Peter Drucker Shaping the Managerial Mind by John E. Flaherty

Transcription

1 Peter Drucker Shaping the Managerial Mind by John E. Flaherty Peter Drucker has been variously labeled a journalist, novelist, economist, sociologist, political theorist, philosopher and art critic. He has earned distinction in each of these professional roles, but he is most widely known as the father of modern management. For almost six decades, Peter Drucker's writings, lectures and consulting have created a legacy of scholarship for business students and an unending source of knowledge and inspiration for business practitioners. Indeed, to this day, Drucker is still the most widely read and influential thinker on business and management. While there have been several books about Peter Drucker and his life, none are as impressive as the new one by well-known and widely respected author John E. Flaherty, entitled Peter Drucker: Shaping the Managerial Mind. John Flaherty is a professor at New York's Pace University and has been a close friend of Drucker's for nearly four decades. Over the years, Flaherty has followed and kept notes on the material from Drucker's lectures, books, articles, conversations and correspondence; many of which have now found their way into Shaping the Managerial Mind. The only business book to focus exclusively on Peter Drucker's management principles, Shaping the Managerial Mind captures Drucker's fundamental theories and shows how they are still highly relevant for today's practitioners. For those new to Peter Drucker, this essential compendium provides a crash course on his most profound discoveries on subjects such as strategic planning, change management and executive effectiveness. For those who remember Drucker from school, Flaherty's book offers deeper insight into some of the great thinker's more novel and far-reaching ideas. Filled with humorous anecdotes and useful checklists of key lessons, Shaping the Managerial Mind offers a lifetime of wisdom and experience for managers and business students everywhere. Overview of the Book Shaping the Managerial Mind is neatly divided into three sections. Part One addresses Drucker's formative years, because, after all, one's childhood does play an important role in shaping one's ideas. After a chronological discussion of Drucker's early books, Flaherty ends this section with a detailed examination of The Practice of Management, one of Drucker's most widely read books and the work that established the framework of his managerial theory. Part Two examines Drucker's views on strategy and entrepreneurship. It focuses 1 The Business Source All Rights Reserved

2 on what Drucker describes as the two central tasks of management: (1) Helping workers to achieve and (2) Moving capital from less to more productive areas. In the final section of the book, Flaherty discusses Drucker's thoughts on the importance of leadership and the ethical dimensions of entrepreneurship. Supplementing this discussion, Flaherty also refers to Drucker's writings on such topics as executive time management, communications and decision-making. The Six Major Themes of Peter Drucker's Work Rather than presenting a chaotic "laundry list" of themes in Shaping the Managerial Mind, Flaherty has elected to analyze only those that permeate and penetrate the entire body of Drucker's writings (in total, over 20 major publications). This constitutes six interacting themes that, in Flaherty's view, provide the "intellectual cement" that binds together Drucker's managerial thought. They are (1) the systems approach, (2) continuity and change, (3) the challenge of productivity, (4) the role of the practitioner, (5) the moral dimension, and (6) the organization of ignorance. Each shall be discussed in turn. The Systems Approach Before Drucker embarked on the study of management, there had been many successful achievements by individual business figures who had no systematic approach to the discipline as a whole. Drucker's primary innovation was in combining the major business survival components (profitability, marketing, human resources and public responsibility) into a single, coherent paradigm. In Drucker's view, corporate survival required that each business function contribute at a minimum level of performance. The role of corporate management, therefore, was simply to ensure that this occurred. Included in Drucker's conception of corporate management are tasks such as providing the company with a purposeful mission statement, organizing people and delegating assignments and recognizing that new tools and techniques are only means, never ends. Once Drucker singled out the "creation and satisfaction of the customer" as the primary goal of corporate activity (yes, that was Drucker's idea), he insisted that no firm, not even a monopoly, has complete control over the consumer. Drucker stressed that no product or service had any value until it found a customer. For example, quality was not determined by how difficult or expensive it was to make a product. Value in his mind constituted only one thing - how much the customer was willing to pay for the product. "What is our business is not determined by the producer but by the consumer," wrote Drucker in "It is not defined by the company's name, statutes or articles of incorporation but rather by the want the customer satisfies when he buys a product or service. The question can therefore only be answered by looking at the business from the outside (as an entire system), from the point of 2 The Business Source All Rights Reserved

3 view of the customer and the market." Continuity and Change The interaction of continuity and change was the topic of Drucker's first major academic work. As described more fully in Chapter Two of Flaherty's book, this piece advanced the notion that progress involves reconciling the legitimate claims of the past with the needs of the future. Based on the assumption that knowledge becomes obsolete quickly, Drucker's conception of progress rested on the notion that a business had to be managed simultaneously but differently along three key dimensions: the traditional, transitional and transformational. The traditional focuses on managing better what is already known, the transitional concentrates on adapting to new opportunities in the environment and the transformational seeks to create an entirely new business direction through purposeful innovation. On this basis, the relationship between continuity and change forms the basis for Drucker's theories of strategic planning and his focus on the entrepreneurial process. The Challenge of Productivity Born in the first decade of the Twentieth Century, Peter Drucker witnessed three major historical models of productivity. Prior to World War One, societies were overwhelmingly agricultural and mirrored a technology based primarily on muscle. After the war, he observed a social and economic transformation to an advanced industrial system based on "moving people and making things." Then, following World War Two, Drucker was the first to identify the transition to the knowledge society. In this new era, the traditional physical features of land, labor and capital have become economically secondary to the invisible mental capital of information, now the major business resource. It has been Drucker's contention, however, that the international economic system has achieved, after decades of effort, only marginal gains from the new technological tools and techniques. He has asserted, and Flaherty has documented, that the main reason full productivity potential has not been achieved by the new technology has been management's focus on improving what is already known rather than concentrating on new and different challenges. For example, Drucker has cited the recent strategic reengineering policy of downsizing as a symptom of what he calls the "productivity malaise." He recognizes that some downsizing was needed to meet the realities of global competition, but he has pointed out that too many companies have made the fatal mistake of performing amputation before making a diagnosis. To this day, Drucker continues to maintain that real productivity will never be realized until managers recognize that the largest asset in a business is not the tangible physical capital but the invisible knowledge resources. 3 The Business Source All Rights Reserved

4 Role of the Practitioner According to Flaherty, a common emphasis in all Drucker's writings is that management research and writing ought to contribute to the practitioner's results. Drucker learned early in his consulting career that if an intellectual concept failed to meet this standard of producing positive performance, it was simply raw and useless information. Of course, Drucker's focus on knowledge for action did not heighten his popularity among his fellow university professors. Yet he continued to believe that subjects that could be mastered by experience should not be taught in school. This explains why, according to Flaherty, Drucker always gave more credence to experience than to credentials. In fact, he seriously questioned the value of a Ph.D. and other advanced degrees in preparing for the world of work. Philosophically, Drucker has long held the assumption that the primary mission of any business school is to serve the needs of its clients, the practitioners. Unfortunately, when examining the world's "top" business schools, he found that most have not established relevant feedback and have contributed neither wisdom nor experience to people confronting difficult business realties. Because of these deficiencies, Drucker has asserted on many occasions that business schools require drastic changes in two of their educational approaches. First, they need to recognize the reality that, at present, it is possible to teach only concepts and not genuine application. Second, they need to make their major academic commitment one of helping students in "learning how to learn." Drucker has also suggested that business programs postpone entry into college for five years so that students can gain practical experience on the job; encourage part-time evening class attendance in conjunction with full-time employment and increase the number of professors with real life experience. Moral Dimension Drucker has examined the moral dimension of management from the angle of individual responsibility. He thinks it extremely dangerous for an institution to subscribe exclusively to the economic value of earnings per share and ignore its obligation to employees, its need for innovation and community accountability. According to Drucker, allowing the stock market to decide the destiny of your business is tantamount to setting yourself up for failure in the long-run. What Flaherty claims has irritated Drucker most about modern corporate capitalism is the "obscene" salaries and perks that top managers have bestowed upon themselves without any regard to ethical performance criteria. It also troubles him that, over the years, corporations have demanded excessive loyalty from their employees to the point that they have been deprived of private lives of their own. 4 The Business Source All Rights Reserved

5 He believes, as many others do, that making a living and having a life are becoming increasingly irreconcilable. Drucker refuses to predict the outcome of the current situation, but he is certain that many businesses will pay a heavy price for their shortsightedness. Organization of Ignorance Drucker frequently remarked to his friend John Flaherty that Organizing Ignorance was the one book that he had often started but never quite finished. This is a reminder that although the body of his work on management is substantial, it represents only one strand of his life's work. Moreover, when one considers Drucker's fundamental belief that the environment outside the business is the source of business results and opportunities, one conclusion Flaherty cannot help but draw is that there is no way of isolating the study of management from other academic disciplines. Studying Drucker's managerial thought, as Flaherty has, will not produce the pragmatic or the predictable, but it does provide a perspective for understanding the restraints of both knowledge and ignorance. He has contended that given the unprecedented speed of change and heightened complexity of events, every advance in knowledge is now accompanied by a similar increase in ignorance. Consequently, ignorance will always outpace knowledge in the analysis of problems because there is always so much more of it. The key to dealing with this problem, he says, is to identify the future that has already happened but whose real impact has yet to be felt. Read that last line again, it's important. Conclusion It is no exaggeration to say that Peter Drucker's name has become synonymous with the theory and practice of management. It follows, then, that by developing a basic understanding of Drucker's career, we will be able to tap into a fertile source of knowledge and inspiration to guide us in our own business ventures and our lives. By blending an analytical capacity for separating "the wheat from the chaff," Drucker produced a profusion of managerial concepts and ideas. If he did not himself originate most of the fundamental principles of modern management, he certainly nurtured their beginnings. In fact, it is difficult to identify a single business concept to which he has not made a contribution. For accountable executives of business and other social organizations, Peter Drucker: Shaping the Managerial Mind offers a detailed frame of reference for meeting the challenges of tomorrow in a competitive environment of accelerated change. To that end, John Flaherty's book is both an intellectual adventure and a practical guide to the Great Peter Drucker's management philosophy. There is no doubt that Peter Drucker: Shaping the Managerial Mind, should be in the book 5 The Business Source All Rights Reserved

6 bag of every senior manager hoping to lead change or build an effective organization. Excerpted with permission from Peter Drucker: Shaping the Managerial Mind, by John E. Flaherty. Copyright 1999 Jossey-Bass Inc., Publishers. (800) The Business Source All Rights Reserved