Download Remembering Peter Drucker

Remembering Peter Drucker ( S. L. Rao)
(I am indebted to a brilliant survey by the “Economist”).
1. Seminal Works on Management for me: Joseph Schumpeter:
Innovation as creative destruction; Taylor and Gilbreth
(“Cheaper by the Dosen) time and motion study; Theodore Levitt
“Marketing Myopia”; Vance Packard “Hidden Persuaders”;
Peter Drucker “The Practice of Management”. They were all
commonsensical and filled for me the gap between what I had
studied in economics and how actually to make things happen.
2. Alfred Sloan in “My years with General Motors” showed how a
large organizations can be made to achieve complex objectives
through management to produce results; the lessons were applied
in the development of the most complicated Polaris submarine. As
Drucker has written: “Management converts a mob into an
organization, and human efforts into performance”.
3. Peter Drucker made management understandable and was responsible
for many ideas, principally:
 The recognition of professional management the world over as
the way to organize people to achieved agreed goals in all
situations, business, not for profit ngo’s, government owned
enterprises, health, education, etc.
 Radical decentralization;
 The idea that Jack Welch implemented that a large organization
should aim to be Number 1 or 2 in its line of business or Get Out.
 Empowerment of Workers as Resources-not just costs.
 Began the trend to be critical of short term profit as the principal
goal of business;
 Criticism of soaring executive pay;
 Rise of knowledge workers;
 Championed privatization;
 Inspired Al Gores’ idea of “reinventing government”
 Predicted the revolution in business because of computers, not
recently but in the 1950’s
 The first systematic study of a big corporation;
 He made management a fashion and easy to understand its
approaches and concepts;
 He predicted in the 1950’s that computers would revolutionize
business;
4. His most memorable quote for me, written in 1955, was: “There is
only one valid definition of business purpose: to create a customer.
…It is the customer who determines what a business is.
“Because it is its purpose to create a customer-any business enterprise
has two, and only these two-basic functions: marketing and innovation.
They are the entrepreneurial functions….Marketing is the distinguishing,
unique function of the business…Any organization that fulfills itself
through marketing a product or a service, is a business.
“The second function of a business is innovation, that is, the provision of
better and more economic goods and services. …Innovation may take the
form of a lower price,..be a new and better product, ..a new convenience
or the creation of a new want, ..finding new uses for old products.
…Innovation mat be in design, in product, in marketing techniques, in
price or in service to the customer,..in management organization or in
management methods, in materials handling, in manager development.”
This extensive quotation from his writing of fifty years ago, seems to be
full of platitudes today. These ideas have now become part of us and we
do not know how novel they were. In India even today many companies
do not see that the customer has to be at the core of their business and
that innovation is not merely through engineering but can be in many
other ways.
5. He was born in 1909 in an Austrian upper middle class family. His
father was a government official. Peter Drucker was a Viennese
Jewish at a time when Vienna was famous for them. He was educated
in Vienna and Germany with a doctorate in international and public
law from Frankfurt University in 1931. The rise of the Nationalist
Socialists saw him drifting between jobs in banking, consultancy,
academics, law and journalism. He ended up like so many Jewish
intellectuals of his generation in the USA, teaching politics,
philosophy and economics. He has said that he liked to keep his mind
fresh by taking up a new subject every 3 or 4 years.
6. He was convinced that the best hope for saving civilization from
barbarism was in the humdrum science of management. He was no
believer in Laissez-Faire, leaving everything to market forces because
he was aware that the veneer of civilization was too thin for the
market to be given complete freedom. There would be people o
exploit the opportunity at the cost of the people.
7. But he was also clear headed, and at a time when many intelligent
idealistic people admired the command and control model of the
Soviet Union, he did not. He did not think that big government was
the answer.
8. For him the Man in the Grey Flannel Suit (Edward Albee) held more
hope for mankind than the hidden hand of Adam Smith or the
command and control model of the Soviet Union.
9. The book that made his name as a guru of management was “The
Concept of the Corporation”. (It came after two others, “The End of
Economic Man” and “The Future of Industrial Man”, which had
considerable influence at that time). But his first work on management
was the concept of the corporation. It was made possible because
Alfred Sloan gave him unparalleled access to the General Motors.
The book developed two interesting concepts about corporations that
had great influence on companies. One was the idea of empowering
workers. Drucker thought that the assembly line failed to engage the
creativity of workers. Mind you this was being written long before the
Japanese style of management came into vogue. He talked about the
rise of knowledge workers. He said that the world is moving from an
economy of goods to an economy of knowledge. We were moving
from an industrial proletariat to brain workers. At the same time he
pointed out that knowledge workers had to come to terms with the fact
that they were neither bosses nor workers but entrepreneurs
responsible for developing their most important resource, brain power.
10.The other major concept that came out of the book is believed today
to have been a bylane, namely, Management by Objectives. This
meant that top management set clear long term objectives for the
corporation and lower level managers converted them into more
immediate goals and were allowed to work out ways of achieving
their goals. MBO has largely been abandoned today in its mechanistic
form of hierarchical organizations, a lot of paper, a top-down
approach, etc. The belief in many organizations today is that new
ideas including long term strategies can come from the bottom and the
middle of organizations rather than being imposed from the top.
11.The criticism of Drucker is that he does not build rigorous systems
with complex mathematical logic as many management writers do
today. He almost seems clichéd. He has not made any specific area his
own like Porter and strategy. Levitt and marketing or CKPrahlad and
core competence. The answer is that he has made the whole of
management his own and the fact that his ideas are clichés today is his
major contribution. A valid criticism is that he did not think of the
problems of small firms.
12.We are professional managers today because Drucker taught us that
management was an essential ingredient to run governments, projects,
businesses and any tye of institution. We are able to look at the state
owned enterprise and suggest how it can improve because Drucker
first thought of it. The same is true of a host of other institutions. If a
Prakash Tandon spoke about applying management principles to
government, Drucker had already said it many years earlier.