Managing Traditional Production

As this profile suggests, the management of production was no more complex than that of commerce. Artisans, craftsmen, shipbuilders, house builders, distillers, and refiners who relied on the labor of apprentices and journeymen found the age-old methods of accounting completely adequate. Like the merchants, they kept records of their financial transactions by using the double-entry system. However, they paid much less attention to improving information on markets and sources of supply than did the merchants.38

The same was true of manufacturers who expanded production by adopting machinery. Their simple machine required neither heavy in- vestment nor a large work force. Few manufacturing enterprises operated full time. Even when they remained active all year, they were closely tied to the seasonal variations and routines of a still overwhelmingly agrarian economy.

Nor was the management of putting-out work any more complicated. In the United States the organization of the putting-out or domestic system of manufacturing was never as sophisticated as it was in sixteenth- century Florence or eighteenth-century Britain.39 Tasks were rarely subdivided; instead the complete product was manufactured in the home. Even in the making of shoes, where the putting-out system was used most extensively, the worker did only two different tasks: the making of the “uppers” and the fitting of the “uppers” to the soles. In carrying out this method of production, the merchant or artisan who owned the materials and was responsible for the sale of the finished goods kept the books. He debited the worker’s account with the value of materials received and credited it with the pieces of finished goods returned at the agreed-upon price. The books show that the worker was often charged for the household supplies he needed, and then credited with farm produce, as well as for the completed shoes or cloth that he returned to the entrepreneur.40

These accounts were not used to control the worker’s activities as they were in the eighteenth and early nineteenth centuries in Great Britain. There, according to Sidney Pollard, they were used as a “check on materials handed over to the outworkers, on rent on their equipment (if any), and on the workmanship of the finished goods handed back.”41 In the United States, the entrepreneur made few attempts to see if the materials he handed out were efficiently used. In fact, the shoemakers usually had enough leftover leather from their production to make and sell shoes for their own profit. Much the same was true of the cloth weavers.42 An Englishman who visited Rhode Island in 1815 deplored the unsystematic nature of American methods. He urged that the distribution of yarn and the receiving of cloth be done on specific days, and that the use of weavers’ tickets, so common in England, be adopted.43 Instead, Americans often turned to the central shop where the work could be supervised by a single overseer. As the merchant who handled the yarn produced in Slater’s mill wrote to a correspondent as early as 1809, “We have several hundred pieces now out weaving, but a hundred looms in families will not weave so much cloth as ten at least constantly employed under the immediate inspection of a workman.”44

All in all, the domestic system of production, so important in the processing of goods in Europe, had little impact on the evolution of a busi- ness enterprise or its management in the United States. It did strengthen the tradition of paying by the piece, and the central shop in shoemaking and cloth weaving had some similarities to the factory. But since the entrepreneur who allotted the materials had little fixed capital to account for and no permanent work force to discipline and control, his business activities were much closer to those of a contemporary merchant than to those of a factory owner.

Before the 1840s the relative scarcity of labor and the continuing use of traditional technologies thus sharply limited the amount an enterprise was able to produce and the size to which it might grow. Before that decade very few enterprises in either production or distribution had acquired an internal organization as complex as a single operating unit of the many that make up a modern business enterprise. Only the southern plantations and the northern textile and gunmaking factories had man- agerial needs at all comparable to those of a single unit at the lowest level of modern management (see figure 1 in the Introduction). The plantations, which were able to enlarge their output by employing slaves, represented an ancient form of production. The textile factories, which expanded their output by developing the technology to harness power from large rivers, and the gun factories, whose guaranteed markets permitted them to pay the costs of traditional technology, were the pioneers of a basic new form of production. The plantations and early textile and arms factories in the United States were as large and as complex to manage as all but the biggest agricultural and industrial enterprises in Europe. An analysis of their operation indicates the nature of management in the largest private businesses at home or abroad before the coming of the railroads. This analysis emphasizes the limited managerial experience on which the later builders of modern business enterprise could draw.

Source: Chandler Alfred D. Jr. (1977), The Visible Hand: The Managerial Revolution in American Business, Harvard University Press.

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