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The Story of an Error

by Orest (Orry) Fiume
July 13, 2017

The Story of an Error

by Orest (Orry) Fiume
July 13, 2017 | Comments (0)

It’s been said that there are no new ideas in the world, just the recycling of old ones. I don’t know if that’s universally true, but it certainly is in some cases. 

In 1916, the founder of The Wiremold Company, D. Hayes Murphy, decided that the right way to run a business was to share the profits of that business with both the Financial Capital (himself) and the Human Capital (the workers). He acted on this belief by creating a “Profit Sharing Dividend Plan.” Although he experimented with various formulas in the early years, ultimately he settled on one that put 15 percent of profit before taxes into the Profit Sharing Pool and that money was shared with the employees every quarter, in cash, pro-rata based on straight time wages. A more complete discussion of the plan, and profit sharing in general is contained in my recent Lean Post article entitled “Want to Respect Your People? Share The Profits!” 

In order to educate the company’s employees about the things that hurt profits, and thus hurt profit sharing, Mr. Murphy would write a letter for each Profit Sharing Distribution and hold an “all hands” meeting to discuss it. In addition, at one point he distributed a little booklet that was published in 1919 by McKesson & Robbins, Inc. entitled “The Story of an Error.” Although written almost 100 years ago, it is as relevant today as it was then. A copy of the booklet is attached here. Enjoy.

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
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