Courtesy of Forbes:
While studying the history of business practices, HBS researcher Caitlin Rosenthal made a startling discovery: Many of the techniques pioneered by slave owners in the 1800s are widely used in business management today. Rosenthal discusses her findings in this story by Katie Johnston, which first appeared on the HBS Working Knowledge website.
Caitlin C. Rosenthal didn’t intend to write a book about slavery. She set out to tackle something much more mundane: the history of business practices. But when she started researching account books from the mid-1800s, a period of major economic development during the rise of industrialization in the United States, Rosenthal stumbled across an unexpected source of innovation.
Rosenthal, a Harvard-Newcomen Fellow in business history at Harvard Business School, found that southern plantation owners kept complex and meticulous records, measuring the productivity of their slaves and carefully monitoring their profits—often using even more sophisticated methods than manufacturers in the North. Several of the slave owners’ practices, such as incentivizing workers (in this case, to get them to pick more cotton) and depreciating their worth through the years, are widely used in business management today.
As fascinating as her findings were, Rosenthal had some misgivings about their implications. She didn’t want to be perceived as saying something positive about slavery. On the contrary, she sees her research as a critique of capitalism—one that could broaden the understanding of today’s business practices.
The work is part of her current book project, “From Slavery to Scientific Management: Capitalism and Control in America, 1754-1911,” and the forthcoming edited collection Slavery’s Capitalism.
The evolution of modern management is usually associated with good old-fashioned intelligence and ingenuity—”a glorious parade of inventions that goes from textile looms to the computer,” Rosenthal says. But in reality, it’s much messier than that. Capitalism is not just about the free market; it was also built on the backs of slaves who were literally the opposite of free.
“It’s a much bigger, more powerful question to ask, If today we are using management techniques that were also used on slave plantations,” she says, “how much more careful do we need to be? How much more do we need to think about our responsibility to people?”
According to Rosenthal, the history of detailed record-keeping on plantations goes back to at least the 1750s in Jamaica and Barbados. When wealthy slave owners in the West Indies started leaving others in charge of their plantations, she found, they asked for regular reports about how their businesses were faring. Some historians see this rise in absentee ownership as a sign of decline, but it is also among the first instances of the separation of ownership and management, Rosenthal says—a landmark in the history of capitalism.
Slave owners were able to collect data on their workforce in ways that other business owners couldn’t because they had complete control over their workers. They didn’t have to worry about turnover or recruiting new workers, and they could experiment with different tactics—moving workers around and demanding higher levels of output, even monitoring what they ate and how long new mothers breastfed their babies. And the slaves had no recourse.
“If you tried to do this with a northern laborer,” Rosenthal says, “they’d just quit.”
The widespread adoption of these accounting techniques is partly due to a Mississippi planter and accountant named Thomas Affleck, who developed account books for plantation owners that allowed them to make sophisticated calculations and measure productivity in a standardized way.
Tracking this information allowed planters to determine how far they could push their workers to get the most profit. Using the account books, slave owners could see how many pounds of cotton each slave picked and compare it to their output from previous years—and then create minimum picking requirements based on these calculations.
This led owners to experiment with ways of increasing the pace of labor, Rosenthal explains, such as holding contests with small cash prizes for those who picked the most cotton, and then requiring the winners to pick that much cotton from there on out. Slave narratives describe how others used the data to calculate punishment, meting out whippings according to how many pounds each picker fell short.
Similar incentive plans reappeared in early twentieth-century factories, with managers dangling the promise of cash rewards if their workers reached certain production levels.
Planters also used group incentives to encourage honesty, doling out a barrel of corn to each hand with the caveat that if anything was stolen from the farm and no one turned in the thief, double the value of that corn would be deducted from each of their Christmas awards. Collective penalties would later be adopted by salesmen and companies like Singer Sewing Company to encourage workers to police one another.
Rosenthal says the rise of the railroad is often credited with creating new units of production, including the cost per ton mile, but slavery’s comparable “bales per prime hand” unit was developed earlier in the nineteenth century. Comparing the number of cotton bales that different types of workers produced to similar workers on other farms, planters calculated the worth of each slave. A healthy 30-year-old male, for instance, would be considered one worker, known as a hand, whereas a child may be recorded as half a hand, and an older slave might be three-quarters of a hand. Figuring out the total number of “hands” on a farm allowed owners and overseers to compare their results.
The concept of depreciation is also credited to the railroad era, when railroad owners allocated the cost of their trains over time, but Rosenthal notes that slave owners were doing this before then. Starting in the late 1840s, Thomas Affleck’s account books instructed planters to record depreciation or appreciation of slaves on their annual balance sheet. In 1861, for example, another Mississippi planter priced his 48-year-old foreman, Hercules, at $500; recorded the worth of Middleton, a 26-year-old top-producing field hand, at $1,500; and gave 9-month-old George Washington a value of $150. At the end of the year, he repeated this process, adjusting for changes in health and market prices, and the difference in price was recorded on the final balance sheet.
These account books played a role in reducing slaves to “human capital,” Rosenthal says, allowing owners who were removed from day-to-day operations to see their slaves as assets, as interchangeable units of production in a ledger, instead of as people.
Rosenthal is aware that what started out as a straightforward history of business practices could become highly controversial, with some misconstruing her research as a kind of justification of slavery. Instead, she wants her research to inform managers and companies to become more aware of the complicated legacy of today’s business practices and the origins of some their day-to-day management practices.
“I got into this because I followed my sources,” Rosenthal says. “I didn’t mean to walk into this minefield.”