Peter Drucker's Major Contributions to Management Theory and Practice - Coursework Example

Introduction: Peter Ferdinand Drucker (1909-2005) is a well known to every person related to the field of management and is also known as the father of management. Other than that he was also quite an expert of various other fields but his major contribution was to the field of business in relation to which he wrote 39 books in total and countless articles throughout the span of his life and laid the foundation for the management practices all around the world. Drucker’s decision to venture into the field of management turned out to be a revolutionary idea. Later on it laid the foundation for the modern organizations and the managers at work. At the time when Drucker started to pay his attention towards the subject of management there was little or no awareness of the subject and he endeavored into this field knowing full well that he will actually be laying the foundations of a discipline. It has been said that what Edwards Deming is to quality and John Maynard Keynes to economics, Drucker is to management (Business week, 2005). Drucker’s major contributions to Management Theory and Practice: One of the main contributions of Drucker was that he took the subject matter of management not just as a random idea but as a proper school of thought. He developed it as a proper discipline and a profession. He considered the topic of management to be of generic nature and that its principles actually form a proper body of knowledge. He was the first one to take the intuitive of actually shedding some light on it in order to make a coherent picture of the discipline that would make people aware of its connotations on every organizational sphere. He was also the one to introduce the idea of decentralization in the 1940s which also refers to an increase in the employee empowerment, a concept that was not very well thought of at that time but the increase in globalization has made it essential for the organizations to be more flexible and responsive to the changing environment and as lower level employees are more “closer to the action” when it comes to dealing with the situations, that’s why giving them a voice in the decision making process was a very important step. (Heller, 2001). Drucker strongly disapproved of the command and control model that was usually sustained at that time as he believed that the best way to run an organization was by making it decentralized. Another revolutionary concept introduced by Drucker in the 1950s was concerning the human resource of the organization as a whole. He was against to the treatment of the employees as machines that are only programmed to give maximum output for the purpose of maximizing profits. He emphasized on the respect of the worker and thought of them as assets of the organization and not just as liabilities to be paid. He promoted the concept of the people as the most important entity contributing to the success of the organization. Accordingly, he was also a strong advocate of choosing the best people for the job as he believed that talented people were the primary ingredient leading to the success of an enterprise. He wanted to bring the focus of industrialists to develop their organizations as learning environments and adopt such an organizational policy that maximizes individual strengths while minimizing the weaknesses. (Wood, J. and Wood, M., 2006) Drucker also presented the idea of simplification of the processes being carried out in the organization. According to him the objective setting function is very crucial to an organization and hence considerable thought should be given to it. He said that in order to handle all the processes in the best possible manner one should be able to synthesize the individual tasks into a coherent practice. He emphasized on the need of determining the contributing factors that increase the value of an enterprise and enhance the organizational performance. His aim was the orientation of the business ideologies in such a manner that it creates a balance between a variety of needs and goals instead of restricting it to a single value. The ideology then set by him also required a high degree of work coordination that would increase the efficiency of each task to its maximum potential. Peter Drucker was also the one to coin the term of knowledge worker in 1959. This term refers to employees having specific expertise and knowledge of the work that they perform. Throughout the 20th century the focus of the organizations had always been to push productivity to its max when it came to manufacturing but since then a lot has changed. Now, in the 21st century our main focus is on developing the knowledge work and developing every individual of the labor force as a knowledge worker. It was Drucker who first predicted the shift of business determining success based on their productivity to rather success based on their extent to generate and use knowledge (Steger, 2005, pg 329). His exact words in relation to the topic are stated as, “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” (Drucker, 1999). In addition to everything mentioned above Drucker was also a strong advocate of innovation and entrepreneurship. In the book Innovation and Entrepreneurship: Practice and Principles written by him in 1985, he wrote that in today’s era these two terms would actually be the key ingredients to the success if an organization. According to him, “Innovation is the specific tool for the entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service.” Drucker actually defined the term of entrepreneurship by high lighting the different aspects of the functions that he should perform. He says that an entrepreneur should always be on the lookout for the trends in business environment, he should be able to identify various incongruities between the current situation and the situation desired and he should also have the foresight to determine the various opportunities that he might encounter or the problems that he may have to face. When we talk about the success of an organization it is quite clear that the business would just not be able to survive until and unless it gets the customer for its goods and services. Business is all about knowing the customer end of the market structure and Drucker really highlighted this aspect. He was the one to suggest back in the 1950s that there is no business without the customer, which greatly changed the whole market mindset and enabled them to think of the customer’s side of the desk and it is now the bed rock principle of all the business ideologies. Peter Drucker’s Ideas on Marketing: Marketing was previously thought of only related to production and productivity and most of the formal definitions of marketing at that time also referred to marketing activities as an entity whose primary focus is towards organization’s production processes. The broad view of the marketing refers to creating efficacy of time and space, activities of buying, selling and distribution of goods and the activities that seek to achieve the organization’s objectives. With the thinking of Drucker the term marketing was given a whole new perspective. He redefined the philosophy to be more consumer oriented saying that the customer is the primary focus and the fore most purpose of an organization. In view of that the marketing purpose was also redefined as the process of determining consumer demand and facilitating the distribution of goods and services. An extract from his book “The Practice of Management” says, “Because the purpose of business is to create a customer, the business enterprise has two_ and only two_ basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business” (Drucker, 1954). Drucker put his thought in the simplest manner as much as possible. He considered that the job of the marketers is to focus on their customers which are after all the focal point of any business, be it related to providing the good or services (Kermally, 2003). On the secondary level Drucker established innovation as the key factor to focus on. Drucker explained that the primary goal of the organization is to make the selling surplus and in order to do that the organization should know exactly about the wants and needs of the customers and in addition to that they should also be innovative enough to come up with newer and better products that might be new to the customers but is something that would fit their requirements perfectly in order to achieve their highest level of satisfaction. Due to the thinking of Drucker the marketing concepts were broadened to a whole new dimension and the term was redefined to shift the emphasis from producers to customers. Now marketing actually constitutes doing the market research, determining the consumer behavior, evaluating ways to reach the consumers and satisfying the present consumers as well as foreseeing their future needs (Kermally, 2003). Peter Drucker’s idea on Performance Management: With the shift of the old system to that based on the factor of knowledge economy businesses now have to deal with a whole new set of circumstances. The rapid changing environment makes it essential for the organizations to have fast reflexes that would enable them to stay ahead of all their competitors. Due to that the focus of the company has shifted from just focusing on the physical outcome and profits to that of more intangible entities like skills, systems and values. Now, the measurement of such entities could not be done using the same managements systems that worked in the past. Drucker fore seeing this aspect of the situation in 1954 came up with the management by objectives model of evaluation. Additionally Drucker, for the purpose of measuring the performance as well as in order to determine how a business is doing, came up with five key points to analyze the its performance namely innovation, productivity, market standing, liquidity and profitability. Innovation is an entity that has always been greatly emphasized upon by Drucker (Bose, 2004) because he was of the view that the only way to gain an edge on the competitors in such a cut throat competition is to come up with things and ideas that have never been thought of before. Secondly, as productivity is a factor that is the focal point of every organization so its determination counts a lot in analyzing the organizations performance. Same is the case with liquidity and profitability. As for market standing, it is something that truly tells you where your organization stands in the overall economic picture and gives you a comparative analysis your company’s performance. Peter Drucker’s ideas on Knowledge Economy: Drucker is considered to be the first one to coin the terms “knowledge worker” and the “knowledge economy” in his book “The Land marks of Tomorrow” published in 1959. He was of the view that America, after going through World War 2 changed from having an economy of goods to a knowledge economy. He said that in a developed and advanced economy knowledge is in fact constituted as the central factor of production. In addition to that he also considered knowledge as being the key factor rather than science that has become the foundation stone of the modern economy. He then based on his assumptions of the knowledge economy highlighted its four main fundamentals which are as follows (Wallace, 2007): 1- The implementation of knowledge work does not mean that it lead to a ‘disappearance of work’. On making a comparison we get to know that the people working under this theory of knowledge work are actually giving more input than those working before its implementation as their work was primarily physical. 2- It had always been the view of previous analysts that skill-based work and the knowledge based work are two comparable entities while Drucker considered skill to be directly dependent on knowledge. He said that the knowledge would be of no use without skill and skill in turn would also be useless if not based on knowledge. 3- Knowledge, according to him did account to a revolution in both the life of a worker on an individual level as well as in the productivity of the overall work. In view of that he fore saw a change in our working environments as such that unlike older times the career opportunities in today’s era are far more diverse and varied which makes it even more crucial for us to get acquainted with the knowledge of each profession at a micro level. 4- As the fourth point Drucker lays emphasis on the increasing dominance of bigger organizations and says that in the past the knowledge workers used to be independent professionals but due to the advent of knowledge economy as a whole an increasing number of such workers have started affiliated with larger organizations and as a result have somewhat lost their substantial personal autonomy. On the concluding note, Drucker’s objective was to bring to light the reason for the transition to the knowledge economy for which he says that in today’s age and time when we have longer life spans, the society not only accepts but also requires an increase in the overall level of knowledge that results in such a situation that the increase in the overall production level and expanding variety of knowledge based jobs is inevitable (Micklethwait, Wooldridge- 1996, pg144). Peter Drucker on Managing Change: Keeping in view the ever changing business scenario and the ever expanding management roles required of us all, Drucker outlines the ways for us to that would encourage us to deal with the changing circumstances and allow us to adapt to changes more easily. This concept was has been elaborated in his book “Managing in a Time of Great Change” which is a collection of essays written by Drucker from 1992 to 1995. On the level of an individual worker, Drucker says that now the employers have to be more flexible in order to keep pace with the changing demands of the customers. One way to do that as told by Drucker is “out sourcing” and which would also include the hiring of employees on the short term contracts based on their knowledge of the task that is to be assigned to them, in turn the employees would be held responsible to acquire requisite knowledge and skills in order to increase their employability that would enable them to adjust to this system. As for the organizations they must constantly have a knowhow of the environment that surrounds it market, customers, society etc and in view of it must keep evolving its theory of business accordingly as they start becoming obsolete with time. The organizations should also keep evolving in terms of its application of knowledge in order to induce the factor of innovation. In addition to that the organizations must always stay up to date concerning its information that is it should know its position in the market as well should always be aware of the threats or opportunities that might come its way. The organization should also keep its goals and objectives in mind because according to Drucker stretching of a company beyond its competence might deflect it from its primary tasks and core mission. Drucker’s Ideas on Post-industrialization: Post industrial society is that which has went through a major economic change and such an economic transition results in the restructuring of the society as a whole. The advent of post industrial society and the knowledge economy has had an influence of gigantic influence on various disciplines which is not only restricted to social sciences but actually encompass all spheres of our lives. Peter Drucker was of the view that whole new management approach would be needed in order to adjust to the post industrial age. He in a way foresaw that the practices and procedures being carried out in the previous age would be of no use after the advent of industrialization and hence tried to impress upon the people the need for a change. He said that the transition to the post industrial society would cause an alteration of the average worker to a knowledge worker. As we have seen before previously the unskilled manual workers had always been the dominant factor and after industrialization the knowledge workers now form the major force of the employee sector. Drucker also emphasized that in order to survive in this post industrial society there would be a greater need for better management techniques in order to achieve better coordination and be flexible at the same time which in turn would enhance the organizations performance. He suggested that decentralization within an organization would be the best way for it to carve out its road to success (Heller, 2001). In addition to that, as mentioned above throughout the essay, majority of the Drucker’s theories were based on the philosophy to deal with the post industrial society. Be it the reference to the knowledge workers, decentralization, information based systems, better communication channels and a constant need to change and evolve along with the induction of the factor of innovation. References Businessweek, “The man who invented management”, 28 November 2005, viewed april 10, 2010, accessed from: http://www.businessweek.com/magazine/content/05_48/b3961001.htm Wood, J., Wood, M. (2006), “Peter F. Drucker: critical evaluations in business and management”, viewed 10 April 2010, Questia- the online library of books and journals, accessed from: http://books.google.com.pk/books?id=Ugv2uojU3D0C&pg=PA221&dq=contribution+of+peter+drucker+in+management&hl=en&ei=q9i9S9rFK8S4rAeUufXkCQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDcQ6AEwAA#v=onepage&q=contribution%20of%20peter%20drucker%20in%20management&f=false “Book review: Innovation and enterprenuership by Peter Drucker”, 13 June 2008, City Wire, accessed from: http://www.citywire.co.uk/adviser/-/features/book-review/content.aspx?ID=305518 Kermally, S. (2003), “Gurus on marketing”, Publisher: Thorogood. London Heller, R. (2001), “Inside the guru mind series”, Publisher: Dorling Kindersely Ltd, London. Wallace, D.P. (2007), “Knowledge management: historical and cross-disciplinary themes”, Publisher: Libraries unlimited, USA. Drucker, P. (2006), “Innovation and Entrepreneurship”, Publisher: Harper Collinds Publisher. Bose, C. (2004), “Principles of management and administration”, 4th edition, Prentice Hall of India, New Dehli Micklethwait, J. & Wooldridge, A. (1996), “Drucker; the guru’s guru”, The Mckinsey Quarterly, issue 3, pg 144 Steger, T. (2005), “In memoriam Peter F. Drucker”, Journal for East European Management Studies, pg 329 Read More