Enterprise growth and standardization brought increased specialization

 

 

Specialization can be considered a natural outgrowth of the Industrial Revolution--even as standardized products and specific procedures resulted from industrial growth from the nineteenth century until now. Specialization brought similar advantages as did standardization and regimentation--they allowed organizations to operate more productively and made it possible for large numbers of people to work together on increasingly more demanding, more complex job requirements.

 

Adam Smith's work in 1776 in The Wealth of Nations was the first major work to explain the rationale for specialization within in an enterprise and to make emphasis of the benefits to be achieved by specializing in an organization. He argued--as it turns out, persuasively and correctly--that by causing managers and workers alike to concentrate on specific--albeit narrow--tasks, each depending on other co-workers or partners to similarly focus on narrow, but mutually-beneficial jobs, the enterprise overall benefits from better quality at lower cost. His principal example was that of a pin maker who could make twenty ordinary pins alone, while ten such workers could produce 48,000 pins dividing up the tasks and developing unique, specialized skills in each sub-task.

 

By the end of the nineteenth century, specialization had transformed not only the workplace, but also society at large. Individuals were able to significantly enhance their standard of living by specializing in a certain kind of work. Henry Ford encouraged the trend by paying an unprecedented $5 per day minimum to workers whose jobs were progressively narrowed in the search for optimum productivity. Such jobs often proved monotonous and unhealthy, but they contributed to the ability of Ford Motor to produce a Model T from $950 to $290 in 1914--bringing a car within reach even of the workers who made them.

 

Worker specialization began to take many forms, including organizing work by task, function, process, product, customer, and geography. By the end of the nineteenth century, so-called scientific management entered into the field--a development encouraged by increased industrialization and concentrated sources of power (moving from water and steam in the early days to electrical and gas motors toward the turn of the twentieth century). With specialization, work was delivered to workers so that they could remain stationary. Specific hand movements were taught. Specialized single-use machines replaced general-purpose hand tools. Not only were movements guided and restricted, time standards were strictly enforced.

 

Specialization had a profound effect on the process of defining and managing an enterprise overall. Workers became much less attached to finished products--as they only saw small segments of the production process and product sub-assemblies that were physically attached to the objects of their own specialized job functions. Individuals whose jobs were specialized by function were restricted by function as well. Workers who worked only on certain processes, products, or customers knew little about other related, but distinct categories. Thus, there were both advantages and disadvantages to the specialization movement.

 

Specialization of managers and staff professionals is helpful for both the organization and the individual; it maximizes the expertise each individual has and can contribute to the realization of the goals of the organizations. Nonetheless, like blue-collar task specialization, knowledge specialization raises problems. A specialist may know more than anyone else about his area, but his knowledge may be so concentrated that he knows nothing about the rest of the organization and how his duties fit into it.  

   

Such specialization also affected the professions of law, engineering, accounting, and industrial management. In an organization, each of these groups developed concepts, tools, systems, and organizations that were supportive of their specific areas of responsibility. These general categories could be compared in a sense to the various types of musicians in an orchestra--conductors, string players, woodwind instrumentalists, pianists, brass players, and percussionists. Each had specific functional goals, organizational requirements, and personality traits and preferences, and unique problems brought on by their available tools and instruments.

 

General management

 

With the rise of complex requirements along with the Industrial Revolution, hands-on management of day-to-day operations by the father, shopkeeper, or craft manufacturer changed in larger industrialized organizations to a more abstract form of leadership, stewardship, or management. Complex operations expanded beyond the personal control--and even comprehension of individual managers. Methods and concepts were developed to allow for managerial oversight by individuals that did not have mastery of the details of each process for which they were responsible.

 

To an extent, this new breed of 'general' manager began to rely on accounting reports and other sources of information derived from the accounting model. Personal relationships of loyalty and trust developed that allowed for management oversight of other managers and supervisors--whose contribution was more hands-on than managers--overseeing specific processes that they usually fully understood. The fundamental idea of a general manager evolved into a philosophy that such individuals' responsibility was to apply rational thought to business problems to assure preferred outcomes. In concert with new business models and combinations, general management allowed for the organization of larger groups of workers with increased functional specialization.

 

 

Accounting

 

The accounting classification model experienced two additional major innovative periods--the advent of the Industrial Revolution, which itself will be discussed presently, and the great period of government growth in the industrialized countries in the late nineteenth and early twentieth centuries.

 

The Industrial Revolution brought about changes in business, and therefore in accounting. Beginning in England in the mid-1800's, manufacturing processes started to evolve from individualized, handicraft systems to mass-production, factory systems. Technological advances not only provided new machinery but required new types of expenditures as well. Cost accounting systems had to be developed to analyze and control the financial operations of these increasingly complex manufacturing processes.  

     

Governmental laws and requirements also have caused changes in the business environment and have stimulated the growth of accounting services. For example, the Companies Act in England in the 1850s established compulsory independent audits by chartered accountants. In the United States, the 1913 Revenue Act instituted the personal federal income tax, which created a need for income tax accounting. The 1934 Securities Exchange Act established the Securities and Exchange Commission (SEC), which monitors the reporting procedures of companies that sell stock publicly.  

 

 

These developments resulted in increasingly diverse areas of specialization--even within the accounting profession. Some accountants focused their efforts on financial accounting, others developed expertise in managerial, or cost accounting--which involved the intense study of manufacturing operations. Tax accounting was established as a viable profession in its own right--with sub specialties in international and regional tax issues and other areas. The complexity of both business and government turned the accounting profession into a growth industry.

 

Marketing and sales

 

 

In the period of the Industrial Revolution, marketers developed interesting strategies and salesmen 'fanned out' over the countryside. Tiered markets for both consumer and industrial products developed--complicating the structure and differentiating sales and marketing processes. Though salespeople of necessity needed to master increasingly complex product builds and sales offerings, the work of such individuals tended to not be automated or systematized.

 

Manufacturing and production

 

 

As production and manufacturing possibilities increased during the Industrial Revolution, complexity and number of industrial processes grew exponentially. Each industry represented fundamental technologies and standards--modified for commercial and practical reasons in each case. Individuals charged with production were often engineers--a new category of professional worker in its own right, an advanced mechanic with a comprehensive understanding of the science and the theory of the field in question. In all cases, they were called on to be practical--devising new and better processes on an ongoing basis.

 

Information technologists

 

 

The Industrial Revolution brought yet another type of working professional--one whose primary task was in the infrastructure of information. The job of these individuals--described as 'systematizers'--was to bring offices, shop floors, and other working environments up to speed with electromechanical office technology.

 

[In the words of one systematizer at the time] "Now, administration without records is like music without notes--by ear. Good as far as it goes--which is but a little way--it bequeathes nothing to the future . . . Under rational management the accumulation of experience, and its systematic use and application, form the first fighting line."  

     

Systematizers set about restructuring the office--introducing typewriters and adding machines, designing multipart business forms and loose-leaf filing systems, replacing old-fashioned accounting ledgers with machine billing systems, and so on. The office systematizer was the ancestor of today's information-technology consultant.

 

The systematizer, then, was the ultimate specialist--a professional who concentrated entirely on the process of process. This was a new development in the history of organizations--one brought on by increased complexity of processes and expanded scope of operations.

 

Adam Smith warning--specialization can go too far

 

These areas of specialization have become strictly enforced and reinforced over the centuries since first described and encouraged by Adam Smith that they are taken for granted almost as a scientific fact. Even in his day, Adam Smith indicated that such specialization had its limits and could become counterproductive.

 

 

Many tribes of animals acknowledged to be all of the same species derive from nature a much more remarkable distinction of genius, that what, antecedent to custom and education, appears to take place among men. By nature a philosopher is not in genius and disposition half so different from a street porter, as a mastiff is from a greyhound, or a greyhound from a spaniel, or this last from a shepherd's dog. Those different tribes of animals, however, though all of the same species, are of scarce any use to one another. The strength of the mastiff is not, in the least, supported either by the swiftness of the greyhound, or by the sagacity of the spaniel, or by the docility of the shepherd's dog. The effects of those different geniuses and talents, for want of the power or disposition to barter and exchange, cannot be brought into a common stock, and do not in the least contribute to the better accommodation and conveniency of the species.

 

Adam Smith makes an analogy here that is at once absolutely correct and comically insulting. There is an important point to be made, however, in the rush to specialization stimulated by the Industrial Revolution. It was possible to extend the specialization model too far--resulting in a sub-partition of the firm overall. It was this problem in part that led researchers to study the industrial phenomenon with the objective of a balanced model--combining proven scientific techniques with procedures and concepts within the understanding and ability of all primary workers within a firm.