Systems and Methods Appraisal
BY GORDON L. MURRAY Partner, Chicago Office
Presented at the Southeastern Electric Exchange Accounting
Conference, Charleston, S. C. — October 1957
The growth in the public utility industry in recent years has been quite phenomenal. During the ten-year period of 1946-1956 one of your member companies shows an increase in gross revenues of almost 3 1/2 times and has 2 1/2 times more customers. Another company shows an increase in gross revenues of almost 3 times and has 2 2/3 more customers. Other indices of growth and other companies show a similar trend.
This growth pattern is one of the reasons the subject of systems-and-methods appraisal is of so much importance to public utilities today. Growth begets change, change begets problems, and problems require study and appraisal to arrive at solutions. This growth places strains on systems and methods which must be solved by adding more of what we have or adopting a significantly different approach.
Coupled with the need to take action to meet growth problems is the need for action to take advantage of the newer, more powerful methods and equipment now available. Therefore, while systems-and-methods appraisal is a desirable activity even without the growth problem, it becomes a mandatory
activity if the advantages of new developments are to be realized.
Company growth in terms of dollars of income, numbers of meters and customers, output in kilowatts, and other growth measures follow fairly consistent curves. The slopes of these curves change from time to time and vary from company to company. However, this type of change can be characterized by a curve.
The growth and development of systems within a company does not follow a curve but, rather, consists of a series of plateaus. A company adopts a class or type of system for a particular function and uses it, refines it, improves it, and then reaches a point when it is time to move to the next plateau and adopt a basically different method. Typically you see, first, a manual system supplemented with conventional calculators, adding machines, etc.; then NCR, Burroughs, and similar billing and book-keeping equipment; then punched-card systems, and on into electronic systems.
One type of systems-and-methods appraisal is represented by the