What is the Division & Specialization of Labor?


This is a fun topic. Let's pretend for a moment that you are a shoemaker. All day, every day, you work in your shop making the best shoes in town. You craft the soles, weave the laces, prepare the leather, bend and fold the material, glue the pieces, and sew everything together. From start to finish, it takes you two weeks to make one pair of shoes. Luckily, people love your products and pay a hefty fee for them. You do wonder, however, if there is a better way. You sometimes feel as though you're spreading yourself too thin and that your process is inefficient. You also wonder if you're not as good at preparing each piece that goes into each shoe as you could be, since you don't really specialize in anything. You are good at the entire process, but you aren't great at any one step.

This is where the division and specialization of labor comes into play. Adam Smith first wrote about this concept in 1776 in his book titled The Wealth of Nations. While economics can been discussed for centuries before Smith touched upon the topic, he was the first to delve into it so comprehensively. Smith laid out the process in which producers can more economically and efficiently manufacture their products. Essentially, he claimed that if a comprehensive process was broken down into pieces (divided) and each piece was handed off to an individual or a team (specialization), those individuals or teams could do a faster and better job of doing what they're responsible for than one person ever could. When one person is responsible for too many tasks, they suffer from what I described at the beginning of this post. They're worn thin and don't so as good of a job as could be done.

Now let's pretend that, as a shoemaker, you hired a few friends to help out in your shoemaking endeavor. Instead of you doing everything and being great at nothing, one person crafts the soles, another weaves the laces, another prepares the leather, another bends and folds the material, another glues the pieces, and another sews everything together. This leaves you, the business owner, the freedom to grow the business. With this division and specialization of labor, the production time of each pair of shoes goes from two weeks to a half hour. As you can imagine, the shoes are of the same quality or better and you've got many more of them to sell. You'll be going global in no time.

What's really interesting about this concept is how often it's applied to our own lives without us even realizing it. Just the fact that we drive cars that we didn't build is proof of the division and specialization of labor. We also don't make the medicine we take. Or deliver the letters we write. Other individuals and teams have chosen to do all that. We specialize and take care of what we've chosen to do so these other people don't need to. It's sort of a miraculous and ingenious system.

Next time you go out to dinner, take a look around to see how many pieces of labor the entire process of running the restaurant has been divided into. I'm sure you'll be surprised. From the host to the waiter or waitress to the chef to the manager, it's a rather complex process. And as you sit there eating your lunch or dinner, think about how complex it must be to run a Fortune 500 company. Say you own ExxonMobile - a company that drills for oil and then refines that oil into a variety of different products. In companies like these, there are thousands and thousands of processes that have been divided up and specialized in through the decades and centuries. Imagine trying to do everything yourself. It's just not possible.