The Industrial Revolution and the Crisis of Control

The Industrial Revolution and the Crisis of Control, written by James Beniger is a fascinating tour de force that examines the crises surrounding the explosion of extraction, production, distribution and consumption in America during the 19th century. The crisis of control began initially in rail transportation involving:

• Inability to control vast rail systems—safety issues!
• Inability to track shipments of goods
• Inability to integrate movements of goods and cash among manufacturers and retailers

Western Rail adopted the following processes to make the rail system safer and more efficient:

• Synchronized watches controlled train movements
• Regulation of data collection
• Creation of three regional offices with solid lines of authority and command
• Formalization of information processing and decision rules
• Standardization of communication feedback

As the rail industry became larger and more complex the crisis of efficiency began. Daniel McCallum of the Erie Railroad was credited for creating one of the earliest organizational charts. The organizational processes developed by the railroads provided other industrialists with useful information on how to organize and build their organizations for peak efficiency.

The steel producers became the innovators during the crisis of production. Steel producer, Andrew Carnegie developed a voucher system for the collection and processing of data. The data collected served as the basis for detailed cost statements; the goal being to keep costs down and profits up.

In an attempt to manage the crisis of material flow through factories, the introduction of a “shop order system of accounts” was begun. Shop orders had identifying numbers and indicated the sequence of departments and the parts and processes that would occur at each department. On the same slips foremen would indicate the machinery, workers, time, material and wages used for each order.

Getting crops to the factory in a timely fashion, when transportation speed and processing had increased exponentially, became the next crisis. The solution involved specialized commodity brokers who purchased crops directly from farmers and sold them directly to processors.

A crisis of bureaucratic control and vertical integration led large wholesale houses to adopt innovations in a bureaucratic structure, which created a hierarchy of salaried managers. Their goal was to keep the stock turning, cash flowing and to allow credit for only the shortest terms possible.

The final crisis was that of consumption. Industry was working night and day to produce goods. Disposing of goods suddenly grew in importance. Producers now had the job of teaching consumers to use more of a product than they had used and to discriminate between sellers. Enter marketing!