Managerial capitalism history

When professional managers run companies; characteristic of the period of American business development when family members yielded control of their companies to professionals. The term helps distinguish the early period of American business, leading to the Civil War, with the period that followed, when businesses began to be run by professional managers trained in various specialty disciplines.

This period coincides with the widespread emergence of stock companies, when many companies sold stock for the first time in order to expand. In the 1840s and 1850s, manufacturing and RAILROADS (especially railroads) began to grow exponentially, requiring managers with more than one set of skills. After the Civil War, as the railroads continued to expand westward, the need for professional managers became more pronounced as the organizations grew larger and more complex. Quite often, business organizations would still be run by family members, although they were increasingly staffed by professional managers, hired from the outside.

After the turn of the 20th century, as the need for managers became more recognized, many business school programs were instituted to provide graduate, and later undergraduate, training for this new managerial class. The Harvard Graduate School of Business was the first graduate program in the country instituted for this purpose.

In the 20th century, the trend became more clear as fewer and fewer companies remained in family or founders’ hands. The rise of the modern CORPORATION after World War I was an excellent example. The size and complexity of DuPont and GENERAL MOTORS, the latter headed by Alfred SLOAN, showed that the 20th-century corporation had become too large to be ruled from the top and now required skilled and trained managers at various stages and levels of organization.

The success of larger business enterprises managed by professionally trained managers became the cornerstone of American business in the 20th century. In many cases, this success can be seen in the MERGERS and acquisitions trend that characterized several decades of the 20th century and the rise of the conglomerate organization in the 1950s and 1960s. In addition, many business disciplines created “managerial” tracks in the post–World War II years, and such disciplines as managerial accounting, finance, economics, and information sciences now exist and are designed to train potential managers in decision making and cooperative planning.

See also DUPONT DE NEMOURS & CO., E. I.; HARVARD BUSINESS SCHOOL; TAYLOR, FREDERICK WINSLOW.

Further reading

• Chandler, Alfred D., Jr. The Visible Hand: The Managerial Revolution in American Business. Cambridge, Mass.: Harvard University Press, 1977. 
• Marris, Robin. Managerial Capitalism in Retrospective. New York: St. Martin’s Press, 1998.