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 Chapter Five The Industrial Revolution in the United States 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    Largest industry at the time was textile Even though the textile industry was the largest business, factories were still small “Photo” on the left depicts an early textile mill Textile Mills  Samuel Slater Samuel Slater – “Rhode Island System”  Very similar to practice and personnel policies existing in Great Britain  First to use steamdriven power looms  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 Textile Mill at Pawtucket, Rhode Island Depiction of Mill Mill – present day reconstruction 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 Innov The Waltham Museum Inc Waltham Public Library The National Archives, Northeast Region, Bo Commonwealth v Hunt (1842)    Worker combinations (unions) were no longer illegal unless their intent was criminal Seeking a closed shop and striking were no longer illegal 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 Peterson, Eric "Springfield Armory National Historic Site." 28 May 2007 HowStuffWorks.com interchangeability of parts 04 December 2008  Springfield Armory http://freepages.history.rootsweb.ancestry.c om/~dickbolt/SpfldMADownTown.html Peterson, Eric "Springfield Armory National Historic Site." 28 May 2007 HowStuffWorks.com http://adventure.howstuffworks.com/springfie ld-armory-national-historic-site.htm04 December 2008 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      Samuel Morse 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 The Age of Rails: Daniel McCallum  Developed a system of managing on the Erie Railroad:  Specific job descriptions  Accurate performance reports  Merit basis for pay and promotion  Organizational chart to show lines of authority, responsibility, and communication  Use of telegraph for Daniel McCallum, Circa 1865 Daniel McCallum (18151878)    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   Workers were on strike for ten days in June 1854 then months in 1857 in defiance of McCallum’s system Successful career building bridges and served as master of 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 rie Railroad Organization Chart of 1855 Library of Congress, Haer, N.Y Henry V Poor (1812-1905 ) A Broader Management View     Henry Varnum Poor Editor of the American Railroad Journal Became “conscience” of first U.S big business Looked for broader principles of railroad operations (financing, regulation, and role of U.S Railroad in life) Developed three principles based on McCallum’s ideas: organization, information, and communication Henry V Poor  In later work, Poor felt the answer to problems of top management was through better leadership    Unity in the organization Selecting leaders on merit Developing better information systems Courtesy of Pics4Learning http://pics.tech4learning.com George Hudson – “Railway King”     Paid dividends out of capital, both existing and borrowed Altered accounts of railway traffic and revenue to indicate more profit than actually existed Published false statements to investors Bought iron rails from one of his lines and sold them to another of his interests for a £6,000 profit Discussion How to The “Railway King’s” practices compare with other examples of executive illegal and unethical behavior? “A long­forgotten document has shed new light on the career of the disgrac 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 Summary      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  ... 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. .. http://adventure.howstuffworks.com/springfie ld-armory-national-historic-site.htm04 December 2008 The American System of Manufactures  Ideas spread to other areas of manufacturing     Ex: The reaper by Cyrus McCormick The. . .Chapter Five The Industrial Revolution in the United States The USA Economy before 1861        British mercantilism kept the U.S as a colony which delayed