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In March 1934 Cecil Kimber read the following paper to the Institution of Automobile Engineers. His comments are still relevant today.
Nearly twenty years ago, the author stood before a similar audience to this, as the joint author of a paper on Works Organization: it was the first experience of its kind, and his stage fright and diffidence may be imagined. Age and experience have removed the stage fright, but the diffidence has increased. The older he grows, the more he realises how very much there is to learn about running such a highly complex business as a motor-car factory. He doubts whether there is another form of commercial activity that demands such close attention to detail, and contains such concentrated elements of trouble. The most insignificant detail can entirely wreck the whole production, and as each car comprises approximately 4,500 potential sources of trouble, there is no doubt that today motor-car production demands intensive effort and organising ability of the very highest degree.
But members know this, and there is no need for the author to enlarge upon it. His object is to relate something of his experience in the motor trade of "Making Modest Production Pay." If his remarks are somewhat autobiographical, it is because he can only tell of his own experiences, which, starting in a somewhat humble way, have achieved a modest success. If such an account is of any help whatever, then he will feel that any trouble he has taken in writing this paper has been amply repaid.
Looking back over the history of making motor cars, with few exceptions, the smaller manufacturer had always great difficulties in making consistent and reasonable profits, and very many found the competition from the larger concerns too much for them, and failed. The quantities were purely relative, for what ten years ago was a big programme is to-day ranked as very modest.
When the author started the concern which he now represents, the present big manufacturers were already beginning their outputs of tens of thousands of cars a year, and to have attempted to compete with them in their markets and at their prices would have been just suicidal. Ever since he started his business career he had the idea that if a firm could offer the public a product only ten per cent better than anyone else's, that firm could command a fifty per cent better price. The percentages are, of course, only figurative, and as an example of what the author means; those who remember the very early days of motor cycling, when machines were somewhat uncertain means of travel, know what a sale, and what a hold on the public, the original Triumph motor cycle had. That has been the keynote of the author's endeavour, and, in his opinion, the only possible way a small firm can exist amidst the present fierce competition in our trade.
Admittedly, he was fortunate in having behind him Lord Nuffield, then W.R. Morris. His dynamic personality - and the author means that in the fullest sense of the term - was, and had been, an ever-present inspiration. But any business of his had to be successful! Many times we have differed in some policy or other, but he has always been big enough - and that is his finest characteristic - to let the author have his way, and when he has done that, we, at the works, have moved mountains to show that we were right, and with very few exceptions we have achieved what we set out to do. Now, the most important necessity of a small firm - and the author cannot stress this too highly - is that the executive staff should be a team. Individual keenness is not enough. They must pull together, and he has always been ruthless about getting rid of any member of the staff who does not get on with his colleagues; his technical or other qualifications count for nothing compared to this. With the team spirit, enthusiasm as a matter of course.
Then another item of management on which the author sets great store is putting all the higher executives, the principal department managers, and the principal foremen on a bonus on profits. In our case a certain portion of these is set aside for distribution on a percentage basis. As a result, everyone concerned realises that everything he can do to make profits for the concern, and avoid waste, will ultimately benefit him individually. The author is amazed to find instances in other firms where bonuses are pais to high officials merely on turnover, or on the number of cars produced, without the cost of producing that turnover being taken into account. In considering this question of making motor cars in modest numbers, and at the same time making a profit, the fact has to be faced that the product will cost more in any case. And here is where salvation comes in - the intense individualism of the Anglo-Saxon race. Mixed up with this is a certain amount of innate snobbery. Without it, all efforts would be hopeless. To this end a motor car must be designed and built that is a little different from and a little better than the product of the big quantity manufacturer.
A market that is different must be found, a market that is not covered or coveted by the large concern. That is becoming increasingly difficult owing to the marvellous finish and even better performance offered by the cheapest cars. But the author believes that there will always be that market available for the car that is that ten per cent better. It is a most difficult market for which to estimate, and as costs per car are high and governed by the number of cars sold, there is little latitude for mistakes, and a certain amount of courage is necessary.
The biggest factor is, of course, overheads. It takes as much time and energy - probably more - to do design and test a car of the speciality type for, say a 3,000-car output, as it does for a 30,000 output. Chassis materials will undoubtedly cost more, much more perhaps, but at least a little more. Coachwork will certainly cost a lot more. Tooling per car will be higher. Selling expenses will be heavy per unit, for it costs very little more to distribute 30,000 than it does 3,000, for the same number of towns has to be covered, and about the same number of distributors and dealers as the big fellow.
Advertising will also be out of all proportion, as the same page spaces in the Motor Press have to be taken as the large concerns, and agents expect to distribute the same amount of equally costly literature.
Olympia Show expenses are equally heavy for the small producer. If a firm caters for the sporting motorist, then the service charges per car are very much higher, and owing to the individual attention expected by the user of the car, much larger service staffs in proportion have to be maintained.
Then again, the small concern has not the advantage of a large spare parts business, which swells so comfortably the profits of the big manufacturer.
However, in spite of all these disadvantages under which the small concern labours, the author says it is possible to carve out a niche in the Empire markets, both at home and abroad, provided that the product offered has some special appeal and especially if it can be endowed with a personality that lifts it out of the ordinary rut.
Having generalised, the author would now like to tell in greater detail how our various functions of management operate. The most important is that of budgetary control. In his opinion, accountancy is not used sufficiently with which he has come in contact. So many seem to overlook the fundamental fact that a man is in business solely with the idea of making that business pay, and the only way in which it can be ascertained - and known from day to day - whether it is being made to pay is by means of accountancy. A vivid example of what disregard of that principle can lead to is the fate of a £1,000,000 company, with which the author is connected in a humble capacity. He well remembers his horror and amazement when one day he discovered that the managing director of that concern was totally unable to read an ordinary trading account, and did not know the debit side from the credit side. That company went into liquidation, taking with it practically all the author's hard-earned savings, and the managing director is a broken man, and looking for a job to-day. The author therefore urges every member of this Institution hand in hand with his study of the technical and production side, as without that knowledge he will never be in a position properly to control a business organisation.
Returning to the question of budgetary control, the preparation of this is possibly the most important piece of work that the management had to do throughout the year. Courage is needed, but not rashness. The various factors that have to be reviewed are the fixed and variable overhead charges, potential sales, the selling prices, and the effect of these on sales, and the amount of profit required.
One of the difficult things that the car manufacturer has to face is the fact that his interests in a factory are diametrically opposed to the interests of the distributor or agent selling his products. This may sound strange, but is explained as follows: The manufacturer is far better off making, say, £15 profit on one £300 motor car than making £10 profit on two motor cars at £250, because there is less capital employed, there are less service charges, and less handling altogether, but the distributor and agents would obviously far sooner sell two cars at £250, because they will be easier to sell, and, what is most important, they will be getting 20 per cent on the two cars, totally £500, instead of 20 per cent on only car totalling £300. In this respect the author considers it essential that the small manufacturer should resist the constant urge he will receive from his agents to give them cheaper and cheaper cars. Leave that to the large quantity car manufacturer, and be content. Map out a modest programme that will assure as far as it is possible a good and reasonable return on the money laid out. To ensure this a very strict budgetary control is required.