American Business History

Frederick Taylors Ideas 

Frederick Taylor, for many, is the revolutionary father of management. The Principles of Scientific Management he introduced positively impacted the manufacturing industry at the time. Through employing his ideas, many businesses optimized their profitability and consequent profitability through enhancing the efficiency of their operations. However, some scholars argue that while his ideas may have been valid for some industries during his time, they have been outmoded and replaced by other management ideas. My analysis indicates that the bulk of Frederick Taylors ideas on management form the core of management practice and still hold true and are being implemented to date.

Frederick Taylors idea that the profitability of an organization can be optimized through enhancing economy efficiency, in particular, labor productivity, is still relevant and useful today. The circumstances and methods of productions have certainly changed but the principles underlying improvement of production efficiency as outlined by American manufacturing manager still apply. For instance, Frederick Taylor identified that human beings require a supervision to work at optimal capacity. When they are supervised, their production is usually higher than when they are not. For instance, he observed an immigrant worker Schmidt carrying 12.5 tons of pig iron bars per day unsupervised. However, when there was supervision, this worker carried 47 tons of the same in a day. The productivity nearly quadrupled. Frederick Taylors idea that human beings are ordinarily lazy and inherently dislike work still holds true today. Workers have vested interests in themselves and would not work if they are not remunerated for their extra efforts. If they are not motivated by the prospect of earning higher salaries, they will not put in extraordinary efforts. As such, managements institute supervisory measures to enhance the productivity. To date, there are foremen in factories floors, agricultural fields, and other workplaces. Workers are also increasingly being forced to sign performance contracts to evaluate their performance, delineating the variance between the actual versus expected or projected results. Not many organizations around the globe appropriate a soft management. In fact, the world is increasingly gravitating towards a tough management where the least performers are castigated and retrenched.

Apart from supervision, Frederick Taylor also explained how remuneration can be appropriated as a motivating factor to enhance labor productivity. Famous manager posited that the relationship between employee motivation and remuneration is not a straight like but rather a bell-like curve. He argued that the workers should not be given a raise of more than 60% at once. When the compensation increases, motivation also increases but up to a certain point beyond which laxity and complacency build causing a decrease in productivity. The idea is still being used by managers to date to keep a short leash of their workers and only affording them a small salary increment. If the ideas were obsolete, they would not be implemented at the moment.

Furthermore, contrary to what detractors posit, the scientific management principles are, in fact, expanding in their application. When Frederick Taylor first used them it was in a manufacturing setting. With time, their application has increased to other sectors of the economy. Managers still use the most efficient of labor choices. Activities that were once labor-intensive now have mechanized alternatives. As Taylor demonstrated, the most efficient of choices bestows the greatest of benefits. Managers have implemented these ideas to the extent of dehumanizing factories and turning humans into automatons. While it is not necessarily a desirable impact, the automation simply signifies the desire to optimize efficiency in production, a key tenet of scientific management. The circumstances of their applications have changed but the principles underlying their applications have not. So long as human beings are predisposed to laziness and are inherently motivated by the desire to improve their wellbeing, Frederick Taylors ideas of scientific management will pass the test of integrity. Other ideas of management may be introduced, for instance of humanizing the workplaces and other forms of motivating factors, but they are complementary facets rather than replacements of Taylors views.

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Sam Walton and the Rise of Wal-Mart

Sam Walton, the proprietor of Wal-Mart, is credited with the management masterstroke that transformed Wal-Mart from a small-sized, mediocre company into a great company. For some years, Sam Walton ran a modest-sized retail chain with no vision to become the worlds largest retail chain. However, in 30 years, this American businessman transformed it into a world renowned brand with branches all over the world. Sam Waltons determination coupled with his desire to fulfill the needs of the low income-earners made Wal-Mart popular among the U.S. citizens, and the popularity drove sales.

Wal-Mart opened its first store in 1962. By the end of 1991 it was the largest retail chain in the U.S., and at the turn of the millennium the largest company in the world. Its meteoric rise can directly be attributed to Sam Walton. The major cause of its rise is the unwavering vision Sam Walton had of a prosperous discount retail store. At the time, it was unheard of. Starting such a venture was akin to committing financial suicide. Many financial analysts did not reckon that a successful business based on offering a lower price and great customer services could be established. However, Sam Walton did. He believed that if all the stakeholders in the U.S. economy could work together, they could afford to collectively lower the cost of living for all the U.S. residents. Successful entrepreneur made it his aspiration to be in good standing with his associates and employees. He even offered the employees the chance to be the owners of the company through investing in shares and his vision of American society with a better wellbeing afforded via lower pricing of products. The discounts on products attracted an extensive consumer base since it is only natural to prefer cheaper options especially if there is no compromise on quality. As Wal-Mart continued to offer a great value of products and customer services its profits started to soar. Between 1962 and 1970 Sam Walton then diligently reinvested his proceeds to further expand the scope and geographical reach of his business.

The major turning point in Wal-Marts fortunes is arguably its incorporation into a public limited company in 1970. The share value of the company was estimated to be on the upwards of U.S. $176 million. The proceeds from the sale of shares enabled the company to rapidly expand its operations. The next decade proved to be a decade of incredible growth. By 1991 Wal-Mart had internationalized its operations. It used varied market entry strategies to enter foreign markets and curve out a niche for itself there. For instance, Wal-Mart formed a joint venture with Cifra to enter the Mexican market in 1991. It then acquired 122 Woolco Stores to enter the Canadian market in 1994 and acquired ASDA to enter the UK market in 1999. The financial nous of Sam Walton and his associates enabled them to make the correct investment decisions and expand rapidly. Even when the rest of the U.S. was struggling to cope with the adverse effects of economic meltdown in 1991, Wal-Mart was making abnormal profits. In fact, during that year, retail corporation recorded a 40% increase in its sales, a feat no other company could match. The bulk of it, though, is attributed to the lower pricing of its products.

Sam Walton played a vital role in the transformation of Wal-Mart into a world retail leader. He was a shrewd businessperson. Just like the many other great entrepreneurs before him, Sam Walton was a risk taker. He was not afraid to the course of his business. During several occasions he changed the format of his business and even the settings of the facilities to establish the most functional of the alternatives at his disposal. He also possessed a distinctive hard-charging and demanding style. Mr. Walton expected those below him to demonstrate the same level of commitment towards the accomplishment of the enterprises goals as he did. As such, he was not afraid to severe his relationship with his staff if the figures and feedback he was receiving were unfavorable. He believed in leadership through the example. He woke up early in the morning and was at his work station on time. Whether it was through emulation or through fear of being reprimanded those under him followed suit, in the process enhancing the productivity of the company. The increase in productivity showed as an increase in profitability and consequent expansion of the enterprise. Gradually, the business grew to become one of the largest companies in the world. Even after his demise, the ethos he had instilled in his venture guaranteed favorable financial and economic performance to date.

Inside Job

The Great Recession that began around 2008 is the second worst financial meltdown in the U.S. history after the Great Depression in the late 1920s and early 1930s. It is estimated that the financial crisis of 2008 resulted in a loss of over U.S. $20 trillion, the bulk of it borne by the taxpayers. Many individuals lost their jobs, houses were foreclosed, and assets seized due to failure to service loans and mortgages. The film Inside Job by Charles Ferguson provides a comprehensive analysis of the causes of the Great Recession. In it, Ferguson asserts that the systemic corruption of the various stakeholders in the financial sector, notably the commercial banks, politicians, regulatory authorities, and ratings agencies, prompted them to deliberately misinform the U.S. public on the real state of the economy in effect causing the financial crisis.

Charles Ferguson attributes the financial meltdown between 2008 and 2009 to the endemic corruption in the U.S. financial sector. He ascertains that it is the corporate greed exhibited by the leaders in the financial sector that caused the Great Recession. The major enabling factor that afforded room for corporate greed was the altering of the policy environment. The financial industry increasingly became deregulated. The institutions in the financial sector were at liberty to regulate their own operations and any attempts to regulate the industry by the government were vehemently rejected by the most leaders in the financial sector. Ferguson especially blamed the politicians for the recession. For instance, he quoted Glenn Hubbard, President Bushs then chief economic adviser advocating for progressive deregulation of the industry. Increased deregulation encouraged dishonesty and outright defrauding of the U.S. investors. Ferguson argues that the commercial banks knew what they were doing when they were advocating for deregulation. Even when they were failing they collated themselves into larger entities which they conceptualized as too big to fail, which was a farce.

The commercial banks contributed immensely towards the financial meltdown. They appropriated credit default swaps and securitization to increase borrowing. They deliberately misrepresented information regarding mortgages, credit card debt, and bank debts. Moreover, they continued to sanction loans that could not be sustained by the economy. The financial lending institutions such as Goldman Sachs, Lehman Brothers, and Merrill Lynch did not issue disclaimers even when they knew that the perceived boom would not last forever. Instead they encouraged an impulsive risk-taking and borrowing. Some people borrowed to finance their personal pleasures including the purchase of private jets, penthouses, and private elevators among others.

The regulatory bodies also massively failed the American public and exacerbated the financial crisis. Rating companies such as Moodys, Standard & Poors, and Fitch deliberately misled investors into believing that certain financial institutions were performing well when in the real sense they were not. They made fortunes from misleading entities that relied on their skewed ratings to make financial decisions. Even two days before their closure, AIG and Lehman Brothers were given very favorable ratings, deliberately misleading investors and borrowers. What makes it abhorrent is the arrogance with which they dismissed their role in the recession. When testifying before the legislature, they alleged that their ratings merely amounted to opinions and should not be conceptualized as guides for investors.

The academia also participated in defrauding the public and causing the Great Recession. Finance and economics professors wrote rave reviews on how well the U.S. economy was performing. Some cited Icelands case where it had borrowed amounts ten times its total GDP yet was still experiencing an economic development. Unlike in normal societies where the academia is the conscience of the democracy, the academic elite at the time only served as cheerleaders of the commercial banks, rating agencies, and security insurance companies among others. If they had disseminated truthful information, the U.S. public would have been better placed to make prudent financial decisions and would have hedged against the financial meltdown.

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