Division of Labor
This is the most classic reason for the creation of organizations, coming
from Adam Smith's argument that one person could scarcely make one pin,
but an organization of laborers could make thousands if the work is divided
into steps (Smith 1776, Wealth of Nations). This occurs largely through
the use of technology, defined by Galbraith (1967) as "the systematic
application of scientific or other organized knowledge to pratical tasks".
This is possible when the tasks are divided into their components in such
a manner that they become "coterminous with some established area of
scientific or engineering knowledge" (1967 p. 24) (from Scott p. 154).
While it allows the organization to better capitalize on the specialized
skills of a worker, it also allows more cost-effective matching of job skills
to labor capabilities (and ultimately pay rates). Workers are also centrally
located to reduce handling and storage, improve monitoring and control,
and reduce need for multiple energy sources (Scott p. 154).
Weber also noted that bureaucratic organizations with specialized jobs was
more efficient (1947 trans.) Giddens (1983) notes that Weber makes a strong
connection between mechanization and bureaucracy through his talk of precision,
stability, and reliability.
Of course, division of labor requires higher coordination costs and can
add regidity to the production process. It has given rise to managerial
hierarchy to improve both productivity and efficiency. Gulick and Urwick
(1937) conclude that work division is the foundation of organization.