Adam Smith was one of the first economists to bring forward the idea of division of labor and specialization. This was first presented in his book “The Wealth of Nations” in 1776. This study will critically analyze the chapter “of the Division of Labor” which was included in the classics of organizational theory by Shafritz, Ott and Jang (1994). The importance of the idea propounded by Adam Smith (1776) can be understood from the fact that not only was it a ground breaking theory when it was released but has continued to play a major role in manufacturing over the years and has become one of the classical theories of business and manufacturing.

The Division of Labor

In the chapter “of the Division of Labor” Adam Smith (1776) talked in detail about the benefits of breaking down manufacturing processes and assigning them to various workers in order to achieve maximum efficiency and output. The idea behind “of the Division of Labor” concept was that if a worker was specialized in doing one task then he would inevitable gain speed and accuracy in its implementation. Once the thinking process was removed and the various actions associated with the manufacturing process became second nature it was possible to gain higher outputs.

Adam Smith (1776) explained this by the famous example of the pin. He explained that even the manufacturing process of an object as small as a pin entailed eighteen different steps in the division of labor and that it was not necessary for eighteen employees to be hired for the task. In fact, as few as 5 or 6 workers could accomplish the same if each was specialized in their respective sub-tasks.

The other concept that Adam Smith propounded in this book was that of specialization. Specialization was explained in two ways. In the first example Adam Smith explained that the size of a country has no bearing towards the kinds of products or raw materials that it has locally available. In fact, it is often the poorer countries which have better raw materials whereas the developed nations have thrived due to their manufacturing industries. In such cases it was only feasible and productive to import those raw materials from the countries that specialized in those particular raw materials.

The other explanation for specialization was that regarding the skills of workers associated with the manufacturing process. Adam Smith (1776) claimed that specialization was an important element in the manufacturing process. It entailed the workers to acquire a level of expertise in their respective tasks in order to perform their tasks in the most efficient way possible. Adam Smith (1776) defined three basic principles of the Division of Labor Theory. These are as follows:

  1. “Increase in dexterity in every particular workman”;
  2. “Saving the time which is commonly lost in passing from one species of work to another”;
  3. “Invention of a great number of machines which facilitate and abridge labor, and enable one man to do the work of many” (Adam Smith, 1776, p.18).

Analysis on Division of Labor and Specialization

It can be argued that Adam Smith’s works were ground breaking in terms of the field of economics and the manufacturing industry in particular. Rosenberg (1965) stated that

“Adam Smith provided a masterful analysis of the gains from specialization and exchange upon which, it is no exaggeration to say, the discipline of economics was nurtured (p.127)”.

Adam Smith propounded the two concepts in an era of industrialism where machinery and manufacturing firms were just beginning to find their way into the modern world. At that time workers did not enjoy the benefits that they do today. In fact, work conditions were very poor. It is due to these work conditions that Smith’s theories flourished. Smith had used specialization and division to touch the crux of the matter and that was defining the role of the worker in the industry (Hill, 2004).

Once these roles were defined, the previously autocratic manufacturing firms realized the actual parts that were played by every employee and the significance of their tasks. It also allowed the workers’ job security. Once their tasks were defined and they specialized in the operation of a specific machine or acquired a dexterous skill they were assured that new inexperienced employees would not take their place. It not only increased the value of the employee in the company but also shifted the balance of power which was previously focused only on the positions of power in the corporations (Hill, 2004). According to Hill (2004, p. 24),

“Specialization not only generates commercial society, it solves an erstwhile and troublesome obstruction to the development of commerce and civilization itself: the security problem.”

Smith also stated that when a worker is able to identify his place in the workplace he starts working towards success in his position. Every employee naturally works for personal gain and not for the greater good of the company. The systematic implementation of the division and specialization would ensure that as each individual worked towards his personal goal, the ultimate goal of the company would also be achieved as a result. If this idea were to be implemented in every manufacturing firm, it would lead to a materially prosperous economy.

Adam Smith’s theories however were not always well received. In fact, Smith’s own largest critic was himself. In a later edition of the book, Smith (1802) stated that by the implementation of division and specialization, the tasks of workers are broken down into one or two robotic movements which reduce the cognitive capabilities of the workers and make them unable to take any other decisions if they are faced with different situations in the workplace (Hill, 2004 & Rosenberg, 1965).  Smith stated that when workers become specialized in their one or two tasks they “become as stupid and ignorant as it is possible for a human creature to become (Smith, 1802, p.182)”. He also declared this condition to be a disease such as leprosy.

Even though it seems that Smith worked towards a more prosperous and favorable working environment for workers, many argued that Smith was actually insensitive to the needs of the workers. The major criticism towards Smith was that he viewed the workers similar to commodities and only as means towards ends. The over-quantification of the infinitesimal actions involved in the manufacture of the product was deemed as transcending (Bulone, 2008). Due to this approach, Smith was actually accused of the de-humanization of the roles of workers (Hill, 2004).

This point could also be valid since even after pointing these flaws out himself, Smith deemed them as acceptable problems which needed to be compromised with in order to flourish in the grander scheme of things. The reason behind this attitude was that Smith’s view of a prosperous society was very different as compared to that of others. According to Smith, the only factor that mattered in economic and social prosperity was that of material gain and that a richer society was always a prosperous society (Hill, 2004).

Intensive Outpatient Programmers and Specialization

A relatively new field of medical sciences that has emerged in recent years is that of Outpatient Services. These outpatient services refer to routine medical treatments provided to patients at external clinics in order to provide them with the care that they need without compromising on other daily chores or activities that are a part of their daily life. These Outpatient services have been very successful in recent years and have been well received by patients but face a few major problems which do not allow its implementation on a large scale. These are the funding required for the setting up of external clinics and the provision of experienced and qualified personnel to provide health care to the patients that are receiving care (Biro, 2011).

Another issue faced by these outpatient programmers is the choice between the kind of care that will be provided at these clinics and which not to. The results of a recent study (SDO, 2007) showed that care could be provided only for routine treatments such as chemotherapy and dialysis but could not be provided for minor surgeries due to the high risks and costs associated with them. IOPs were then specialized in terms of very specific treatments which can be provided to patients on a routine basis without incurring high costs (SDO, 2007).

The most commonly specialized medical services provided are for mental and eating disorders and rehabilitation services. Other services provided in IOPs include pathological, radiology, pharmaceutical and other alcohol and drug abuse care services (American Psychiatric Association, 1995). It is interesting to note how an idea originally intended for the manufacturing industry is now being applied in the provision of services. Providing specialized care for specific patients at external clinics is a new concept which will alter the way health care is prided in the coming years.


Adam Smith’s (1776) theories of specialization and division were ground-breaking in the industrial era for the manufacturing industry and determined the way modern manufacturing industries would operate. These were met with valid and invalid criticisms but were inevitably one of the most influential concepts that were brought forward in manufacturing. What was interesting to note was the implementation of the same concepts of the manufacturing industry to the service industry and the relative success that they have acquired. Since the IOP is still in its growing stages, the progress made would be slow but sure.