The Integrated Textile Mill – a New Form of Large-Scale Production

Unlike the operation of the plantation, the management of the inte- grated textile mills, the largest industrial establishments of their days, did create new challenges. Owners and managers paid close attention to expanding output and increasing productivity. Nevertheless, their man- agerial methods adhered to those of the mercantile world that spawned them. The transition from mercantile to industrial management came slowly.

Within a single mill the integration of all the processes of production involved in making cloth stimulated innovation in each of the specific processes. Close coordination of the flow at first put a premium on speeding up the spinning processes so that the thread could be fed into the weaving machines as fast as the latter could consume it. Then came the development of leather belting to transmit power faster than was possible with the cumbersome and costly iron gearing. Soon throstle-spinning (and later ring-spinning) frames replaced the slower mule-spinning frames. Besides permitting a much faster and therefore much larger output for each machine, throstle-spinning and ring-spinning frames were easier for women and children to operate. In Britain, on the other hand* where spinning and weaving were not integrated and male labor was more extensively used, the mule continued to be used well into the twentieth century.55 The increase in velocity of output encouraged by the integration of the processes of production thus helped to make the three decades after the War of 1812, in the words of an expert in the field, a “seminal period in the history of American textile technology.” The resulting increase in speed caused output per spindle to rise by almost 50 percent.56

Organizational innovation came more slowly. The merchants who founded the mills and those who came to control them, as well as those who marketed their output, held to traditional ways. Although they incorporated these manufacturing enterprises in order to pool capital, they continued to manage them like partnerships. The manufacturing firm had one full-time officer, normally the treasurer, who resided and worked in Boston or another commercial center and was a major stockholder.57 The day-to-day operations of the distant mill were left to a salaried agent or to a superintendent. To the treasurer and members of the board, the mill agent was a technician similar to an engineer on a canal or an inspector in an insurance company. He was not, as was the overseer to the planter, a close personal assistant helping him to supervise the enterprise as a whole. The treasurer kept in touch with the agent through the accounts the agent sent him and through weekly visits to the mill.

As the mills were designed to facilitate the coordination of flow through the processes of production, the mill agent’s administrative task was rela- tively routine. Each process was normally carried out on a separate floor. In the early mills the raw cotton entered at the bottom floor and the finished cloth emerged at the top.58 On the first floor, raw cotton was picked and cleaned by machines, “lapped” on to wooden cylinders, and then carded. The cleaned and carded cotton went by elevator to the second floor where it was spun into yarn. Next the yarn was dressed—sized, brushed, and dried— and wrapped on to a lap or heavy wooden bobbin, while the fill (undressed yarn) was also wound on another set of bobbins. The warp (the dressed yarn) and the fill were woven into cloth on the third floor. The cloth was then moved to the next floor where it was dressed, and then sent to the cloth room, where it was trimmed, measured, and folded. Some of the finished product went to a nearby bleachery to be bleached and, as facilities were added, to be dyed and printed. Such a factory embodied, it must be stressed, an integration, not a subdivision of work.

Each process was, then, carried on within a subunit of the factory, mostly on one floor, and was supervised by two or three foremen or overseers, as they were then called. The machine tenders were usually women, since the tasks required dexterity and certain manipulative skills and not heavy manual labor. The work was far more routine than even that of plantation slaves. Indeed, the mill workers were the first sizable group of Americans to be totally isolated from seasonal variations in the tempo of their work. Although the rooms were large, with many workers, the foremen had little difficulty in keeping a close watch on their employees. The mill agent had no trouble either in maintaining constant personal touch with the overseers and maintaining an eye on the flow of materials from one floor to another. In fact, when the owners put up a new mill on the same site, their agent normally had the time to take charge of both mills.

The agent’s concern was almost wholly with the processes of production. He had to manage workers, as did the plantation overseer, but he also had to have an intimate knowledge of machines. James Montgomery, a British textile manager with American experience, wrote that the mill agent must “have a thorough knowledge of the business in all its details.”59 To Montgomery these details were technological not entrepreneurial. He advised agents to permit their overseers or foremen to carry out the detailed supervision of their departments, even to the hiring and firing of workers, and the processing of payrolls. The agent’s task was, Montgomery emphasized, to concentrate on maintaining a high steady flow of materials through the mill. He was to “be expert in performing all kinds of calculations connected with the business . . . First, in regulating the speed of the various machines; second, in adjusting the draughts of the different machines; and third, in making changes in the qualities of the cotton and size of the yarn.” Most of Montgomery’s treatise on the management of textile mills was devoted to methods of machine tending. In handling workers, Montgomery’s advice was much the same as that which the planter gave to his overseer. To assure “good feeling and good understanding” within the factory, Montgomery urged that, “while guarding against too much lenity on the one hand, to be careful to avoid too much severity on the other; and let him [the agent] be firm and decisive in all his measures, but not overbearing and tyrannical;—not too distant and haughty, but affable and easy of access, yet not too familiar.”

In his treatises on mill management Montgomery said nothing about accounts. The mill agent did, however, keep a set of reports which w’ent to the treasurer. Assisted by a clerk or bookkeeper, he recorded the amounts of raw cotton received at the mill, from where and by what means it had been transported, and from what mercantile firms it had been obtained.00 The actual buying of the cotton remained the province of the treasurer. The agent also kept an account of the cloth manufactured and then shipped to the company’s selling agent.

In addition the mill agent maintained the payrolls. At first most mill workers were paid by the piece.61 By the 1830s, however, daily payment was becoming more common. This shift occurred because day work was easier to compute. Carding and weaving tended to be paid by the day, while dressing and winding remained by the piece. Weaving was paid both ways. The operators, whether paid by the piece or by the day, received their wages monthly. These monthly payrolls went to the treasurer who maintained the financial accounts of the company.

The treasurer’s accounts show clearly that these factories were run by merchants for merchants.02 The journals and ledgers differed little from those that were used for the sale of the firm’s finished goods. They relied on double-entry bookkeeping, and made increasing use of “trial balances” which were presented semiannually to the board of directors. These balances, drawn from the company’s ledger, were cast into four sets of accounts and then into a “final balance.” One of these four was the cotton account; another the cloth account. The first listed the amounts paid for cotton and cotton on hand; the second, cloth on hand which had not yet been shipped to the marketing firm. The third was the “general expense” account including all wages, all supplies and materials (including oil, starch, flour, wood, burlap, paper, but not cotton), cartage within the mill town, repair charges, and miscellaneous items. The fourth “balance” listed accounts receivable and accounts payable. Some firms also had special sets of treasurer’s accounts for taxes, insurance, and transportation of raw cotton.

All this information was then placed in the “final balance.” The credit side listed bills receivable, cotton and cloth on hand, the amount listed as sold in the selling agent’s account, and the value of property (mills, houses, bleacheries, machines, and land). The debit side listed stock outstanding, bills payable, and finally profit and loss (income received minus general expenses and the cost of cotton). Paul McGouldrick, who reviewed the accounts of many Lowell mills, gained “a strong impression that valuation [of cotton and cloth] at market (minus an arbitrary percentage as insurance against the fall of cloth prices) was customary,” and that the valuation of capital facilities was usually set at cost.63

There was little uniformity in the accounting practices of the leading textile mills, even among those that leased their water power from the same company, sold through the same agents, and had some of the same stockholders. In accounting for depreciation, directors wrote down the value of mills and machinery and other assets in an ad hoc, unsystematic way. The amount and timing was purely at the discretion of the board. Some mills kept reserve funds for specific contingencies including fire and bad debts, and occasionally for renewal and repair, but others did not. None had a surplus account as such. Surpluses were listed under profit and loss or in the contingency accounts. As McGouldrick discovered, fixed assets, insurance, bad debts, and even payments of dividends were accounted for separately by the different companies with mills in Lowell. Nor was there any public discussion (comparable to that carried on after 1850 in the railroad world) on ways to increase uniformity and accuracy on accounting problems and procedures.

This lack of interest in accounting suggests that textile executives were not using their accounts to assist them in the management of their enter prises. As in the case of commercial firms, accounting remained merely a recording of past transactions. It was not until the 1850s that the owners and managers began to use their accounts to determine unit costs.64 By then they had a fair picture of their prime costs but little information on overhead or capital costs. In any case, the mill agents rarely, if ever, looked at the company’s financial books in Boston, and the treasurer and parttime president and members of the board had an up-to-date picture of their company’s finances only twice a year.65

As in the case of the plantation owners, there was little pressure on the textile manufacturers to improve cost data. As labor and cotton were by far the major costs, they had little incentive to compute indirect and overhead cost. McGouldrick estimates that cotton represented over 90 percent of the costs of all purchased materials.66 And the manufacturers had as little control over the price of cotton as they did over that of their finished cloth. Both were determined by the forces of supply and demand in the international markets. Moreover the treasurer and the board came to rely increasingly on their selling agent to make critical decisions as to output, quality, and style.67

These selling agents included some of the best-known mercantile part- nerships in Boston. By the 1830s Benjamin C. Ward & Company, and its successor, James W. Paige & Company (Nathan Appleton, a founder of the Boston Manufacturing Company and several of the Lowell firms, was a senior partner in both), A. & A. Lawrence, Mason & Lawrence, J. K. Mills, and Francis Skinner & Company were all specialists in selling textile products. Each of these enterprises, serving as exclusive marketing agents for several large mills, sold their products through the distributing network which had been created after 1815 and remained centered on New York.68 Mason & Lawrence, for example, had accounts with 105 firms in New York, 16 in Philadelphia, 15 in New Orleans, and a few in other scattered towns. These selling agents came to provide the textile companies with the credit needed for working capital in much the same way as the factors aided the plantation owners, and as other middlemen assisted the small shop and mill owners. They also paid the insurance and most of the transportation costs of the finished cloth. They, of course, determined the terms of sale, including discounts and time of payment. It is hardly surprising, therefore, that they were soon also deciding what styles, quantity, and quality of cloth the different mills should produce.

Thus, in the textile industries long after 1840, the basic functions of marketing, production, finance, and purchasing remained under the control of different men often in different enterprises who rarely lived in the same place and who at most saw each other briefly once a week or less. In a word, no central management yet existed. Indeed, the selling and production remained in the hands of two legally different enterprises. There was, of course, some coordination, for often merchants who were partners in the selling company were on the board of the manufacturing firms. Once in a while a man like J. K. Mills came to head both manufacturing and selling firms and so managed the enterprise as a whole. Yet even for Mills this arrangement proved only temporary. More normal were the conflicts that occurred during the 1850s and 1860s between the mill agents, treasurers, and selling agents of the mills of Lowell and Lawrence.69 In many Boston owned and managed companies and in those of other areas, a single set of executives did not become responsible for the basic activities of an industrial enterprise—marketing, manufacturing, purchasing, and finance—until well after the Civil War. Despite the fact that the integrated textile mills were the first large factories in this country, the new textile industry had little impact on the development of modern industrial management. This was in large part because traditional businessmen had not yet been pressed to alter their traditional ways.

The textile mills were, nevertheless, pioneers in the technology of modern production. They did internalize and integrate all or nearly all the processes of production involved in making a product within a single mill. Such integration provided a basic model for later mass production. It is significant, in light of later developments, that the factory first came to the United States as a result of internalizing several processes of production and not from the specialization and subdivision of labor within the industrial establishment.

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

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