page_title: Daniel McCallum
section_title: Large-scale management problems at New York & Erie Railroad, 1850s
hierarchical_section_title: Daniel McCallum / Work / Large-scale management problems at New York & Erie Railroad, 1850s
context_page_description: Daniel Craig McCallum was a Scottish-born American railroad engineer, general manager of the New York and Erie Railroad and Union Brevet Major General during the American Civil War, known as one of the early pioneers of management. He set down a set of general principles of management, and is credited for having developed the first modern organizational chart.
context_section_description: McCallum had started at the New York & Erie Railroad as a subcontractor to build and maintain bridges, was appointed superintendent of one region, and eventually made it General superintendent in 1855, controlling over 5000 employees. In this position McCallum came in contact with the large-scale management problems, which other great railroad companies such as the Pennsylvania Railroad (PRR), the Baltimore and Ohio Railroad also faced. One of the main problems of these largest railroad companies was the rising of costs of moving freight in comparison to smaller companies. McCallum postulated that this was caused by the inefficient internal organization. In his 1856 report to the stockholders of the New York & Erie Railroad he explained:
  A superintendent of a road fifty miles in length can give it's business his professional attention and may be constantly on the line engaged in the direction of its details; each person is personally known to him, and all questions in relation to its business are at once presented and acted upon, and any system however imperfect may under such circumstances prove comparatively successful.   
   In the government of five hundred miles in length a very different state exists. Any system which might be applicable to the business and extent of a short road would be found entirely inadequate to the wants of a long one. and I am fully convinced that in the want of system perfect in its details, properly adapted and vigilantly enforced, lies the true secret of their [the large roads’] failure; and that this disparity of cost per mile in operating long and short roads, is not produced by a difference in length, but is in proportion to the perfection of the system adopted.
  New methods had to be invented for mobilizing, controlling, and apportioning capital, for operating a widely dispersed system, and for supervising thousands of specialized workmen spread over hundreds of miles. The railroads solved all these problems and became the model for all large businesses. The main innovators were three engineers, Benjamin H. Latrobe of the Baltimore and Ohio, McCallum of the Erie, and John Edgar Thomson of the Pennsylvania (railroad). They devised the functional departments and first defined the lines of authority, responsibility, and communication with the concomitant separation of line and staff duties which have remained the principles of the modern American corporation.
caption: New York & Erie Railroad system map, circa 1855
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