Transcript Seminar One

Week 3 Notes
The Industrial Revolution in the
United States
The Industrial Revolution – in the
United States
 British mercantilism kept the U.S. as a colony
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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.
Textile Industry
Commonwealth vs. Hunt 1842
American System of Manufactures
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 – “Rhode
Island System”
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Samuel Slater
First to use steam-driven
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 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.
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Textile Mill at Pawtucket, Rhode
Island
Depiction of Mill
Mill – present day
reconstruction
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 interchangeability of
parts.
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
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The Railroads: Pioneering in U.S.
Management
Courtesy of Association of American Railroads (AAR)
 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.
Communication Revolution
 Telegraph, patented by
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Samuel Morse
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 (1815-1878)
 Developed a system of
managing on the Erie Railroad:
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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
dispatching trains and
checking on performance
Daniel McCallum, Circa 1865
Daniel McCallum
 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.
 Lost his job when the locomotive engineers would
not follow his rules.
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Workers were on strike for ten days in June 1854
then 6 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
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
 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 Varnum Poor
Henry V. Poor
 In later work, Poor felt
the answer to problems
of top management was
through better
leadership
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Unity in the
organization
Selecting leaders on
merit
Developing better
information systems
Courtesy of Pics4Learning. http://pics.tech4learning.com
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.
 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.
Chapter Six
Industrial Growth and
Systematic Management
Industrial Growth and Systematic
Management
 Growth of enterprise was facilitated by
transportation and communication revolutions
as well as manufacture by interchangeable
parts.
 Alfred D. Chandler Jr.
 Andrew Carnegie
 Systematic Management
 The Changing Environment
Alfred D. Chandler, Jr.
 Chandler wrote about
the evolution of U.S.
Corporations in 1962
book Strategy and
Structure.
 He developed his ideas
from the study of U.S.
corporations during this
period.
Alfred D. Chandler, Jr.
Courtesy of Harvard Business School
Alfred D. Chandler, Jr.
 Described the late 19th century as the
accumulation of resources with growth occurring
because of:
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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.
Andrew Carnegie (1835-1919)
Steel Industry
 Learned McCallum’s
system of management
on the Pennsylvania
Railroad.
 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 Industry
 He increased the
“throughput” velocity to
gain economies of scale
and to fully utilize his
resources.
 The result was a
declining price of steel
for the consumer.
Andrew Carnegie’s his first job was in a
textile mill like this.
The Renaissance of Systematic
Management
 Mechanical engineers
(especially Henry R.
Towne) became important
in improving factory
operations – they often
became the managers.
 Numerous others began to
take an interest in
management.
 The idea that good
management was critical in
a firm gained credence
with engineers and
economists.
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.
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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.
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Big Business and Its Changing
Environment
 The social conscience of
the 19th century
entrepreneur gave rise to
individual philanthropy:
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Ezra Cornell – his money
founded Cornell
University.
William Colgate –
college changed its
name to his as result of
his generosity.
John Hopkins – founded
John Hopkins University.
Cornelius Vanderbilt –
founded Vanderbilt
University.
Cornelius Vanderbilt
Courtesy of The General Libraries, The University of
Texas at Austin.
Big Business and Its Changing
Environment
 More Philanthropists
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Joseph Wharton – grant enabled first business school at
University of Pennsylvania.
Edward Tuck – gift to Dartmouth started Amos Tuck
School of Admin. & Finance.
Leland Stanford – honored his son with a university
John Stevens – provided for the Stevens Institute of
Technology.
James B. Duke – Trinity College (later renamed for the
family).
Daniel Drew – promise of funds led to Drew University.
Moses Brown – founded Rhode Island College; became
Brown University in 1804.
Big Business and Its Changing
Environment
 Famous Philanthropists
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John D. Rockefeller –
given 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, DN0051595. Courtesy of the Chicago Historical
Society
Big Business and Its Changing
Environment
 Famous Philanthropists
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Andrew Carnegie
Courtesy of The General Libraries, The University of
Texas at Austin.
Andrew Carnegie –
gave away $350
million by the time of
his death in addition
to his libraries,
university, and the
Carnegie Foundation.
Rockefeller and Carnegie
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Despite generosity by both individuals, the
Congressional Committee on Industrial
Relations in 1915 denounced both as
“menaces to society.”
Andrew Carnegie Free Library & Music
Hall
Rockefeller Archive Center
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
communication.
 Other industries developed and grew:
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Electrical
Mass marketers
Sewing machines
Harvesters
Steel
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
generally ineffectual.
 Woodrow Wilson (then a
college professor) advocated
better management of
government.
Woodrow Wilson, courtesy of
The Constitution Society
Summary of Part One
 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.
Figure 6-1
Synopsis of early management thought.
Additional Internet Resources
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Academy of Management – Management History Division Website
http://www.aomhistory.baker.edu/departments/leadership/mgthistory/links.html
List of Internet Resources compiled by Charles Booth
http://www.jiscmail.ac.uk/files/MANAGEMENT-HISTORY/links.htm
Western Libraries Business Library – Biographies of Gurus
http://www.lib.uwo.ca/business/gurus.html
Developments from Ancient History
http://www.accel-team.com/scientific/index.html
Max Weber
http://www.faculty.rsu.edu/~felwell/Theorists/Weber/Whome.htm
Nicolo Machiavelli – Medieval Source Book – The Prince 1513
http://www.fordham.edu/halsall/basis/machiavelli-prince.html
John Locke Biography
http://www.blupete.com/Literature/Biographies/Philosophy/Locke.htm
Adam Smith
http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/smith/
James Watt by Carnegie
http://www.history.rochester.edu/steam/carnegie/
Developments during the Industrial Revolution
http://www.accel-team.com/scientific/scientific_01.html
Additional Internet Resources
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The Robert Owen Museum
http://robert-owen.midwales.com/
Charles Babbage Institute
http://www.cbi.umn.edu/exhibits/cb.html
Andrew Ure - The Philosophy of the Manufacturers 1835
http://www.fordham.edu/halsall/mod/1835ure.html
Charles Dupin Biography
http://www-groups.dcs.st-and.ac.uk/~history/Mathematicians/Dupin.html
Cyrus McCormick - Biography
http://www.vaes.vt.edu/steeles/mccormick/bio.html
Samuel F.B. Morse
http://memory.loc.gov/ammem/atthtml/mrshome.html
Henry R. Towne – Address delivered at Purdue University (1905)
http://www.cslib.org/stamford/towne1905.htm
Andrew Carnegie
http://www.americaslibrary.gov/cgi-bin/page.cgi/aa/carnegie
The Rockefellers – PBS Documentary
http://www.pbs.org/wgbh/amex/rockefellers/
The Samuel Gompers Papers
http://www.history.umd.edu/Gompers/index.html
End of Part One