Leadership Patterns in the First Industrial Revolution

Leadership Patterns in the First Industrial Revolution

The hallmark of the First Industrial Revolution was the transition of the society from an agrarian to an industrial economy. Manual labour was replaced by mechanical manufacturing powered by steam and water, leading to significant improvements in productivity and lower production costs. While the initial impact was felt in Britain, soon, these inventions and methods of manufacturing spread to other parts of Europe and North America. As a result, there was a dramatic shift in how production took place and how people lived and worked. People started migrating to cities from rural areas in large numbers to work in factories. Factories were established by entrepreneur capitalists who centralised production under a single roof with the focus on efficiency and control but with no attention being given to poor working conditions and long working hours of the workers. Leaders were taskmasters focused on maximising productivity, often enforcing child labour as workers had no recourse to legal support.

Most of the businesses were family-run enterprises. The leaders were hands-on and controlled all aspects of their businesses. The businesses were established around inventions, with the focus on taking advantage as first movers with those inventions. The environment was unstable, and leaders had to take huge risks on new technologies, untested markets and large capital investments. Many leaders were inventor-entrepreneurs. James Watt, known for the invention of the steam engine, expanded the use of the steam engine to various domains, including transportation, agriculture and factories, thus making it a hugely successful business proposition. James Watt partnered with Matthew Boulton, a businessman with complementary strengths in sales, finance and business development, and thus created an impactful business model in the energy segment.23 Richard Arkwright invented the mechanised spinning device and established the first factory system in Cromford Mill, Derbyshire, which became the prototype for future mills.24 He built a scalable model combining machinery, water power and wage labour that he licensed to others, leading to rapid mechanisation of manufacturing. His innovation helped transform Britain into the world’s textile hub, making cotton goods more affordable. George Stephenson was a self-taught engineer working in coal mines when he invented the steam locomotive. He soon realised that railways were not just for mining and collaborated with other engineers to design the railway system for transportation. Stephenson is credited with building Stockton and Darlington Railway, the world’s first public railway to use steam locomotives, and developing the Liverpool and Manchester Railway, which was seen as the precursor to an economically viable railroad system.25 Thus, the First Industrial Revolution brought to the fore leaders who possessed both technical expertise and business acumen. Since these were the early days of formal industrialisation, top-down control was necessary to ensure quality and maximise production output. The leaders possessed the vision to convert their inventions into solutions beneficial to the society and create the foundation for future innovations. Some of them demonstrated a paternalistic leadership style, believing that they had the moral responsibility to uplift the status of workers through housing, education, healthcare and religious instruction. This phase also witnessed the beginnings of labour unrest due to poor working conditions and low wages creating a class divide. Hence, some of the leaders were mindful of the need to develop strategies to address these concerns and, at the same time, build employee loyalty. Robert Owen was one such industrialist who was a pioneer in blending social reformation with business economics. As a co-owner and manager of New Lanark Mills, a company that employed 2,000 workers, including children, Owen banned child labour and established infant schools and adult evening education, improved worker housing and introduced moral instruction without religious coercion.

Owen transformed the industrial village of New Lanark in Scotland, which eventually became the model across Europe for humane factory management.26 This trend of blending commercial interests with social welfare objectives has been carried forward in subsequent decades, leading to the ESG (environmental, social and governance) framework in the current day being adopted by several organisations worldwide.

Leadership Patterns in the Second Industrial Revolution

The late 18th century to mid-20th century witnessed the industrial revolution during which period efficiency and productivity gained importance and a new definition of economic models emerged. With the demand for products increasing substantially, large factories began to be set up, which meant hiring a large workforce with minimal education to carry out the work. To get the required output from them, laying down well-defined processes and having a strict control over operations was necessary. Therefore, leadership continued to be centralised and authoritarian, with orders flowing from the top. Henry Ford succeeded with a manufacturing model led by assembly lines due to standardisation and military-style supervision of the factory.27 Frederick Taylor’s work on time and motion studies and optimising labour productivity focuses on maximising output by repeating tasks and processes with predictable quality with low tolerance for deviation or failure and, at the same time, little room for innovation.28 The role of the leaders was to supervise large teams by monitoring their productivity and ensuring compliance with the laid-down processes. New ideas and changes were slow and not encouraged, with the focus being on maintaining stability. Leadership positions were largely occupied by men who reinforced the prevalent societal norms of authority and discipline in their conduct of affairs with strict hierarchical organisation structure, centralised decision-making and clear lines of authority, control and responsibility. There was very little delegation, and power was concentrated at the top. Some industrialists such as George Pullman provided housing, education and healthcare support to the workers and expected loyalty in return.29 While industrialists benefited with large-scale factories and rapid urbanisation, excessive controls on functioning and an authoritative style of leadership led to the emergence of labour unrest and labour rights movements. Industrialists built their businesses, leading their organisations with personal charisma, and were rewarded for their risk-taking ability. Andrew Carnegie emigrated from Scotland to the United States of America, where he initially worked as a bobbin boy in a textile mill and later as a telegraph operator. He also managed a railroad business.30 He was known as a steel magnate for foreseeing that steel would become the mainstay for infrastructure projects. Controlling the complete supply chain, including raw materials, transportation and manufacturing, enabled him to build the successful conglomerate Carnegie Steel. Andrew Carnegie built a successful steel empire through relentless focus on cost control and maximum efficiency. Carnegie Steel was sold to J.P. Morgan for US$480 million in 1901, the largest business deal in history at the time. This led to the formation of US Steel. Carnegie possessed outstanding expertise in putting across his ideas in captivating ways, and he even demonstrated his moral conviction that the rich had a duty to improve society through his investments for social good. Cornelius Vanderbilt was considered a railroad and shipping tycoon. He wielded fear and respect among his employees and rivals through his larger-than-life personality. He started a ferry service at an early age and set up a steamboat business by offering faster and cheaper services. Vanderbilt bet upon the future of rail transportation and invested in buying and merging railroad businesses. The oil tycoon John D. Rockefeller, with his calm demeanour and frugal lifestyle exuding moral conviction, was well respected by his employees and the industry, despite building a monopoly business. He built an enormously successful oil-refining business through buyouts, price wars, purchase of businesses during downturn at low costs and secret deals with railroad businesses. He was admired for his large-scale philanthropy, including the founding of the University of Chicago and the Rockefeller Foundation. Successful leaders in the industrial phase drew strength from mastering emerging technologies and supply chains. As regulation was minimal, they exploited opportunities through centralised control and market dominance, often becoming monopolies in their businesses. They could rationalise their ruthless behaviour through philanthropic activities or religious conviction. As pioneers in their businesses, they took full advantage of the lack of rules or restrictions for conducting business affairs and also the limited worker rights and collective bargaining capabilities.

Leadership Patterns in the Information Age

In the aftermath of the Second World War, there were massive investments in rebuilding the infrastructure of nations and technology. The Cold War between the erstwhile Union of Soviet Socialist Republics (USSR) and the United States of America also led to competition in path-breaking innovations, especially in the domains of space, defence and science. This resulted in the expansion of higher education, creating a huge asset bank consisting of talent with skills in engineering and science and later in information technology (IT), not only in the developed world but also in several developing countries. There was a significant rise in the number of women joining the workforce. As per an International Labour Organisation report, in 2000, the labour force participation of women increased to approximately 50 per cent.31 Also known as the Third Industrial Revolution or the Digital Age, the Information Age saw a transition from mechanical and analogue technologies to digital systems. This has resulted in the transformation of businesses, functioning of societies and redefinition of the leadership approach.

The invention of the transistor and, later, the microchip, the proliferation of computing due to reduced costs of hardware and access to affordable software, and advancement in communication through a combination of developments in satellites, mobile phones and fibre optics as well as the democratisation of the World Wide Web have resulted in dramatic changes in the way we work, live and communicate. The constraints of time and space have disappeared, and business leaders have become global-minded as they seek to identify and service customers from around the world. Process orientation has become a must for every business for every function. Management by family members has given way to professional management. The matrix organisation structure adopted by several multinational organisations enables them to address the needs of implementing global strategy but with local action and verticalised business-focused expertise blended with horizontal practices. Globalisation, outsourcing, integration of supply chains and the ability of people to work remotely across the world has led to the creation of knowledge economies. Thus, intellectual capital has become more valuable than the physical assets, and a new category of knowledge-based assets has emerged as a result. Innovations by Bill Gates, Steve Jobs, Larry Page, Sergey Brin and several other entrepreneurial leaders have resulted in the establishment of world-class global businesses. Microsoft, Apple and Google have become household products that are part of everyday life. Leaders have been constantly rethinking the power and the potential of digital logic to create new products and services and scale their businesses. While engineering design and quality in production have remained important, scaling of businesses by creating products and services that deliver human-centred experiences has been the high point of this phase of digital transformation. Design aesthetics and user experience (UX) have driven sales volumes for products such as Apple and have drawn millions of customers to products of Google or Amazon. In this pursuit, the unique capabilities of many of these path-breaking businesses have been in their leaders bringing together technology, design and cognitive sciences, a hitherto unexploited phenomenon. Leaders of these successful corporations also recognised the importance of building talent ecosystems and focused on fostering culture that would help in attracting and retaining talent to scale their businesses. This is a far cry from the earlier phases of the industrial revolution where an authoritarian top-down approach, including welfare measures at times, was prevalent among leaders to achieve loyalty from employees.

It can be deduced from the analysis of successful leaders across multiple phases of industrialisation that they possessed vision—to change the world order or the business landscape. They remained focused on delivering on this vision and could articulate it well and communicate it to various stakeholders. Their ability to innovate, inspire and ensure positive outcomes has depended largely upon the extent of buy-in they could derive from the stakeholders. Among the various factors that determine the growth trajectory of a business, technology intervention is a key subject that leaders have had to address as it has brought in its wake the responsibility to determine the technology to use or adopt, the timing, change management for successful implementation and the likely outcomes. Choice of technology and sophistication options have been industry-specific and depend on the maturity, the opportunity landscape and the risk-taking ability of leaders.