There

FACTORY MANAGEMENT. are two accepted uses of the word "factory," the meaning in any given case depending largely on the context, and the term "Factory management" similarly partakes of this usage. As commonly used the term "factory" is understood to mean a group of elements made up of land and buildings, capital and credit, equipment and men, comprising what is known as the modern factory or establishment for the conversion of raw materials into goods for sale. Factory management in this sense is, therefore, the organizing and directing of men and materials for the production of goods through the medium of the factory.

The broader use of the term, however, includes any group of non-self-directing employees under the control of their employer, and it is so used particularly in reference to the series of problems arising wherever conditions of grouped labor obtain in the railroad gang, the army, the construction crew -conditions reaching their climax in what we are familiar with as the modern factory. We may, therefore, encounter factory conditions and factory problems in fighting forest fires, for instance, though in no sense would a group of fire fighters be termed a factory. But it is just this broader use of the term which must not be overlooked, for it implies considerations of peculiarly far-reaching importance to the factory manager of to-day. For under present day factory conditions we encounter a complexity of relations and problems undreamed of a few years ago, and in order that the aims, and the ends, and the methods of modern industrial or factory management may be the more readily appreciated, it is necessary first to consider some of the fundamental problems which must be faced by those engaged in industry to-day. The massing of workers, the specialization of processes and the minute subdivision of labor, the economic dependence of the employee on the employer, the aggregation of capital and plant, and the keen competition in a world market-all conditions brought on directly by the industrial revolution and its succeeding developments and finally with the more general dissemination of education among the workers themselves the growing insistence that labor have an increased participation in the operation and fruits of industrythe problems presented through these factors are all distinctly modern problems requiring distinctly modern methods of attack and solution. Some of the broader aspects of each of these factors will be briefly discussed.

The Massing of Workers. The very act of bringing together a large number of employees brings with it entirely new problems. With a group of half a dozen workers we encounter certain problems; multiply this number by hundreds or even thousands, and our problems immeasurably increase not only in degree but also in kind. With any aggregation of persons for any purpose we encounter the psy

chology of the crowd-the something within us which arises when we become one of a throng and which may, upon provocation, develop into the spirit of the mob. In the case of industry, however, to these psychological considerations must be added a third: the non-self-directing character of the groups of workers, imposing as this does the oftentimes tremendous burden of the mere physical handling and direction of our force. Taken together, these factors underlie many of the extremely delicate and far-reaching problems of organization and of management which the factory manager of today must face. What are to be the relations of the group as a whole to each individual, to each superior and to the firm as an individual? What form of organization, how administered, will best serve the true interests of each of these bodies-employer and employed? The simple organization of the small one-man business will no longer suffice. How, in the more complex organization, can there be maintained the desirable personal contact, freedom of action and play of individual initiative, together with the submission to authority necessary wherever men are grouped together for profitable production? These and scores of similar questions of organization and of management present themselves for solution the moment we bring together large numbers of individuals for any industrial purpose.

To

The Specialization of Processes.- It is sometimes said that the minute subdivision of labor resulting from advanced specialization of processes is all wrong, and that we should return more nearly to handicraft work. what extent is this claim well founded, and how, if at all, do the interests of the individual and of society at large and in the long run conflict in any solution which may be evolved? On the one hand, through the expertness which results with specialization of labor, and through the increased use of machinery, goods are more cheaply produced. Sooner or later the selling price must thereupon be lowered, resulting in turn in an increased demand for the product. This increased demand must be supplied by additional labor, which reacts beneficially on the worker either through more constant employment at the same wages or through the same amount of employment at higher wages. Society at large of course also benefits. On the other hand, in certain industries and for comparatively short periods of time the individual workers, upon the sudden introduction of labor-saving machinery, have suffered through being thrown out of employment and through being unable to secure new work or work to which they could adapt themselves. Here society at large and in the long run benefits at the expense of the individual. It may at least be fairly said that there are elements both of strength and of weakness in the modern factory system of production, and if so, how are we to preserve the strong points and at the same time eliminate the dangers of this method? Is it, or is it not, a fact that there is and of necessity must be monotony in industry? That there is in many cases seems indisputable, but how about the necessity of it- are not ways being found, and may there not be other ways found to alleviate and in cases to eliminate monotony, secure the advantages of high specialization of labor, and

at the same time retain free scope for individuality and personal initiative? Such measures as the interchange of work and workers, the establishment of definite and proper tasks of short duration and the payment of a bonus for accomplishment of each, allowing and expecting on the part of each operative a more detailed knowledge of each step in the processes in which he is engaged, the various industrial partnership and profit sharing plans, the suggestion box and welfare work-such measures and many others may play their part here. These considerations, together with the very recently widespread extension of fatigue studies, form a comparatively open field in the realm of industry.

The Economic Dependence of the Employee. Grave social problems arise through the economic dependence of the employee on his employer. Previous to the industrial revolution the apprentice or journeyman who had saved up a few dollars or who, in absence of these, had attached to himself a few regular customers, could withdraw from his employer and set up in business for himself. With the introduction of machinery and its accompanying demands, however, all this was changed; he could then no longer work for himself at his option because he lacked the necessary capital or the knowledge of the proper handling of capital, or the knowledge of all technical processes involved, with which to start his business, and he must perforce join the masses of hired workers dependent on the capitalistic entrepreneur. This change brought with it actual or implied obligations on the part of the employer, with corresponding obligations on the part of the employee. Foremost among the former was the social obligation of paying at least a living wage- unfortunately not always translated into action. Regularity of employment was another obligation. Proper working hours comprised an obligation notoriously overlooked until recently. The obligation of the worker as well as of the employer in regard to the determination of a proper day's work and a proper day's pay is constantly claiming the attention of the industrial world. Then how far beyond the providing of the bare necessities of life does the employer's duty extend? The attempt to answer this question plunges us at once almost hopelessly into the realms of reasonable costs and justifiable profits, of relative abilities and commensurate rewards, of standards of living and opportunities for advancement. The paying of at least a living wage, however, the maintenance of proper working conditions, accident insurance and the prevention of accidents and the provision for open channels for advancement all these and many other duties which the employee can little effect, devolve as social obligations upon the management rather than upon the men, due simply to the relative economic positions of the two. It is correspondingly incumbent upon the employee to give his employer honest and whole-hearted co-operation and similarly to refrain from using unjustly to the detriment of the management any power he may possess or obtain through collective

action.

The Aggregation of Capital and Plant.So much for some of the broader aspects of some modern industrial problems viewed par

ticularly from the standpoint of the employee. No less vital questions arise in the case of the employer. The very increase in size of plant and consequently in amount of capital involved, bring forth organization and managerial problems and policies only distinctly related to any questions of human relations. The mere act of keeping the wheels in motion smoothly requires organization and system to a degree unknown previous to the development of modern methods of production. Add to this the keen, worldwide competition, involving as this does the necessity of operating at a high efficiency in order to be able to survive in industry at all, and it must necessarily follow that these complex modern requirements of production must be met by complex modern methods of management. Where shall my plant be erected and how shall it be laid out; what is the minimum amount of equipment and labor necessary; how shall my business be organized and administered; what system of controlling each of the innumerable plant activities shall I use? Am I producing more cheaply than my competitors but losing money on the whole because my methods of buying or selling are archaic? What means of increasing production or decreasing costs with a given amount of labor and equipment may I take, and what are the interacting effects of these methods upon the larger questions suggested; how shall I deal with my employees, both individually and collectively, in order to attain the industrial ends of economical production, sale at a profit and growth to the point of diminishing returns with maximum prosperity for employer and employed? From among the scores of different ways in which each of these problems may be answered, how, for my particular case, am I to know and to utilize the one best way? It is upon this phase of the broader industrial problems the technique of production and distribution that a large part of the more recent literature on the so-called "efficiency movement" has been written. It is significant that Frederick W. Taylor, the pioneer and father of scientific management, never allowed simple efficiency in production to become with him an end in itself, but insisted both in his work and in his writings on adherence to the fundamental principles embodying the economic welfare of all persons concerned.

Democracy in Industry.-And finally, what is to be my attitude, be I manager or workman, in regard to democracy in industry and the distribution of the profits and losses arising through my participation? The maxim of a well-known railway magnate who, several years ago, gave expression to the sentiment "The public be damned" has been found to be no less an inadmissible working formula in industry than in railroading, perhaps much to the chagrin of several "captains of industry" who were wont to substitute "workman" in place of "public." Granted that we believe that à degree of democracy in industry is to be desired, there yet remains the delicate problem of balance as between the ideal and the exact degree which our particular concern, under our particular conditions at any given time, can justifiably affect. Many a concern has faced the bankruptcy court through a maladjustment, either one way or the other, of this balance. Such questions, together with those of the

division of profits, require for their proper solution the best informed and broadest minded men of the age, but most of all they require the close and active co-operation of both parties capital and labor. Such are some of the questions presented to the modern factory manager. They are all more or less interrelated and no one of them can be properly viewed except in connection with the others. Collectively, all these questions form a background necessary to the adequate solution of any one of them. Each one, furthermore, is a life study and in the present discussion it is manifestly out of the question to attempt to cover the ground in any but a very broad survey. And in what follows in regard to the technique of factory management, a proper perspective must be maintained by keeping constantly in mind the broad social questions which must form the true background for a proper solution of these more tangible factors which arise for consideration in the every-day work of the executive.

Going back to our original definition we see that factory management as ordinarily considered deals, broadly, with land and buildings, capital and credit, equipment and men that it is the organizing and directing of these elements in an establishment adapted to attain the ends of economical production, sale at a profit, and growth at least to the point where the effect of diminishing returns counterbalances the possible advantages of further expansion. The art of organizing and directing these elements of production, selling and finance, with all that this implies, constitutes the field of modern factory management.

Organization at once becomes the keystone upon which must be reared the whole structure which is to mold, guide and direct the activities of the business. Organization as such must be distinguished from the personnel which, at any given time, is entrusted with the task of making effective the policies and principles under which we are to operate. Although personality enters into and distinctly affects the minutiæ of organization, organization must, to be permanently effective, be independent of the personality of any one man or group of men. The form of organization under which we are to operate must be determined only after a careful analysis of first: the problems which we encounter; second: the conditions under which we must solve these problems; and to a less extent third: the character of the personnel available; and as the conditions vary, so must the solution (organization) vary. A study of the evolution of organization not only reveals most interesting ramifications, but also may furnish invaluable instruction to one entrusted with the delicate task of molding the form of organization best adapted to any given enterprise. The subject may profitably be viewed from two standpoints: organization in war, and organization in industry. If we go back to primitive times we find comparatively small hordes of savages making war upon the neighboring tribes. The conditions under which they operated were simple: small numbers of warriors, individual bodily encounter with primitive weapons only, a comparatively small territory covered on foot or on horse and hence an absence of the problems of engineering and transportation, maintenance largely individual by pillage, little or no division of labor, few ad

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one-man

ministrative or technical details, few problems of correlation, complete mobility. The problems were those of secrecy, surprise, control swift, absolute control in everything. The solution was correspondingly simple: control by the best, often the physically strongest, warrior. As is true generally in warfare, delay in execution becomes often more fatal than mistakes in details due to unbalanced judgment. We thus get a pure "line" form of organization orders and directions being passed down directly from the leader to his warriors, each of whom performed all functions pertaining to the work. Up until the extensive use of gunpowder in warfare the problems and the conditions under which they had to be solved differed comparatively little from those theretofore encountered. We find the solution to minor changes to consist of minor extensions and developments of the previous form of organization a delegation of supervisory powers to lieutenants immediately over the men, reporting directly to the one superior, who is thus somewhat relieved of the minute details of execution. With the development of modern warfare of course all this was changed. It was then no longer mentally or physically possible for the one strong man to maintain the personal touch and exercise the close supervision of all details of the operations, although it was still necessary for him to keep final control and authority absolutely to himself. This in turn made necessary an augmented means of solution, and as a result we find the development of the staff a cardinal principle of military organization to-day. Here we have a group of expert officers under the chief of staff, reporting to the officer in command upon the innumerable specialized and technical questions encountered in modern warfare, the commander thereafter taking such action upon their recommendations as he sees fit and passing his orders down through the now numerous officers of the line until they finally reach the man in the ranks.

In industry on the other hand, previous to the industrial revolution (if we except such works as the building of the pyramids and of the cathedrals and similar construction projects) we find no grouped labor. Passing through the successive stages of industrial development as described by Bucher, of housework, wage work, handicraft and commission work, and up until the development of the factory system, we find production carried on entirely by individuals or small groups of home-workers. The problems of control-as expressed in organization - therefore were extremely simple and in many cases non-existent, seldom necessitating more than a one-man organization and perhaps entirely naturally the organization of the army served as the model and was literally copied by those engaged in industry.

With the rise of the factory system of production, however, conditions were revolutionized. Then arose the intricate questions of human relations and material management outlined in the opening paragraphs. The problems encountered were far different from those of warfare, not the least significant of which was the substitution in industry of duty and the good of the individual, for the idea of force and the good of the state which forms the background of military discipline and control.

It is, however, perhaps not strange that the traditional forms of organization of the army should have still been embodied wholesale in the activities of industry, where they remained firmly entrenched until comparatively recently. It was not until near the last of the past century that these fundamental differences as between military and industrial aims and methods became consciously recognized and embodied in the various forms of industrial organization which are offered to-day as more nearly applicable to industrial needs. In closing the discussion of organization, bare mention may be made of these modern tendencies and further details must be sought in the numerous writings on the subject. One of the earlier forms was the committee system. This exists in two forms the committee with power to enforce its decisions and the committee with advisory duties only. In the latter case the organization retains most of the disadvantages of the staff, with few compensating advantages. Both forms are found to a limited extent in industry to-day. The departmental and the divisional forms differ somewhat in operation, but are little more than the extension of the principle of division of labor. None of these forms of organization necessarily differs in principle or operation from the regular line form of the military. A fundamental departure from the military, however, is found in the modern functional organization devised by Mr. Taylor in connection with the development of scientific management. Here the staff idea is utilized, but with this fundamental difference in the staff the individual expert performs an advisory function only, while in the Taylor functional these same experts are given administrative authority to embody the results of their knowledge in orders issued direct to men under them as regards their particular sphere of action. Under conditions where this form of organization is necessary and applicable, surprising results are secured.

So much for the various forms of organization from which the factory manager must choose that best adapted to his particular circumstances. Of the other broad division of factory management as an art- the directing, the management of personnel and material little need be said. Sufficient outline of the various factors to be considered has been suggested to give an insight into the nature of the problems involved. The problems of finance, of division of duties, of delegation of authority and responsibility, of purchasing, of storage of materials, of planning, of shop administration, of cost, of central control of all of these and the innumerable other necessary activities of the modern factory - all such questions arise in never-ending variety in the management of the plant problems nowise different intrinsically from those of organization previously discussed, and problems requiring for their proper solution the same careful analysis and the same adherence to fundamental principles of proved soundness and practicability. See FACTORY SYSTEM; LABOR LEGISLATION; SCIENTIFIC MANAGEMENT.

HENRY H. FARQUHAR, Consultant in Industrial Management and Instructor in the Harvard Business School.

VOL. 10-45

FACTORY SYSTEM, The. Definition. -The word factory seems to have been first used in its modern sense about 1792. Previous to this time a factor had been an agent, and all compound derivatives of this word had carried with them the idea of agentship. But with the new system of industry introduced by the Industrial Revolution (q.v.) the term seems to have been used as an abbreviation of manufactory, and in the first factory act in England in 1802 was used interchangeably with mills to designate cotton manufacturing establishments. To-day the term factory covers any establishment, with its buildings and equipment, used for the manufacture of goods. The legal definition varies widely in different States, but is usually based upon the number of workers; thus an extreme definition of factory is "any place where two or more persons are engaged in working for hire or reward in any handicraft." As a description this is a poor definition, for it leaves out of account the essential characteristics of the system. Better is C. D. Wright's definition, "a factory is an establishment where several workmen are collected for the purpose of obtaining greater and cheaper conveniences for labor than they could procure individually at their houses; for producing results by their combined efforts which they could not accomplish separately; and for preventing the loss occasioned by carrying articles from place to place during the several processes necessary to complete their manufacture."

Not merely has the definition of the term broadened, but the scope of the factory system has widened also. Applied originally only to the textile industry, it has gradually been extended to other branches of manufacturing, until to-day it dominates the manufacture of agricultural implements, automobiles, boots and shoes, carriages and wagons, clothing, fire-arms, metallic goods of all sorts, musical instruments, rubber goods, slaughtering and meat packing, wooden goods, watches, etc. Most of the people employed in the mechanical industries of this country to-day are working under the factory system. Indeed the principles which govern the factory system in the concentration and division of labor, the use of non-human power and of labor-saving machinery, have also been applied to other fields of economic activity such as agriculture, fishing, forestry, mining, transportation, and even personal and professional service. There can be no doubt therefore as to the importance of so universal a system.

Domestic System.- We shall perhaps better understand the factory system if we contrast it with the system under which industry was organized, at least in England, just before its introduction. This was the domestic system. According to this manufacturing - which was then truly "making by hand" (manus-facere)— was carried on by small masters in their own houses, with the help perhaps of a journeyman and an apprentice or two. Such a master almost always owned the implements or tools of manufacture. In some cases the raw material was the property of a middleman who simply hired the domestic worker to work it up into finished goods, while he distributed the raw material to the homes of the workers and collected the completed product. The essential

feature of the system, however, to which it owed its name, was the fact that manufacturing was carried on in his own house by the domestic worker, who usually also owned a plot of ground which he cultivated as a byindustry.

Factory System.-All this was entirely changed by the introduction of the factory system. The first series of changes that may be noted was the transfer of the industry from the home to the factory, the change in ownership of the implements of production from the artisan to the capitalist employer, and the change in the power that drove the machines from the muscles of the workers to the force of falling water, and later of expanding steam. A second characteristic of the factory system was the enlargement of the business unit. The textile industry was affected less than mining and the metallurgical industries; but transportation showed the greatest development along these lines. To-day, however, large-scale production is a common characteristic of almost all factory industries. As a result of these changes capital has become increasingly important in modern industry until our present system of industrial organization is often called a "capitalistic" system rather than a factory system.

Evils. It is obvious that no such farreaching change in industrial organization could be effected without serious disorganization and readjustment. The transitional period during which the factory system was instituted witnesses many serious evils, some of which have not yet been altogether eradicated, and which are consequently assumed by some writers to be inherent in the system itself. To a brief consideration of these we may turn. Five criticisms were noted by C. D. Wright in an account of the system given in the Tenth Census, as follows:*

(a) The factory system necessitates the employment of women and children to an injurious extent, and consequently its tendency is to destroy family ties and domestic habits and ultimately the home.

(b) Factory employments are injurious to health.

(c) The factory system is productive of intemperance, unthrift and poverty.

(d) It feeds prostitution and swells the criminal lists.

(e) It tends to intellectual degeneracy.

In answer to these criticisms it may be pointed out that the employment of women and especially of children has been regulated and greatly reduced by factory legislation. The employment of married women and of young children is, however, still unhappily too great. On the score of health the best equipped and managed factories undoubtedly compare very favorably with the environment under which work was carried on in the home under the domestic system, but the number of dangerous and injurious trades has multiplied. The resulting evils should, however, be cared for by legislation. The next two counts may be dismissed as untrue; the factory system as such cannot be held responsible for these evils and in fact works directly against such a vice as

*C. D. Wright, Report on the Factory System of the United States,' in Tenth Census, Vol. II, p. 552.

intemperance as inconsistent with efficiency. On the last point so eminent an authority as Prof. Alfred Marshall is of the opinion that the modern factory system makes higher demands upon the intellectual capacity of the workers than any system of industrial organization which has preceded it.

Advantages. On the other hand certain positive advantages of the factory system of industry may be noted. It makes possible a vastly greater output. That this is not more equitably distributed is indeed a serious problem of social justice, but the inequity of our present system of distribution should not be made an indictment against the system of production which gives us more to divide. It has, moreover, greatly lessened the cost of production and hence lowered the price of thousands of articles, which have thus been brought within reach of everyone. One has only to point for illustration to the myriads of articles produced under the factory system which can be found in the 5 and 10 cent stores. And finally wages, both nominal and real, have increased under this system, so that the economic position of the average factory operative is better than that of a similar worker under the domestic system. All in all, in spite of certain dark spots, the factory system may be regarded as a long step forward in the march of industrial progress. See HISTORY, MODERN. "The

Bibliography.- Babbage, Charles, Economy of Manufactures' (London 1835); Clarke, Allen, The Effects of the Factory System) (London 1894); Cooke-Taylor, R. W., 'Introduction to a History of the Factory System' (London 1886); Čooke-Taylor, R. W., 'The Modern Factory System' (London 1891); Hobson, J. A., The Evolution of Modern Capitalism (New York 1894); Ure, Andrew, "The Philosophy of Manufactures) (London 1861); Wright, C. D., 'Report on the Factory System of the United States) (Tenth Census, Volume Manufactures, Washington 1884).

ERNEST L. BOGART, Professor of Economics, University of Illinois. FACULÆ, the brighter spots sometimes observed on the sun's disc. Generally they are small at first and gradually assume large proportions. See SUN.

FACULTIES, Court of, an English ecclesiastical court, under the archbishop, which creates rights to pews, monuments and particular places and modes of burial. and has also various powers in granting licenses of different descriptions, as a license to marry, a faculty to erect an organ in a parish church or to remove bodies previously buried.

FACULTY, in ecclesiastical law, a privilege or license granted to any person by favor, and not as a right to do any act which by law he may not do. In the Roman Catholic Church, permission granted by an ecclesiastical superior to a duly qualified subject to hear confessions. Such permission only extends to the district over which the superior has jurisdiction. Thus, faculties are granted by bishops to the priests in their dioceses, and by the heads of religious houses to such of their subjects as they judge qualified to hear the confessions of the community. In the United States, the term faculty indicates the body of persons who are entrusted with the government and instruction of a uni