Modem management had its birth in the railroad industry in the 1850s. In the early years, railroads ran their trains along a single track. Keeping “track” of train movements became critical to maintaining safe passage along the lin-e. When the Western Railroad experienced a
series of accidents on its Hudson River rail, culminating in a head-on crash on October 4,1841, that killed a pass-enger and conductor, the company responded to the growing safety problem by instituting elaborate changes in its organizational management, including a more systematic process of data collection from its roadmasters and faster dissemination of vital scheduling information to its train crews. The innovations in management, says historian Alfr-ed Chandler, made Western Railroad “the first modern, carefully defined, internal organizational structure used by American business enterprise/’^^
The invention of the telegraph in 1844 greatly facilitated communications, allowing the railroads to expand across the continent. Together, the rail and telegraph provided the critical transportation and communication infrastructure to serve a national market stretching some 3,000 miles. To meet the needs of this new market, other businesses began to adopt their own increasingly sophisticated managerial schemes. By the time Alfred Sloan of General Mot-ors introduced the multidivisional organizational model in the 1920s, the modern managerial corporation had grown to maturity and was the driving force behind the American economy.
The defining characteristic of the modern corporation is its hierarchical management structure. Virtually every mode-rn corporation chart appears as a pyramid, with field staff and production workers at the bottom of the hierarchy and an ascending staff of professional managers rising up the hierarchy, with a chief executive officer perched on top of the pyramid. Employees at each rung of the corporate ladder have assigned tasks and are held accountab-le for their work to those immediately on top of them on the corporate pyramid. Vital information concerning prod-uction, distribution, and marketing flows up the chain of command, where it is processed at each level and then carried to the next until it eventually reaches top management which, in turn, use that information to make comm-and decisions that are then transmitted down the hierarchy and implemented at each descending level of the cor-porate structure. The organizational chart of the giant modern corporation contains hierarchies within hierarchies. Departments like finance and accounting, research and development, and marketing and advertising, each has its own chain of command embedded inside the larger structure.
At the very bottom of the corporate hierarchy is the unskilled and semiskilled workforce whose job is to make and move things or perform the hands-on services that are the company’s trademark. Their
tasks are for all intents and purposes rigidly routinized along the classical lines of scientific management first espo-used by efficiency expert Frederick Taylor at the turn of the century.
For the better part of the twentieth century, this form of managerial capitalism dominated the American and Euro-pean economies. The organizational arrangement relied heavily on the increasingly bloated ranks of middle manag-ement to both process the flow of information up and down the corporate hierarchy and coordinate and control the many functions of the company.
Robert Reich, the Secretary of Labor, has compared the modern corporation to a military bureaucracy. In both ins-tances, the chain of command runs from the top doun, with less and less room for independent decision-making at the lower levels of the command structure. In the era of mass production and distribution, with its emphasis on increasing division of labor and standardized goods, the need for “absolute control was necessary,” says Reich, “if plans were to be implemented exacdy.”^^
The managerial system of corporate organization was like a lumbering giant, a powerful producer able to turn out a large volume of standardized goods but lacking the flexibilit}’ to make the kind of rapid changes necessary to adjust to sudden fluctuations in the domestic or global market. At their apex of power in the late 1950s and early 1960s, five hundred giant corporations produced half of the nations industrial output and nearly one quarter of the industrial output of the noncommunist world. They employed more than 12 percent of the nations workforce. Gen-eral Motors, the worlds largest corporation, had earnings in 1955 equivalent to 3 percent of the GNP of the coun-try. ^^
By the 1980s, however, American corporate power was being challenged by new global competitors armed with a very different organizational arrangement better equipped to take adxantage of the new technologies of the infor-mation re\olution. The new form of management emerged first in the Japanese automobile industry after World War II. The new approach to making cars dixerged so radical!)’ from the kind of management used in Detroit that industry observers began to refer to the Japanese method as post-Fordist production.
In their book The Machine That Changed the World, James Womack, Daniel Jones, and Daniel Roos examine the revolutionary changes in the manufacturing of automobiles that have occurred over the past century. They recount the story of the Honorable Evel\Ti Henry Ellis, a well-to-do member of the British Parliament, who in
1894 paid a visit to the Paris machine tool company of Panhard and Levassor to “commission” an automobile. The company’s owners, Panhard and Levassor, met with Ellis, soliciting his ideas about the kind of automobile he wan-ted. Their skilled craftsman then set about the task of designing the vehicle and ordering materials to be made by other machine and tool shops in Paris. The custom-ordered parts and components were brought together in the Panhard and Levassor shop, where they were assembled by hand to make the automobile. Ellis s car, like the few hundred other automobiles made each year by Pan-hard and Levassor, was unique and drawn up to meet the very exacting standards of an individual customer. Ellis became the first Englishman to own an automobile.^^
Less than twenty years later Henry Ford was producing thousands of identical cars each day at a fraction of the cost Ellis paid for his handcrafted vehicle. Ford was the first automaker to mass produce a standardized product using interchangeable parts. Because the individual components were always cut and shaped exactly the same, they could be attached to each other quickly and simply, without requiring a skilled craftsman to put them togeth-er. To quicken the process of attachment, Ford introduced a moving assembly line to the factory floor—an innova-tion he first observed in the giant slaughterhouses of the Chicago stockyards. By bringing the car directly to the worker, he shaved precious time off the production process and was able to control the pace of movement in the factory.
By the 1920s Ford was mass producing more than 2 million automobiles a year, each one identical in every detail to the one before and after it on the assembly line.^”^ Ford once quipped that his customers could choose any color they wanted for their Model T as long as it was black. This principle of mass-produced standardized produc-ts set the norm for manufacturing for more than a half a century.
Like other giant manufacturing concerns. Ford and the Detroit automakers were organized along rigid hierarchical lines with a command structure running from top management down a descending line to the shop floor. In strict Tayloresque style, the workforce assembling the cars was stripped of any kind of skilled knowledge and denied in-dependent control over the pace of production. Design and engineering skills and all production and scheduling decisions were placed in the hands of management. The organizational hierarchy was divided into departments, each with responsibility over a specific function or activity and all accountable up the chain of command, with the ultimate authority resting in the hands of top management.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s