The Man Who Invented Management

Why Peter Drucker's ideas still matter

By John A. Byrne

"He was the creator and inventor of modern management. In the early 1950s, nobody had a tool kit to manage these incredibly complex

organizations that had gone out of control.

Drucker was the first person to give us a handbook for that.

Tom Peters, management guru

 

The story of Peter Drucker is the story of management itself. It's the story of the rise of the modern corporation and the managers who organize work. Without his analysis it's almost impossible to imagine the rise of dispersed, globe-spanning corporations.

But it's also the story of Drucker's own rising disenchantment with capitalism in the late 20th century that seemed to reward greed as easily as it did performance. Drucker was sickened by the excessive riches awarded to mediocre executives even as they slashed the ranks of ordinary workers. And as he entered his 10th decade, there were some in corporations and academia who said his time had passed.

But Drucker's tale is not mere history. Whether it's recog­nized or not, the organization and practice of management to­day is derived largely from the thinking of Peter Drucker. His teachings form a blueprint for every thinking leader.

In a world of fads and simplistic PowerPoint lessons, he understood that the job of leading people and In a world of quick fixes and glib explanations, a institutions is filled with complexity. He taught generations of managers the importance of picking the best people, of focusing on opportunities and not problems, of getting on the same side of the desk as your customer, of the need to understand your competitive advantages, and to con­tinue to refine them. He believed that talented people were the essential ingredient of every successful enterprise.

RENAISSANCE MAN

He was the guru's guru, a sage, kibitzer, doyen, and gadfly of business, all in one. He had moved fluidly among his various roles as journalist, professor, historian, economics com­mentator, and raconteur. Over his 95 prolific years, he had been a true Renaissance man, a teacher of religion, philosophy, po­litical science, and Asian art, even a novelist. But his most important contribution, clearly, was in business. What John Maynard Keynes is to economics or W. Edwards Deming to quality, Drucker is to management.

· It was Drucker who introduced the idea of decentralization—in the 1940s—which became a bedrock principle for virtually every large organization in the world.

· He was the first to assert—in the 1950s—that workers should be treated as assets, not as liabilities to be eliminated.

· He originated the view of the corporation as a human community—again, in the 1950s—built on trust and respect for the worker and not just a profit-making machine, a perspective that won Drucker an almost godlike reverence among the Japanese.

· He first made clear—still the 50s—that there is "no business without a customer," a simple notion that ushered in a new marketing mind-set.

· He argued in the 1960s—long before others—for the importance of substance over style, for institutionalized practices over charismatic, cult leaders.

· And it was Drucker again who wrote about the contribution of knowledge workers—in the 1970s—long before anyone knew or understood how knowledge would trump raw material as the essential capital of the New Economy.

Drucker made observation his life's work, gleaning decep­tively simple ideas that often elicited startling results. Shortly after Welch became CEO of General Electric in 1981, for exam­ple, he sat down with Drucker at the company's New York headquarters. Drucker posed two questions that arguably changed the course of Welch's tenure: "If you weren't already in a business, would you enter it today?" he asked. "And if the an­swer is no, what are you going to do about it?"

Those questions led Welch to his first big transformative idea: that every business under the GE umbrella had to be ei­ther No. 1 or No. 2 in its class. If not, Welch decreed that the business would have to be fixed, sold, or closed. It was the core strategy that helped Welch remake GE into one of the most suc­cessful American corporations of the past 25 years.

Drucker's work at GE is instructive. It was never his style to bring CEOs clear, concise answers to their problems but rather to frame the questions that could uncover the larger issues standing in the way of performance. "My job," he once lectured a consulting client, "is to ask questions. It's your job to provide answers."

That was frustrating for a while. But while it required a little more brain matter, it was enormously helpful to us. After you spent time with him, you really admired him not only for the quality of his thinking but for his foresight, which was amazing. He was way ahead of the curve on major trends.

Part of Drucker 's genius lay in his ability to find patterns among seemingly unconnected disci­plines. Warren Bennis, a man­agement guru himself and long­time admirer of Drucker, says he once asked his friend how he came up with so many original insights. Drucker narrowed his eyes thoughtfully. "I learn only through listening," he said, pausing, "to myself."

Among academics, that ad hoc, nonlinear approach some­times led to charges that Drucker just wasn't rigorous enough, that his work wasn't backed up by quantifiable research. "With all those books he wrote, I know very few professors who ever as­signed one to their MBA stu­dents," says O'Toole. "Peter would never have gotten tenure in a major business school."

CREATING A DISCIPLINE

Drucker's most famous text, The Practice of Management, published in 1954, laid out the American corporation like a well-dissected frog in a college laboratory, with chapter headings such as -What is a Business?" and "Managing Growth." It be­came his first popular book about management, and its title was, in effect, a manifesto. He was saying that management

was not a science or an art. It was a profession, like medicine or law. It was about getting the very best out of people. As he him­self put it: "I wrote The Practice of Management because there was no book on management".

In the 1980s he began to have grave doubts about business and even capitalism itself. He no longer saw the corporation as an ideal space to create community. In fact, he saw nearly the opposite: a place where self-interest had triumphed over the egalitarian principles he long championed. In both his writings and speeches, Drucker emerged as one of Corporate America's most important critics. When conglomerates were the rage, he preached against reckless mergers and acquisitions. When ex­ecutives were engaged in empire-building, he argued against excess staff and the inefficiencies of numerous "assistants to." In a 1984 essay he persuasively argued that CEO pay had rock­eted out of control and implored boards to hold CEO compen­sation to no more than 20 times what the rank and file made. What particularly enraged him was the tendency of corporate managers to reap massive earnings while firing, thousands of their workers. "This is morally and socially unforgivable," wrote Drucker, "and we will pay a heavy price for it."

The hostile takeovers of the 1980s, a period that revisionists now say was essential to improve American efficiency and pro­ductivity, was for Drucker "the final failure of corporate capital­ism." He then likened Wall Street traders to "Balkan peasants stealing each other's sheep" or "pigs gorging themselves at the trough." He maintained that multi­million-dollar severance packages had perverted management's ability to look out for anything but itself. "When you have golden parachutes," he told one journalist, "you have created incentives for management to collude with the raiders." At one point, Drucker was so put off by American corporate values that he was moved to say that, "although I believe in the free market, I have serious reservations about capitalism."

Management theory has not evolved into the world's most rigorous or enticing intellectual discipline. But in Peter Drucker it at least found a champion whom every educated person should take the trouble to read.

 

BusinessWeek

WHY DRUCKER STILL MATTERS