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.