GRAPHIC CHARTS FOR THE BUSINESS MAN ONB or A SERIES OF LECTURES IN A SYSTEMATIC COURSE STEPHEN OILMAN, B.Sc., C.P.A. Formerly Credit Manager Tennessee Coal, Iron & Railroad Company • a:-' T7>- .* SHI ■, .' ^aS fgsSBK - BC-7 . ■- ' V-*V:4..:r'v «4--V*>' ■ >--vN-■ * ''r'Vfs,7 LaF Jie Extension University * CKicagro - _ \ GRAPHIC CHARTS FOR THE BUSINESS MAN STEPHEN GILMAN, B.Sc., C.P.A. Formerly Credit Manager, Tennessee Coal, Iron & Railroad Company La Salle Extension University C h i c a gf o 1921 (4-251) omruwio 38 i. 4 i ^ T 4?' 7 % SEP 19 1921 : . - ' c3 a 1254B4 Copyright, 1917 All Eights Beserved in All Countries LaSalle Extension TJniveksity 0 CONTENTS Introduction 1 What Are Graphs 3 Cost op Charts 5 Principles op Chart Making . 5 Development op the Chart Form 6 The Four Steps 9 Varieties of Charts 10 Prophecy Charts 13 Organization Charts 14 Flow Charts 17 Line Charts 17 Frequency Curves 18 Chart Standardization 20 Rules Governing Presentation of Graphs 20 Selection of Scales 22 Materials Used in Making Charts 24 Checking List for Graphic Presentations 26 Misleading Charts 27 Comparative Charts .'... 29 Charts for Each Department op Business 30 The Sales Department 31 The Advertising Department 33 The Credit Department 37 Accountants' Reports 41 Production Charts 45 Research Work 53. The Purchasing Agent 55 'Miscellaneous 56 Photographs and Charts 61 Conclusion 61 Self Test Questions 62 i GRAPHIC CHARTS FOR THE BUSINESS MAN The remarkable success of the moving-picture industry has one important lesson for the American business man. It has convinced him as nothing else could, that the most effeotive appeal to the public is through the eye—not by print, but by pictures. This same peculiarity of human nature has been taken advantage of by the skilled advertising man. The maga- zine advertisement withopt illustrations is almost so rare as to excite comment. The reason is obvious. A picture is universal in its appeal. It can be understood by the American or the Chinaman, by the Spaniard or the Hindoo without dif- ficulty. Printed words, sentences, and paragraphs, on the other hand, are distinctly limited in their appeal. The reader must get the author's meaning through a sec- ondary medium, and not direct, as in the case of a picture. The engineering profession has for many years rec- ognized this trick of human psychology. Engineers use pictures to convey engineering facts. The kind of pic- tures which they use are termed "graphs" or graphic charts." What Abe Graphs These graphs are merely "pictures of figures," sort of visual ledgers. Their function is to present to the 3 • 4 STEPHEN GILMAN mind in a definite, clear, and comprehensive manner, the relation of important factors to one another. Within the past half-dozen years accountants, credit men, production managers, sales managers, advertising men, and general business executives have come more and more to realize how greatly graphic charts may help them in their work. Long rows of figures must be thoroughly studied in order to convert them mentally into quantities which may be compared as to size. This is a tedious task which many executives have learned to dread. The reason is a simple one—a row of figures does not tell a story of itself. A somewhat involved mental process is required to grasp fully the real facts. The use of graphic charts or "curves," as they are sometimes called, permits more rapid and accurate interpretation of data. Pages and pages of valuable figures might be laboriously prepared, yet they have little value unless studied as an aid to administrative guidance. A simple chart may convey more real infor- mation than the most elaborate written report. Always, of course, it is necessary to discriminate between impor- tant and unimportant data. There is a proper and an improper use for charts. Collecting the statistics is only half the battle. The method of presentatioif is fully as important as the data itself. The charts should be put up in such inviting form that they will be studied by the executive. For example, anyone can write an advertisement, but the real art consists in so writing it that its attractiveness will make people want to read it. We have, in the graphic chart, a mighty instrument for executive control—a mechanism which sifts figures, abolishes detail, and makes impprtant points stand out, thus giving all the necessary information to the execu- GRAPHIC CHARTS 5 tive at a glance. It makes possible, without mental exertion in reading, accurately measured information of deviations and permits vital comparisons. Certain charts give the present status and indicate the trend. Abnormal conditions are shown by unusual "peaks" and "valleys." The executive should watch chance happenings. Properly used, a graph is simply an aid for executive judgment, never a substitute. The extensive use of charts and curves in corporate reports furnishes ample demonstration of the high regard now held by business men for the graphic form of fhct presentation. Cost of Charts In addition to the great utility of graphic charts, another splendid argument in their favor is the low cost of constructing and maintaining them. The mate- rials are cheap, and it does not require a highly paid man to plot the data in graphic form., The operation is a simple one, involving only painstaking accuracy. A cost of one dollar per chart per year is the figure given by one corporation executive who uses a great many of these convenient curves for the purpose of administrative control. Principles of Chart Making What is the technique of graph making? What are the principles underlying the construction of graphs? When we consider the potency of this instrument, we may well be surprised at its extreme simplicity. As a very elementary illustration, consider the matter of finding out how hot or cold it is. If you read in the newspapers that the maximum temperature of a given 6 STEPHEN OILMAN day is 95 degrees, you find it necessary to interpret this fact by mentally visualizing a thermometer. This we all do automatically, almost unconsciously. This involves a translation from printed facts to a picture— a roundabout method. How much more effective it would be actually to show a picture of a thermometer with the mercury in the tube at 95 degrees. Figure 1, therefore, represents a graphic chart of the maximum Fig. 1.—Thermometer—a Picture of Temperature temperature on a given day. It is a picture of tern- perature. It has exactly the same story to tell to all men, regardless of their intelligence, nationality, or any other factor. It involves no mental translations, but tells a direct story. Development of the Chart Form To tell the same story for the seven days of the week, we may line up the pictures of seven different thermom- GRAPHIC CHARTS 7 = -? | 1 lr» j-8 1-8 rs 2_0 -O 1 1 1 1 1 1 1 1 1 4J (0 n c 3 l/> Fig. 2.—Maximum Temperature Picture by Thermometers for a Week eters as shown in Figure 2. Comparison of these ther- mometers one with the other tells a running story of the temperature for a week which is much more vivid than a row of seven figures would be. A very slight study of Figure 2 clearly illustrates the importance of this use. < r* ' l-s ► ( i i rS Lo j-a - o 7 w ■_o Fig. 3.—Maximum Temperature Shown by Lines 8 STEPHEN GILMAN From Figure 2 to Figure 3 is only a very short step, since Figure 3 tells exactly the same story that is told by Figure 2. We simply have conventionalised thermom- eters. Instead of somewhat elaborate pictures of the thermometer, the height of the mercury in each is repre- sented by a straight line. In Figure 4 we have conventionalized even more. Clearly the important fact is the distance of the top of each line from the base. This can be readily -i -8 -8 -8 © -8 -8 -8 -8 s -2 o c. z ? 5 (- Fig. 4.—Maximum Temperature Scale Represented by Dots grasped without the necessity of actually connecting the top to the base by physical line. A series of dots, such as shown in Figure 4, is just as effective when the principle is once grasped. In order to assist the eye in grasping the facts, we may connect the various dots shown in Figure 4 by a line which transforms it into the curve illustrated in Figure 5. By a series of illustrations (Figures 2, 3, 4, and 5) we have shown the manner of developing graphic charts, "figure 5 is a very good illustration of a simple chart. GRAPHIC CHARTS 9 A careful comparison of the various illustrations used in the development of Figure 5 will help in understand- ing the basic principles of chart development. Practically any series of facts involving two quan- tities, such as temperature and time, may he plotted graphically. £ • ~S = *> c O 3 .J X "C » 3 £ *- f F k. O 05 20* 10* II Step I • O H N W *• IO tO !£££££££ Fig. 6.—The Four Steps of Charting Step 4 consists simply in connecting the various points by a line. Vabieties of Chaets In addition to the simple type of chart just developed, there are other kinds of charts which are in common use. Some are good and some are bad. For general year- round utility, the line chart, such as is illustrated in Figure 5, is probably preferable to any other type. But for certain kinds of facts, other forms are useful. For example, we may wish to show the component parts of a total—we may do so by the use of a so-called GRAPHIC CHARTS 11 "bar chart," as illustrated in Figure 7. The total length of the bar represents 100 per cent. The various component elements of the total are shown as segments of the bar. Thus, in Figure 7, we see that the total expense of the company is equal to 100 per cent, of which 32 per cent represents manufacturing expense, c fJ £ J? Q. b . CM- rO c C V CM _ C .9 „ Z £ ■1 .E x £ lj -o < s* . VD - cm H 1 b to 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 100%- A Fig. 7.—Chart Showing Percentage of Different Classes of Expense to Total Expense for the Blank Manufacturing Company for the Year Ending December 31, 1917 42 per cent represents selling expense, and 26 per cent administrative expense. This represents a very good and simple way of clearly illustrating the relation of the various kinds of expense, one to the other and to the total. The same facts may also be shown by means of a circle, the total area of which represents 100 per cent. This circle is divided into segments of 32 per cent, 42 per cent, and 26 per cent, respectively, for the three varieties of expense mentioned. The bar chart, as illustrated in Figure 7, can be used for comparative purposes, i. e., by showing a number 12 STEPHEN GILMAN Fig. 8.—Chart Showing Percentage of Different Classes of Expense to Total Expense for the Blank Manufacturing Company, for the Year Ending December 31, 1917 of different bar charts on the same scale, each one representing a separate period of time. The bars may be lined up one over the other or side by side. The 20,000 IS.OOO to o • 3 IO.OOO to a <& 5,000 o Units production 1908 1909 1910 1911 1912 1913 19k* 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924- •925 5.000 5,400 5.900 6.300 7.000 7.200 e.ooo 6.3 OO 9,000 9.SOO IO.OOO 10.800 11.200 12.000 IS.OOO 14.000 15.000 16,0 OO ! o 2 = £ <2 •* « * n ® 5 g s £ 8 S S Fig. 9.—Forecast Chart Showing the Tendency or Trend of Production The heavy line represents actual past production. The dotted line Is an extension of the heavy line and represents a prophecy regarding future production. GRAPHIC CHARTS ' 13 circle chart is not useful for comparative purposes, however, and its field is probably limited to the illus- trations of facts which are not intended to be compared from period to period. PROPHECY CHARTS The ordinary line chart is sometimes made to serve the purpose of prophecy. The trend of a line may be determined by extending that line into the future. For example, the history of a company may show: Year 1908 " 1909 " 1910 " 1911 " 1912 " 1913 " 1914 " 1915 " 1916 From these facts we may construct a chart, as shown by the heavy line in Figure 9. It will be observed that this line shows a "trend" or general direction in which it is headed, and we may extend it by the dotted line, as shown in the illustration. This, we may assume, represents a normal trend or direction which the line will follow during future years. By reading from this hypothetical line we may obtain figures representing the probable production for any given future year. Year 1917 9,500 units produced " 1918 10,000 " " 1919 10,800 " " 1920 11,200 " " . " 1921 12,000 " 5,000 units produced 5,400 " 5,900 " 6,300 " 7,000 " 7,200 " 8,000 " 8,300 " 9,000 " 14 STEPHEN GILMAN 1922 13,000 " " 1923 14,000 " " 1924 15,000 11 " 1925 16,000 " Such charts as these are being extensively used in certain lines of business, and also in municipal investi- gations where it is absolutely necessary to arrive at a fairly accurate forecast of population. It is said of the Bell Telephone Company that it has charted many of its future requirements and much of its expected growth for many years ahead, using graphs very similar in principle to the one illustrated in Figure 9, in which the future curve is projected on the basis of past experience and known data as to future tendencies. Engineers for municipalities use such charts to deter- mine the probable population which will require the use of sewers, gas and water, which must be built for the future. OBGANIZATION CHABTS Even such a complicated thing as the organization of a large business may be reduced to the form of a picture. In Figure 10 is illustrated an organization chart which clearly*shows how such a complex and intangible thing as organization may be crystallized into the form of a picture. Organization charts are of the very highest impor- tance in connection with expert consulting services such as accountants and engineers are called upon to per- form. The defects of an organization are never so apparent as when an attempt is made to construct an organization chart. It is almost an invariable rule that public accountants engaged in system work construct organization charts for their clients before taking any other steps, for the very good reason that the accounts GRAPHIC CHARTS 15 U* a a u G O G G bjD u O fa 16 STEPHEN GILMAN | Coloi 1 1 Paper-1 | Receiving 1 I Mixing 1 Cut ting | Squaring 1 lnsp< and Wr jcting ap&inri | Casing | Stora^ ?e| I | Coating | 1 Drying | I Embossing | S in $TeT~] I Double I Wrapping I | Wrapping | Crating | | Shipping | Fig. 11.—Illustration of Flow Chart Showing Flow of Materials through Various Processes (Copied from article in Industrial Management, January. 1917.) GRAPHIC CHARTS 17 merely reflect organization activity, and until the organ- ization is clearly determined, the appropriate account- ing system cannot possibly be constructed. There are no particular rules with regard to the technique of constructing organization charts. This is a procedure which is almost unstandardized. Each accountant or engineer follows his own fancy as to form and arrangement of these exhibits. FLOW CHAETS ♦ Another type of chart which has been in use for many years among engineers and which is attaining consider- able vogue among accountants is what is known as a "flow" chart. The flow chart usually pictures the flow of materials through the Various processes in a factory. Figure 11 shows a typical flow chart. Such exhibits are often very useful to the consulting cost accountant as well as to the efficiency man, since they enable them to visualize in a comprehensive way the activities of an organization. As in the case of organization charts, we find there is no particular standardization as to form, although it is a safe rule that the simpler they are, the better. LINE CHAETS Returning to the type of chart which has the widest general use—the ordinary line chart shown on coordi- nate paper—we find there are a number of different ways of using them. For ordinary business use there are two applications for this type of chart that seem general. One is to serve a historical purpose—to tell a story in which time is a factor. Thus we have charts showing prices of various commodities from month to month and from year to year; fluctuations in the I 18 STEPHEN GILMAN I stock market over various periods of time; fluctuations in the birth rate or death rate or pay roll or the number of accidents or the number of complaints received, or any data having to do with time. This is probably the most common form of line chart. FREQUENCY CURVES Another kind of chart which is very useful is known as the "frequency" chart. The purpose underlying the frequency chart may be most easily illustrated by considering what happens 900 soo 700 0> E MO 0> JD £400 z 300 200 U I 2 3-45 67 89 10 II 12 Number of spots Fig. 12.—Frequency Chart Based on Throwing a Pair of Dice 2,500 Times when we cast a pair of dice two thousand five hundred times. We know that the number of times any number turns up must be governed by the laws of chance. We can determine definitely that out of two thousand five hundred casts of dice, the number 2 will appear a certain number of times, the number 3 will appear a greater number of times, the number 4 a still greater, and so on GRAPHIC CHARTS 19 up to 7, after wliicli the frequency will decline until we get to 12. If we now take these facts and plot them on an ordinary piece of coordinate paper, we shall have a curve resembling Figure 12, which clearly indicates that the appearance of the number 7 is most frequent. When a 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 Fig. 13.—Frequency Curve Illustrated by Coins number of observations are taken, the curve becomes a very smooth one, without noticeable irregularities. As another illustration we might accumulate at ran- dom eighty-three 25-cent pieces, none of them minted before 1908. If they were sorted into piles by dates and ° 96 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25*k Weekly wages Fig. 14.—Frequency Chart Showing Number of Male Employees of the Blank Manufacturing Company at Different Amounts of Weekly Salaries - A chart of this sort is very useful in making a wage study. 20 STEPHEN GILMAN the piles arranged side by side according to years, we would obtain a true frequency curve by connecting the tops of the various columns of coins with an imaginary line. The foregoing illustrations are not taken from the field of business, but have been used to illustrate the theory underlying the use of this type of graphic exhibit. The business utility of these curves may be illustrated by Figure 14, which represents a frequency chart show- ing the results of a wage study in a large corporation. It will be impossible to illustrate the many ways of applying such charts to ordinary business, but experi- ence has shown that frequency charts may be very valuable when properly used in connection with research studies. Chart Standardization The use of charts being so general within the past years, it was recently decided to form a joint committee of a number of scientific and statistical societies in order to work out standard procedure and technique for the construction of graphs. This joint committee has not yet submitted its final report, but it has'suggested certain fundamental chart standards, many of which seem well worthy of adoption. It should be observed that these tentative standards are intended to apply only to the construction of ordi- nary line charts. rules governing presentation of graphs The general rules which apply in the presentation of graphs are given in the following: 1. The general arrangement of a chart should pro- ceed from left to right and from bottom to top. GRAPHIC CHARTS 21 o O O O o o o 8 § 8 § 8 § § % » • • •> % co in w vo m o* $ to,000 5,000 "" I 1 \ 1 • I ■ s f 1 * V A r L * Ml f \ J O : W M < 10 0) 0> O 0> 0) $10,000 5,000 g O - w 5 5 io o o> o> o» © © o Fig. 15.—Charts Showing Two Methods of Exhibiting All Data Right on Face of Chart I 22 STEPHEN GILMAN 2. Horizontal scale figures should always be placed at the bottom of the chart, and the vertical scale * figures at the left of the chart, although if the size of the chart warrants it, these scales may be presented again on the top and right-hand side. 3. In all cases Avhere it is possible to do so, the zero line should be shown on the chart. 4. The zero line on both the vertical and the hori- zontal scale should be much heavier lines than the average coordinate lines. 5. The curve lines should be much broader than the coordinate ruling, so that they may be clearly distinguished from their background. 6. Make the title of a chart so complete that it will be impossible to misinterpret its meaning. 7. Do not overcrowd the chart with too many differ- ent curves. This makes a chart very difficult to read. 8. Whenever possible, show the data right on the face of the chart itself. This may be done in one of two ways, as is illustrated in Figure 15. / The best method is the one shown on the upper section of Figure 15, where the data is shown on the top edge of the chart. Occasionally this form is not feasible, and the alternative tabular arrangement, as shown on the lower section of Figure 15, is allowable. SELECTION OF SCALES A matter of technique which assumes importance is the selection of vertical and horizontal scales for curved plotting. If ordinary good judgment is not exercised in the selection of these scales, the curves plotted will lose somewhat in effectiveness. As an illustration of the difference^ in the shape of a curve when various GRAPHIC CHARTS 23 (c) *10,000 5.000 0) o - n 12 J in ^ 0) 0) O 01 0) 0) oo-cmtn Fio. Ad.—Illustration of the Effect Produced by the Plotting of Exactly the Same Information on Different Scales 24 STEPHEN OILMAN scales are used, see Figure 16, where exactly the same facts are plotted on three different charts. Some care should be exercised in selecting the coordinate scales in order that the final curve may be in good proportion. It is obvious that the optical and psychological effect of the plotting of data may convey an erroneous or exag- gerated impression concerning those facts. For example, if Figure 16 were used to represent the net profit for each year, Form A would convey the idea of extreme fluctuations, Form B would suggest only slight varia- tions, while Form C would indicate a more intermediate tendency. MATERIALS USED IN MAKING CHARTS A few words might be said regarding the materials of graph construction. Practically the only material required is coordinate paper, and this may be obtained in a number of different rulings and styles. A few of these are illustrated in Figure 17. In addition to the ruled paper, which may be punched for loose-leaf books, coordinate ruled cards are becom- ing popular. Such a card is illustrated in Figure 18. The principal utility of the cards is the fact that the whole charting prpcedure for a large organization may be standardized, and a central charting room, or statistical department, as it is sometimes called, may be maintained, and the cards may be systematically filed in drawers for ready reference. These cards are manu- factured of a special paper stock which is tough and durable and yet thin enough so that blueprints may be taken of the curves. When a charting department is maintained, these curved cards are plotted periodically and carry a serial number which remains the same year after year and which renders cross-indexing easy. It is customary GRAPHIC CHARTS 25 n Fig. 17.—Types of Coordinate Paper Courtesy of Educational Exhibition Company. 26 STEPHEN OILMAN to plot only one set of facts on a card and to obtain desired comparisons between different curves by laying out the proper cards in vertical or horizontal rows. NO. tt# CotlCO CROV,. » t Fig. 18.—4x6 Curve Card Thick enough for card index Hie; transparent enough to blue print. The purpose of using semitransparent coordinate paper or cards is to enable the charting department to make blueprints of the curves each month for the various department heads. CHECKING LIST FOB GRAPHIC PRESENTATIONS After a chart has been constructed, it is wise to proof read it carefully against the original data in order to make sure that nothing has been omitted or carelessly •'posted." Willard C. Brinton is responsible for many of the items of the following checking lists: 1. Are the data of the chart correct! 2. Has the best method been used for showing the data? GRAPHIC CHARTS 27 3. Are the proportions of the chart the best possible to show the data? 4. Are all scales in place? 5. Have the scales been selected and placed in the best possible manner? 6. Are the points accurately plotted? 7. Are the numerical figures for the data shown as a portion of the chart? 8. Have the figures for the data been copied cor- rectly ? 9- Are all dates accurately shown? 10. Is the tero of the vertical scale shown on the chart ? 11. Are the zero lines and the 100 per cent lines made bro^d enough? 12. Is all the lettering placed on the chart in the proper directions for reading? 13. Is a key or legend necessary? 14. Does the key or legend correspond with the draw- ing? 15. Is there a complete title, clear and concise? 16. Is the drafting work of good quality? 17. Is the chart in every way ready to mark 0. K.? A number of cautions might be given regarding the Construction of charts, since we find there may be opportunity for optical illusions. Misleading Charts Serious errors may result if curves not having the same zero line are compared, but perhaps the most- potent cause for error is due to the construction of charts which compare diameters of circles instead of areas only. As an illustration of this error, Figure 19 is worthy of attention. Here are the same facts charted 28 STEPHEN GILMAN in three different ways. . These facts are very simple ones, the comparison covering the net profits of a com- pany for three consecutive years. The upper chart shows a graphic presentation of these figures, the rela- tionship being expressed by the diameters of the circles. This gives an entirely false idea of the comparative profits, because the 1916 profits appear very much larger than they should as compared with 1914 and 1915. The $39000 Pacts charted Net profit 1914 *15000 1914. 1915 1915 24,000 1916 39.000 *15,000 *24,000 • • 1914 1915 ♦AftOOO- 30000- 20000 10,000- 0 * !£ — On £ 1916 , Chart showing comparison of net profits by circles on diameter basis Chart showing comparison of net profits by circles on area basis Chart showing comparison of net profits by bar or curves' giving a true comparison Fig. 19.—Comparison of Three Different Graphs Showing the Same Facts The use of circles for comparative purposes is very misleading. next chart shows the same comparison except that instead of the diameters, the areas of the circles have been used. This is more scientific, but it results in an optical illusion, since the circle for 1916 does not seem so large as it should in order to exhibit the proper relationship with the other years. In the line chart shown at the bottom of Figure 19 we find a device which tells the entire truth about the GRAPHIC CHARTS 29 comparative profits for the three years, in the simplest possible manner. Were it not for the fact that many writers in financial and business magazines use circles of various sizes for graphic comparisons, it would seem unnecessary to call attention to the serious error involved. As a matter of fact, the use of circles in such a way surely defeats the whole purpose of graphics. Practically the same objections that are inherent in the use of circles for comparative purposes apply also to the Jtriangle, the square, the cube or any other area or volume figures which involve the use of more than one dimension in the comparison. The mind cannot readily comprehend the comparative importance of such illus- trations. Comparative Charts The maximum benefit of graph presentation comes when two or more curves are to be compared. A single curve of itself is valuable, but a comparison of curves where a "cause and effect" relationship exists is infi- nitely more useful. For this reason, we find very few charts where only one curve is shown. Usually two or even more curves are reproduced on the same field. A very popular type of chart shows similar curves for successive years. For example, the net profits per month for twelve months for a series of years may be plotted and the general characteristic operations be determined. Or gross sales and net profits may be charted together in order to determine the exact rela- tionship existing between them. The use of different colored inks sharply distinguishes the various lines. It frequently happens that a cause and effect relation- ship is suspected between various sets of facts. Thus it is claimed on good authority that there is a distinct relationship between prices on the New York stock 30 STEPHEN OILMAN market and general business prosperity and depression. If a rise in prices on the stock exchange causes an increase in business prosperity, then a chart of average prices should serve as a splendid guide to the business man. Some attempt has been made by economists to graph the general condition of business. If such a curve be plotted on the same field with one showing average stock prices, it may be clearly seen that a true cause and effect relationship actually exists. This is merely one illustration taken from many that are available. The science of expressing business facts graphically is only in its infancy. We find the chart form of reproducing statistics to be a particularly effective instrument of business research, since relation- ships between various sets of facts become much clearer. A great deal of clever work along these lines has been accomplished by organizations such as the Brookmire and Babson statistical bureaus. Figure 20 illustrates a chart typical of those used by many business men. The relationship between prices on the stock exchange and the gross sales and net profits of a particular business are well worth study by its executive. If a distinct cause and effect 'relationship can be discovered, then a very important guide to business administration is at hand. Charts for Each Department of Business Each separate department or function of business has its own peculiar uses for charts. In every depart- ment there are facts and statistics which require com- parison and analysis. Every department head requires those facts to be placed before him in a form easy to interpret. Again, however, the warning may be thrown out that important as these charts are as a means of control, they are only an aid to management. GRAPHIC CHARTS 31 Stocks Sales $120 no 100 * IOQPOO 90 9QjOOO 60 eopoo 70 70.000 60 6O06O 50 50POO 40 4QOOO 30 30,000 20 20,000 • 10 • OOOO 8008- 01 a © a 8 <0 K CO OOOO a a © a w © © - 5 S oi a i Fig. 20.—Chart Showing How Two or More Curves May Be Plotted on the Same Sheet This graph shows the relationship between the state of the stock market (as shown by average prices of twelve industrial stocks) and the gross sales and net profits of the Blank Steel Company. The Sales Department In the Sales Department we find that the manager is vitally interested in facts and figures relating to gross sales for the business as a whole, and also relating to the individual efficiency of each salesman. The prime importance of sales statistics is evident from the increasing tendency to put sales administration on a scientific basis—to apply the budget idea, or, as it is better known, the "quota" plan. It is absolutely essential, therefore, for a sales man- ager to keep in daily touch with the volume of sales actually made, compared with the sales quota. The quota data may be charted in advance and actual accom- plishments charted as results come in. The direction of the latter curve then shows how results are meas- uring up to the quota. To secure a satisfactory volume of total sales requires 32 STEPHEN GILMAN Fig. 21.—Chart'Showing Single Salesman's Record constant watchfulness over the current sales of indi- vidual salesmen. Statistics reflecting the individual's activities, the' number of orders he has obtained, the average profit per order, and his cost of obtaining business, are splendid aids to the manager. GRAPHIC CHARTS 33 Figure 21 exhibits the individual record of a sales- man for a year. It requires but little imagination to see how a chart of this type would be of great value to the executive. • Figure 22 shows the individual salesman's efficiency, not in terms of money, but of his activity—the number of calls made per day and the number of orders taken per day. Any serious discrepancy between the two indicates some fault in the salesman's selling technique. It is an undeniable fact that salesmen frequently go ♦'stale," and a chart like this is the quickest way of finding it out. A chart such as the one shown in Figure 23 can be both current and cumulative. To give the best effects, such charts should show figures for at least two years, so that unfavorable comparisons between them may be investigated. THE ADVERTISING DEPARTMENT To the advertising man also the graphic charts have value. His problem is similar to that of the sales man- •ioqooo 95,000 90/000 65/000 80/000 75/000 70/000 65,000 60000 53/000 5QCOO 4-5/000 4QOOO 35/000 50/000 25/000 2QOOO >5f>00 10000 aooo Fig. 23.—Chart of Gross Sales 34 STEPHEN GILMAN ager, except that instead of dealing with salesmen, the advertising executive deals with various magazines and other periodicals. Requests for information from interested readers of an advertisement are known as "inquiries." It is usually figured that a certain percentage of the total inquiries received will result in orders. That percent- age indicates the effectiveness of the "follow-up" mate- rial, consisting of letters, pamphlets, and other forms of sales literature. 1.500 1,400 1.3 OO 1,200 1,1 OO 1,000 900 Soo 700 600 SOO 400 300 200 lOO O er. age; iinjqiri^t Aye rra or* es: ex = jj * a >• = . •op Q. *. > o 3 3 «> o O —> CO O Z O Fig. 24.—Chart Showing Average Number of Inquiries and Orders by Months One of the principal figures which should be watched by the advertising manager is the current ratio between inquiries and orders. Such a chart is illustrated in Figure 24. As the two lines get closer together, 'it shows that the efficiency of the "follow-up" is increas- ing. The farther apart they spread, the more unfavor- able is the indication. Such a comparison may be made of different advertisements or of different mediums to GRAPHIC CHARTS 35 ilOQOOO 90(000 60.000 70p00 60)000 50,000 40,000 3QOOO 20)000 10,000 o c-d i; « 3T c _>- "°° "a. * d IE „. uo.™*: — oiroocj ^5L£S:<:2:-3-3 o e o o> o> Fig. 33.—Chart Showing Net Earnings and Dividends Declared for a Corporation shown in a vivid way. If the upper line diverges too. far from the lower line, it is a clear signal that collec- tions should be pushed. accountants' reports Until recent years accountants have used graphic charts very little, but an increasing tendency toward this form of expressing figures has recently been noted. In many annual reports published during the last few years, graphic charts have been employed. The results seem fully to justify their use. Not only in the annual report, but in the current accounting work, curve charts are becoming more pop- ular. Many executives demand that their weekly and monthly reports be in graphic form. As an example of such a chart, the one shown in 42 STEPHEN GILMAN Fig. 34.—Chart Showing Distribution of Gross Income for the Blank Company, 1916 Figure 32 is interesting. Instead of the usual dry report of cash balances, we find an easily interpreted financial history of the company, showing the various fluctuations in the state of its treasury. For annual report purposes the graph shown in Figure 33 gives stockholders in a nutshell the informa- 4,500 4,000 «^00 ce <31000 U^50° U. 1,500 O CO 1,000 9 SOO 1 1 1'1 1 5 :o:d'.u:c!^i!o.n dt ib+ti hiprn epis: III c *3 ja is ^ «a £ 4 a. § ^ 1? 4 < £ cf o £ & Fig. 35.—Chart Showing Production and Shipments (in Tons) of Steel Bars GRAPHIC CHARTS 43 Fig. 36.—Chart Showing Sales, Cost of Sales, and Expenses by Months $60,000 55000 50.000 45.000 40.000 35,000 30.000 ZS.000 rgTTT-nnprm i ru i 11111. i i i 1111 :j 111 11 Cos a tttti i n 11111 i ii :6oodsjsol,d: us pure ias?s 20,000 I50OO 10,000 5,000 c Fig. 38.—The Blank Company Pay-Roll Charts v 2 «-> GRAPHIC CHARTS 45 tion they really desire. The difference between the net earnings and the dividends declared is known as the "margin of safety" of the dividend rates. Figure 34 is also very interesting to those who read such a report. The head bookkeeper or the accountant of a corpora- tion can make himself popular with his superior officers by presenting for their inspection charts like those in Figures 35, 36, 37, and 38. The relation between the total production of a given ^ commodity and the total shipment of that commodity to customers is very important from a financial stand- point, since it is desirable to keep as little money as possible tied up in inventory. The closer together the two lines in Figure 35, the more favorable the situation from a financial standpoint. A similar chart for a trading concern is shown in Figure 37. The pay-roll analysis is very important, particularly in the manufacturing business. It is easier to interpret if in chart form similar to Figure 38. This is a chart which differs slightly in form from those previously studied. It consists of three charts, one placed above the other, each using the same horizontal scale, but having three different scales for the left-hand side. The purpose of this arrangement is to permit ready com- parison between the three factors charted. Where graphic charts are used for annual reports or even for departmental reports, it is frequently desirable to have them appear as a preface to detailed sheets showing all the figures. The chart, therefore, should represent only a summary, fully supported in each case by full detail. PRODUCTION CHARTS A number of different charts have been devised by the consulting efficiency specialist and the shop executive. 46 STEPHEN GILMAN Maximum efficiency in a machine shop or foundry demands careful record keeping and close analysis of operating results. For the time-study man, a chart like the one in Figure 39 visualizes increased efficiency. Where a complete operation consists of a chain of suboperations, it is 1ST 2D 3D A TH V) c 5TH o •P 6TH <0 > 7 TH V « 1 ni 11 ua liiOu W 2? 00 2000 ijjoo ipoo 900 o c o J3 V tu ^ 0, 1 x £ z % ± t < 3 ~v) 3 *0 Q. ^ > « y y o t# w O £ A Fig. 41.—Chart Showing Manufacturing Schedule for the Blank Company 48 STEPHEN GILMAN Many shop executives have a chart like that shown in Figure 40 before them constantly. It shows at once when the amount of idle time is becoming dangerous. Modern competitive conditions require a close sched- uling of manufacturing output, and every attempt is made by the shop force to keep production up to the program. Figure 41 shows a graphic history of actual O- ORDERED R-RECEIVED M-MACHINED (QUANTITY) ACQUIRED PART O NO R Z N PART O NO R Z M PART O NO R Z N - Fig. 42.—Chart Showing Progress of Parts Entering into an Assembly1 production as contrasted with scheduled production of a manufacturing plant. Of course there should be one separate chart for each kind of product manufactured. Mr. C. E. Knoeppel, the efficiency engineer, is respon- sible for the chart shown in Figure 42. This pictures the progress of each part entering into an assembly. The various part symbols are listed on the left-hand side, and the distance from left to right is used to repre- sent the number of units. The heavy black line across the top expresses the number of assemblies required for each part; the quantity ordered, received, and machined is indicated by separate distinct lines. Figure 43 graphically compares scheduled and actual dates, and it is almost self-explanatory. The lines con- necting scheduled and actual dates show by their incli- nation whether production is running ahead or behind schedule. 1 Figures 42 to 46 inclusive are reproduced from the 100% Magazine by the courtesy of its publishers. GRAPHIC CHARTS 49 comparison scheduled and actual-dates \ if « nc f MPft* c /' bill material — / scheduled maVhimbd' — % :: 'V 1 a - actual §2 : Fig. 43.—Chart Showing Comparison of Scheduled and Actual Dates The diagram in Figure 44 is particularly interesting, since it is used in planning for complicated assembly work, such as is found in the automobile industry. The tools, purchases, machining, and subassemblies must be started at proper times in order to coordinate in a finished machine on a specific date. The drawing is always started at the extreme right-hand side, and the Eeb. —1— ma f* cm 1 april. ZO 1 tt 21 to analysis of job to be asseh bled o- or dm ft r- tool. m-machine s - sub-assembly f-final assembly Fig. 44.—Chart Analysis of Job to Be Assembled various times required are "worked back." Thus the fine "F" is drawn to represent the distance equivalent to the number of days necessary to the final assembly of the desired quantity. The two lines "S" have been drawn to represent the time required for each sub- 50 STEPHEN GILMAN assembly. In the same way, lines "M," "0," and "T" represent time required for macbining, purchasing, and tooling, and this chart is elaborated to include every subassembly and part. It is clear that lines extending COMPARISON OF PRODUCTION BY DAYS DATE STANDARD 1 2 3 ♦ 5 6 6 9 10 H 12 13 Fig. 45.—Chart Showing Comparison of Production by Days farthest to the left point to the activities which must be started first. As operations begin the accomplishments may be charted parallel to the schedule and thus the exact status of the work is visible at a glance. WORM AHEAD FOR MACHINES HOURS / 2 3 A- «U T X 8 ? 9 •v M 1 12 < 13 1* 15 - — Fig. 46.—Chart Showing Work Ahead for Machines GRAPHIC CHARTS 51 Fig. 47.—Order Flow Chart of the Blank Company 52 STEPHEN OILMAN Chart -e." Fig. 48.—Car Flow Chart The chart in Figure 45 is similar to the one? shown in Figure 41, except that a different technique is used. The purpose of the two charts is approximately the ^same. They compare the production with the standard. Figure 46 is useful in machine-shop planning, since it affords a graphic presentation of the number of hours of work ahead of each machine. Proper adjustments and revisions of the schedule can be made, based upon this chart, in order to bring all lines as nearly as pos- sible to a uniform length. In nearly all efficiency work it is necessary to con- struct flow charts. This type of chart has already been illustrated (see Figure 11). Another type of flow chart is shown in Figure 47, representing the procedure of handling orders in a large mail-order house. GRAPHIC CHARTS 53 Another flow chart built on a different basis is shown in Figure 48, which represents a traffic study made in the city of Chicago, based upon which some startling recommendations for rerouting of cars were made. RESEARCH WORK In certain types of research work it is customary to use so-called "shotgun" diagrams, of which Figure 49 is a good example. The usual manner of making such graphic charts is to make a large number of observa- jtions, or to accumulate a large amount of data, and to •o*04 llllllMIIIMMIIMMMllllMIIIIIMIMIIHI+44-M 25 50 75 100 IZ5 150 175 200 225 250 275 300 325 350 375 400 Weight per casting Fig. 49.—Chart Showing Manufacturing Cost per Pound of Castings of Different Sizes plot them on coordinate paper, either a dot or a small circle being made for each observation. Ordinarily the dots will center along a fairly definite path, and a curve line can be drawn through them in such a way as to cut through all points where the dots are most dense. This represents a graphic means of arriving at a fair average for all the data plotted. « 54 STEPHEN GILMAN Figure 49 shows the results of graphing a number of cost cards representing the cost per pound of making castings. In certain kinds of industrial research work it is necessary to make great numbers of these "shotgun" charts. The statistical department of one large com- pany uses small rubber stamps with needle points just projecting through the center to plot data on the coordi- nate paper. For different hinds of data, different rub- ber stamp designs may be used, such as squares, triangles, and circles. . ♦2SO 340 450 2 20 310 200 VO 190 S» 180 170 0 160 — 150 £ 140 E 130 01 120 IIO IOO 90 O E 3 Z 80 70 60 SO 40 30 20 10 0 W; ft I I III 2 4 5 6 7 8 9 II 12 13 14 15 16 18 19 20 21 22 JUNE 1917 23 ZS 26 27 28 29 30 Fig. 50.—Chart to Study Effect of Introducing Bonus Wage Method in Factory i Curve shows number of employees making bonus. This has been found to be very quick and efficient when a large number of charts must be prepared. Another type of chart used in business research work is shown in Figure 50. This represents the history of an attempt to introduce the bonus wage method into a GRAPHIC CHARTS 55 factory. It shows clearly that the attempt, at least from one standpoint, has been successful, since an inckeas- ing number of employees "make" the bonus as time passes. THE bUKCHASING AGENT The purchasing agent has occasion to use many charts, particularly in keeping track of raw material prices. These are the usual line charts showing unit values on the vertical scale and time on the horizontal scale, and they are not illustrated, as their technique is ^ery simple. Another curve which is useful to the purchasing agent is one which really acts as a perpetual inventory record. Such a chart is shown in Figure 51. It clearly signals the danger point in the consumption of raw stock by the factory, showing both the consumption of material and 70.000 45,000 40,000 5S.OOO 50000 J4S.000 <040,000 •3S.000 5)30,000 025JOOO V 20,000 C •><5.000 10.000 c # u x ^ fe* H *o>J2 J2 5 *3 5 g- o o £ Fig. 51.—Chart Showing Relation between Raw Stock on Hand and Ordered, and Raw Stock Used by Factory I 56 STEPHEN GILMAN the replenishing of supplies received; the addition of lines indicating orders placed, makes the chart complete. MISCELLANEOUS In connection with bank advertising it has frequently been found that a graphic chart showing the growth in deposits tends to increase public confidence in the institution. The simpler such a chart is, the better. A graph like Figure 52 is probably the most effective single form of advertising that a bank can display in its windows. The Department of Public Service in Chicago has been responsible for the creation of a number of inter- esting charts which they have used in their annual reports. One is reproduced in Figure 53 and repre- sents a graphic analysis of telephone service complaints. I ♦ 1,300.000 1,200.000 1.100,000 1000,000 900,000 600,000 700,000 600,000 500.000 400,000 300,000 200,000 100,000 O o - M "I ♦ w >0 O* o\ en 0* Fig. 52.—Banking Chart Showing Growth in Deposits for a Series of Years GRAPHIC CHARTS GRAPHIC CHARTS 59 UNITS SOLO Fig. 55.—Chart for a Company Making Only One Product Shows yearly volume of business necessary to make a profit. Another chart appearing in the same report shows results of a telephone study in a large Chicago store. This chart is reproduced in Figure 54. From such a chart as this a vivid idea of the density of telephone traffic can be obtained. As an aid to the proprietor or the manager of a business in determining the volume of sales required to produce a net profit, Figure 55 suggests a valuable chart, illustrating, as it does, the relation between sales, fixed overhead, and fluctuating overhead expenses. The chart here illustrated indicates that sales of thirteen thousand units must be made before any profit at all can be obtained. Much more complicated charts are such as those issued by statistical bureaus like Babson's or Brook- mire's. Such a chart is reproduced in Figure 56. vSpace 60 STEPHEN GILMAN 0> a Tn 2 M i- a S3 o U a> ■+-> Q a o c3 N a o 0 S-4 ? LO 1 GRAPHIC CHARTS 61 does not permit a complete description. It is sufficient to say that a study of the various factors plotted in these charts should give an investigator or a merchant a fairly good basis for determining general financial trends and tendencies. Photographs and Charts Somewhat allied to graphic charts are progress pho- tographs used by contractors and builders. A photo- grhph of a structure under construction is taken at regular daily or weekly intervals; in this way is pro- duced a running history of the work accomplished. When these are mounted side by side on long sheets, they tell a very vivid story of the progress of the contract. Photographing is also used in connection with charts where it is desired to send copies to distant points. A photograph of a large wall chart may be taken daily or weekly and a number of prints taken off and sent to branch offices or absent executives. This operation is, of course, somewhat expensive, and as a substitute charts are frequently made on thin paper, or tracing cloth, and blueprints are made in the usual way. The curve cards and coordinate paper illustrated in Figures 17 and 18 are constructed of a thin, tougb paper which is sufficiently transparent to permit blue printing. Conclusion The nature of graphs and the principles which underlie the construction of useful graphs have now been discussed. Suggestions have been made for their use in organization, administration, sales, advertising, credit, research, business economics, and other activities of 62 STEPHEN GILMAN business. The aim of this treatise has been to present suggestive charts which will enable the reader to see the possibilities of' graphic illustration in his own particular line of business. The entire subject is only in its infancy, and it may reasonably be expected that the art will be developed very extensively within the next decade. Unquestionably, the enthusiasm of business men and accountants for these "pictures of figures" is becoming greater every day. SELF TEST QUESTIONS These questions are for the reader to use in testing his knowledge of the lecture. The answers are not to be sent in to the University. 1. What is meant by graphs? By what other names are they sometimes known? 2. What is the proper use for graphs in managerial and executive work? 3. What is meant by a line chart ? 4. For what purposes are .bar charts suited ? 5. Explain the use of prophecy charts. 6. What is meant by organization charts ? 7. When may flow charts serve a useful purpose ? 8. Enumerate eight general rules given for the effective presentation of graphs. . 9. What caution should be used in the selection of scales? 10. For what purposes are comparative charts useful? 11. Describe some of the uses of graphs in the sales department. 12. What data from the advertising department lends itself readily to graphic presentation? 13. How may a credit man use graphic charts in his work? 14. Indicate some of the possible uses of graphic charts in accountants' reports. 15. Enumerate at least six different uses of graphic charts in the production department. 16. Explain some of the uses of graphic charts made by the Department of Public Service in Chicago. 17. Explain some of the uses of photography in graphic presentation of facts. 3 5556 004 530 903