Managers-Net

Introduction

Peter Drucker is known as the father of modern management. A prolific writer, business consultant and lecturer, he introduced many management concepts that have been embraced by corporations around the world.

Peter Ferdinand Drucker (November 19, 1909 - November 11, 2005) was a writer, management consultant, and self-described "social ecologist." His books and scholarly and popular articles explored how humans are organized across the business, government and the nonprofit sectors of society. His writings have predicted many of the major developments of the late twentieth century, including privatisation and decentralization; the rise of Japan to economic world power; the decisive importance of marketing; and the emergence of the information society with its necessity of lifelong learning. In 1959, Peter Drucker coined the term "knowledge worker" and later in his life considered knowledge work productivity to be the next frontier of management.

Personal life and roots of Peter Drucker's philosophy

The son of a high-level civil servant in Austria-Hungary - his mother Caroline Bondi had studied medicine and his father Adolf Drucker was a lawyer - Drucker was born in Vienna, the capital of Austria, in a small village named Kaasgraben (now part of the 19th district of Vienna, Döbling). He grew up in a home where intellectuals, high government officials, and scientists would meet to discuss new ideas. After graduating from Döbling Gymnasium, Drucker found few opportunities for employment in post-Habsburg Vienna, so he moved to Hamburg, Germany, first working as an apprentice at an established cotton trading company, then as a journalist, writing for Der Österreichische Volkswirt (The Austrian Economist). Drucker then moved to Frankfurt, where he took a job at the Daily Frankfurter General-Anzeiger. While in Frankfurt, he also earned a doctorate in international law and public law from the University of Frankfurt in 1931. Among his early influences was the Austrian economist Joseph Schumpeter, a friend of his father's, who impressed upon Drucker the importance of innovation and entrepreneurship. Drucker was also influenced, in a much different way, by John Maynard Keynes, whom he heard lecture in 1934 in Cambridge. "I suddenly realized that Keynes and all the brilliant economic students in the room were interested in the behaviour of commodities," Drucker wrote, "while I was interested in the behaviour of people."

Over the next 70 years, Drucker's writings would be marked by a focus on relationships among human beings, as opposed to the crunching of numbers. His books were filled with lessons on how organizations can bring out the best in people, and how workers can find a sense of community and dignity in a modern society organized around large institutions.

As a young writer, Drucker wrote two pieces - one on the conservative German philosopher Friedrich Julius Stahl and another called The Jewish Question in Germany - that were burned and banned by the Nazis. In 1933, Drucker left Germany for England. In London, he worked for an insurance company, then as the chief economist at a private bank. He also reconnected with Doris Schmitz, an acquaintance from the University of Frankfurt. They married in 1934. (His wedding certificate lists his name as Peter George Drucker.) The couple permanently relocated to the United States, where he became a university professor as well as a free-lance writer and business consultant. (Drucker disliked the term 'guru', though it was often applied to him; I have been saying for many years, Drucker once remarked, that we are using the word 'guru' only because 'charlatan' is too long to fit into a headline.)

In 1943, Drucker became a naturalized citizen of the United States. He taught at Bennington College from 1942-1949, then at New York University as a Professor of Management from 1950 to 1971. Drucker came to California in 1971, where he developed one of the country's first executive MBA programs for working professionals at Claremont Graduate University (then known as Claremont Graduate School). From 1971 to his death he was the Clarke Professor of Social Science and Management at Claremont Graduate University. The university's management school was named the Peter F. Drucker Graduate School of Management (later known as the Peter F. Drucker and Masatoshi Ito Graduate School of Management) in his honour in 1987. He taught his last class at the school in 2002 at age 92.

Career of Peter Drucker

His career as a business thinker took off in 1942, when his initial writings on politics and society won him access to the internal workings of General Motors (GM), one of the largest companies in the world at that time. His experiences in Europe had left him fascinated with the problem of authority. He shared his fascination with Donaldson Brown, the mastermind behind the administrative controls at GM. In 1943 Brown invited him in to conduct what might be called a "political audit": a two-year social-scientific analysis of the corporation. Drucker attended every board meeting, interviewed employees, and analysed production and decision-making processes.

The resulting book, Concept of the Corporation, popularised GM's multidivisional structure and led to numerous articles, consulting engagements, and additional books. GM, however, was hardly thrilled with the final product. Drucker had suggested that the auto giant might want to re-examine a host of long-standing policies on customer relations, dealer relations, employee relations and more. Inside the corporation, Drucker's counsel was viewed as hypercritical. GM's revered chairman, Alfred Sloan, was so upset about the book that he simply treated it as if it did not exist, Drucker later recalled, never mentioning it and never allowing it to be mentioned in his presence.

Drucker taught that management is "a liberal art," and he infused his management advice with interdisciplinary lessons from history, sociology, psychology, philosophy, culture and religion. He also believed strongly that all institutions, including those in the private sector, have a responsibility to the whole of society. The fact is, Drucker wrote in his 1973 Management: Tasks, Responsibilities, Practices, that in modern society there is no other leadership group but managers. If the managers of our major institutions, and especially of business, do not take responsibility for the common good, no one else can or will.

Drucker was interested in the growing effect of people who worked with their minds rather than their hands. He was intrigued by employees who knew more about certain subjects than their bosses or colleagues and yet had to cooperate with others in a large organization. Rather than simply glorify the phenomenon as the epitome of human progress, Drucker analyzed it and explained how it challenged the common thinking about how organizations should be run.

His approach worked well in the increasingly mature business world of the second half of the twentieth century. By that time, large corporations had developed the basic manufacturing efficiencies and managerial hierarchies of mass production. Executives thought they knew how to run companies, and Drucker took it upon himself to poke holes in their beliefs, lest organizations become stale. But he did so in a sympathetic way. He assumed that his readers were intelligent, rational, hardworking people of good will. If their organizations struggled, he believed it was usually because of outdated ideas, a narrow conception of problems, or internal misunderstandings.

During his long consulting career, Drucker worked with many major corporations, including General Electric, Coca-Cola, Citicorp, IBM, and Intel. He consulted with notable business leaders such as GM's Jack Welch; Procter & Gamble's A.G. Lafley; Intel's Andy Grove; Edward Jones' John Bachmann; Shoichiro Toyoda, the honorary chairman of Toyota Motor Corp.; and Masatoshi Ito, the honorary chairman of the Ito-Yokado Group, the second largest retailing organization in the world. Although he helped many corporate executives succeed, he was appalled when the level of Fortune 500 CEO pay in America ballooned to hundreds of times that of the average worker. He argued in a 1984 essay that CEO compensation should be no more than 20 times what the rank and file make - especially at companies where thousands of employees are being laid off. This is morally and socially unforgivable, Drucker wrote, and we will pay a heavy price for it.

Drucker served as a consultant for various government agencies in the United States, Canada and Japan. He worked with various nonprofit organizations to help them become successful, often consulting pro bono. Among the many social-sector groups he advised were the Salvation Army, the Girl Scouts of the USA, C.A.R.E., the American Red Cross, and the Navajo Indian Tribal Council.

In fact, Drucker anticipated the rise of the social sector in America, maintaining that it was through volunteering in nonprofits that people would find the kind of fulfillment that he originally thought would be provided through their place of work, but that had proven elusive in that arena. Citizenship in and through the social sector is not a panacea for the ills of post-capitalist society and post-capitalist polity, but it may be a prerequisite for tackling these ills, Drucker wrote. It restores the civic responsibility that is the mark of citizenship, and the civic pride that is the mark of community.

Basic ideas of Peter Drucker

Several ideas run through most of Peter Drucker's writings:

• Decentralization and simplification. Drucker discounted the command and control model and asserted that companies work best when they are decentralized. According to Drucker, corporations tend to produce too many products, hire employees they don't need (when a better solution would be outsourcing), and expand into economic sectors that they should avoid.
• A profound scepticism of macroeconomic theory. Drucker contended that economists of all schools fail to explain significant aspects of modern economies.
• Respect of the worker. Drucker believed that employees are assets and not liabilities. He taught that knowledge workers are the essential ingredients of the modern economy. Central to this philosophy is the view that people are an organization's most valuable resource and that a manager's job is to prepare and free people to perform.
• A belief in what he called the sickness of government. Drucker made non-partisan claims that government is often unable or unwilling to provide new services that people need or want, though he believed that this condition is not inherent to the form of government. The chapter The Sickness of Government in his book The Age of Discontinuity formed the basis of the New Public Management, a theory of public administration that dominated the discipline in the 1980s and 1990s.
• The need for planned abandonment. Businesses and governments have a natural human tendency to cling to "yesterday's successes" rather than seeing when they are no longer useful.
• A belief that taking action without thinking is the cause of every failure.
• The need for community. Early in his career, Drucker predicted the "end of economic man" and advocated the creation of a "plant community" where individuals' social needs could be met. He later acknowledged that the plant community never materialized, and by the 1980s, suggested that volunteering in the nonprofit sector was the key to fostering a healthy society where people found a sense of belonging and civic pride.
• The need to manage business by balancing a variety of needs and goals, rather than subordinating an institution to a single value. This concept of management by objectives forms the keynote of his 1954 landmark The Practice of Management.
• A company's primary responsibility is to serve its customers. Profit is not the primary goal, but rather an essential condition for the company's continued existence.
• An organization should have a proper way of executing all its business processes.
• A belief in the notion that great companies could stand among humankind's noblest inventions.

Awards and honours of Peter Drucker

Peter Drucker was awarded the Presidential Medal of Freedom by U.S. President George W. Bush on July 9, 2002. He also received honours from the governments of Japan and Austria. He was the Honorary Chairman of the Peter F. Drucker Foundation for Nonprofit Management, now the Leader to Leader Institute, from 1990 through 2002. In 1969 he was awarded New York University's highest honour, the NYU Presidential Citation. Harvard Business Review honoured Drucker in the spring of 2005 with his seventh McKinsey Award for his article, "What Makes an Effective Executive", the most awarded to one person. Peter Drucker was inducted into the Junior Achievement U.S. Business Hall of Fame in 1996. Additionally he holds 25 honorary doctorates from American, Belgian, Czech, English, Spanish and Swiss Universities. In Claremont, California, Eleventh Street between College Avenue and Dartmouth Avenue was renamed "Drucker Way" in October of 2009 to commemorate the 100th anniversary of Drucker's birth.