THE EVOLUTION OF MANAGEMENT THOUGHT

We began our discussion of management by suggesting that every one of us is already a manager in terms of our daily activities. Historically, we can also find many examples of management. The Great Wall of China could not have happened without a great deal of management expertise. The same could be said of the construction of the pyramids in Egypt. Without management, Columbus could not have made his journeys of discovery. Napoleon’s march across Europe required considerable management. Nonetheless, the systematic study of management is a fairly recent phenomenon.

The need to study management arose with the industrial revolution in Europe (more specifically, England). The industrial revolution and the systematic study of management are the result of a remarkable confluence of ideas and events.

The industrial revolution required an unprecedented increase in scientific and technological knowledge. It further required enormous inputs of human capital (workers) to operate the factories made possible by the new technology. Not only did new technologies bring about newer, more efficient ways of producing goods, technological developments in agriculture also ensured that workers, no longer needed on farms, became available as cheap labor to urban factories. But the industrial revolution was not simply a technological and economic (increased supply of labor resulting in cheap labor) phenomenon. The emergence of the industrial revolution also required a philosophical shift.

Without a new way of thinking about the role of human beings in society, the industrial revolution would likely not have happened; at least not in the way that it did. The period just prior to the industrial revolution was marked by a changing philosophical paradigm. Not only was it economically convenient for wealthy land owners to let their peasants go (now that new technologies made them superfluous on the farms), new ways of thinking about the rights of humans made it seem morally right. With the emergence of liberal philosophies, which spoke of individual rights, land owners no longer needed to feel a sense of obligation to the day laborers on their lands. It became quite right and proper to "give these people their freedom". And that they did.

Once in the cities, these former peasants found work in factories exploiting the new technologies. And, in keeping with the new philosophy and the notion of individual rights, workers were "free" to accept the jobs or not. Of course, the factory owners were free to pay the workers according to the basic economic principles of supply and demand. As there were thousands of peasants streaming into the cities from the country and from as far away as Ireland and Scotland, the supply of labor was plentiful. And the price was low.

The lives of these workers were clearly governed by the economics of supply and demand. And the principles of economics, as part of this new philosophical paradigm, had been articulated by Adam Smith.

 For purposes of this course, we'll dispense with the bulk of Adam Smith's learned writings and concentrate on his astute observations about job specialization through division of labor. Smith described the transition from a craft approach to the manufacture of goods, to the factory approach.

Craft manufacture describes the creation of products by one (or a few) person(s) in disparate locations. The solitary cabinetmaker, slowly crafting a dining room cabinet, which he will later take to the village market to sell, provides an example of craft manufacturing. On the other hand, the factory approach to cabinet making would involve a number of people who have specialized in small, discrete elements of the process. Likely one person would be responsible for the purchase of the wood and other materials required. Another person might be required to cut all wood to the appropriate dimensions.

Yet another worker might glue and fasten the pieces of wood according to plan. Finishing the cabinet through sanding and painting could constitute one or more other jobs. Sales would be left to someone else.

The genius in job specialization lies, of course, in increased efficiency. The productivity per worker is naturally significantly higher than that of the craft worker. Adam Smith's logic set the scene for the industrial revolution. In a way, this insight was the first modern managerial principle. This bit of management insight (how to "organize" the firm's resources), coupled with new technologies and new philosophies, about the rights of individuals, set the scene for a genuine revolution.