The Crisis of Control
It is clear that traditional organizational structures are struggling to meet the challenges of the 21st century. Yet they were once revolutionary, responding to the wave of change created by industrialization.
Before the Industrial Revolution, businesses were small and a single individual could manage them. Until then, James Beniger wrote in The Control Revolution: Technological and Economic Origins of the Information Society (1986), the economy ran at a human pace. But mechanization was speeding things up.
“By far the greatest effect of industrialization… was to speed up a society’s entire material processing system, thereby precipitating what I call a crisis of control, a period in which innovations in information processing and communication technologies lagged behind those of energy and its application to manufacturing and transportation.”
Mechanization also encouraged the division of labor. Andrew Ure described the benefits for factory owners in The Philosophy of Manufactures (1835).
“By the infirmity of human nature it happens, that the more skilled the workman, the more self-willed and intractable he is apt to become, and, of course, the less fit a component of a mechanical system, in which, by occasional irregularities, he may do great damage to the whole.” Through the division of labor, Ure said, skilled labor would eventually be replaced by “mere overlookers of machines.”
Chain of Command
As power and speed increased exponentially through the 1800s new structures were created to avoid system breakdown. Western Railroad introduced a chain-of-command organization in 1842, after a series of accidents and a collision between two trains. The new model improved data collection and scheduling. Alfred Chandler described it in The Visible Hand: The Managerial Revolution in American Business (1977) as “the first modern, carefully defined, internal organizational structure used by American business enterprise.”
The New York and Erie Railroad implemented a hierarchical management structure to improve communication and control in a company with three thousand employees, drawing an early version of what we now call an organization chart. The chart is now in the collection of the Library of Congress.
Daniel C. McCallum, the railway’s general superintendent, established clear lines of authority that made subordinates accountable to their immediate superiors. Workers wore uniforms to show their position in the hierarchy.
Western Union adopted the hierarchical model of the railways to manage its telegraph network. AT&T used it to manage its telephone network. The new model was also adopted by steamship lines, street railways, and the U.S. Postal Service.
The revolution in transportation and communication enabled a high-volume, high-velocity flow of goods to customers across the continent. This triggered a parallel revolution in wholesaling, retailing, and manufacturing. Rapidly expanding enterprises depended on organizational hierarchies to manage the increase in scale.
Within a quarter-century wholesalers grew from small, family-run businesses to companies with thousands of employees. Firms created separate operating units in the 1860s to manage the distribution of thousands of products from manufacturers to thousands of geographically dispersed customers. Advertising, order, shipping, credit and accounting departments assumed different control functions.
As businesses grew larger vertically-integrated multi-functional corporations emerged. Managers were added to direct other managers. Writing in The Twilight of Sovereignty: How the Information Revolution is Transforming Our World (1992), Walter B. Wriston described the rapid growth of middle management.
“Middle managers were unknown in the United States before the mid-nineteenth century, yet managers and clerks accounted for almost 17 percent of the U.S. work force by 1940. From 1900 to 1910 the number of managers in the U.S. work force grew by 45 percent, far outpacing the growth in the general work force.”
Towering skyscrapers were built to house these new office workers, as images of the New York City skyline in 1876 and 1932 show.
Corporations created large bureaucracies to resolve the control crisis brought about by the growing scale of human systems. “Resolution of the crisis demanded new means of information processing and communication,” James Beniger wrote in The Control Revolution, “to control an economy shifting from local segmented markets to increasingly higher levels of organization — what might be seen as the growing ‘systemness’ of society.” Even the logistics of 19th century armies, he says, were affected by the growing complexity of the material economy.
Workers were destined to become subservient to systems. “In the past, the man has been first,” Frederick Winslow Taylor wrote in The Principles of Scientific Management (1911). “In the future the system must be first.”
In 1878, when he was 22 years old, Taylor went to work at Midvale Steel — a steel-making, casting, forging and machining company with a flagship plant in Philadelphia. Shortly after, he was promoted to gang boss. He analyzed the nature of work, breaking each job into its component tasks and measuring the time required to complete each step. He separated planning from execution, and assigned it to managers and engineers. Workers were expected to perform repetitive tasks with ever greater efficiency. The goal was increased productivity.
In The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (1997), Robert Kanigel described this as reinventing the very nature of work.
“Taylor was bringing to the machine shop at Midvale, and increasingly to the rest of the works, a new paradigm of order, standardization, and system. For the very act of close looking, central to time study, revealed not only useless motions by the worker but also deficiencies in the machines, bottlenecks in the flow of material, and other impediments to production.”
By 1883 Taylor had subdivided the foreman’s job into specialized functions assigned to different people. His obsession with efficiency paid off. Where two thousand people might otherwise have worked at Midvale, the actual number was twelve hundred.
Kanigel says Taylor’s scientific management ideas quickly caught on. Henry Ford enthusiastically adopted Taylor’s ideas and applied them at River Rouge, an integrated factory complex of eleven hundred acres, with 75,000 workers and 27 miles of conveyor belts. Ford was able to manufacture 6,000 cars a day, while his closest competitor produced only 700 cars a year.
Taylor’s work was so influential that Peter Drucker recognized him, with Darwin and Freud, as one of three prime shapers of the modern world. Through his dramatic impact on the efficiency of American manufacturing, Drucker said, Taylor could be credited for the American victory in World War II.
Now, more than a hundred years later, history is repeating itself. Today’s challenges require yet another organizational transformation. Models that served well when the goal was to increase efficiency and productivity are now a liability when we need to be creative and agile.
This article is an excerpt from a book in progress on collaboration and transformative change. It was first posted on January 30, 2018, on LinkedIn.