Corporate Strategy
The above neighborhood/people-based community development strategy, involving as it did a combination of academic and activist proponents, suggested a bit of “new country heard from”. Our first chapter model developed a concept, the Policy World to describe this phenomenon. The Policy World owes its Progressive Age vitality to several developments, in particular the formation of academic disciplines (sociology) and the leadership of newly founded universities such the University of Chicago. Developing alongside, and by no means in a secondary position, was yet another Policy World strategy—one I have entitled the “corporate strategy”.
The first manifestation of corporate strategy bloomed during the Progressive Age and it fixed attention on the corporation, the industrial firm in particular. A two-pronged evolution characterized this development. First, a profession emerged comprised of industrial firm (middle) management responsible for organizing to produce outputs as cheaply and efficiently as possible. Once it had achieved sufficient momentum, expertise, and leadership this new profession prompted the formation of an academic discipline (business administration) and state and national professional associations. This is not too different than the experience of the neighborhood/community development strategy.
The core units of our Policy World are the media, professions academic disciplines, and policy-focused organizations. The Progressive Era was an age of professions. The National Municipal League had been formed in 1894; alongside the NML was the National Civic Foundation (1900), the American Economic Association (1885), the National Housing Association (1910), the National Association of Settlements (1911), the American Political Science Association (1903), the American Institute of Planners (1909), the U.S. Chamber of Commerce (1912) and the American Association of Chamber Executives in 1914. Many others such as the National Association of Port Authorities (1912), the National Conferences of Mayors, the ICMA, and the Municipal Finance Officers Association coalesced and established national bodies during the Progressive years. Hidden in this avalanche of professions and national professional associations was the American Institute of Mining and Metallurgical Engineers (ASME), one of the very first professional associations founded in 1880. ASME was the first bloom of a “movement” that not only rocked America’s industrial world, but revolutionized the foundations of American municipal and state government. So let’s turn our attention to the professionalization of American industrial management.
Professionalization of Industrial Management
One of the first industries created by the industrial revolution was railroads. The Gilded Age witnessed an explosion of railroads—literally across the nation, into almost every urban nook and cranny. Railroads were the chief land transportation mode for the American economy—both agricultural and industrial. And railroads, in a perverse way, yanked our political system around triggering first the agricultural Populist Movement, and then by the 1990’s the Progressive Movement. Good effects and bad, it did not matter; railroads drove our economy and politics in the Gilded Age. No surprise then, it is also in the Gilded Age that railroads spawned a profession based on a body of knowledge necessary to “run the trains on time”.
During the 1880’s and 1890’s, “cooperation required by the managers to integrate what had become by far the largest transportation network in the world stimulated a sense of professionalism among them. The middle managers who met regularly to discuss common problems in performing their different functions soon set up permanent quasi-professional associations”.[1] Within two decades of the Civil War a wide variety of associations[2] had been established supportive of the railroad industry. Two striking characteristics of this almost instinctual professionalization are quite evident: its narrowness and micro-expertise specialization. Each of the associations listed in the previous footnote established offices in Washington D.C., held annual meetings complete with presentation of papers/research, and often established regional affiliates. Railroad journals proliferated. Universities responded by developing courses, and in some instances offering specialized degrees (Chandler cites Harvard, Yale, Columbia, University of Pennsylvania, Virginia and MIT as leaders). “(B)y the 1880’s American railroad managers had taken on the standard appurtenances of a profession. They had their societies and their journals… they saw themselves and were recognized by others as a new and distinct business class—the first professional business managers in America”.[3]
Obviously, railroads required iron rail tracks and locomotives and accordingly, the rail profession movement spun off to the iron industry. So as it turns out the management profession began with the management of factories (with emphasis on the supervisor-worker relationship) making and bending iron; in particular, in the metal-making and metal-working industries, such as General Electric, DuPont and Westinghouse corporations. “The(se were the) men who were in the forefront of designing and putting into operation, new machines, furnaces, factories and works, and in developing new management techniques and structures were the moving spirits of the new professional societies”[4]. In 1880 several prominent engineers founded the American Institute of Mining and Metallurgical Engineers (ASME). One of the four founding engineers of ASME was Frederick W. Taylor—the founder of the future scientific management movement, who at the time was an engineer in the employ of the Midvale Steel Company.
Taylor was always more concerned with the process and the management of the process behind production, than production or the product itself. In 1895 he delivered his first paper on “scientific management” at a ASME conference. Because ASME focused more on engineering and the product or equipment that made the product rather than management, Taylor and early scientific management proponents formed the American Association of Industrial Management in 1899[5]. A series of mergers and reorganizations followed, but suffice it to say, it wound up as today’s American Management Association (AMA). In any case, after 1899 newly founded management association was able to take advantage of the explosive growth of universities, and in particular, the formation of business schools within those universities.
Central to the professionalization of management in the new multiunit business enterprises were modern business schools…. In the late nineteenth century business education consisted of little more than the teaching of bookkeeping and secretarial skills in small specialized private schools of commerce, and increasingly in public high schools. Only the University of Pennsylvania’s Wharton School of Commerce and Finance, founded in 1881 offered courses in business, and these included little more than commercial accounting and law. In the decade after 1899, business education became part of the curriculum of the nation’s most prestigious colleges and universities. … The appurtenances of professionalism—societies, journals, university training and specialized consultants [such as Arthur D. Little]—hardly existed in the United States in 1900. By the 1920’s they were all flourishing.[6]
The University of Chicago and University of California set up undergraduate schools of commerce in 1899, New York University and Dartmouth’s Amos Tuck School of Administration and Finance in 1900, and slow to respond was Harvard who in 1908 set up the Graduate School of Business Administration (presenting in one of its first courses was Frederick W. Taylor). It is Taylor, and his scientific management approach—the paradigm of early industrial management– that we now turn.
Scientific Management
To motivate the reader to continue reading about scientific management I offer tantalizing tidbits about future notables and policy derivatives of scientific management. Edward Deming, Peter Drucker, Six Sigma, the Quality Movement, Lean Manufacturing, NIST’s Manufacturing Extension Program, and Michael Porter’s corporate competitive strategy and his approach to clusters follow from the traditions of scientific management. From another angle, scientific management is an important step toward innovation, productivity (automation, robotics), even creative destruction. Further, the implications of scientific management on workforce training are huge. Also scientific management and its successors will develop over the years a more sophisticated understanding of internal corporate processes and management skills which private and public EDOs will utilize to further their community-economic base competitiveness and profitability. In short, scientific management evolved over the next century into a series of economic development-related strategies fundamental to our policy area and profession.
Picking up on our previous discussion regarding Frederick W. Taylor and his early version of scientific management, the reader is reminded that:
Scientific factory management pioneered by an engineer named Frederick W. Taylor, spread widely by the end of the century. Scientific management brought a new level of organization and structure to factory work. Factory managers rearranged and integrated various aspects of production on the shop floor. They introduced a greater degree of specialization and imposed a more rigorous work discipline on the labor force. New factory machinery hastened the transformation of work and production …[7]
It was, however, Taylor’s negative, at times almost vicious, depiction of worker motivation that I will pick up in this section. Taylor’s controversial but path-breaking research sparked further research by others. The “halo effect” suggested that positive human motivation could increase production. But it was the Hawthorne studies, completed at the Western Electric Cicero Illinois factory following Taylor’s death, that have been described as the “seed bed of the Quality revolution”. Of particular note, was the work of Walter Shewhart, an engineer who today is considered the father of statistical quality control. Shewhart worked, as did Taylor, at Western Electric, and its Hawthorne Works and he later worked for Bell Telephone. A leader in his field, he wrote several impactful works, was a founding member of the American Society for Quality, and a leader in the American Society for Testing and Materials (ASTM).
While scientific management and Frederick Taylor[8] are sometimes reduced to synonyms, the movement was always more than Taylor and it certainly didn’t end with his death in 1915. Henry Ford and “Fordism” was a second generation application of Taylor’s scientific management and quickly led to the most powerful process innovation of this era: the assembly line. The development and agglomeration of the auto industry would follow. In 1938 Shewhart’s writings and reputation influenced the thought of two physicists. One of these physicists, W. Edwards Deming and Shewhart became collaborators, applying Shewhart’s work to increase productivity. The result, called by various names, including PDCA (Plan-Do-Check-Act), the Shewhart cycle or the Deming circle is the foundation of continuous improvement of processes. Deming’s continuous improvement process was introduced into World War II production, and in the 1950’s carried to Japan. Deming launched the now-famous post-World War Japanese manufacturing miracle.
In regards to the Progressive Era, however, scientific management offers yet another dimension. In those years, scientific management was applied to the structure of an organization—that is how a corporation could be set up to maximize the effectiveness, the efficiency of its operations. These principles of structural organization and management were revolutionary in that day that businessmen wasted no time in applying them to the wasteful, corrupt, fragmented and inefficient government of the Gilded Age. In time, during the early New Deal years, they were to be applied to the federal government and used as the original paradigm of public administration.
Applying Scientific Management to Government
Thus far the reader has been introduced to scientific management in the context of professionalization, business schools and the founding of the business management discipline. The application of key principles and tenets of scientific management were further extended into government as structural reformers incorporated them into their agendas and then, upon success in their reform efforts, their injection into municipal policy system. Scientific management structures, processes, principles and tools infused capacity that was lacking into modern municipal government and completed their transition into a relatively modern jurisdictional policy process.
By the 1890’s, the Gilded Age Mugwump reform campaign had joined with the Municipal League reform effort and by the late 1890’s the purely political, anti-immigrant reform had been taken over by the NML and our structural reformers. The previous civil service/electoral reform agenda was augmented with a strong administrative management program. In the Gilded Age public-private relationship had gotten pretty sloppy with the machines, bribery, corruption and franchises. The old-style Privatist” businessman as mayor” paradigm had worn thin with the arrival of the still relatively new career political class. Ever-pressing was the constant need for government and key government services (water and sewer, and in 1900, paved roads), and huge, mostly private, investment in transportation, communication and power infrastructures, usually through public franchises, stressed flexibility/predictability and as time elapsed, low financing (tax exempt and lower interest rates).
The expansive tendency of the modern city required the extension of old and the introduction of new services, and as the size and scope of city governments mounted, key officials had accumulated a new range of power which derived from their newly enlarged stock of patronage …. Thus they could direct the direction of lucrative construction and supply contracts, franchises to those who worked for, contributed to, or cooperated with the machine. They also could juggle tax assessment of commercial firms or industries and residential property owners, exert pressure on banks for city deposits … plant tips among friendly real estate operators about future public improvements …[9]
De-politicalization of government was the first step and this was accomplished through electoral reforms and the infusion of modern management techniques which promoted efficiency and least cost executive. The basic principle involved in administrative de-politicization was that professional expertise should be entrusted with the delivery of municipal services and programs, professionals should be hired and retained on the basis of their merit–not their politics. Politics itself became the source of nearly all government inefficiency and waste. The key to successful Managerial Privatist reform was to reduce politics to the initial choice of the city’s governance or the adoption of public policy only. The critical economic development public policy of the era involved the installation of critical infrastructures.
… a city is a corporation; that as a city it has nothing whatever to do with general political interests; that party political names and duties are utterly out of place there. The questions in a city are not political questions. They have reference to laying out of streets, to the erection of buildings; to sanitary arrangements, sewerage, water supply, gas supply, electric supply; to the control of franchises and the like; and to the provisions for the public health and comfort in parks, boulevards, libraries and museums. The work of a city being the creation and the control of the city property, it should logically be managed as a piece of property…[10]
The reader guessed it—“there’s no Republican or Democratic way to pave a street”[11]. So the core notion of structural reformists/Managerial Privatists to separate politics from administration required as a necessary first step electoral reform: the end of ward-based council districts and their replacement with at-large districts, and non-partisan elections, i.e. elections in which candidates do not declare a party or identification of a party in a ballot—and a civil service system. The short ballot (reducing the number of independently elected officials, strengthened mayoral/councilmanic power as did unicameral city councils. Thus the now generation-old agenda of the Mugwumps and their Civic Reform Clubs became incorporated into scientific management.
The new managerial privatism understood “government as essentially an enterprise aimed at solving social problems and structured in such a manner that the management of the enterprise can be effectively and fruitfully undertaken”[12], i.e. government can be effective in responding to change and can solve problems because it is organized and managed rationally and accountable to its voters–just as business is responsive to consumer demand. Carried over into government were management principles such as centralization of authority (unity of decision) so that both internal administrative units as well as voters could know who was responsible for decision-making and who could be held responsible. Multiple chains of command invited duplication and waste and so fragmentation was despised as sources of inefficiency and needless cost. Centralization’s structural expression was the “cabinet-style”, conglomerate department which grouped any number of subdivision units relevant to a defined function, purpose or geography. Spasms of centralization reform would be the hallmark for future economic development governmental programs. “Where’s Waldo” will be pretty much the story of finding economic development departments and offices within a host of cabinet style units.
Lacking a clear goal or benchmark as profit-sales were to private business, low taxes and cost minimization became adequate public sector substitutes. Business techniques such as budgeting, capital budgeting and bond issuance, leadership, principles of structural organization (delegation of authority to specialized units) were adapted to government–and eventually professional associations were formed to incorporate these new bodies of knowledge. The second set of structural reforms installed the new-fangled, business management tools such budgeting, planning, professional management, capital budgeting and bond issuance. From this period onward, budget and finance departments and planning commissions spread to municipal governments across America. To manage these new tools required that authority be centralized into a CEO type office. Centralization of authority was necessary if efficiency (cost-reduction) was to be achieved. First, this inevitably strengthened the chief elected official whose dominance over budgeting, finance and planning created a power base never before seen in municipal government.
We have inherited much from the structural reformer’s faith in the neutral expert, the economic developer if you will, and their belief that expert should be insulated from politics so that she can employ the “best practices” of her profession without interference. Kettl[13] best expressed the tightrope dilemma this created as “an administration strong enough to be effective, but not so strong as to endanger accountability”. A fine line to be sure, but the victory of structural reformers and their adoption of scientific management injected that fine line into the economic development profession. What role does politics play in our policy-making—and to what extent political issues can/should not impinge on economic development practice is a recurrent issue that has reduced many a Practitioner to hover over a beer or bourbon late at night.
The little-known secret of the city efficient movement was that it swept through these smaller, more ethnically-homogenous middle class second and third tier cities more than the Big Cities. The issues which motivated structural reformers were especially critical to second and third tier municipalities whose governments were often dominated by cliques, factions and cabals. These “courthouse gangs” used government for their own purposes and often held an extreme Jeffersonian limited government, low taxes mentality which stopped the city’s ability to modernize (paved roads, water/sewer) and install new technologies (street lights, electricity and telephone) dead in their tracks. Unpaved streets got quite old when an affordable paved alternative was available; these are the first years of the Model T and the consumer love affair with the car.
Still, it took awhile for the city efficient movement to build up a head of steam. Before 1910 non partisan elections were non-existent. By 1929, fifty-seven per cent of all cities over 30,000 had non partisan elections. In1967 85% of cities with fewer than 5,000 residents held non partisan elections. Indeed, several states have since amended their state constitutions to require non partisan, sub-state elections.[14] and over the next half-century. The city efficient movement acquired much of its present-day reputation because it replaced the mayor-council form of government—which were 99% of municipal and county governments in 1900 –with commission/city manager forms.
[1] Alfred D. Chandler Jr., The Visible Hand: the Managerial Revolution in American Business (Cambridge, MA, the Belknap Press of Harvard University Press.1977), pp. 130-131.
[2] American Society of Railroad Superintendents, American Railway Master Mechanics Association, Master Car Builders Association, Roadmasters Association of America, National Association of Passenger and Ticket Agents, National Railroad Agents Association, American Ticket Brokers Association, General Baggage Agents Association, Society of Railroad Comptrollers, Accountants, and Auditors, Railroad Traveling Auditors Association, Car Accountants Association, American Train Dispatchers Association, and the Association of Railroad Telegraph Superintendents ,Chandler, The Visible Hand, op. cit. pp.130-131.
[3] Alfred D. Chandler, Jr., The Visible Hand, op. cit., p. 132.
[4] Alfred D. Chandler, The Visible Hand, op. cit., p. 282.
[5] Alfred D. Chandler, The Visible Hand, op. cit., pp. 465-466.
[6] Alfred D. Chandler, The Visible Hand, op. cit., pp. 466-468.
[7] Mohl, op. cit. p,57ff
[8] An interesting treatment of Taylor is included in Page Smith’s, America Enters the World: A People’s History of the Progressive Era and World War I (Volume 7) (New York, Penguin Books, 1985) pp. 376-378.
[9] Zane L. Miller and Patricia M. Melvin, The Urbanization of Modern America (2nd Ed) (New York, Harcourt Brace Jovanovich, Publishers, 1987), pp. 106-107.
[10] Andrew D. White, “City Affairs are not Political”, Forum (December, 1890), pp. 213-216. The quote goes on to say “Under our theory that (if) a city is a political body, a crowd of illiterate peasants, freshly raked in from Irish bogs, or Bohemian mines, or Italian robber nests may exercise virtual control. How such men govern cities we know too well; as a rule they are not even alive to their own most direct interests.” Dr. White was a co-founder and first President of Cornell University, and his daughter was acknowledged as the first female PhD in the United States. At a later point in his career he was offered the position of the first President of Stanford University–but he declined. A diplomat, ambassador to both Germany and later Russia (and other nations), he declined repeated Republican entreaties to run for office, preferring instead to become the first President of the American Historical Association. We do not believe him to be related to Leonard D. White an early founder of American Public Administration.
[11] Maybe not, but it says nothing about whose street will be paved, and whose will not. It also says little about which contractors get the contract to pave the street and if the paving is done badly will anybody be reelected.
[12] Peter J. Steinberger, Ideology and the Urban Crisis (Albany, New York, University of Albany Press, 1985) p. 28.
[13] Donald F. Kettl, The Transformation of Governance: Public Administration for the Twenty-First Century (Baltimore, The Johns Hopkins University Press, 2002), p. 82.
[14] At large elections were often linked with non partisan elections. Dennis R. Judd, The Politics of American Cities (2nd Edition) (Boston, Little, Brown & Company, 1984), p. 94.
Ron W. Coan 