Daniel McCallum is often credited with having developed the first modern organizational chart. McCallum took over operations of the New York and Erie Railroad in 1854, which at that time was one of the longest and most extensive railroad systems in the world with nearly 500 total miles of track. Once he took charge, McCallum quickly discovered that railroad operations were very inefficient. The problem wasn't necessarily about communication, as by this time the railroad operators had access to real-time data and information via telegraph. The problem was one of coordination, or the lack thereof.
McCallum solved this coordination problem by developing the first modern organizational chart, which is shown below (it's easier to see the details of the structure in the online version here).
My first impression of this chart is how very different it is compared to the organization charts that we see today. Rather than a pyramid-shape, we have a flowery diagram that looks more like a tree. I might even go as far as saying that the overall structure of this chart reminds me a little of the Mandelbrot set (at least when you start to zoom in on the fractal geometry of the Mandelbrot set). What's not readily appreciated, however, is the fact that McCallum deliberately placed the Board of Directors at the root and the executive leadership team at the trunk. In other words, he turned the organizational structure (at least the traditional ones used today) upside down!
As Caitlin Rosenthal, writing for The McKinsey Quarterly, described it, "Critically, McCallum gained control by giving up control, delegating authority to managers who could use information in real time." McCallum knew that the amount of data generated by front-line operations was far too much for any one individual to be able to process. Rather, he empowered his front-line managers with the necessary authority to make decisions in real-time. The executive leadership team would in turn review system-wide metrics and hold front-line managers accountable to performing to their targets on those metrics.
It's clear that McCallum was well ahead of his time in using what we frequently call "Deference to Expertise" or "Pushing authority to information" (as opposed to pushing information to authority in the traditional top-down, pyramid, hierarchical structure of today's organizational charts). It's amazing to me that it has taken us this long to grasp the significance of McCallum's original organization chart.
I always like to learn the history of the what behind the why. In this classic example, the leadership is at the bottom where the tree, the roots feed and provide for the rest of the tree, allowing it to flourish and thrive, branch by branch; leaf by leaf. Thank you for your insights and examples.
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