What is management science?
Introduction of Management Science
As we discussed in a previous Article, for thousands of years entrepreneurial capitalism was, quite literally, the capitalism. That was the case until the early 1900s and the introduction of Industrial Capitalism.
Giant firms such as U.S. Steel, Ford, DuPont, General Motors, General Electric, and Sears became characteristic institutions of the twentieth century. Managers had to learn how to handle huge forces of workers, miles of assembly lines, and deeply vertical integrated facilities like Ford’s River Rouge plant, where iron ore and sand entered, and Model Ts made of steel and glass exited.
This transformation of American industry from small-scale manufacturing to large industrial corporations created new administrative needs and structural changes and innovations at all administrative levels. Simply the rethinking of the shop floors for electricity led to “organizational innovations” and displaced the old ways of running a business.
This transformation also led to the rethinking of capital inputs, like labor, resources, supplies, and inventory. And the creation of “best practices” led to the emergence of standardized information, accounting, and administration procedures using new office machinery and communication systems (typewriters, telephones, and telegraph) and linking branch offices, plants, and sales organizations with headquarters.
The science of managing money and understanding return on investment was initiated by the DuPont family, who at that time in 1919 were the largest shareholders in General Motors. Simply by using the “DuPont Formula,” finance for new investment, in procurement of materials, in establishing marketing networks, and in research, design, and development now became of equal or greater importance.
Diffusion of Fordism into the “Post-Industrial Era”
Paul David, an economic historian at Stanford University, noted that it took some forty years for industry to figure out how to reorganize itself and to take advantage of the “decentralizing power of electric motors.” Henry Ford was one of the first. He took the disruptive electric motor and incorporated it into an assembly line. Ford not only advanced electricity, he advanced an era of mass production never seen before. Historian David Lewis gives us an impression of Ford’s grand scale. In 1925, Ford’s workforce at the River Rouge plant approached nearly 60,000 employees. The facility occupied some seven million square feet, or more than 1,115 acres. It was known as the “greatest industrial domain in the world.”
This “Diffusion of Fordism” that followed captured the heart of industrialized America. Fordism meant economies of scale, low production cost, and fixed design. Production strategies were built on the notion that low cost required high volumes of standardized parts.
The best examples surfaced during the massive buildup of military resources for World War II. Douglas Aircraft built some 30,000 aircraft, and the Kaiser shipyards in San Francisco were launching large ships daily. Following the war, on potato fields twenty miles from New York City, William Levitt pioneered the mass production of affordable housing. He built some 17,477 homes, putting up about twenty-four per day, each on a 750-square-foot concrete slab.
This radical change in the nation’s system of production was not an easy one for the workforce and the management. In fact, some even countered Fordism. Alfred Sloan, the chief architect of the giant corporation that was later to be General Motors, triggered a shift from a “production focus” to a “market focus.” Sloan established the first design group dedicated to automotive styling and developed a production system that pursued variety in body style and color.
Disciples of This Management Science Revolution
The industrial capitalists leading the corporate world laid down huge investments in production functions. They struggled on repositioning their companies to ensure future profitability and offset decline of their production infrastructure. They won, and business management had come to the forefront in America. Between 1880 and 1920 the number of professional managers climbed from 161,000 to more than one million.
Harvard Business School opened its doors in 1908, and management journals were soon being published, such as Administrative Management in 1919 and Management and Administration in 1921. In 1923, Herbert Hoover convened the first International Management Congress in Prague and the American Management Association, publishers of our book Roadmap To Entrepreneurial Success, was founded.
Management science crested around the mid-1950s with work by Peter F. Drucker and William H. Whyte. Drucker’s Concept of the Corporation in 1946 was a study of General Motors, and his Practice of Management in 1954 was a great attempt to organize and present the management science revolution as a discipline of knowledge.
Drucker saw that between 1950 and 1970 either big business or governments created three out of every four new domestic jobs. In other words, “the growth dynamics of the American economy lay in established institutions.” William H. Whyte’s influential study, The Organizational Man, was published in 1956. His thesis was that people have to work with others because “it is an age of organizations.”
Andrea Gabor’s book, The Capitalist Philosophers: The Geniuses of Modern Business, explores the other fathers of modern business management theory. The portraits in her book “provide a taxonomy of management’s rich multidisciplinary heritage.” She looks at individuals “who profoundly shaped the course of the twentieth century.” They include Frederick Winslow Taylor, the “father of scientific management”; Robert S. McNamara, one of the original “Whiz Kids”; W. Edwards Deming, “a prophet of the quality movement and the learning organization”; and Herbert A. Simon, the “Leonardo da Vinci of the information age.”