less than one percent) have proved unacceptable, technically. This is because the majority of ideas originate with people having intimate knowledge of the generally complex hardware forming the basis of the idea.

GET WELL HURDLE - By definition, a VECP cannot be applied to any device that does not perform to its specification. Ideas that apply to such a device are retained on a holding basis, however, since they may still apply later after the current problem is solved. Particularly distressing are those few cases where an idea has progressed nearly to the VECP submittal stage when a problem with the part crops up.

POLITICAL HURDLE - When an idea has passed the first two hurdles, it then is examined for political implica­tions. There are times when technical and cost-saving factors will be overruled by forces in the contractor's or customer's houses that are beyond the VE sphere. Fortun­ately, this does not often occur. When it does, it means the VECP, i f generated, would not be submitted, or i f sub-

PERFORMANCE 9

Figure 1. V E C P Obstacle Course

mitted would not be approved. Such foreknowledge must be accepted realistically and the idea dropped.

BASE LINE HURDLE - Most ideas fall neatly into the change of form, fit, function or contract-change require­ment. Occasionally, a potentially high cost-savings idea arises that cannot be made to fit under the rules governing a VE submittal. Generally a company will , or can, profit from such a good idea by some alternative means. When the greatest return to the company would be through the VECP, considerable time can be invested in making the idea an acceptable VECP.

Low Savings Hurdles Nearly half of the ideas that pass the Early Rejection

Criteria ultimately fail, because a final accounting of all cost and quantity factors discloses a low-savings potential. Not all ideas can initially be evaluated cost-wise with enough accuracy to make a keep/rejection decision. In fact, our experience has shown that the first cost-saving estimate on a new idea can be inaccurate; with no reliable trend either high or low. Because of this, an additional series of individual hurdles is created. These hurdles represent the most frequent causes of idea rejection late in the game, due to cost factors that tend to be overlooked or grossly under­estimated at idea inception.

By experience, we have found these causes to be: High development cost; Long development cycle, or lack of lead time; Requalification requirement; High tooling cost; Low production quantity, or future parts; High government costs; and Inadequate backup.

Success Criteria I f the Late Rejection Causes spell probable doom, their

opposites should give us the clues for spotting the most probable successes. A checklist of Success Criteria is pre­sented in Figure 2 with the corresponding Late Rejection Causes. This success criteria becomes the judgement factors for clearing each Low Saving Hurdle.

Success Criteria Corresponding Late Rejection Cause

1. Proposed change is:

• Simple High development cost

2. Proposed change is:

• Proven, or easily provable Long development cycle

30 Proposed change is:

• Not subject to Qualification Requalification requirement

• A deletion - no requal reqM

• A substitution - qual by simil.

• Self contained - no effect on other parts or systems

• Adaptable to existing test fixtures and procedures

4. Proposed change is:

• Not a manufactured item High tooling cost

• Producible by conventional methods on existing equip.

5. Proposed change gives:

• High unit cost saving Low production quantities, or future parts already procured

6. Proposed change is:

• Interchangeable High Government cost

7. Proposed change Is:

• Well described technically Inadequate backup

• "Reasonably" costed for all known in-house and customer areas

Figure 2. Idea Success Criteria

When an idea does not meet a Success Criteria at a par­ticular Late Rejection hurdle, then a separate evaluation must be performed to decide i f that hurdle can be cleared or not.

The Success Criteria serves as a reminder to check danger areas that may be overlooked in the exuberance of a fine sounding, new idea, such as:

1. I f the idea is not a simple change, be careful to in­clude an estimate for the cost of development.

2. I f the idea is not already proven or is not easily pro­vable, then time, which is money, may become a big cost factor.

3. I f the idea affects a qualified item, obtain an input on how maintenance of qualification will be handled and its cost.

4. I f the idea means a change in manufacturing pro­cedure, make sure the capability exists to accomplish the change, and in particular consider the need for new or exotic tooling or equipment.

5. Be sure to investigate the present state of production part quantities when comparing estimated unit saving with number of units to be made.

6. I f the idea changes a part so it is not directly inter­changeable with the original part, then the government will have to expend dollars to accommodate the change in con­figuration documentation.

7. A final check should be made of the technical descrip­tion and cost estimate for the change to evaluate the feasibility and cost of obtaining all additional data necessary to produce a complete VECP document.

Idea Follow-Up

This, then, completes the VECP obstacle course. Since there is no competition, each new idea has only to finish

10 PERFORMANCE

o

tn 60 <

O 40

16

10

0

u POTENTIAL VECP'S

PROBABLE VECP'S

ACTUAL VECP'S

UJ _J u z >- g o 1- 1-_1 UJ :O

S u os

> a u UJ —J C3 o Q < z cc > O _1 a. o Z o o S a o UJ o o

cc i - _J X

LOW SAVING

- D A Y S -

A,

Figure 4. VECP Obstacle Course 1975 Performance

Reason for Rejection as a VECP

No VE clause

Commercial Program

Technical

Get Well

Political

Baseline

Low Saving

High Development Cost Long Development Cycle

Requalification

High tooling costs

Low Production

High Government cost

Inadequate backup

Figure 5. Disposition

Idea Disposition

Consider for submittal as VEP, company sponsored effort, unsolicited proposal

Recommend to Program Manager for action

Alternate solutions requested

Recommend as possible problem solution Shelve for possible later consideration

Drop

Seek variations to meet VECP requirements Consider for VEP, CI, company effort

CI or AN

Seek alternate means to reduce cost Find alternate funds to support program

Seek means to reduce requirements

Seek alternate production methods Seek alternate means to obtain capability

CI or AN

Consider breaking idea into smaller parts CI or AN

Seek means to obtain needed information

of Rejected VECP Ideas

the course to qualify as a potential VECP. The hurdles are not particularly difficult, but failure to get over any one means idea failure. Most ideas will either clear each hurdle easily, or will fall flat at one hurdle and be eliminated.

The Low-Saving hurdle generally is the only trouble­maker. The judges for the race are initially the value engineers. We alone decide the fate of each idea at this stage of the race. We judge strictly according to the two rules stated previously: every idea is given a chance, and no idea is rejected without a valid reason. We sometimes will even provide a boost to help an idea over a difficult hurdle.

Each idea that survives this initial VE screen is then presented to the program manager, chief engineer and contracts manager. I f they agree that the idea has VECP potential and that the estimated cost data is reasonable, they are asked to sign a Preview Document. This event signifies management support for continued evaluation of the idea, triggers the release of a telegram to the customef (

disclosing the basic idea as a VE idea, starts the effort" required to draft a detailed VECP, and provides visibility to the effort for monitoring and reporting purposes.

Each idea should be run through the obstacle course quickly; within days of the idea log-in date. Those ideas definitely lacking potential must be discarded, so effort can be channeled to those ideas having potential.

Program Results The track record of new ideas exposed to the hurdles

course in 1975 is shown in Figure 3. Early Rejection Criteria Number Rejected (%) Not Applicable 40 Technical 1 Get Well 2 Political 5 Baseline 12 Low Saving 24

Total Rejected 84%

Figure 3: Results — 1975 Ideas Through Hurdle Course

The remaining sixteen percent of ideas are thus identi­fied as the most probable to become successful VECPs. Each must now be expanded technically and financially toward proof that the proposed change will , in fact, retain product performance and quality and will , in fact, reduce the overall cost to the government. Those that do become the actual submitted VECPs.

In 1975, the method spotted sixteen percent of the original ideas as potentially successful VECPs. About two-thirds of these were successful and were submitted. Figure 4 graphically shows the year's results and indicates generally where in the obstacle course various ideas failed. Forty percent of the ideas did not apply. Twenty percent were rejected for reasons other than cost, twenty-four per­cent did not show a positive or a sufficiently high cost saving, leaving sixteen percent spotted as likely to succeed.

Since only ten percent finally became submitted VECPs, we examined the six percent failure to determine i f the spotting method was deficient in some way. This investiga­tion disclosed that, in every case except one, the failures were due to factors that could not have been detected earlier in time. The exception was an idea that stumbled over the political hurdle and finally died from the wounds received.

The final question is what happens to the ninety ideas that were rejected as potential VECPs. This is an important part of the VE operation, since every good idea should receive attention and should be considered. Figure 5 docu­

ments the disposition of rejected VECP ideas. The method works. It minimizes the effort necessary to

evaluate the true potential of each new idea, and it probably was a contributor to the quality of the actual VECPs submitted in 1975; all of which were approved by the customer. 1~P]

PERFORMANCE 11

THE E V A L U A T O R G I V E S IT

L I F E

PETER R. HINES is the Suggestion Program administrator at the Utica Trim Plant of the Ford Motor Com­pany. In his twenty-five-year career with Ford he has served as supervisor of Nonproduction Stores, Procure­ment, and as a cost analyst.

Hines received a BBA degree from the University of Detroit and had done graduate work at Wayne State Univer­sity. He is a Registered Suggestion System Administrator.

By Peter R. Hines, RSSA

A suggestion program evaluator is a midwife. This may sound like a strange title and I am sure few, i f any, would accept i t . But i f you stop and think about i t , this is the duty that many good suggestion evaluators perform. They take a struggling new idea and recognize it as the embryo of a method or process that, i f given life, can assist or improve their company's competitive position. They breathe life into a suggestion by giving i t encour­agement and assisting its implementa­tion over the stony road that change must often face. And, in the end, they take pleasure in the moment when the idea's parent receives his award. For the evaluator knows that without his assistance the new-born idea might not have lived because of negative thinking that seems to surround attempts to change.

Just what is a suggestion evaluator and how is he chosen? This varies with the significance top management assigns to the importance of the sug­gestion program. In many companies, it does not nave the rank of a full-time position. The evaluators are people who are assigned to assist the sugges­tion program administrators in the evaluation of ideas. They should be picked for their expertise in the various fields that affect the company. It is important that this assignment be

12 PERFORMANCE

given an appropriate priority and not be classified as a fill-in job for spare time. I f i t is a spare-time assignment, your case load will suffer a significant backlog, suggestors will become dis­couraged, and the submittal rate will suffer.

The suggestion program administra­tor should develop an effective train­ing program for evaluators. The admin­istrator's success or failure will de­pend, to a great degree, on the evalua­tor. Management should be aware that this program is necessary. Many seem to think that one can merely send an engineer, or some other expert, an idea and he will react to it positively and evaluate it correctly within the rules of your program. This, unfortunately, just is not the way it happens. One's human nature does not always accept, easily, someone looking over his shoul­der to catch him making mistakes, or improving on something that he de­signed and at which he is supposed to be an expert. I f you have not trained and conditioned your evaluators, their first normal reaction might be, "How can I reject this idea?"

How do you begin your evaluator training program? First, determine i f top management believes in the pro­gram. I f they do sincerely believe in the significant assistance a suggestion program can give to their company, then get them to make a public and well-distributed announcement of their support of the program, and their expectation that all those who are in­volved will perform to the best of their ability with a positive approach.

After this first step — the declara­tion of support by top management — it is time to begin the actual training of the evaluators. I believe the best way to begin is at a luncheon meeting for all evaluators and their supervisors. This accomplishes many things:

1. It shows that the company con­siders the program important enough to give it the attention it deserves.

2. It brings the evaluators together with their supervisors in a positive dis­cussion of ideas and the procedures for handling them correctly.

3. It provides common ground for further discussions.

4. It gives the suggestion program administrator the opportunity to meet all of his team and present his program to them.

5. It allows the program administra­tor to listen to the questions and prob­lems of the evaluators; and by discuss­ing them in the group, it gives him an invaluable opportunity to clear up mis­conceptions.

I f you obtain this opportunity, it may be a once-in-a-suggestion-time opportunity. Therefore, you must take time to prepare the best program you ever presented. Otherwise, you may also get the same hasty rejection that you are working to prevent your sug­gestors from receiving.

These are a few ideas that you might use in your presentation:

1. Begin the program with a posi­tive statement of the importance of the suggestion program by the highest ranking official of the company that you can obtain. It need not be lengthy, just firmly in support of your goals. , i

2. Outline the positive duties of an evaluator and how he is expected to perform under your company's proce­dures. Even give the mechanics of the program and how the paperwork flow is to be completed. Some may be un­aware that the answer that they pro­vide is the answer that the employee will finally receive. I f some were aware of this, I am sure they would be less negative, or fl ip. I f the evaluator is in doubt about the proper answer, there is no disgrace in recommending re­ferral to another area.

3. Highlight the important factor or approach. Each suggestion should be reviewed with the thought "how will this work?" no matter how ridiculous it first appears on the surface. The employee on the job every day may see things we did not even know exist­ed. Therefore, we must overcome the sometimes human tendency to pick up a marginal suggestion and say to our­selves, "How can I reject this?" This is a cop-out and is used because it might involve extra work to try the idea. But, the dollar savings accruing to your company's program is proof of the value of many ideas. I f you have analyzed the cases that are awarded after first being recommended for non-adoption, you know that a lot of valu­able new ideas are aborted because of negative thinking. I took one year of maximum awards in our plant and checked the record. There were fifteen maximum awards last year and, of the fifteen, ten of them were rejected at least once. This delay cost us money; the ideas could have been lost com­pletely. So, we must think positively to make money in suggestions.

4. We all know that all suggestions are not adoptable. Therefore, we must train our evaluators to be profession­als, even in their nonadoption recom­mendations. A very important and final cause for nonadoption in our company, and I believe in many others, is where a prior, identical idea

is still credited to the original sugges-tor during his equity period; another is when the company has documented proof that they have been working on the suggested method. This is the merciful method of ending an em­ployee's dream. There is nothing worse than declining an idea this year for lack of merit, and then a year later telling him the company had already been working on the subject of his sug­gestion prior to his first submission. Another bad phrase to use seems to be "We could never do it this way." Never is a long time, and it is amazing how often never becomes next year.

5. After you have discussed non-adoptions, it is time to get the bad taste out of everyone's mouth and conclude with a motivational message on the positive side. Outline the value to the company of the suggestion pro­gram in dollars and cents. When I start feeling low, I go to talk to the one engineering section that really believes in suggestions, our industrial engineers. They tell me, "Where do you think we get many of the ideas listed on our methods agenda? We get them from suggestions." This section gives sugges­tions more than lip service; no sugges­tion can stay in their area more than three days without being answered.

Finally, the administrators wind up with a strong finish on the positive side to motivate the evaluators to re­turn to their stack of suggestions and prospect for the gold in them thar hills.

But what is in the program for an evaluator? The satisfaction of doing a good job, knowledge that he has im­proved his company's profit position by the conscientious processing of sug­gestions, the warm feeling of seeing a deserving employee receive a valuable award; all are good reasons for per­forming the duties of an evaluator with dedication.

But, I wonder i f any companies offer more. When one sees some evalu­ators take a raw idea with the mere skeleton of a solution and, because of their interest, spend additional time to develop and enlarge upon the sugges­tion until it is a successful method, one wonders i f there could not be more. I would like to see the first evaluator who recognizes the value of each idea that becomes a successful maximum award suggestion receive an appropriate award in recognition of his positive approach. It need not be expensive - just an appropriate gift that recognizes a positive evaluator who knows how to bring the ideas in his care to ful l growth and maximum profit. [T]

PERFORMANCE 13

, ~ , R A N D CREASY is a certified Value Specialist, SAVE fellow, and a Registered Professional Engineer. He is active in the Society of American Value Engineers on the local and national levels. He has served as president of the Dallas/Fort Worth Chapter, national vice-president, lectured nationally on various VE topics, authored a textbook on Value Engineering and a manual on Function Analysis System Technique. He was selected as Value Engineer of the Year (1970), Engineer of Distinction by the

Engineers' Joint Council (1974), Prominent Engineer by the Library of Congress (1975), and he received SAVE's Distinguished Service Award in 1975. Creasy is currently with D.M. Investments, Incorporated, Fort Worth, where he is vice-president of Value/Industrial Engineering. He was recently named editor of Interactions.

Creasy received a first prize Joy Manufacturing Company Recognition Award for this article submitted in 1975 competition.

A p i c t u r e is worth a

t h o u s a n d w o r d s

By Rand Creasy

Value Engineering and Value Analysis efforts have been in being at the Vought Systems Division of LTV Aerospace Corporation since 1957. Vought has a full-time Value Engineer­ing effort in Engineering and Value Analysis in Materials with the overall division effort reporting directly to the vice-president-administration. It is an in-depth program that generates results.

But, no matter how satisfied one may be with the past, there is always room for planned betterment to meet the challenge of the future. With this thought in mind, action was taken to make changes in the workshop training effort, with emphasis geared to after-workshop use of the. functionaj approach..

CP. Smith, past national president of the Society of American Value Engineers (SAVE), Hal W. Morrow, c u r r e n t S A V E vice-president-communications, and myself, use function-oriented value thinking in our day-to-day activity. We have a total of over thirty-five years' experience in full-time value work.

On a few special studies we follow, in written detail, the Job Plan. Yet, most of our success has been based on a mental exercise with little or no visual evidence that the function approach was used. Typically, we get the facts, define the functions, apply creative thinking, analyze alternatives and implement changes. We mentally follow the value Job Plan.

This mental exercise is necessary in many instances due to crash efforts, lack of time, work load and other factors that creep into the normal work day. But, we reasoned, should this become the rule rather than the exception? Also, what were other seasoned value engineers doing? Were they, as a rule, going the mental gymnastic route?

We did two primary things to find out. First, this question was posed at a regular monthly meeting of the Dallas/Fort Worth SAVE Chapter. The majority of the practicing VEs in attendance indicated they follow the mental route in most of their value decisions. Armed with this informa­t i o n , a Nielsen-type survey on a

national scale was envisioned as the second step.

The National Survey

The Nielsen ratings are broadly based on the industrial engineering technique of work sampling; statistical model approach where a small sample tends to reflect the actions of the whole. Nielsen uses 1200 carefully selected homes to mirror the TV view­ing habits of the 69.6 million U.S. households that have TV sets. Special telephone hookups transmit informa­tion directly from the homes to a central computer where the data is collected, analyzed and the ratings are based on only .0017 percent of the homes with sets.

In our survey, the SAVE National Board was selected as the sample unit. As you know, the members represent a number of diverse organizations and all sections of the country. Most are mature value engineers as indicated by their company stature and Certified Value Specialists (CVS) designation. They account for more than one percent of the SAVE membership.

14 PERFORMANCE

Even though this is a small percent­age, it still represents a sample percent­age base that is approximately six hundred times broader than Nielsen's. This fact puts the confidence level of the sample on a considerably higher plane. At least, i t is ample for the use intended of simply gathering informa­tion on the day-to-day applications of the VE discipline.

The Survey Questions

The survey was designed to obtain data- in the following major areas: Mental vs. Detail Application of the VE Approach; Use of FAST (Function Analysis System Technique); Matrix Use in Analysis; and Workshop Work­books.

The Survey Sheets were distributed at the National Board Meeting held September 19 and 20, 1975. A personal follow-up was made in October. Al l board members respond­ed.

Survey Analysis And General Conclusions HOW WE DO VE, QUESTIONS 1

AND 3 - Some value decisions have to be made immediately in the real environment of our daily work. There is no time for a detail analysis or a w r i t t e n step-by-step Job Plan approach. Too, one major objective of workshop training is to generate this value/function thinking in workshop trained employees.

But we are the professionals, and over eighty percent of the time we mentally apply VE. Are we flying by the seat of our pants too much? It is possible we are. Too much of this and we could well drift back into the in tu i t ive or -gut-feel method of problem solving' to enhance value. Also, what does this do to our image in the eyes of our fellow workers and our management?

An analogy with learning to drive an automobile may or may not apply. Let's take a look. When we are learn­ing to drive we pay strict attention to everything. We concentrate. We

practice safe driving, observe all road signs and stay well within the speed l i m i t s . With experience, driving becomes easy and automatic.

However, most of us do not con­centrate as much; we let our minds wander. We hedge on stop signs and speed limits. We get involved in accidents or get traffic tickets. Our driving problems become even more magnified i f we are on unfamiliar route or i f we change from automatic shift to manual shift or say to a 2^-ton truck or tractor-trailer unit. We can't cope with these situations because there are different problems involved.

So as it with Value Analysis. Each value study has a different problem to solve. We are always on a different route. The step-by-step approach we learned still works, but we must con­centrate to get the end functional result. One means of assuring concen­tration is to write things down, to follow the written Job Plan approach.

Alex Osborn, in discussing brain­storming in his book "Applied Imagin­a t ion ," states: "The only strictly formal feature should be a written record of all ideas suggested." Further, his group brainstorming methodology specifically calls for a person to take notes. In discussing devices to help the production of ideas, he includes these words: "Another simple but effective way to induce imaginative effort is to make notes. For the purpose of moving our minds, pencils can serve as crowbars."

CONCLUSION - In more than twenty percent of the time, we need to apply a written approach that shows the systematic Job Plan tech­nique was used in our decision making. Also, we may just do a better job.

USE OF FAST, QUESTION 2 -FAST is one of the newest techniques developed in the VE/VA discipline. Its many and varied applications are re­flected in Survey Item 2. Over f i f ty percent use FAST in workshops and approximately eighty percent in day-to-day value work.

CONCLUSION - FAST is a value technique that is in widespread use in training and the work-a-day world; i t evidently aids in our problem solving and in the pursuit of value. Also, i t visualizes some of our key value work.

PAPER WORK AND COMPUTER WORKSHOPS, QUESTION 4 - Value techniques are being used more and more uvpaper work and software ap­plications. Survey results indicate-that over two-thirds of us have participated in workshops where all projects were paper work or software.

Very limited use, less than twenty-five percent, is being made of the value

SURVEY SUMMARY

1. IN DAY-TO-DAY V A L U E WORK Job Plan followed in detail 16% Steps followed mentally 84%

2. F A S T IS USED IN Workshops Yes = 47% No = 40% On-the-Job Yes - 80% No = 20% No Workshops = 13%

3. S INCE WORKSHOP TRAIN ING, T H E JOB PLAN is followed Step-by-Step All Jobs = 7% % of Jobs = 7% % to % = 40% 1/10 =40% 0 = 6%

4. PARTIC IPATED IN A L L PAPER WORK OR S O F T W A R E WORKSHOP Yes = 73% No =27%

4A. PARTIC IPATED IN AN " A L L COMPUTER" WORKSHOP Yes = 20% No = 80%

5. A MATRIX IS USED IN T H E A N A L Y S I S PHASE OF WORKSHOPS Yes = 73% No =27%

6. T H E H E A R T O F V A L U E DISCIPLINE IS T H E FUNCTION APPROACH Agree 100%

7. FOLLOW-UP IS MADE TO D E T E R M I N E IF WORKSHOP G R A D S APPLY V E FUNCTION THINKING IN D A I L Y DECISIONS

Yes =60% Sometimes =20% No = 20%

8. W R I T T E N COMPLETIONS R E P O R T S P R E P A R E D ON EACH WORKSHOP P R O J E C T Yes = 86%

No = 7% No Answer = 7% 9. A WORKBOOK IS USED IN WORKSHOPS

Yes = 86% No = 7%' No Answer =7%

9A. WORKBOOK IS USED AS COMPLETION R E P O R T Yes = 38% No = 62%

Figure 1: Survey Results — Utilization of VE Concepts

PERFORMANCE 15

HOW WE LEARN:

l^t^ru Taste r$hhru ? touch

:.3£%5tfjrV«mell [lift thru1 Hearing 83%'thrjj. Sight

• • I

PRESENTATION METHODS:

METHOD ./^tMng^- alone

i < ^ a ^ - p s e d alone ^ I M h o w S -

RECALL 3his. later 25%

85%

earning and Retention exceptions

RECALL

later-1Q%

techniques to stem the rising cost of computer operations.

USE OF ANALYSIS MATRIX, QUESTION 5 - Some type of matrix is being used by over seventy percent of us to analyze alternatives. At least, this is the situation relative to work­shops.

FUNCTION, QUESTION 6 - The Function approach is the unique dis­tinction of the value discipline. This question was specifically asked be­cause we, as a Society, have been un­able, to date, to arrive at an acceptable glossary of definitions. Projecting this sample survey to the total member­ship, we now have one item that we all can agree on one hundred percent. It is

FINAL QUESTIONS - Lastly, over three-fourths of us use a workbook during our workshops, and also require a completion report. Yet, only about one-third let the workbook serve as the completion report. I arrive at the conclusion that we see the value of w r i t t e n (visual) documentation initially, but get away from this as we get more experienced. Also, we should strive to let the workbook serve the completion report function.

A Picture Is Worth...

We can make use of the axiom that "a picture is worth more than a thousand words." It takes more than words to effectively convince our management and fellow workers. But

i f we go the mental route to value, we have only words eighty percent of the time. Results show we have been successful in our past applications of the value techniques.

But could this success have been even greater? What i f we had had more visual evidence to support our step-by-step creative problem-solving approach? Would our discussions and presentations have been more orderly, factual and businesslike? And what about our creditability? One thing is certain: we would have written docu­mentation in the event we had to justify our decision at a later date.

All of us have probably heard the following statement: "We do value engineering but we just don't call it that." When the evidence and facts don't support this statement, we are nonbelievers. Does our predominately mental approach — with very little to back-up our decisions — cast a shadow on our own VA efforts? One thing for sure, i t fosters an art approach for which we strive.

I believe that when we are present­ing results we should also be selling the VA concept. Visualization aids in sell­ing. Information in Figure 2 supports the reasoning behind using visualiza­tion of our efforts.

A picture is worth a thousand words because people are visual minded. Why? Because most of what we hear goes in one ear and out the other without being processed, absorb­ed or understood. We are not good listeners, as a general rule. Visualiza­tion, plus our word message, will en­hance the communication of value messages.

Results - What We Are Doing The survey confirmed our own

experience. It gave us added vision and broadened our base for decision making. As a result, we have imple­mented the following actions:

To motivate all personnel by making it easier, more convenient and to encourage after-workshop use of the value discipline, we have developed and are using several new techniques and methods. As a secondary function, these were designed to visualize the efforts. These aids are brought togeth­er in an Action Packet that has been issued to each graduate of the VA workshops. These aids are:

VALUE WORK SHEET - To en­courage Value Analysis usage by the workshop grads and practicing value analysts, a summarized Value Work Sheet has been designed and issued.

I t summarizes the step-by-step approach into the classic Six Ques­tions: 1. What Is It? 2. What Does It Do? 3. What Does It Cost? 4. What Is It Worth? 5. What Else Will Do The Job? 6. What Does That Cost?

An Action Plan block is also includ­ed.

PERFORMANCE

We will continue to use the mental approach to value in some of our day-to-day decisions. Well encourage the workshop grads to do the same. We must think value. However, we are getting away from the over eighty per­cent category by making it more convenient to fo l low a written approach. Our goal is f i f ty percent.

FAST AIDS - A supply of 1x2-inch FAST cards for function listing and arrangement has been designed in connection with FAST diagram format sheets. The purpose was to make it as convenient as possible to prepare rough FAST diagrams.

Seventeen-inch by twenty-two-inch F A S T d i a g r a m formats have been prepared -also. These are similar to the above, but for a different use. The blocks are designed to accept the lx2-inch FAST cards noted above.

The two main purposes of these sheets are workshop use in the team's final presentation and for use in day-to-day FAST diagramming.

GRAPHIC MATRIX - For the analysis of ideas, a supply of Graphic Matrix forms is included. This is an aid to make it very easy to evaluate alternate means to perform the func­tion.

SPEAKERS BUREAU - A mini-speaker's bureau, composed of the workshop staff, has been offered to the workshop grads and their depart­ments. A matrix, showing speakers and subjects, is furnished for reference in­formation. In addition, the films used in the workshop are made available.

A Value News newsletter has been originated to maintain communica­tion, crossfeed ideas, recognize per­sonnel and highlight specific actions. It is issued on a periodic basis to work­shop grads and cost-reduction repre­sentatives. Our workshop workbook has been redesigned to perform the added function of serving as the com­pletion report. A part of the work­book is a one-page summary of the workshop project results. Summary

In summary, the survey results con­firmed our belief that the vast majoriety of day-to-day value decisions are mental excercises. Again, we don't advocate that this be stopped. It is good; but we are making a diligent and planned effort to bring the mental exercise and written exercise more in balance with each other. At the same time, by making it easier and more convenient, we are confident that this increased visualization of all our efforts will enhance our overall value function and serve as an additional vehicle to foster the use of Value Engineering and Value Analysis. [ H

P E R F O R M A N C E T R E N D S

S C I E N T I F I C / P L U S C A L C U L A T O R - A new, six-ounce personal calculator that combines all of the most frequently used scientific, statistical and financial functions has been introduced by Hewlett-Packard. The HP-27 Scientific/Plus pocket calculator, priced at $200, contains more prepro­grammed functions and operations than any other HP pocket calculator. Twenty-eight exponential, log, trig and arithmetic func­tions, including time, angle and coordinate conversion functions, are preprogrammed in the HP-27, as well as fifteen statistical functions and ten financial functions. For addi t ional information write Hewlett Packard, Dept. P, 1501 Page Mill Road, Palo Alto, California 94304.

T R U T H T A B L E LOGIC CL IP - Added to Hewlett-Packard's family of integrated circuit logic testers is the Model 548A Logic Clip. Easy to use, the device simply clips on to a sixteen-pin DEP-packaged integrated circuit under test and its light-emitting diodes show logic states of each of the I C s pins simultaneously. It is automatic for all logic families from four to eighteen volts dc that include T T L , D T L , R T L , CMOS and HTL circuits. Three volt CMOS is tested by connecting a 4.5-volt supply to an auxiliary power pin. U.S. price of the Hewlett-Packard Model 548A Logic Clip is $105.

m

17

P R E L I M I N A R Y F INDINGS OF A MULTIVARIATE

ANALYSIS OF SUGGESTION S Y S T E M ' S

IMPACT ON PRODUCTIVITY

JOSEPH SHORT is a recent graduate of the MBA program at the University of Texas at Austin. Previously he was a career military intelligence specialist.

By Joseph Short Brian E. Moore Francoise Arton

PROFESSOR BRIAN E. MOORE is a member of the Department of Manage­ment, Graduate School of Business, The University of Texas at Austin. He has published in the area of incentive systems, occupational analysis for manpower planning, and personnel management.

FRANCOISE ARTON is a Ph.D. candidate in the Department of Man­agement at the Univetjsity of Texas. She is currently teaching at the Univer­sity of Grenoble.

Purpose To determine i f the structure of suggestions can be cate­

gorized by their effect on productivity. To isolate those structural variables having the greatest impact on produc­tivity and determine which combinations of variables are consistently associated with high productivity. To provide a basis for investigation of nonstructural activities of those suggestion systems which exhibit desired structural characteristics. For example, suggestion systems exist for three reasons: for employee relations; for cost reduction; and a combination of the two. This paper shows how secondary analysis of structural level data leads to a strong inference that financial departments administer suggestion systems better than industrial engineering, personnel, and line management.

Description of data base. The data base for this study is the National Association

of Suggestion Systems (NASS) statistical report for the year 1971. This report contains data from 212 reporting member organizations. Data for 193 of these organizations was used in this study. The range of industries represented is quite broad and includes manufacturing, sales, service, insurance, basic metals, basic chemicals, rubber, machinery, transportation, public utilities, hospitals and all levels of government. There is good variability on most measures. Federal government agencies were not included in this research because of their disproportionate representation and because the variability of the data was lost through aggregation.

The NASS report categorizes data into seven broad classifications: statistics, savings, awards, policy, administra-Each of these classifications is divided into subclassifications.' Statistics, for example, is subdivided into average number of employees, suggestions received, employees submitting (suggestions), suggestions processed, and award payments. These subclassifications are then further subdivided. Average number of employees is divided into total, and eligible (to participate in the suggestion system). Award payments is divided into total (awards paid), average award, and highest award (paid during the report period). Using the subdivided classifications, a total of fifty-six variables

were selected which permitted construction of a 193x56 matrix.

The variables were constructed using actual data where possible (total number of employees, total awards paid, etc.). Where the response was descriptive rather than numerical, the answers were assigned a numerical value. A question which was answered yes or no was coded as l=no, 2=yes, and a nonresponse=0. A question requiring a qualitative answer was coded with the lowest value being equal to one and numbers used in an ascending order up to nine.

In the few cases where both numerical and descriptive answers were provided for the same question by different respondents, actual data were used where provided and descriptive answers were coded. Missing data were always assigned a value of 0 to permit inclusion in the study. However, pairwise deletion was employed for any given analysis. Missing data were a minor problem. All pertinent data permitted any given analysis to average at least ninety-three percent of the 193 organizations.

The range of the data reported can be considerable. For a simple yes or no variable without missing data, the range is obviously one. In the case of actual data, such as the total numbers of employees, where the largest firm reports 589,953 and the smallest reports only 104, the range is almost 590,000. We divided number of organizational units into total employment to get an approximation of number of employees per unit. Thus, at the lower end of the range, the average size variable is a measure of central tendency.

Also, in order to dampen the effect of size it is necessary to use a relative variable. The number of employees eligible to participate in the suggestion system, expressed as a per­centage of the total number of employees, is , therefore, a better measure to use when comparing firms of consider­able difference in size.

The range is even larger in the case of total awards paid where the largest total is $13,445,253 and the smallest is $55. Although the range is great, these values tend to be highly concentrated because there are only a few firms at the extremes. Eligibility of employees to participate in the suggestions system (computed as a percentage to total

18 PERFORMANCE

number of employees) has values which range from one hundred percent to as low as eighteen percent. However, slightly more than half of the observations — 51.8 percent — have an eligibility participation rate of ninety percent or higher.

Preliminary findings Initial findings indicate that this approach does identify

structural differences that are associated with productivity. A sample of the correlations of some of the variables

used in this study are presented along with an explanation of the variables. It is interesting to note, however, the significant differences between firms having more or less than 1000 employees. The differences are particularly note­worthy in the Case of correlation between the total number of suggestions received during the report and the highest award paid for a single suggestion during the same period: smaller firms = .56, larger firms = .18.

When the total number of suggestions submitted is , correlated with the total amount of awards paid during the period, the results shift: smaller firms = .38, larger firms = .77.

These correlations indicate a difference between firms of different sizes. The number of suggestions submitted in the smaller firms appears more directly related to the value of the highest single award paid, rather than to the total amount of awards paid. The reverse relationship appears to be true for the larger firms.

Inspecting the distribution of the values, the most apparent explanation of this finding is that smaller firms generally tend to have a large range of values for the highest award paid. Most larger firms tend to place ceilings on pay­ments and these ceilings are more uniform than in the smaller firms.

Another, and equally plausible, answer may be that the highest single award for the small firms represents, in many cases, a sizable proportion of the total amount paid. Where­as, in the larger firms, the highest award is only a fraction of a percent of the total awards. Understanding the associa­tion of size with award payout is being undertaken by breaking down those factors which may influence the correlation.

An interesting, but not unexpected, finding was that as the firm size increases, the percentage of employees eligible to participate in the suggestion program decreases. Many firms exclude management personnel from the suggestion program. As the firm increases, additional levels of super­vision are added and, generally, the larger the firm the larger the management element; not only is the manage­ment larger, but it is disproportionately larger.

This finding held not only across all firms (except government), but it also held for three industries that were checked (rubber, steel, and insurance). When the number of employees eligible to submit suggestions is correlated with the number of suggestions submitted, the following correla­tions result: smaller firms = .50, larger firms = .78.

The difference may be significant. There are two possible explanations for this difference. The first is that the larger firms are better able to motivate their personnel than the smaller firms. The second is that the smaller firms tend to formally exclude fewer employees, but that un­written policies tend to keep a portion of the eligibles from participating in the program.

I n other words, the larger firms exclude certain categories of personnel (supervisors for instance), and they do this in writing. Smaller firms include this type of personnel in the system on a formal basis, but exclude them in practice. This difference will be further analyzed to determine i f either of the above possibilities appears to be

true. Because data are not available in the NASS report, however, the real cause may only be determined by obtain­ing additional data directly.

Tables 1 through 6 show cross tabulations between the location of the suggestion system functions within the organizational structure and the organization policies which determine the amount of money paid for a suggestion that results in tangible savings. Tables 5 through 6 show the composite effect of these policies in determining the amount of award paid. The four sections to which sugges­t ion systems are attached are industrial engineering, finance, personnel, or management. The four factors used in computing awards are basis used, period of time, over­head costs, and percentage of savings.

GROSS NET OTHER ROW TOTALS

Industrial 28.0 72.0 0.0 100 Engineering Finance 35.7 57.1 7.1 100 Personnel 28.8 67.8 3.4 100 Management 23.1 76.9 0.0 100 N = 183 94.8%

Table I Basis Used for Computing Savings By Type of Administrative Department

(percent)

Table 1 shows cross tabulation with the basis used in computing savings. The three categories are gross, net, or other. It should be noted that most of the organizations (68.9 percent) use net savings as their basis for computing savings. Finance shows a significant difference with other sections in this regard. The training and experience of personnel associated with finance sections should tend to cause a greater awareness of the need to use net savings rather than gross savings unless there is some other formula in effect which achieves an equitable share. The fact that the other sections are relatively the same in their use of the systems makes the finance use of gross savings even more noticeable. Management, industrial engineering, and personnel use gross savings 23.1 percent, 28.0 percent, and 28.8 percent respectively.

First Year Savings

Annual Savings Other Total

Industrial Engineering 100.0 0.0 0.0 100

Finance 78.6 14.3 7.1 100

Personnel 91.6 8.4 0.0 100

Management 86.2 6.9 6.9 100

N = 186 96.4%

T A B L E 2 Period Used for Computing Savings By Type of Administrative Department

(percent)

Table 2 depicts the cross tabulation with the period of time used in computing savings. The three periods used are first-year savings, annual savings, and others. The most significant finding is that industrial engineering uses first-

PERFORMANCE 19

year savings exclusively. Finance uses annual savings or other 21.4 percent of the time. Management and personnel use annual savings or other 13.8 percent and 8.4 percent, respectively. These findings indicate that the industrial engineering sections follow a short-term policy that would be associated with personnel concerned with short-term problems. Management, personnel, and finance are general­ly considered to have a longer range view.

Table 3 shows cross tabulations with inclusion or exclus­ion of overhead costs in computing savings. None of the sections use either method exclusively, although, as expect­ed, the finance section uses overhead costs more (28.6 percent) than the others. Industrial engineering, personnel, and management are extremely similar in their use of over­head costs in computing savings, using it 16.7 percent, 16.8 percent, and 18.5 percent of the time, respectively.

No Yes Totals

Industrial Engineering 83.3 16.7 100

Finance 71.4 28.6 100

Personnel 83.2 16.8 100

Management 81.5 18.5 100

N = 184 95.3%

Table 3 (percent) Overhead Costs Used to Compute Savings By Type of Administrative Department

Table 4 shows cross tabulations with percentage of savings paid as an award — ten percent or less, twenty percent or less, or greater than twenty percent. The most significant finding is that industrial engineering has the highest percentage of payments in the greater than twenty percent payment category, 21.7 percent, while finance has the lowest, 7.7 percent. Management uses this category 16.0 percent and personnel uses it 17.6 percent.

Tables 1 through 4 interact with each other and the effects of this interaction are presented in Table 5 and 6. These tables are based on a suggestion with an assumed net savings of $20,000, a gross savings of $30,000, and other savings of $25,000, on an annual basis. Savings on a first-year basis are thus initially equal to these figures. Other and annual savings are computed at a rate of one and one-half times the annual rate. This multiplier is purposely low and is based on the assumption that any member firm

sophisticated enough to project savings beyond the one-year time frame would also be sophisticated enough to use present value concepts and discount future savings to present values. The use of overhead cost in computing savings results in a multiplier of 1.5. I f overhead costs are not included, the multiplier is 1.0.

Using the above figures, Table 5 was constructed by multiplying these figures by the percentages in the appropriate table — Tables 1 through 4. To illustrate, finance departments were computed as follows:

Column 1 = (30,000x35.7) + (20,000x57.1) + (25,000x7.1) = 23,905

Column 2 = (23,905x1.0x78.6) + (23,905x1.5x14.3) + (23,905x1.5x7.1) = 26,463

Column 3 = (26,463x1.0x71.4) + (26,463x1.5x28.6) = 30,252

The computations for Table 6 are: Row 2 = ( 3 0 , 2 5 2 x . 0 9 5 x 4 6 . 2 ) + (30,252x. 171 x46 .2) + (30,252x.304x7.7) = 442,587

A most interesting finding occurs in Table 5. I f the reader grants that our weighting assumptions are reasonable, then the financial departments distribute more award dollars. In general, it appears that this distribution is based on measurements which permit longer payouts with overhead costs subtracted. Our inference is that finance is operating with a cost-reduction suggestion system rationale - at least more so than other functional departments.

'Table 6 carries our logic to the final step and the extend­ed results change dramatically. That is, by using the mean for the weight we now combine our figures of Table 5 with the policy governing percent of bonus paid. This policy is arbitrary. Without exception, the nonfmancial departments are more inclined to award greater than twenty percent of savings; where the mean is actually thirty percent. Thus, when this policy is reflected in our weights, Table 6 illus­trates that differences between departments wash out.

The range of payouts, as expressed as a percent of finance departments, is from ninety-three to ninety-seven percent. Clearly, personnel and management departments are close to the actual payouts of finance departments. Also, industrial engineering departments show the same tendency to have high bonus percent policies; 162,961 is the highest amount in that category.

When Table 6 is compared to Table 5, the range of pay­outs as expressed as a percent of finance departments is eighty-two to eighty-six percent. The contrast is sharp enough to suggest that finance departments award the most in payouts, but the method seems less of a giveaway. There­fore, the NASS Annual Report of 1971 shows remarkable uniformity of suggestion system policies and experience in

Award Less than 10% of Save

Award Less than 20% of Save

Award More than 20% of Save

Row Totals

Industrial Engineering 43.5 34.8 21.7 100 Finance 46.2 46.2 7.7 100 Personnel 38.0 44.4 17.6 100 Management 36.0 48.0 16.0 100 N = 167, 86.5%

Table 4 Percentage of Savings Given as Award by Type of Administrative Department

(percent)

20 PERFORMANCE

C r r foi Period Overhead As a Percent Computing Used Used of Finance

Industrial 8 400 18,992 Engineering 14,400 5.711 82%

22.800 22,800 " 24,703 10,710 18 789 11,420 h 128 18,895

Finance 1.775 2.546 11.357 100% 23 905 26,463 30,252 8,640

13,560 21,114 Personnel 850 2,904 6,053 86%

23,050 24,018 26,035 1<) ^1

6,930 2,309 l i l I I l i i ^ B i Mdiugement lb J u ( i 1 ,W'i 6,053 86% 23 310 23i849

Compulation Factots Gross = 30,000 First Year = 1 0 Net = 20,000 Annual = 1 5 Other = 25,000 Other = 1 5

Overhead (No) = 1 0 Overhead (Yes) = 1 5

Table 5 Combined Ba is Used for Computing Savings by Type of Administrative Department With Dollar Value of Suggestion Weighted for Policy of Administration

the aggregate. However, as Tables 1 through 6 indicate, a finer breakdown offers information contrary to this uniformity.

The strong inference which seems indicated is that individual suggestion systems administered by financial departments in major U.S. corporations are operated for cost reduction. Perhaps the measurement of the true effect of a suggestion on cost reduction is better and thus its relationship to productivity is more exact. Therefore, this relationship permits a more equitable incentive to the

suggester. Conversely, i f suggestion systems are for employee relations, then other noneconomic benefits are sought. Should that be the case, the wealth of the firm and the whim of management determines the payout for suggestions. However, the reinforcer is general since better employee relations are sought. Where the reinforcer is contingent on productivity related suggestions, the learning that follows is specific. Only a carefully controlled, direct survey of suggestion system firms will redefine these inferences into fact. f_p]

Bonus Paid a

Department Industrial Engineenng Finance Personnel Management

Computation Factors Percent of Savings < 10, X = 095 means used as weights < 20, X = 171 > 20, X - 304

< 10 Grand As a Percent

< 10 < 20 < 20 Total Of Finance

102,085 147,003 162,961 412,049 93% 132,776 238,997 70 81 1 442,587 100 93,986 197,668 139,298 430,952 " 9 7 89,108 213,859 126,732 429,699 97

Tjableg • ** ... • • . • . > , :

Combined Basis of Suggestion Award by Type of Administrative

Department with Dollar Value Weighted for Percent of Bonus Paid

PERFORMANCE

G O V E R N M E N T AND B U S I N E S S

ROBERT M. BLEIBERG, editor of Barron's National Business and Financial Weekly for twenty years, came to Barron's in 1946 from Prudden's Digest of Investment and Banking Opinions, where he was asso­ciate editor. Bleiberg received a BA degree from Columbia University (Phi Beta Kappa), and an MBA degree from New York University. Bleiberg is a member of the New York Security Analysts, the New York Financial Writers Association, and the Mont Pelerin Society. He is a trustee of the American Economic Foundation. This presentation is available in its full length as one of six lectures compiled in Champions of Freedom, Volume 2. It may be ordered from Hillsdale College, (Dept. P, Hillsdale, Michigan 49242) where Bleiberg delivered this address.

By Robert M. Bleiberg

(Reprinted from Imprimis, with permission of Hillsdale College.)

While it :nay strike some of you as smacking of heresy, I'd like to begin by saying a good word for modern economics. Poor Ricardo and Marshall. They lived and worked in an orderly, more or less rational society, where experimentation was confined to the laboratories of the newly emerging physical sciences, and the world — or at least the part of it .that counted — was solidly wedded to the gold standard. Thus they were barred from such ex­citing pursuits as fine-tuning the gross national product, or manipulating corporate profit margins; as one Nixon price controller confessed to posterity when he first tackled the intricacies of Freeze One and Phase Two (and I quote): "It's fun." .

On the contrary, Nineteenth Century economists were compelled to turn their talents to the dull, plodding and often thankless quest for truth. There were Gresham's Law, Say's Law and the Law of Supply and Demand — but re­latively few lawbreakers. That was a time in which you could almost learn economics in one lesson. To prove (or disprove) a theory, few followers of the dismal science had the slightest inclination, let alone authority, to carve up either the body economic or the body politic.

What a backward day and age, with its mindless belief in pure reason. In striking contrast, today — and for roughly the past half century — economics has broken out of the confines of the classical mold, and we are all thereby infinitely richer. Thus, while experts might have argued the point endlessly, now we know for sure — thanks to the New Economics as practiced for decades in Washington, D.C. — that the dollar is not as good as gold. We have found out the hard way the heavy impact of minimum wage laws on teen-age unemployment, notably among minority groups. We have learned for ourselves that wage and price controls, notably in peacetime, do discourage capital formation, create artificial shortages and ultimately lead to debasement of the currency, both at home and abroad. And after sub­sidizing illegitimacy for a generation, through so-called federal aid to dependent children, we have belatedly come to recognize that we live in a world full of bastards.

All of which brings me — by a slightly roundabout route, to be sure — to my topic: Government and Business. Thanks to decades of social experimentation at a mounting

pace, a large body of empirical evidence has now piled up as to the efficacy — or, more accurately, the lack of efficacy — of federal regulation of U.S. economic life. The evidence supports the following conclusions, each of which we shall explore in turn. 1. Measured in terms of number of bureaucrats involved, volume of decisions and decrees or sweeping significance, U.S. rules and regulations in recent years have increased at an almost geometric rate. 2. Weighed on a scale of input against output or cost vs. benefits, virtually all such activities, both old and new, invariably are found wanting. Some have proven counter­productive, while a few are demonstrably a menace to the nation's health or welfare. 3. Perhaps because of its blatant shortcomings, government regulation - for the first time in living memory — is running into criticism and resistance, from an unlikely coalition of conservatives and liberals alike. 4. Ironically, some of the most powerful support for regulation is coming from quarters which by rights should be leading the fight against i t , namely, the business com­munity.

In order to appraise properly the current regulatory explosion, some background is useful. In The Wealth of Nations — we will celebrate the two-hundredth anniversary of its publication next year - Adam Smith wrote as follows (and I quote): "No regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone; and it is by no means certain that this artificial direction is likely to be more advantageous to the society than that into which it would have gone of its own accord ."

Thanks to the wisdom of the Founding Fathers, this country heeded Adam Smith for nearly a century. Then a basic change occurred, one described concisely and well in the latest annual report of the President's Council of Economic Advisers, headed by my old friend Alan Green­span.

(And I quote): "Until after the Civil War, the federal government's policy toward the economy involved little or no direct regulation.... The first steps toward regulation were designed to deal with problems of monopoly. In 1887, the Act to Regulate Commerce set up an Interstate Com­merce Commission (ICC) to regulate the railroads, which eventually led to reduced competition throughout the sur­face transportation sector. In 1890 the Sherman Act out-

22 PERFORMANCE

lawed contracts and activities designed to create monopolies in restraint of interstate trade, intending thereby to promote competition. In succeeding years, the transportation and anti-trust statutes were amended and complemented and direct economic regulation spread to other industries. There's been a marked trend toward more rather than less governmental regulation, (one which) has been particularly evident in recent years. More re­quirements have been placed on the private sector, often to achieve objectives such as safety, health and pollution con­trol...."

Some facts and figures underscore the point. In the past decade, according to the National Association of Manu­facturers, Congress has enacted more than sixty major"', pieces of legislation affecting the conduct of business. For " example, in 1965-1966, the 89th Congress passed the f o l l o w i n g measures: Child Protection Act; Cigarette Labeling and Advertising Act; Extension of Defense Pro­duction Act; Extension of Re-Negotiation Act; Fair Pack­aging and Labeling Act; Federal Housing Subsidies; Man­power Development and Training Amendments; Nuclear Indemnity; Patent Fees; State Technical Services; Taxation of Foreign Securities; Traffic Safety Act; Water Pollution; Water Resources Planning.

Similarly, the 90th Congress (1967-68) passed laws involving Age Discrimination in Employment; Air Pollution Control; Extension of the Defense Production Act; Exten­sion of the Interest Equalization Tax; Flammable Fabrics Act; Interstate Land Sales Full Disclosure Act; Land and Water Conservation Fund Amendments; Natural Gas Pipe­line Safety; Radiation Control for Health and Safety Act; Truth in Lending; Wholesome Meat Act; Wholesome Poultry Products Act.

Came 1969-1970, the 91st Congress and a fresh spate of legislation, as follows: Extension of Defense Production Act - Authorization of Economic Controls; Extension of the National Commission on Product Safety; Federal Standards for Occupational Safety and Health; National Environmental Policy Act; Poison Prevention Packaging; Public Health Smoking Act; Securities Investor Protection Act; Tax Reform; Water Quality Improvement; Workmen's Compensation.

In 1971-72, under the aegis of the 92nd Congress, came the following measures: Consumer Product Safety Act; Economic Stabilization Act Amendments of 1971; Emergency Unemployment Compensation Act of 1971; Equal Employment Opportunity Act; Federal Boat Safety Act; Federal Water Pollution Control Act Amendments of 1972; Lead-Based Paint Elimination Act; Longshoremen's and Harbor Workers' Compensation Act Amendments; Noise Pollution and Control Act; Ocean Dumping; Revenue Act of 1971.

Finally, the 93rd Congress, which spanned 1973-1974, left its mark on business as follows: Anti-Trust Procedures and Penalties; Commission on Federal Paperwork (there's a fine irony for you); Emergency Unemployment Compen­sation; Energy Supply and Environmental Coordination; Establishment of a Council on Wage and Price Stability; Export Controls; Federal Energy Administration; Federal Non-Nuclear Energy Research and Development; Federal Protection of Private Pension Plans; Minimum Wage.

Federal regulation has burgeoned in other ways, notably in the growth in the number of regulators and the amount of taxpayers' money which they spend. In the past two years, according to Murray L. Weidenbaum, director of the

Center for the Study of American Business at Washington University (and former Assistant Secretary of the Treasury for Economic Policy), the number of persons employed in the major federal regulatory agencies rose from 55,316 to nearly 64,000. In the twelve months ended June 30, 1972, federal spending for such purposes totalled $1.3 billion. By fiscal 1974, just twenty-four months later, such outlays had increased forty-six percent, to $1.9 billion, while for fiscal 1975, the total is estimated at roughly $2.2 billion. In short, the federal regulatory establishment is growing at a greater rate than the industries which it oversees.

Notably impressive rates of gain were scored by the De­partment of Health, Education and Welfare, Department of the Interior, Department of Justice, Environmental Protec­tion Agency, Equal Employment Opportunity Commission and the U.S. Treasury, all of which, from fiscal 1972 to fiscal 1975, more than doubled expenditures on business regulation.

In terms of costs to U.S. industry and the U.S. economy, moreover, the numbers cited above barely scratch the sur­face. Just to fill out federal forms - as of June 30, 1974, according to the Office of Management and Budget, there were 5146 different ones — business spends over 130 million man-hours a year. Merely to work up the required data for the new line-of-business reports currently sought by the Federal Trade Commission (which, by the way, industry is contesting in the courts), eight companies, including Beatrice Foods, Dow Chemical, duPont, General Electric, Procter & Gamble, Singer, Standard Oil of California, Union Carbide and Westinghouse, estimated that it would cost upwards of $8 million for start-up costs alone and over a million dollars a year in annual maintenance.

Similarly, in a recent study for the Brookings Institu­tion, Professors Douglas and Miller concluded that in 1969 air passengers paid excess fares to domestic trunk airlines ranging between $366 million and $538 million. Deducting improvements in quality — notably, in less waiting time at airports — the authors concluded that the traveling public that year suffered a dead-weight loss put at between $248 million and $536 million. In an update of this estimate, offered in testimony two months ago before a Senate sub­committee, one of the authors observed: "In our judgment, this figure today would be in the neighborhood of $1 billion per year, or around ten percent total domestic trunk-line revenues."

But the CAB looks like a bargain compared to the Inter­state Commerce Commission. Two years ago, in a study, "Surface Freight and the ICC," the American Enterprise Institute for Public Policy Research concluded that the agency properly may be charged with worsening freight shortages and delaying such technical breakthroughs as the Big John Hopper Car and the unit train. All told, the study estimated that ICC regulation costs the railroad industry $1.7 billion to $2.4 billion per year, the U.S. economy perhaps as much as $10 billion. Early this month, Vice-President Rockefeller told a group of concerned business­men that nobody in government had the slightest idea how much regulation as a whole costs the country. To judge by the fragmentary figures cited above, it seems fairly clear that the annual total runs into tens of billions of dollars.

One reason is the way that regulation breeds regulation, a process clearly described by Thomas E. Kauper, assistant attorney general, at the Senate subcommittee hearings. Regarding airlines, for example, Kauper pointed out that after experimenting with different ways of handling a

PERFORMANCE 23

system for subsidizing the air transport of mail — it's worth noting that mail was Congress's chief concern at the time — the lawmakers in 1930 granted the postmaster general broad powers over the routes, rates and practices of carriers hauling air mail under government contract. In 1935, Con­gress broadened the scope of regulation.

Kauper explained (and I quote): "The predominance of mail over passenger service was rapidly diminishing, how­ever, and by 1937 air carrier income from passenger service was twice as great as mail income. Unregulated carriers without air mail contracts began to compete with air mail carriers, who naturally complained about their unregulated competitors' greater economic freedom." Thereupon the ICC pushed for extension of economic regulation over all air carriers, under the general theory that it is unfair and "chaotic" for unregulated counterparts. Acting on the same so-called principle in 1938, when trucks became a pondera­ble element on the nation's transportation scene, the ICC -instead of opting for de-regulation, since the railroads plainly were no longer a monopoly — merely extended its sway to motor trucks and water carriers, too.

Dollars-and-cents-wise, as we have seen, the costs of regulation are staggeringly high. Perhaps even more signifi­cant is the threat to freedom of choice from ill-considered or unscientific regulatory decrees, the kind that seems to have proliferated along with regulation itself in recent years. On this score, take the case of cyclamate, the artificial sweetener which, for the past six years, despite a vast weight of evidence in its favor, remains banned to most Americans. First discovered by a scientist at the University of Illinois in 1937, cyclamate was licensed in 1950 to Abbott Laboratories, which proceeded to develop and exploit its unique properties (while noncaloric, it is thirty to forty times sweeter than sugar and much cheaper to use.)

By the late 60s, cyclamates had begun to revolutionize U.S. eating and drinking. From 1963 through mid-1969, consumption soared from five million to seventeen million pounds per year and, prior to the abrupt ban late in 1969, twenty million pounds were projected for 1970. As the House Judiciary Committee reported (and I quote): "Cyclamates were extensively used in carbonated beverages, fruit drinks and weight control preparations. They also were used in canned fruits, jam, jelly, preserves, desserts, salad dressings, maple syrup, baked goods and candy, and direct application as a food sweetener." By 1969, diet soft drinks were pushing fifteen percent of total production, while cyclamates in all formulations were displacing a ponderable quantity of sugar.

Alarmed at the competitive thrust, the sugar trade fought back. (And I quote): "As the low-calorie market was developing into a major industry," so Abbott has publicly charged, "the sugar interests openly launched a research, advertising and publicity program designed to raise doubts about noncaloric sweeteners, especially cyclamates. By 1967, anti-cyclamate publicity was strident, and FDA felt a thorough scientific evaluation was necessary." After weighing all available data, the National Academy of Sciences — National Research Council in November 1968 issued a report which concluded that consumption of cyclamate in reasonable amount posed no health hazard to human beings.

However, NAS-NRC urged further tests, some of which Abbott proceeded to finance. One turned up evidence of tumors in rats fed huge doses of a cyclamate-saccharin mixture, which Abbott promptly reported to the Food and

Drug Administration. The infamous Delaney Amendment, that unfortunate by-product of food faddism written into law in 1958 - and zealously defended ever since - by Congressional primitives, provides that (and I quote): "no additive shall be deemed safe i f it is found to induce cancer when ingested by man or animal...." Invoking its mis­chievous mandate, FDA in October 1969 abruptly struck cyclamate off the list of substances "Generally Recognized As Safe." Early the following year, under further pressure from legislative know-nothings, the agency banned its use outright.

How sweet it is, said the Sugar Daddies (whose lawyer, Thomas G. Corcoran, known in New Deal days as Tommy the Cork, claimed credit for the move). Everyone else cried f o u l . In part icular , processors, canners and farm cooperatives, caught with heavy inventories ¥ o f cyclamate foods and beverages, suffered unrequited losses estimated at $100 to $125 million. Consumers by the millions overnight were deprived of access to low-calorie products. A great growth industry was stopped in its tracks - under new, less palatable formulations (largely of saccharin - itself the target of sugar industry-financed attacks) — diet drinks today command only a fraction of the market share they once commanded. Low-calorie foodstuffs are hard to find on grocery shelves. As in the Middle Ages, sugar once again is a luxury.

The blow to the pocketbook is bad enough. What is genuinely alarming is the FDA's stubborn refusal to admit and rectify a mistake. As an overwhelming mass of evidence now suggests, mistake it undoubtedly was. Since 1969, more than a dozen new scientific studies — conducted under such prestigious auspices as the British Industrial Biological Research Association, Curie Institute, German Cancer Research Association, Osaka University School of Medicine, U.S. National Cancer Institute and FDA itself -have been unanimous in finding that cyclamates, even when fed in large quantities or in combination with saccharin, are free of either carcinogenic (that's cancer-producing) or other adverse effects. The German experiments, inciden­tally, involved the study of twice as many rats as before, and for a far longer time. Hence the Bonn Republic, which enacted stiff food and drug laws after the thalidomide tragedy of a decade or so ago, has rejoined the large number of Western countries, including Canada and Switzerland, where cyclamate in all its many uses freely may be bought and sold. Contrariwise, this country continues to suffer, financial and otherwise, from Big Brother's boneheaded-ness.

Let's turn now to the Environmental Protection Agency, which, as noted earlier, is one of the faster-growing regulatory bodies in Washington. In just a few years, the agency has done an awesome amount of mischief, notably in its rulings on automotive exhausts and DDT. Let's first look at the latter, which has been under assault from environmentalists and other pseudo-scientific types ever since Rachel Carson published her highly alarming and equally misleading book, Silent Spring, over a decade ago.

Early in 1972, after eighty-one days of hearings, during which 125 witnesses filled nearly 10,000 pages with testi­mony, an EPA hearing examiner reached the following con­clusions (and I quote): "DDT as offered under the registra­tions involved herein is not misbranded. DDT is not a carcinogenic hazard to man. The uses of DDT under the registrations involved here do not have a deleterious effect on freshwater fish, wild birds or other wildlife.... In my

24 PERFORMANCE

opinion, the evidence in this proceeding supports the con­clusion that there is a present need for the essential uses of DDT."

'Nonetheless, six months later EPA, for all practical pur­poses - except in cases of emergency — banned the pesticide's use. In the spring of 1973, despite anguished pleas by the cities of Walla Walla, Washington and Milton-Freewater, Oregon, as well as both states, EPA refused to grant request for emergency use of DDT. Regarding the proposed use of DDT to control an infestation of the tussock moth in the Pacific Northwest, the "benefits," so the agency decreed, failed to outweigh the risks.

Regarding risks, an agency spokesman, quoting the official decision to ban the stuff, mentioned "cause for concern given by unknown and possibly forever undeter­minable long-range effects of DDT on man and the environ­ment." As against such nebulous terrors, the costs of with­holding its use turned out to be mercilessly real. Nearly 700,000 acres of forest land in Washington, Oregon and northern Idaho were defoliated. Dollars-and-cents-wise the Department of Agriculture issued the following grim tally: loss in timber stumpage value, $3,650,000; loss of timber value that cannot be salvaged, $10 million; reforestation costs, $7,304,000; costs of reducing fire hazard to normal and extra fire protection over the next five years, $25,712,000. All told, including a few other expense items, nearly $50 million. As Sen. James A. McClure (R-Idaho) bitterly remarked in Congress: "Some risk. Some benefit."

Nor was the environment itself immune. Far from it . As the Tussock Moth Control Association and Pacific Legal Foundation cogently argued: "During a tussock moth epidemic, entire trees are often defoliated in one summer.... In an evergreen forest, once a large number of trees is suddenly killed, serious environmental degradation occurs at once. Dead leafless spires cannot properly diminish the forces of wind, rain and snow. Ground cover is torn off by snow-melt and heavy rain. Dependent plant and animal life do not obtain necessary support. The result is a desert.... The destruction of the forests by the tussock moth has great adverse effect on wildlife...."

Finally, last spring, despite cries of rage from rabid ecologists, EPA relented and allowed the Pacific Northwest to spray the tussock moth with DDT. Nearly 426,000 acres were sprayed with dramatic results. According to the U.S. Forest Service, the pesticide achieved a mortality of 96.8 percent within a few days. Feeding in the treated areas stopped immediately. The twenty-one-day post spray weighted insect mortality averages for all units was 98.8 percent. Thanks to DDT, the Pacific Northwest forests have been saved.

Or consider how EPA has handled the catalytic con­verter, the device which it seized upon years ago as the most feasible means of reducing automotive exhausts to the levels prescribed by the Clean Air Act of 1970. Back in 1971, Barron's National Business and Financial Weekly cited what happened in Japan when authorities ordered the lead content of gasoline cut in half. Following the change­over in motor fuel, Tokyo suffered several "white smogs," caused by sulphuric acid mist, which led to thousands of cases of breathing difficulties, burning eyes and sore throats.

A year or so later, Herbert L. Misch, Ford Motor Com­pany vice-president, said that Ford had (and I quote) "noted the formation of some sulphuric acid particulates resulting from the use of catalysts (which) we reported to

EPA.... The phenomenon merits further study to determine whether the levels which would occur in the atmosphere are deleterious to health." In the fall of 1973, the authoritative publication, Science, reported that (and I quote) "tests made by industry and EPA beginning in 1972...showed that relatively large amounts of sulphuric acid...were coming from the tailpipes of catalyst-equipped cars."

Evidence pointing in the same ugly direction, i.e., that catalytic converters, while ridding automotive exhausts of some pollutants, cause dangerous emissions of sulphuric acid, continued to accumulate. As a result, Russell E. Train, EPA administrator, last month reluctantly announced that he had granted auto makers their request for a one-year delay in imposing emission standards for 1977 model cars. Not surprisingly, the move triggered a storm of protest from the hinterlands. Upset at the response, EPA swiftly went back to the drawing board. Last week, believe it or not, the agency leaked a brand new study purporting to show that perhaps the threat of sulphuric acid is not so deadly after all. Where the issue goes from here remains to be seen, but one thing is clear: the automobile industry, at official behest, already has spent several hundred millions of dollars working on a process which literally may do more harm than good.

So the dismal story goes. I f time permitted, I could regale you all night with similar tales of bureaucratic excess and folly. Suffice it to say that the U.S. rejoices in a Federal Communications Commission and a so-called Fair­ness Doctrine - yet television shows bias toward collec­tivism and against private enterprise and the free market, while officialdom throws one roadblock after another in the path of technological developments that might expose the nation to a fresh diversity of viewpoint. There is the Federal Power Commission — and thanks to its policies, a worsening man-made shortage of natural gas. We have a Securities and Exchange Commission - and from 1968 through 1974, American investors suffered a financial disaster in many respects comparable to that of the Great Crash. The other day, a group of visiting students asked James Needham, president of the New York Stock Exchange, whether 1929 could ever recur. His reply — a fairly sensible one — was that history indeed could repeat. But what Needham failed to add was that on Wall Street, at any rate, we in effect have just lived through 1929-32. Nor should one overlook the fact that despite the menacing presence of the SEC, investors in the last few years have lost through fraud far more money, both absolutely and relative to their investment, than in any other era in American history.

Perhaps not surprisingly in the circumstances — though I must say that I am always surprised when something sensi­ble seems to be shaping up in the nation's capital — for the first time in decades, a discernible groundswell of opposi­tion to regulation has begun to surface. Last October, Lewis A. Engman, head of the Federal Trade Commission, publ ic ly charged that "much of today's regulatory machinery does little more than shelter producers from the normal competi t ive consequences of lassitude and inefficiency." The public, he added, was "beginning to view the price of government with the same jaundiced eye with which it views prices in the marketplace." In view of the source - Engman's agency, the FTC, has been perhaps one of the worst offenders of all — this was a fairly astonishing statement. Nor could it be simply shrugged off; next day, the White House asked Congress to create a study group "to

PERFORMANCE 25

identify and eliminate existing federal rules and regulations which increased costs to the consumer without any good reason in today's economic climate."

Congress has proven receptive. According to the authoritative National Journal, which keeps tabs on what goes on in the nation's capital (and I quote): "Reform has attracted Congressional supporters who make strange bed­fellows, such as conservative Republican Senators John Tower of Texas and Bill Brock of Tennessee, and liberal Democratic Senators Edward M. Kennedy of Massachusetts and George McGovern of South Dakota...."

National Journal added that Senator Kennedy "provided the platform from which the Ford Administration recently detailed an airline regulation reform proposal that shocked both the airlines and the Civil Aeronautics Board. Kennedy's Administrative Practices and Procedures Sub­committee of the Senate Judiciary Committee also aired its own criticisms of CAB. At a subcommittee hearing on February 6, administration officials blasted 'uneconomical and irrational' regulation, adding that the White House will propose a measure to promote air fare competition, to allow new competitors into the airline business and to apply anti-trust principles to airline mergers." Incidentally, the White House shortly plans to introduce legislation aimed at achieving similar reforms in the regulation of rail­roads and trucks.

Other Congressional moves are afoot. In mid-January, Rep. James T. Broyhill (R-N.C.) introduced a bill to authorize an in-depth Congressional study of each of the major regulatory bodies every three years. It is designed to replace the current unsatisfactory state of affairs, whereby the agencies each year present their budgets directly to the House Appropriations Committee, thus by-passing most of the lawmakers. Again, various Congressional probes of the regulatory agencies — notably one soon to be launched by Rep. John E. Moss (D-Calif), head of the Subcommittee on Investigations of the Interstate and Foreign Commerce Committee — will soon be afoot.

The shift in thinking — now highly visible, by the way, in the communications media, both electronic and print — is noteworthy. However, we would be well advised not to expect free-market miracles overnight. Bureaucrats are powerful and shrewd, and they're not about to give up their entrenched authority" without a fight. Moreover, they com­mand considerable support in the business community. Corporate executives seem to split into two camps on the issue: one that will voice muted criticism of the regulatory process, "and another that wholeheartedly embraces the existing system. As to the first, the chairman of a major Midwest railroad last month spoke out as follows (and I quote): "The current dialogue over de-regulation, or re-regulation, reflects a healthy, overdue and widespread public questioning...." However, he then proceeded to add (and I quote): "Most railroad executives accept regulation — they have all lived with it throughout their careers. They accept its usefulness and fairness in many situations, as I do."

The head of another Midwest carrier has had even harsher things to say about the ICC. Thus, in a speech in mid-February before the Mountain-Plains Shippers' Board in Lincoln, Nebraska, this executive caustically observed (and I quote): "Of all the regulatory agencies at the federal level, the ICC operates with the least regard for the economic realities of our times." Specifically, he charged it with behavior that is "not only erratic and irrational, but

also clearly punitive." Then, having painfully documented his charges, he proceeded to voice the hope that (and I quote) "the Administration and Congress will see the wisdom of replacing the ICC with a federal railroad com­mission operating along the lines of the Federal Maritime Commission and the Civil Aeronautics Board."

His sentiments were echoed the other day by a major shipper, who, in view of the burdensome costs imposed on him by regulation, might have been expected to look for a change. So he does, but in severely limited fashion. Those who seek to abolish regulation, he said, are generally far removed from actual involvement in the transportation business. "The closer people are to that business," he added, "the less likely they are to support de-regulation."

Despite their angry words, such executives must willy-nilly (and sadly) be placed in the category ..of regulatory fellow travelers. From their own long experience, they see clearly that regulation has gone off the tracks, yet they blink at reaching the logical conclusion. More reprehensible, in our book at any rate, are their colleagues who have sprung to the defense of the sorry status quo.

To illustrate, we recently received the following com­munication from the American Trucking Associations, Incorporated. "Dear Mr. Bleiberg: To the typical American, the word regulation no doubt is repugnant. Proud of our freedom, jealous of our independence, confident of our system of private enterprise, we Americans just naturally get our backs up whenever anyone tries to slap laws or rules or regulations upon us. That's the way it ought to be, and that's the way it is. And that's what makes it so tough for the transportation industry to obtain a sympathetic, even an objective audience in support of government regulation of transportation.

"Yet economic and safety regulation...is the very foundation of the American transportation system, which is generally conceded to be the best in the world.... That system today, however, is threatened because the concept of regulation that makes it possible is threatened. Sweeping accusations, unsupported claims and baseless arguments are hurled at the regulatory structure - both the governmental regulatory framework and the carriers which provide the essential transportation services within that framework....

" I t is in recognition of this situation...that the American Trucking Association has compiled the enclosed 'White Paper' in support of sound economic regulation of trans­portation."

The White Paper dismisses as theoretical and unsub­stantiated the impressive array of independent studies from a half-dozen different sources, including the American Enterprise Institute for Public Policy Research, Hoover Institution and the National Bureau of Economic Research, which document the heavy cost to the public of ICC regula­tion of railroads and trucks.

As to the inefficiency of airline regulation, and the financial penalties which it exacts from U.S. consumers, these are amply documented. As it happens, in two parts of the U.S., Texas and California, federally unregulated intra­state air carriers flourish, the operations of which may be compared to those of their CAB-controlled counterparts. The contrasts are striking. In the relatively free California intra-state market, air fares range from 4.76 cents per passenger mile to 7.31 cents. On the East Coast, con­trariwise, the cost of similar hauls runs from 8.63 cents to 11.61 cents per passenger mile.

An equally striking disparity shows up in the Texas

26 PERFORMANCE

intra-state market, where Southwest Airlines, a carrier licensed solely by the Texas Aeronautics Commission, com­petes with Braniff Airways, a CAB-regulated trunk carrier, and Texas International Airways, a CAB-regulated local service carrier. Although it couldn't get off the ground for nearly four years because of judicial challenges by Braniff and Texas International, Southwest Airlines now serves the Golden Triangle (Dallas, Austin and Houston) at a profit, charging fares which average twenty to fifty percent less than comparable CAB-regulated tariffs.

Any way you look at it , regulatory reform will not come easy. Emphasis on cost-benefit ratios is all well and good, and may curtail the more blatant abuses. However, truly effective criticism of the regulatory process must cut. deeper, to first principles, so to speak. On this score, one of. the most powerful arguments against regulation which we have ever seen was penned over a decade ago by Alan Greenspan, chairman of the President's Council of Economic Advisers. In The Objectivist Newsletter for August 1963, Greenspan wrote as follows (and I quote): "Protection of the consumer against dishonest and un­scrupulous business practices has become a cardinal ingredient of welfare statism. Left to their own devices, it is alleged, businessmen would attempt to sell unsafe food and drugs, fraudulent securities and Exchange Commission buildings. Thus, it is argued, the Pure Food and Drug Administration, the Securities and Exchange Commission and the numerous building regulatory agencies are

indispensable i f the consumer is to be protected from the greed of the businessman.

"What collectivists refuse to recognize is that it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product. Since the market value of a going business is measured by its money-making potential, reputation or good-will is as much an asset as its physical plant and equipment.... Reputation, in an unregulated economy, is thus a major competitive tool.

Builders who have acquired a reputation for top quality construction take the market away from their less scrupulous or less conscientious competitors. The most reputable securities dealers get the bulk of the commission business. Drug manufacturers and food processors vie with one another to make their brand names synonymous with fine quality.

"Government regulation is not an alternative means of protecting the consumer. It does not build quality into goods, nor accuracy into information. Its sole contribution is to substitute force and fear for incentive as the protector of the consumer.

"Protection of the consumer by regulation is thus illusory. Rather than isolating the consumer from the dis­honest businessman, it is gradually destroying the only reliable protection the consumer has: competition for reputation."

Let's hope that sooner or later the American people — and the powers-that-be in Washington — get the message.PH

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PERFORMANCE 27

H o w T o Ident i fy Successful A n d

Unsuccessful F o r e m e n HENRY HENTZ is a senior executive in the management consultant firm of Imberman and DeForest, headquarter­ed in Chicago. He is a graduate of Northwestern University and has been in the personnel consulting field for about twenty years.

,Most foremen training courses rarely change foremen performance. Why? Having trained about 3000 fore­men in my consulting work and having studied their behavior on the job, I suggest that you can improve foremen performance only i f you pay attention to the differences between successful and unsuccessful foremen.

The major differences lie in four areas: 1. desire for achievement; 2. attitude towards higher authority; 3. ability to organize; and 4. attitude towards oneself. To improve foremen performance, changes in those four areas are mandatory. Anything else is window dressing.

The Desire For Achievement The drive of most foremen (as with

most people) is a mixture of desires fo r achievement, advancement, money, prestige, recognition and status. In the successful foreman, the most potent of these drives seems to be for achievement. This might be high labor productivity, meeting quality standards, shipping on schedule, main­taining good labor relations, or safety, etc. Whatever the corporate goals are, achieving them grabs him; not as an onerous duty, but for the love of i t .

The less successful foreman seems motivated more by the money or prestige of his job. He relies on his formal authority in dealing with hour­ly workers. He is rarely out on the plant floor. He prefers a private office and telephone. He is deferential to his superiors, but often verbally abusive to his subordinates. He prefers to keep

By Henry Hentz

them at a distance. Whenever things go wrong, he blames others.

The unsuccessful supervisor often regards employees as lazy work-dodgers. He relies mainly on the threat of punishment (a stick) for poor per­formance. This may be effective for achieving high productivity in the short run, but never in the long run, because lengthy exposure to threats affects worker attitudes adversely. He cheats on a union contract even where the company might be better served by following the letter of the contract and avoiding grievances. He regards grievances as an affront to the fore­man's status, and hence are to be won, not resolved.

In a four hundred-man, nonunion, metal-fabricating plant, all foremen had labor budgets for discretionary merit increases for employees ranging from five cents to fifteen cents. The foreman earned a bonus if he could save on his labor budget (i.e., not spend as much for labor). One fore­man, Smithson (not his real name) gave his merit increases on nine-month and ten-month intervals, while the other foremen gave them at six-month intervals.

Smithson handled his department's capital budget the same way. He re­ceived a bonus if he did not spend all the funds available to him. His em­ployees resented not only being cheat­ed on merit increases, but also were frustrated by lack of trays, work tables, fans in the summertime, bins for spare parts, etc. Equipment main­tenance was poor in Smithson's department; he held it to a minimum because the company maintained charges against each department for such work. Poor maintenance meant more machine break-downs, erratic production schedules and increased employee frustration.

In early 1970, the machinists filed a petition for an NLRB^election in the plant, but lost. The personnel depart­ment subsequently found that the unionization movement began among the employees of Smithson's depart­ment - but did nothing about it. In 1972, the UAW came into the picture; this time the company lost the NLRB election. After a contract was signed, Smithson's department began to generate a large number of grievances that led to expensive arbitration hassles and, eventually, to a wildcat strike.

Smithson was not stupid, but his motivation was wrong. He had no real yen for achievement; he was interested only in money.

The successful foreman, motivated mainly by achievement, accepts reality whether it's the old submissive breed of employee or the new militant em­ployee. But he is not a sweet charac­ter. He pushes harder than his em­ployees like, but he also pulls, which makes the pressure more acceptable. He establishes the way he wants things done and lets everyone know what the goals are. He sweats for his goals and expects all subordinates to be equally willing to sweat. Some employees regard such a foreman as a harsh taskmaster. He is.

He never seems to take things easy; he never walks, but runs. He over­works himself and expects everyone to do the same. His motor never slows down or is shut off. Where he has a group leader under him, he is not satis­fied merely to delegate tasks and re­sponsibilities; he quite often bypasses the assistant and checks details for himself. He has self-confidence, but constantly worries that he may fall short of his objectives. Achievement is his main itch and he is respected (although not loved) for that by his employees. (Charts illustrating the beneficial results that flow from such achievement drives are given in

28 PERFORMANCE

"Foremen Training: Results Should Be Measurable," by A.A. Imberman, in The National Provisioner, May, 1973. Single copies are available free by re­quest to the author at 209 S. LaSalle Street, Chicago, Illinois 60604.)

Attitude Towards Authority Successful foremen support higher

authority in working towards com­pany goals. Once decisions are made, the effective supervisor accepts the pronouncements of higher manage­ment as his own, and endeavors to get cooperation from the hourly work force. He regards higher authority as being more experienced, more know­ledgeable and more likely to recom­mend the most effective course of action — even when their opinions differ from his own.

The unsuccessful supervisor resents direction from any authority. He prefers to run his own show; he side­steps the constraints of higher manage­ment. Accepting coaching from above is regarded by him as a sign of weakness. When he disagrees with the general foreman or plant manager he becomes tense or angry, and will undermine the overall objective of management policy. He regards all policy differences as personal attacks. Sometimes this appears as a persecu­tion complex — those who are not his friends are his enemies.

When the EEO became law, a large, Southern food processing company adopted a policy of no racial dis­crimination. Hall (not his real name), a general foreman in the large distribu­tion warehouse, could not hold on to his minority employees. As fast as minority workers were hired, other minority employees were fired from the warehouse. This affected the morale and performance of minority members in the rest of the plant, and community groups denounced the company's bad practices.

The company president ordered an investigation. All firings in the ware­house were found to be beautifully documented. Personnel files showed that each fired minority employee had received three written warnings for faults, then a two-day supension, and then Out. All according to the rules.

What was wrong? Among the dis­charged warehouse employees there were no whites, although the depart­ment had about forty percent whites. Did the whites all arrive on time every day? Did the whites commit no faults? Investigation disclosed that whenever a white employee violated some rule, Hall looked the other way. Only when the minorities were involved did he follow the rules. Despite plant

manager instruction and company policy, Hall was not in agreement and did everything he could to undermine corporate decision in this matter.

This sort of action is more com­mon than one realizes. Such foremen will give interpretations of company policy at variance with the rest of the plant; criticize instructions from the plant manager by snide remarks to employees; play favorites on job assignments; regard women's lib as a joke and sneer at female employees; resent hard-core minority workers in his department by sabotaging their t ra in ing , etc. Such foremen will torpedo the bids of employees for pro­motion, even though management may want to encourage ambitious effort. The foreman's personal status is too dependent upon such an employee's good performance, so why let him go?

Such a foreman downgrades any opinions that do not coincide with his own. He is authoritarian with no patience even for employee sugges­tions. Unlike the competent foreman who leads by influence and who usually suggests actions to be taken, the incompetent foreman simply issues o r d e r s and demands absolute obedience. Such an authoritarian style might produce higher levels of per­formance for a while, but usually at the expense of morale and high turn­over. He acts less mature than the average and usually is low in seniority among the foremen. His attitude towards higher authority is militant.

The Ability To Organize A l l foremen make plans and

decisions, but not all decide well. The difference seems to be that the successful foreman anticipates most of the consequences of his decisions — what will happen next week or next month as a result of his plans and decisions. He operates with con­fidence.

The unsuccessful foreman operates on a much shorter perspective, practicing fire fighting where fire pre­vention might be a sounder policy. His schedule sheet for that day or week is solely what concerns him, and he manages from crisis to crisis, leading to emotional frustration in his workers who don't understand why they so often are caught flat-footed by a shortage of parts, machine breakdowns or lack of space. Invariably the ine f f i c i ency is blamed on plant management.

The unsuccessful foreman performs 1000 tasks over a week — everything f rom making out time tickets to checking job lots, moving materials, checking tools, jigs, fixtures, looking

at quality, worrying about mainten­ance, chasing parts, etc. All of this he does on a catch-as-catch-can basis, wi thou t planning. Rush jobs and emergencies disrupt everything because he has no flexibility or cushion in his schedules. Again, such a foreman blames management. This attitude spills over to his employees, clouding their attitude towards their work and their company.

An effective foreman can find time for unexpected rush jobs, emergencies or preventive maintenance; they can be programmed into the production schedule that is kept flexible by careful planning decisions. The result not only is fewer breakdowns, but priority can be given to completing rush jobs on a planned schedule so operators have less time lost due to interruptions.

The greatest sin in management (as in the army) is to be surprised by events. The successful foreman com­bines, arranges and orchestrates equip­ment, natural resources and labor so every worker, like every musician in the band, knows what's expected. Hourly employees feel more secure in an orderly climate. Some employees do not know how to conserve materials to the utmost, use machines in the best manner, or put their time to the most productive use. However, i f the foreman anticipates problems and systematically plans the work, then his subordinates know that he knows what's going on and they act accordingly. Nothing is more anxiety-provoking to the typical hourly worker than uncertainty or surprises in the job. Hence, any foreman who structures the work situation and plans it well is welcomed by the hourly group.

This is less commonly (but most dramatically) encountered when new product lines are introduced. There has to be some rearrangement of jobs, tasks and relationships. The response of successful foremen in such situa­tions is to learn quickly what is ex­pected of them, and then to direct their employees in the right direction. In other foremen there is an unwilling­ness to cope or reluctance to act, until they are forced into crash programs. This is unnerving to employees. The price paid here is often marginal per­formance, tension, frustration or con­flict.

The successful foreman doesn't have to be liked or run a country club to gain employee cooperation and show satisfying results. But he does have to enjoy the acceptability of his people in order to gain cooperation. By far, the overwhelming majority of

PERFORMANCE 29

employees would like to turn out an honest day's work for a day's pay. All they want is the proper working environment: the equipment that runs well, the parts that fit, the supplies being available, and someone helpful on vexing problems as they arise. Any f o r e m a n whose decisions and supportive direction help bring all that about will gain one hundred percent acceptability from his employees.

It is not that the unsuccessful foreman has too many people to supervise or too many things to do. The basic trouble is that he cannot organize them well or anticipate what may happen when he doesn't. He is always chasing bits of driftwood.

Attitude Towards Himself The successful foreman is out­

wardly enthusiastic, but he is not necessarily a happy man. He often is dissatisfied with his own performance. He is like the character in Ring Lardner's baseball story, "You Know Me A l , " who was apologetic about hitting a two-bagger because i f his shoe laces hadn't been loose, he "woulda made third base." I f he had made third, he would have apologized for not hitting a homer.

The successful foreman often feels that i f he hadn't done this or that, or had done this or that better, the results would have been more satisfying (to him). He is a man with an itch to do better. He is not really a flexible, tolerant man. He knows that to rule effectively he must convince his people that he knows exactly what he is doing and that he has their interests at heart. But he is not softhearted about employees. To achieve his ends, he is sometimes hard; but he is respected. He gets his respect from his employees by influence, not by formal authority.

The successful foreman listens to the needs of his people because he regards himself as a responsive senior partner. When he refuses a request, he gives a logical explanation. It may not be persuasive, but it is reasonable. He willingly explains why practices or rules are to be followed. He will find mutually acceptable answers to work-related problems. But he insists that the job be well done, and on time.

Where a union contract governs, he has good working relationships with union stewards. He knows the com­pany needs production and profits, while the union needs to justify its reasons for being. Difficult as it is to carry water on both shoulders, he tries. Most often, he is successful.

The unsuccessful foreman usually is satisfied with himself. He frustrates his

employees by his indifference to situations in which he should argue with higher management, asking for those th ings the work force legitimately needs.

He regards his employees as problems and as costs, rather than resources and opportunity. He feels it is not their concern as to how a new machine may cut jobs in the plant. He ignores such questions since he does not regard himself as a communicator. He also ignores the problem created by the employment of young people and minor i t ies unaccustomed to the discipline of working in a plant, because he does not regard himself as a trainer. The door to his office may be open, as company policy dictates, but no one in his department would dare enter it without his permission.

Because some supervisors can't be bothered with listening to employee requests, many employees turn sour on the company. As a result they form a union; or, i f unionized, shower the company with grievances and make outrageous demands at contract renewal time. That is how strikes are born.

It must be obvious that successful foremen training (producing desir­able, measurable results) must be a mixed bag. Because of the diversity in foremen, an effective training course cannot present standardized material; only a few men can profit from a common approach. For that reason, the cassette course so popular in the hinterlands because it can be bought by mail, or the catch-all course that pulls foremen from a half-dozen d i f f e r en t local industries into a common course, are equally deficient. Both types of courses assume that the students will adapt and adjust to the common material. In my experience only the reverse is true: the successful foremen courses adapt and adjust the material to the students. This takes doing.

Successful foremen training is ex­pensive, time consuming and complex to administer. Leading companies such as Exxon, AT&T, IBM, Citicorp, General Electric and some others have the most effective programs. An effective program can pay enormous dividends. It can boost morale and slice absenteeism and turnover; i t can raise productivity, cut overtime and still maintain volume output; it can cut down quality rejects, improve safety, decrease grievances, help eliminate desires for unionization (in nonunion plants) and desires for con­tract rejection (in unionized plants). F ina l ly , it can increase company profits.

To be successful, a foreman training program seems to require six factors:

1. It has to be based on some know­ledge of the foremen to be trained: their traits, mode of behavior, attitude towards employees (and employee attitude towards their foremen).

2. Case studies and other pedagogic tools and methods must be firmly based on in-plant materials indigenous to the foremen's own plant ex­perience. Examples drawn from other industries or other plants have little impact upon the foremen.

3. Benchmarks must be used to chart progress before and after the training. Without benchmarks, fore­men training is about as reliable as dreams of love. Such benchmarks may be absenteeism and turnover, unit labor cost, percentage on-time ship­ments, percentage quality rejects, waste and spoilage, productivity, time-lost accidents. Any of these are useful, provided the data are by department and shift. Plantwide data are useless for benchmarks.

4. The class and homework assign­ments must be tailored to the individuals in the course. No foreman whose basic itch is to be important is going to be transformed into a man motivated mainly by achievement. But assignments can help enlighten such a man as to how he can gain importance by hitching that desire to better achievement. This is not always successful, but it works well in many cases.

5. Managers must be involved by par t ic ipat ing in separate sessions covering the same material, thereby ensuring that higher management proceeds on the same philosophy, uses the same methods and has a clear com­mitment to make the training work.

6. Management must be prepared to face the fact that (on the average) about thirty percent of the foremen are uneducable, untrainable, unchange­able. They are either neurotic, insecure, so ossified and set in their ways, that only God Himself, with infinite resources, can affect a change in behavior. No human instructor can do so. In those cases, i f these men cannot be moved sideways out of departments where they manage people and into slots where they manage things (e.g., in charge of the tool crib), and i f they cannot be separated ("How can we let Joe go, he's been with the company twenty-nine years?"), then upper management must be alerted and taught how to monitor Joe's behavior by looking over his shoulder regularly, counselling with him and watching the results. [T\

30 PERFORMANCE

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Home Flag Set(s) @ $9.95 Flag without Accessories @ $7.95 Flag Window Sticker(s)@$ .35(3for$1) "F ly the Flag" Bumper Strip @ $ .50 Lapel Pin(s) @$1.00

1 enclose a check for $ Postage and Handling $ .50

1 enclose a check for $ Total $

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A MUST FOR Y O U R C O M P A N Y L I B R A R Y

QUALITY ASSURANCE MANAGEMENT

AND TECHNOLOGY

If you haven't passed the Qual i ty Engineering Cert i f icat ion Examinat ion, this book is a MUST!

Already adopted by many colleges and universities, coast to coast, as a classroom tex tbook.

Revised Edition Second Printing

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H A R D - B O U N D T E X T B O O K S I Z E A U T H O R : G L E N N E. H A Y E S , Ed . D.

Q U A L I T Y A S S U R A N C E : M A N A G E M E N T A N D T E C H N O L O G Y , G lenn Hayes ' second b o o k on the sub ject , encompasses the ent i re Q A s p e c t r u m . His f i rs t w o r k , Quality Assurance in a Manufacturing Enterprise — pub l i shed in 1 9 7 0 , was q u i c k l y accepted as a s tandard t e x t by ma jo r colleges and univers i t ies.

Q U A L I T Y A S S U R A N C E : M A N A G E M E N T A N D T E C H N O L O G Y delves p r o f o u n d l y i n to the theore t i ca l aspects of Q A wh i le at the same t i m e a m p l i f y i n g pract ica l techn iques fo r c o n t r o l and mean ing fu l r e p o r t i n g .

Q U A L I T Y A S S U R A N C E : M A N A G E M E N T A N D T E C H N O L O G Y ' S more than 4 0 0 pages, the result of over t w o years-p repa ra t i on , are p ro fuse ly i l l us t ra ted w i t h easy t o read d iagrams, charts and r e p o r t i n g s t ruc tu res . Expand ing great ly on his f i rs t w o r k , Hayes ' second v o l u m e is des t ined t o become T H E p r i m a r y gu ide l ine fo r establ ish ing and m a i n t a i n i n g e f fec t i ve indus t r ia l Q A opera t ions .

Q U A L I T Y A S S U R A N C E : M A N A G E M E N T A N D T E C H N O L O G Y , a t t rac t i ve l y b o u n d in a durab le c l o t h cover w i t h si lver f o i l i m p r i n t , is avai lable on a special 30 -day , money -back quarantee to ind iv idua ls and c o r p o r a t i o n s at $ 1 4 . 9 5 a c o p y . The c o m p a n i o n Q A P R O B L E M SET is avai lable at $ 3 a c o p y . T o take advantage o f the money -back o f f e r o n the h a r d - b o u n d t e x t b o o k , s imp l y comp le te and mai l the c o u p o n b e l o w .

Q A : P R O B L E M S E T , designed as a c o m p a n i o n s tudy guide and s t r uc tu red in the ident ica l chap te r - to -chapte r sequence of Dr . Hayes ' h a r d - b o u n d t e x t b o o k on Q u a l i t y Assurance, con ta ins a c o m p i l a t i o n o f near ly 7 0 0 selected ques t ions , p rob lems and answers. Th is QVz x 11 - inch , 48-page supp lemen t n o t o n l y is he lp fu l t o i ns t ruc to rs and s tudents o f q u a l i t y assurance, b u t also is an i m p o r t a n t t o o l f o r those a t t e m p t i n g t o become ce r t i f i ed q u a l i t y engineers; quest ions and p rob lems presented are representat ive of those given on the q u a l i t y engineer ing c e r t i f i c a t i o n e x a m i n a t i o n .

EXECUTIVE 'S BOOKSHOP P.O. Box HH Capistrano Beach, C A 92624

Please send copy / cop ies of Dr. G lenn Hayes ' b o o k , Q U A L I T Y A S S U R A N C E : M A N A G E M E N T A N D T E C H N O L O G Y . If n o t c o m p l e t e l y sat is f ied w i t h the con ten t s , I may , w i t h i n 3 0 days of rece ip t , r e tu rn the book (s ) f o r a f u l l r e f u n d . Paymen t of $ 1 4 . 9 5 fo r each c o p y o rdered enc losed: ( ) Check ; ( ) M o n e y Orde r ; or ( ) Bi l l C o m p a n y .

I also w a n t copy / cop ies o f the Q A : P R O B L E M S E T f o r w h i c h I have added $ 3 . 0 0 each.

Name Company Name

AHHrpct Address

Ci ty Ci ty State Zip State Z ip

(Please print plainly)

Sub-To ta l $

Calif, residents add 6% sales tax T o t a l $