Managerial Revolution

Conceptual Overview

The concept of the managerial revolution can be found in the 1932 publication of The Modern Corporation and Private Property. The authors, Adolph Berle and Gardiner Means, made two novel observations that challenged economic theories of capitalism in America at the time. They observed a dispersion of ownership and a greater prominence of financial institutions, namely that the control of family capitalism—which was fairly strong in American corporations until the early 1900s—was gradually eroded through stock dispersion. They further observed that a new class of professionals—the business-school educated—succeeded in developing an autonomous agenda that was significantly different from that of capitalists.

A decade later, in 1941, James Burnham, taking a different ideological position, was the first in coining [Page 873]the term. In his oft-cited book The Managerial Revolution, Burnham set the tone for the formulation of a new perspective that generated awareness of the role of managers as an autonomous class in modern capitalist America. These two books suggested that the managerial revolution was the result of two intertwined historical processes: a corporate revolution that radically transformed the economic and social landscape of America and the professionalization of management, including business-school training and theory building, which provided the ideological pillar for the revolution.

The term corporate revolution refers to a new legal form that resulted from the amalgamation of manufacturing capital with financial capital, exploitation of the law, and in their wake, unprecedented industrial mergers. The original blueprint for the newly emerging corporate form is to be found in public and quasigovernment agencies that went through legal metamorphoses into private property during the last decade of the 19th century. From a few large publicly owned manufacturing corporations in 1890, the economy came to be dominated—at the turn of the century—by numerous private corporations, soon to be managed by salaried workers. It was in the large corporation that ownership was gradually divorced from management and control. At the turn of the century, the United States had the world's largest proportion of industrial workers to administrative staff, indicating that in the United States economy, the separation of ownership from control in industrial firms was the most significant.

The second pillar of the revolution was the professionalization of management. Management practices grew initially out of engineering work. American engineers, and particularly the American Society of Mechanical Engineers, were attuned to economic constraints and to the administration of the corporation, treating management as a separate domain of practice and inquiry. The first formal entry for “management” in the engineering literature was in 1896, but articles and editorials about management had existed already in the late 1870s. Between 1895 and 1917, the volume of management texts, mainly within engineering periodicals, ballooned by 400 percent. It was the birth of a new language, a language that has gradually come to replace the language of traditional capitalism: “system rationality” instead of “individual initiative”; “jobs” instead of “natural rights”; “routing,” “rational planning,” and “efficiency” instead of “free market.” Such proliferation—which did not take place among contemporary European engineers—was followed by the formation of professional societies in different domains of management such as scientific management, accountancy, and marketing, as well as the appearance of management consultants and the institutionalization of business schools. The Wharton School was founded in 1881, and at the turn of the century additional prestigious business schools were established in the University of Chicago and the University of California in 1899 and at Harvard in 1908. These institutions provided legitimacy to the newly established occupation and have further participated in the manufacturing of management paradigms that dominated the field throughout the 20th century. Those were scientific management (mainly during 1900–1925), human relations (mainly during 1925–1940), systems rationalism (mainly during 1940–1980), organization culture (mainly during 1980–1990), and contemporary restructuring. It is widely agreed that management is an American term and that managerialism was an American creation. During the first half of the 20th century, American management started its universal career by attracting pilgrimages of interested parties from Europe. The economic and military supremacy of the United States was attributed to its unique managerial and productivity spirit. After World War II, American management and corporate capitalism were exported to Europe and Asia mainly under the Marshall Plan. At the risk of oversimplifying, it can be said that European countries such as England, France, and Germany developed different indigenous models and justifications of management. For example, in the United States the application of management was justified in terms of scientific solutions to industrial practice. The debates about management in England, however, were framed as moral and ideological discourses and were not couched in scientific terms.

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