1305. the man who invented management

8/12/2019 1305. the Man Who Invented Management

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The Man Who Invented

Management

Why Peter Drucker's ideas still matterhttp://www.businessweek.com/magazine/content/05_48/b3961001.htm

COVER STORY PODCAST

Little more than six months ago, I was sitting within a foot of Peter F. Drucker's right ear -- the one he could still hear from -- in the living room of his modest home in Claremont, Calif.Even that close, I had to shout my questions to him, often eliciting a "What?" rather than ananswer. Yet when he absorbed my words, his mind remained vigorous even as his bodywas failing.

He had often said that at his age "one doesn't pray for a long life but for an easy death."Since then he had struggled through a series of ailments, from life-threatening abdominalcancer to a broken hip. Oversize hearing aids plugged into both ears, he had a pacemakerin his chest and needed a walker to get around his ranch home on Wellesley Drive. Over20-plus years, I often met or spoke to Drucker in the course of reporting any number ofbusiness and management stories.

On that spring morning in April, in black cotton slippers and socks that barely covered hisankles, Drucker seemed unusually frail and tired -- not at all in a mood to ponder his legacy."I'm not very introspective," he protested in his familiar guttural baritone, thick with theaccent of his native Austria. "I don't know. What I would say is I helped a few good people beeffective in doing the right things."

Let others now speak for Drucker, who died peacefully in his sleep at home on Nov. 11 atage 95, eight days shy of his 96th birthday:

"The world knows he was the greatest management thinker of the last century," JackWelch, former chairman of General Electric Co. (GE ), said after Drucker's death.

"He was the creator and inventor of modern management," said management guru TomPeters. "In the early 1950s, nobody had a tool kit to manage these incredibly complexorganizations that had gone out of control. Drucker was the first person to give us ahandbook for that."

Adds Intel Corp. (INTC ) co-founder Andrew S. Grove: "Like many philosophers, he spoke inplain language that resonated with ordinary managers. Consequently, simple statementsfrom him have influenced untold numbers of daily actions; they did mine over decades."

The story of Peter Drucker is the story of management itself. It's the story of the rise of themodern corporation and the managers who organize work. Without his analysis it's almostimpossible 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 late20th century that seemed to reward greed as easily as it did performance. Drucker wassickened by the excessive riches awarded to mediocre executives even as they slashed theranks of ordinary workers. And as he entered his 10th decade, there were some incorporations and academia who said his time had passed. Others said he grew sloppy with

the facts. Meanwhile, new generations of management gurus and pundits, many of whomgrew rich off books and speaking tours, superseded him. The doubt and disillusionment

with business that Drucker expressed in his later years caused him to turn away from thecorporation and instead offer his advice to the nonprofit sector. It seemed anacknowledgment that business and management had somehow failed him.


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But Drucker's tale is not mere history. Whether it's recognized or not, the organization andpractice of management today is derived largely from the thinking of Peter Drucker. His

teachings form a blueprint for every thinking leader (page 106). In a world of quick fixes andglib explanations, a world of fads and simplistic PowerPoint lessons, he understood that the

job of leading people and institutions is filled with complexity. He taught generations of

managers the importance of picking the best people, of focusing on opportunities and notproblems, of getting on the same side of the desk as your customer, of the need tounderstand your competitive advantages, and to continue to refine them. He believed that

talented people were the essential ingredient of every successful enterprise.

RENAISSANCE MANWell before his death, before the almost obligatory accolades poured in, Drucker hadalready become a legend, of course. He was the guru's guru, a sage, kibitzer, doyen, andgadfly 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, hehad been a true Renaissance man, a teacher of religion, philosophy, political science, andAsian 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.

After witnessing the oppression of the Nazi regime, he found great hope in the possibilitiesof the modern corporation to build communities and provide meaning for the people whoworked in them. For the next 50 years he would train his intellect on helping companies liveup to those lofty possibilities. He was always able to discern trends -- sometimes 20 yearsor more before they were visible to anyone else. "It is frustratingly difficult to cite asignificant modern management concept that was not first articulated, if not invented, byDrucker," says James O'Toole, the management author and University of SouthernCalifornia professor. "I say that with both awe and dismay." In the course of his long career,Drucker consulted for the most celebrated CEOs of his era, from Alfred P. Sloan Jr. ofGeneral Motors Corp. (GM ) to Grove of Intel.

-- It was Drucker who introduced the idea of decentralization -- in the 1940s -- whichbecame 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, notas 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, aperspective 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," asimple notion that ushered in a new marketing mind-set.

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

-- And it was Drucker again who wrote about the contribution of knowledge workers -- in the1970s -- long before anyone knew or understood how knowledge would trump raw materialas the essential capital of the New Economy.

Drucker made observation his life's work, gleaning deceptively simple ideas that oftenelicited startling results. Shortly after Welch became CEO of General Electric in 1981, forexample, he sat down with Drucker at the company's New York headquarters. Druckerposed two questions that arguably changed the course of Welch's tenure: "If you weren'talready in a business, would you enter it today?" he asked. "And if the answer is no, whatare 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 thebusiness would have to be fixed, sold, or closed. It was the core strategy that helped Welchremake GE into one of the most successful American corporations of the past 25 years.


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Drucker. "In Europe the only hope was to go back to 1913. In this country everyone lookedforward."

So did Drucker. He taught part time at Sarah Lawrence College before joining the faculty atBennington College in Vermont. He could be a difficult taskmaster. One Bennington studentrecalled that Drucker said her paper "resembled turnips sprinkled with parsley. I could

wring his fat frog-like neck," she wrote in a letter to her parents. "Unfortunately, he is a verybrilliant and famous man. He has at least taught me something."

Drucker was a professor of politics and philosophy at Bennington when he was given theopportunity to study General Motors in 1945, the first time he peeked inside thecorporation. His examination led to the publication of his groundbreaking book, Concept of

the Corporation, and his decision, in 1950, to attach himself to New York University'sGraduate School of Business. It was around this time that Drucker heard Schumpeter,

then at Harvard University, say: "I know that it is not enough to be remembered for booksand theories. One does not make a difference unless it is a difference in people's lives."

CREATING A DISCIPLINEHe took Schumpeter's advice to heart, beginning a career in consulting while continuing hislife as a teacher and writer. Drucker's most famous text, The Practice of Management,published in 1954, laid out the American corporation like a well-dissected frog in a collegelaboratory, 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, likemedicine or law. It was about getting the very best out of people. As he himself put it: "Iwrote The Practice of Management because there was no book on management. I hadbeen working for 10 years consulting and teaching, and there simply was nothing or verylittle. So I kind of sat down and wrote it, very conscious of the fact that I was laying thefoundations of a discipline."

Drucker taught at NYU for 21 years -- and his executive classes became so popular that they were held in a nearby gym where the swimming pool was drained and covered sohundreds of folding chairs could be set up. Drucker moved to California in 1971 to becomea professor of social sciences and management at Claremont Graduate School, as it wasknown then. But he was always thought to be an outsider -- a writer, not a scholar -- whowas largely ignored by the business schools. Tom Peters says he earned two advanceddegrees, including a PhD in business, without once studying Drucker or reading a singlebook written by him. Even some of Drucker's colleagues at NYU had fought againstawarding him tenure because his ideas were not the result of rigorous academic research.For years professors at the most elite business schools said they didn't bother to readDrucker because they found him superficial. And in the years before Drucker's death even

the dean of the Peter F. Drucker Graduate School of Management at Claremont said: "Thisis a brand in decline."

In the 1980s he began to have grave doubts about business and even capitalism itself. Heno longer saw the corporation as an ideal space to create community. In fact, he sawnearly the opposite: a place where self-interest had triumphed over the egalitarianprinciples he long championed. In both his writings and speeches, Drucker emerged as oneof Corporate America's most important critics. When conglomerates were the rage, hepreached against reckless mergers and acquisitions. When executives were engaged inempire-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 ofcontrol and implored boards to hold CEO compensation to no more than 20 times what therank and file made. What particularly enraged him was the tendency of corporatemanagers to reap massive earnings while firing thousands of their workers. "This is morallyand 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 toimprove American efficiency and productivity, was for Drucker "the final failure of corporatecapitalism." He then likened Wall Street traders to "Balkan peasants stealing each other'ssheep" or "pigs gorging themselves at the trough." He maintained that multimillion-dollarseverance 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


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management to collude with the raiders." At one point, Drucker was so put off by Americancorporate values that he was moved to say that, "although I believe in the free market, Ihave serious reservations about capitalism."

We tend to think of Drucker as forever old, a gnomic and mysterious elder. At least Ialways did. His speech, always slow and measured, was forever accented in that

commanding Viennese. His wisdom could not have come from anyone who was young. Soit's easy to forget his dashing youth, his long devotion to one woman and their four children(until the end, Drucker still greeted his wife of 71 years with an effusive "Hello, my darling!"),or even his deliciously self-deprecating sense of play.

During his early consulting work with DLJ, the partners flew out to California to meet withDrucker at home. After one of his famously meandering monologues, Drucker thoughteveryone needed a break.

"Well, boys," he said, "why don't we relax for a few minutes? Let's go for a swim."

The executives explained that they hadn't brought their swimming trunks.

"You don't need swimming suits because it's just men here today," replied Drucker.

"And we took off our clothes and went skinny-dipping in his pool," recalls Charles Ellis, whowas with the group.

Surely, Drucker never fit into the buttoned-down stereotype of a management consultant.He always favored bright colors: a bottle-green shirt, a knit tie, a royal blue jacket with ablue-on-blue shirt, or simply a woolen flannel shirt and tan trousers. Drucker always workedfrom a home office filled with books and classical records on shelves that groaned under

their weight. He never had a secretary and usually handled the fax machine and answered the telephone himself -- he was something of a phone addict, he admitted.

PRIVACY PREVAILS Yet Drucker also was an intensely private man, revealing little of his personal life, even inhis own autobiography, Adventures of a Bystander, the book he told me was his favorite of

them all. Not surprisingly, perhaps, the Drucker Archives at Claremont Graduate Universitycontain only one personal letter from his wife to him. Doris had clipped two images from a1950s-era newspaper, one of a handsome man in a plaid robe, fresh from a good night'ssleep, another of a couple in love, man and woman staring into each other's eyes, over alate evening snack. She glued each black-and-white image onto a flimsy piece of typingpaper and wrote the words: "I love you in the morning when things are kind of frantic. I love

you in the evening when things are more romantic." It is undated and unsigned.

It was Doris, in her own unpublished memoir, who told the story of how she once lockedDrucker in a London coal cellar to hide him from her disapproving mother. As Doris'mother turned the house upside down in a frantic search for a man she thought wassleeping with her daughter, Peter spent the better part of the night crouched in a cold,dark hole. Doris' mother had long hoped her daughter would someday marry a Rothschildor a German of high social standing. The last thing she wanted was for her to marry a light-in-the-pocket Austrian.

In his later years, as his health weakened, so did Drucker's magnetic pull. Although hemaintained a coterie of corporate followers, he increasingly turned his attention tononprofit leaders, from Frances Hesselbein of the Girl Scouts of the USA to Rick Warren,founding pastor of Saddleback Church in Lake Forest, Calif. Warren, author of ThePurpose-Driven Life, considered Drucker a mentor. "Drucker told me: 'The function ofmanagement in a church is to make the church more churchlike, not more businesslike. It's

to allow you to do what your mission is,"' Warren said. "Business was just a starting pointfrom which he had this platform to influence leaders of all different kinds."

Still, it was clear Drucker cared deeply about how he would be remembered. He tried in1990 to discredit and quash an admiring biography of quality guru Deming, whom heseemed to consider a rival. And when Professor O'Toole assessed the influence ofDrucker's landmark 1945 study on General Motors, he concluded that the guru not only


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had had no impact on GM but also became persona non grata at the company for nearlyhalf a century. "I sent it to Peter, and he spent hours going over it with me," recalls O'Toole."He was a little unhappy with it because he didn't like the conclusion. He felt he had had abig impact at GM. I thought that was either very generous of Peter or else he was kiddinghimself."

During the same period, Drucker, then 80 years old, penned a severely flawed foreword fora new edition of Alfred Sloan's My Years with General Motors. In one passage, Druckerquotes Sloan as saying that the death of his younger brother Raymond was "the greatestpersonal tragedy in my life." Raymond, however, died 17 years after Alfred. In anothersection, Drucker noted that the publication of the book had been delayed because Sloan"refused to publish as long as any of the GM people mentioned in the book was still alive. On

the day of the death of the last living person mentioned in the book, Sloan released it forpublication," wrote Drucker. In fact, Sloan generously heaped praise on 14 colleagues in

the preface of his book, and all were still alive when My Years with General Motors was firstpublished.

Whether the mistakes were a result of sloppiness or his declining intellectual power is notclear. But Drucker was no longer at the top of his game. The dean of the Drucker school,Cornelis de Kluyver, had reason to believe that Drucker's influence was on the wane -- theschool was having difficulty attracting big money from potential donors. To gain a $20million gift for its puny endowment, de Kluyver agreed in 2003 to put another name on theschool, that of Masatoshi Ito, the founder of Ito-Yokado Group, owner of 7-Eleven stores inJapan and North America. Students protested, even marching outside the dean's office

toting placards decrying the change. An ailing Drucker volunteered to speak directly to thestudents. "I consider it quite likely that three years after my death my name will be ofabsolutely no advantage," he told them. "If you can get 10 million bucks by taking my nameoff, more power to you."

In April, during our last meeting, I asked Drucker what he had been up to lately. "Not verymuch," he replied. "I have been putting things in order, slowly. I am reasonably sure that Iam not going to write another book. I just don't have the energy. My desk is a mess, and Ican't find anything."

I almost felt guilty for having asked the question, so I praised his work, the 38 books, thecountless essays and articles, the consulting gigs, his widespread influence on so many of

the world's most celebrated leaders. But he was agitated, even dismissive, of much of hisaccomplishment.

"I did my best work early on -- in the 1950s. Since then it's marginal. O.K.? What else do you have?"

I pressed the nonagenarian for more reflection, more introspection. "Look," he sighed, "I'm totally uninteresting. I'm a writer, and writers don't have interesting lives. My books, mywork, yes. That's different."

1305. the man who invented management

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