The Crisis of Control
As we struggle today to cope with a volatile, uncertain, complex and ambiguous (VUCA) world, history is repeating itself. Organizational models we now take for granted were once revolutionary – created in response to a wave of deep systemic change driven by industrialization.
Before the Industrial Revolution, businesses were small and within the ability of a single individual to control. Until then, James Beniger says in The Control Revolution: Technological and Economic Origins of the Information Society (1986), the economy ran at a human pace, augmented by wind and water power; now steam engines were 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. Writing in The Philosophy of Manufactures in 1835, Andrew Ure described the benefits of dividing up tasks for employers. “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 Through the division of labor, Ure said, “skilled labor gets progressively superseded, and will, eventually, be replaced by mere overlookers of machines.”
Chain of Command
As power and speed accelerated through the 1800s, new forms of organization had to be created to avoid system breakdown.
Western Railroad introduced a chain-of-command structure in 1842, after a series of accidents and a collision between two trains. The new organizational model improved data collection and scheduling. Alfred Chandler described this in his book 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 enable communication and authority in a company with three thousand employees, creating the first example of what we know now as an organization chart. The title of the chart was “The New York & Erie Railroad Diagram Representing A Plan Of Organization Exhibiting The Division Of Administrative Duties And Showing The Number And Class Of Employés Engaged In Each Department From The Returns Of September 1855.”
19th Century Organization Chart for the New York and Erie Railroad
(Geography and Map Division, Library of Congress)
The railway’s general superintendent, Daniel C. McCallum, established clear lines of authority, making subordinates accountable to their immediate superiors. Workers wore uniforms indicating their position in the hierarchy.
Western Union adopted the hierarchical organization model of the railways to manage its telegraph network. American Telephone and Telegraph 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 — enabling a high-volume, high-velocity flow of goods and linking suppliers to customers across the continent — triggered a parallel revolution in wholesaling, retailing, and manufacturing. These rapidly expanding enterprises depended on organizational hierarchies to manage increasing complexity.
Within a quarter-century wholesalers grew from small, family-run businesses to firms with thousands of employees. In the 1860s, they established separate operating units to manage the distribution of thousands of products from a multitude of manufacturers to thousands of customers. Advertising, order, shipping, credit and accounting departments were responsible for different control functions.
As businesses grew larger, vertically-integrated multi-functional corporations emerged, and middle 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.”
Corporations created large bureaucracies to resolve the control crisis brought about by the growing complexity 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 said, were affected by the growing complexity of the material economy.
“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.” Workers were destined to play an increasingly subservient role to systems.
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 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 greater and greater efficiency. The goal was increased productivity.
Biographer Robert Kanigel writes in The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (1997), that Taylor was reinventing the fundamental 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. It was as if once you decided to really look, there was no end to what you could find.”
By 1883 Taylor had subdivided the foreman’s job into specialized functions, assigned to different people. He was obsessive about efficiency. Where two thousand people would otherwise have worked at Midvale Steel, the actual number was twelve hundred due to Taylor’s efforts.
The New Industrial Model
Kanigel says Taylor’s scientific management ideas spread widely.
“Time and motion study and other Taylorist paraphernalia spread all through industry, along with planning departments, standardization, and other features once virtually the intellectual property of Taylor’s disciples. By 1929, Westinghouse’s East Pittsburgh works had a time-study staff of a hundred and twenty;… U.S. Rubber, Western Electric, International Harvester, General Motors — the time and motion experts were everywhere. Something like a consensus had emerged that Taylor’s methods represented the one best way to run a shop.”
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. He 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 the 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.
Our New Challenge
Coping with today’s challenge of a volatile, uncertain, complex and ambiguous (VUCA) world will demand a new kind of transformation. Organizational models that have functioned well to increase efficiency and productivity are failing now when creativity, agility and individual judgement are required for renewal and survival. We will have to think differently, and we will have to find a way to reconcile two seemingly opposite ways of working.