Monday, December 05, 2005














FE Specials

FE Education

Urban Property

Monthly Roundup


Saturday Feature

Asia/South Asia





57th Republic Day of India






Site Search



A proselytiser for the human side of business
Stefan Stern

          The opposite of a management fad must be an idea that survives, develops and continues to influence businesses long after the thought is first aired. No wonder, then, that Peter Drucker who died last month at the age of 95 rejected the label of "guru" with all its associations of fads and charlatanism. His ideas have continued to inspire managers and business leaders for decades.
Born in Austria in 1909, Drucker had enjoyed a conventional upper-middle-class upbringing and would ordinarily have been heading for a professional or academic career had Hitler not intervened. In 1937 he left Europe for the US, where he worked initially as a journalist before embarking on his lifelong career in management writing.
He was to write over 30 books on the subject during the next seven decades, and even had another title in the pipeline at the time of his death.
"You ask me how well I think Drucker's ideas have lasted," says Arie de Geus, author of The Living Company. "Frankly, I have always thought of him as being so far ahead that the question is really how long has it taken the rest of us to catch up."
For Mr de Geus, Drucker remained unmistakably Austrian in spite of spending most of his life in the US. "His emphasis on innovation goes back a long way, all the way in fact to Schumpeter [originator of the concept of capitalism's 'creative destruction']."
The subject of innovation leads directly into some of Drucker's best-known insights. "Innovating organisations spend neither time nor resources on defending yesterday," he wrote. "Systematic abandonment of yesterday alone can free the resources, and especially the scarcest resource of them all, capable people... "
And people remained the focus of Drucker's work for over 60 years. (He rejected a career in economics for what he considered its lack of interest in human matters.) Management is essentially a social function, Drucker believed.
It is possible to consider his impact under four headings that derive from that people-centred approach.
Knowledge workers: Drucker was a critic of centralised, dehumanised systems that looked back to F.W. Taylor's "scientific management". He imagined a new kind of work, one that relied more on the intellectual contribution of employees and less on their basic physical capacity.
But while much of Drucker's earlier work had considered the valuable contribution employees could make when they were seen as a resource and not merely a cost, it was not until his 1969 publication, The Age of Discontinuity, that he spoke specifically of the "knowledge worker", a phrase he made his own.
"Though the knowledge worker is not a labourer, and certainly not proletarian, he is not a subordinate in the sense that he can be told what to do; he is paid, on the contrary, for applying his knowledge, exercising his judgement and taking responsible leadership," Drucker wrote.
He had to wait almost 30 years, until the hype-filled days of the "new economy", for the term knowledge worker to achieve popular acceptance. But his description of the modern employee, using more brain than brawn, is now conventional wisdom.
"The phrase has moved into the vernacular, and most companies are probably not using it any more," says Lynda Gratton, professor of management practice at London Business School (LBS). "He shifted the focus of companies, and got them to see that value was derived not from goods but from intellectual capital. The concept of the knowledge worker lives on, even if people now have more specific job titles to describe what they do."
In one of his last works, Management Challenges for the 21st Century, Drucker returned to the theme: "The most valuable assets of a 20th century company were its production equipment. The most valuable asset of a 21st century institution, whether business or non-business, will be its knowledge workers and their productivity," he wrote.
Concept of the corporation: Though an admirer of great corporations, Drucker nonetheless felt that their inherited structures were too often centralised and rigid. This did not play to the talents and abilities that knowledge workers had to offer. Inefficient hierarchies had to be challenged. This idea influenced General Electric's restructuring in the 1950s, but its inspiration had come earlier.
Drucker had spent two years studying the structure of Alfred P. Sloan's General Motors in the 1940s, producing The Concept of the Corporation (1945). In this he foresaw the rise of the flatter, networked organisation, criticising the inefficient conveyor-belt mentality of the car giant.
Sloan was not impressed -- Drucker later claimed that any manager found with a copy of his book would be fired -- but the author's insights were far ahead of their time.
"Drucker really began the whole conversation about peer groups and about how knowledge and information is shared within an organisation," Prof Gratton says. "If you look at BP's work with its 'peer assist' programmes, or Nokia, which is doing great things in this area, it all goes back to Drucker's original work."
Management by objectives: Drucker argued that management, at all levels of a business, lost its way when not adhering to a disciplined pursuit of objectives, both in the long and short term. The impact of this simple assertion has been dramatic.
In an interview last month with the Los Angeles Times, Jack Welch, former chief executive of GE, described a moment when a brief conversation with Drucker led him to rethink GE's strategic approach. "Drucker said: 'If you weren't already in this business, would you enter it today? And if not, what are you going to do about it? Simple, right? But incredibly powerful."
Drucker first wrote of "management by objectives" in his 1954 work The Practice of Management. The phrase stuck. MBO has been perhaps the most influential of all of his ideas. Who bas not had to attend a planning meeting and been confronted by a flip-chart with the word "Objectives" written in large letters at the head of the (blank) top sheet?
MBO, perhaps because of being almost universally adopted, has also been the most misunderstood of Drucker's concepts. "It's absolutely embedded in every single organisation," says Prof Gratton, "though now it is probably much more heavily driven by data than Drucker would have wanted."
Criticisms have been made of MBO for many years. In 1970, US psychologist Harry Levinson wrote an article in the Harvard Business Review (HBR) entitled "Management by Whose Objectives?", in which he argued that MBO failed to take account of employees' motivations.
Gerry Kraines, chief executive of the Levinson Institute, a leadership consultancy, shares some of the objections the founder of his organisation set out 35 years ago. He is particularly concerned about the link between objectives and reward.
"When managers seek to induce certain behaviour by tying compensation to whether or not people have achieved objectives you set up an adversarial relationship," he says. "It's in the employee's interest to commit to something that minimises the return. It induces greed, and encourages employees to 'game' the system."
Kraines sees GE as a good example of a company that initially adopted MBO but then adapted it successfully. "The 'Neutron Jack' phase was a literal response to MBO- be number one or number two in a market or get out of it but in time [Jack] Welch started looking at how people added value over and above the numbers," he says. "They broadened out from being a Lord of the Flies organisation, having taken MBO as far as it could go.
"I feel tremendous ambivalence about Drucker, because he was a great storyteller, and 80 per cent of what he wrote continues to hold up," Dr Kraines says. "He is the single most important writer on management. He was logical, but not too rigorous."
Create a customer: The Practice of Management also contains this famous Drucker statement: "There is only one valid definition of a business purpose: to create a customer. Markets are not created by God, nature or economic forces, but by businessmen. The want they satisfy may have been felt by the customer before he was offered the means of satisfying it. . . But it was a theoretical want before; only when the action of businessmen makes it an effective demand is there a customer, a market."
"By this he did not mean 'tell a customer what to do'," says Barbara Bund, senior lecturer at the Massachusetts Institute of Technology Sloan School of Management. "I often quote Drucker's other remark: 'Businesses are not paid to reform customers, they are paid to satisfy customers"."
"There should be an explicit customer reason for everything you do," Dr Bund says. "You can never know enough about your customers - they are unpredictable, difficult and awkward. But you have to keep working at it, improve your 'customer pictures', and communicate that internally.
She offers an example: "This is what Tesco [the UK supermarket group] has done so well-putting customers at the heart of what it does. It's a discipline. It's what Drucker was talking about 20 years ago."
Under syndication arrangement
with FE


  More Headline
A proselytiser for the human side of business
Books to change the way you do business
Pietra Rivoli
John Battelle
Constantinos C. Markides (with the late Paul A. Geroski)
Thomas Friedman
James B. Stewart
Steven D. Levitt and Stephen J. Dubner

Print this page | Mail this page | Save this page | Make this page my home page

About us  |  Contact us  |  Editor's panel  |  Career opportunity | Web Mail





Copy right @ financialexpress.com