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Organization and principles – the main prerequisites for productivity

The owners of a large industrial plant had many orders and wanted to increase production from thirteen units per month (a record number) to twenty-three.

They set a ten-month deadline for such an increase. The director of the factory, a man of great ability, but from the old school, managed the production for a long time.

He knew only one means for this purpose – the installation of additional machines and the hiring of additional workers. So when the owners insisted on twenty-three units a month, he asked them for new machines for $ 500,000.

Such a huge additional capital investment, even if it were possible, could not solve the problem. It takes one year to install the new equipment.

While the work was at a dead end – the owners insisted on increasing production and the director insisted on new facilities – the plant was inspected by two knowledgeable and experienced innovation engineers. They presented a detailed report, which ended with the following words:

Your factory consists of:

  • machine shop
  • boiler shop
  • assembly shop
  • blacksmith workshop
  • foundry

Having inspected the condition of all workshops and workshops, talked to the director, manager, a number of craftsmen, some suppliers and many workers, we consider it possible to say definitely that if a few small organizational improvements are made and the current director or other person with similar qualifications of the whole activity, the output of your factory can increase by sixty percent. This does not require hiring new workers and installing new machines, and labor costs will increase by no more than 10%. These results can be achieved gradually over a period of six months.

In order to achieve this goal, the innovators proposed a number of organizational principles. These principles have been adopted and put into practice. What was the result – he will show us a quote from a letter written ten months later:

New York, May 1, 1908

It will not be uninteresting for you to learn that in April our production exceeded the average monthly production from the last operating year by 69.2%.

The working day in the factory was reduced from ten to nine hours on average. Wage costs have fallen by 15% from last year, from $ 8 to $ 10 a month.

Later, the same innovation engineers were invited for inspection and consultation at another plant. Here, too, the administration adopted their principles and followed their advice.

It is difficult to assume that two people from the Far West, who arrived in the large eastern factories, knew all the local conditions and circumstances to such an extent that they could see and understand the work better than the experienced local workers.

These Western innovators knew operations and machines, local circumstances and local people much worse than local production managers, but they knew much better than them the new type of organization without which high productivity is unthinkable. Not only did they know this organizational type, but they had extensive experience in its practical application.

If modern man works more productively than people who lived a thousand years ago, the work is not in some internal difference, not in the quality of the brain, but in the huge difference in conditions. A boy with a slingshot that strikes at a distance can defeat a heavily armed giant with a spear.

It is extremely difficult to introduce new principles, because individuals, tribes and entire nations, who cannot go beyond their limited point of view, are beginning to fear that the innovator will undermine their competence and skill.

If Greek athletes had bicycles, cars and airplanes at their disposal, if they had automatic pistols and rifles, they would have shown excellent sports results.

But no matter how agile and skillful an archer is, with a bow he can never hit such a distant target as with a rifle. The principle of our rifle is very old: it is simply the principle of the compressed air rifle. It has nothing to do with the principle of the bow and arrow.

But if we arm the savage with a rifle, he will suddenly become stronger than all the armored knights. In the same way, if we teach a mediocre modern factory director to apply organizational principles, we enable him to achieve such productivity that he will leave far behind the greatest production geniuses working on the old system.

The innovators knew the new theories because they had applied them on a large scale before.

They could design and introduce a new type of production management, different from the old one, such as the rifle from the bow and arrow, the cyclist from the pedestrian, the airplane from the car, the Arabic numerals from the Roman ones.

These new principles and their application in the management of production will be attractive only to the people whose interests they directly affect, ie. only for the shareholders, directors, workers and customers of the plant.

But they will seem incomparably deeper if we understand that these new principles underlie every activity and have unconditional general applicability, that true productivity is determined by them and is unthinkable without them at all times, that they are applicable and apply on a huge scale resolutely everywhere.

We hope to arouse interest in these theories and principles not by pointing out material benefits (although in the end these benefits largely measure the value of these principles), but by their significance in modern history.

And then we will be able to go back to the beginning, to trace their action from the times when they were applicable in the grandiose state-building, and to explore their significance for the future restructuring of industry.

For North and South America, the 16th century was an era of land discovery, the 17th was an era of its conquest and colonization, and the 18th and the first quarter of the 19th were an era of consolidation and at the same time development of natural resources.

Therefore, the twentieth century has the still unsolved task of preserving these riches, of eliminating losses – the ugly and inadmissible losses that have made our government a “parable in tongues”, our barbaric waste of natural resources a global scandal, and the benevolently tolerable low productivity of our industry a real national disgrace.

It is this national inefficiency, this national wastefulness, this national waste of materials, human and machine energy that we can reduce, as long as we take into account and put into practice the simplest lessons of recent history – lessons that are the most a good introduction to the exposition of the principles of the organization of productive labor.

Beginning in 1850, Louis Napoleon was a leading figure in European politics for twenty years. England maintains friendship with him. Italy calls on him to release her. Turkey begs for his protection, Russia is humiliated by him, Austria seeks his union. But in the small kingdom of Prussia, which is equal in size to our state of Colorado, two people – the statesman Bismarck and the military organizer Moltke – formed an alliance with each other in order to make their king the hegemon of Europe. King Wilhelm ascended the Prussian throne in 1861. He was a sixty-four-year-old man imbued with all the moldy traditions of the past, but he trusted his two distinguished advisers.

Prussia is a small, poor, minor kingdom, to which a total of about a quarter of German (ie German and Austrian) land and the German population belongs. The balance of power in Germany at the time did not in the least indicate that Prussia could play a leading role. And outside of Prussia, no one respects Prussia.

In order for the dream of the two royal advisers to come true, there is only one possible path. This requires the following:

  1. A clear plan or ideal, a pattern.
  2. An organization that, according to its form, can achieve the ideals (goals) and consolidate what has been achieved by applying certain principles.
  3. Availability of people, materials, machines, funds and methods to enable the organization to apply the principles by which the goals are achieved and the achievements are consolidated.
  4. Competent and knowledgeable leaders who will be able to force the organization and equipment to achieve the set goals or ideals and to consolidate what has been achieved.

Consciously or unconsciously, but in all activities the organizers of victory follow nature itself.

Two chiefs, whose ideal or goal is the mighty German Empire with the Prussian state or the Prussian king at its head, set out to create two respective organizations: military and diplomatic; to equip these organizations, to prepare the force necessary to achieve the set goal.

First, the diplomatic intrigue is launched, which brings each enemy to a dead end, and then the army, which destroys this enemy. We are not affected by diplomacy.

In order to provoke the necessary clashes at the most convenient moment, in order to ignite all the wars during the pleasant and comfortable spring season, great dexterity and great skill are needed. But Moltke’s goal is even more difficult.

He cannot have as many people, not as much money, not as much equipment and materials as the enemies have.

It is clear to him that the scarcity of material resources, the conservatism of human material, obsolete weapons, he can oppose only those theories and principles that his arrogant opponents remember too late.

Even before the beginning, in the very idea, the struggle he undertook was a struggle of productivity against unproductivity. The productivity of the army was created by applying the twelve principles and a new concept and new setting of the whole military organization was created.

The big game begins with a clash with small and poor Denmark. The War of Denmark was declared in 1864, and in this war Prussia united with its main rival in the struggle for power over Germany – Austria. As a result of the war, two provinces were taken from Denmark, namely:

Holstein and Schleswig, where Prussia received Schleswig, Austria – Holstein. The Danish campaign is helping Moltke in two ways: to test his organization in a modest action and to explore all the weaknesses of the Austrian organization.

In 1866, Bismarck took the next step. Because of the same Holstein, he clashed with Austria and provoked a war, which was declared on June 14. Not only Austria, but almost all other German states turned against Prussia.

During this time it numbered about 22 million, and Austria and other German states – 59 million inhabitants. But Moltke studied the history of the civil war between the northern and southern states in vain; from this story he understood perfectly well how not to act. Bismarck issued a twelve-hour ultimatum to a number of small German states, and after those twelve hours Moltke’s army almost immediately attacked them and destroyed their troops.

Exactly two years after the Battle of Hettisburg, which was thirty months after the burning of Fort Sumter, and nineteen days after the declaration of the Austro-Prussian War, i.e. on July 3, 1866, the Prussian army of 225,000 defeated the Austrian army, numbering 268,000.

Three weeks later, Austria asked for a truce, and then a peace was made, which snatched the six-century domination of Germany and handed it over to Prussia. As the whole war was a purely business undertaking included in the general plan for the creation of the empire, Prussia forced Austria to pay a contribution of 40 million thalers (about $ 30 million), and also took sums from the small states under a proportional system.

As the whole war from the very beginning to the very end was fought on Austrian territory, the costs of the occupation were also borne by the defeated. In addition, Prussia, according to this peace, received 27,000 miles of {sup} 2 {/ sup} territory. We do not know of a single case in which an American manufacturing company has made such a large net and total profit in such a short time.

European dictator Napoleon III underestimates the danger. Bismarck and Moltke are already preparing for the next step – replacing the French emperor with a German emperor as military hegemon in Europe.

On July 4, 1870, the Spanish throne was offered to German Prince Leopold. It is also possible that this was part of Bismarck’s plan, which sought to provoke an armed conflict. Out of habit, Napoleon stomps his foot, but knocks for the last time.

On July 19, he declared war on Prussia. Moltke is said to have been asleep when the telegram informing him of this was brought to him; when he was awakened, he said, “The campaign plan is in the third drawer of my desk,” and then turned to the other side and fell asleep again.

It is very possible that this was the case, because starting from this second, over one million Germans began to march, eat and fill all their minutes according to a pre-designed plan and schedule.

In all German kingdoms and principalities men were separated from their families and personal affairs and drafted into the army; all railways with all their facilities also stand under the flags. No confusion, no hysteria, no unnecessary haste – “Ohne Hast, ohne Rast” (without haste and without delay).

Citizens called to actual service find equipment, weapons, uniforms and provisions on the spot and in full order. As the French headquarters planned to mobilize in 19 days, Moltke planned his mobilization in 18 days: he knew that would be enough for the theater of operations to be on French territory instead of Germany.

In practice, the mobilization of the French took place not in 19 but in 21 days; thus, they showed 86% productivity. At Moltke, productivity was no more, but no less than 100 percent.

In eleven days, Germany mobilized 450,000 troops; the first battle was fought on August 2; on August 6, i.e. 18 days after the start of the war, one of the bloodiest battles of the entire campaign broke out. And on September 2, 45 days after the declaration of war, Napoleon and his army were defeated at Sedan, captured and taken to Germany.

What is striking here is not that one side defeated the other, it is not that the decisive victory was won in such a short time, but that Moltke’s plans proved so perfect that, despite the desperate resistance of the enemy, they were met with accuracy up to one day. And the forces on both sides were almost equal, with approximately forty million in Germany and France.

If this is not so terrible, it would be ridiculous to compare this war planned by the greatest organizer of the past century with our civil war, a war unproductive, slow, illiterately organized and illiterately managed, sluggishly and destructively procrastinating for four years. our legacy of forty years of hatred, a little smoothed out by the new war (this time against the foreign enemy), has left us with the agony of huge pension costs, nine-tenths of which are outright fines for unproductivity.

In the American Civil War, both sides were inspired by high ideals: southerners fought for freedom and independence, and northerners fought against hateful slavery. But both sides did not know any of the twelve principles of productivity, and so both failed in the most hopeless way.

Moltke knew the twelve principles of productivity, for him war is not a joke and a toy, but a serious business venture, and Bismarck calculates its cost, puts everything to the last penny at the expense of France, shows her this account and receives payment.

He took from the French one billion dollars with interest, and as a legitimate profit from the business operation annexed two provinces – Alsace and Lorraine. When I followed the course of this campaign, I was not attracted by the glory or the brilliance of victory, because there is really no glory or brilliance here.

I was attracted by the calm, relentless skill with which the Germans played the whole game. This skill shows what the right principles, conducted by a conscious and clear organization, can do. It was not the qualities of the German soldier that won the war: Moltke would have achieved the same success if he had applied his principles not to the German army but to the Italian, Austrian, French, Russian and Japanese or American armies.

The German soldiers were not enthusiastic about any special enthusiasm and were generally below the average level of European armies in terms of militancy. The war was not won by German harsh discipline or tactics; the equipment of the German army was old enough.

The French chassepot was better than the German needle rifle, the French machine gun was better than the German field cannon. In the end, Germany won the war not with money, because France was richer than it and had much more credit.

The war won the principles of Moltke and the organization he created. And a generation later, the same organization and the same principles applied at the opposite end of the globe by completely different people under the same talented leaders gave the same brilliant results.

Because Moltke perfected the ancient military organization by understanding and practicing the Twelve Principles of Productivity, his wars caused fewer deaths and mutilations than the major American industrial and transportation companies, which received roughly the same income. World history knows of no business venture as smooth as Moltke’s wars.

Bismarck dies unsatisfied, Moltke is no longer alive either, but their lessons live on. Even today (the beginning of the century), the German army, which with every movement throws Britain into meaningless panic, is the most brilliant example of the application of modern business principles in building a great state.

But the most brilliant example of rational organization and the principles of productivity we see not in how the Germans reorganized their country, but in how the Japanese for a generation actually created a great state out of nothing. In 1867, Japan was a purely feudal state.

The shop of the merchants and the shop of the poor in it are on the same level and are subjected to exactly the same contempt. The peasants are ruined. The best people in the country are suffocating in the clutches of feudalism and do not dare to show the slightest initiative. Leaving the country is considered treason and is punishable by death.

But a few samurai still decide to leave Japan not for profit, not for entertainment, not for personal gain, but only to learn everything valuable from Western civilization and bring it to their own, for the benefit of the beloved homeland.

They adopted Moltke’s organization in order to consciously and rationally rebuild their homeland on this basis. They put into operation the twelve principles of productivity that they may have been able to discover and recognize even before they began their training abroad.

Thirty years later, Japan, with a population of forty million, was able to defeat four hundred million China, and five years later it decisively defeated Russia, its powerful northern neighbor who defeated the great Napoleon and feared England and France for ninety years. and Germany. During the Russo-Japanese War, American sympathies were with Japan.

But this war was not over yet, and the Japanese organization of production, which in principle surpassed our production organization as many times as the Japanese army and navy surpassed the Russians, caused fear and terror in our country.

Not the special properties of the body, blood and brain make the Japanese dangerous rivals to American industrialists, not money because the Japanese are poor, not equipment because the Japanese have it, not natural resources, because there are almost none in Japan; the Japanese industry has become a dangerous competitor for us only because, unlike them, we have not yet grown up to the type of organization that allows for high productivity.

We are still asleep, and we do not even see the fact that the right principles in the hands of mediocre people turn out to be stronger than the unsystematic and accidental attempts of the genius, and the Japanese saw it.

Since the birth of life on our planet, there have been and still are two types of organization. These are the same ones that Taylor defines as a functional and military type. The first type can be called the organization of creation, and the second – the destruction.

Primitive economic life (including our American trade with Madagascar) is so clearly associated with looting and raids, piracy, slavery, and trade, that everywhere and inevitably the business organization is built on a military type.

We now know that this type can in no way be reconciled with the nature and tasks of the modern enterprise. The great benevolence that Field Marshal Moltke has done to the world is that, as a military man with a military tradition, he still organizes the army in a new type, in a functional type that must always be applied in economic enterprises.

Since in the big game he starts with Bismarck, the only chance of success lies in high productivity, he is forced to clarify all the principles on which this productivity is built, to introduce the only type of organization that allows them to be attached.

And all this – so unnoticed that even the most astute opponents of Moltke see nothing in the German army except the ubiquitous helmets, epaulets, gold cords and ringing swords, to which they have long been accustomed to pay attention.

No one understood that without changing the names, without changing and affecting the ranks and orders, in his predatory purposes Moltke destroyed the old predatory organization and replaced it with a new one – functional, creative, productive.

How much do the great achievements of the great American railway companies cost in the face of Moltke’s calm, preconceived plans, which passed so smoothly, without hindrance, the whole great test of practical implementation?

How much does the largest American enterprise cost as a working unit to Moltke’s perfect organization, to the perfect organization of that handful of chiefs that made Japan a great world power?

The leaders of large production companies and railways in England, France, Germany, America are all people with great will, exceptional abilities, inexhaustible energy and at the same time committed to their interests.

But these people know productivity only empirically, they apply these principles only randomly and irregularly, and that is why the factories, plants, and railroads to which they devote so much energy and talent work incredibly extravagantly.

The non-productive costs of American railroads reach one million dollars a day; and if the principles of productivity are taken into account and persistently applied, we would get rid of these losses.

They can be eliminated, like the yellow fever in the Isthmus of Panama, as well as the overuse of fuel in well-designed machines, boilers and furnaces.

Even if it has first-class technology, American industry cannot use it properly, because the organization itself, which is copied from outdated English models, is so imperfect that it rules out any possibility of applying true principles and using superior technology.

In this chapter we have tried to prove that the plant, like the state, can in a very short time pass from extreme unproductivity to the highest productivity; that the main premise and tool of productivity in all the examples given were organizational theories and principles; that the unproductiveness that prevails in American industrial life is explained by the inconsistency of the type of organization with the principles of productivity, and finally that the only hope for immediate improvement is to restructure the modern organizational type, which will allow these principles to be applied.

In the next chapter we will try to describe and compare the two types of organization and prove why one of them gives high productivity and the other – low.

By Robert Brown

Robert Brown is a longtime manager of a technology organization and author of a management book. In his spare time, Mr. Brown helps students get a better education by helping to publish free study materials.

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