In memoriam: Alexander Hamilton Church's system of 'scientific machine rates' at Hans Renold Ltd., c.1901 - c.1920

Accounting Historians Journal, The, Jun 2003 by Boyns, Trevor

Abstract: In 1901, Alexander Hamilton Church wrote a path-breaking article in The Engineering Magazine, entitled 'The proper distribution of establishment charges'. This article, published in six parts, is generally considered to have been one of the most important articles on the subject of overhead allocation and Church's system of scientific machine rates is often seen as a precursor of work which eventually resulted in the emergence of standard costing. Around the same time, Church introduced his system at Renold, a firm of British chain manufacturers, where it was used well into the First World War. Towards the end of the war, however, the system was gradually abandoned in favor of standard costing and budgetary control. Using archival and published sources, this paper examines the factors leading to the demise of Church's system at Renold and, in so doing, throws light on the between scientific management, organizational change and the development of successful costing systems.

Submitted September 2000

Revised October 2002

Revised January 2003

Accepted January 2003

INTRODUCTION

In the late 19th and early 20th centuries, there developed, in the Anglo-Saxon world, a literature that began to deal with costing generally and, in particular, the issue of overheads (or burden). Some of this burgeoning literature was produced in the form of scholarly texts which were to be used for educational purposes, while a significant role was played by journal articles, in both the accounting and trade press, illustrating ideas and systems favored, or utilized, by the authors and/or the companies that they represented. One important article, published in the Engineering Magazine in 1901, was 'The proper distribution of establishment charges', written by Alexander Hamilton Church. Within 20 years, however, articles had begun to appear on the topic of standard costing, a system which is considered to have had a much greater impact during the 20th century than Church's system of scientific machine rates for allocating overheads. Indeed, Johnson and Kaplan [1987, pp. 127-128] have suggested that although manufacturing cost systems designed to trace costs accurately to diverse lines of products, and hence producing information for assessing efficiency and opportunities for product differentiation, such as that of Church, were available by 1910, they had disappeared by the First World War. It is in this light that the experience of Renold is of interest to accounting historians since this chain manufacturing business adopted Church's system at the beginning of the 20th century, but then subsequently abandoned the system in favor of standard costing and budgetary control. This paper therefore adopts something of the genealogical approach advocated by Miller and Napier [1993], since it focuses in the main upon the factors that led to the failure of Church's costing system at Renold, thereby possibly shedding further light on why this system failed to find widespread acceptance.

This paper attempts to fill in many of the gaps in the details associated with the use of Church's system at Renold, thereby correcting a deficiency noted by Johnson and Kaplan [1987, p. 128], and does this by taking up Vangermeersch's challenge to conduct "a careful mining of the excellent archives at the Renold Company in Manchester, England" [1988, p. 103]. Since Vangermeersch made his comment, the Renold archive has been transferred from the headquarters of Renold pic to the archives section of Manchester Central Library, where it occupies 85 shelves of space. The archive, which is extremely limited for the pre-1909 period, is nevertheless very detailed thereafter, and provides an extremely rich source of material not only for accounting historians but also for anyone interested in the development of scientific management practices in Britain. The differential survival of pre- and post-1909 material reflects a major change in the organizational structure of the company and the impact of scientific management. From around 1909 the company's management began to embrace Taylorism, both at the shop floor level (e.g. introduction of time studies c.1910/11, the use of functional foremen, etc.) and within the higher levels of management. The latter involved a decisive shift from an organization dominated by the owner-entrepreneur, Hans Renold, to one in which committees began to proliferate and play an increasingly more important role in decision-making [for fuller details see Boyns, 2001, pp. 721-722]. The proceedings of all committees, many of which met weekly, were minuted in copious detail, indicating the nature of discussions and who said what. The various sets of minute books have been preserved and provide a major source of information for this study, though the archives also contain large amounts of supporting material, not least the detailed reports, cost investigations, etc., upon which the committee discussions took place and decisions were based. For certain sets of documents there are also explanatory notes and comments, written some years after the event by Charles Renold, which provide additional contextualization. Most significantly from the point of view of this paper, the survival of records relating to the costing and accounting systems for the period c. 1908/09 to c.1920 are reasonably full and informative.1