Industrial Revolution - Seminar One

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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

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Alfred D. Chandler, Jr.

Described the late 19th century as the accumulation of resources with growth occurring because of:

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.

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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.

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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.

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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.

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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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Slide 27

Big Business and Its Changing Environment

Business & Society

Matthew Josephson characterized the business leaders of this time as “Robber Barons.”