 |
| Alfred Chandler |
The rise of what Alfred Chandler called the ‘visible hand’
of management has dominated the business history literature for forty years.
Simply put, Chandler argued that managers came to dominate American business in
the late nineteenth and early twentieth century. As technology was introduced
to companies and markets expanded, their processes of distribution and then coordination
became more complex as they increased in size. Consequently, this generated a
need for better administrative control of the organisations’ activities,
leading to the rise of the ‘visible hand’ of management. Indeed, as managers
grew in number within firms, they increasingly steered their destinies, wrestling
control of corporate strategy from companies’ shareholders, financiers and
directors. Chandler
called this ‘managerial capitalism.’[1]
In the United States this process occurred first in the
railroads. When faced with challenges such as safety concerns, then the
increasing volume, speed and complexity of traffic on the line, companies quickly
developed hierarchies of railway managers to coordinate their activities,
leading to the rise of the ‘visible hand.’ Ward argued that a situation had developed
on the Pennsylvania Railroad by 1873 where ‘paramount executive authority had
emerged’, directors were by then ‘pliant acceders,’ and shareholders were
virtually impotent.[2] Indeed, there is no doubt that Chandler admired
railroads, such as the Pennsylvania, where managers had seized control of the organisation,
arguing they were the best managed and innovative. They adopted high-level
strategic direction, with considerable authority delegated to operating units
and complex administrative practices were developed.[3] Indeed, Zunz also
argued similar of the Chicago, Burlington and Quincy Railroad, which he considered
an exemplar of good management practice because it was controlled by the
company’s management class.[4]
The question, therefore, is to what extent this process
was replicated in the British context? How much control did British railway
managers have over their companies’ directors and shareholders in the
nineteenth century, and, ultimately, their destinies? Chandler argued
that because of the nation’s smaller size British railway managers were
challenged less than their American counterparts to develop new and innovative
management techniques.[5] Therefore, this possibly implies that British railway
managers did not secure the same level of control as some American managers. However,
Channon countered this by arguing that British railway managers were challenged
in different ways because of the country’s high-density, expensive and
intensive network, which was, unlike in the United States, complete in its
operating and physical details in a much shorter time period after the industry’s
establishment.[6] Therefore, while not ruling out a rise of the ‘visible hand’
of management, this may suggest that a different pattern of managerial development
occurred within British railways. Nevertheless, neither of these perspectives
really answered the question of whether there was a rise in the ‘visible hand’
of management in the British railway industry in the nineteenth century.
No comprehensive history of British railway management before
1914 has been written. Therefore, I have had to compile what I know about the
rise of the ‘visible hand’ from case studies. However, some historians have broadly
attempted to assess when the railways’ management class, particularly within larger
companies, came to dominate the industry’s direction. Cain argued that General
Managers, who were usually at the top of railway companies’ hierarchies, were the most
important decision-makers in the industry by 1870.[7] Channon made a similar claim, stating that
before 1870 managerial ascendency ‘cannot be assumed.’[8] I believe both were
wrong, and using a number of case studies I will suggest that management cannot
be said to have ascended into a position of control before the 1900s.
 |
| Richard Moon |
Terry Gourvish’s book on Mark Huish, the London and North
Western Railway’s General Manager between the company’s formation in 1846 and
1858, is an enthralling text. It relates the story of a railway manager who
during his administration and after his death was considered ‘unscrupulous,
dictatorial and Machiavellian’; controlling the companies' policies. At face value this would suggest he was the
first ‘managerial capitalist’ in Britain’s railway industry. Yet, Gourvish’s
research showed the reverse. He argued that while Huish had more control of
the company’s policies than his contemporaries, he did not possess the
‘dictatorial’ influence in decision-making often ascribed to him.’ Indeed, his
resignation was forced on him 1858 as he did not satisfy the board’s
requirements regarding inter-company diplomacy.[9]
 |
| Archibald Scott |
Indeed, it was the career of the man who instigated Huish’s resignation,
LNWR director Richard Moon, that truly shows that the ‘visible hand’ of management did not really control policy on the
British railway network until long after it had on many American railroads.
Moon was appointed chairman of the company in 1861 and stayed in the post for
thirty years. Before his ascendency becoming chairman, he had a reputation for taking
a highly detailed interest in most of the company’s operational affairs, even
when they were beyond his remit. Indeed, most railways’ boards met twice monthly,
with directors meeting in committees the day before. Yet, Moon would be active
in the company’s affairs every day of the week. Thus, when made chairman his
controlling instincts were let loose. His biographer, Peter Braine, described him as being
‘not only a managing director, but also effectively his own General
Manager,’ throughout his chairmanship. [10] Indeed, the company’s General Manager between 1858 and 1875, William Cawkwell, was
very much under his and the board’s control.[11]
But directors having control of companies’ strategic
direction was not unusual in the period. Lord Salisbury, chairman of the Great
Eastern Railway between 1868 and 1871, looms large in the company’s history. On
his appointment the GER was in chancery. Yet, he successfully turned it around
and it began paying dividends again in the 1870s.[12] On the London and South
Western Railway, as I will explain in my thesis, policy was dominated by
directors until the 1881 when they gave the General Manager, Archibald Scott,
more ‘general control’ over the concern’s affairs.[13] However, even then he
was still under their control and did not have a decisive role in corporate
decision-making. Lastly, on the Great Northern Railway in the 1850s, 60s and
70s it had directors who ‘thought they knew more about the business than the
company’s senior officers.’[14] Therefore, this would suggest that the dominance of company boards was still present in the industry as late as the 1870s.
Indeed, from the 1860s there also appeared controlling positions
within companies which would now be described as managing directorships. In
most cases the individuals taking these positions were ex-managers, who on
retirement became controlling directors. The most prominent examples of this
were Edward Watkin and James Staats Forbes. They were fierce rivals, with
Watkin chairing the Manchester Sheffield and Lincolnshire (1864-1894), South
Eastern (1866-1894) and Metropolitan Railways (1872-1894); while Forbes was
chairman of the London, Chatham and Dover (1873-1898) and Metropolitan District
Railways (1872-1901). Both men had served as railwaymen and then had moved onto
railways’ boards where they dominated policy.[15] The other example of
this was the managing directorship of the Daniel Gooch on the Great Western
Railway. Gooch had been the company’s Locomotive Superintendent between 1837
and 1864, and when he resigned took up a position on the board.
He then became the company’s chairman, and had a position akin to a managing
director between 1865 and his death in 1889.[16] Furthermore, James Ramsden on
the Furness railway also was in such a position between 1866 and 1883.[17]
 |
| Myles Fenton |
But by the late 1880s the dominant power of railway
managers was coming through more widely within the British Railway industry.
Between 1885 and 1897, as my thesis will show, Charles Scotter was the dominant
General Manager of the London and South Western Railway, controlling almost all
aspects of policy, large and small. Cornelius Lundie, General Manager and
Superintendent of the Line of the Rhymney Railway between 1858 and 1904, ran
the railway as he wished with little or no reference to the board’s interests.[18]
Even Watkin relied on the General
Managers at each of his companies for their safe and efficient operation. They
were the SER’s Myles Fenton, William Pollitt at the MSLR and John Bell at the
Metropolitan.[19] Indeed, Hodgkins argued that because Pollitt and Bell were
rivals a proposed link between the MSLR and Metropolitan in the 1890s would
have been difficult to arrange. Therefore, this suggests that despite Watkin’s domineering
chairmanship of his companies, his chief executives still heavily influenced
their railways’ policies.[20]
 |
| George Gibb |
These cases were, however, only the start of a shift of towards
the absolute control of the ‘visible hand’ of management within Britain’s
railways. In 1891 George Gibb was appointed General Manager of the North
Eastern Railway. Gibb reformed the company’s operations and, through dominating
the company’s board and staff, dragged it into a position where experts
acknowledged it was a model of good management practice.[21] But Gibb was just
the first of a new breed of railway executives. Indeed, as a crisis hit the
industry around 1900, as passenger, goods and revenue growth stalled, the cost
of fuel and materials increased, and railway securities became less favoured as
investment opportunities, the role of reversing the industry’s financial
situation fell onto the shoulders of executives.
After 1900 a raft of new and innovative managers
came to the fore within British railways. Sam Fay, an ex-LSWR employee, became
the Great Central Railway’s General Manager in 1902, and through his dynamic
leadership transformed it from being a poorly performing to concern into one
that, while never rich, made great advances and innovations in operational practice.[22] On the Midland
Railway Cecil Paget, the company’s Chief Operating Officer, devised a whole new
method of train control that added greatly to the company’s operating
efficiency,[23] reducing delays to freight trains from 21,869 hours in 1907 to 7,749
hours in 1913.[24] Lastly, in 1912 Herbert Walker became the LSWR’s General
Manager. Through dominating the company’s directorate he reformed its
management and introduced electric traction onto its ailing suburban
network.[25]
Of course, not all railways had General Managers that were
as dynamic as these three. However, generally by the early twentieth century executives
controlled the strategic direction of most of the largest companies within the
British railway industry. Furthermore, the process of the rise of the ‘visible
hand’ was also helped, as my thesis will relate and as Channon discussed,[26]
by directors having less time to dedicate to the companies they served. Before 1900
the many took an active interest in their railway companies as they had little
else to occupy their time. However, from around 1900, as the British corporate
economy grew, they took on other external responsibilities, such other
directorships. Thus, large numbers of directors were
occupied by these activities, leaving vacuum of control into which railway executives could step.
 |
| Herbert Walker |
Therefore, it is not surprising that on the formation in
1912 of the Railway Executive Committee, established to organise Britain’s
railways in wartime, all its members were General Managers of the country’s
largest companies. Indeed, the diminished role of the railway directors in the administration
of the industry by that time was reflected by the fact that not one was
present on the REC. Consequently, Britain’s railways in World War One
was completely managed by the ‘visible hand’ of management,[27] the final proof that it had
secured strategic control of the industry by 1914.
Overall, this survey [tentatively] disproves Channon and Cain’s claims
that railway managers were universally important to British railways’ policies by 1870, and there was much variance in who controlled their direction. Overall,
in the contrast with experience of the American railroads, the rise of the ‘Visible
Hand’ of management occurred relatively late in the British context; only
truly emerging after 1900. But why this was so?
I think that Chandler was correct to
some extent in arguing that British railway managers were challenged less than
their American counterparts because of the country’s smaller size. Despite the
dramatic traffic growth throughout the century, the smaller size of British railway companies meant that there was never a point until
after the 1890s when the internal administrative control required by them was beyond the ability of one director or their boards to organise. Indeed, the highly centralised
management structures of British railway companies throughout the period, where decisions could be
made by a small group of directors or managers at the top of the hierarchy,[28] meant that dynamic and knowledgeable
individuals, irrespective of whether they were directors or a managers, had the possibility of controlling their railways. Thus, this is why it is unclear before 1900 if management had 'ascended' within the industry. Indeed, one factor in an individual controlling a railway in the period was his personality; and all of the men mentioned were certainly characters.
-------------
[1] Channon, Geoffrey, Railways in Britain
and the United States,
1830-1940: Studies in Economic and Business History, (Aldershot,
2001), p.5
[2] Ward, James A., ‘Power
and Accountability on the Pennsylvania Railroad, 1846-1878’, Business History Review, XLIX (1975),
p.58
[3] Channon, Railways in Britain
and the United States,
1830-1940, p.5
[4] Zunz, Oliver, Making America
Corporate: 1870-1920, (Chicago,
1990), p.47
[5] Chandler,
Alfred D., Scale and Scope: the Dynamics
of Industrial Capitalism, (London,
1990) p.253
[6] Channon, Railways in Britain
and the United States,
1830-1940, p.29
[7] Cain, P.J., ‘Railways
1870-1914: the maturity of the private system,’ in Freeman, Michael J. and Aldcroft, Derek H. (eds.) Transport in Victorian Britain, (Manchester, 1988), p.112
[8] Channon, Railways in Britain
and the United States,
1830-1940, p.44
[9]
Gourvish, T.R. Mark Huish and the London & North Western Railway, (Leicester,
1972), p.167-182
[10] Braine, Peter, The Railway Moon – A Man and His Railway:
Sir Richard Moon and the L&NWR, (Taunton,
2012), p.477
[11] Channon, Railways in Britain
and the United States,
1830-1940, p.44
[12]
Barker, T.C., 'Lord Salisbury, Chairman of the Great Eastern Railway 1868-1872'
in Marriner, S., Business and
Businessmen: Studies in Business, Economic and Accounting History, (Liverpool, 1972)
[13]
The South Western Gazette, December 1881, p.2
[14] Simmons, Jack, The Railway in England
and Wales 1830-1914, (Leicester, 1978), p.247
[15] Gourvish, T.R., ‘The
Performance of British Railway Management after 1860: The Railways of Watkin
and Forbes’, Business History, 20
(1978), p.198
[16] Cain, P.J., ‘Railways
1870-1914: The maturity of the private system’, in Freeman, Michael J. and
Aldcroft, Derek H. (eds.) Transport in
Victorian Britain (Manchester,
1988), p.113
[17] Simmons, The Railway in England
and Wales
1830-1914, p.247
[18]
Simmons, The Railway in England and Wales 1830-1914, p.247
[19] Gourvish, ‘The
performance of British railway management after 1860’, p.188-191
[20] Hodgkins, David, The Second Railway King: The Life and Times
of Sir Edward Watkin, (Melton Priory, 2002), p.609
[21] Irving , R.J., The North Eastern Railway Company: An
Economic History, 1870-1914,
(Leicester, 1976) p.261-264
[22] Dow, Andrew, ‘Great
Central Railway,’ The Oxford Companion to
British Railway History, (1997, Oxford), p.191-192
[23] Burtt, Philip, Control on the Railways, (London, 1926),
p.144-151
[24] Edwards, Roy, ‘Divisional
train control and the emergence of dynamic capabilities: The experience of the
London, Midland and Scottish Railway, c.1923-c.1939, Management and Organisational History, 6 (2011), p.398
[25] Klapper, C.F., Sir Herbert Walker’s Southern Railway,
(London, 1973), p.33-76
[26] Channon, Railways in Britain and the United States,
1830-1940, p.187-188
[27] Pratt, Edwin A., British Railways and the Great War:
Organisation, Efforts, Difficulties and Achievements – Vol. 1, (London,
1921), p.40-50
[28] Bonavia, The Organisation of British Railways,
p.17-18
