Lecture The evolution of management thought (6th edition) - Chapter 6: Industrial Growth and Systematic Management

Examined management thought prior to the scientific management era in the U.S. Early civilizations placed a low value on economic activity. The technical and cultural changes of the Industrial Revolution presented managerial problems in : organizing, motivating people, and fusing people and processes.

THE EVOLUTION

OF MANAGEMENT THOUGHT, 6TH

EDITION

Electronic Resource by:

Regina Greenwood and Julia Teahen

Industrial Growth and

Systematic Management

Chapter Six

Industrial Growth and Systematic

Alfred D Chandler, Jr. 2007)

Alfred D Chandler, Jr.

 Described the late 19th century as the accumulation of resources with growth occurring because of:

 Horizontal combinations of firms in

smaller fields

 Vertical integration – forward and

backward

 Larger firms and the growth of hierarchy

of managers to coordinate and integrate operations were the result.

 Key to success was good management, not size.

 Used the new Bessemer furnace technology to begin vertically and

horizontally integrating his firm

in the steel industry

 Used cost accounting to guide his pricing strategy and drive costs

down.

Andrew Carnegie

Courtesy of The General Libraries, The University of

Texas at Austin

Andrew Carnegie - Steel

steel for the

consumer. Andrew Carnegie’s first job was in a textile mill like this.

The Renaissance of Systematic Management

 Edward Atkinson – management made a difference

 Alfred and Mary Marshall

 Management requires “rarer natural

abilities…and training”

 Managers must forecast, plan, and

organize to gain economies of scale

 Internal economies are enable by more efficient management

The Renaissance of Systematic

Management

 The Labor Question

 Some “Social Gospel” proponents felt that workers should join unions, share in

profits, and have arbitration instead of

strikes

 Engineers and others felt that better work methods and systems were the answer, including pay for performance incentive systems

 In 1895 Frederick W Taylor proposed a

rate setting and piece-rate system

Big Business and Its Changing

Environment

 Business & Society

 Matthew Josephson characterized the

business leaders of this time as “Robber Barons.”

 There is evidence that business leaders did engage in some corrupt practices:

watering stock, bribery of government

officials, manipulating stock, and

conspiracy

 Their motivation was alleged to be

“survival of the fittest” and desire for

monopoly

 Motivation was also drive for economies of scale that led to lower prices

Big Business and Its Changing Environment

college changed its

name to his as result of

his generosity

John Hopkins University.

founded Vanderbilt

University.

Cornelius Vanderbilt Courtesy of The General Libraries The University of Texas at Austin

Big Business and Its Changing Environment

Famous Philanthropists – John D

Rockefeller

 Gave half a billion dollars by the time of his death as well as establishing the Rockefeller

Foundation

 Rockefeller is pictured here in

1907 beside a building

John D Rockefeller

Chicago Daily News negatives collection, DN-0051595 Courtesy of the Chicago Historical

Society

Famous Philanthropists

gave away $350 million by the time

of his death in addition to his libraries,

university, and the Carnegie

Foundation.

Courtesy of The General Libraries, The University of Texas at Austin

Rockefeller and Carnegie

Music Hall

Business and Labor

 The Commonwealth v Hunt decision (1842) broke the British tradition of

unions as conspiracies in restraint of trade.

 U.S craft unions and brotherhoods of railroad workers were successful in the late 19th century.

 Efforts to organize other workers were generally unsuccessful.

 Labor violence in the late 1800s fueled public fear of unions.

Business and Labor

 American Federation of Labor organized in 1886 under Samuel

Gompers

 Without unions, and despite

growing numbers

of immigrants, U.S workers found their wages and real

(purchasing power) wages rising

during the period

Samuel Gompers

Courtesy of Library of Congress

Inventive and Innovative Impulses

 Railroads: made travel possible and

pleasurable; fostered a retailing revolution

 Telegraph and telephone: aided growth of commerce and transportation through

Business and Government:

The Seeds of Reform

 The “elastic clause,”

the commerce clause,

of the U.S Constitution

expanded during this

period with regulation

of railroads.

 The Interstate

Commerce Act and the

Sherman Antitrust Act

were attempts to

regulate business but

these laws were

Summary of Part One

 Examined management thought prior to the scientific management era in the

managerial problems in : organizing,

motivating people, and fusing people and processes.

Figure 6­1         Synopsis of early management thought.