CHAPTER V
FINDINGS FROM A PRELIMINARY MANAGEMENT AUDIT OF FIVE SELECTED RAILROADS
This chapter presents the findings from the application of the preliminary management audit technique to five railroads:(1) the Chicago, Burlington and Quincy, (2) the Illinois Central, (3) the Atchison, Topeka and Santa Fe, (4) the Boston and Maine, and (5) the Louisville and Nashville for the years of 1870, 1880, 1890 and 1900. Only a few references will be made to the Boston and Maine in this chapter because Chapter VI discusses that road in more detail.
Reference is made to selected accounting and related statistical data for each railroad. See Appendix C. This data was developed following Kennedy’s method of compilation. See Appendix B. Such data, although not all one might desire, does provide a basis for textual analysis and a source of more detail. As Kennedy notes:
Railroad managers and large investors during the first decades following the beginning of the first railroads frequently discussed financial strength and operating efficiency but found them difficult to measure. Today’s historian likewise is necessarily handicapped because of inadequate records and the impossibility of personal interviews. Although the extremes are easily discernible, the comparison of many early roads is most difficult yet necessary in order to understand the record of any one ccnpany and the development of the railroad industry.1
It should be emphasized that the findings portrayed in this chapter are very “preliminary” and in nowise on the sane level of thoroughness as a complete management appraisal based On primary sources would be. Although a judgment of superior, average, or harmful is rendered for each railroad in each of die eleven categories for the years examined, such judgments were based on varying mounts of data. For example, there was a great deal of data available on most of the roads during the years examined regarding Category IV, executive ability. On the other hand, very little could be found in the area of Category III, organizational structure, for the Illinois Central, while data in this category was plentiful On the Chicago, Burlington and Quincy. Further, in sane categories it was necessary to estimate from data of a preceding or subsequent year. As Kennedy notes, “obviously some points cannot be measured very adequately, but the limitations…apply to all the railroads…and do not seriously effect the rank of any one road in comparison with other roads.”2
The secondary sources also varied in terms of the amount of data they disclosed. For exanple, the sources for the Boston and Maine, although highly interesting and illuninating, did not lend themselves particularly well to this kind of inquiry.3 On the other hand, Overton’s Chicago, Burlington and Quincy was quite helpful. These limitations will be recognized in the next chapter.
Each of the categories, then, is evaluated by applying appropriate questions to the data available. A summary of the overall findings is given in Figure 5:9 at the end of this chapter. Following the assessment of the roads, some general illustrations are given for each category to demonstrate the kind of data on which the judgments were based. These examples are purely illustrative; they are not meant to be either exclusive or inclusive. Some roads are mentioned in some of the various categories; others are not. The illustrations are added simply to give the reader sane idea of the kind of data available.
I. ENTREPRENEURSHIP
| 1870 | 1880 | 1890 | 1900 |
A T & S F | Superior | Average | Harmful | Average |
B & M | Superior | Superior | Average | Average |
CB& Q | Superior | Superior | Average | Average |
I C | Average | Average | Average | Average |
L & N | Superior | Average | Average | Average |
Entrepreneurship has been defined as the functions performed by persons responsible for the inauguration, maintenance, or direction of a profit-oriented business.4 Not only does management need to manage and improve what is already known but it needs to redirect resources from areas of low or diminishing results to areas of high or increasing results. In reflecting upon the role of the entrepreneur, Drucker notes that the entrepreneur has to slough off yesterday and to render obsolete what already exists and is already kncwi. He has to create tomorrow. 5 Hew successful were the managements of these railroads in creating the “business of tanorrcw”?
Perhaps one of the best illustrations, which in sane ways is representative of all five roads in their infancy, is provided by Colonel Cyrus K. Holliday, the early entrepreneur of the Atchison, Topeka, and Santa Fe. The completion of seven miles of roads in 1869 marked the occasion of a speech by Holliday in which he began to predict the future of the western railroads. “Fellow citizens,” he proclaimed, “the coming tide of immigratian will flow along these lines and, like an ocean wave, advance upon the sides of the Rockies and dash their foamy crests down upon the Pacific. See, there rolls the broad Pacific and On its breast are the ships of the Santa Fe riding in fron the Orient.”6 Such was Colonel Holliday’s vision of the Atchiscn, Topeka, and Santa Fe be caning a giant railway network, a transcontinental railroad, creating the business of tomorrow.”
If Holliday’s enthusiasm seems unbounded and unrealistic to the reader, it should be remembered that an optimistic belief in progress was a dominant thread in American life in the forty years before and the thirty years after the Civil War.7 Nationalism and expansionism contained with a sense of adventure and a desire for trade and markets made visions such as Colonel Holliday’s conmonplace.
In 1900, thirty-two years after ground was broken in Topeka the Atchison, Topeka, and Santa Fe had grown to a system of 7,425 miles.8In retrospect, several factors were noteworthy during this expansion.9 First, those individuals who headed the company were railroad men who wanted to build and run a railroad. Second, much of the line was built in advance of traffic. Lines were built where trade had the best prospects of developing. Third, construction was above average in quality. Fourth, competition among railroads occasioned construction of some lines long before traffic warranted. Areas had to be tapped; those companies which hesitated lost traffic. Fifth, as population in-creased a necessity developed for branch lines and feeders to fill the gaps between the main lines. Thus, the Atchison, Topeka, and Santa Fe built mmerous feeders. Sixth, rapid expansion in undeveloped areas ...