The Constraints of Chandler’s Managerialism
Muhammad Mustafa Moeen, 214682876
MGMT1030: History of Capitalism: Structures, Agents, Artefacts
Dr. Andrew Thompson, Section B
Prior to the formation of the Industrial Society that allowed mechanization of production processes, deployment of specialized labor and presented urbanization as a lucrative prospect, managerial practice was an unknown concept as owners themselves took on various tasks, including but not restricted to, planning, resource allocation, coordination and controlling. The Industrial Revolution, spanning the mid-1700s to the mid-1800s, marked the transition from traditional manufacturing tools to powered, purpose-built technology that allowed businesses to gain scale and streamline operations. Enterprise shifted from people’s homes to factories and businesses keenly began adopting capital-intensive methods. At the heart of this explosion of technological innovation was the invention of the railroad and telegraph business.
In his article, The Emergence of Managerial Capitalism[footnoteRef:1], Professor Alfred D. Chandler, while questioning Adam Smith's emphasis on the invisible hand, accredited the visible hand of managers for the exponential enterprise growth during the Industrial Revolution and for laying the foundation for the modern-day firm. In his article, Chandler, while observing a common pattern among growing firms, notes the global differences in the pace, timing and character of change in the United States, Great Britain, Germany and Japan. Chandler argues that large corporations, a product of the integration of mass production and mass distribution, evolved and expanded due to the acceptance of separation of ownership from control and superior management techniques. Chandler’s exploration of the relationship between strategy and structure focused primarily on managerial solutions such as workforce planning, division of labor and, most importantly, quality control that facilitated organizations in the effective and efficient execution of large-scale production. [1: 1. Chandler, Alfred D. "The Emergence of Managerial Capitalism." The Business History Review 58, no. 4 (1984): 473-503. ]
Managerial capitalism differed from the traditional personal capitalism set-up in that decisions concerning the production and distribution of goods and services were made by teams, or hierarchies, of managers who had no equity ownership in the enterprises they operated and were paid fixed salaries in exchange for their services. Chandler sought to validate his framework by establishing a case for the growth of large corporations such as Pennsylvania Railroad[footnoteRef:2]. Pennsylvania Railroad created an organizational structure that defined precisely the duties and competencies of managers who were assigned tasks, ranging from maintenance of telegraph to supervision of superintendents, based on the skillsets that they possessed. Chandler not only acknowledged the administrative...