Peter Druckers Management - Article Example

The last century has seen a wave of thinkers emerge in the field of management, becoming the driving force behind the evolution of practice and application of various theories in the area. The objective behind much of the development and research has been to find better ways to perform the management tasks that are part of each industry’s dynamics: planning, organizing, leading and controlling (Waring, 1992). For much of the evolution and change that theorists, researchers and consultants have published, the underlying factor remains the understanding of how economic, political and cultural forces affect the ways in which managers and organizations behave. In the 20th century, the critical concern for most managers was efficiency and productivity. A key factor that actively pushed for the development of these areas was the rapid introduction and acceptance of industrialization within the economy at the turn of the 19th century, followed by the liberalisation of the economy in the Western world and the emergence of globalization. The variances to the economic and social environments required managers to adapt their practices of planning and controlling, so as to harness the workforce and lead by a system that allowed for business goals to be achieved with the minimum of resistance. The efficient use of the workforce remained critical for most managers due to the short supply of skilled labour that plagued many industries (Drucker, 1958). This meant that the organizations had to find ways to ensure that the labour it had employed could be managed in ways that productivity was achieved at the maximum or optimum level. Alternatively, some entities approached the dilemma by substituting capital for labour, as a means of compensating and catering to the needs of the economy. One of the earlier theories that studied the person-task relationships from a manager’s perspective was proposed in the early 1900s and referred to as the Scientific Management Theory. Developed initially by Fredrick Taylor, it addressed the matters of job specialization and division of labour in the context of work settings in large organizations. This was followed by the Administrative Management Theory put forth by Max Weber and Henri Fayol, which outlined the principles of bureaucracy and administration. Over the years, these principles were refined to suit the conditions of modern management; however, inter-departmental teams and worker empowerment are some issues that were as relevant a century ago as they are today. Mary Follett advocated the Behavioural Management Theory that focused on the different approaches to managerial behaviour but was only accepted as conditions became more consistent with the presented views. The Management Science Theory introduced quantitative techniques that would empower managers with control over the use of organizational resources, in a bid to bring efficiency to the production of goods and services. By the 1960s, the importance of an organization’s external environment in relation to its operations became clearer, prompting researchers to develop the Organizational Environment Theory. The focus here was to find methods that would assist managers in utilising an organization’s resources efficiently and effectively, in line with the competition demands of the global environment (Waring, 1992). By the 1950s, the importance of people to achievement of an organization’s goals was clearer, as more incidents of authority issues rose in the corporate world. The American automotive giant GM was widely regarded for its administrative controls and chose to allow a young business thinker by the name of Peter Drucker access to its internal workings, in order for a social-scientific analysis of the corporation to be performed (Byrne & Gerdes, 2005). The resulting book, Concept of the Corporation, ended as a critical view of the various facets of the organization that needed to be re-examined by the administration, as well as insight into the multidivisional structure that was employed by GM. While not received well by the involved entity, the book propelled the views of Drucker globally, and brought a new flavour to the field of management across all industries. Drucker proposed the concept of Management by Objectives (MBO), a process of agreement of objectives within an organization that allowed management and employees to understand their individual and collective roles (Drucker, 1988). The essence of MBO lay in a participatory style of management, in which goal setting, course of actions and decision making all required the presence of the employee. Drucker felt that this level of involvement not only gave the employees and management clarity of individual and collective goals, but provided the motivation for job satisfaction and commitment as well as better communication and coordination within the workforce. One of key interests that shaped the work of Drucker was his interest in the growing percentage of people who used their minds as the primary tool for work, instead of their hands. He believed that public and private institutions had a responsibility to the whole of society, rather than simply to the business needs of the entity itself. “The fact is 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, 2007b) Over several decades of work as a management consultant and writer, Drucker penned 39 books on various facets of the field of management, as well as attempted to predict the developments of the later century. These included the ideologies of privatization of industries, emergence of Japan as an economic power and the necessity of lifelong learning due to the rise of the information society. In 1959, he penned the term “knowledge worker”, to give identity to those individuals in the workforce who are valued for their ability to understand and interpret information in a particular subject area (Drucker, 1993). In the business terminology, such individuals are commonly referred to as professionals, who have the insight and expertise to solve problems and from an integral part of the overall decisions and strategy development of organizations. Drucker also acknowledged the intellect of workers, and identified knowledge work productivity as the important economic need of organizations for long term prosperity and survival. He emphasized on the requirement for managers to make their enterprise more effective by acknowledging the potential of the workforce and innovating and shifting resources to areas that were more productive. The shift in the existent industry setting when Drucker proposed this concept was the thinking in the working system employed by organizations; most were developed on Frederick Taylor’s ideology of manual work that required management to define the task, administer command and control as well as apply strict standards, while maintaining a focus on the quantity of the output. Drucker contrasted with this thinking by requiring management to understand the task, give autonomy to the workforce and ensure continuous innovation, while maintaining a focus on the quality of the output. Another key area of management that Drucker emphasized upon in his writings was the decentralization and simplification of processes within companies (Drucker, 1993). He contradicted with the command and control model that brought about a dictatorial style of management and leadership to organizations, and asserted through analysis that benefits of efficient working when authority was segmented across the enterprise. Additionally, Drucker also professed the earlier concept of outsourcing, lamenting companies for being involved in industry sectors that counter the strengths of the entity, as well as hiring excessive workforce to produce too many products resulting in wastage of resources and capital. He believed in organizations adopting a more focused approach to business processes, by finding the best fit for itself in the global economy. In terms of marketing, Drucker preached the need for companies to accept the servitude of customers as its primary responsibility. That, coupled with the need to periodically innovate its products and services to cater to the demands of the consumer, reflected the objectives that business should model themselves to (Drucker, 1958). On this topic, Drucker stated: “Because the purpose of business is to create and keep a customer, the business enterprise has two, and only two, basic function: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.” (Drucker, 2007a) Drucker believed in marketing being the distinguishing function that separated a business from other organizations, as well as the unique and central function of the enterprise. However, unlike the norms of the business world, he believed that there was a need to incorporate the marketing function at the beginning of any process, especially if it was the manufacturing of a product to meet consumer needs (Drucker, 1958). By doing so, the product would integrate the demands of the economy and customer at each phase of development and prove to be more successful for the company. Like many thinkers before him, there were critics who were not keen on the ideas and projections presented by Peter Drucker. The first ones would have to be the management at GM, who had initially hired Drucker for a two year assessment project that had later launched his career as management authority (Drucker, 2007a). His suggestions for changes to authority and work processes were in direct conflict to the established norms of the enterprise; something that was prized in the company and regarded as the envy across the business world. However, Drucker professed on the need for management to value its workforce as an asset, rather than a liability. The tacit knowledge that each employee possessed resulted in them being the drivers for initiating positive change within the enterprise, as well as the ideal marketing tool for drawing the attention of consumers. However, the principles of delegation were not practiced rampantly in the industry, and GM management saw it as a proponent to the reduction in output from the workers. This, of course, was due to the principles that had been established in the enterprise through the workings of Taylor and the rule of focusing on quantity of deliverables. Among the academic detractors, Edwards Deming argued against Drucker’s MBO principle, stating that the lack of understanding of systems possessed by managers often resulted in the misapplication of objectives (Drucker, 1999). Deming also pointed to limitations in the philosophy of management by objectives that undermine the impact of the process. One of these limitations was the emphasis that Drucker had placed on setting of goals as the driver of outcomes. Deming noted that while goals allowed for the end-point to be clarified for the management and workers, the working of a plan to reach those goals should be considered as the more important driver, since it was this part of the process that defined the efficiency and effectiveness. Deming also found that the MBO did not give significant importance to the environment that goals were set in, believing that the context held value for the achievement of productivity by companies, especially in line with various factors like leadership, availability and quality of resources. Furthermore, the use of MBO placed emphasis on amalgamation with the culture of the organization (Drucker, 2007b). The culture defines the values and norms of the organization, as well as shapes the fundamentals workings that result in providing an identity to the organization. This identity is represented at each step of the organizational processes as well as in the products or services that the company creates for the consumer. The culture is also a driving factor in the management and leadership styles that form the guiding force for the organization, and thus link with Drucker’s concepts of delegation of responsibility and authority. As he once stated: “Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you’ve got.” (Drucker, 1993) In the later part of his consulting career, Drucker moved away from the corporate business world to work more closely with non-profit leaders and advise on management of such establishments (Lenkowsky, 2005). One of the reasoning behind this move was his disenchantment with capitalism and the method in which it rewarded greed, as well as the disdain towards the excessive riches that corporations awarded to executives, while slashing the ranks of the ordinary workers. His hope from the non-profit groups was of them playing a key role in giving a key purpose to society, especially in context to his ideology of knowledge workers and the information age. In order to do so, Drucker provided clear distinction in the goals and values that non-profit organizations should set as part of their core processes. He professed that there was not a need to make such organizations business-like, but to make them more like the business they are involved in. This meant that instead of non-profit organizations following the model set up by the corporate world, it was more effective for them to follow a model that catered to their goals and needs, since their line of business had donors and not consumers (The Drucker Institute, 2009). Despite some lapses in projections and the limitations of some principles, Peter Drucker is widely regarded as the ‘man who invented management’. The corporate world in the past decades has adopted a lot of his principles in terms of process-definition, and the economies of the world have developed down the information and computer path that he projected in the late 1950s. As management guru Tom Peters stated: “He was the creator and inventor of modern management. In the early 1950s, nobody had a toolkit to manage these incredibly complex organizations that had gone out of control. Drucker was the first person to give us a handbook on that.” (Byrne & Gerdes, 2005) The key practice of putting people first was what Drucker believed in until the end, emphasizing that innovation in corporations is the result of the ideas of a knowledgeable workforce. The wisdom of experience that each worker brings to the organization is invaluable and cannot be replaced by machines. Toyota, widely regarded for its model of human creativity and placing people first, took a lot from Drucker’s vision of human-oriented management, signifying his place as one of the finest modern management thinkers of the 20th century (The Drucker Institute, 2009). Bibliography Byrne, J. & Gerdes, L. (2005) ‘The Man Who Invented Management: Why Peter Drucker’s ideas still matter’, BusinessWeek, 28 November, Available at: http://www.businessweek.com/magazine/content/05_48/b3961001.htm, Accessed on 22 April 2010 Drucker, P. (1958) ‘Marketing and Economic Development’, The Journal of Marketing, Volume 22, No. 3, pp. 252 – 259 Drucker, P. (1988) ‘Management and the world’s work’, Harvard Business Review, Volume 66, Issue 5, pp. 65 – 76 Drucker, P. (1993) Concept of the Corporation, Transaction Publishers Drucker, P. (1999) Management: Tasks, Responsibilities, Practices, Gulf Professional Publishing Drucker, P. (2007a) Management Challenges for the 21st Century, Butterworth-Heinemann Drucker, P. (2007b) The Practice of Management, Butterworth-Heinemann Lenkowsky, L. (2005) ‘Drucker’s Contributions to Nonprofit Management’, BusinessWeek, 18 November, Available at: http://www.businessweek.com/bwdaily/dnflash/nov2005/nf20051118_9372_db_085.htm, Accessed on 22 April 2010 The Drucker Institute (2009) The Drucker Institute – Claremont Graduate University, Available at: http://www.druckerinstitute.com/, Accessed on 22 April 2010 Waring, S. (1992) ‘Peter Drucker, MBO, and the Corporatist Critique of Scientific Management’ in Nelson, D. (ed) A Mental Revolution: scientific management since Taylor, Ohio State University Press, pp. 205 – 236 Read More