Laying Down the Principles: Management

A system of centralized management was born from the need to direct the flow of capital and run large-scale railroad operations safely, efficiently, and profitably. The fact that operations did not occur in a single place, but rather over widely dispersed areas made management both imperative and challenging. “An important question in the management of a large railroad system is how to get local responsibility on the part of those engaged in operating different arms of the system,” wrote Charles E. Perkins, President of the Chicago, Burlington, and Quincy Railroad.²⁵

The Pennsylvania Railroad alone, which employed over 110,000 workers by 1891, dwarfed the number of personnel of the United States Army, Navy, and Marines combined. Early surveyors and managers included engineers from West Point or the War Department—individuals well versed in civil and military engineering and rigorous bureaucratic procedures. Railroad managers were responsible for supervising thousands of specialized employees—from surveyors, engineers, and construction workers to conductors, accountants, and ticket sellers—all within distinct units of operation. Management required micro-level, daily supervision as well as macro-level, long-term planning. A hierarchical structure emerged with delineated lines of authority narrowing upward, from middle and top managers to a board of directors.

Pioneers in management included Benjamin H. Latrobe of the Baltimore and Ohio Railway, who focused on financial accounting; J. Edgar Thomas of the Pennsylvania Railway, who worked on the coordination of regional lines within a large organization; and Daniel McCallum of the New York and Erie Railroad, who devised systems outlining the lines of responsibilities, authority, and communication. Their contributions laid the founding managerial principles of modern big business. By the late 1800s, other large, geographically dispersed organizations—including banks, manufacturers, and department stores—followed the same managerial standards.

Railroad regulation books outlined detailed responsibilities of specialized personnel noting that “A perfect familiarity with the following rules . . . will be expected of all employees . . . and an ignorance of their requirements will never be received as an excuse for not obeying them,” or, “If you are unwilling to work under these rules, you are requested to leave the service at once.”²⁶ Historian Richard White declares that the orderly system outlined was not always followed in the messy reality of railroad management, citing cases in which railroad organizational charts sometimes “dissolved into particular networks of dependence, cronyism, and kinship.”²⁷