4. Management and the limits to growth

If slow growth was an important survival strategy of the individual steamboat proprietor, he was also well aware of the organizational constraints on that growth. Pollard, in his study of the role of management in the British industrial revolution has argued that there is a threshold level in most industries above which the entrepreneur could no longer adequately supervise his work gang leaders and needed to rely on an intermediate level of managers. Pollard set this level somewhere between 120 and 300 workers depending on the amount of capital, the number of skilled and differentiated workers. The size and number of workplaces was another major factor.(8) Because the steamboat trade employed a range of skilled and semi-skilled workers--from navigators to engineers, accountants to cooks and waiters to manual labourers in groups of only 25 to 30--the threshold for the steamboat trade was probably close to Pollard's lower limit, perhaps four to six vessels. Major commitments of time outside the workplace, especially to politics, could further reduce this optimum size.

When the major proprietors contemplated expansion beyond this point there were several important considerations. The first was the basic trustworthiness and competency of any senior management figure. In the brief history of D. Bethune and Co., both Bethune and Holland appeared as less than honest managers of the limited partners' interests.

Even if the hurdle of trust were surmounted there was still a more serious barrier. New boats could be financed either through earnings or on credit. We have already established that the former was the safer route. In a smaller operation the proprietor could keep for himself that portion of the returns which would otherwise have been paid to the manager. If one followed a conservative growth pattern, the addition of one vessel beyond the limit and the resultant necessity of a salaried manager, and the capitalist could actually be faced with a smaller return on his investment. In addition either the capitalist or the manager would be underemployed unless the fleet continued to grow, or the capitalist decided to devote some of his time to other pursuits.

The reluctance of the personal proprietors to yield the returns of their own management was not a major factor in the joint stock company which succeeded them. The investment community which provided most of the necessary capital expected to pay the additional costs of management. Such was the price they had become accustomed to rendering for diversifying their interests.

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Chapter 5 appeared in FreshWater.