In a classic, Peter Drucker, there is an insightful piece by Ronald S. Ritchie.
In the popular view, the role of a prophet is to prophesy, to foretell the future. In fact, his task is less mysterious and more important. It is to understand the men and the society around him and to use that understanding to help create the future. Drucker's role as analyst, interpreter, and adviser in management practice is inseparable from his role as prophet for his day and age.
The great prophets of history have looked through veils of complexity and controversy to discover the true nature of the society of their day, the directions in which it was moving, the fundamental forces which were at work. The fiery prophets of the Old Testament warned the children of Israel that the supreme threat was not the yoke of foreign oppression but a spiritual poverty of their own making. They called for repentance, for a new purpose, and for a new dedication. In the last century, Tocqueville's insights revealed the essential foundations of popular democracy and laid bare its inherent tendencies, both desirable and undesirable. His intended audience was his own countrymen, who did not have the experience of popular democracy in their bones. His actual audience has been very much wider, and his work has influenced the development of modern democracy in its original homes.
Drucker is more in the style and tone of Alexis de Tocqueville than of the highly charged Old Testament prophets, but he is very much a social analyst, critic, and prophet of his day. Hard as it is to be confident about judgments on men and events of one's own time, it seems assured that Drucker's major insights will stand the test of a century, as well as they have stood the test of thirty years.
Drucker is also an expert reporter, researcher, consultant, adviser, analyst, synthesizer, innovator, and, above all, interpreter of the practice of management. This is not a separate, nor even a subordinate, career. Everything he has to say about management is an integral part, a specific elaboration, of what he has been saying about the nature of our modern society and of the forces at work in it. His books on social analysis have been regularly followed by books on management: The Future of Industrial Man in 1942 by Concept of the Corporation in 1946; The New Society in 1950 by Practice of Management in 1954; The Landmarks of Tomorrow in the late 1950s by Managing for Results and The Effective Executive in the mid 1960s. If this pattern continues, The Age of Discontinuity of 1969 will be followed in due course by another direct contribution to the advancement of thinking about management.
Each of these works focuses on, or takes as its essential framework, our evolving industrial society, the forces at work in it, and the demands it makes. The theory and practice of management emerge, not as abstract, intellectual concepts, but as revelations of both practical and intellectually stimulating wisdom derived from a concentration on the nature of the task, the nature of man, and the nature of group effort in the kind of society in which we live. The management knowledge is a part of the social knowledge. Its application is important to the future of our society.
Shortly after Concept of the Corporation appeared, a reviewer wrote: "It is to be hoped that the author's talent will soon be devoted to more respectable topics." That reviewer recognized the quality of what he had read but failed to grasp the central message about the large-scale corporation as the representative institution of our day. It would be harder to make the same error twenty-five years later. Drucker has had much to do with the change.
THE TASK OF MANAGEMENT
The insights Drucker has contributed to our understanding of management and the management process come, to a great extent, from his insistence on the task as the basic determinant. Results are required. They shape the role and define the required performance of the corporation itself, its management workers, its knowledge workers, and the rest of its work force. Neither the task itself nor the setting in which it must be performed are the product of individual whim or predilection. Both are socially determined. The need is to identify the results to be achieved and to understand their requirements well enough to make an adequate contribution. Although he does not use the phrase, Drucker's analysis has always to do with the "authority of the situation," with the requirements which it imposes and the opportunities for contribution which it offers.
Thus, he begins with the corporation as the specific organ through which a modern society discharges its basic economic functions. The corporation, then, is intimately involved in the social and economic development of a modern society. But, like all good definitions and descriptions, these statements exclude as well as include. Economic activity is related to many of society's other concerns and is influenced by many of them, but it does not encompass them. The primary role of the corporation does not, therefore, bring responsibility for these other social concerns, except to the extent that society demands their performance in the economic process. The shape, the size, and the processes of the corporation as an organ of the economic task are determined by the time span of modern production and business decisions, the kind of permanence required for combining material and human resources into a productive organization, and the scale of aggregation required for performance.
The task of managers is, in turn, determined by the task of corporations. Their focus must be on the requirements of the enterprise, both internal and external. In fact, this is true for all participants in the organization, whether managerial, professional, clerical, or labor. For managers, it means accepting the objective requirements of the enterprise as the guide for managing the business itself, for managing the managers, and for managing work and workers.
Managing a business requires an understanding of the needs of economic performance and a commitment to it. A first step is to determine what the business really is. For this, one looks not internally but externally, for it is the customer who determines whether there is a business and who determines what the business is by his perception, conscious or unconscious, of the need it meets and the values it offers. Well before "market orientation" and "marketing myopia" had become common terms, Drucker was telling managers that the heart of the business was marketing and market innovation, not the production processes. He was describing how business leaders such as Alfred P. Sloan, Jr., and Julius Rosenwald had created hugely successful business organizations on just this premise. Equally, well before any widespread application of a systems approach to business and other social processes, he was emphasizing the need to view the activities of the particular enterprise in relation to the total process from initial resource to final consumption, citing the success stories of Sears, Roebuck and American Telephone and Telegraph.
While many management theorists have been implicitly assuming that management is concerned with known and defined tasks, Drucker has been proclaiming that the entrepreneurial task is central to the task of managing the business. To adopt language from another context, the manager is engaged in "creating futures." The manager's business today is to make decisions which can have their results only in the future. His business also includes sloughing off activities from the past which either should never have begun or which, successful as they have been, have now had their day. The economic performance task of management is not achieved by adapting or reacting but by creating and changing. Hence, the necessity for management by objectives, a concept and a phrase which have become part of the conventional wisdom about the methods of management since Drucker introduced it in Practice of Management in 1954.
The discipline of task orientation is central also to what Drucker has to say about managing managers. Each managerial job must be real, that is, it must be grounded in the needs of the enterprise, and the authority and the responsibility which it carries must be task focused. Where the task is too big for one man, a team is required. This is increasingly true of the chief executive role. Management should be by objectives and self-control, and it should be measured by the contribution made to the performance of the business. The task orientation and the contribution test determine the nature of relationships upward, horizontally, and downward. In this perspective, the essential contribution of the superior is to assist rather than to direct and control.
A major need of the enterprise is a continuing flow of leaders for tomorrow. In the 1940s, Drucker was stressing that managers develop only by being given something to manage and that such opportunities should come early enough in their careers and at such a level in the enterprise that they can make mistakes without too serious consequences. In the decentralization of General Motors, he described a system of organization which offers such opportunities on a large enough scale to provide for the increasing requirement of managers in modern enterprises. Consistent with the results orientation, there is an emphasis on self-development, concentration on building strengths, and discouragement of long-range promotion planning or potential rating.
Management structure plays a key role both in managing managers and in managing the enterprise. Here again, task orientation and the objective requirements of the enterprise are the key determinants. Periodic analysis of required activities, decisions and relations is necessary to keep the structure of management appropriate to the needs. The aims must form a structure which permits, and demands, business performance from all managers, has the least number of management levels, and facilitates training tomorrow's managers.
The third part of the task of management is managing work and workers. Here, the stress is on employing the whole man, that is, recognizing the distinctive productive potential of the human being and so organizing the work and the work place, that the strengths, initiative, responsibility, and competence of each individual become a source of strength and performance for the enterprise as a whole. This requires organizing jobs so that each constitutes a distinct stage or complete step, dependent for its speed and rhythm on the performance of the individual rather than on what comes before or after, and embodying challenge or thought. What must be sought is a sense of responsibility which can be induced and encouraged but not bought. The worker needs the kind of information which will allow him to measure his contribution and his performance. He needs to share in the managerial vision. He can do so only if he can, to some degree, participate in planning the job or in the organization and administration of the enterprise's community and information services. Most of what is required psychologically is now widely known, but the hard task of converting such knowledge into actual managerial practices and work atmospheres has been tackled by very few.
Managing work and worker includes today managing the knowledge worker, the professional. Knowledge has become the central factor of production in a modern economy, and the knowledge worker is the successor to the manual worker, skilled or unskilled, of yesterday. The emergence of the knowledge worker as a major element in the enterprise brings home even more forcibly the absolute need for the organization to focus on task and results. Only with such a focus can the efforts of the knowledge worker be made productive. Drucker has contributed more than most to an understanding of the management implications of the advent of the knowledge worker. In his view, "to make knowledge work productive will be the great management task of this century, just as to make manual work productive was the great management task of the last century." The knowledge worker, the professional, is not a manager, but he is responsible for ensuring his own contribution to the task of the enterprise and to a major degree for setting his own standards of performance. In him, even more readily than in the nonprofessional employee, it should be possible to approach more closely the ultimate goal of realization of the managerial vision for all members of the enterprise, an acceptance of significant responsibility and decision-making power by every worker.
Decision-making is a primary activity of management. It is, in fact, the specific executive activity. Again, analysis in terms of the objective requirements of the enterprise tells much about the requirements of the decision-making responsibility and about effective approaches to it. This kind of analysis tells which decisions can be reduced to routine and handled at lower levels of the organization, and which are the few that are strategic. It helps to find the right questions and reveals the need for identifying and evaluating alternative answers. It makes it clear that decisions have to do with an uncertain future, that the objective is not to minimize or even to reduce risks but to find the right risks to take in light of relevant expectations. Finally, it shows who are the right people to involve in each decision and what implementation and follow-up components must be built in to assure results.
It is of the essence of the corporation that it is a social, that is, a human organization. Society determines the task demands on the corporation and, therefore, on management. At the same time, it imposes other demands and constraints which are not inherent in the economic task. In our society, where the individual has a paramount place, the requirements and atmosphere of corporate life must not be in conflict with basic beliefs and promises of our society for the individual. This raises questions about the dignity of the individual in the work place and about equality of opportunity. It introduces ethical considerations into the internal organizational relationships and structures of the corporation.
Such aspects of the management task and of the performance of the corporation enter frequently into Drucker's treatment of the subject. He stresses integrity as a key attribute of the manager, as an essential underpinning for acceptable and effective human relationships within the corporation. He emphasizes the life-and-death power involved in promotion and management-development decisions and labels them as too critical to be left to a single superior. In all these areas, the immediate functional needs of the enterprise are intertwined with society's expectation that the enterprise will discharge its function in ways compatible with, and reinforcing, society's views about the place and objectives of the individual.
THEORY OF CORPORATE BEHAVIOR
Management's responsibility is to the enterprise, but through the enterprise it has a functional and clearly delineated responsibility to society. Its functional role is economic and gives it no authority in other areas of social concern except that which stems directly from its economic responsibility. Even authority exercised over those members of society in the employ of the enterprise is illegitimate if it goes beyond the objective needs of the enterprise. Management and the enterprise share with other institutions the objective of fulfilling basic social values, especially fulfillment of the individual, but they work toward this objective through the creation of business opportunities rather than by the assumption of social responsibility that restrains or lies outside their primary functions.
Management's obligation to the enterprise calls for continuing care that its present actions and decisions do not create future public-opinion threats to the enterprise or to its function. In other words, as part of its primary function, management must be always alert to trends in public thinking and to their significance for the ways in which it performs its tasks.
Drucker's analysis of management philosophy and practice has the odor of the real world about it. Unlike many others who have written about management, it is not his practice to construct intellectual scaffolding upon which to hang suitably chosen or contrived examples from corporate experience. Instead, he has studied in depth both corporate experiences and the forces at work in the societies in which management performs. On this basis he arrives at conclusions and interpretations which carry the conviction of reality deciphered.
In Concept of the Corporation, he set out to study the corporation as the representative social institution of the United States, not by focusing on abstract principle, but by focusing on the analysis of one corporation, General Motors, which could fairly be considered as representative of the possibilities, problems, perils, and achievements of the large corporation. Twenty years before, Alfred P. Sloan, Jr., had worked out the marketing approaches and the managerial organization and climate which made possible a corporation of the size, diversity, and effectiveness of General Motors. It was left to Drucker to put before the world both a report on what had been done and an interpretation and analysis which suggested its generic importance.
In the early 1950s with Practice of Management, Drucker sought "to narrow the gap between what can be done and what is being done, between the leaders in management and the average." It is, he said, "a practical book . . . written fully as much for the citizen without direct management experience" as for men in management. The book, like others he has written, shows the detailed knowledge of actual business-management situations and problems acquired in years of working with business as a consultant. Its major principles are based upon historically significant experiences of Sears, Ford, IBM, and others. Their relevance is apparent, the insights and perspectives associated with them often as refreshingly new on rehearing as they are compellingly persuasive.
This continued relevance of Drucker's writings is startling. In an age of change as rapid as that of the last few decades, it has been difficult to avoid being dated by the passage of twenty-five years, or even of ten. The likelihood is great in literature and in art, in science and in technology. The past quarter of a century has certainly demagnetized much of the earlier writing about management. The threat appears scarcely to have touched the works of Drucker. One reads Concept of the Corporation with perhaps more appreciation of its full meaning and pertinence today than would have been likely for most readers twenty-five years ago.
Since that time, for instance, there have been many arguments, political and professional, about size in business organization, but Drucker's 1946 view of the large corporation as the prototype organization of a modern industrial society is even more persuasive today. The advantage of bigness, he said, is that it enables the enterprise to have a policy and to have a special policy-making body sufficiently far removed from day-to-day problems to take the long view and to take into account the relationship between the organization and society. Eight years later, in Practice of Management, he pointed out that size does not affect the nature of the enterprise, the principles for managing it, or the basic problems of managing managers, work, and workers. What size does affect is the structure of management. "A company is as large as the management structure it requires." The business which is too small suffers from limitation of the size of management structure it can support. The business which is unmanageably large is the one which has come to require too many management layers between the managers of the actual operating business of which it is composed and the chief executive team. What he has to say on this score goes to the heart of organizational theory, of the management-structure requirements of large enterprises, and of the management hazards which encompass a variety of unrelated businesses. It has much to contribute to the current controversy about conglomerates.
Over the past several decades, discussion has swayed back and forth on the merits and the requirements of decentralization, of delegation, and of staff, line, and functional relationships. Decentralization has been seen as the essential pattern for large and geographically extensive organizations; delegation, as almost an end in itself. The appropriate dimensions of span of control have been worked out with scholastic precision. As the first waves of computers washed over the management scene, second thoughts about decentralization and delegation came to the fore. It was argued by some that in the computer age decision-making must once more be centralized. Later, the decentralizers were able to bring the computer in as an ally, establishing that it can strengthen the ability of decentralized management to cope with decision-making.
The Drucker analysis of these questions in Concept of the Corporation seems just as pertinent in 1970 as it did in 1946. What he had to say then was based on the actual working experience and achievements of General Motors. He saw that decentralization in General Motors sought to combine the greatest corporate unity with the greatest divisional autonomy and responsibility, that like every true federation it aimed at realizing unity through local self-government and vice versa. He saw that it was not confined to the relations between divisional managers and central managers but that it extended in theory to all managerial positions and to the relations with General Motors' partners in business, particularly the automobile dealers. The analysis of the aims and the requirements of decentralization as a managerial principle is as valid today as when it was written and as it was even earlier when Sloan devised it. Equally valid is the insight that centralization cannot develop tomorrow's leaders. In other words, centralization works against the achievement of one of management's primary responsibilities.
Practice of Management also deals extensively with federal decentralization, building on the initial analysis and insights of Concept of the Corporation. Everything which is said in both treatments is based on demonstrated experience and is subjected to the tests of the needs of the enterprise for performance and of the needs of managers for developmental opportunities. Federal decentralization requires, among other things, management by objectives, the approach which focuses the vision and efforts of managers directly on business performance and business results. Decentralization and management by objectives between them destroy the relevance of the whole idea of "span of control." The relevant concept in Drucker's words becomes "span of managerial responsibility," the number of people whom one superior can assist, teach, and help to reach the objectives of their own jobs. The Sears experience is cited to show that one vice-president may have a hundred stores under him, each an autonomous unit responsible for marketing and for profit. Each store manager may, in turn, have thirty section managers under him.
Concept of the Corporation puts forward yet another basic idea which has been developed and elaborated in Drucker's subsequent works. Today, after twenty-five years, it still represents profoundly important prophecy rather than an accepted guideline to current managerial practice. At that time, he stressed the need for individual dignity and fulfillment in an industrial society to be found in and through work. He related individual fulfillment to a sense of importance which can come only through the reality of having importance. He pointed to the links between unconstructive and negative worker emphasis on seniority and economic improvement on one hand; and, on the other, the frustrations, lack of status, lack of equal opportunity for promotion, and lack of understanding of the enterprise as a whole.
Practice of Management carries the analysis much further. The analysis starts from the basic assumption that people want to work. It focuses on the objective needs of the enterprise, as well as on the needs of the human beings involved. In the process, it lays bare in reasonably sympathetic fashion the partial irrelevancy and bankruptcy of many of the major fashions in personnel management. It stresses organizing the job so that it constitutes a distinct stage or complete step and provides motivation for peak performance, for which an essential element is a feeling of individual responsibility. This feeling of responsibility cannot be bought, but it is ready to spring into existence in the right atmosphere. It accompanies emergence of the managerial vision. The suggestions for stimulating this managerial vision, detailed in both books, still sound like productive approaches. Some element of the managerial vision is needed for all members of the enterprise. It is absolutely essential for the growing number of professional and knowledge workers whose inherent autonomy can be enlisted in the needs of the enterprise only if they do catch at least some of the managerial vision. The insights which Drucker described in 1946, in 1954, and later, are as relevant now, and much needed as they were at the time of their first exposition, perhaps much more. We can no longer in our industrial society maintain even the fiction of a hierarchical organization directed by edict from the center.
Had Drucker written nothing but Practice of Management, his major contribution to understanding of the management task and its inherent requirements would have been largely complete. His subsequent books, Managing for Results and The Effective Executive, are rich in productive and stimulating insights, but they do more to show the relevance and practical application of the 1954 analysis than to enlarge it. To read them is to have one's sights lifted, one's understanding improved, one's competence enhanced. Both are "how-to-do-it" books and "why-to-do-it" books. They bear the essential trademark of all of Drucker's work in the field of management, the sense of relevancy and immediacy which they have, as much for the manager who practices the art as for the layman who simply seeks to understand an important sector of his society. That this relevancy and immediacy are as compelling today in the works he produced twenty-five years and fifteen years ago, as those he is now producing, fully justifies the assertion at the beginning of this essay that Peter Drucker is truly a prophet of his age.
The literature of management is seldom laced with references which span the course of human history and range through philosophy, religion, military science, biology, and government. Perhaps because he was a teacher of philosophy and a student of history and international finance before he ever thought of being a student of management, Drucker's works are laced with such references. There is no affectation in them. Rather, they add immensely to the meaning he seeks to convey, and in their frequency and their aptness do much to explain the quality of mind which has succeeded so well in piercing surface appearances and conventional wisdom to the real essence of process and social requirements.
In a discussion of the size of the corporation, we are reminded of the biological law that the larger an organism grows the greater is the ratio between its mass and its surface and the less exposure to the outside there is for the cells on the inside. As living organisms grow, they have, therefore, to develop special organs of breathing, circulation, and excretion. It is this law that sets a limit to the size of living organisms. Thus, we gain new dimensions of understanding of certain characteristics, particular needs, and particular dangers inherent in the very large organization. In a discussion of decision-making, there is telling emphasis on the need for forcing consideration of alternatives as a key to effectiveness. The point is made by reference to Franklin Delano Roosevelt's habit of creating dissension and disagreement among his advisers, to President Kennedy's reaction to the Bay of Pigs fiasco, and to the inability of the Tsar of All the Russians in 1914 to halt the mobilization which had been started because, as his chief of staff reported, "Your Majesty, this is impossible; there is no plan for calling off the mobilization once it has started."
The effect of such a wide-ranging perspective is to bring the practice of management into the mainstream of human experience, to emphasize the essentials upon which it rests, and, in some measure, to give it the status and the wider understanding which it deserves and needs.