Becoming fully functional: The conceptual struggle for a new structure for the giant corporation in the US and UK in the first half of the twentieth century

Abstract

The rapid growth of the larger corporations in the US from the late nineteenth century onwards made the question of the appropriate structure for these new corporate giants of increasing importance to management writers. Particularly difficult was the relationship between line management and functional management as management hierarchies lengthened and specialisms grew in number and scope. Developing ideas from F.W. Taylor and Harrington Emerson by US and UK writers brought confusion as much as it brought progress. Attempts from the late 1920s to evolve organisational proposals by establishing principles of organisation brought modest advances but no conceptual breakthroughs. By the Second World War no management writers appear to have proposed or identified anything resembling the multidivisional form.

Keywords:

• corporate structures
• line management
• functional management

Notes

 1. ‘A comparative analysis of the adoption of or failure to adopt the new multidivisional form can best be made by grouping the enterprises by industries and by keeping the definition of the multidivisional structure a fairly loose one. An enterprise can be said to have adopted the new form if it came to have a general office with executives whose primary tasks were general rather than functional and if it also had at least two major multidepartmental, relatively autonomous divisions’ (Chandler, 1962, p. 325).

 2. The implications of Galileo's discovery were huge – a fatal blow to Earth-centric interpretations of the universe and all the meanings piled upon it. Significantly for the argument in this paper, however, the implications were readily understood by Galileo's contemporaries which does not appear to be the case as far as the contemporaries of the ‘birth’ of the multidivisional corporation were concerned.

 3. A revised version is forthcoming in a Cambridge University Press book on twentieth-century European business performance, edited by Cassis and Colli.

 4. Lamoreaux only considers horizontal mergers of five firms or more and other authors have given greater numbers of combinations during this period. In other words 1800 firms did not disappear into 157 combinations, the number of combinations, including combinations of smaller numbers of firms, being rather larger. Nevertheless the increase in concentration was very significant.

 5. The 65 groups with more than 50 establishments represented only 0.8% of the total number of central office groups.

 6. The number of wage earners grew by 66.3% while the numbers of salaried employees grew by 178.6%; the ratio of salaried to waged staff increase and the percentage rises are calculated from numbers in Alford, 1924, summary census data, Table 28, 54.

 7. Transaction cost theory explains the occurrence of large corporations as the point at which managed transactions become cheaper than market transactions. It does not appear to apply here.

 8. The growth of marketing as opposed to selling requires closer integration of production and distribution and tends to give control to the latter function. See Fligstein, The Transformation of Corporate Control.

 9. See the useful summary in Wren, 1972, Chapters 7 and 8.

10. Not least the organisation named after him – the Taylor Society – and its Bulletin. In 1911 a group of members of the American Society of Mechanical Engineers, dissatisfied with opportunities to publish material on management, formed the Society to Promote the Science of Management. After Taylor's death in 1917 this was renamed the Taylor Society. The Bulletin of the Taylor Society was published until 1934, when it became the Bulletin of the Taylor Society and the Society of Industrial Engineers. The Taylor Society and the Society of Industrial Engineers merged in 1936 to form the Society for the Advancement of Management. This brief account is sufficient to demonstrate the lasting organised nature of Taylor's legacy.

11. Taylor's proposals on functional foremanship were in fact part of a wider division and redistribution of labour in the supervision of production with all ‘brain’ work removed from foremen and workmen to the planning office. The foreman's role was reduced to enforcing the decisions of the functional specialists in the planning office (Taylor, 1903, pp. 98–99).

12. See for example the lists of abstract functions in Sheldon, 1923, p. 207.

13. A chapter of this book, ‘Functionalizing a Business Organization’, was published in the Harvard Business Review in 1925.

14. The use of the word ‘division’ in the inter-war period should not be taken to carry any Chandlerian implications. It can simply mean, as here, some sub-divided part of an organisation. It is also used to describe acquired businesses within an amalgamated firm. Alfred Sloan, for example, uses the term in this sense for the acquired motor parts companies loosely assembled in the United Motors company (Sloan, 1986, pp. 47–48).

15. Interestingly, Management and Administration, specifically mentioned by Chandler as a strong source for ideas on organisational innovation, only has organisation material for General Motors.

16. The probable author of the report, Lyndall Urwick, was director of the International Management Institute from 1927 to 1934 and subsequently co-founded the UK management consultancy Urwick Orr & Partners. A prominent management writer well known in the US and Europe, his views carried serious weight. See the biographical details in the introduction to his papers at Henley Management College available via the web. Lilian Gilbreth was to say of him that ‘Just as Shelley was the poet's poet, [Urwick] seems to me to be the consultant's consultant’ (quoted in Clutterbuck & Crainer, 1990, p. 47). The same authors describe Urwick's intimacy with leading management thinkers of his day and his consultancy firm is called ‘one of the world's most prominent management consultancy companies’ (ibid.). It may be noted that Urwick made a six week visit to the US from 12 April 1931 as a guest of the Taylor Society (Bulletin of the Taylor Society, 16(2) (1931)) and was thus in an excellent position to observe the effects of the Depression on US companies.

17. In the usage of the times, ‘administration’ meant policy formation and broad monitoring of performance, generally identified as the function of a non-executive board. Management were the employees who actually did the work. The effect in the UK was inter alia to act as a strong prophylactic against the formation of top management (see Quail, 2000).

18. The ‘relationship between a centralised functional staff department and a local functional line department’ is an interesting example of the stresses and strains on an organisational terminology struggling to encompass a new organisational reality. In Harrington Emerson's original formulation the line was the transmission of orders, of authority. ‘Staff’ was an advice function which while located at the top was not to be reserved to senior levels only but should percolate down the organisation. Restricted to unitary and relatively small-scale organisations this made sense. In larger organisations, however, staff functions developed authority hierarchies of their own and the word ‘line’ began to be applied to any managerial hierarchy. See, for example, the following remark from 1929: ‘to separate selling, or accounting, or buying is to departmentalize with respect to the type of activity or function rather than the type of goods to be handled, equipment to be used, or territory to be covered ... These more obvious and inescapable divisions of labour, however, have been so long settled as to be considered normal “line” departments’ (Dennison, 1929, p. 498). Urwick is asking about the relationship between HQ and local functional management given local line management.

19. Urwick's later writings are of less interest because of somewhat arid attempts at a kind of ‘unified field theory’ giving general principles of management, the material for which he is regrettably largely remembered.

20. Mooney and Reiley here go beyond the initially crude financial controls which were the basis of the ‘decentralisation with co-ordinated control’ which Sloan instituted at GM in the early 1920s (see Sloan, 1986, pp. 119 ff.)