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final selection from the tenders received, and decisions are all complete for the first year's programme. During the coming financial year the second year's programme will be handled. On receipt of the new machinery the best of the existing machinery will be selected to augment the facilities at running-sheds and small terminal repair shops of all kinds. Workshops Electrification. Work is proceeding satisfactorily with regard to the electrification of existing workshops at Petone, Addington, and Hillside. Petone and Addington have been gas-engine driven, and Hillside steam-engine driven, in the past. Complete plans for electrically driving all machinery in these shops have been made. Motors and electrical gear have already arrived and are being installed at Petone and Addington, and the motors for Hillside are expected in a few months. Ultimately all these motors will be transferred to the new workshops. Not only will this relieve the smoke and gas annoyance to the men and to the neighbourhood, but it will be a distinct step in advancement towards economy and efficiency in working. Workshop-lighting is also being modernized, and conditions made much more comfortable for the employees in this and other directions. Reorganization of Existing Workshops Management. Good progress can be reported in the reorganization of existing workshops management, methods, and services, some of which may be mentioned as follows : — The official staff of our four main workshops in the past consisted of a Workshop Manager and six Foremen, one over every major trade —namely, fitters, blacksmiths, moulders, carpenters, painters, and boilermakers. These Foremen supervised all their respective craftsmen wherever they were located in the workshop area. Analysis showed that each Foreman had men all over each workshop, and that efficient supervision was impossible because of the number of duties involved and the area to be covered. This organization has been changed, and now consists of a Workshop Manager and two General Foremen, one over car and wagon work and one over locomotive work. These General Foremen have Foremen in each shop, supported by Assistant Foremen where the number of men warrants it. In addition, a Production Office division has been set up to route work through the shops, dovetailing the work of one department with another, and to trace material that is required, so that the Foremen are not employed doing work that clerical men can do better. The new organization is better balanced, provides means of production through a progressive route, and is producing economic results. Cost-keeping methods have been established in the four main workshops as part of the Production Division, and the system of recording labour distribution has been changed. A daily time-card replaces the old fortnightly book, so that by a process of keeping the supervisory staff informed of the cost of the work in progress, each Department separately, they will be able to assist in introducing cost-reducing methods. A proper knowledge of detail costs is essential in all businesses, and the methods now introduced cannot fail to have good results. A new system of costing material has been instituted in all four main workshops, so that the supervisory staff will be acquainted with the values of the material they are using. Stock-lists of slow-moving stores are now issued monthly to all departments, as also are lists of stocks of special materials, such as tires, tubes, and plates, so that purchasing may be kept down to a minimum. A matter in connection with the administration of the workshops to which I have devoted considerable attention during the past year is that of relating the earnings of the employees in some way to their output. This is, of course, no new problem in industrial affairs, and various schemes have from time to time been applied to its solution. That, however, which appeals to me as having the greatest possibilities is the premium bonus system. The basic principle of this system is that the profits arising from increased output per unit of labour shall be divided between the. worker and employer. This system is now in operation in many parts of the world, and although it has in many cases been opposed at the outset by labour organizations (more, I believe, as a matter of tradition or sentiment than

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