P G t f O R m m c E 19 J A N U A R Y / F E B R U A R Y

1974

SIXTH ANNUAL A.S.P.I. CONFERENCE

, san. francisco

APRIL 24TH THROUGH APRIL 26TH 1974

THEME "PRODUCTIVITY, A NATIONAL CONCERN"

T h e Nat iona l Commiss ion on Productivity is comprised of foremost leaders of Government, Labor and Industry who are concerned with the United States' rate of productivity growth. The Commission promulgates that we must resolve as a Nation and as individuals to use our precious resources more prudently, more imaginatively and more productively than we have ever done before through the progressive improvement or our tools, our materials, our work skills — and most important — through the ever more constructive combinations of men, money, materials and methods. The Commission and The American Soc ie ty for Performance Improvement, having common interest in improving performance, have agreed to join together in sponsoring this, the Sixth Annual ASPI Conference. An outstanding Program has been developed that will benefit all through an interchange of knowledge from both sponsors and attendees. We urge you to join us for this unique conference that will include:

D a i l y L e c t u r e s by the foremost men of Government, Labor and Industry.

Daily Panel Discussions — drawn from the speakers of the day.

Daily Participation Workshops in sufficient depth to allow a latitude of choice.

A.S.P.I. Annual Conference Registration

" P R O D U C T I V I T Y , A NATIONAL C O N C E R N "

American Society for Performance Improvement Wed., Thurs., Fri., April 24, 25, 26th, 1974 at R O Y A L COACH INN, SAN MATEO, C A L I F O R N I A

Name Organization/Address_ City

.Ti t le.

State. Zip-

No money enclosed, send additional into. Please check one:

Member $60 enclosed (Pre-regis­tration before April 1) $70 enclosed (Registra tion after April 1)

Non-Member $80 enclosed (Pre-regis­tration before April 1) $90 enclosed (Registra­

tion after April 1)

I would like to apply for membership now and the special Conference rate of $15 as opposed to the regular $18 annual rate.

All Conference registration fees include luncheons, workshop materials and the awards banquet. Mako check payable to ASPI National Conference. Mail to Box 454, Sunnyvale, CA 94088.

14TH ANNUAL SAVE NATIONAL CONFERENCE ON VALUE AMPLIFICATION APRIL 28 - MAY 1, 1974

T H E I N T E R N A T I O N A L H O T E L - L O S A N G E L E S

NEW APPROACHES ADVANCING THE ART AND APPLICATIONS OF VALUE ENGINEERING

C O N F E R E N C E T H E M E This conference focuses on the amplification of VALUE in our products and services through the development and application of improved Value Engineering/Analysis methods. The program will be oriented to include key topics and problem solving activities of major interest and importance to all profit conscious individuals. Whatever your field, industrial, business or govern­ment, we invite you to see how Value Engineering can help you.

I N T E R N A T I O N A L A F F I L I A T E S Speakers and delegates from our International Affiliates will include VEs from Japan, England, Israel, Canada, and the Scandinavian countries.

T E C H N I C A L INFORMATION Take advantage of our Technical Services that include Consultation with experts, books, films, video-tapes, reports, publications, and other VE tools.

L A D I E S A C T I V I T I E S

Shopping and Lunch in the popular Olvera Street section of Los Angeles, then off to the Queen Mary and Ports of Call. The next day a Tour and Lunch at Universal Studio where you may see your favorite TV or Movie Star. Or you may enjoy the hospitality and activities provided by the International Hotel.

T E C H N I C A L S E S S I O N S

• V E in Non-Defense Government Agencies

• VE in Construction

• VE in Small Business

• How to Use FAST Techniques

• New ASOR V E Clauses

• Top Management Looks at V E

• Value in the Energy Crisis

• Value vs. Worth in Setting Targets

• Improving Your Creativity

• Value Analysis Workshop

• Design to Cost Implementation

• The Future of V E

E X H I B I T S 46 exciting new exhibits will be available

so you can investigate the latest

innovations in the "state-of-the-art."

S P E C I A L FOR E A R L Y REGISTRATIONS

The f irst 200 delegates to register will

receive a special " E X E C U F O L I O " .

P L E A S E R E G I S T E R M E F O R T H E 1 4 t h A N N U A L S A V E N A T I O N A L C O N F E R E N C E T O BE H E L D A T T H E I N T E R N A T I O N A L H O T E L I N L O S A N G E L E S O N A P R I L 2 8 , T H R O U G H M A Y 1 , 1 9 7 4 .

N a m e : (At tach list if registration is for more than one)

F i r m / A g e n c y / O r g a n i z a t i o n :

Division:

C i ty :

.S t reet : .

_Sta te /Prov ince: _^lip:

Our organization is a Corporate member of S A V E : Y e s [ ] No [ ]

F U L L R E G I S T R A T I O N F E E : Includes all sessions, lunch, banquet and social funct ions, Proceedings, conference materials.

L A D I E S P R O G R A M :

O N E D A Y S E S S I O N :

A D V A N C E R E G I S T R A T I O N A F T E R R E G I S T R A T I O N M A R C H 31 , 1974 [ ] $ 90 S A V E Member [ ] $100 S A V E Member E) $ 1 3 0 Non-Member* [ ] $ 1 4 0 Non-Member '

[ ] $ 50

[ ] $ 60

[ ) $ 60

t 1 $ 60

N O T E : A D V A N C E D R E G I S T R A T I O N discount applicable only if registration is accompanied by payment or billing instruct ions.

R E F U N D S will be made for Delegate's registration or Ladies Program O N L Y if written cancel lat ions arel received prior to Apri l 16, 1974.

E n c l o s e d is check for $ (U .S . F u n d s ) Please bill P.O. No.

• N O N - M E M B E R F E E : F o r those w h o join S A V E before May 1, 1 9 / 4 , the membership registration fee of $40 will be waived.

COMPLETE AND MAIL YOUR REGISTRATION

FORM NOW!

1974 S A V E National Conference 2550 Hargrove Dr. L-205 Smyrna, Georgia 30080

.1

PERFORMANCE 3

E D I T O R I A L D I R E C T O R Bi l l Ba i ley

H I T C O Defense Produc ts G r o u p

A S P ! E D I T O R Pat r i ck M o n a h a n

Manager, Q u a l i t y Eng ineer ing A p p l i e d T e c h n o l o g y D iv . of I t ek C o r p .

525 A l m a n o r Ave . S u n n y v a l e , C A 9 4 0 8 6

T e l : ( 4 0 8 ) 7 3 2 - 2 7 1 0 E x t . 2 3 6 3

S A V E E D I T O R R o b e r t H . Rossman

C o n s u l t a n t 5 9 7 1 W i l t o n Road

A l e x a n d r i a , V a . 2 2 3 1 0 T e l : ( 703 ) 9 6 0 - 9 0 3 9

N A S S E D I T O R Jus t ine H. C lark

D i r e c t o r , E m p l o y e e R e c o g n i t i o n Programs

N a t i o n a l Bank of N o r t h A m e r i c a 6 0 Hemps tead A v e n u e

West H e m p s t e a d , N .Y . 1 1 5 5 2 T e l : ( 5 1 6 ) 4 8 1 - 9 0 0 0

N P M A E D I T O R W i l l i a m D. Morgan

P rope r t y A d m i n i s t r a t i o n V o u g h t Sys tems D iv i s ion

P.O. Box 5907 U n i t 2 - 9 1 0 0 0 Dal las, Texas 7 5 2 2 2 T e l : ( 2 1 4 ) 2 6 6 - 5 0 2 4

E D I T O R I A L O F F I C E S 1600 W. 1 3 5 t h St reet Gardena , C A 9 0 2 4 9 T e l : ( 213 ) 3 2 1 - 8 0 8 0

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

PERFORfTlfiTKE

K e i t h A d a m s D S A

Robe r t B i d w e l l D o D V E Services

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

At C h o p N A S A

A d r i a n Cu lveyhouse Sanders Associates

Bi l l Dean H o n e y w e l l , Inc .

George D u n c a n Eas tman K o d a k Co .

Charles Ha l l Dep t . o f t he Navy

R u d y K e m p t e r O f f i c e o f A S D

Joseph Mar te l l i V o c a t i o n a l N u r s i n g Schoo l o f Ca.

A n t h o n y T o c c o T R W Sys tems G r o u p

R o b e r t V i n c e n t I T T C o r p o r a t i o n

V O L U M E 4 NUMBER 1

BUSINESS OFFICE Charger P r o d u c t i o n s , Inc .

3 4 2 4 9 C a m i n o Cap is t rano (Box H H ) Cap is t rano Beach, C A 9 2 6 2 4

T e l : ( 7 1 4 ) 4 9 3 - 2 1 0 1

P R O D U C T I O N E D I T O R Rober t R. Spr inger

A R T D I R E C T O R S Pat H o p p e r

K a t h e r i n e M a l o n e A n d y Grenne l l

P R O D U C T I O N C O O R D I N A T O R J u d y K. Rader

P R O D U C T I O N A S S I S T A N T W e n d y I Wisehar t

A D V E R T I S I N G D I R E C T O R R o b e r t W. A r s e n a u l t

C I R C U L A T I O N M A N A G E R Barbara S i m i n u k

J A N U A R Y / F E B R U A R Y 1974

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

and

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

and

N A T I O N A L A S S O C I A T I O N O F S U G G E S T I O N S Y S T E M S

and

N A T I O N A L P R O P E R T Y M A N A G E M E N T ASSOCIAT ION

F E A T U R E S :

What Makes The Society Of American

Value Engineers What It Is? C.P.Smith 7

Relating Property Management To Profit - An Approach Earl 0. Clark 10

Suggestion System Administrator

(VP In Charge Of Revolution) Abate Kassa 14

S A V E National Conference 18

Computers Vis-A-Vis Value John W. Shaffer 20

Value Engineering At Japan

Steel Works, Hiroshima Takehiko Tanaka 23

C/SCSC - What Results Lt. Col. Leonard S. Marrella 26 The Eligibility Question Charles H. Foos 30

D E P A R T M E N T S :

If The Shoe Fits 5

Update 6

Comment 9

Book Review: Effective Management Of Computer Software 25

S U B S C R I P T I O N S - Single Issue: $ 1 ; Y e a r l y Rates : U.S.A. & Canada $ 5 ; Fo re ign $ 6 .

Wr i t e f o r Organ iza t i ona l B u l k 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 material 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 Ivngineers, the National Association of Suggestion Systems, nor that of the National Prop­erty Management Association.

PERFORMANCE Magazine is published by Chainoi I'loiluclions, Incorpo­rated. 34249 Camino Capistrano, Capistrano Hoaih. California 92624. Second class entry at San Clemente, California ''.Ni \ \

4 PERFORMANCE

If The Shoe FHs

ROBERT H. ROSSMAN

• • •

D A N G E R FROM WITHIN

During these troubled days of our great Nation, is there any need to fear that our demise will be caused by forces beyond our own shores? Can the oil embargo which is imposed on us by the Arab oil-producing nations cause us to falter in attaining our National goals? Will the overall reduc­tion in energy resources cause undue pressure on our industrial might, or w i l l the unreasonably exhorbitant costs for foreign oil products (includ­ing those of our so-called allies in the Americas) drastically delay our efforts to improve the quality of life of our people? Has the combination of environmental problems and the energy shortage sounded the death knell for this "experiment in freedom" that our forefathers founded in 1776?

The answers to these questions in the American mind is a- resounding, "No!" It 'll take a lot more than the efforts of inconsequential sheiks and despots of the Middle East (in coun­tries we have supported, protected and helped to free from foreign aggression) to leave any permanent scar on the lives of the people of the United States. And it will require much more than the exploiters of our Nation's shortages, both internal and external, to turn the people of this Nation away from their duties and responsibilities toward their country in its time of need.

The shortage of energy resources can — and will — be rectified by American ingenuity. Oil shale, oil sands, geothermal heat sources, solar power and nuclear fission and fusion are some of the areas in which we will spend our efforts to provide for future energy sources of our Nation. In addi­tion, the use of coal and the conver­sion of our vast resources of this

natural fuel into gases and oil could rapidly relieve the shortages of natural gas and petroleum products we face at present. With determined effort and the backing of government and big industry, we will weather this tempo­rary problem, as we have faced and overcome other National problems during our history.

The solutions to our energy prob­lems may have an adverse impact on, and delay, the Utopian dream of our environmentalists and ecologists for pure air and water, but none of the energy solutions will affect our total quality of life to any measurable extent. The idealists and dreamers must be reminded that heat for our homes, ready access of food products to the marketplace, mobility of our populace, and control of inflationary pressures imposed on us by foreigners are all part of our overall quality of life — and not just clean air and water.

Americans have been asked to help conserve energy. We have been re­quested to reduce the temperatures in our homes and the number of miles we drive in our automobiles. Our govern­ment has asked us to form car pools wherever we are able, and to utilize mass transportation wherever it is available. The speed at which we may drive our vehicles has been reduced to produce the best fuel economy for the major portion of the vehicles on our roads. We are constantly reminded that curtailment of the use of lights and electrical appliances will help the overall effort to reduce fuel usage. If we all do our part of the job, the shortage of energy can be overcome.

With the vast majority of our' people joining the effort to overcome the fuel shortage and to perform their duty for the Nation, I am amazed that

there are still certain groups which blatantly refuse to accept responsibil­ity for National needs. Coal miners, although exploited prior to the forma­tion of their union many years ago, became so strong in bargaining power that their excess of wages over their productivity a few years ago made the use of coal uneconomical in all but a few areas of production. Now that coal is again becoming important as an energy source, we are faced with out­right threats that the miners want new pay raises which will far outstrip the pay that is their due in accordance with their present productivity, or they are "prepared to strike for six months."

The major oil companies, with profits at record-breaking levels for the past three (or more) years, are more interested in distributing these profits to their stockholders than they are in building vitally needed refineries to handle the potential full flow of raw petroleum in the Continental United States. It should be noted that, at present, a substantial portion of the pumping capability in this Nation can­not be utilized because there is not enough refinery capacity to accept all of the raw petroleum — and this has been the case for a number of years. In addi t ion , information concerning pumping capability, oil reserves, oil production, exports and imports are kept secret from our citizens and our government.

Self-seeking environmentalists, ecologists and members of Congress continue to block expansion of nuclear power generating capacity through innuendo, surmise and half-truths. They also delay construction of offshore oil and gas wells (and the Alaskan pipeline) vitally needed for the future energy independence of our Nation. They prevent construction of port facilities and small refineries necessary for better distribution of petroleum products and natural gas, even though every precaution has been taken to protect both the environment and the aesthetic value of the affected areas. Continued on page 1 7

SUCCESS IS NOT ACCIDENTAL A Library of audio i ,iv.H Ii-:. In int|\ y< HI Hi'' nli'.i'., pi iiu.ipli.'s and to<:hni(|inrs usrd by lh" nm-.l MI .\lul pi-opk. Mun (iM'lls 1)1 i .iv.irl I'-. n i l -..ili-., t i i . in. i i i ' -Mfi i l , iMiit iv. i lum, s(; 11 • (IcviHopmriil, n-.il i".t.ilt\ IIIMII.Hit v .md iii.iny IIIOII!.

I III I C A I A I (Mi Human Dynamics Associates

Tiipo Rental Library 2031 Humlock Roud, Norristown, Pa. 19401

PERFORMANCE 5

P E R F O R M A N C E U P D A T E Performance subscribers are invited to contribute

$5 M I L L I O N IN S A V I N G S

A presentation ceremony, commemorating the cost sav­ings from Value Engineering Changes submitted by the De­fense Products Division, Federal Systems Group of Fairchild Camera and Instrument Corp., which have gener­ated gross savings of $5 million, was held recently at the company's Space and Defense Systems Division Head­quarters in Syosset, New York. BrigGen N.C. Manitsas, USA, commander. Defense Contract Administration Ser­vices Region (DCASR), New York, presented a plaque to Mr. L.H. Pighi, vice president and group general manager.

Fairchild has received $2 million as its share of the sav­ings by the Value Engineering Changes on U.S. Navy con­tracts for the MK 344 Fuze, and the U.S. Government has received $3 million.

General Manitsas congratulated Mr. Pighi and the Divi­sion for their two Value Engineering Change Proposals which have produced tangible savings of $5 million, stating, "Such major savings just don't happen. They result from a firm stimulating thinking among its engineers and produc­tion people of figuring out ways to reduce costs in the production of Defense materiel. Your success will help sell Value Engineering to other contractors."

BrigGen N.C. Manitsas, USA, commander, DCASR New York, and Mr. L.H. Pighi, vice president and group general manager. Federal Systems Group, Fairchild Camera and Instrument Corporation, Syosset, New York, exchange symbolic-checks representing $5 million in cost savings realized from Value Engineering Changes submitted by the Group's Defense Products Division. Seated to the left of Mr. Pighi is Cmdr James V. Mullen, USN, commander, DCASD Garden City. (Fairchild photo)

N O R T H T E X A S C H A P T E R NPMA C H R I S T M A S P A R T Y

The NPMA North Texas Chapter held its annual Christmas Party and election of officers December 6. Officers for 1974 are: James R. Stiles - General Dynamics - president; James L. Bone - DCASR-Dallas - vice president; Frank H. Edwards - V S D / L T V - secretary; and Robert H. Dussman - V S D / L T V - treasurer.

NEW C O N C E P T IN T R A I N I N G AND S E L F -D E V E L O P M E N T

Human Dynamics Associates of 2031 Hemlock Road, Dept. P, Norristown, Pennsylvania 19401 (branch of Tape Rental Library, Incorporated, of Vineland, New Jersey), believes that learning need not be expensive and time con­suming. The primary function of the Tape Rental Library is to service large companies, individuals, students and families with economic and convenient training and self-development by way of cassette tape rental. The tapes may be used in training classes or while driving, dressing, dining or relaxing.

The Library has hundreds of tapes on management, sales, motivation, real estate, insurance and mind control. Tapes for families and students include best-seller books, languages, the Bible, drug abuse, Shakespeare, Ben Franklin, Abraham Lincoln, Mark Twain, science, history and old-time radio programs.

The young fry are not overlooked either: Gulliver's Travels, Rip Van Winkle, Just So Stories and selections from Alice in Wonderland, Wizard of Oz and Pinocchio.

Some of the sources of these tapes are well known: Nation's Business, Dow Jones, Fortune, Robert Townsend, Earl Nightingale, Bob Richards, W. Clement Stone, Julius Boros and Joe Batten.

With a system like Tape Rental Library, learning can be a pleasurable experience. [~pj

6 PERFORMANCE

What Makes The Society of American Value Engineers

What It Is?

by CP. Smith Vought Aeronautics Company SA VE National President

I t is a well-known fact that "a national technical society must be huge in numbers of members to be considered successful and influential at the national level." Is this really true? Not necessarily so. Let's take a look at a National Society that many people may have never heard about, or per­haps, heard very little about. This is the group of men and women who make up the Society of .American Value Engineers.

This group has been referred to by some other names — one of the most common mis-names being the Society of American Valve Engineers. Their acronym, SAVE, has also been mis­understood — many people have thought of SAVE as some kind of evangelistic group. Despite these numerous misunderstandings, the Society of American Value Engineers has carried on, in constant pursuit of the primary objective: the advance­ment of knowledge and application of, and education in, the principles of Value Engineering/Value Analysis.

The Society is really not very old, as technical societies go; being incorporated October 22, 1959, and originally chartered under the laws of the District of Columbia. Currently, SAVE is chartered under the laws of the State of Georgia.

MORE THAN NUMBERS

Current membership is approxi­mately 1500. This total may seem small compared to many other

PFR1 O R \ l , \ \ ( 1

national organizations. However, suc­cess is not measured in terms of num­bers alone. Let's look at the sphere of influence of our members in their working environment. By nature, a value engineer or value analyst, in pur­suit of his daily tasks, works through the many department lines of the normal organization. As such, he or she may be serving as the one individ­ual responsible for value activities, or a member of a small value staff in larger companies. The point is this: Com­panies and organizations do not normally have large numbers of full-time value engineers/analysts. The norm will be a centrally located value function of one or more value special­ists, applying the value, technique in selected areas or specific projects.

-Many times this central staff is aug­mented by functional specialties through use of the value team approach.

We can now see that SAVE is made up of individuals, strategically located in a multitude of companies, organiza­tions, agencies and institutions scat­tered throughout the country. With this type of base, SAVE may never become a huge society in terms of numbers of members. Current five-year projections consider a member­ship of 2500 to be a reasonable num­ber. Size alone is not the most impor­tant ingredient to success. With its members located in strategic positions, close to the higher level decision­making organizational elements, SAVE can and does have considerable success in the achievement of its primary objective, stated earlier in this article.

D I V E R S E BACKGROUNDS

The next question may very well be: What types of people make up the membership of SAVE? Members include value engineers and analysts, architects, executives, scientists, con­sultants, professors, managers, admin­istrators, purchasing agents, engineers and designers. The one thing in com­mon among SAVE members is an interest in improving the value of products and services.

Wi th such diverse backgrounds among the membership, it may be assumed the management of such a group would require many officers, tight control and stiff regulations. Such is not the case with SA VE. Our

members are urged to use their crea­t i v i t y as individuals and as local chapter groups to assist in achievement of the primary SAVE objective.

The national SAVE organization is made up of forty local chapters, with­in seven regions of the United States, plus a significant number of inter­national affiliates formed as a direct result of SAVE's efforts in the United States. Operations of the regions fall under the regional vice presidents, elected by members of each region. The vice president-international is responsible for coordination of activities with international value practitioners who have affiliated with SAVE. National officers elected by the entire membership are president, executive vice president, vice presi­dents o f finance, administration, professional development, and com­munications. Affairs of the Society are conducted by the Board of Directors (regional vice presidents, vice president-international, and national officers), who meet every three to four months. SAVE currently operates a national business office under the direction of an executive director, serving as a central point for member­ship records, communication and information.

COMMUNICATION FLOW

The Board of Directors is ever mindful of its major responsibility, which is meaningful, timely service to the members in pursuit of the primary national SAVE objective. This respon­sibility is basically discharged through the regional vice presidents, maintain­ing continuous personal communica­tions with chapter presidents and members throughout their regions, and is accomplished through personal visits with the chapters in addition to the Regional Newsletters published by each regional VP. Communication from the members to the national organization is accomplished readily through the chapter presidents to the regional VPs, who serve as the voice of the members from throughout the country at the National Board of Directors ' meetings. The elected national officers practice a policy of personally responding to any request for help or information received from an individual member or a chapter of SAVE. This closeness with the mem­bers is further enhanced by many per­

sonal visits of the national officers with chapters at their monthly meet­ings in the seven Society regions.

Communication among the mem­bers is aided considerably through annual publication of the National SAVE Membership Directory. The Direc tory identifies the national officers/Board of Directors, chapters making up the regions, chapter presi­dents and members of the chapters, by name and location. Member communi­cations through the National Society are handled primarily through two publications regularly mailed to all SAVE members. One publication is primarily dedicated to SAVE activities — member, chapter, region and nation­al. The other publication presents articles and discussions concerning developments and accomplishments in the application of the value engineer­ing technique.

ASSISTANCE FOR MEMBERS

Members have ready access to a wealth of knowledge on Value Engineering/Value Analysis through use of the Value Engineering Re­sources Center. This Center, located at Miami University in Middletown, Ohio, is a service free of charge to SAVE members (except postage) providing extensive research material on the subject of Value Engineering.

Individual members, joined to­gether in an agreed upon centralized location, may form a local chapter. Here again, a bounty of assistance is provided by the national SAVE organi­zation for the local chapter. Available to every chapter are many standard manuals which are resources for guid­ing action. These manuals include: Chapter Programs, Chapter Effective­ness, Honors and Awards, Chapter Boundary, Nominating and Election Procedure, Chapter Expansion, and the National Conference Manual.

SAVE provides exceptional incen­tives for "and recognition of, outstand­ing performance of individuals, chap­ters and organizations in support of the primary SAVE objective. These incentives and awards are provided through the National Honors and Awards program, and the Chapter Effectiveness program. Normally, award recipients receive their awards with suitable special recognition at the Society's Annual National Conference.

8 PERFORMANCE

PROFESSIONALISM ADVANCED

The latest national SAVE activity to provide meaningful professional recognition of deserving value practi­tioners is the SAVE Certified Value Specialist provision. By fulfilling prescribed standards of value educa­tion, performance and conduct, and demonstrating and maintaining a high level of competence and ethical prac­tices in Value Engineering/Value Analysis, a value practitioner can earn this special recognition as a Certified Value Specialist. Certification hand­books are available for guidance in pursuing SAVE certification.

SAVE members have ample oppor­tunities to share their findings and works with others by publishing their articles in one of the national SAVE communicat ion publications, and presenting papers at chapter meetings as well as Regional and National SAVE Conferences. Complete written pro­ceedings are normally available from every Regional and National Confer­ence. SAVE recently performed a needed service for the Department of Defense in their continuous quest for methods to reduce costs of defense procurement. This was a very timely and extensive SAVE survey of mem­bers throughout the nation which cited specific examples of DOD pro­curement specifications, requirements and procedures which appeared to be redundant, non-cost effective or obso­lete, w i t h recommendations for changes to reduce costs. These survey recommendations are now being re­viewed. The national voice of SAVE also was heard as part of the testimony given by SAVE members before the U.S. Senate Public Works Committee Hearings in June, 1973, on Value Engi­neering Applications.

NEW IN IT IAT IVES

A current national SAVE project in work is the development and semi­annual publication of a new SAVE document. This is the result of discus­sions with NASA personnel concerning increased Value Engineering effective­ness. This new SAVE document will contain live examples of implemented cost reduction actions resulting from use of the Value Engineering tech­niques including VECPs. Also to be in­cluded will be examples of incorporat­

ed value changes that were not near as cost effective as originally projected, along with the reasons why the antici­pated savings were not achieved. This publication will be circulated to SAVE members, companies, agencies and organizations to serve as a stimulus by example for increased value activity, and to help others avoid pitfalls previ­ously experienced by fellow value practitioners.

Of major interest to current SAVE members and potential members is the study underway at the national level at this time to develop provisions for various membership types and an asso­ciated dues-scale structure. This is being done in recognition of the di­verse backgrounds • and areas of employment among the current and potential SAVE membership. The changes being considered should pro­vide more meaningful membership arrangements, aligned closer to the individual member's interest in SAVE and professional activities.

INCREASING B E N E F I T S

Many of the activities mentioned in this article should vividly demonstrate that the national SAVE organization is constantly aware of the needs of the membership and is guided by these needs in planned undertakings. Hope­fully, existing members and potential members will become increasingly aware of the sincere dedication of the national officers and Board of Direc­tors of SAVE to provide ever increas­ing services and benefits to the mem­bership that makes up the national organization. After all, isn't that the only reason we have a national SAVE organization? To provide service to the membership in the advancement of knowledge and application of, and ed­ucation in, the principles of Value Engineering/Value Analysis. All this activity of service helps to prove that a technical society does not necessarily have to be huge in numbers to be con­sidered successful and influential on a national scale. \T]

Labor unions demand higher wages to meet rising costs. Higher wages in­crease the cost of living. Back come the labor unions demanding higher wages. Obviously, this is not the way to combat inflation; to the contrary.

There is only one solution: Increas­ed productivity per man-hour. In other words, fellow employees, work harder or go down the financial drain!

Has the American workingman got the guts? I believe he has, but I fear it's going to take a disastrous depres­sion to wake him up.

Otto A. Hansen Santa Ana, Calif.

Forty lashes with a wet Candela to your contributor Richard E. Meyers for describing the units of MPa as "mega pascals per square meter"; such inaccuracies are unlikely to ease the transition to The International System of Units (S.I.). As any student of the

system will know, the pascal (or unit of pressure or stress) is simply a name for newton per square meter — force per unit area; thus, the term with units of "mega pascals per square meter" would become mega newton per square meter per square meter (MN.m-4), — which is most certainly not a unit of pressure.

Two further points in Mr. Meyers' article cause me some consternation: What part of Miss America's anatomy does "-D-" refer to, and why should anyone be subjected to arithmetic gymnastics such as "10+3 to 10-2" in any jargon — household or otherwise?

Notwithstanding the above observa­tions, I shall continue to read and en­joy the many fine contributions to PERFORMANCE.

J.H. Matthews The De Havilland Aircraft of Canada, Ltd. Downsview, Ontario

PERFORMANCE 9

Relating Property Management to Profit

-An Approach! by Earl 0. Clark

All professional or trade associa­tions and their members have at least one common, predominant character­istic. When they meet as a group or as individuals, they engage in long, eloquent and persuasive sermons — to the choir. The reason is simple. It is comfortable, refreshing and relaxing to talk to people who share your prob­lems, are seeking the same remedies, and fully understand the complica­tions and aggravations of a particular endeavor.

The most frequent, stringent mes­sage in these sermons revolves about top management. "Top management doesn't know...or care." "You must get top management's attention." "Sell top management." "You must have top management's support," are the echoing clarion calls. They are exactly correct. In large companies, it is fundamental that nothing significant will be done unless there is an interest expressed by top management.

I t is my observation that few property managers have been success­ful in achieving top management atten­tion or, once gained, keeping it over an extended period of time. I f this is the case, the obvious solution to the prob­lem seems to be to turn away from the choir and focus on the object of our attention: top management or the top manager. What insight can we gain?

T H E TOP M A N A G E M E N T PER­

S P E C T I V E

Whimsically, as the typical, defense-contractor top manager peeps over the top of his circled wagons (Figure 1) he is quick to note that he is surrounded.

A second look suggests that the encompassing force may be friendly or partially so. While each of the organi­zational heads are prepared to provide some modicum of comfort, each is prepared to create all kinds of prob­lems for him. Demands on budget, demands on time, poor planning, poor execution, faulty decisions, jurisdic­tional disputes and personnel problems are but a few of the goodies available for him to share. Rapid evaluation tells him these folk may be foes as well as friends.

Looking to the second circle, it becomes crystal clear that there is not a friendly face in the bunch. Each has some peculiar requirement which has been or is to be invoked i f the business is to continue. Each requirement, well meaning and necessary as it may be,

impinges on management prerogatives and affords a place to spend time and money without evident compensation. This short reconnaissance, performed while things are at rest, is enough to make a coward out of a strong man.

Place this scenario in motion and about all the manager can see is a veri­table sea of beady-eyed zealots, each trumpeting his own cause and pro­phesying ultimate doom for the com­pany i f his thing does not get manage­ment attention, management support and f i r s t priority. This situation obviously is more than the manager can cope with, so he has two choices: quit; or place things in some type of rational order. Since his dedication is to orderly, efficient operation of the business and producing a profit, those who offer assistance in these areas will receive first attention.

FIG. 1. A TOP MANAGEMENT PERSPECTIVE

10 PERFORMANCE

SOME G E N E R A L I T I E S

I f we assume that this possibly exaggerated, over-simplified concept is correct, it's time to review the bidding.

Although company assets at cost or depreciated value are invariably signifi­cant entries on the balance sheet, for years the property manager was unable to place this element in proper focus due to his inability to retrieve and dis­play the masses of data necessary to portray the property picture. The advent of the computer has eliminated this constraint. Today's mechanized property systems — especially i f cen­tralized — can readily and quickly pro­duce any kind of property information which may be needed.

So, in today's world, the property manager is usually capable of meeting two of management's criteria: order and efficiency. What seems to be lack­ing is the relationship of property management to profit. I f we can crack that nut, our ticket to the inner circle should be assured. How??? Let's analyze. A compilation and recap of GAO, DOD and other studies reveals the following:

a. Top management of a defense industry is charged with the responsi­bility for profit.

b. All defense industry is organized to include a cost center concept which collects and treats direct and indirect costs.

c. All defense industry organiza­tions budget these costs.

d. The profit manager (top manage­ment) plans for profit and assigns operating budget responsibility to staff and operating managers whom we can call "budget" managers. In keeping with good management, the budget limits are invariably stringent.

e. The primary controls established to assure that "budget" managers in non-process industries perform to operating budget (and thus assure planned profit) are almost invariably:

(1) Labor costs (direct & indirect) (2) Headcount (3) Materials cost (direct & indirect)

or (4) Some combination of the above

f. Without exception, all defense industry organizations create, approve and work to capital budgets oriented to acquisition of assets.

PERFORMANCE

g. In a predominant number of defense industries the capital budget is very carefully scrutinized, analyzed, massaged and shaped prior to approv­al. Top management is very much in­volved.

h. Almost universally, approval for expenditures of the approved capital budget dollars is metriculously just-fied and equally well reviewed on an item by item basis.

i . Now the hooker — in less than five percent of about 1000 cases re­viewed — is there a significant post audit effort to find out i f the original justification Was' valid (government furnished plant equipment furnished on modernization programs except­ed)? In no instance were the charges for care and feeding of the equipment, including cost of possession, passed on to the "budget" managers except as some sort of uncontrollable costs. If you do things differently than suggest­ed above, quit here. However, for those of us who fit into this pattern of operation there is some further analy­sis to be made. I f we are going to re­late to profit, there is no better place to look first than in the area of what things cost.

MATERIALS CAPITAL ASSETS

Cost of Capital 8.0 8.0

Physical Deterioration 5.0 4.0

Obsolescence 10.0 3.0

Maintenance/Calibration 0 3.0

Handling 2.5 2.5

Transportation .5 .5

Physical Inventory .5 .5

Taxes .5 .5

Insurance .25 .25

.Storage .25 .25

Opportunity Loss 6.0 6.0

33.5 28.5

Fiqure 2 COST OF P O S S E S S I O N STATED AS A % OF ACQUIS IT ION COST P E R Y E A R

11

* SOME FACTS

We must recognize that acquisition and installation costs of assets are only openers in the game. In addition to these costs we must bear the cost of possession, which are costs related to having the item on hand. How can we determine these costs? If we use cost of materials or inventory ownership — which has been well developed over the years — as a starting point, we can conservatively estimate these costs for capital assets. (In the case of leased equipment, a lease vs. purchase analy­sis will provide comparable data). One such estimate is shown in Figure 2. Al­though some costs will vary slightly,

ACQUISITION (SUNK) COSTS

TIME

I B H I A C C O U N T I N G COSTS

P H Y S I C A L COSTS

I M M I I I I T O T A L COST OF POSSESSION (A + B)

Figure 3 ASSET COST HISTORY

depending on company environment, it appears safe to say that capital assets cost us at least twenty percent of their acquisition value each year we possess them. In order to preclude argument, i f these numbers don't suit us we can use our own. The point is that these costs are real and exist even though the book value of the asset has been depreciated to zero. Another approach to reaching satisfactory figures to fi t our environment may be to examine the typical cost history of an asset shown in Figure 3. Physical costs re­late to maintenance labor and materi­als, utility usage, square foot costs of real estate and other breakdowns we may choose. Accounting costs relate

to depreciation cost of capital, obso­lescence and other "book" costs which are available or can be calculated. Using proper indices, these curves fit all assets.

THE N E X T S T E P

To this point, we have established several pertinent points in the scheme of things: the "budget" manager's lack of involvement after acquisition of assets; and the magnitude and true cost of assets. The next step is to look at the three "M's" of business money, men and machines. This leads to another analysis. In the defense busi­ness today, the odds are good that we will find a situation like that shown in

12 PERFORMANCE

Figure 4. I f this picture fits, we may be looking at the pot at the end of the rainbow. Simply put our company indices on the curves and bend the property curve to fit the trend of the others. Calculate the dollars involved in excessive ownership or possession cost. I f ours is a typical situation, we will find that these excessive costs are as high as thirty percent of our com­pany's operating income. These dollars also can be converted into points of overhead or considered as direct input to profit for presentation purposes. I f the numbers are significant, we will get management attention.

M M PROPERTY IN S

SALES IN S

i POPULATION IN HEAD COUNT

THE OBVIOUS R O A D B L O C K S

The obvious roadblocks include things like, "We gotta keep all of that stuff around for the next big one (con­tract)"; "We need it for...capability... emergencies...etc."; "We gotta keep it to satisfy ...the VP...the manager...the experts...whoever says they need i t " ; or, "They will never release it...declare it excess...get rid of it...etc." Then there's the, " I t will cost us money to get rid of i t " ; "It's paid for"; "Re­placement will cost X dollars," ad infinitum. In the cold light of day, most of these arguments are emotion­al. Some have validity. To sift wheat from chaff, further study may be necessary. Salient points of attack are, "When do we honestly expect the next big one (contract)?" Long-range plans or direct contact with top manage­ment can provide answers. I f the big one is several years down the road, we

have a cost trade-off of continued pos­session costs versus acquisition costs to make at an appropriate time. Other questions evolve around what is the nature of the next big one? Is it new to our product mix? More advanced? More sophisticated? A major departure from what we have done? Next, we will want to review the track record for asset acquisitions on receipt of the last big one. How much of our existing stuff did we use? How much did we buy? Still another angle suggests that assets be age grouped to forecast items or areas where assets will soon be re­placed or need to be replaced and

should not be retained. Once started down this line of thought, other opportunities will arise as a result of our particular operations or environ­ments. In most instances, a strong case can be made to realize reduced owner­ship or possession costs to the com­pany's benefit.

IMPLEMENTATION

The results of our work to date brings up the final question of how to implement a program of reduced costs in the property area. The most effec­tive of many ways available is to intro­duce property management into the "budget" manager's world of opera­tion. Make the "budget" manager re­sponsible and accountable for post acquisition costs of his equipment — this applies to office areas as well as the factory. Specifically, charge him for costs of ownership or possession

and include these dollars in the budget he manages. I f there is a need to retain assets for capability, charge these costs to a capability pool so that the impact can be periodically measured. Finally, give the "budget" manager the prerog­ative to freely change his mix of men, materials and machines to optimize his operation. Reward him for taking ad­vantage of the opportunities this arrangement provides. I f it can be done, and experience says it can, this system w i l l destroy the pack-rat syndrome and provide a continuing beneficial relationship of property management to profit. \Y\

EARL 0 . CLARK is the vice-president, Central Region, NPMA. His background includes over thirty years of government and industry experi­ence in the areas of operations, facili­ties, procurement, contract and prop­erty management. Educational qualifi­cations include graduation from the USAFIT Industrial Management School and the BBA and MBA degrees from North Texas State University. He is a prolific author, speaker and educa­tor in the field of general management. His professional associations include NPMA, SAVE and AIPE.

TIME

(Suggest slotting about 1965)

Figu re 4 P R O P E R T Y , SALES A N D P O P U L A T I O N TRENDS

PERFORMANCE 13

"Suggestion System VICE PRESIDENT

REVOLUTION'

I share the opinion expressed by many that a company's economic well-being, often referred to as its competi­tive position, poses a problem which is in no manner unique to any organiza­t i o n . However, the acceptance of responsibility to improve one's compet­itive position is often thought to be someone else's job: "Not mine."

Because of their assigned and regi­mented functional responsibilities, i.e., engineering, purchasing, manufactur­ing, finance, personnel, marketing, etc., the consensus is that individual job responsibilities are of first order of importance, and that begets organiza­tional myopia.

Conceptually, however, the Sugges­t ion System administrator is the organization's imagineering specialist, manager of improvement ideas - that is, he is the vice president in Charge of Revolution to help his organization improve its competitive position through the collective knowledge of all employees. While others are busy handling the daily crisis and others are busy defending yesterday, the SS administrator is working on tomorrow. Hence, the Suggestion System, a cure for organizational myopia.

Different companies have different Suggestion System policies, but it is better to have no Suggestion System than to have one that is badly run. Suggestion Systems primarily must be sold as employee motivators and, secondly, as a source of ideas that con­tribute to performance improvement and cost effectiveness. Professor Frederick Herzberg's motivation/ hygiene theory offers a lending hand

to suggestion work. Herzberg's theory of the motivational factors f i t the need for employee creativity, and the hygiene factors satisfy the need for fair treatment. Therefore, the appro­priate -incentive (motivators and hygiene) must be present in order that organizations may be able to achieve the desired job attitudes and perform­ance from their employees. The Em­ployee Suggestion System, a participa­tive management scheme, provides employees with opportunity to realize both sets of their needs, and that is why successful organizations strongly support their Suggestion Systems.

Here is what business does to accomplish its objectives: Marketing strategy to make money, and cost-cutting strategy to save money. With a simple analogy we find that an em­ployee who participates in the Sugges­tion Program makes money for himself and saves money for his organization, and the analogy ends there. But, strategy-wise, we find that Suggestion System is run primarily as a cost-cutting effort with other objectives subordinated to this one.

There are as many cost-cutting pro­grams as there are companies, but they conventionally take two approaches; namely, austerity program and formal cost improvement program. And Sug­gestion Programs are promoted at both periods (and sometimes getting the axe in the case of the former). I would like to first briefly review the practice of management in these two approaches, and will then present a better system that can help management to make money while saving money.

It is common knowledge that when an industry enjoys high selling prices competition is attracted to the market­place, forcing prices down. But then the business within the industry reacts to the competitive environment with an austerity program in a form of crash program and belt-tightening pro­gram. Some common tools of financial austerity are a freeze on hiring, reduc­tion of overtime, and stand-still bud­gets.

But the measure taken by top man­agement most commonly is the arbi­trary edict of cutting all costs by an equivalent amount, a wholesale slash­ing of expenses by ten percent. Re­adjustments is the excuse rather than the reason given by most for such a move. At best, such cost-cutting effort is evidence of a failure of a good com­pany's long-range plans; and at worst, it is indicative of panic management. You see, not all that glitters is gold, and nor are all costs bad. Reducing all costs by the same percentage is like punishing all crimes with the same sen­tence.

The better-managed companies, however, have formal cost improve­ment programs with top management support and line management commit­ment. And, according to Herbert E. Geissler, the most common formal cost improvement methods are build­ing cost consciousness into line man­agement, having specialized staff units, project teams and reorganization.

Attempts to cut costs are certainly proper and necessary management efforts, as weight watchers and waste watchers stay lean. The formal cost

14 PERFORMANCE

Administrator, the in CHARGE of

by Abate Kassa

improvement program (a planned cost reduction program) is better than no program at all, and far better than the austerity program. Formal cost im­provement program does help to save money and stay lean, thus preventing the necessity for an austerity program.

Austerity programs result in poor employee attitude, poor quality work and lower productivity. And the main problem with arbitrary cuts is their being arbitrary. The indiscriminate cuts without due regard to contribu­tions make employees feel insecure; yet it is people, not austerity, that make money. I submit that the answer to a meaningful performance improve­ment and cost effectiveness lies in a new strategy (practiced by some suc­cessful companies), namely, the Value Improvement Program.

Success in marketing a product or service depends mainly upon two fac­tors, viz., performance equality or

leadership, and cost equality or leader­ship when compared at any time with the competition. Therefore, it is the goal of every leading company's Value Improvement Program to deliver the highest quality of service or perform­ance at the lowest overall cost and thereby help the organization achieve value leadership.

By contrast, cost reduction pro­grams cannot effectively prevent or remedy cost carelessness. Moreover, they tend to be negative and anti­social; yet sound management requires that due consideration be given to human characteristics and behavior in the design of methods for their use. On the other hand, the search for bet­ter value, not necessarily lower cost, has better acceptability than the crash diet of every now and then designed to fight expensitis. Once people appreci­ate the concept of economic value, there exists the chance that they will

carry a more positive attitude toward economies. The value approach can serve as a long-term preventive medi­cine as it can be made a way of life by weaving it into the fabric of business.

I further submit that the manage­ment of the Value Program can fight the paralysis of analysis by integrating the disciplines of human-factors engi­neering, industrial engineering, value engineering; hence, the acronym HIVE (see diagram). HIVE, an overall man­agement doctrine, is a master plan to achieve performance improvement and cost effectiveness.

In spite of the fact that precise defi­nition is not a simple task, and not­withstanding the trouble with many one-sentence definitions, I will use the following for purposes of my illustra­tion. Human-factors engineering may be defined as, "The application of social, biological and psychological science or knowledge from other sources to the design, operation and maintenance of man-machine systems and system components." For my pur­pose, human-factors engineering also includes the Employee Suggestion System, zero defects program, job en­largement program, job enrichment program and other motivational ac­tivities.

According to the American Insti­tute of Industrial Engineers, industrial engineering is concerned with the de­sign, improvement and installation of integrated systems of men, materials and equipment; drawing upon special­ized knowledge and skill in the mathe­matical, physical and social sciences together with the principles and

ABATE KASSA, a Certified Value Specialist, heads his own management counseling and education f i rm, ACE Consultants. Abate introduced the Va lue I m p r o v e m e n t Program at Ethiopian Airlines and also revitalized their Employee Suggestion System. A lecturer on Value Analysis and Sugges­tion Systems, Abate is the immediate past president of the Greater New York Chapter of the National Associa­tion of Suggestion Systems. He is a member of the Society of American Value Engineers and resides in Hollis, New York.

><s*i

PERFORMANCE 15

HUMAN-INDUSTRIAL-VALUE-ENGINEERING

H.I.V.E A MASTER PLAN TO ACHIEVE

PERFORMANCE IMPROVEMENT AND COST-EFFECTIVENESS.

PROFIT IMPROVEMENT

COST REDUCTION

OPERATIONS IMPROVEMENT

PRODUCTIVITY IMPROVEMENT

RESOURCE APPLICATION

PRODUCT EXCELLENCE

methods of engineering analysis and design, to specify, predict and evaluate the results to be obtained from such systems.

Value engineering is an organized, creative discipline directed at analyz­ing the function of a product or ser-

MPROVEMENT PROGRAM vice with the purpose of achieving the required function at the lowest overall cost, consistent with requirements for performance, including reliability, maintainability and delivery.

Apparently, 'then, the unifying theme of HIVE so well integrates the

disciplines of Human-Industrial-Value-Engineering that the whole becomes greater than its parts.

With a Value Improvement Program set up on such integrated approach of a staff function to be known by some such name as Corporate Value Ser-

16 PERFORMANCE

vices, I believe better assurances exist for continued employee creativity and management innovation, thus enhanc­ing the possibilities for achieving both individual and organizational needs more effectively.

Some companies have Suggestion Systems in name only. But a Sugges­tion System cannot administer itself. And considering the industry average return on investment of four to one, a full-time Suggestion System admini­strator ought to be a must, especially in firms with more than 2000 eligible employees (rule of thumb). I f for some reason or other one decides to have a part-time SS administrator, sug­gestion work is best tied to industrial engineering or value engineering. One measure of the SS administrator's work are the tools he employs to re­place the "seat-of-the-pants" approach used by employees to produce their

IF T H E S H O E F ITS. . . Continued from page 5

Certain retailers and wholesalers have taken advantage of the energy shortage to practice price-gouging on the consumer, particularly in some gasoline and diesel service stations. Farmers, canners and distributors of foods use the energy shortage as an excuse to "charge what the traffic will bear," and add to the inflationary spiral which could strangle our economy.

American automobile manufactur­ers are still trying to force the large gas-guzzlers on the populace; cars which can accelerate to sixty miles per hour in seconds, and which are capable of reaching speeds in excess of 120 miles per hour on the "straightaway." The lack of foresight, common sense and business acumen on the part of the executives of our automobile industry is unbelievable, especially in the face of booming sales of small, low power, foreign imports.

We can be thankful that the numbers of people and companies who will not set aside selfish interests for the common good of the Nation are very small. We are st'ill a Nation of "can-do" spirit; of reliance on the

award-winning ideas. The SSA's know-how or no-how in value analysis/engi­neering, methods improvement and work simplification marks the differ­ence between success and failure in his suggestion work. Therefore, employee training (including the SSA himself) in these disciplines is essential for sustain­ed employee creativity.

The greatest wasted asset in any organization is MAN (of course includ­ing women). There.'is great need for judicious use of this hidden asset. For management to learn through personal experience is expensive. But, when you receive suggestions from employ­ees, you will be better than your f if­teen, ten, or five years' experience. Moreover, the Employee Suggestion System gives people the opportunity to acquire the great pleasure of dis­covery — to create new ideas. But, i f for instance, your Suggestion System

ultimate good of our country and its cause. We shall overcome here, as in every challenge in our history. How­ever, the danger which can delay our ultimate victory comes from within, and must be removed by the majority — working together to keep our Nation great. A National commitment must be made to support our Presi­dent, as he leads us out of the prob­lems facing us today.

The danger to our Nation does not come from forces from without, but from the self-serving or overly idealis­tic minority within, which is attempt­ing to destroy the spirit of our Nation. Abraham Lincoln, viewing this coun­try today might say, "This government must be preserved in spite of the acts of any man or set of men. Nowhere in the world is presented a government of so much liberty and equality. To the humblest and poorest among us are held the highest privileges and posi­tions. What constitutes the bulwark of our liberty and independence? It is not our frowning battlements or bristling seacoast, our Army and Navy. These are not our reliance against tyranny. Our reliance is in the love of liberty which God has planted in us. Our defense is in the spirit which prizes

administration responsibility is in a personnel function that is not people-oriented, naturally the employees will be deprived of the needed motivation for their creative abilities, and of course, then, your effectiveness as a vice president in Charge of Revolution is also in doubt. If such be your case, maybe you would like to consider either an evolutionary or revolutionary movement toward the integrative organizational strategy of HIVE to re­locate your Suggestion System in a Corporate Value Services function.

Such metamorphosis of your Sug­gestion System may even open up a better career path for yourself. Be­sides, is it not about time for Sugges­t ion System to practice what it preaches: "Thou shalt not worship the methods nor designs nor layouts thou useth, for verily there are better ways and thou must seek them out!"?|~p]

liberty as the heritage of all men, in all lands everywhere. Destroy this spirit and you have planted the seeds of despotism at your own doors.

"At what point shall we expect the approach of danger? By what means shall we fortify against it? Shall we expect some transatlantic giant to step the ocean and crush us at a blow? Never! All the armies of Europe, Asia and Africa combined could not by force take a drink from the Ohio or make a track on the Blue Ridge. At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up among us. It cannot come from abroad. If destruction be our lot, we ourselves must be its author and its finisher. As a Nation of free men, we must live through all time, ... or die by suicide."

The words above, attributed to the Great Emancipator, are presented here with the permission of Walt Disney World Company, Lake Buena Vista, Florida, where I became enthralled while listening to Mr. Lincoln at the exhibit, "Hall of Presidents." The simplicity of his message is as appli­cable to the United States of the mid-1970s as it was during his own life­time. | T |

PERFORMANCE 17

by John W. Shaffer

raijjPLrrtFS

Papers on Value Engineering in general always seem to be prepared with the message, "This is what I (we or they) am doing, why don't you also do this?" This one will be slightly dif­ferent. "This is what I (we or they) am not doing. Why not?"

Value Engineering and the compu­ter have strikingly similar histories over the past twenty-odd years. As I reflect on this thought, I think I could write a paper just covering this aspect. Both had significant beginnings in the late Forties and early Fifties, slowly took hold in the late Fifties, exploded in the Sixties. Both were adopted by many companies because they were the " in thing" to have. Both received only lip service from all but a few en­lightened members of management. The unenlightened derived much glee each time a toe was stubbed. Both had organizational difficulties — where to put them. Both ended up, in many cases, with a section under the finan­cial departments and a section in Re­search and Engineering. In both there were many instances where lack of top management support relegated them to menial tasks which had merely been done another way before their advent.

DYNAMIC I N F L U E N C E S

Then the differences begin to take

shape. The computer could stay just as i t is today and be forever a dynamic influence on society and business. Value Engineering is not so fortunate. I f we stay as we are today, we'll fade away in an embarrassingly short period of time. Value Engineering's critics are very much in evidence, while the com­puter's critics are buried deep in the woodwork. The most serious threat to the computer, unless the energy crisis gets pretty drastic, are those who con­tinue to do things the way they always have, and those types are getting pretty scarce in today's austere envi­ronment.

Value Engineers modestly admit that they are superbly innovative, to­tally positive with respect to attitude, and completely in control of habits. Value Engineering has always been a foe of status quo. We can't stand to see things continue today (and tomor­row) using yesterday's procedures, i f there is a better way. The computer is a magnificent machine specifically de­signed to expand mans' capability be­yond belief. Why, then, are Value Engineering and the computer not speaking?

V A L U E APPLICATIONS

While I can find no literature

describing great accomplishments from the application of the techniques of Value Engineering to computer use, there is more than abundant evidence that computer people are striving to reduce costs. Most cost reductions are depicted in the area of equipment de­sign, manufacturing and selection. Hardware costs have been declining steadily and are expected to continue to do so. One source expects computer prices to decrease by the 1980s to 1/100th that of 1968. However, while hardware costs are decreasing, the to­tal cost of computers — hardware, software, operation, maintenance and the like — continues to rise.

A major computer problem is ex­cess capacity. Current hardware capa­city far exceeds the ability to utilize the hardware fully. The computer peo­ple cannot effectively generate busi­ness for themselves. The user (and po­tential user) must participate in the planning for efficient utilization of the equipment. Some large companies are selling surplus computer time to re­lieve the burden of excess capacity. This doesn't reflect Value Engineering necessarily, but could be the result of a value study. Perhaps a better way to say it is that a value study, i f one were conducted, could well reach that con­clusion.

20 PERFORMANCE

101 IF " SI ' r F L i C . > • supeivisoi of Value Engineering in the Rnseaich and Engineering Department at General Dynamics Corpoiation, Convan Aerospace Division, Fort Worth Opetation He was supervisor in Mateiials and Processes and in Wing Design Gioup at Fort Woith pnorto his piesent assignment. He received his BSME degiee from the Univeisity of Wisconsin this year. He is a registered Professional Engineer and the curient treasure! of the Dallas/Fort Worth chaptei of S A V E

IMPROVED E F F E C T I V E N E S S

The closest I have found to a report of the application of value techniques in connection with the computer is one entitled, "Value Received Analy­sis." It is described as a thorough examination of all aspects of data pro­cessing as related to its profitability or return on investment. Try as I might, I cannot describe this as an outgrowth of Value Engineering. Value Engineer­ing techniques, however, could be applied to the phases of VRA to make it even more effective.

Most companies conducting value workshop training classes can count a respectable number of computer people among their graduates. Cost savings/avoidances have been docu­mented from both the scientific lab and from the business data sections. Value Engineers reflect, however, that they hardly know where the labs are located nor how they operate.

COMPUTER APPLICATIONS

I believe I could leave this section out and not be too far wrong. Most uses I have found are those created by someone else but of benefit to Value Engineering. Included are cost data on current in-production hardware, and maintenance data originated by Relia­

bility and Maintainability. Value Engi­neering's primary use of the computer is beginning in widely scattered appli­cations, one of which is a computeriz­ed system for reporting cost reduc­tion/avoidance. Those Value Engineers with time-sharing terminals and desk computers are trying to become famil­iar with the operation of them. Value Engineering is beginning - but what a shame that most of us have to be among the last to recognize the com­puter's talents!

T H E R E F I T S

Literature describes a condition, prevalent in companies converting to computer operation, which I have little difficulty in applying to Value Engineering. That condition, in this case, is so true that it will make every­one mad! Ninety-eight percent of all Value Engineers are "warmed over" something. With the exception of Mr. Miles and a half-dozen others, every Value Engineer has been a Value Engi­neer for less than fourteen years. Be­fore that, he was a design engineer, a purchasing agent, an industrial engi­neer, an administrative assistant, a tool engineer or something equally gross. The overwhelming majority of the re­fits were well over 40 years old; in, or approaching, middle management. They viewed the advent of the compu­

ter as a threat to their importance, i f not their very existence. Since their movement into Value Engineering generally coincided with the compu­ter's birth and adolescence, they had no experience with it in their prior assignment. It didn't exist! Since com­puter use was not essential for their work, they ignored i t , and secretly hoped it would go away. The Value Engineers were too busy teaching others, in seminars, that habits and atti­tudes, and the control thereof, are too essential for superior Value Engineer­ing activity to take the time to help the upstart computer come to life.

EXTEND CAPABIL IT IES

One of Value Engineering's basic tenets is, " I f it is not essential for the use function, avoid i t . " Maybe the times have changed. Maybe essentiality has slipped up on us!

Value Engineers basically are moti­vation oriented, but we are not cheer­leaders. We are doers. Austerity has further thinned a very thin line of Value Engineers. To remain doers, we must extend our capabilities. That which used to be done by people must be accomplished by other means. The whole tone of business has changed in a short five years. We used to be look­ed upon as those people — those "nuts" — who were totally preoccu-

PERFORMANCE 21

pied with costs. Current trends tend to make us look like the horse who pull­ed the heavy load to the top of the hill, topped the crest, and then got run over on the way down the other side. Everyone is now cost oriented and, of course, claiming that he always has been!

Everyone now feels as though cost knowledge should have been readily available long ago; and "What have you been doing that kept you from making it available in a form that I could use?" Catching up in a big hurry, while short-handed, is the di­lemma facing the operating Value Engineer. Maybe the answer is in the computer.

Let's explore the basics underlying computer utilization to see whether there are grounds for a closer relation­ship.

COMPUTER APPLICATIONS

Computers cover three broad cate­gories of use, only two of which are of interest to Value Engineers:

1. S c i e n t i f i c (mathematical) systems. 2. Information storage and retrieval systems. 3. Control systems.

The first two are usable by Value Engineering; the third, physical con­trol of some process or activity, is not of interest in this paper.

SCIENTIF IC SYSTEMS

At first blush, scientific systems seem far more complicated than Value Engineering needs. We have been able to function for years with inputs from estimators, "dime store" slide rules and desk calculators. We would steer clear of statistical analysis, modeling,

linear programming, regression analysis and the like. As mentioned earlier, however, drastic measures are called for in today's environment, and the working Value Engineer who expects to be a force in that environment had better consider the scientific comput­ing system as his abettor. Operations research can be expected to f i l l the void left by the Value Engineer willing to stick to the "old tried and true" methods, or one who has convinced himself that he can be indefinitely a father-figure for the line people who are striving to hold the line on hard­ware costs.

INFORMATION R E T R I E V A L SYSTEMS

Information storage and retrieval systems are probably those most used to date by Value Engineering, primari­ly because they are in many cases available from someone else's program. Materials department purchased parts and raw material cost data and indus­t r i a l engineering factory man-hour data runs normally are available with, at most, some reprogramming neces­sary to make the data findable. Those data are most important since they form the basis for cost projections by application of the scientific systems.

CONCLUSIONS

Value Engineering has been servic­ing/supporting a relatively small num­ber of people in our organizations. A review of the study file index will re­veal a relatively few names entered over and over. We have wondered for some time what would happen i f everyone were as cost/value conscious as our few friends. Now we are begin­ning to find out - the hard way. Austerity and the resulting profit

squeeze have centered more attention on cost of product than ever before. In the meantime, that same- austerity has seriously thinned our ranks. In order to provide more and more with less and less, each of us must grow addi­tional hands, or we must find a way for the two we inherited to do more work. The computer each of us has ignored as long as possible stands as one way, maybe the only way, to do our jobs.

No one knows better where to find the reducible costs of computer opera­tion than the computer people. That statement, altered slightly by substitu­tion of such words as design engineer, purchasing agent, shipping agent, con­tract specialist or you name it , is true in the fields of endeavor in which you and I work. We do not know each of those people's jobs, but we do possess a certain know-how and a set of tech­niques which can be applied regardless of the field of effort. Then, why not the computer!?

May I suggest that each of you Value Engineers set out to make the computer your ally. There are proba­bly routine computer courses being offered in your company or at your local schools. I f not, you who have spent your Value Engineering lives organizing and teaching classes can cause it to happen. Computer people are as anxious to spread the word on their activities as you are on yours. I f you have access to time-sharing ter­minals or even a desk computer, find a f r iend who won't broadcast your ignorance to introduce you.

While you are at i t , find out why there is no literature on application of Value Engineering to computer opera­tions. I t can't hurt, and it might do you both worlds of good.[jD

22 PERFORMANCE

"VALUE ENGINEERING AT

JAPAN STEELWORKS, HIROSHIMA"

B y T a k e h i k o T a n a k a

ed the 10th National Conference of S A V E in Dallas, Texas. He also pre­sented a paper, "Value Engineering Promotion and its Motivation at Japan Steel Works, Hiroshima Plant," at the 12th National SAVE Conference in Miami Beach in 1972.

Mr. Tanaka is the executive secre­tary of the Society of Japanese Value Engineers (SJVE), and is an elector of the Science Council of Japan (Nippon Gakujutsu Kaigi) . He presented "Manuals of Value Engineering Promo­tion" at the 3rd Conference of the SJVE.

TAKEHIKO TANAKA is the Value Engineering specialist and assistant to the manager of the Production Control Department at the Hiroshima Plant of the Japan Steel Works, Ltd. He also is an assistant professor at both the Hiroshima Denki Institute of Technol­ogy and the Hiroshima Junior College of Automotive Engineering. He is a graduate of the Mechanical Engineer­ing Department of Kanazawa Techni­cal College.

He was the group leader of "Cor­porate Cost Reduction Programs," U.S. Tour Group in 1970, and attend-

The line of products at the Hiroshima plant of the Japan Steel Works covers a wide range, consisting of plastics materials manufacturing equipment, various kinds of plastics processing machinery (particularly medium and large-sized injection molding machines), various kinds of machinery for the chemical equipment industry, paper machines, etc. The plant comes under the category of the so-called manufacturer of variegated products in small quantities. There­fore , unl ike the mass-production system, it is generally believed difficult to expect much of a result from Value Engineering.

However, with a firm conviction that even in a plant where variegated products in small quantities are manu­factured, considerable cost reduction of the essential production items can be realized by accumulation of novel results of cost reduction - i f "Value Engineering for the pursuance of func­tions" is properly adopted so as to in­clude even piece parts - the general manager of the Hiroshima plant, on his own initiative, introduced Value Engi­neering into the plant in 1967. From the standpoint that it is most effica­cious to realize cost reduction by applying VE at the design stage of the

products, a target was set to train all the design personnel as Value Engi­neers, and to bring about a revolution in cost consciousness among the de­signers.

V A L U E PROMOTION

At the Hiroshima plant, VE promo­tion was centered on the Design De­partment. VE workshop-seminars were held nine times, and on-the-job train­ing courses were conducted nine times. As many as 134 task force project teams were organized, which showed great activities. We now have 306 Value Engineers. During the three

PERFORMANCE 23

years prior to 1972, the total amount of cost reduction realized on the essen¬t i a l product ion items reached $200,000, in addition to which many intangible merits were gained.

Regarding the above status of VE promotion, a paper entitled "Value Engineering Promotion and its Motiva­tion at Japan Steel Works, Hiroshima Plant," was presented by this writer at the 12th National SAVE Conference held in Miami Beach, Florida, in June, 1972, and appears in detail in the SAVE Conference Proceedings, 1972.

This paper indicates some salient points of our VE promotion since the last report was made at the 1972 SAVE Conference, broken down as follows:

The total amount of the annual cost reduction by adopting VE propo­sals.

The status of educational measures for, and implementation of, develop­ment and establishment of VE tech­niques.

A partial report on the all-out cost reduction plan by integration of various management techniques such as Zero Defects, Quality Control, In­dustrial Engineering, Value Engineer­ing, etc., and the engineering tech­niques of workers personally gained by long experience.

Other items.

T O T A L ANNUAL V E COST REDUCTION

During one year, 1972, the total amount of cost reduction realized by adopting VE proposals during the de¬sign stage was approximately S200,000. This amount is equal to the total amount of the past three years, and indicates steady improvement in results obtained from VE promotion.

A breakdown of the above reveals that various plastics processing machinery and deck cranes for ships comprise approximately eighty per­cent. By properly applying VE tech­niques, even to the level of sub­assemblies and parts, phenomenal success was achieved, particularly in the case of in jec t ion molding machines, resulting in the manufacture and sale of a new model machine which permitted considerable reduc­tion of cost. In the case of the deck crane, the margin of profit had been extremely small, and it became an issue whether to continue or discontin­ue its production. However, thanks to the great efforts exerted on VE by all

concerned, success has been attained to secure sufficient profit as i f a new competitive product had been intro­duced.

STATUS OF EDUCATION FOR AND

IMPLEMENTATION OF V E TECHNIQUES

Along with the VE education in the Designing Department, it has been planned to hold an educational pro­gram for improvement in operation of the first-line supervisors on the pro­duction line. The aim is to establish a system whereby the effect of integrat­ed cost reduction will be fully display­ed by the VE effort on the part of the Designing Department and the effort to improve operation methods on the part of the Production Department, the relation of which can be likened to the two wheels of a cart.

*Number of personnel to be edu­cated — 250 persons.

*Lengfh of program — From Sept., 1972 to Sept., 1973.

*Method of education: Number of hours — seventy hours (all day long). Problems existing in the Produc­tion Department will be taken up and improvement methods will be pursued by task force teams by applying Industrial Engineering techniques. Number of participants in one seminar — 7 persons x 6 teams = 42 persons.

On the occasion of the visit to Japan in the autumn of 1972 of Mr. Lawrence D. Miles, the founder of Value Engineering, an invitation was extended to Mr. Miles to visit our Hiroshima plant and a commemorative lecture was held on October 31.

The meeting was attended by the general manager and management staff concerned, all Value Engineers and management staff of sub-contractors. Renewed determination was made to revert once again to the original view­point of VE and to follow up the basic steps and techniques. Implementation of re-education plan for Value Engi­neers was undertaken with the follow­ing objectives:

Improvement in quality of Value Engineers. Cultivation of capacity and spirit of

cooperation so that the Value Engi­neers can attend to their daily task and still take an active part in VE.

Deeper understanding regarding application of VE techniques at the development stage of new products.

Establishment of systems whereby profits can be increased in time of favorable market conditions, profits can be realized even in time of depres­sion, and profits can be realized even from the initial unit of new products, for which Value Engineers have to act as a driving force.

*Number of personnel to be re­educated — 300 persons.

*Length of program — From March to June, 1973.

*Number of hours and personnel per group — 3 hours x 3 days = 9 hours. 7 persons x 4 teams = 28 per­sons. ^

The method of educational review for the Value Engineers was as fol­lows:

First day — Follow-up of basic steps of VE techniques.

Second day — Training to draw up definition of functions and function diagrams. Training to develop original­ity. Training to develop creative think­ing.

Third day — Training of application of VE techniques at the development stage of new products. Emphasizing the development of alternatives in VE project studies. Holding tests as finali-zation of the re-education program.

Resumption of VE workshop seminars has been accomplished. The following is the schedule to hold the 10th workshop seminars for the newly employed engineers:

*Personnel to attend the seminars — Engineers assigned to the Designing, Planning, Purchasing and Production departments.

*Number of teams and personnel — 7 persons x 4 teams = 28 persons.

*Length of program — From May -to June, 1973, 22 days (all day long).

PRESENTATION OF V E CASE STUDIES

In October, 1972, on the occasion of the 5th National Conference of the Society of Japanese Value Engineers (SJVE), two case studies were present­ed which attracted the attention of those present. The titles of the papers, and the names of the authors, both of whom are employees of Japan Steel Works, are as follows:

"Cost Reduction of Large-sized, Ordermade Products," Kenji Hirata, Machine Designing Department.

24 PERFORMANCE

" V E Techniques of Purchasing Items," Hideo Wakashima, Supply Sec­tion.

COOPERATION FOR V E

EDUCATIONAL M A T E R I A L S

We rendered positive cooperation to the Japan Productivity Center in preparing slides for VE educational programs, with the cooperation of the Society of Japanese Value Engineers.

The slides were in three series, as follows:

No. 1 A first step in VE No. 2 VE techniques No. 3 From the induction till the establishment of VE No. 3 was a full depiction of the

induction and promotion of VE by the general manager of the Hiroshima plant of Japan Steel Works, recogniz­ing the necessity thereof and complet­ing the VE basic promotion plan. It

then described in detail the circum­stances leading to the aforementioned successful results obtained in cost re­duction and the present status of VE at the plant.

CONCLUSION

The foregoing is the present status and the future plans of our VE promo­tion program since the last report made at the SAVE Conference in 1972. The actual cost reduction of $200,000 realized during the past year by adoption of VE proposals of the Design Department may not neces­sarily be large, but it far exceeds the average annual amount realized during the past three years. It can therefore be stated that the VE investment is gradually but increasingly paying divi­dends. Even though VE had been inducted, i f vigorous promotion had not been made, it would not have been

possible to expect revolution in cost consciousness among the employees of the Design Department, much less to realize the cost reduction and the in­crease of profits obtained today.

At the Hiroshima plant, with the general manager forming the nucleus, management personnel at all levels and all Value Engineers are making united efforts in steadily putting into practice various alternatives for the develop­ment and establishment of VE tech­niques, the above-mentioned actual achievements of VE serving as a step­ping-stone. As the next step, it is our plan to tackle the problem positively to formulate and implement a program of consolidated cost reduction of the plant by integration of the various management techniques and the engi­neering techniques of workers obtain­ed through long experience in their jobs.[p]

Book Review

EFFECTIVE MANAGEMENT

OF COMPUTER SOFTWARE by Warren J . Ridge and Leann E. Johnson (Dow Jones — Irwin, Home wood. III.)

The rapidly spiraling costs of computer software during the past several years has forced many companies to under­take an in-depth analysis of past practices and to develop new and less costly methods of operation. In this book, the authors have advocated the use of Value Engineering tech­niques to reduce computer software costs. Warren Ridge, co-author, is the originator of "Value Analysis of Manage­ment Practices (VAMP)," which was developed as a long-needed set of techniques to analyze, evaluate and improve organizations and the systems used by each organization. For perhaps the first time, VAMP applied Value Engineer­ing/Analysis techniques to areas other than hardware.

Until now, however, the Value techniques had not been effectively applied to computer software problems. Guide­lines for an organized and analytical approach to the prob­lem of computer software were not available. This book does provide these guidelines. It resulted from two years of intensive Value Engineering studies in the area of computer software.

Perhaps the greatest value of this book is that it discusses an area in which most engineers and cost technologists have feared to tread and explains, in great detail, the simplicity of computer software systems for the practicing Value En­gineer. Various chapters explain the evolution and cost fac­tors relating to software, how the Value techniques are applied to software cost reduction, estimating procedures for computer software, quality assurance, documentation and cost targeting, among other themes.

Value practitioners, computer engineers, managers of computer services and administrators of organizations which utilize computer systems will greatly benefit from this well-written book. Robert H. Rossman

Mr. Idea says . . .

w—^ [STOP

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

+ Powerful posters (4 colors). it Durable and attractive cabinets. ic Carefully worded suggestion forms. if Effective employee booklets.

Unique Award Certificates and other incentives.

P H O N E : 3 1 2 - 2 3 2 - 7 2 1 3 I P H O N E : 3

P. 0. Box 134P —Geneva, III. 60134

PERFORMANCE 25

C/SCSC - What Results? LT.COL. LEONARD S. MARRELLA is chief of the Cost Performance Re­porting Division in the United States Army Materiel Command's Require­ments and Procurement Directorate. He was graduated from the U.S. Mili­tary Academy at West Point in 1957 with a BS in Military Engineering; awarded a MA in Finance and Manage¬m e n t f r o m the University of Oklahoma in 1965, and was granted the Doctor of Business Administration Degree in Financial Management from George Washington University in 1973. As chief of AMC's Cost Per­formance Reporting Division, Marrella is responsible for implementing and re­viewing contractors' management plan­ning and control systems on major weapons acquisition programs, and currently serves as chairman of a Joint Logistics Commanders' panel to de­velop a tri-service joint surveillance guide for cost and schedule control activities for major defense systems. (U.S. Army photo)

by Lt. Col. Leonard S. Marrella

It is now over five years since the Cost/Schedule Control Systems Criteria and the associated acronym C/SCSC first appeared in the defense contracting and project management world. Since then the criteria have been heartily endorsed by many pro­ject managers and Defense contractors — but they have been ignored, received skeptically or maligneg by others. Much has been said about C/SCSC, but until now there have been no compre­hensive assessments of the effective­ness of C/SCSC. What have we learned about C/SCSC and where are we now? In 1972, a year-long study was con­ducted by the author to meet part of his requirement for a Doctorate in Business Administration from George Washington University. This article describes that study and its results, and briefly discusses the status of cur­rent Army implementation of C/SCSC.

r O U T L I N E O F C ' S C S C R E Q U I R E M E N T

ORGANIZATION D.-fiin ill•- i.iiiitr.it tudl i flint in terms of

oru.ini/ntmn.il ii-<.|>iiiiMbili1if« .mil work hrt-rikrliuvn -.tincture i-liiim-iiK

PLANNING AND BUDGETING Pl.iii. M:III'I]IIIF- l)iid(|i't iiurl .iiithunze the

wink EsTdbli^h i iv ihi ail liuili|f'K

ACCOUNTING Di'trrniim' .II i (iiiiplishiiiuir HIIII wist at

low |fv>-N MriiiiMin intt'Miiil if'piirtimi (lisci-pliii'" •md (ivurliivil rnnliul.

Mi'ii'Liir |)rngri<A nujuUiu-lv nn tin-basis (if ivuik .ircnmplhlii'd Deu-lop suunil csti-m.iI• - nf final i.iMt An.ily/i- i.nst diid M.lii'duli I . I IM I I I -PN cind fnii-i nM impart.

REVISIONS I ••• urpntcili

dllll SI llCllllll's LDIltllll

:lutiqi'? into pl.ins, budqi'ts r.l.iintiiin I'ffi'i in,!- b a s i l i c

END OF TWO-SYSTEM SYSTEM

The Cost/Schedule Control Systems Criteria were officially established in 1967 by DOD Instruction 7000.2, "Performance Measurement of Select­ed Acquisitions." These criteria consti­tute the standards of acceptability for contractor management control systems. The thirty-five criteria are grouped into five general categories: Organization; Planning and Budgeting; Accounting; Analysis; and Revisions. (Figure 1)

Prior to 1967, the Defense Depart­ment had imposed specific manage­ment control systems on Defense con­tractors. This meant that the contrac­tor often had to operate two expensive and duplicative control systems side by side — one for his own internal management and another more rigid system to satisfy the DOD require­ment.

With the introduction of Cost/ Schedule Control Systems Criteria, the contractor is able to proceed using only his own management control system, perhaps modifying some fea-

26 PERFORMANCE

tures of that system to meet DOD criteria. The contractor no longer is re­quired to maintain duplicate control systems and the government gains assurance that the contractor has effi­cient management planning and con­trol which will provide project man­agement (both contractor and govern­ment) with timely and reliable cost and schedule performance data.

It is important to note that C/SCSC apply to the contractor's internal man­agement system, not to the contrac­tor's reports to the government (al­though the contractor's internal data provide the basis for these reports). Further, it is inappropriate to refer to C/SCSC as a system. Many different management control systems can and do meet these criteria.

Key to the criteria and philosophy behind them are flexibility and the use of common-sense principles in seeking out the most cost-effective way to manage the large development and production programs of the Armed Services.

C / S C S C E F F E C T I V E N E S S S T U D Y

The author's study assessing the effect of C/SCSC on contractor plan­ning and control had strict academic constraints to insure that a bias in favor of the Defense Department could not prevail . The George Washington University academic board insisted on rigorous checks to insure that the results were objectively attain­ed.

T H E E I G H T C O M P A N Y S A M P L E

The study had to be based on an appropriate sampling of Defense con­tractors. By the beginning of CY 1972, contractor management control systems at twenty-four locations had been accepted as meeting C/SCSC on thirty-seven Defense acquisition pro­grams. Of the twenty-four Defense contractors there were fourteen who had applied C/SCSC (or its predeces­sor, the Cost/Schedule Planning and Control Specification, C/SPCS) to on­going programs.

It was decided that, for a given pro­gram, the effect of applying C/SCSC could be observed and documented more vividly through "before and after" comparisons of ongoing pro­grams which had C/SCSC applied on a "retrofit" basis.

Therefore, a primary universe of the fourteen contractors who retrofit­ted the criteria to ongoing programs was selected. From these a sample of eight firms was picked for this study, plus one firm for pre-testing purposes. Of the eight firms, which were well-scattered geographically, four were in­volved with development contracts and four were working on production contracts. Four of the contracts were very large and four were relatively small (Figure 2). The sample, there­fore, was diversified, v.

Figute 2

T H E R E S E A R C H S A M P L E

U N I V E R S E 24 Contractors wurkinq on V

SUB S E T 14 Contidi tors required to apply C'SCSC nn a "Retrofit ' hasis-

T H E M E T H O D O L O G Y

In choosing'the methodology for the study, some consideration was given to sending out questionnaires to a large number of contractors. How­ever, it was decided that the question­naire approach would not provide for in-depth probing of the subject. Conse­quently, the "depth interview" tech­nique was chosen as the research methodology.

Extensive interviews were conduct­ed with eighty-three key personnel in the eight firms. Top executives, pro­gram managers, functional managers, and planning and control specialists were interviewed, and reinterviewed i f deemed necessary.

E F F E C T O F C / S C S C O N P L A N N I N G

For the purpose of this study, the planning function was subdivided into three elements, i.e., work definition, budgeting and scheduling.

The effect that the criteria had on work definition was significant. That is, the criteria forced contractors to develop hardware-oriented work breakdown structures with short-span work packages as the basic building blocks. In order to retain a functional orientation, many contractors found that an effective approach to relating work breakdown structure (WBS) ele­ments to functional organizations was to develop an organization-WBS matrix. This enabled contractors to summarize cost, schedule and config­uration data both on a hardware-oriented basis and on an organization-oriented basis. Consequently, they obtained two dimensions of visibility into contract performance.

In the budgeting area, the criteria forced contractors to develop budgets from the bottom up on a hardware-

SAMPLE 8 of the 14 'Retrofit' applua

CONTRACTORS I N V O L V E D

Pilot Program (FPS 95) ' R C A , Gnvt & Commeicial Systems

Div., Moorestown, NJ

Prodmtitin Program* V G M Oelco Electronics Div., Milwaukee,

WI (TITAN III) 'General Dynamics, Fort Wmth, TX

( F r l 1 ) . _ ": . "Boeing Cu., Seattle, WA (Minuteman) 'United Technology Center, Sunnyvale

CA fTTTAN III)

Development Programs " G E / R e - e n t r y Systems D iv is ion ,

Philadelphia, PA (Minuteman} "McDonnell Douglas Astronautics East

St. Louis, MO (ABRES) ' L u i k h p e d M I S M I P & Space C n ,

Sunnyvale. CA (ABRES) 'TRW. Redondo Beach, CA (Model 35)

iillllS^Ssitifi! •̂ InlBli-.l

PERFORMANCE 27

oriented basis in addition to their old budgeting technique which was from the top down on a functionally orient­ed basis. As a result, the budget plan became oriented to the progress of work rather than simply to the expen­diture of funds. With budgets firmly tied to specific increments of work, the derivation of a budgeted cost for work performed (BCWP), or earned value, became possible. This BCWP can be compared with the budgeted cost for work scheduled (BCWS) to obtain a schedule variance which indicates how many dollars-worth of work more than or less than the amount planned has actually been accomplished in the time period being considered. The BCWP also is compared with the actual cost of work performed (ACWP) to provide a cost variance which indicates the difference between the actual cost and what it should have cost for the amount of work actually accomplish­ed. This cost variance is much more meaningful to the program manager than the traditional "spending vari­ance," which does not consider how much of the work planned to be accomplished was actually accomplish­ed. BCWP can be effectively compared with the budgeted cost for work scheduled and with the actual cost of work performed. The resulting cost and schedule variances allow program managers to see not only how much money was planned to be spent versus how much money was actually spent, but also how many dollars-worth of work have been accomplished.

In the scheduling area, C/SCSC did not add much to the array of sophisti­cated scheduling techniques that con­tractors already had in their tool kit. Moreover, the criteria were not design­ed to promote specific scheduling or management techniques. However, C/SCSC did facilitate the integration of schedules with budgets, and also facilitated scheduling disciplines in the contractors' planning process.

E F F E C T OF C/SCSC ON CONTROL

The function of control also was broken down into three elements, i.e., problem detection, variance analysis and corrective action. The study re­vealed that C/SCSC did not markedly improve the ability of program man­agers or functional managers to detect technical problems. However, it was found that, as a result of C/SCSC, pro­

gram managers were provided with a clear indication of the cost impact of technical problems which existed. This information had heretofore been diff i ­cult to determine.

Variance analysis was significantly improved as a result of C/SCSC. Prior to C/SCSC, managers analyzed a "spending variance," i.e., the differ­ence between what was budgeted and what was actually spent. With the budgeted cost for work performed, program managers were able to consid­er the value of work that was actually accomplished and, consequently, analyze cost and schedule variances in terms of work accomplishment.

Corrective action for identified problems was facilitated since cost problems tended to become visible at an earlier stage through routine analyses of variances by middle-level managers. These managers were in a position to initiate corrective action long before top-level management be­came involved.

MAJOR B E N E F I T S

Although contractors claimed more than twenty-five different benefits from C/SCSC implementation, six in particular stood out.

All eight contractors surveyed indi­cate that the most significant benefit derived was the overall system disci­pline imposed by the criteria. Rated the second most significant benefit was the ability to determine earned value, or the budgeted value of work accomplished.

The detailed, forward planning pre­dicated on short-span work packages was also deemed a significant improve­ment for defense contractors. Some other C/SCSC bonus effects cited by contractors came from the improve­ment in internal and external commu­nication that resulted from the em­ployment of common language and from a common understanding of the criteria.

The managerial training that many technically oriented engineers received as a result of C/SCSC also brought specific favorable comment.

MAJOR CRITICISMS

With respect to contractors' major criticisms of C/SCSC, the loudest com­plaint voiced was against the C/SCSC requirement to account for material costs at the point of usage. Since many

contractors prefer to account for material costs at the point of commit­ment, they found this requirement dif­ficult to accept.

Another criticism concerned the levels of detail to which some contrac­tors felt they were being forced in planning and budgeting the work. It was felt that rigid interpretations of the criteria by some of the early government team chiefs forced levels of detail which were unnecessary and costly. Some contractors did not quite comprehend the utility of a schedule variance that was expressed in dollars-worth of work in addition to one ex­pressed in terms of time.

All these criticisms were subse­quently recognized by the government in revised regulations, guidance, and instruction to those responsible for implementation and consequently a number of adjustments have resulted.

COST E F F E C T I V E N E S S

While the determination of cost-effectiveness of the eight C/SCSC implementations in this study is not claimed to be the product of purely scientific assessment and quantifica­tion, it is important to note that a genuine effort was made to quantify costs and benefits where possible, and to couple these computations with subjective assessments of cost-effectiveness determined for each facility. On the basis of this approach, the composite cost-effectiveness for each implementation is shown in Figure 3. (Contractors are referred to by letter rather than by actual name.)

Figure 3

COST E F F E C T I V E N E S S CONTRACTOR B YES CONTRACTOR C CONTRACTOR D CONTRACTOR E CONTRACTOR F CONTRACTOR G CONTRACTOR H CONTRACTOR I

YES* (Despite business decline) NO (Difficult retrofit) YES NO (Long costly implementation} YES YES NO (Not quite)

*Plant-wide implementation of C/SCSC

On balance, the implementations were determined to be cost effective. This determination is highly significant in that the eight implementations studied were the early, difficult imple­mentations of the 1968-1969 time­frame. Consequently, there is little question that the C/SCSC implementa­tions in the present time-frame are clearly cost effective.

28 PERFORMANCE

CONCLUSIONS

As a result of this research several conclusions were reached:

* Contractors who have systems which meet C/SCSC now readily accept the concept as a desirable approach to assuring effective manage­ment control.

*The manner of implementation is important. Those team members in­volved in implementation must be competent and conscientious.

*There must be high-level support by the contractor, and the government

review team must be well-qualified for successful implementation.

*It is difficult and costly to retrofit a C/SCSC requirement to an ongoing contract.

Cont rac to r s benefit from the greatly improved planning required and the discipline inherent in systems which meet C/SCSC. Control also showed improvement in the sample studied, although the improvement in control was not as substantial as the improvement in planning.

* In the early implementations, neither the contractor nor the govern­

ment made the best use of the data which was generated by the manage­ment systems.

*Surveillance by the government (to assure that an acceptable system was not degraded or misused) was not adequate and requires emphasis.

*The application of C/SCSC was found to be most effective when government and industry work to­gether to embrace the concepts involv­ed and to reinforce each other in achieving the application of these con­cepts. \V\

r • n A R M Y IMPLEMENTATION O F C ' S C S C

Thp Depaitment ol the Ai my and the Ami/- Matei ipl Command have been cfcvoting substantial attention to tlns successful application of C/SCSC in connection with large acquis!iion piogiams (development

The emphasis placed on this activity by Dipoitment of the Army is evidenced by inclusion of this task as one of the Inst foui high ptioiity tasks selected for emphasis by the Assistant Secictary of the Aimy (Installations and Loqistics) jnd the DA Steeling Gioup for the Imptovoment of Acquisition Management. Within the Army Materiel Command, this activity leceivps command emphasis as one of some fifteen high priority tasks of IMPACT (Impiovul Management of Pro­curement and Contractor Techniques).

AMC presently is chairing a Joint Logistics Commanders' Panel whose purpose is the publication of a C/SCSC Joint Surveillance Guide. This Joint Surveillance Guide will be a companion to the C/SCSC Joint Implementation Guide, which has been so helpful in achieving the uniformity of implementation and interpretation so much desiied by industry. Ropiosentatives of the Naval Mateiiel Command, Air Force Systems Command, Air Force Logistics Command, Defense Contiact Administiation Service, and Defense Contract Audit Agency ate on the

AMC already has performed the complete series of C /SCSC reviews at fifteen locations and foimally accepted the management systems as meeting C/SCSC, while the Satoguaid Systems Command has accepted five moie. Curiuntly, C/SCSC requirements uxisi with respect to eigh­teen mote locations involving AMC piogiams. Half of the programmed AMC C/SCSC implementations will be applied to government arsenals or Government Owned Contractor Operated (GOCO) ammunition plants. Incieasing evidence is accumulating to assuie that most of the problems encountered with the implementation process have been ovei-come and that the government project managers and their nulustty counti-ipaits ate now leaping the rewards of this useful management

PERFORMANCE

Suggestion Systems a n d .

Possibly the most controversial aspect of administering a viable Sug­gestion System is the subject of eligi­bility. Invariably, when talking about Suggestion plans, this subject receives a large percentage of the conversation. It not only influences the basic funda­mentals of administering a plan, but eligibility also touches on some of the more profound aspects of a successful program. While concentrating on this topic, we should not lose sight of the fact that eligibility is not an end unto itself, but is merely a means to achiev­ing the purpose given to a specific plan.

Eligibility rules should be integrat­ed into the overall plan. From a broad point of view, eligibility rules should reflect the desire of management in stimulating certain types of sugges­tions and screening out some undesir­able suggestions. Eligibility rules can be looked upon as a strong indicator of the interest and sincerity manage­ment has in its Suggestion System. I f management is sincere in providing opportunities for broad participation, then its rules will likewise be broad in terms of eligibility. I f management wants to limit input to specific areas and from specific individuals, the rules will reflect these limitations.

Let's assume that the primary goal of a particular Suggestion Program is to obtain voluntary ideas which save money. Yet, the eligibility rules limit suggestions only to a limited phase of that company's operation. One could

ask the obvious question, "Aren't there any opportunities to save money in these other areas that are not eligi­ble — or isn't the firm or agency spending money in these areas?" It would be an over-simplification to state that the more liberal the eligi­bility policy, the greater the chance of having higher employee participa­tion and involvement; whereas, in con­trast, the more restrictive the eligi­bility policies, the smaller the scope of participation and involvement.

However, there may be some very good reasons for having a more restric­tive policy. Usually, administrators will report that they encounter fewer administrative problems and argu­ments. An important thing that we will touch on later — how do we chan­nel suggestions which are not eligible by our policy into channels outside of the suggestion program so that they can be evaluated and not lost; thereby, denying the firm the chance to benefit from them?

Eligibility can be looked upon as a two-edged sword with one edge repre­senting what is eligible, i.e., subject matter — and the other edge represent­ing who is eligible, i.e., individuals bas­ed on position and function. It is appropriate to look at each one of these separately. In other words, to examine who can participate on the one hand and what are eligible sugges­tions on the other. In looking at the "who" part, we must examine both who can participate and who can re­ceive awards.

Regarding what is eligible, the rules should be written so as to communi­cate a very clear picture of what sub­jects are fair game and what are off-limits. I f the percentage of suggestions ruled to be ineligible is greater than the percentage which are acceptable, the employees will conclude that there is not a great deal of interest on man­agement's part in receiving ideas; whereas, i f all areas are open, which would indicate that there are no so-called "sacred cows," then manage­ment must be willing to receive em­ployee proposals on all topics without restriction.

When formulating eligibility rules, the thought should be kept in mind to make the rules as stimulating as possi­ble and expressed in language which all can clearly understand. My experience would indicate that there are no firms that have no restrictions on eligibility whatsoever. In the majority are those that include the following subjects as ineligible topics for suggestions:

Routine maintenance Company benefit policies Labor contracts Typographical errors Sales tips Items already under review by management Proposals which identify a prob­lem but offer no solutions Request for standard or stock items Part of one's job responsibility Outside the jurisdiction of the firm or agency

30 PERFORMANCE

The reason given for these topics being declared ineligible is that they generally do not lend themselves to change by way of an employee's sug­gestion. It is obvious that Union con­tract items are agreed to through nego­tiations and are only changed in like manner. Sales tips represent an oppor­tunity for an immediate sale, and the

C H A R L E S H. FOOS began his career with United Air Lines as a passenger agent in 1960 after serving two years in the Army as an officer. With Un i ted , Mr. Foos served as test analyst, employment manager, staff assistant, personnel representative and currently serves as manager of their Corporate Suggestion System which generated $2,400,000 in gross savings last year. He is a graduate of Loyola University and has done graduate work at the University of Pittsburgh and University of California. He has been elected as a director of the National Association of Suggestion Systems and progressed to become president in 1972. His involvement in the Sugges­tion field has also brought him recog­nition in Europe and he is currently vice president of the National Sugges­tion Schemes Association of England. He has twice lectured behind the Iron Cur ta in and annually lectures in Europe. He has authored many articles and technical papers, especially a Cer­tification Program offered by NASS.

time it would take to process a sugges­tion of this nature would normally be such that the opportunity would dis­appear, plus the fact that where there is a product involved, every employee is generally considered to be responsi­ble for promoting the product.

Routine maintenance is a pre­planned housekeeping type chore which is accomplished on a pre-scheduled basis; such as cleaning ash trays, waste cans, dirty floors, painting walls, greasing machines, changing oil, etc.

Benefit policies are very frequently tied in with Union negotiated agree­ments, and also some variables from government and industry, and there­fore do not lend themselves to isolated and unilateral action in many cases.

Subjects that management already is reviewing are not eligible because of the fact that management established prior involvement and it is within its ju r i sd ic t ion to conduct reviews, studies, evaluations as part of its func­tion.

Depending upon the specific indus­try, there are other topics that may be on this ineligible list, but those men­tioned appear most frequently. In the automotive industry, for instance, de­sign changes are the reason for many suggestions being ruled ineligible. In the food and drug industry, the re­search and development section very frequently is considered to be off-limits. Some topics are declared ineligi­ble for a temporary period, but we will touch on those when we talk about moratoriums.

If it is the desire of management that the Suggestion System be charged with the goal of stretching the minds of employees beyond the repetitious and the routine, then few limitations should be established that would in­hibit the stretching process and the free flow of creativity. Very frequent­ly, the reason given for adding limita­tions by means of declaring topics ineligible is to cut down the number of irrelevant, non-productive and trivia suggestions. However, while various limitations will do this, they are not selective in cutting down only undesir­able suggestions, but they also inhibit desirable ones. No one has yet come up with a way of getting only good ideas and suppressing those considered not so good. In screening out the chaff, we also must accept the fact

that limiting rules also screen out the wheat. To separate particular areas from the inquisitive eye of a suggester could give the employee the impres­sion that function is above ineffi­ciency, change or error.

While talking about the things and areas which are ineligible, we must also point out that a particular subject may be ineligible when it comes from a par­ticular person as a result of a very broad eligibility rule which states that to be eligible for an award, an idea must be outside of the scope of that particular suggester's job responsibil­ity, authority and expectation. While tolerances on a given machine may be eligible for suggestions, a suggestion from that machine's operator or the man that sets up the machine may be judged to be ineligible because, by practice, he is expected to make recommendations and apply changes to the tolerances. In order to apply this rule, which is based upon a per­son's function, it is necessary to know the parameters of the job. In some cases, the decision of whether or not a suggestion is within or out of the job expectation is made by the suggestion administrator. This can result in the administrator becoming unpopular in someone's eyes based upon his deci­sion. Determining job expectancy is not a function of a suggestion adminis­trator, but more in line with the super­visor of the person involved and more in line with the individual who evalu­ates whether or not a job is being accomplished and makes decisions on the size and type of raise and evalua­tion which will be given.

I am one who believes that the deci­sion on eligibility of a suggestion based upon a person's job should be made by that person's supervisor, because it is most important that the two of them understand what is expected and where the job responsibility begins and ends. Quite frequently, it is only the boss who can comment on the rela­tionship of the idea to the suggester's assignment. Frequently, there are writ­ten job descriptions, Union contracts and work orders which will prove objective and helpful in arriving at a conclusion. A rule of thumb used by some individuals is to ask, "Can the suggester do what he suggests on his own? I f he doesn't do i t , can you criti­cize him for it?" I f the answer is "no" to both, then an award is paid. If

PERFORMANCE 31

"yes" to both, no award is paid. I f mixed, they give the benefit of the doubt to the suggester.

When developing eligibility rules, we also must consider i f various types of ideas will be eligible. Some rules only award tangible suggestions, i.e., those that produce computable, measurable or cost-saving benefits. Some programs also will pay awards for intangible benefits such as safety, housekeeping, morale, public relations, etc. There is another category not quite as popular — we will call it impetus. In this area, companies are willing to pay an award for a sugges­tion that speeds up action on an item management already had under review or which brings about a solution con­sidered to be somewhat better than management was planning to use. In such cases, a judgment is made and an award is granted without the use of statistics, but serves as a reflection of gratitude for the help rendered as a re­sult of the suggestion.

The rules pertaining to tangible sug­gestions are usually very clear, succinct and easily understood. Rules pertain­ing to intangibles do not share the same characteristics, because in those cases it is a judgment factor and very hard to quantify. Can you tell us what $50 worth of safety or $200 worth of morale or $1000 worth of image is really worth? There is no question that the intangible area represents a cost item in the management of a firm; therefore, it represents an area where savings may be realized. To declare in­tangibles as ineligible just because we can't define what they are worth is not the best use of an opportunity to harness creativity. Many firms have de­vised formulas and tables to help in­stall an element of consistency in de­termining a fair and equitable award for intangible suggestions. My experi­ence would indicate that there are really two factors that are essential: 1. The seriousness of the situation; and, 2. The effectiveness of the solution.

Before leaving the subject of what is eligible, we should mention that our definition of an acceptable suggestion should give a very clear idea of what the firm desires and should indicate the kinds of proposals you wish to re­ceive. One definition I recently came across stipulates that the firm consid­ers an eligible suggestion to be vol­untary, constructive, written proposal

which identifies a specific problem, advantage or opportunity and recom­mends a specific and detailed solution.

Eligibility rules are best formulated when they project a positive image and emphasize what you want and the kind of suggestions you are willing to pay for. Don't emphasize what is not allowed, because, remember, we want to open up areas for stretching the creativity and innovation of our em­ployees rather than laying down speci­fics for what will not be accepted. We should attempt to make our rules posi­tive so as not to encourage gripes; con­structive so as not to open up other grievance procedures; timely so that we receive ideas which are technically feasible and within our capability; original so that we do not receive ideas that are already in use by us; and bene­ficial so that they apply to our imme­diate situation and can produce some immediate benefits. Our booklets could stress the positive approach by actually stating:

We want ideas which improve our service Decrease safety hazards Eliminate waste Avoid duplication Simplify procedures Increase efficiency Decrease costs Enhance profits Advance new service Save time and labor

The definition you establish for an eligible suggestion and the rules per­taining to what and who is eligible will be the guiding light to your employ­ees; therefore, it makes sense to make it as stimulating as possible and in language which they can clearly under­stand.

The second part of the eligibility question pertains to who is eligible. In itself, this is a two-sided coin in that we must specify who is eligible to re­ceive awards. Let's initially look at who is eligible to participate. Roughly, of any given number of firms survey­ed, one-third of those firms will allow all employees to participate, one-third will allow certain levels of manage­ment to participate and one-third will limit participation to non-management employees only. In a very few cases where management cannot participate, separate plans have been developed for them. In the United States, there are

fewer than thirty in this category. The most liberal rule would permit all em­ployees, whereas, the most limited rule would permit a very small segment of the work force to be eligible.

Here again, the rules should reflect management's earnestness in wanting participation and new thinking. There should be no doubt in an employee's mind concerning his eligibility based upon his position and classification. The trend lately has been to liberalize eligibility rules with regard to who can participate. There are those who feel that all employees should have the same opportunities for self-expression, recognition and involvement. We are asked, "Why should we discriminate against one sector of the work force because of its function or position? Shouldn't all employees be entitled to exercise their individuality by submit­ting proposals which are beyond their scope of authority, responsibility and expectation?" In these days of equal rights for all, answering this question can become more difficult. The area that generates concern is eligibility as it applies to management, professional and technical employees.

Of 167 companies surveyed recent­ly, 47 percent would not permit man­agement eligibility in the basic plan, but 53 percent did. Twenty-nine per­cent permitted management eligibility to a given level and nine provided a separate plan for management. In the 97 plans where management is eligible to participate, thirty-four do not grant cash awards, but use plaques, certifi­cates, jewelry, letters of recognition or merchandise instead.

Concerning eligibility of manage­ment employees, we can take it for granted that they will continue to have ideas and continue to want to exercise their creativity and participate in im­proving their company. Some econom­ic channel is needed for processing their inputs, particularly for those that cross administrative lines. A firm's eligibility rules ought to reflect its in­terest and sincerity in hearing from all its employees, plus its desire to pro­vide the opportunity for them to get involved in areas outside of their immediate span of responsibility. The very nature of suggestions, either formal or informal, implies criticism, and to depend upon or expect 1000 or more exempt or management employ­ees to pass on their ideas across divi-

32 PERFORMANCE

sion lines to higher ranking officials is unrealistic, naive and ignores the human relations inhibiting factor brought about by having different levels of management.

There is considerable creative po­tential in management, professional and technical employees which, i f en­gaged properly, can contribute sub­stantially to reduce costs and improve operations. The essence of determining job responsibility is the primary cause of difficulty in this phase of suggestion administration. Borderline cases con­stantly arise. To expect the suggestion administrator to know the parameters of every job classification in the firm is out of the question; yet, every em­ployee at some point in time is evalu­ated with regard to performance and given a salary increase.

In order to evaluate performance, one must know the aspects of the job. That person is usually the employee's supervisor. In my mind, he is in the best position to tell us whether or not a particular proposal falls within the job responsibility of the suggester. I f it is part of the employee's job and the employee doesn't know it , it is the business of his boss to tell him — not the suggestion administrator. Occasion­ally, two different bosses working in the same operation will have two dif­ferent opinions, and in such cases the next level of management is approach­ed for a decision. At times it is helpful to get this decision in writing, especial­ly i f the answer is that the employee is eligible for an award, because there will be professionals in other departments who will be suspect of the decision.

The decision on who can receive awards is one that must be made by each individual firm on an individual basis and will reflect the climate and attitude that firm has toward employ­ee relations, communication and recognition. Once the rule has been established, it should be followed con­sistently. When no award is offered to a management employee, he is in a position to ask what incentive he has, to give of himself above and beyond his normal job expectation. Is he paid any less for not submitting sugges­tions, or are there any benefits he re­ceives that are non-monetary as a re­sult of adopted suggestions? What are your thoughts on the following two questions concerning eligibility of management employees?

1. A foreman in Department " A " transfers to Department "B" and sub­mits a suggestion which applies to his old Department " A " and he does this within four months of leaving Depart­ment "A . " Is he eligible for an award?

2. What are your thoughts on a supervisor who submits a suggestion involving his own department and which is considered to be part of his job responsibility? The idea is adopted not only in his own department but in many others and even in other plants. Should he be eligible for an award for the application of the suggestion in the other plants and in the other depart­ments?

Our e l i g ib i l i t y question also addresses itself to joint suggestions which are submitted by more than one employee and, in most cases, the award will be shared by the number of suggesters who have signed the original proposal. Occasionally, the same sug­gestion will be received within two or three weeks, in which case most firms give credit to the earliest one on file.

Concerning moratoriums, some companies establish a closed period or moratorium on new installations, new pieces of equipment, processing or methods. These are in the minority; yet, moratoriums do offer advantages and disadvantages. They provide a period of time to phase in new equip­ment and to get the bugs out and not have to answer suggestions on items which are included in the installation plans of the new item. A disadvantage is experienced when the moratorium is lifted, since many employees do not know it and, consequently, do not consider the new equipment to be fair game for their proposals. Then, too, i f as an employee you have a good idea pertaining to the new machine, where is the logic in denying the company the use of that idea until the date the moratorium ends and you will be eligible for an award? The idea sits on ice until the moratorium is lifted.

There is one other point which per­tains to eligibility and that is, at what point do you stop processing a sugges­tion because it is ruled ineligible? Having just received a new proposal, do you process it to determine i f it will produce some benefit to your employer, or do you first determine i f

that particular employee is eligible for an award? We must consider that three out of four ideas are unadopted, so we could process it with a 75 percent chance that it won't be necessary to tell the employee his idea isn't eligible — yet we may be doing him a dis­service by not training him in light of our rules. Many suggestion administra­tors will readily state that their first obligation is to their company, so they will first determine if the idea will generate a benefit to the firm, and secondly, address themselves to the question of the eligibility of its source.

I feel that each case must be looked upon on its individual merits, because to conduct an extensive evaluation is going to build up false hope in the eyes of the employee. Many firms require that an employee first review his suggestion with his supervisor, and at this review the question of eligibil­ity is covered in advance.

In summary, the problems of eligibility boil down to formulating a set of rules which will reflect the climate, support and desires of your particular employer. There isn't any one set of rules which are best. There is no panacea with regard to eligibility guidelines. The best rules are those which will work for you. The policies governing eligibility define the type of ideas for which awards will be paid; consequently, it is important to make them explicit, positive and reasonable. Eligibility rules must be tailored to a particular firm, plant or government agency to fi t in with the overall man­agement climate. They should not be so rigid as to exclude a dis­proport ionate number of your employees or restrict ideas in fertile fields of your operation. Caution must be exercised in establishing these rules to insure that there is a clear under­standing as to who can participate and who can receive awards, in order to minimize the problems associated with interpreted policy in relation to its intent.

Let me leave you with this thought: To achieve progress, man must first make the best possible use of his cur­rent knowledge, and secondly, develop new ideas. Eligibility rules will have a substantial impact on the number and quality of those new ideas; conse­quently, our eligibility rules can play an active role in our firm's achieving progress. \T]

PERFORMANCE 33

I N N O V A T I O N D Y N A M I C S

- WHY -

Is the effect iveness of your organization

being st i f led by low productivity and in­

sufficient profit margins? poor quality of

workmanship? or an unmotivated workforce

characterized by high-turnover and a lack of

commitment and involvement?

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n o w . . . what are you doing about them?

Would you be interested in a h ighly-success­

ful management system with an outstanding

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to the s u c c e s s of any organization?

A N I N V I T A T I O N

Improvement results are achieved through

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sults through channeling the latent creat ivi ty

present in all employees into a positive,

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are warmly invited to share in a 2 1/z day

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details this most effective management tool.

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SEMINAR RESULTS

Learn how to develop a Dynamic Innovation Program, one achieving desired results . . . or if you have a System which is not producing . . . get it going, get it "On Track". Come and meet with executives who have the same difficult job you do — finding new solutions to management problems. You'll be glad you did!

Some comments about

INNOVATION DYNAMICS

"Wanted to revitalize a dormant Program . . . through attending, our Suggestion System is now alive and well!" Richard Reck, Armak Co. (Chem. Div.)

" . . . now in a much better position to shape a more meaningful Program . . . looking forward to more NASS Seminars." Jack Donathon, U. S. Postal Service

"Well run . . . and real good job by the Seminar Leaders." Jim Vaughn, Northern Illinois Gas Co.

"Terrific! Told me how to develop an effective System." Doreen Forslund, Health & Hosp. Govn. Comm.

"Idea-exchange gave added dimension to our Program." Thomas Luka, Zenith

"Very helpful . . . especially in System organ­ization; met every objective I had in attending." Loretta Collins, Detroit Bank & Trust

"System improvement: processing, awards, feed­

back, gen. admin. — much information!" Al

McCowan, Johnson & Johnson

"I'm elated at the results! . . . got many new ideas I put to use immediately." Jessie Hackett, Dept. of Commerce

"In-depth experience of the Seminar Leaders provided new insights into improving our Pro­gram." Ray Ruzich, Chgo. Transit Authority

"The course was a long-needed grass roots session which provided motivation for the in­novators!" Chester Hayes, U.S. Army — Fin. Ctr.

34 PERFORMANCE

WHAT - WHO -

I. H ISTORY, B A C K G R O U N D A N D TRENDS

I I . P L A N N I N G T H E SUGGESTION S Y S T E M

• What Is A Suggest ion System? Def ined.

• Object ives Of A Suggest ion System:

1. Business, industry and govern­ment agencies 2 . Management 's point of v iew 3. Employee's point of v iew

III. O R G A N I Z I N G THE S U G G E S T I O N S Y S T E M

• The Suggest ion System Department • Top Management 's Role • The Role Of Staff And Line Manage­

ment

• The Role Of The Commit tee • Ant ic ipat ing The Problem Areas

• Forms, Records, and Reports • El igibi l i ty — Suggestors And Sug­

gest ions • Award Structures

IV. E X E C U T I N G T H E S U G G E S T I O N S Y S T E M

• Receipt Of Suggest ions • Types Of Suggest ions • Off ice Procedures • Processing T imes

E X E C U T I N G T H E S U G G E S T I O N S Y S T E M (Continued)

• Analyzing Suggest ions • Adopt ing Suggest ions • Install ing Adop ted Suggest ions • Paying Awards • Handling Non-Adopt ions

V. S E L L I N G THE S U G G E S T I O N S Y S T E M

• Establishing Goals (Budget, Perfor­mance, And Promotion}

• Introducing A .Sugges t ion System To Top Management

• Presentation To Line And Staff Man­agement

• Presentation To Employees • Maintaining Employee Interest and

Management Commit tment

VI . E V A L U A T I N G S U G G E S T I O N S Y S T E M S

• Measuring Effectiveness • Value Of Employee Morale • W h y Suggest ion Systems Fail • Correcting The Failing System

VI I . G E N E R A L D I S C U S S I O N AND I N D I V I D U A L C O U N S E L I N G

D E S I G N E D F O R :

• Corporate Control lers & Planners

• S u g g e s t i o n S y s t e m s & I n c e n t i v e A w a r d s A d m i n i s t r a t o r s ( S e m i n a r counts toward Certi f ication)

• Plant Managers • Safe ty /Tra in ing Managers • Consultants • Government Off icials • Hospital Administrators • MIS Directors • Bankers • Industrial Relations Managers • Employee Re la t ions /Benef i ts Admin­

istrators

• Industrial and Management Engineers

W H E R E :

Chicago Kansas City Wash ington, D.C. Apri l 2 3 - 2 5 May 1 3 - 1 5 June 1 2 - 1 4 H O T E L I N F O R M A T I O N Al l hotels are near major airports, assuring easy access. Information on the accommoda­t ions w i l l be included in your conf i rmat ion so that you can make your own reservations.

C A N C E L L A T I O N I N F O R M A T I O N Your wr i t ten cancellation not ice must be received by the National Headquarters no later than 10 days before the scheduled start of the Seminar, in order for you to receive a refund.

( S u g g e s t i o n Administrators Inst i tute: De­signed for Senior Level , Advanced Sugges­t ion Administ rators, Evansvil le, Ind. , May 6 - 8 . Contact: Tom Blair, Deaconess Hospital , 6 0 0 Mary Street, Evansvil le, Ind. 4 7 7 1 0 )

P L E A S E COMPLETE AND RETURN TO: NATIONAL ASSOCIAT ION OF S U G G E S T I O N S Y S T E M S • 4 3 5 N. Michigan Avenue • Chicago, III. 60611

I W A N T NEW I D E A S . . . NEW T O O L S TO U S E . . . T O PROVIDE INTERNAL D Y N A M I S M , C R E A T I V I T Y , AND INNOVATION. P L E A S E E N R O L L ME IN T H E O F F I C I A L N A S S S E M I N A R IN: YES!

( ) Chicago April 2 3 - 2 5

• Check Is Enclosed

Name_

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• Bill Me, Using P.O. # _

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) Washington, D . C . J u n e 1 2 - 1 4

Organization.

Address City_ State_ Zip_

D O E S Y O U R ORGANIZATION H A V E A S U G G E S T I O N S Y S T E M ? • Y E S • NO

REGISTRATION FEES: NASS members $ 150 Non-Members $ 1 8 5 *

* $ 3 5 applicable towards membership

SEMINAR FEE INCLUDES: Materials, Work Book,

Coffee Breaks, Luncheons and a Certificate of Accomplishment

HOTEL RESERVATIONS: A sufficient number of hotel rooms will be booked for each Seminar to assure accommodations for each registrant. Reser­vation card will be sent as acknowledgment of registration (Room charges not included in Seminar fee).

PERFORMANCE

H O W A V A I L A B L E F O R I M M E D I A T E S H I P M E N T

QUALITY A S S U R A N C E : MANAGEMENT

AND TECHNOLOGY

Encompassing the 240 primary inputs necessary

f o r an effective QA program

HARD-BOUND TEXTBOOK SIZE AUTHOR: GLENN E. HAYES, Ed. D.

QUALITY ASSURANCE: MANAGEMENT AND T E C H N O L O G Y , Glenn Hayes' second book on the subject, encompasses the entire QA spectrum. His first work, Quality Assurance in a Manufacturing Enterprise — published in 1970, was quickly accepted as a standard text by major colleges and universities.

QUALITY A S S U R A N C E : MANAGEMENT AND T E C H N O L O G Y delves profoundly into the theoretical aspects of QA while at the same time amplifying practical techniques for control and meaningful reporting.

QUALITY ASSURANCE: MANAGEMENT AND TECHNOLOGY 'S more than 400 pages, the result of over two years' preparation, are profusely illustrated wi th easy to read diagrams, charts and reporting structures. Expanding greatly on his first work, Hayes' second volume is destined to become THE primary guideline for establishing and maintaining effective industrial QA operations.

QUALITY A S S U R A N C E : MANAGEMENT AND T E C H N O L O G Y , attractively bound in a durable cloth cover wi th silver foil imprint, is being offered on a pre-publication basis wi th a special 30-day, money-back guarantee to individuals and corpora­tions at $14.95 a copy. To take advantage of this pre-publication, money-back offer, simply complete and mail the coupon below:

r.i Glenn Hayes, a registered professional engineer in the state of California, is Associate Professor in the H Industrial Technology Department, California State University, Long Beach. Prior to his academe

aff i l iat ion, he held various quality assurance management positions in the electronics, steel, aluminum, ^ aerospace and aircraft fields. He has served in a consultant capacity in quality assurance to private industry

and the U.S. government.

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

Please send. .copy/copies of Dr. Glenn Hayes' book, QUAL ITY ASSURANCE: MANAGEMENT AND TECHNOLOGY. If not completely satisfied wi th the contents, I may, within 30 clays of receipt, return the book(s) for a ful l refund. Payment of $14.95 for each copy ordered enclosed: ( ) Check; ( ) Money Order; or ( ) Bill Company.

Sub-Total $ Cal i f , res idents add 6% sales tax

Total $

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