April, 1932
INDUSTRIAL AND ENGINEERING CHEMISTRY
the lines of organization which must be maintained in order to promote smooth operation of the plant. To enjoy fully the advantages of constructive accomplishment, a research worker should reflect optimism. The possession of a critical mind does not exclude a cheerful personality. The possession of a good-humored tenacity in the search for truth not only makes the job more enjoyable, but it inspires others with confidence and makes them want to share in the ,joy of the accomplishment. Very valuable attributes in a good research man are invariable optimism seasoned with judgment and the J\-illingness to icooperate by utilizing other branches of the organization in arrking a t success. Whether training can or cannot implant these attributes, they must be present in the man v h o hopes to succeed. In conclusion it is pointed out that executives and others responsible for research in any growing industry should ever
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keep in mind that the end to be attained in the selection and training of research personnel is t o build up a research organization composed of men having superior qualifications and especially initiative, creative instinct, breadth of vision, and a capacity for hard work; men who possess physical fitness to enable them to carry on energetically, tenacity of purpose to compel them t o stick until the end, resourcefulness to direct them out of the beaten paths into the unexplored areas, personality such as to enable them to live amicably in their environment, and knowledge in their particular fields which will render them capable of effective work. Such an organization will contain few geniuses, for genius is indeed rare, but it will be composed of men of high average ability who are capable of consistent productive labor and combined group effort. This is the sine qua non of industrial research. RECEIVED January 16, 1932.
7 9 2
Control of Research ExpensaWILLIAMA. HAMORAND GEORGED. BEAL
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Mellon Institute of Industrial Research, University of Pittsburgh, Pittsburgh, Pa. N 1921 the great importance of planning and control began to be recognized in management. Since then many companies have required definite organizational plans for their research departments or laboratories, and in general the results have been beneficial to the directors of these laboratories, principally because their authority and responsibility are now defined. This attention to planning and control has induced various studies of industrial research procedures, and has led in not a few instances to the installation of budget systems whereby financial requirements can be predetermined with satisfactory accuracy. Their first experience with budgetary practice was almost painful to research directors who had no knowledge of the science of management. According to our observations, however, budgets have rather quickly become the guides for the operation of a number of large industrial research laboratories. I n some companies, it is true, the administration of research is still a rather hit and miss affair. If a department desires the laboratory to make an investigation, its request is submitted to a conference committee, a decision is made as to the merit thereof, and authority is then given or withheld. But in more progressive companies a definite organization set-up has been established to plan all research laboratory activities and to control research expense. The laboratory thus has a clearly defined program for the year and can plan its personnel and work accordingly. This systematic planning gives the basis for establishing an expense budget, and experience has shown that, if the latter is controlled, satisfactory progress is made toward controlling the costs of research, to the joint benefit of management, technology, and science. The control of research comprises questions of controlling expense as well as problems of generating desirable spirit and attitude and of producing greater activity. It must be guided by what expense is necessary and what the bu m' e s s can stand. There are many companies that have enjoyed growth because of the successful management of their researches. There are other companies that have died because of their failure properly to evaluate and control the costs of research. It is always essential in planning research
to give due attention to the probability of the solution of the problems a t a cost that is commensurate with the values involved. It must be remembered, moreover, that the expense of research must be controlled and kept within bounds without in any way constringing the initiative of the laboratorian in making investigational advancements. It is plain that the degree of effectiveness of a laboratory staff always has much to do with the cost of a research. .The average industrial research laboratory is founded for profit, and a company cannot afford a laboratory that does not a t least pay for itself. The research laboratory is intended to aid in increasing earnings and in decreasing costs in the company of which it is a part. The best tool for helping to reduce costs in the laboratory and elsewhere is efficient accounting. The purpose of accounting is to control all expenditures, to analyze departments, and to present informative reports to the company officers who should have them. A competent accountant will study the methods of the department to which he is assigned, plan their accounting and procedures of recording costs so that the data procured will satisfy all requirements, and then give the management the information that is needed If accounting records are kept close to the work, the department concerned can secure statistics that can be utilized quickly. APPORTIOSJIENT OF RESEARCHEXPENSEIK IXDCSTRIAL MANAGEMENT "A pencil in t h e hands of a cost accountant ceases t o b e a writing implement; i t becomes a surgical instrument. -An Industrial Research Veteran
A question that has often come to us is, what is the most adequate accounting system to use for crediting the research accomplishments of a laboratory? W7ehave always answered this query by explaining that a comprehensive procedure therefor has not been evolved, and that the current practice, which is conceded to be in the developmental stage and hence tentative, is based upon the evaluation of only part of the results of research-upon the so-called tangibles that can be definitely credited against the expense of scientific investiga-
tion. 111eonsequeiice, we have pointed out, research expense can be reduced only partially to a method of accounting. As a matt.er of fact, in most instances the intangible resnlts of research are undoubtedly more valuable than the tangibles, and consequently it is not possible at present, a t least, to put an industrial research laboratory on a full accounting basis. In these cases the laboratory accounting system must consider the positive savings classifiable as tangibles that are derived from novel or improved processes, reduction or disposal of wastes, s a l e or licensine of natented inven-
cent of tlie total appropriation. If i t is inadequate at any time, a special extra appropriation is made for supporting promising new investigations. Accounting experience has shown that, when charges for research expenses are deferred, it is invariably difficult to value these items. In auditing, it is first considered whether these expenditures should not have been absorbed in operating expenses when actually incurred. But if it is decided that it mas proper to defer them, it is necessary t o determine whether the period over which these items have been deferred is of reasonable l e n g t h a n d not too long. The original value of a research product, such as a patent, is usually regarded as its cost (purchase p r i c e or d e v e l o p inent.al expenditure); and l a b o r a t o r y expenditures that have been directly UIIp r o d u c t i v e of results are classed as indirect costs of such patents as have heerr d e v e l o p e d from time to time. BUDGETING OF RSSEAIKU EXI'ENSE
ing."
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Theuseof budgetsoroperating scliednles, for the pur-
April, IY32
I N 11 U S T 1%1 A 1. A N D E N G I N E E R I N G C H E AMI S T K Y
limitations that are sometimes of serious coneern in research laborat,ory management. In the first place, as is well known, every budgetary program is based on estimates. Tlicse estimates, however, are not supposed to be followed arbitrarily, but are intended For use with judgment and with revision as actual results reveal variations from hlie estimated performance. Secondly, budgetary control cannot replace management. But it is not the purpose of budgetary control to deurive a lahoratorv director of tho essential freedom of a c i i a n t h a t enstires progressi s e management. Budgetary control c a n n o t be p e r i e c t e d quickly; it requires time properly to make and use estimates of future plans. In g e n e r a l , r e s e a r c h results cannot be guarant e e d in a d v a n c e . As a m a t t e r of fact, the proc e d u r e s of l a b o r a t o r y m a n a g e m e n t do not provide For tire assurance of success in the i n v e s t i g a tion of problems. It is moreover diflicult to predetermine closely the time needed to solve and the amount of money required to i n v e s t i g a t e major or long-time b a s i c produotion problems, which constituce the main tasks assigned to research laboratories. It happens occasionally, of course, that estimates OF this type can be prepared on the basis of experience in prior investigations OF similar problems; but while industrial research directors are cost conscious, they lack a full set of standards or measuring appliances for controlling the various cost elements and for determining variations in laboratory work. Notwithstanding these ohstacles, the managemental Facts and mechanisms that are available can be used to evolve budgets of research, and thus provide a syytem of control that enhances the effectiveness of the laboratory and the cooperative position of its staff in the company organization. Such budgets, which may be monthly, quarterly, or annual, we divided into projects, with calculated costs of supplies, special equipment and general expense, and estimated salaries OF personnel. Throughout the period the actual expenditures for research are checked against this laboratory budget. This system enables the officers of a company to compare expenses lronl year to year and to observe whether increases are justifiable. The compilation of budgets OF research should be done by the laboratory executive staff. These budgets must then be coordinated with the other activities OF the company, examined and revised by the comptroller, reviewed by the general administration, and finally adopted by mutual agreement. I n many companies a budget committee whose chairman is the comptroller is responsible to t.he president for the coijrdination of all budgets. Management is riglitly insisting upoll the opportunity to observe the progress and accomplishments of resoarch through the clarifying medium of the budget. Management understands or soon learns that scientific investigation cannot be charged a.head with the same accuracy as production. But the keen management OF today requires reasonably close estimates of the cost of researches planned by the laboratory director and his staff, so as to determine whether the work
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can be begun, and, having allocated a definite amount OF money to research, depends upon the director to spend this sum most advantageously. Even in laboratories that are not operated under a budget system there is usually kept a careful record of the expenditures for salaries, supplira, insurance, etc., all classified in detail, for following in exercising economy in the conduct of work. Every laboratory manager should know enough about accounting to know when he needs an accountant.
RESE.~RCX CONTROL
PROCEDURES OF
It is not rare t.o find that tlie expense of a carefully m a n a g e d l a b o r a t o r y is largely b a l a n c e d against tlie s a v i n g s t h a t h a v e ensued from the tangible results of research effort. In such cases only a comp a r a t i v e l y s m a l l charge has to be made for intangibles. ks pointed out, the expense of r e s e a r c h pert a i n i n g to the latter can be f a i r l y c h a r g e d off to p r o d u c t and market iniprovenleiits. If this accounting practice must have justification, support can be easily found in the fact that industrial laboratory investigations are principally basic production research-, aimed toward (1) the improvement of processes in use, (2) the betterment of products already in the line, (3) the d i e covery of new products, and/or (4) the evolution of novel urocesses. The urocess work of a laboratory establishes its eonnection with production; the research on-products brings out its lineal relationship to marketing. Industrial research, production, and marketing, then, are closely interdependent in planning and effecting technologic progress. In consequence, it is plain that the value of a laboratory cannot he appraised fully in terms of definite economie8 resulting From its accomplishments. This conception of the place and utility of the laboratory in an industrial organization has led specialists to contend that gross sales should be chosen as a basis for determining the amount of the appropriation For research and that oiie per cent, at least, is the reasonable ratio OF research to gross sales. Research control that has due regard for these facts and For the time factor is capable of estimating the value of the results of laboratory work and of operating productively according to a budget. It is believed by some specialists that a docket system OF research control enables the laboratory director to evaluate with most certainty the cost of the work entrusted to him and his staff and io ascertain a capacity load for the latter. This procedure also gives him the mea.ns to fix responsibility if changes are made in any of the projects undcr the docket. At Mellon Institute we control all rescarches similarly, according to definite investigational prog r a m and fellowship budgets, by dose advisory contact and conlerences with the fellows, supplcmcnted by weekly progress revorts of the latter and bv statement,s from our accountine department. The progress chart, such as the device introduced by Gantt,
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SALARIES OW b S E A K C E i STAFF MEMBEBS.
which is used in measuring production, sales, expenses, etc., may be applied in planning certain types of laboratory work. A skeleton form for projects under a research docket aiid also a form for a monthly time sheet for use in determining monthly costs of researches are givcn in Donald's very helpful handbook ( 1 ) . I n employing the monthly time sheet, as deseribcil therein by R. G . Casacll, each resenrch laboratory rmployee records his own distribution of his timr to the projects oii which he has been a.ssigned to work. By it,s use therc can be calculated the dist,ribntion of salary to the proj. Other itcrns of expenfie, except supplies and specia! eqiripnient which are charged to the projeck for which they wore ordered, are generally prorated to the respective projecti in the same ratio that salary charged monthly to a particulai project beass to i.he total laboratory salaries. Among thex items are cleaning, light, heat, power, steam, wntrr, insurance, and depreciation. The depreciation rate of laboratory equipment is generally given as 10 per cent. The case system of research control, used with success by Arthur D. Little, h e . , was outlined by Earl P. Stevenson (8). In this procedure daily reports on special cards are said to aford a satisfactory means of recording the distribution by hours of the working time of the laboratory staff. The accounting department then converts this time into dollars and cents, and these fignres are followed in budgetirig the tinlo of the staff for the next month. A system of this type evideutly has additional utility: it eriables the easy keeping of an accumulat.ive record illustrative of the progress of researches in hand, and i t facilitates a clear insight into the cost of certain researches as compared with other investigations. GENEBAL ~ I S C U S S l O i YOF &BEARC4
EXPENSES
"The liuman element i~ baaio in rwoaieb. iuat a8 it is in Lusineas snd indiintry." - A n Apothemz 01 Peraonacl M n n i w m m t
The expenditures for research in a large laboratory coinyrise the salaries and expenses of executives; office, library, shop, storeroom, and building operation and maintenance; salaries of research men and assistants; supplies and house charges, which will include as well special charges for shop arid oflice work; and traveling expenses incurred during investigational inquiries and during the attendance of members of the research st,affa t appropriate scientific gatherings.
The initial salaries of research men will depend upon the standing of each man and up011 the importance of the problem to be studied by him. No research specialist should ever be employed until after a personal interview. This interview can well supplant the necessity for csreful veighing of certain letters of recominendation. Furthermore, as working and living conditionsareimportant considerations for the speeialist, such an interview will affordthe candidate the opportunity for an inspection of the laboratory and an introduction to future associates. With no training other than that of the university, the suggested entrance salaries for the first year, according to highest degree held, are as follows: B.S., 51,500 to $1$00; M.S., %1800 to $2100; and P1i.D.. $2500 to $3000. It may well be stipulated that, in the event of substantial progress being shown, the minimal beginning salaries will be inercased at the end of six months to $1800, 92100, and 8 0 0 0 . respectively. I n several laboratories with which we are familiar, the initial salary for the Ph.D. is $2750 for the first year. By this arrangement the salary for the year will be equalized therewith, a probationary period provided for, and the self-respect and professional attitude of the man worthily stimulated. When the candidate possesses additional professional training, the conditions of his employment become competitive. I n general, however, the sal.wy should be comparable with that of men oE equal experience already in the laboratory. Even in this case a probationary period of service is highly desirable. Salary increases is a much debated subject, with probably more argument than over entrance salaries. Salary advancement is necessary for its psychological effect, hut must be judiciously administered for the same reason. A wise policy will provide for reasonable increases based on merit, seconded by family considerations. We all know that no man can he a t his best when domestic difficulties compete with laboratory problems for his attention. Financial embarrassment will kill &s much energy as home ailments. The young P h D . has just left a long period of financial non-production. Even under the most favorable circumstances he has undoubtedly reached the age of twenty-five, with the average probably much nearer to thirty. Examination of our experience a t Mellon Institute shows that, with few exceptions, the salaries of the research men amount to about 60 per cent of the gross cost of each industrial fellowship. ItESEARCH SUP1'1,IEs. Although very constant over a period of years for a laboratory organization, this item may vary widely for different problems. It is oft,e.n difficult bo predict in advance just what the expenditure on supplies for a given research mill be, although the past experience of the
laboratory will be a guide. One of the most expmsive types of investigation to conduct is upon pharmacodynamic problems, in diich the maintenance of a constant supply of animals of definite and pure pedigree is essential. We have understood that in some pharmacologic laboratories the expenditure for supplies, including animals, lias reached 35 per cent of the total cost of research, but such experience is probably both exceptional and extreme. Our own records show an expenditure for industrial fellowsliip supplies, including traveling and house charges, of 20 per cent of thc tot,nl fellowship receipts. Traveling, a variable item, may he coiisidered as a part ol tho experimental work. We have already alluded to the dcsirable practice of sending technical men to pertinent mieetings of scientific societies. For the average inan an amount approximating SI50 should be provided each year for this purpose. Specialists of higher standing may frequently be obliged to spend mucli more, and for this reason it is difficult to lay down any definite provisions, but rather it is desirnhle to recognize that the general overhead of the laboratory should carry these charges. Averaging all traveling, on all types of research problems, at least 5 per cent of the budgeted cost should be available therefor. Probably the Mellon Institute experience on this point is a little unusual, because, in the niajority oi cases, a certain amount of t r v e l is necessary in order to maintain a proper roritact between the fellow and the donor's organization. Furthermore, in association fellowships, t i form of research developnicnt that does riot usually come into the province of the industrial research laboratory, ti considerable amount of time and moiiey may be spent iii plant visits. I t is often uecessary, especially at tlie cornniencernent of an investigation, to make a search of the literature is1 one or more special libraries. The cost thereof must be borne in mind as a possible traveling charge :against :my research. The actual cost of storerooni supplies is gcmerally chiirgcd against the researches. Economies in storeroom opcrat,ion may he elfectod by securing the interest of thc research clieuiists. In our own orgaiiisat,iori we have a social group, thr Robert Kennedy Ihncan Club, to which all fellows nut,oiiiatically belong. One of its standing committees is tlie dorcroosn cotunlittee, having a Inemher from each floor,
with a diairmaii in addition. This committee meets regularly with our assistant director who combines the functions of 1biisi11e-srnanngcr and purchasing agent, for the joiut purpose of a.\vartling orders on bids previously received and of determining the general storeroom policy. Through the aid ol this committee the storeroom hos become of real service to all fellows. The committee has made a careful examination of all types of supplies, both apparatus and reagcnts, as they h a w been found in the storeroom and as they have been requested by fellows. The committeemen have effected standardization by elimination of many grades of reagents and nisny sizes of apparatus. They have determined what specifications are desirable and iii a number of cases have ordered the U. 8. P. grade for either c. P. or rea.gent quality, or both, and have formed decided opinions as to brands to he used or jobbers to be dealt with. Iteceiitly the committee has also taken an active part in a cornplete inventory, house-cleaning, and rearrangement 01 the storcroom. Tatorally this help has been of much assistance to the purchasing agent, himself a mechanical engineer. Some purchasing agents buy according to rigid specifications, which, in our own experience, are not always rigorously enforced; otlicrs buy entirely for price, while still others are worshippers of quantity discounts. Our committee has not hesitated to divide orders where the interest of the Institute is benefited, and has in every way used excelleiit judgment in the placement of orders. Our business ofiice has effected other savings in storeroom operation b,: tlie iristallat,ion of a perpetual inventory of the Kardex type. 137 daily entry of sales and purchases, the office is in possession of accurate information regarding the actual stock that ma,y be kept on hand most economically and yet serve practically all calls. Furthermore, the business oiiice is ablc thcrehy t,o \veed out all dead material and to of slowly moving items.
I,I,SE~ATURECrmn (1) l h o a i d , ''I~Iamibookoi Ihsine~s.,lreinistretio.." hleGrau;-Hill, 1931, pp. 5DD and 601. (a)St,cvenioii, E. P.. Natl. hasoc. Coat Accountants. Bull. IO, No.19, soot. I, 12i".-3 (1929). 'lliCI,"rn
I'ebrusry 3. 1932
TIIEALCHEMIST
bv Elihu Vcdder Elihu Vedder (183tLi923)
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famous American genre and figure pninter. 110 exeont,ed five murals, symbolic of government, for t,he 1,ibrary of Congress, a180 the beautiful mosaic "Minerva" at the head of the main staircase of the Library. Vedder probably achiwed his greatest renown t.hrough his illustrations of the ltubaiyiyat.
