CONCLUSION

INTERVIEW: MANAGING IN A POST-CAPITALIST SOCIETY

An Interview with Industry Week
Conducted by Tom Brown

One of the downsides of what passes as contemporary management thinking is that too many managers venerate “newness” and nothing else. The latest-fad authors, whether there’s substance to their claims or not, too often become the hot ticket for a month or two and then fade. But then there’s Peter Drucker. He wrote his first book, The End of Economic Man, in 1937—and in more than half a century, the steady stream of rock-solid management books that he has written are, in and of themselves, a complete management library. To meet him in his neighborly California home, to see him most comfortable in sport shirt and casual walking shoes, to hear him cite facts, figures, names, and anecdotes without strain, and to note that he shares his thinking with courtesy and good humor—this is the Peter Drucker that still remains in many ways hidden from even his most avid followers. If there ever was a master of management, then Peter Drucker is the genuine article.

Q: Peter, let me start this interview at a strange place—at the last chapter of your book, in which you discuss “the educated person.” Just how educated are most of us, in terms of being prepared to deal with the society and the workplace of the future?

A: You know, we have a very peculiar situation. Young people, when they are in school, are extremely excited by the humanities, even the most traditional subjects. And five years after graduation, they will reject them, basically, and become totally vocational in their orientation. This imbalance isn’t healthy in a long-range sense. As I look at our executive-management people who started out 20 or 30 years ago, I thought that these just-turned-45-or-50-year-old managers would ultimately come back to their schools and say, “Now we need to understand a little bit about ourselves and about life!” But the postgraduate education of our managers, from this perspective, has been a total flop.

Q: A flop?

A: Almost a total fizzle. But more and more are coming back, and they always want to come back to vocational or their professional depth. They start to see the humanities or the world of history as a way to reflect on their business experiences and to judge how they might have thought or acted differently, to look at their lives from whole new perspectives.

Q: What does this mean, that too many of us blur the world of work and the world of “life”?

A: It’s deeper than just that. For most of history, earning a living was something you had to do because, after all, you had to eat. Life did not have that much leisure at all, in our sense of the word. Now, many people allow their work to consume their lives totally: that’s what they enjoy. But in the past for people to admit that they enjoyed their work was simply—I wouldn’t say it wasn’t done—it wasn’t expected . . . The idea that your work was supposed to be meaningful was not a topic of discussion in the past. That’s much different from today and even more different from the world of the future. Today more and more people simply expect and demand that their work and their jobs should be meaningful. I don’t think it would ever have occurred to most people a hundred years ago.

Q: So this, of course, has management and business implications, no?

A: I think the growth industry in this country and the world will soon be continuing education of adults. Nothing else is growing as fast, whether you are talking physicians, or engineers, or dentists. This is happening in part because things are changing so fast in every field of every business or occupation.

Let me personalize this for you. There’s a young man I know—at least he’s a young man to me; he’s in his forties—he’s probably the leading radiologist on the East Coast. I’ve known him since he was a child. He heads up the radiology, now “imaging,” department at a major medical school. I was heading to the East Coast to do some speaking, so I called him up, to arrange a get-together. His response: “Peter, I am sorry. I’ll be out of town that week. I’m going to Minnesota for a course.” And I asked, “What are you teaching?” And he said, “Peter, I’m not teaching. I’m going for a week to study new aspects in ultrasound technology. You know, I should have gone to study this last year, but I had some surgery, and I couldn’t go. Now I’m way behind.” And so I think that the educated person of the future is somebody who realizes they need to continue to learn. That is a new definition, and it is going to change the world we live and work in.

Q: That brings me to the management implications. I had the feeling in your book that you felt that a lot of companies forced people, or encouraged people, to be too narrowly focused.

A: Not just companies. Almost the only organization that is different is the military. Check it out, and you’ll see that practically all the senior military people have been back to school numerous times. Now when they go to the command and general staff school, that’s very narrow. But when the Air Force or Army sends them to the university to get their master’s or Ph.D., then they’ve pushed them to be more broad, to get some new perspectives.

Q: So how does a company broaden its managers?

A: A good many companies today are encouraging their people to work in the community with nonprofit organizations, which is perhaps the best educational experience I could advise for a thirty-five-year-old manager.

Q: Peter, I feel that I’m almost grasping the significance of what you’re driving at. Your book extols how the shrinking world will increasingly be the reality for everyone in business. Are you saying that we need to learn more about how the world works?

A: One hundred years ago, people did not travel as much, but many talked more to each other about the nature of being human and about life. I can’t explain to my children or my grandchildren, in a way that they can appreciate, that when I was growing up, my father had a dinner party every Monday. There were often economists, ranking civil servants, even a major international lawyer. And about every week there were other dinners when my parents would invite medical people. My mother and father were very interested in mathematics and philosophy—so they invited folks to dinner from these fields once a month. This is unthinkable today.

Q: The reason that your words are so important is that your book makes many forceful points about the increasing importance of knowledge as a commodity in and of itself. You say that “knowledge is the only meaningful resource today.” You also state that “knowledge employees cannot, in effect, be supervised.” Will managers be needed in the future?

A: Managers will still be needed. But fewer will be needed than we see today. A lot of people who now have the title manager don’t manage a damn thing. We have all these corporate layers for a variety of reasons. One is that when big organizations came into existence, the only model we had was the army. The Prussian army was at that time at the peak of its renown, right after 1870, and—like all armies—they had to have a lot of redundancy. So corporations built in a lot of redundancy. No one under sixty can possibly imagine how denuded we were of people after World War II. As the economy began to expand right after the war, you needed people and you had none, because the baby boomers didn’t join the workforce until twenty-five years later. And so the available young people had to be promoted very fast. Before 1929 you didn’t become a full professor anyplace until you were fifty. When I first taught in a business school, enrollments were exploding: for five years, we doubled each year. When I joined it in 1949, it had 600 students. When I left, it had 6,500. And it reached that in ten years!

During this time, I once studied the management of a bank, at one point reporting to the chief executive officer the average age of the bank’s senior managers. “Your vice presidents,” I said, “have fewer years of age than your predecessor’s vice presidents had years of seniority.” It traditionally took thirty years to become a vice president at a bank. Traditionally, you could come into a bank during this tough time, say at age twenty-one, and if you were very, very, very good, you became an assistant vice president in your mid-forties. Then suddenly, because of manpower shortages, you had twenty-six-year-old vice presidents. You had to! And we made jobs very small.

There will, to be sure, be less of a need for this many levels of management and for this many managers in the future. The nature of work—and of workers—is such that oversupervision can become a drag on the productivity of the firm. But as I say in the book, management is needed in all modern organizations; it’s a generic function of all organizations, whatever their specific mission. And you could say that management is the generic organ of the knowledge society.

Q: Yet I noted the importance you attached to teams in your book—and how they can manage themselves. It is one of the most powerful and useful parts of your book.

A: A team is one of the most difficult things to run. Look, I’ve done a lot of work with baseball teams. They are very peculiar organizations. They are among the most difficult things to run. Very few coaches do a good job, precisely because you are dealing with a team, but your best pitcher is either a prima donna or he’s no good. In baseball, average pitchers need not apply.

In corporations, you are also often dealing with prima donnas, yet it is a team where people often don’t perceive that they have to work together. Think of most any design team you know.

I happen to know Toyota quite well. A couple of years ago, I asked one of their senior executives, just retired, “How long did it take you before your design team performed well?” He laughed and said, “In the first place, it doesn’t perform yet. And in the second place, we began in 1950.” Donald Petersen of Ford started in the early seventies and retired in the mid-eighties; he worked very hard to get teams going, but you hear constant complaints at Ford that their teams don’t work.

It takes a really superb manager to build that kind of team where people really work together and adjust and take their cues from the others and move ahead as a unit. That’s not easy. That takes time and nerve and a very clear mission and a very skillful leader . . . perhaps “skillful” isn’t the right word. You need a very focused, a very clear kind of leadership. So what’s needed in the future may not be “a manager” in the typical sense. Many executives I meet are totally baffled by what I’m talking about. They don’t know how to build a team. And not because they don’t try it, but because it’s got to be built. You manage to build a team, and yet you work each day with individuals.

Q: Peter, the time when I have seen managers get the most bothered by your writing is when you talk about the move to knowledge work as part of “a knowledge society,” and they say—perhaps without reading you closely—“Does Drucker believe we in the United States won’t manufacture things anymore, that our economy will be solid enough without a manufacturing base?” How do you answer them?

A: That’s nonsense. Look, most people believe that American manufacturing has been in decline. There isn’t the slightest reason for that belief. Manufacturing has grown as fast as the economy, that is, very fast. It has expanded two- and-a-half times in the last, well, since the late sixties—the last twenty, twenty-five years. Same as GNP. But people still identify manufacturing production with manufacturing and blue-collar employment. Big mistake.

Q: Explain, please.

A: Blue-collar employment has grown less fast than manufacturing volume since 1900, which nobody seems to know, even though it’s in every statistical yearbook. It has been declining: the unit of blue-collar labor needed to make an additional unit of manufacturing has been going down at 1 percent compounded for more than ninety years—for almost a century!

Manufacturing production has been going up steadily and shows every sign of continuing to grow, and the share of manufacturing in GNP has remained steady since about 1890—for one hundred years—between 21 percent and 23 percent. The entire growth of services is at the expense of agriculture. Agriculture in 1900 was still more than 50 percent; it is now 3 percent. Manufacturing has remained constant. But blue-collar employment—not total employment—has come down and will continue to go down. We are not at the bottom yet, though we are getting there. We’re down to 18 percent. It’ll bottom out at around 10 percent or 11 percent, which doesn’t mean that you have another cut of 50 percent, because manufacturing production is steadily growing. But you have another cut of maybe 2 percent to 4 percent of the present force. But this trend represents an enormous shift.

Q: What caused the shift?

A: There are two or three key things we could talk about. Let me talk about the biggest single factor: the emergence of new manufacturing industries that are not blue- collar labor-intensive, but knowledge-intensive!

Q: So it’s knowledge in the form of . . .

A: Reengineering! It’s the steady reengineering of the manufacturing process. Most people think of automation as the reason for the lower demand for labor; automation is almost irrelevant. Take, for example, making blue jeans. That’s a sewing operation. Even thirty years ago, blue jeans came in three sizes—that was it—and in one color and in one style.

Today, blue jeans come in about sixteen sizes and twice as many styles. But the process has been organized so that the burden of adjustment is not at the beginning of the process, but at the end. It’s at the very end: you go right through to the final sewing stage with one length, one width, and maybe one color. The burden of adjustment to styles and sizes is all at the end, the culmination of a continuous and uniform process. It costs a little extra cloth to do it this way, but you basically have a flow process in which practically all the work can be programmed. It’s not machine work; there’s still a lot of handwork, but it is programmed and very well engineered. And so the labor needed is probably one-fifth of what you had even twenty years ago, but not just because they’ve automated anything. We have cut cloth by machine for sixty years; this is nothing very new. It’s the reengineering.

Q: That doesn’t sound all that radical.

A: It’s not. Any good engineer was probably taught to approach production this way since 1940. But the last ones to actually do it will probably be the automobile manufacturers, because they had the fantastically efficient system based on a minimum number of models. Once you have locked into a model for the year, you didn’t do anything to it. Well, that’s gone. So they have to relearn the process. The Japanese have led the way, but there’s still more to be learned.

Q: So knowledge is absolutely key.

A: It’s as I say in the book: A country that has the knowledge workers to design products and to market them will have no difficulty getting those products made at low cost and high quality. But narrow-mindedness and narrow perspectives are not going to make any business in any country more competitive in the future.

Q: I was amazed at how I misunderstood F. W. Taylor, the pioneer business thinker of the early 1900s. You have given me a new appreciation for him. Do you think, given your awesome stretch of books, that you have been understood?

A: I think I have been understood in different ways in different parts of the world. For example, in Japan people seem to note that I made businesses and managers much more aware of the need to understand marketing in the truest sense: you have to let the market drive your business; you have to listen to customers and heed their wants and needs.

The Japanese also seem to appreciate my words on pricecontrolled costing: that you have to design products to the price that the marketplace is willing to pay.

I also believe the Japanese heeded first and best my point of view that people must be viewed as your colleagues and one of your prime resources. It is only through such respect of the workers that true productivity is achieved.

And, lastly, the Japanese seemed to take to heart that there really is such a thing as a world economy and that trying to sell only within your national borders is provincialism when it comes to business.

Q: How about Europe?

A: I think they see me as a pioneer of the counterculture. During modern times, most of European management (and Europe is, after all, where my own roots are) had what I would call a “Krupp” mentality, where the manager projects the attitude that “I own everything” and that everyone who works within a company is no more than a “helper.” I’m afraid to think how many managers of this ilk are still around, all over the world.

The problems with this attitude are many. It blocks out the kind of communication and dialogue that you need to run a business. It doesn’t allow for the possibility that lots of people need to make decisions if a business is to be dynamic. In fact, a lot of European managers were reduced to counting pencil stubs or meaningless stuff like that.

Well, European managers who have followed my books and my thinking right away saw my advocacy of management as a profession, as something that was a bit subversive, a bit revolutionary, and—in short—countercultural. In fact, in this light my book The Practice of Management was, and is, a sort of a manifesto in Europe.

Q: What about the United States?

A: My impression is that managers in the United States derived two major points from my writing and my counsel. First, they at least started to understand that people are a resource and not just a cost. I think that the most enlightened managers have started to understand what could be realized by managing people toward a desired end or goal.

Which raises the second major point that managers here seem to note about my work, that I helped them start to see management. In other words, for a long time, the impact—plus or minus—of management was invisible to most Americans. I think that many credit me with discovering the discipline and insisting that businesses take management seriously—as a profession that can make a difference in the life of the business.

I would hope that American managers—indeed, managers worldwide—continue to appreciate what I have been saying almost since day one: that management is so much more than exercising rank and privilege; it’s so much more than “making deals.” Management affects people and their lives, both in business and in many other aspects as well. The practice of management deserves our utmost attention; it deserves to be studied.

1994