Lecture The evolution of management thought (6th edition) - Chapter 5: The industrial revolution in the United States

From independence to 1860, the U.S. grew and developed industry. This period was critical to development of the modern enterprise. Railroads and the telegraph allowed firms to grow for economies of scale and scope. Managers were required for large, complex organizations. Quality of life for people was improving.

THE EVOLUTION

OF MANAGEMENT THOUGHT, 6TH

EDITION

Electronic Resource by:

Regina Greenwood and Julia Teahen

The Industrial Revolution

in the United States

Chapter Five

The USA Economy before

1861

 British mercantilism kept the U.S as a

colony which delayed economic

development.

 Great Britain prohibited the sale of

manufacturing equipment and emigration of skilled labor to U.S.

 Adam Smith influenced writing of the U.S Constitution and economic system.

 Earliest factories were textile mills

 Commonwealth vs Hunt 1842

 American System of Manufactures –

manufacture by interchangeable parts

 Railroads

Early Industrial Development– Textile Mills

factories were still small

 “Photo” on the left depicts an early textile mill

 First to use driven power looms

steam- Relied on sole proprietorship or partnership form of ownership initially.

 Relied on family for labor – with growth had

to hire professional managers.

 Vertically integrated operations forward and backward.

Samuel Slater

Textile Mill at Pawtucket, Rhode Island

Mill – present day reconstruction

Depiction of Mill

Textile Mills

 Francis Lowell – “Waltham System”

 Used water-power looms.

 Hired non-family supervisors & managers with corporate model.

 Used integrated spinning and weaving to manufacture goods in large quantities.

 Relied on adult female labor.

 Praised by Charles Dickens for better

treatment of employees.

Resources from Waltham,

MA

 Charles River Museum of Industry and Innovation

 The Waltham Museum Inc

 Waltham Public Library

 The National Archives, Northeast Region, Boston

 Only applied to Massachusetts but

discouraged prosecution of worker

organizations elsewhere

The American System of Manufactures

 Manufacture by interchangeable parts was not new – previously confined to making

muskets and revolvers.

 The Springfield (MA) Armory was an early factory prototype.

 250 employees – largest factory in the U.S until after the Civil War.

 Organized by Colonel Roswell Lee in 1815.

 Used piece rate incentive payments and

accounting system.

 Labor was more specialized.

 Uniform standards promoted

interchangeability of parts.

Peterson, Eric "Springfield Armory National Historic Site." 28 May 2007 HowStuffWorks.com

<http://adventure.howstuffworks.com/springfield-armory-national-historic-site.htm> 04 December 2008.

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The American System of

Manufactures

 Ideas spread to other areas of

manufacturing.

 Ex: The reaper by Cyrus McCormick

 The “American System” received its name

at the exposition of 1851 in London.

 U.S factories remained relatively small.

 The McLane report of 1832 found the firms were mostly:

 Family owned and managed

 Few corporations – unlimited liability

 Little use of steam power

 Similar to findings of Andrew Ure regarding English firms

The Railroads: Pioneering in U.S

Management

 First “big business” in the U.S –

developed c 1830

 Started the transportation revolution

 Facilitated U.S industry move from local markets to national markets

 Railroads had size and complexity

 Required a management system

Courtesy of Association of American Railroads (AAR)

Communication Revolution

 Telegraph, patented by Samuel Morse in 1837, started concurrent revolution in

communication

 By 1860, about 50,000 miles of wires extended over the eastern U.S.

 Dramatic effect on business communication.

 Facilitated U.S industry move from local markets to national markets.

 Richard Sears used the telegraph to see gold watches – the first electronic commerce.

Samuel Morse

The Age of Rails: Daniel

 Use of telegraph for

dispatching trains and

checking on

performance

Daniel McCallum, Circa 1865

Daniel McCallum

(1815-1878)

 System of management relied on

division of labor, personal responsibility, and organization

 Developed a formal organization chart

 Developed highest state of the art

information management

Daniel McCallum (1815-1878)

 Lost his job when

the locomotive

engineers would not

follow his rules.

the Union’s railroads

in the Civil War.

Erie Railroad Organizational Chart

 This is perhaps the first organizational chart ever made

 McCallum created the organizational chart to explain the Erie Railroad

Operation

Erie Railroad Organization Chart of 1855 Library of Congress, Haer, N.Y

Henry V Poor (1812-1905 )

A Broader Management View

 Editor of the American Railroad Journal

 Developed three principles based on McCallum’s ideas:

organization, information, and communication

Henry Varnum Poor

Henry V Poor

felt the answer to

George Hudson – “Railway King”

 Paid dividends out of

capital, both existing

 Bought iron rails from

one of his lines and

sold them to another

of his interests for a

£6,000 profit

How to The “Railway King’s” practices

compare with other examples of

executive illegal and unethical

behavior?

Discussion

“A long­forgotten document has shed new light on the career of the disgraced York railway pioneer, George Hudson.” BBC News, 2 May, 2005

Emerging Governance

Issues

 Early industries were partnerships or

sole proprietorships

 Railroads, requiring large amounts of

capital, saw the growth of joint-stock

companies

 Without uniform, adequate laws in Great Britain, management malfeasance

occurred

 Henry Poor wrote about the need for

government regulation but not control

 From independence to 1860, the U.S

grew and developed industry

 This period was critical to development

of the modern enterprise

 Railroads and the telegraph allowed

firms to grow for economies of scale and scope

 Managers were required for large,

complex organizations

 Quality of life for people was improving