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Continued from previous page
Let's talk about how executive careers
began. How did we get here?
The point to note at the very beginning of American industry is
that there weren't any executives. There were founders and worker
bees. The founders outsourced most of what went on and didn't really
have managers or executives. Before William Durant went into
the car business and created what became General Motors, he led a
large carriage company that was strictly a marketing operation. The
company contracted with a local builder to make the carriages that the
Durant-Dort Carriage Company put its brand on and sold.
Early companies like Durant-Dort were organized very simply.
The founders were at the top葉hey were the venture capitalists of
their day and were paid sometimes huge amounts based on the value
of their ownership. There were no managers葉he founders handled
everything themselves葉he finances, distribution and sales. Henry
Ford is a great example of this kind of owner洋anager who ran everything
himself, even resisting management systems like accounting. There's a very telling story about Ford becoming irritated about some
accounting issue one day, going into the head office at lunchtime,
and throwing all the accounting books into the street. He didn't care
about organization, either, keeping track of his 446 salaried workers (in 1913) with no job titles, just by ranking them according to their
pay level.
How was this possible?
It was possible to run these large companies without managers or
executives because most of the tasks were outsourced, and this went
beyond buying parts and supplies. Very few companies even sold their
own products 葉hey supplied merchants who sold the products for
them. A company like DuPont did none of its sales or distribution
at the turn of the last century. The company used hundreds of independent
agents who were paid on commission and often represented
more than one company.
But as companies grew it became more difficult for the founders to
do everything themselves, and they then turned to people they knew
and trusted蓉sually family members葉o step in. Even then, there
were few executives around the founder. Most of them came from
the families葉hese were like today's small businesses except that
they had thousands of employees. There was the founder, his son,
sometimes his wife.
DuPont is perhaps the best example of a company filling top
jobs with members of the founding family, making college choices
for young DuPont children based on job needs within the company
-in essence picking their careers for them to prepare them for the
executive track.
When did modern management
structures begin to take shape?
It wasn't until the railroads came along that we began to see organizations
that were a little more sophisticated. The physical scale
of railroad operations created enormous challenges. Running a train
from one part of the country to another, picking up cargo and passengers
along the way, changing crews and refueling, making connections with other trains, and doing all of this on a tight schedule meant
a tremendous amount of coordination. The only way the railroads
could be sure that everything was perfectly coordinated and on time
was to do everything themselves葉hey had to develop internal systems of
accounting and control and find people to run them. They
had to hire middle managers to develop and administer these systems.
The Pennsylvania Railroad was the largest and most complex of the
railroad operations and is typically credited with creating middle
management.
Andrew Carnegie also deserves a great deal of credit for creating
the modern executive career in corporations by transferring many of
the operating procedures of railroads into manufacturing. He worked
his way up from a telegraph operator into a job at the Pennsylvania
Railroad and eventually became superintendent of its Western
Division, the most important division in that railroad. Along the
way he absorbed many of the railroad's elaborate operating principles,
especially the idea that performance standards could be created for
every job and that individual managers should be responsible for
meeting those standards.
Carnegie came up with the idea of an operating or line executive
based on the superintendent's job he once held on the railroad, and
it's not a coincidence that the top job in a Carnegie steel mill and later
in all steel plants had the superintendent title.
Carnegie was a guy who gave people opportunity and moved them
up quickly if they did the right things. His most famous executive
was Charles Schwab, who started as grocer boy to Carnegie executive
Captain Bill Jones and went on to head Bethlehem Steel. Carnegie
wanted to promote executives from within and to get to know the
men who stood out.
But other than the Carnegie Steel Works, it's hard to see many
examples of corporations elevating employees from their own ranks to
these new executive positions during this time period. Carnegie gave
managers a great deal of discretion and responsibility and promoted
people based on merit, which was not common.
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