drucker ch in kennedy

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12PETER DRUCKER

(1909-2005)Originator of modern management thinking

The apparently indestructible P ete r D ru ck er , who d ie da few days short of his 96th bi rthday in November 2005,is acknowledged as th e greatest management thinker ofth e 20th century. Born in Vienna during th e heyday ofthat city's pre-1914 culture, he once interviewed AdolfHitler, and his f i rs t book, a study ofNazi Germany calledThe End of Economic Man, was admiringly reviewed byWinston Churchill in 1939. Mter World War I I, Druckerwent on to invent or prefigure most of t he l eadi ngmanagement theories of the next 50 years. These. rangedfrom 'Management by Objectives' to privatization; fromdefining a business in terms of creating and satistyingcustomers to th e role of chief executive i n corpo ra testrategy; from decentralizat ion to the implications of th einformation ag e and th e rise of th e knowledge worker,a term he coined as early a s 1969. In th e infancy ofmodern management theory,when control-and-commandand the mechanist ic approach of Frederick "W: Taylor (qv)and th e efficiency experts still held sway,Drucker believedthat management was a social art , dependent on goodcommunication with others and regard fo r t he peopl eworki ng i n the organizat ion.Hi s five basic pr inciples of management , formulated

in books published between 1954 and 1974, remain as

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valid as ever: setting objectives, organizing, motivatingand cOtnmunicating, establishing measurements ofperformance and developing people. Hi s influence wasfelt far outs ide business, in areas as diverse as th e publicsec to r, volun ta ry o rgan izat ions , chu rches an d government, even President Geo rge W. Bush's White House,whose poli cy-makers revered Drucker's concept ofManagement by Objectives - setting long-term goals tob e r ea li zed by manag er s in more immediate stages. Inthe 1990s, h e f ound ed th e P ete r F. Drucker Foundationto help non-profit organizations ach ieve excel lencet hrough good management .Many big corporat ions were also totally transformed

by his work. Invited to carry ou t a study of GeneralMotors for his seminal book, The Concept of the Corporation(1946), Drucker propagated the decentralization principle introduced by GM's then chairman, Alfred P. Sloan(qv), an d it spread around th e world. Tom Peters, whoseco-authored book In Search of Excellence developed manyDrucker ideas, said th e Viennese sage deserved much oft he c redi t f or moving 75 to 80 pe r cent of t he Fortune500 to radical decentralization, adding that no true discipline of management had exis ted before Drucker.P ro bably by v ir tu e of it s many facets, and by being

first in th e field, his body ofwork has received less attention in th e world's business schools t han t ha t of m.anyla ter gurus who developed niche reputations in strategy,marketing, leadership, innovation a nd o th er aspects ofmanagement theory. Drucker himself always scorned th eword 'guru', saying t ha t i t was only used because 'charlatan' was to o l ong t o fi t in a headline, but in th e overallstudy of management there was no one to touch him:he ha d formulated all the princip les before many of th efashionable gurus of the late 20th century were evenborn.T he most admired business leaders of ou r t ime haveall recorded their d eb t to Drucker. Jack Welch has said

t ha t whe n mak in g his key decision that each GeneralElectric business ha d to be No. 1 or No . 2 in t he worl dor face c losure, he l ea rned t o ask Drucker's question: ' I f

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you weren 't already in this business, would y ou en ter ittoday?' Andy Grove of Intel claims him as 'a hero ofmine' , and Bill Gates ranks his work ahead of al l othermanagetnent books .On e of th e latest PhD students of hi s work concludesthat Drucker, a master synthesizer as well as creator ofideas, made a philosophy ou t ofmanagement by movingan d extending it s boundar'ies and m ak in g it an intellec-tual challenge.From 1950 to 1971 Drucker taught management atNewYork University's Graduate Business School, an d fo r

the next 31 years he was Clarke Professor of SocialScience at th e modest institution of Claremont Gr.aduateSchool, Claremont, California, where h e lived. In hi snineties he was still a star a tt rac tion a t int erna tiona lconferences, speaking an d answering questions by i nt er active video link, an d he was still writing prolifically.Th elast of his 40 books, The Effective Exewtive in Action, waspublished posthumously in 2006. A blueprint for get t ingth e right things d on e in organizations, an d fo r effectiveself-management, it updated a book first writ t en in 1966f or s en io r executives in the Eisenhower Administration.Hi s books divide almost equally between works on

m anagem ent the ory an d technique an d works ofeconomic, political an d social analysis. Many of the la tterare semina l works which mapped ou t whole landseapesof th e future with much w id er h or iz on s t ha n thosebounded by management . Philip Sadler, vice-presidentand f ormer director of Ashridge Management College(Berkhamsted, Hertfordshire), found his thinking entirelychanged by Drucker's 1969 book The Age of Discontinuity,which for Sad le r pointed clearly to th e coming declineof Britain's manufacturing industry.This book, still well worth study, prefigured many ofth e business bestsellers of th e late 1980s an d early 1990son managing chaos an d d is rupt ive change. Drucker' sbooks have anticipated those of Charles Handy (qv) ,TomPeters (qv) an d Richard Pascale (qv), t o n ame only three.In some of it s ideas, The Age of Discontinuity was 20 yearsahead of John Naisbitt's Megatrends an d Charles Handy's

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The Age of Unreason. It also in troduced for th e first timein a management book t he concept of th e coming information economy an d the 'knowledge worker ' , a termco ined by Drucker .

I t was in The Age of Discontinuity, incidentally, thatDrucker in troduced the concept o f privatization, thoughhe called it 'reprivatization'. He accurately forecast th edisillusionment w it h gov er nmen t arising from th ediscovery that government s could no t, after all, producemiracles. 'There is little doubt , f or instance, that th eBritish in adop ti ng the Nati ona l Heal th Service believedthat medical care would cost nothing .. . Nurses, doctors,hospitals, drugs an d so on have to be p aid fo r by somebody. Bu t everybody expected this " some bo dy " to b esomebody else.'Drucker advocated privatization on t he g rounds that

th e purpose of government was to govern, no t to 'do ' ,and that the tw o roles were incompati bl e. His vision,unlike the Conservative Party's realization of it , was fo rpr ivatizat ion to cover all institutions, not merely bus iness ones - universities, fo r example.In May 1970, a year or s o a ft er publication of The Ageof Discontinuity, the word privatization made it s first

appearance in a Conservative Central Office pamphlet( 'A New Style of Government' ) , which credi ted Druckerwith the coinage.In his nineties, Drucker's interests became more focused

on changes in society and macro-economic matters,a lt hough he never lost his incisive ability to cut to the.heart of business problems an d pu t forward solutions inclear, clean-cut language that is a pleasure to re ad fo rits own sake. Hi s towering reputation is unlikely to bechallenged in the years ahead.

The son of an Austrian government official who helped foundthe Salzburg Festival, Drucker came to Britain in the late 1920s,and his first job was an apprentice clerk in a Bradford wool

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exporting firm, working with a quill pen i n 80-pound/36-kilogram brass-bound ledgers chained to the desk. Between 1933and 1936 he worked as an economist in a London merchantbank and then dec ided to throw in his lot with the UnitedStates. He emigrated to America in 1937, produced his first booktwo years later and, in 1942, took a consultant's job with GeneralMotors, then the world's largest company.

Ou t of this experience came his influential 1946 book Conceptof the Corporation, still one of the best and most perceptive analysesof the successful large organization. As well as General Motors,other companies studied in the book were General Electric, IBMand Sears Roebuck. Drucker identified their success with certainmanagerial characteristics, notably delegation and g o a l - s ~ t t i n g(Management by Objectives) and certain structural characteristics, such as decentralization. Drucker believed that the ultimatekey to success in all these companies was that ' they knew whatbusinesses they were in,what their competencies were and howto keep their efforts focused on their goals' (Otganization Theory,ed.D. S. Pugh).Nearly 40 years later Peters andWaterman reachedmuch the same conclusion, set ou t i n more populist style, intheir bestseller In Search if Excellence. Concept of the Corporationalso analysed the importance of marketing - at that time analmost universally neglected function - and the delicate balancewhich a company must seek to achieve between long-termstrategy and short-term performance.

Drucker figures in more management-book indexes than anyother individual by far. In Makers i f Management, by DavidClutterbuck and Stuart Crainer, he rates no fewer than 40 separate page references.Peter Drucker's reputation as a management guru was established with TIle Practice i fManagement (1954), a work still regardedby later theorists as one of the best and clearest in the field. Inthis, he identifiedManagement by Objectives as the first of sevenprimary tasks ofmanagement. MBO, dignified with capital letters,became a movement of its own, and Britain's John Humble (qv)made a speciality of developing its theory and practice.

Management by Objectives emerged ou t of Drucker's workwith General Electric among his stud ies for Concept of theCorporation. Each GE manager was responsible for a profit centreand given target s to achieve - 7 per cent return on sales and 20

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per cent return on investment.These were severely applied; youlost your job if you didn't meet them.Drucker perceived that, since businesses survive or fall by the

bottol11. line, corporate goals should be divided into objectivesand clearly assigned to units and individuals. 'Management byObjectives,' as Richard Pascale observes in Managing on the Edge,'ensures that each link in the chain of command does its part . . .'

A subsequent handbook, Managing for Results (1964) is, inDrucker's own words of introduction, a 'what to do ' book. I t'Yas , he believed, 'the first attempt at an organized presentat ionof the economic tasks of the business executive a nd t he firsthal ting step towards a discipl ine of economic performance inbusiness enterprise.' It sets out, in clear, no-nonsense prose, guidelines for understanding business realities and for analys ing acompany in terms of revenues, resources, prospects, cost centres,customer needs, building on strengths, finding potential, makingkey decisions and building strategies for the future. It is still oneof the best pract ical vade-mecums for anyone running a bus iness enterprise. Drucker believed that every three years or so acompanyshould be pu t under the microscope and every product,process, technology, service or market subjected to a gruel lingassessment.Throughout his work, Drucker 's emphasis has been on theeffectiveness of managers - particularly in making good use oftheir human resources as the key to a product ive and profitableorganization. Management, said Drucker, is the jo b of organizing resources to achieve the satisfactory performance of anenterprise. Managers must in the end be measured by theireconomic pel{ormance, though this is no t necessarily synonymous with maximum profits; rather, with sufficient profit tocover the risks that have been taken, and to avoid the enterprisemaking a loss. Management by Objectives is the key to this.

Drucker was sometimes criticized for neglecting theories ofmotivation, though he was one of the first to recognize andpraise Douglas McGregor's Theory Y of consultative management as early as 1954.

Drucker's emphasis on objective-setting for management ismost clearly set ou t in his mammoth compendium Managemetlt:Tilsks, Responsibilities, Practices (1974). This represents an encyclopedia of his earlier writings and is recommended as the bedrock

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of any aspiring manager's reading list. Studded with illuminatingcase studies, the massive volume (weighing 3.5 pounds/1.6 kilograms in hardback) defines every aspect of managerial skills andpinpoints eight areas where clear objectives are vital: marketing,innovation, human organization, financial resources, physicalresources, productivity, social responsibility and profit requirements. A thorough grounding in this vast work is virtually theequivalent of a do-it-yourself business-school course.

Shortly before this was published, Drucker had defined hisbroad view of management in People and Peiformance (1973): 'Tofulfil the specific purpose and mission of the organizat ion; tomake work productive and the worker achieving; and to managesocial impacts and social responsibility.'

In Management: Tasks, Responsibilities, Practices, he identified fivebasic operations in the work of the manager, which togetherresult in the integration of resources into a viable g rowingorganism. These summarize the essentials of management withmore clarity than any other book before or since:

A manager, in the first place, sets objectives. He determineswhat the objectives should be. He determines what the goalsin each area of objectives should be. He decides what has tobe done to reach these objectives. He makes the objectiveseffective by communicat ing them to the peopl e whoseperformance is needed to a ttain them.

Second, a manager organizes. He analyses the activities,decisions and relations needed. He classifies the work. Hedivides it into manageable activities and further divides theactivities into manageable jobs. He groups these units and jobsinto an organizat ion structure. He selects people for themanagement of these units and f or t he jobs to be done.N ext , a manager motivates and communicates. He makes

a team out of the people that are responsible for various jobs.He does that through the practices with which he works. Hedoes i t i n his own relations to the men with whom he works.He does it through his 'people decisions' on pay, placementand promotion. And he does i t through constant communication, to and from his subordinates, to and from his superior, and to and from his colleagues.

The fourth basic element in the work of the manager is

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measurement. The manager establishes yardsticks - and fewfactors are as important to the performance of the organization and of every man in it. He sees to i t tha t each man hasmeasurements available to him which are focused on theperformance of the whole organization and which , at thesame time, focus on the work of the individual and help himdo it. He analyses, appraises and interprets performance. As inall other areas of his work, he communicates the meaning ofthe measurements and their f indings to his subordinates, tohis superiors and to colleagues.

Finally, a manager develops people, including himself.Taking an historical perspective, Drucker later identified sevenkey elements in postwar management development:

1. Scientific management ofwork as the key to productivity2. Decentralization as a basic principle of organization3. Personnel management as the orderly way of fitting people

into organization structures4. Manager development to provide for the needs of

tomorrow5. Manager ia l a ccount ing - use of analysis and informationas the foundation for firm decision-making6. Marke ti ng7. Long-range planning

In recent years, Drucker 's books have included Innovationand Entrepreneurship (1985), a typically wide-ranging study ofgrowth sectors of the US economy in the early 1980s, includingmany businesses not normally considered as such: private healthcare, f or example , non-profit-making private schools andpublic/private partnerships in which government units contractout services to competitive private companies. The New Realities(1989) ranged over a global stage, anticipating the developmentof such contemporary phenomena as the transnational economy,the democratization of the Soviet republics, the changing ethosof the United States and the demands of a post-industrial, postbusiness society. Post-Capitalist Society (1992) examined amongother phenomena the division of society into knowledge andserviceworkers, and the economic and social challenges involved.

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Drucker's breadth of vision and eclectic range of publicationssprang f rom his belief that management is central to life, notmerely to business. One of his recurring concepts was that ofthe chief executive as conductor of an orchestra. As he said: 'Weare beginning to realize that managel11.ent itself is the centralinstitution of our present society, and that there are very fewdifferences between managing a business, managing a diocese,managing a hospital, managing a university, managing a researchlab, managing a labour union or managing a government agency.All a long, this has been the main thrust of my work, and theone that distinguishes it from practically all my contemporariesworking in the field.'Rosabeth Moss Kanter (qv) views his goals as even more

embracing. In an article in New Management (winter 1985), shewrote: 'Good management is also ou r best hope for world peace.In the Drucker perspective, imperatives for growth push organization beyond national borders in the search for new markets.The world becomes interconnected by a series of cross-cuttingtrade relationships in which the interests of managers in thesurvival of their multinational enterprises outweigh the interestsof politicians. Quality of life, technological progress and worldpeace, then, are all the products of good management . . . Atroot, Drucker is a management utopian, descended as much fromRobert Owen as MaxWeber.'

To Drucker , the business organization, as any organization,was a human, a social, indeed a moral phenomenon. Customerservice rather than profits should dominatemanagement thinking,profit being the means of continued investment in innovationand improvement.'Contrary to the approach to the study of political and social

organization that has prevailed in the West since Machiavelli, Istressed all along that organization does not deal with power bu twith responsibility. This is the keynote of my wor k tha t hasremained constant over more than 40 years.'Drucker once summed up his own vast contribution to

management thinking in these words, quo ted in Makers ojManagement (Clutterbuck and Crainer): 'I was the first one tosee that the purpose of a business lies outside of i tsel f - tha t is,in creating"and satisfYing a customer. I was the first to see thedecision process as central, the first t o see t ha t s tr uc tu re has to

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fol low strategy, and the first one to see, or at least the f irst tosay, that management has to be management by objectives andself-control.'

REY WRITINGS

J Drucker, P. F. (1946) Concept oj the Corporation, NewYork: JohnDay.Drucker, P. F. (1951) The New Society, London: Heinemann.Drucker, P. F. (1954) The Practice ojManagement, NewYork:Harperand Row.Drucker, P. F. (1964, 1989) Managing Jor Results, London:Heinemann.Drucker, P. F. (1969) TheAge oJDiscontinuity,London:Heinemann.Drucker, P. F. (1974) l\IIanagelllent: Tasks, Responsibilities, Practices,London: Heinemann; New York: Harper and Row.Drucker, P. F. (1985) Innovation and Entrepreneurship, London:Heinemann.Drucker, P. F. (1989, 1990) The New Realities, London: HeinemannProfessional Publishing; Mandarin Paperback.Drucker, P. F. (1992) Post-Capitalist Society, Oxford: ButterworthHeinemann.Drucker, P. E (1994) Frontiers ojManagement, Oxford: ButterworthHeinemann.Drucker, .P. F. (1997) Drucker on Asia, Oxford: ButterworthHeinemann.Drucker, P. E (1998) On the ProJession oj Management, Boston:Harvard Business School Press.Drucker, .P. F. (1999) Management Challenges Jor the 21st Century,London: HarperCollins.Drucker, P. E (2001) The Essential Drucker, Oxford: ButterworthHeinemann.Drucker, .P. E and Maciarello, J. A. (2006) The Effective Executive;n Action, London: HarperBusiness.

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drucker ch in kennedy

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