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
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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
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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
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Samuel Slater
Samuel Slater – “Rhode Island
System”
 Very similar to practice and
personnel policies existing in
Great Britain
 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 Mill at Pawtucket, Rhode Island
Depiction of Mill
Mill – present day
reconstruction
Textile Mills
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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
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Charles River Museum of Industry and Innovation
The Waltham Museum Inc.
Waltham Public Library
The National Archives, Northeast Region, Boston
Commonwealth v. Hunt (1842)
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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
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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.
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Peterson, Eric. "Springfield Armory National Historic Site." 28 May 2007. HowStuffWorks.com.
<http://adventure.howstuffworks.com/springfield-armory-national-historic-site.htm> 04 December 2008.
Springfield Armory
http://freepages.history.rootsweb.ancestry.com/~dickb
olt/SpfldMADownTown.html
Peterson, Eric. "Springfield Armory National Historic
Site." 28 May 2007. HowStuffWorks.com.
http://adventure.howstuffworks.com/springfield-armorynational-historic-site.htm04 December 2008.
The American System of Manufactures
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Ideas spread to other areas of manufacturing.
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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
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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
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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
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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
dispatching trains and
checking on performance
Daniel McCallum, Circa 1865
Daniel McCallum (1815-1878)
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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)
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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
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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
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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
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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”
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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 long-forgotten document has shed new light on the career of the
disgraced York railway pioneer, George Hudson.”
BBC News, 2 May, 2005
Emerging Governance Issues
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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
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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.