coal trade bulletin - Clpdigital.org

THE COAL TRADE BULLETIN. 31
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| EFFICIENCY THOUGHTS AS TO COAL MINING* i
\ By Harrington Emerson, Efficiency Engineer J
Mathematics is a science. Different businesses
use it in different ways. Chemistry is a science.
Different businesses use it in different ways. Hygiene
is a science. Different people use it in
different ways. Efficiency is a science. It is the
science of realizing standards. Different businesses
have different standards and different men
have different standards for the same business.
We cannot talk of efficiency in coal niining without
first setting up standards. As the special
cases are usually more interesting than abstract
reasonings, I shall give the standards that we
established for a particular coal mine in a particular
locality. I do not claim that these standards
would have applied to any other mine.
As to capital there are four general rules, one
or the other or all of which are frequently violated:
(1) Know what all the facts are. Do not
delude yourself with fancies or guesses.
(2) Do not pay more for any property or improvement
than you can get back out of it, including
six per cent, interest, in eight to 10 years.
Do not pay more than $1,000 for a property that
will not yield a net profit of $150 to $200 a year.
(3) Do not spend $1,000 for an income of $200
until you are sure you have no opportunity to
spend $200 or less to save $1,000.
(4) Do not allow your capital to shrink. Carry
as an operating expense any shrink.
Coal properties as to capital investment come
in the same category as real estate; unless the
property is made productive the
INTEREST AND TAXES
accumulate faster than any possible increase in
value. A lot in New York at the corner of Broadway
and Wall street sold about 10 years ago for
$1,000,000. Even at this price it would not have
been a profitable investment in 1800 at $1,000
unelss it had brought in current revenue. The
great land grants to the railroads would have
swamped them if for the first 20 years taxes had
been levied at $0.10 an acres a year. The taxes
would have amounted to $5,000,000 yearly for the
Northern Pacific alone.
Coal properties and lumber properties have to
be worked. The revenues must come from the
coal mined and the trees felled. It is a very ticklish
business in real estate, in coal lands, in timber
tracts to put the dead certainty of taxes and
interest against the guessed at rise in value.
Therefore, in considering timber tracts and coal
fields I always insist on a separation of land in-
*Paper read at the Winter Meeting of the Coal Mining Institute
of America, at Pittsburgh, Dec. 4.
vestments from operating investments. My
second rule applied to both tract investments and
to operating investments.
The third rule is very often violated because
the first rule about knowing the facts is violated.
Don't invest $5,000 to earn $1,000, if you
can earn $1,000 by investing $200.
It is not what you pay labor, it is the profit it
yields you that counts.
It is a general law applying not only to labor
but also to equipment, and to materials that tlie
best grades are relatively cheaper than poor grades.
You know that this applies to coal.
Mr. Mellen, former president of the New York,
New Haven & Hartford, is quoted recently as saying
that no railroad official
IS WORTH MORE
than $25,000 a year. He said that he would have
worked just as hard for $25,000 as he worked for
$75,000. This may be true. Caruso may sing
just as well at a charity concern as in grand opera
for $5,000 a night. It does not follow that you
could get Caruso for $50 a night. The right president
for the New Haven would have been cheap at
a million dollars a year, if he could not have been
secured for less.
The one efficiency rule as to labor is to determine
what you can afford to pay ancl then put in
your time and your skill and your energy finding
the best man that your permitted pay can buy.
In coal mining you have the scale. You are
prevented from going below a certain amount. I
have never seen a coal mine yet in which money
was spent to best advantage for labor.
This is so tremendously important a subject that
I wish I could dwell on it. Take it from me that
your descendants 100 years from now will have
learned to handle labor in the way you ought to
be able to handle it today. A strike seems to me
not only a preventable thing but a ridiculous, a
stupid thing like the sinking of the Titanic or
the wrecks on the New York. New Haven & Hartford
railroad.
In these two rules: Handle your capital economically;
handle labor economically; I have laid
down the basis for efficient coal mining.
How to handle capital and labor efficiently is
the chief business of the great executive. There
are many principles, not rules or devices, that
will guide him, and without these principles he
cannot succeed. Some great geniuses know the
rules instinctively. The rest of us poor mortals
HAVE TO LEARN THEM.
Some boys learn to swim by themselves, most of