BBC Learning English
The Handy Guide to the Gurus
of Management
Programme 3 - Peter Drucker
The Handy Guide to the Gurus of Management
© BBC English/Charles Handy
Programme 3 - Peter Drucker
Page 1 of 8
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Think of any management idea that is fashionable today and the
chances are that Peter Drucker was writing about it before you
were born. He has to be at the front of any list of management
thinkers, the people that we’re calling the gurus of management
in this series of talks.
I’ve known Peter Drucker for many years. He was born in Vienna
four years before the start of the First World War in 1914. He has
been around a long time, so long that much of what sounded
revolutionary, even absurd, when he first said it, has now
become so familiar that we take it for granted. He is credited with
inventing management, for instance. Before Drucker came along
management was something people did, of course, but it wasn't
something that people could talk about because it hadn't been
defined.
Peter Drucker's first great contribution was to focus on
management as a discipline in its own right. In so doing he has
been credited with changing the face of industrial America.
Drucker went on to invent many of the concepts that are now
part of our common language. He was suggesting that
government should privatize many of its functions long before
any nation actually did it. The 'profit centre' and the 'knowledge
worker' were concepts first used by him. He was the first to talk
The Handy Guide to the Gurus of Management
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Programme 3 - Peter Drucker
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of 'discontinuity' the idea that the future is going to be
completely different rather than more of the same. He invented
the notion of 'management by objectives' and was writing about
'decentralization' at a time when most organizations were still
behaving as if they were large country estates run by the owner.
Yes, writing about it, because that is how Drucker sees himself,
as a writer. He has written thirty or so books which, he says,
have sold five or six million copies. There are also literally
hundreds of articles and essays. He also teaches, still talking to
conferences by satellite from his Californian home and still, in his
nineties, teaching two courses at the Business School of
Claremont University. "I learn by listening" he once told me, and
added, "to myself". I thought he must be joking, in his quizzical
way, but he was serious. He uses his books and lectures as a
way to work out his ideas.
In fact, he’s too modest, because Drucker is the nearest
equivalent of a Renaissance man in our list of gurus. He sets
himself out to master a new topic every year and is an expert in
a surprising number of fields. For many years he lectured on
Japanese Art. He’s a social historian at heart and is able to draw
fascinating parallels from other ages and societies. What other
management writer could slip in the fact that the word 'risk' in
the original Arabic meant 'earning ones daily bread'? Or be able
to mention, in passing, that the first management conference
was organized in 1882 by the German Post Office -and that
nobody showed up? To read Peter Drucker is to be educated in
more ways than one.
The Handy Guide to the Gurus of Management
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Programme 3 - Peter Drucker
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Like all writers, his books are the milestones in his life. There are
too many to summarize them all. They are all worth reading, and
are readable because he takes language seriously. 'Language'
he says 'is the cement that holds humanity together.' His prose
has dash and excitement. He revels in surprising you. Do try any
of them, but five of them, in particular, mark the different stages
of his thinking.
The first of those milestones was The Concept of the
Corporation, Drucker's account of how General Motors was
organized. Written in 1945, it is not much read these days,
which is a pity, because it contains much wisdom. In particular,
he explained, for the first time, how and why decentralization
worked. He calculated that 95 per cent of all decisions in General
motors at that time were taken by the divisions, leaving only the
really big ones for the centre. Drucker was keen on
decentralization because of its impact on what he called Human
Effort, the motivation it provided to people to work and to learn.
Decentralization created small pools where people felt that their
contribution mattered. Those small pools also meant that there
was space for young executives to make mistakes without
threatening the future of the company. They were, he said, farms
for growing talent.
Ironically, General Motors didn't like the book and banned its use
in the company. But the Japanese read it and learnt from it - to
their great benefit. Eventually, by the mid-eighties, most of the
leading companies in America had finally got the message and
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had decentralized. Drucker later said "People are a resource,
and not a cost. The Japanese have accepted that idea and we
haven't." His idea, in that book, of the 'responsible worker' was
taken up by Toyota and his call for a guaranteed annual income
became the basis for Japan's lifetime employment policy.
Having invented management, Drucker needed next to tell us
how to do it. His book “The Effective Executive” summarizes his
views very crisply. He begins at the beginning with a simple
question 'What is a business?' The answer that is usually given is
'It is an organization to make a profit.' That is not only false, said,
Drucker, it is irrelevant. Profit-seeking is not the purpose of
management decisions but a test of whether they work. He goes
on "If you want to know what a business is we have to start with
its purpose, which must be found outside the business itself,... in
society, in fact, since a business enterprise is an organ of society.
There is only one valid definition of business purpose - namely to
create a customer." This is the Drucker dictum that is best known
around the world. “There is only one valid definition of business
purpose - namely to create a customer.”
If you’ve just joined us, I’m Charles Handy and you’re listening to
The Handy Guide to the Gurus of Management from the BBC
World Service. We’re discussing the work of Peter Drucker, one
of the great management thinkers featured in this series.
Drucker went on to get practical about the job of the manager.
What kinds of things would you say a manager does? Well,
Drucker - who, like many gurus, is keen on lists - says he, or
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© BBC English/Charles Handy
Programme 3 - Peter Drucker
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nowadays she, does five things:
-A manager sets objectives
-A manager organizes
-A manager motivates and communicates
-A manager, measures results
-A manager develops people, including himself.
Obvious stuff perhaps, but new then and often forgotten now.
Drucker later elaborated on the setting of objectives in Managing
by Results and many have considered this to be his most
important contribution to management thinking. He shifted the
focus of management actions away from the inputs to the
outputs. It was management by results rather than management
by supervision.
But... there’s always a but… Any idea carried too far can
boomerang - bounce back in your face. Management by
Objectives can turn into management by targets and quotas,
with workers spending more time chasing the numbers than
doing the real work. Give policemen a target of so many arrests a
week and they may spend more time on parking offences rather
than the real crimes. Drucker knew this. The measures had to
measure what really mattered. What Drucker wanted was a
workplace where workers were trusted to get on with the job
without undue supervision, where they knew what was expected
of them and were clear about how it would be measured and
how they would be rewarded.
The Handy Guide to the Gurus of Management
© BBC English/Charles Handy
Programme 3 - Peter Drucker
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It was at the end of the sixties that Drucker shifted his focus from
managing a business to the world outside the organization. The
Age of Discontinuity was the first of a series of books on the
changing shape of society and its impact on the manager of the
future. That book was published in 1969 but it reads as if it was
written yesterday. The shifts that Drucker glimpsed then are still
reverberating today.
The first of these shifts in society was the arrival of the
knowledge industries. The problem here, said Drucker, was that
knowledge work needed new types of workers, people who liked
new challenges, not routines. Finding them and keeping them
motivated would be management's new problem. Think of graphic
designers, web developers or consultants. "Knowledge workers",
Drucker said "cannot be satisfied with work that is only a
livelihood."
The second shift would be a move to a global economy. A global
shopping centre would mean that everyone would want access
to the same goods. It would, he forecast, become an age of
conspicuous luxury. The global shopping centre makes brands all
important. When the world is your customer you cannot afford to
think locally any more. What Drucker foresaw thirty years ago is
now all around us. Just think of the Internet.
Drucker's third discontinuity is a growing disenchantment with
government. This worried Drucker. Never, he wrote, has strong
government been more necessary in this dangerous age. Not
The Handy Guide to the Gurus of Management
© BBC English/Charles Handy
Programme 3 - Peter Drucker
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that government should do everything. Government, he said,
should legislate, regulate and provide the funds, but leave the
doing to others. He called it reprivatization. It was a theme that
governments everywhere picked up ten to twenty years later. It
hasn't always worked that well because businesses are not
accountable to the public in the same way that governments are.
Privatization can mean more economic freedom for the
organization but less for the individual.
In the nineteen eighties Drucker began to despair of his first
love, the big corporations. He found them stuck in the past, self-
centred and over-fond of paying themselves huge salaries. He
turned his attention instead to the entrepreneurs of the new
industries. His book, Innovation and Entrepreneurship was
published in 1985. In times of stability, he remarked,
organizations need to do things better. In changing times,
however, we need to do things differently. It is a jaunty book,
with chapter titles like "Hit Them Where They Ain't". "But aren't
new ideas risky?" he asks, "Of course innovation is risky" he
answers "All economic activity is by definition high risk. And
defending yesterday - that is, not innovating - is far more risky
than making tomorrow."
All very true but the entrepreneurial society has turned out to be
great for those who can do it and pretty awful for those who
needed the security of a large organization and have found it
hard to survive without it. We have begun to see the rise of a
new apartheid society, divided between the rich and the poor. To
counter this, Drucker has always argued for a strong non-
The Handy Guide to the Gurus of Management
© BBC English/Charles Handy
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economic sector to make this inequality more tolerable. In his
later years he has done much to boost the role of the non-profit
organizations, or what he calls the 'social sector'. They, not
government, he believes, are best able to deal with the social
problems that a competitive capitalism throws up.
Peter Drucker's work has always moved with the times, or, more
accurately, has usually gone ahead of them. But there has
always been a consistent thread. Asked what effect he thought
his work had had he replied "… that management is so much
more than exercising rank and privilege, that it is so much more
than making deals. Management affects people and their lives."
In the next talk I will be discussing another man who puts people
first - Tom Peters.
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