Scientific Management
Brian Trumbore
President/Editor, StocksandNews.com

Last week we took a look at Henry Ford and the Model T, this time it's an examination of the theories of Frederick W. "Speedy" Taylor, a theorist who had an awful lot to do with Ford's success, along with that of many others.

Taylor, born in 1856, was the first "efficiency expert," as postulated in his 1911 book, "Principles of Scientific Management," which spelled out the new discipline of the same name.

Taylor formulated his theories as a steel company foreman in the 1880s and 90s, working for the likes of Bethlehem Steel. He analyzed every job in the mill and worked out a system of division of labor, increased mechanization, and piecework wage systems, in order to increase efficiency and production, and thus profits. "Scientific management," or Taylorism, also believed in the elimination of allegedly extraneous work motions and the acceleration of others.

Taylor quit his job in the steel mills in 1901 and set to work on promoting his management system, aided by a number of associates including Morris L. Cooke. But it was only after his book was published (much of which was written by Cooke) that his theories gained a wide audience.

From Taylor's observations in the 1880s and 1890s, the practice of having foremen pressure workers for greater output resulted in unnecessary conflict.

"Throughout American industry," he wrote, "management's concept of a proper day's work was what the foreman could drive workers to do and the workers' conception was how little they could do and (still) hold their jobs." [Tindall and Shi]

The basic principle was to use the carrot rather than the stick, and grant incentives to those who produced the most.

As historian David Kennedy notes, this proved to be the "ideological justification for automation in industry?.For Taylor, workers as well as machines lacked intelligence and performed most efficiently when controlled completely by engineers and managers." You can see how Henry Ford was able to quickly adapt the theory in institutionalizing the auto assembly line for the Model T.

Taylor did a lot of work on time-motion studies, using a stopwatch, to improve factory arrangement, proper use of tools and equipment, and the development of planning departments. Efficiency experts became a part of the everyday scene in business, though this was not always well received.

Taylorism was also used to "defang" union organizers. Non- union corporations in the 1910s and 1920s often offered stock bonuses and profit-sharing plans, life insurance, and old-age pensions, what was known as "welfare capitalism." But then the corporation could modify or terminate the plans at will. Kennedy writes in "Freedom From Fear":

"When the Crash came, the transient generosity of employers was starkly revealed as a shabby substitute for the genuine power of collective bargaining that only an independent union could wield - or for the entitled benefits that only the federal government could confer."

Scientific management led to design departments at the likes of General Electric and Sears Roebuck, in the first broad-based promotion of "consumer engineering," but as Kennedy noted above, by the 1930s Taylorism became shorthand for an oppressive industrial system. Micromanagement wasn't viewed in the positive light by social scientists as it once was. In the long run, scientific management proved to be a "highly malleable and ambiguous term defined by diverse, conflicting constituencies." [Paul S. Boyer]

As an aside, Frederick Taylor was one of the first lecturers at the new Harvard Graduate School of Business Administration, founded in 1908 and the first to offer a Masters in Business Administration. The initial core courses covered topics such as "Corporate Finance" and "Industrial Organization."

Sources:

"The Growth of the American Republic," Morison, Commager, Leuchtenburg
"America: A Narrative History," George Brown Tindall and David Shi
"New York Times Century of Business," Floyd Norris and Christine Bockelmann
"Freedom From Fear," David M. Kennedy
"A People's History of the United States," Howard Zinn
"The Oxford Companion to United States History," edited by Paul S. Boyer

Wall Street History returns September 5.

Brian Trumbore

BUYandHOLD does not recommend any securities. The securities mentioned above are being used for illustrative and informational purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy.