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EFFICIENCY IN GOODS TRANSPORT THE VIEWPOINT OF THE USER

By F. R. L. Wentworth

MA(Cantab), AMInstT, MBIM Distribution director, Schweppes (Home) Ltd.

I HOPE that the other speakers today will not take it amiss if I say that ultimately it is the user and only the user who matters when it comes to efficiency. This is rather like saying that the customer is always right —and so he is. Marketing, which is now the guiding light of most progressive corn ponies, teaches that it is the satisfaction of consumers' needs and wants that is all important--not because of any moral law, but simply because it pays to treat it in this way.

And in the transport of goods, it is the user who is the consumer. You can have the most efficient vehicle in the world as a piece of machinery, but if it is too short, or made to the wrong gross weight specifications from the user's point of view, then that machine is not efficient as I understand the word.

In the same way, a haulier can have the most beautifully organized trunking services anyone ever saw, and yet if they don't go to the right places, or cost too much, or take too long for the user's liking, then his operations are not efficient within my meaning.

This leads me on to try to define what I do mean by efficiency. Incidentally, it is a word I much prefer to that rather overworked term "productivity-, which seems to have so many different meanings, depending on who you are and what you are trying to prove.

Efficiency, to my way of thinking, is that manner of performing a task which fully meets all the requirements of that job at the least cost. It must be clear that this is something no one ever achieves completely. Perfection is, of course, by definition unattainable. And when it comes to a field like our own, in which everything around us is constantly changing: our products, our customers, traffic conditions, legislation, social factors, the economy, the state of technology, then the constant struggle towards greater efficiency means that we have to run pretty hard if we are just to stay in the same place.

If costs are the all-important factor in efficiency, it might not seem unreasonable to ask what is a fair cost figure for an efficient firm? This is the kind of question that general management is apt to ask, in its search for some way of judging the efficiency of its own transport operations, or of comparing them with those of a rival firm or of an outside contractor. Unfortunately this is a question that cannot be answered, because costs are only one side of the equation. The other side is the precise requirements that are laid upon transport. Every firm is different in this respect, and simple comparisons are meaningless.

I must now come out into the open and admit that what I want to talk about, to begin with at least, is not just transport but physical distribution. This is not merely a hobby horse of mine, but the reflection of a fundamental principle that underlies everything that the so-called transport manager of a company is, or should be, doing. It is absolutely no use discussing efficiency in the transport of goods except in the context of distribution efficiency.

To examine transport in isolation is like a doctor trying to diagnose a patient's general condition by looking only at one of his arms. The great and dominating fact about the way in which a company—any company—works is the interdependence of its various parts, and although this may seem obvious, it is in the very nature of human organization to divide things up into separate functions, with an executive in charge of each one. Then straight away you have the danger that each one will go off and try to do his job as well as he possibly can, but as if the others did not exist. There are many ways of overcoming this inherent difficulty, including Committees, but the first thing to do is to get the groupings into separate functions right.

Look at the progress that has been made since marketing emerged as a single function, embracing such previously separated jobs as sales, advertising, 'market research and product development. This is exactly what has happened also with transport. The breakthrough came with the realization that there exists a particularly close interdependence between the transport of goods and their storage, and out of this has come the new science, the new management function of physical distribution.

Perhaps I should stress' the use of both these words: Physical Distribution, even though in practice it is a little cumbersome and they generally get cut down to the one word "distribution". Unless one is careful, it is possible to confuse both oneself and other people because of the other meanings of the word "distribution". I remember talking to someone from one of the Gas Boards, who controls a very large fleet of vehicles, for some little time before realizing that what he meant by distribution was gas-pipes under the ground. Even more confusing is the whole structure of wholesaling and retailing which is still referred to as the distributive trades, and in which one unit regards itself as a distributor—engaged presumably in nothing other than distribution. Or you can hear sales people talking about "getting good distribution" by which they mean getting a new product accepted by a large proportion of customers. So one has to be a little wary of it, but having made this point clear, I will from now on use the one word, distribution, for the sake of simplicity.

Let us then look at the field covered by distribution. it extends typically from the end of the production line right through to the point of delivery to the customer. One sometimes hears it referred to as a pipeline, connecting production to marketing and the customer, which is a reasonable analogy except that it does not illustrate adequately the storage element. Maybe a pipeline with a storage tank introduced halfway along would be more appropriate.

Functions of distribution

What are distribution's functions? Essentially they are to provide services first, service to the marketing side in terms of delivery to the customer, and secondly service to the production side in so far as it absorbs the ups and downs of demand and enables production to carry on at reasonably uniform levels and so to operate efficiently.

Now you will begin to see how there emerge three distinct influences on the costs of distribution: the requirements of marketing, those of production, and the internal, technical efficiency of distribution itself within the framework of the other two. Only one of these, the last one, is within the direct control of the distribution manager, but he is of course interested in the effects of the other two on his costs.

What also emerges from this situation is that it contains the seeds of conflict. The interests of marketing, production and distribution are bound to diverge at times and it is particularly important in my view that none of the three should be subordinated to either of the other two, which happens only too often.

This can, for instance, take the form of placing distribution under the wing of marketing. Indeed, the Institute of Marketing openly lays claim to distribution as falling within its sphere of influence. This is an idea that is widely accepted in the United States, and since it was the Americans who first developed the idea of distribution, you might well ask why I have the temerity to disagree with this notion.

My answer is, in the first place, that with the scope and techniques that distribution covers it is too complex a field for a marketing executive to cover adequately in addition to his own, which is itself already complex enough. Secondly, as I have already indicated, the separate point of view of distribution is liable to become stifled, and its policy will tend to become slanted. if it is subordinated to marketing.

This is no way to diminish the importance of marketing. We are always hearing that the best companies are those which are market oriented, and I strongly support that philosophy. What it means is that all a company's activities should be harnessed, harmonized and directed towards the marketing effort of satisfying customers, since this is the best way of achieving every company's targets: profitability and growth. What it does not mean is that the marketing executive should, or even remotely want to, run the whole show. Or if he does, he should be re-named the managing director.

But distribution is just as likely to be placed under the wing of production, maybe because some of the warehouses are physically in the factories, or because of the close links between stock control and production planning, or maybe just because the factory manager has always been accustomed to running his own transport Whatever the reasons, this kind of situation is as likely to distort distribution policy as subordination to marketing.

Just to demonstrate that I am being consistent on a point of principle and that I am not just an empire-builder, let me add that I am equally opposed to the situation in which production is subordinated to distribution, which I have come across once or twice. This can only lead to a distortion of production policy.

No, these three: marketing, production and distribution, ought to be regarded functionally as equal partners, whose job it is to operate as efficiently as possible, both severally and in concert with one another. I believe that the Americans will eventually come to this conclusion too, and there are signs that they are beginning to move in the right direction.

Now there may be among you some transport managers and maybe even distribution managers in industrial concerns who are not in this happy position and wish that they were, and so far as they are concerned no doubt I am preaching to the converted. Indeed, we keep, hearing speeches from a variety of leading figures in transport be moaning the fact that transport managers are not accorded sufficient status, that transport is the Cinderella of industry, and so on. While I have some sympathy with the feelings of these speakers. I have none for their approach to the problem.

It is not transport managers who need to be convinced of this, it is the people at the top, and they will certainly not be impressed by the mere desire of certain managers to be paid more money and treated as more important. This increase in status is something that has to be won as of right, because the job is worth it to the company. The concept of distribution provides, in itself, the first step towards getting this message across, because it broadens the scope of the job.

And the second step is concerned with costs. It is astonishing how many headings of cost which belong by rights under distribution are normally tucked away elsewhere. Internal cross-subsidies and undercharging are the rule rather than the exception, and the distribution manager's first task must be to expose them, re-value them, and have everything charged to distribution that should be.

This can be a long and difficult task, in which the accountants need to be persuaded at every stage. The target is to secure a proper allocation of all costs incurred in the distribution process, to have these entered at their true cost level, and finally to analyse them.

The first thing that will stand out as a result of an exercise of this kind is that distribution costs will appear openly for the first time as what they are—a large proportion of total costs. One very big company I know of called in some consultants because they thought that their transport costs of £7 million were probably too high. Almost the first thing the consultants did was to point out that the true transport costs were more like £12 million, and that true distribution costs came to around £19 million. Almost the first thing the company did. I am glad to say, was to engage a top-flight distribution executive.

As a proportion of turnover, 8 to 10 per cent is quite a common figure for true total distribution costs, while in some industries with a low-value product in relation to weight they can amount to 20 or even 25 per cent. In the United States, where distances are so much greater, the figure goes even higher.

Although I have indicated that applying the concept of total distribution costs is likely to be a good way of securing recognition and status for the depressed transport manager. I must stress that this is not a Machiavellian plot to hoodwink top management, nor am I founding a League of Empire-Builders. The message I am trying to get across is essentially aimed at the good of the companies themselves. Distribution costs are high: this is an area that has for too long been overlooked and that holds the promise of significant savings to be made; and in this age of increasing competition and narrowing profit-margins, these savings are almost the last ones that can be made.

There is every indication that top management is waking up to this situation, and there are today far more distribution managers and directors in British industry than there were five years ago.

To return to the question of costs: in total they are not enough, they need to be analysed and sub-analysed in great detail if they are to be of use as a means of control and cost reduction by the distribution manager. It is axiomatic that costs cannot be controlled unless they are identified.

There are four main headings: first, delivery transport; second, storage including stock costs; third, freighting or transport in bulk ffrom production points to bulk-breaking points if any); and fourth, administration. As I said at the outset, they are interdependent A distribution network covering the whole country may have many depots, in which case delivery transport costs will be relatively low but storage and freighting costs will be high, or it may have very few, in which case the converse will be the case—high delivery transport costs, and low storage and freighting costs.

Everything depends on the precise circumstances—the type of industry, the number of customers, the size and frequency of order, the total sales volume, the variety and perishability of the products, the state of competition and so forth. But given a particular situation, there is one structure of distribution network which will give the least total costs across the board, and this is what the distribution manager must try to achieve.

The general experience of companies in this country appears to be in favour of fewer depots rather than more, and this is especially apparent when mergers take place. Indeed. one of the most frequentlyquoted reasons for mergers nowadays is economies in distribution. One well-known biscuit giant formed in this way found itself with 70 depots after the merger, and has now managed to cut them down to 25.

To American eyes, 25 or even 10 still seems high for an island the size of ours when they themselves often cover one or several entire States from a single depot. But this is an illusion for much depenth on the density of sales—and our country is more densely populater than most American States—and also on the pattern of the "Distributive trades" I talked about earlier. In the USA, it is rare for the national nanufacturer's customer to be the last link in the chain—the retailer imself. It is more likely to be a wholesaler or other intermediary who limself operates a distribution network, so in reality their system is not 311 that different from ours.

All the same, bringing storage costs into the calculation has iefinitely had the effect of causing firms to try to reduce the number of lepots they operate. Alternatively, in cases where the cost advantage 3f freighting in bulk over the final means of delivery transport is still arge, there has been a growing interest in the use of stockless sublepots or transit depots, which act merely as bulk-breaking points and lot as storage points.

Now neither the means of storage nor the means of delivery transport need to be within the ownership of the company concerned. There are many haulage companies who undertake delivery work, and there are many public warehousing companies up and down the country. But what really is lacking has been the realization that the two go together, and moreover that a manufacturer wishing to distribute his goods is likely to need a national and not merely a local coverage.

How many times have I heard individual distribution managers who use outside facilities say how pleased they were with some and how displeased with others ! Some are expensive, others are not. some---a few—employ up-to-date methods, others do not ; and too frequently there is a kind of local monopoly, so that the user has little choice anyway.

It really is time that some national-sized organizations grew up--and may be with the proposed new vehicle licensing laws they will—capable of giving a uniformly good national distribution service to users. The need is great, for it is by no means every manufacturer whose volume is large enough to sustain a viable distribution network of his own. Even the large companies within Unilever have found it to their benefit to pool their traffics and use a common distribution subsidiary. It ought not to be necessary to wait for mergers in order to reap economies of this kind, I am not in favour of monopolies, so I believe that several cornpanies ought to enter this field. Besides, not all kinds of traffic are compatible with each other, so that probably several kinds of groupings would probably emerge, specializing in various classes of goods. As the railways and BRS gradually discourage parcels traffic let present, the only way many smaller manufacturers can distribute nationally) because of the money thay claim they lose on it, so will the pressure build up, I believe, for an alternative.

Enough of the distribution network as a whole; let us now turn to the separate cost elements. Since this conference is essentially about transport, 1 will confine my remarks to the subject of delivery transport.

In 'practice in nearly every case, this takes the form of delivery by road vehicle, so that what we are considering is the efficiency of operating a fleet of delivery lorries, possibly based on several distribution points across the country. Costs alone, however well analysed, will not be enough to guide the manager of this fleet. What he also needs are operating statistics that tell him something of the physical reality that underlies the costs. He can then ask himself a whole series of questions.

What is the proportion of vehicle days on which the vehicles are lot employed in delivering? If this looks high, what is it due to ? Are the vehicles off the road for repairs? If so, could the repairs be done 3t night either by outside repairers or by his own staff? Is the system of oreventive maintenance and inspection adequate ? Or are the vehicles 3eing run beyond their optimum life?

What about days lost through accident repairs? If these are high, maybe a drive on road safety is called for, with driver testing and training, competitions of skill, the appointment of a road safety officer, and the analysis of accidents and their causes.

Or are days being lost because the traffic is not available ? Then Derhaps the fleet is too large in relation to the volume of goods to be delivered? Or are there fluctuations from day to day or season to season which leave some vehicles idle? If so, could the fleet be cut down and supplemented when necessary from other sources ? Maybe something can be done to iron out at least the short-term fluctuations by planning deliveries by areas on different days?

And supposing that some non-delivery days are inevitable, could those vehicles on those days be employed on something else such as supplementing the freighting in bulk of goods that have to be sent from production points to delivery points? All this arises out of a scrutiny of the days not employed by the vehicles on delivery work.

But when they are indeed engaged in delivering, what is their efficiency like then ? One indicator might be the size of the loads carried relative to the vehicles' capacity, and if these averaged out at, say. 95 per cent, this might be regarded as rather good. The trouble is that it might only be an indication that the vehicles are too small. The central fact about delivery work of this kind is that it is what is called labour-intensive. That is.to say, labour costs are the biggest single item of cost, so that when we speak of efficiency we are speaking of the efficiency of labour.

The only way to find out how efficient it is, is by work-study on the job. This may reveal for example that the driver's mate is not earning his keep and should be dispensed with; or that time-wasting is prevalent, in which case the system of payment for overtime is almost certainly at fault. Maybe a bonus incentive scheme would encourage higher rates of working.

Work-study may also reveal that the planning of the loads is poor and wastes the drivers' time with an excessive amount of running around, or by not giving them a full day's work. Load-planning is after all the key function in operating a fleet of vehicles, and it is generally entrusted to ex-drivers who know the work and the area. But does this really work well enough in practice? Doubts of this kind have led several companies, including my own, to experiment with load-planning by computer. The main thing is that, with the aid of work-study, one should set up a system using standard times for the various elements of work mileage, making a delivery, unloading the goods and so on—that will monitor the load-planners' degree of success in providing each man with a full day's work.

Work study can also reveal other shortcomings. In my own company it showed that a lot of time was spent in roping and unroping, sheeting and unsheeting, climbing on and off the vehicle platform, and restacking goods when empties got in the way of full goods to be delivered. Our solution was to commission a new type of vehicle with a roof and reinforced side-blinds to do away with the sheet and ropes; with a much lower platform achieved through the addition of a third axle so as to give ready access to all parts of the load from the ground; and with a longer platform to provide more space for empties in the early stages of a delivery round.

Another example taken from my own company is the time and effort needed to get our goods into cellars and the empties out again, which were highlighted by work study. As a result, we are now well on the way to developing a portable mechanical lift powered by springs which halves the time taken and takes a lot of the hard work out of the job. It is not difficult to find other examples of mechanical aids which can speed up delivery work, such as the auto-bagger and conveyor-discharge systems adopted by the coal delivery people. Speed up the work enough, and you may be back to considering a larger vehicle.

Virtue of work-study

As I hope I have driven home, the virtue of work-study is the way in which it analyses time, so that one can then tackle each category of time-consuming activity with a view to reducing it. Probably the most glaring example of wasted time is spent in waiting or queueing. This can occur at the home base, or en route, or at the delivery point.

Time lost at the home base generally calls for a look at the system of loading and unloading. It may be possible to speed this up by better organization, or the use of mechanical aids or of pallets. Or else it may be caused by congestion due to too many vehicles and too-limited facilities. It may turn out that night loading is the answer, or even the pre-loading of exchangeable bodies or semi-trailers.

Time lost en route is inevitable nowadays in our congested urban areas, but it does highlight the advantages that can be gained from making out-of-hours deliveries. This is a broad subject which is receiving a lot of attention at present, but one incontrovertible fact that has emerged is that in the early morning or late evening, let alone at night, average road speeds in urban areas are at least 20 per cent faster and sometimes much more than that. Of course, this needs to be balanced up together with the other factors, such as higher wagerates for shift work on the one hand and increased vehicle utilization on the other.

Finally, there is time lost at the delivery point through queueing, which is one of the most aggravating and intractable of problems. It is difficult to tackle because essentially it is due to inefficiency on the part of our customers, and as I said earlier, the customer is always right I Wherever the solution lies, it does not, in this competitive world, lie in being uppish with the customer. It may lie in cultivating a good relationship with the customer's warehouseman, or in an extension of the appointments system, or even in out-of-hours deliveries. Most of all, I believe it lies in making the customers realize that it is in their own best interests to have a speedy and efficient way of handling goods inwards, which in the short-term might mean some kind of financial inducement.

But before we get too worked up about this problem, it is as well for us users to look at the beam in our own eye. How many of us do not keep our suppliers' vehicles, or those of our hauliers, waiting for hours to suit our own convenience, or merely because it does not appear to inconvenience us to do so ?

I said at the beginning that perfect efficiency is unattainable, but I hope that I have planted one or two signposts to indicate the direction in which we should all be striving. 1. Introduction—the historical ups and downs of road haulage

1.1 I am well aware of my limitations, and one such is to write and deliver a paper of such importance and to such an illustrious gathering, the majority of whom are no doubt engaged in direct transport operations for hire and reward and C-licence operations; and, if last year's list of those attending the FMC is a guide, a fair representation of sales, servicing and engineering undertakings.

1.2 I found it difficult to refuse Brian Cottee's request to speak, for the reason that when I was organizing Northern Ireland Carriers and getting it off the ground he wrote an article of my endeavours, which helped considerably. I might add that a reprint of this article from COMMERCIAL MOTOR is still used and sent to industrialists and traders who enquire about our transport facilities in Northern Ireland.

1.3 In a country which is becoming increasingly conscious of the need for freeing trade, the basic requirements for this freedom are sometimes overlooked, Such a requirement, in my view, is the availability of a fast, efficient and economic road transport system.

1.4 Over the past 40 years there has never been in Great Britain one clear five-year period on the road freight side in which drastic changes were not either threatened or in process of implementation. No major innovation has been allowed to run a five-year period so that it could at least be seen whether or not it would work. After the war we had the Transport Acts of 1947, 1953, 1956 and 1962, the Geddes Committee on licensing in 1963 and the White Paper in 1966, and by the day this address appears in print other policies will no doubt be propounded.

1.5 It is a matter of considerable surprise to those concerned that the road haulage industry has not merely survived these shocks but that it has thrived, growing in strength as it has moved steadily from crisis to crisis, and we now have before us a National Freight Organization, the outcome of which is rather obscure. The changes in Northern Ireland have not, fortunately, been so frequent.

2. Measurement of efficiency

2.1 Reputation is an indication of efficiency. Indices of performance can be developed on a highly sophisticated basis to measure efficiency. Gross revenue provides an indication of customer support, and its growth should be a sign that efficient services are being provided. But it is the net that matters; and the profit earned in a genuinely and fairly competitive world is the only sure and certain sign of an efficiently run organization which gives proof positive that assets and the men employed are being advantageously used with no waste of resources.

2.2 It is for this reason that a complete monopoly is always to be regarded with the utmost suspicion. There may be cases in which it can be claimed that the advantages outweigh the disadvantages, especially where there is great capital investment, which is not the case in road haulage: but the disastrous consequences of having no irrefutable check are too important to be ignored. Our economic wellbeing as a country depends upon our efficiency; without it our export markets are in peril; it is all too true that we must "export or die".

2.3 Transport affects every part of trade and industry; if it is defective or ineffective the results will be felt throughout the length and breadth of our economy. If trade and industry have to rely on a completely monopolistic transport system, with no effective checks on its efficiency, and no way of escape if it fails to meet essential needs, the whole body politic will suffer; costs of production will rise; we will be handicapped in our attack on foreign markets; cost of living will rise at home; and our standard of living will decline. Which matters most 5.4 We have now seven Divisions within the NIC, all managed by experienced personnel. Each one is experienced in his own particular field: each Division is self-accounting: and while they work independently I would not like to give the impression that they work entirely in watertight compartments. The Divisions are clearly defined as follows—general haulage, ferry servicing, parcels and sundries, household removals, contract hire, heavy haulage and, set up within the last month or two, a Docks Division.

5.5 This organization is poles apart from that which existed under the Ulster Transport Authority, a monolithic organization controlled from one central office with little or no authority being given to the men in the field. Rate books were printed and these were strictly enforced. I could not see this type of organization working in a situation where we were in competition with experienced and inexperienced carriers, many of whom had no previous experience of road transport of any consequence.

5.6 The effect of this new type of organization was dramatic and had the same effect as the changes made by the Holding Company at the time of the breakaway from the Transport Commission. The result of that change has been highlighted by the progress and the growing profitability of the organization over the past three years. You can well imagine the effect this new type of organization in Northern Ireland had on men who had for years endured direction from above and where there was no incentive for them to think for themselves.

5.7 With a divisional structure, each Division develops a sense of responsibility in that part of the undertaking which benefits the whole. The general principle is for each Division to specialise in a particular field of activity, so that there is a clear and single-minded purpose. A manager is in charge of each Division, and he is directly responsible to me for the performance of his Division and its profitability. He is encouraged to act as if he were the owner of the business, and the fact that he does so is shown by the pride he takes in its success as evidenced by its profitability and the way he takes to heart any fall-off in its success. There is no comparable spirit when there is no separate accounting and everything disappears into the same pot. There is something more real in the profits made by a separate unit and the reality of them is seen and understood and followed month by month throughout the year.

5.8 The day-to-day running of our business is left very much in the hands of the divisional managers, with the general framework of policy laid down by the board. It is not the board's business to manage—it leaves that to the manager whom it appoints. It is only therefore through this type of organization that a large transport business can become really efficient.

5,9 The big and vital question of monopoly as opposed to competition may of course arise out of ownership since State ownership must tend towards monopoly, but at least in Great Britain you have settled down on a basis of mixed economy. It is of course essential in a mixed economy that competition should be on a fair basis as between public and private enterprise without favour shown to one or restrictions placed on the other. In Northern Ireland road haulage is now entirely a "free for all"; there is little or no attempt to agree rates policy; some attempt is being made through the NJ. Road Haulage Association to agree certain conditions, but large numbers of independent carriers remain outside and have no wish to join with us in building up an interworking relationship of the kind which exists in Great Britain.

5.10 We therefore intend to take our normal place in the transport industry of Northern Ireland, standing on our own feet and competing without fear or favour with other hauliers. We are now operating 800 vehicles and some 1,200 trailers in categories from 2 tons upwards, and we are in a position to cater for indivisible loads up to 200 tons.

6. Staff co-operation essential to efficiency

6.1 Earlier in this paper I posed the question of how efficiency is to be measured. To produce profits one would rightly assume that the organization must be efficient; if the structure of the organization is not correct there could be a loss in efficiency. Would it be true to say that the speed by which goods are collected and delivered points to efficiency, and if our commercial acumen is high can one assume that the organization is efficient? Similarly, what effect do our relations with trade unions and the morale of our employees have on the efficiency of our road transport organization? Which of these would you consider would be most likely to produce an efficient organization? No doubt a combination of all, but I think that the success of our business is very largely in the hands of our employees. It is here that we should turn our attention.

6,2 I have forgotten the number of man hours that have been lost through strikes and unofficial stoppages throughout industry. I do know that it is enormous, and I feel too that in many instances management has failed, and the greatest need in a road transport undertaking is that management should take steps best calculated to ensure a high sense of duty and morale amongst its operatives.

6.3 Good morale in an organization should be fostered and care taken to ensure its continuance. It is like good health., in that it is taken for granted until it is lost or impaired in some way.

6.4 Good morale will help enormously to ensure an efficient organization: it is achieved by the interplay of many differing factors; and it is necessary for management to study and appreciate the factors concerned in order that they may understand the nature of the problem and the steps which should be taken to develop and maintain it. It is revealed and highlighted by a briskness and an enthusiasm running through all of the organization's activities.

6.5 There are many signs which indicate the presence of an efficient organization. I will mention four. (1) A low rate of absenteeism, {2} a low rate of staff turnover, (3) a steady flow of recruits, and (4) by staff identifying themselves fully with the aims and objects of. the organization to which they belong. These should form a subject of study for management at all levels, just in the same way as do projects, trading returns, balance sheets and profit and loss accounts.

6.6 Efficient organization serves no useful purpose unless it contains a team with a high standard of morale, and to counter any factors tending to lessen it requires leadership and initiative. I have found in Northern Ireland especially, due possibly to the changes that have taken place, that the feeling of security is disturbed. Management, particularly those in charge of men, should be continually on the look-out for this kind of problem, appreciating that, though people are dealt with collectively, each one on the payroll is an individual and needs to be dealt with as a human being.

6.7 In asking myself how efficiency is to be measured I have not as yet mentioned the standard of maintenance of vehicles and equipment. In this field I have found that men do not like to feel that in comparison with their mates working in other undertakings they are called upon to use inferior or badly maintained equipment. They like to feel that they work in an up-to-date and forward looking industry, where vehicles are well maintained and are renewed at periods indicated by engineers qualified to assess the life of such equipment. Old, dilapidated, badly maintained vehicles depress morale.

6.8 We should not underestimate the importance of rates of pay in obtaining efficiency, but by the same token we should not overestimate it. Can we have efficiency where our workpeople are on rates of pay which keep them at a bare existence? On the other hand, a good sense of duty can be obtained even when rates are low, as a satisfying job is still highly valued. There is no better rule than "a good day's work for a good day's pay", and that is what we aim for in NIC.

6.9 The new Training Boards which are in course of being set up will, I hope, make a contribution to bringing better men into our industry; but in recruitment we are at present on occasions left with little option but to appoint the best of a poor bunch. This should be avoided at all costs however pressing the situation may be. The recruitment of men of poor quality, whether in job knowledge or character, has undoubtedly a very lowering effect on the reliable men already in employment. It is far easier to dilute real experience and ability in a body of men by introducing unsuitable labour than it is to create experience and ability by attempting to teach unwilling and unsuitable men once recruited.

6,10 How often have we, when enquiring about a case of a strike or stoppage, been told that men have had insufficient warning of changes in method of working. Whilst it is not always possible to forecast changes of events, it may be necessary to alter at short notice the pattern or work or method of working, therefore as much notice as possible should be given of any change, and the need for such change explained as far as it is possible to do so.

6.11 Morale and discipline are interdependent. If morale is good then so also is discipline. If discipline is poor, morale suffers. Men do not expect to be spoon-fed. They do expect, however, that if one of their number contravenes the rules he should be disciplined, and, if he is not, morale will suffer as a result of the greater body of men laughing at management for letting the culprit get away with it.

6.12 On every hand we hear of increased productivity, and I cannot stress enough the importance of increased productivity if we in this country are to enjoy the standard of living to which we are entitled. To achieve productivity it is necessary on occasions to reorganize work, redeploy labour, introduce work-study techniques, and in fact take those steps best calculated to ensure that the most efficient method of performing work is introduced.

6.13 All changes of this nature concern our employees, and handled wrongly can create uncertainty and perhaps anxiety in the minds of those who may be affected. Particularly is this the case among the older age groups, who, incidentally, are usually the most loyal of our employees. Our business will undoubtedly suffer in introducing new productivity techniques unless staff are handled in the correct way and with the utmost understanding. Our managers must make the staff familiar with the proposals before the introduction of new methods.

6.14 I find that men are of two kinds—those who want promotion and see in it a chance for their ability, and those who do not want it at all. I have the type of fellow who prefers to remain on the parcel bank although every opportunity has been given to him to learn how to drive. I have even men in the clerical field who prefer to stay exactly where they are, having been born and brought up in the same town and wishing to remain there for the rest of their working life. Both are entitled to their viewpoint; but the more ambitious will want to see opportunities for promotion, and therefore an honest account must always be given of the possibilities and prospects which exist.

6.15 Finally, as good morale is prerequisite to efficiency, I come to the question of internal relations. Men must be fully informed on matters which concern them, either directly or from an interest point of view, and this requires a reliable and efficient system of communications—and goodness knows these are sadly lacking in some directions at the present time. Such a system of communications is built up by very diverse methods. The spoken word, the notice-board and news-letters will pass correct information to the staff rather than allowing them to rely on rumour. And by having a good system of communications the unfortunate effects that the passing of inaccurate information can produce will be avoided and confidence created. Keeping men in the picture raises their selfrespect. Most of you will recollect the comment frequently made by General Montgomery—as he then was—in the last war: -Keep the troops informed".

6.16 I rarely think of my now being employed in a State-owned organization. I have always disliked monopolies; fortunately we are not a monopoly but are subject to the spur of competition. My aim is to produce an efficient transport organization, and as I have stressed the importance of securing the best type of employees and producing good morale as a major factor in efficiency one would not blind oneself to the importance of making a profit. A recent article I read posed the question: "Should State companies run at a profit?".

6.17 There are many reasons why people engage in business or industry. Apart. from the profit motive there is the desire of people either at national or local level to create employment. It is generally accepted that the prime reason why people engage in business is to make a profit. Profit is the key to the success of a commercial enterprise, but does this apply to State enterprise? The answer must be "Yes", for nobody can stay in business indefinitely unless he makes a profit.

6.18 Profit is the excess of revenue over expenditure after charging depreciation, interest, etc. Those familiar with the accounts of public companies know that approximately half of their profits go in taxes. The remaining half has then to be allocated to keep plant and equipment up to date, provide for future expansion to make secure the jobs of those employed in the industry, and, only after all these provisions are made, to pay dividends to the shareholders. The net amount paid out to shareholders is therefore usually less than a quarter of the profits.

6.19 Whether a quarter of the profits is too much or too little is not for me to say, but I think it is quite clear that the incentive element paid out to the owner of capital in a prudently run business should have no ill effect on the incomes of employees or on the expansion or modernization of the business.

7. Conclusion

7.1 To sum up I submit for your consideration that competition is essential to efficiency: that profit is the only real test of efficiency: that a proper organizational structure is essential to efficiency; that efficiency and profitability will be maximised if—as with the company structure—management units of reasonable size, with proper accountability, are put in charge of a manager who is judged by. and in the long run rewarded in accordance with, his financial results.