Modern workplaces continue to advance at a lightning pace. Where once, concepts like computers, automation and artificial intelligence (AI) were the subject of science fiction, they’re now critical tools in helping us do more with less, not just in business but across all industries. But the notion of revolutionizing productivity existed long before our digital age. The man credited with masterminding this shift is Adam Smith, who expounded the economic concept of the division of labor during the 18th century.
In this post, we will be exploring what made this idea so fantastic and how Adam Smith was able to revolutionize the workplace forever.
Who was Adam Smith?
Adam Smith was an 18th-century philosopher and economist who became one of the most crucial figures of the Scottish Enlightenment. His achievements and the concepts he developed and delivered through his The Wealth of Nations, and other books earned him the titles of “The Father of Capitalism” and “The Father of Economics”.
What is the division of labor?
One of the most interesting and revolutionary ideas Smith introduced was the concept of the division of labor. It’s something we take for granted these days, but during the industrial revolution it meant breaking down workloads into specialized tasks which lead to greater efficiencies across the organization.
Smith developed his theory after visiting a pin factory that produced up to 48,000 pins daily despite only having ten men. What stood out most to Smith was seeing how each man focused on a specific aspect of the pin-making process rather than the entire procedure. Knowing the ins and outs of their designated part of the process meant they became highly specialized in their work. Smith saw how a worker’s mastery of a single area, instead of being a jack of all trades, had a huge impact on the factory’s overall productivity.
How did the division of labor improve the pin-making process?
1. Allocating work to match skills
Smith’s theory famously put forward the idea that 10 men working in a factory that used the division of labor principle could make as many pins as 4,800 workers in a factory that didn’t. While this idea may seem crazy at first, this could not be further from the case.
Factories that employed several workers on the floor likely had men that were good at one aspect of the pin-making process but terrible at another. For example, they may have had a worker who was excellent at straightening and drawing out a wire, but who struggled with grinding the pin head.
Without the division of labor, the worker who had deftly created the wire would then spend extended minutes trying to get the pin head accurate. Naturally, the more time they spent on this part of the process, the fewer pins they’d produce each day.
By applying the division of labor, factory heads knew each worker’s strengths and weaknesses and would assign different stages of the process accordingly. Workers’ production increased, contributing to the factory’s overall efficiency to produce more with less (in this case, fewer workers could make more pins).
2. Supported improved specialization
While specialization rules the modern world, this wasn’t the case back in Adam Smith’s time. Some factories had hundreds of workers, each carrying out all the steps required to produce a single item.
As an illustration, Smith pointed out that there were 18 main steps in pin-making, including drawing out the wire, straightening it, cutting it, then grinding the head. At the time, this was a relatively complicated procedure, and it would take months for each worker to learn all the necessary steps.
Once again, without the division of labor principle, factory floors would have been full of men making good pins, but never great ones. The division of labor allowed each worker to focus on just one aspect of the process only and become a master of it.
3. Higher productivity led to higher wages
The more items a factory produces, the more revenue it generates, and the better it can afford to pay higher wages. It’s a rule that’s as relevant today as it was back when Adam Smith was advocating his ideas on productivity.
Pin-making factories that used the division of labor employed fewer hands while maintaining similar revenues to those with more workers. As a consequence, these factories were able to pay workers better while owners benefited from greater profits.
Higher salaries encouraged workers to further hone their mastery of their craft and produce greater volumes of product. They also felt more valued and appreciated as workers.
4. Less money and time spent on training
As we said earlier, the process of pin making in the 18th century was a complex one. Before factory heads could allow a new worker on the floor, they had to make sure they had the appropriate level of skills and training. Factories that didn’t use the division of labor principle would expend much more time and money on training as they would have to take new hands through each step in the process — with each intake of new workers.
Factories using the division of labor principle found training much more cost and time efficient. Factory heads would only have to train new hires on one aspect of the process, and could then send them straight to the factory floor. And as these factories needed fewer workers to reach production targets, they would easily spend less time and money training new staff.
What the division of labor means for your business
Think about how you divide labor in your business: Do you have a team of specialists working together in harmony, or are they all generalists? While it’s good for everyone to understand the fundamentals of your business, having people who specialize in specific areas boosts your overall productivity. By leveraging each others’ skills and strengths, your team can create more with less, boosting profitability with productivity.