“Thus Ended Efficiency Red Tape”

I am revisiting a great book – “My Forty Years With Ford” – written by Charles Sorensen.  Sorensen was as close to being in charge of production at Ford during the Model T, genesis of the assembly line, $5 day era.  The following is an excerpt from that book that might ring a bell in the days leading up to the Lean Accounting Summit

One of our first bouts with the experts came in the pre-Model T days. In 1907, Couzens brought in Norval Hawkins on the sales and accounting end. When a member of his own auditing firm, Hawkins had made an impressive inventory of the Ford Manufacturing Company after that organization had served Henry Ford’s purpose—to manufacture parts—and was about to be merged with Ford Motor Company. He was a supreme example of a man whose contribution to success of Ford Motor Company was in a field apart from the one in which he was an expert. He was the greatest sales manager the company ever had, and my hat is off to his natural-born genius in this line. He also brought considerable order to office routine. But the toilsome record-keeping of the cost-accounting systems he installed initially was a bureaucrat’s heaven and a production man’s hell, and the latter is where much of it went.

Under Hawkins’s cost-time study, a part such as a piston entered production bearing a ticket which covered every operation. If ten operations were involved, an entry was made on the ticket after each stage before proceeding to the next one. If one piston was lost in the move, all progress stopped until the missing piece could be found and accounted for. The time consumed in each operation was computed in lots of 100 or more, and results were tabulated on a card file which ultimately found its way back to the foreman so that he might check timing at each stage. Not only did the process mean delay from one operation to another, but when a motor assembler couldn’t get pistons, all car production was held up.

This rigmarole did not appeal to Mr. Ford. While Couzens roared for more production and at the same time put the brakes on expenditures, costs were rising and production falling in the name of “efficiency.” One Sunday morning Ford and I went into the record room Hawkins had set up. We found drawer after drawer of cards and tickets. Mr. Ford took one drawer, held it bottom up, and its contents spilled on the floor. We did the same with all other cards until the entire record system was thoroughly fouled up. Then Ford departed, leaving me to settle with Couzens and Hawkins the next day.

Bright and early Monday morning Couzens sent for me. He had heard Hawkins’s report of the shambles in the record room, and he was boiling. All that Couzens knew about the system was what Hawkins had told him; he had never seen it at work. When he stopped for breath, I said to him, ‘Come out with me into the shop and let me show you what has happened to plant operation. This system can’t adapt itself to our kind of manufacturing. Just spend half an hour in the plant and see for yourself.’

When he refused but calmed down a bit, I gave Mr. Couzens the real story of how production was delayed by a system which had complicated instead of simplifying operations. I told him that, since reports from the Hawkins system were a week old, they were too late to help us keep on top of the job. Couzens thought we were spoiling work and losing materials and that there was no accounting for the loss. He then said that his idea of a proper operation was a good receiving clerk and an equally good shipping clerk in each department. I agreed with him, because that was what we already had. If what came out of a department didn’t tally with what went in, the difference represented spoilage, which was all we needed to know. That ended my trouble with Couzens over excessive record-keeping. When he saw our daily checks on spoilage, he called me in to tell me that he now saw we had a simpler way to control costs.

Thus ended ‘efficiency red tape’ with Ford Motor Company almost before it began, and Hawkins confined himself to sales, where he did a magnificent job. I have gone into this incident with some detail because it strikes me as a vivid illustration of the difference between two diametrically opposed shop management practices. One is rigid system, in which rules tend to be paramount; the other is flexible method, in which the objective comes first. And, so, our supervisors were not required to bury their noses in paper work; they were expected to watch the production lines where their eyes would tell them what might be going wrong before reports could be written.”

The last lines - the difference between a rules driven approach that has supervisors consumed with paperwork, and one that has supervisors focused on the line looking at people and activities - are priceless.

  1. It’s a great story. What Hawkins was implementing is now known as a traveller and, while not usually found in auto parts manufacturing, it is alive and well in other activities, where it is actually needed. I saw it in operation last week in small and mid-size plants in Germany that produce paints in thousands of shades in batches from 100Kg to 2,000Kg. Each batch has a traveller attached to it as a way to keep track of where it is in its process and which materials or pigments are needed for it. In semiconductor manufacturing, you also have travellers, albeit electronic, to keep track of where a batch of wafers is in its 500+ operations process that involves multiple visits to the same equipment.

    The principle is not intrinsically wrong. The mistake Sorensen reports was applying it in the wrong place.

  2. A great story indeed, and a great tragedy that we have taken an 80-year detour in our understanding of best practices in this regard. It is sadly ironic that just as Ford’s system was being dismantled in the late 40′s in favor of the GM model, Toyota was simultaneously adopting and improving it.