are certain general principles which are gradually being recognized, and which within the next few years will doubtless be well enough known to classify and make available for the executive's use. At present, however, each executive must work out for himself his own means of recording data and of determining policies in operating his business. An example showing some of the difficulties involved in correct interpretation is one concerning overhead-expense ratios. Some managers consider the ratio of indirect expenses to the direct labor in any department of a manufacturing business as an infallible barometer by which each department of the business can be run. They little realize the absurdity of paying too much attention to overhead-expense ratios and the danger to the business of using overhead-expense ratios as a yard-stick by which to measure accomplishment. In this particular case, that of a large manufacturing plant, a new department manager changed the manufacturing methods so radically that he was able to produce an increased output with less than half the former payroll for direct labor. The expenses for the foremen, clerks, supplies, etc., in the department remained about the same as before. Because of the reduced amount of direct labor the overhead-expense ratio was of course doubled, much to the astonishment of the chief executive, who accordingly considered this department as the worst managed in his whole works. This executive had been running his plant for so many years on the expense-ratio basis that the new department head found it almost impossible to convince the chief executive that the department was making money more rapidly than ever before, even though the overhead-expense ratio had doubled. The overhead expense itself had not increased, and the ratio was doubled simply because the amount of direct labor had been decreased.
It is perhaps worth while to point out here that there is danger in giving too much information and too many facts to executives of small brain capacity who do not know how to use their authority intelligently. Curves such as those described in this and the preceding chapter, placed for the first time in the hands of the executive who does not know the technology or the general underlying principles of the business which he controls, are likely to prompt such a narrow-*minded director to send out a regular deluge of letters unjustly criticising the actions of his subordinates. There is a possibility that a small-caliber man in the manager's chair may send out too much
