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Management as a Discipline

Peter Drucker: Timeless, Ubiquitous

A few Sundays ago, I was sitting in my home office, working on an outside writing project—a historical narrative that has nothing to do with my day job as director of the Drucker Institute. The think tank’s mission is to advance the teachings of the late Peter Drucker, the man widely hailed as “the father of modern management.”

My stack of reading this day included a 1939 article from The Nation magazine that explored a long-forgotten pension scheme, popularly known as Ham and Eggs, which failed twice at the ballot box in Depression-era California. I was breezing right along—that is, until I got to the penultimate sentence, which contained these six words: “as Peter Drucker has pointed out.” I shook my head, burst out laughing, and raced downstairs to tell my wife about my serendipitous discovery. “Geez,” I said, “this guy’s following me everywhere.”

In the weeks since, though, what has struck me as most remarkable is not that I stumbled upon Drucker in a nearly 70-year-old magazine story. It is that hardly a week passes when a major publication somewhere in the world doesn’t invoke him in the very same manner: “as Peter Drucker has said,” “as Peter Drucker has pointed out.”

The Big Idea

How many people can you name whose ideas—and ideals—were being discussed in 1939, in 1969, in 1999, and will be, undoubtedly, in 2039? Likewise, how many people can you cite whose counsel was requested and (to varying degrees) followed by both General Electric Chief Executive Jack Welch and United Farm Workers leader Cesar Chavez? How many get credit for inspiring an organization such as the Girl Scouts while also helping guide a financial giant like Edward Jones?

Drucker’s extraordinary staying power and his wide reach speak to several factors: the depth and breadth of his insights, an uncanny ability to anticipate the future, and a prose style that is as clear as mountain water.

But perhaps most of all, he remains highly relevant two years after his death at age 95 because he reminded us again and again that responsible management is not about buzzwords. It’s not about fads. Ultimately, it is not even about developing new products or fattening the bottom line (although he believed those things are important).

Rather, it is about far more fundamental tenets—a philosophy that grew directly out of Drucker’s experience as a young writer who had witnessed the rise of Nazi Germany (which in the early 1930s banned and burned the Austria native’s work).

Drucker wrote that management, at its core, “deals with people, their values, their growth and development—and this makes it a humanity. So does its concern with, and impact on, social structure and the community. Indeed, as everyone has learned who . . . has been working with managers of all kinds of institutions for long years, management is deeply involved in moral concerns—the nature of man, good, and evil.”

Every couple of weeks, this column will endeavor to tie Drucker’s teachings to events in the news. It will also, from time to time, feature the latest thinking of scholars and practitioners who have been strongly influenced by Drucker. There is no shortage of these folks around, from Procter & Gamble Chairman and Chief Executive A.G. Lafley to bestselling author Jim Collins, who has said that his book Built to Last: Successful Habits of Visionary Companies might well have been called “Drucker Was Right.”

“What Would Peter Say?”

I am neither presumptuous nor foolish enough to suggest that I can possibly write with Drucker’s prescience or perspicacity. That’s not the intent of this column. All that any of us can do is simply ask, “What would Peter say?” and then try to connect the dots between his body of work and some of the issues making headlines now: the mortgage industry meltdown, thorny questions about globalization, immigration and income inequality, the blurring of nonprofits and profit-making enterprises in the social sector, the government’s handling of a disaster like Hurricane Katrina.

Fortunately, there is a vast amount to draw from. Drucker wrote 39 books and countless articles.

He didn’t always hit the mark and was occasionally criticized for being loose with the facts. But many of the concepts that Drucker introduced in the 1940s, ’50s, ’60s, and beyond have been built into the DNA of the world’s top companies and embraced as second nature by a generation of social entrepreneurs. Among them: “There is only one valid definition of business purpose: to create a customer.” “The business enterprise has two—and only these two—basic functions: marketing and innovation.” “The shift from manual workers who do as they are being told—either by the task or by the boss—to knowledge workers who have to manage themselves profoundly challenges social structure.” “Innovation and entrepreneurship are . . . needed in society as much as in the economy, in public-service institutions as much as in businesses.”

These are but a few of his principles, and they lead to what could be called the Drucker Paradox. His imprint is everywhere, so much so that his contribution has become, in many ways, imperceptible. Yet, at the same time, there are lots of people in business, government, and the nonprofit realm who forsake his wisdom each and every day. The need for effective management and ethical leadership—the need for Peter Drucker—has never been more pressing.

September 13, 2007

Muhammad Yunus:
The Unlikely Disciple

There is no shortage of people who exemplify Peter Drucker’s principles and practices—a multitude of middle managers and top executives responsible for many millions, if not billions, of dollars in economic activity. Yet the most Drucker-like of all may well be a man who launched his enterprise with a series of transactions totaling 27 bucks.

Nobel Peace Prize winner Muhammad Yunus, who pioneered the concept of microcredit—providing the poorest of the poor with tiny loans to start their own moneymaking ventures—is promoting a new idea these days. He calls it “social business,” and in his just-released book, Creating a World Without Poverty, he contends that it promises to relegate destitution across the globe to where it belongs: inside a museum.

His notion is to foster a whole class of companies capable of competing in the marketplace but whose primary aim is to meet a clear social need, not to maximize profits.

These firms are meant to earn money. But they pay no dividends. Instead, explains Yunus, “any profit stays in the business—to finance expansion, to create products or services, and to do more good for the world.” (Microsoft Chairman Bill Gates recently shared a somewhat similar, though not identical, vision in Davos, Switzerland, with his plea for “creative capitalism.”)

And what might Drucker have made of all this?

Any business, he asserted in Management: Tasks, Responsibilities, Practices, “exists for the sake of society.” In The Effective Executive, he added: “An organization is not like an animal, an end in itself, and successful by the mere act of perpetuating the species. An organization is an organ of society and fulfills itself by the contribution it makes to the outside environment.”

No Political Boxes

This is not to say Drucker pushed for corporations to focus specifically on the needs of the indigent as Yunus has. But I think he would have greatly appreciated Yunus’ model, for it is an overt expression of Drucker’s conviction that “psychologically, geographically, culturally, and socially,” the business community must be part of the wider community.

Interestingly, it’s tough to stick Yunus in any particular political box. His Grameen Bank “supports less government . . . is committed to the free market, and promotes entrepreneurial institutions,” he pointed out. “So it must be far right.” At the same time, Grameen is “committed to social objectives” and does not advocate a system of pure laissez-faire; rather, it would like to see policy incentives that encourage “businesses to move in directions desired by society.” Yunus noted: “All these features place Grameen on the political left.”

Surely Drucker could relate, once suggesting that, as he sought out the proper balance between continuity and change in society, he could see himself “sometimes as a liberal conservative and sometimes as a conservative liberal but never as a ‘conservative conservative’ or a ‘liberal liberal.’”

Motivated by More than Dollars

Drucker, too, would have no doubt been sold on Yunus’ basic premise: People are motivated by a variety of impulses—not simply a desire to get filthy rich. The existing system, said Yunus, has “created a one-dimensional human being to play the role of business leader. . . . We’ve insulated him from the rest of life, the religious, emotional, political, and social. He is dedicated to one mission only—maximize profit.”

Drucker—whose own writing draws heavily on sociology and psychology, on history and art and religion—once remarked that his work was likewise predicated on the belief that “people are diverse, often unpredictable, always multidimensional.”

In the end, though, it is not just Yunus’ theories Drucker would have admired; above all, it’s his effectiveness. Two things are behind it.

Challenge Conventional Wisdom

The first is a willingness to punch holes in conventional wisdom. “Despite their importance,” Drucker wrote in Management Challenges for the 21st Century, “the assumptions are rarely analyzed, rarely studied, rarely challenged—indeed rarely even made explicit.”

Yunus thrives on challenging assumptions. He’s doing it now, as he tries to reframe what most people imagine a business can be. And he did it before, when he established Grameen.

Indeed, had he listened to the many reasons that offering credit to poor people was supposedly a fool’s errand, Grameen never would have grown from that first $27 in loans, made 32 years ago straight from Yunus’ pocket to 42 Bangladeshi villagers, into what it is today: a financially self-reliant bank that has given $6 billion in loans to millions of Bangladeshis, boasts a 98.6 percent repayment rate, and has put a huge dent in that nation’s level of poverty. (It also has become the centerpiece of a network of two dozen socially driven companies with interests in education, health care, apparel, telecommunications, and much more.)

Avoid Lofty Philosophy

The second factor that makes Yunus so effective is that, even though there is more than a hint of idealism in his efforts, he consciously tries “to avoid grandiloquent philosophies and . . . take a pragmatic approach.” To that end, Grameen backs its actions with sound market analysis, nurtures its employees, actively seeks out customer input, and continually improves its products and services.

This, of course, is classic Drucker. Despite “the romance of invention and innovation,” Drucker advised, “‘flashes of genius’” don’t get terribly far. What does carry a business forward is “hard, organized, purposeful work.”

See for yourself. Check out Yunus’ new book and, if you missed it, his first: Banker to the Poor. Not only are they inspirational, they are highly informational—fantastic case studies on how to manage a business the right way. Which is to say, the Drucker way.

January 31, 2008

Wide-Angle Thinking

Charles Handy has been called “the Peter Drucker of Britain.” But in a sense, pinning Handy to a particular place misses the whole point. In the last year alone, this venerated thinker and writer on organizational behavior and society has left his home near London to spend time in Hong Kong, China, Romania, Spain, Italy, Denmark, Sweden, and India. He’s also made three trips to the U.S., where he just wrapped up a five-week stay as a scholar-in-residence at Claremont Graduate University’s Drucker School of Management and the Drucker Institute, of which I am the director.

It was there that I had the pleasure and privilege of watching Handy up close and discovering a couple of lessons that all of us would be wise to heed—for ourselves as well as for the institutions we manage.

Handy, as you might imagine, was a magnet during his stay. All sorts of people—students, faculty, and members of the larger community—were eager to pick his brain. And he gave generously, whether in the campus lecture hall, in small meetings, in countless one-on-one sessions, or during the weekly commentaries he crafted for public radio’s Marketplace while in Southern California.

The Art of Listening

But what I noticed most is that Handy didn’t always command the spotlight. Often he’d retreat a bit and discreetly survey the interaction of others around him, playing the role of bystander, just as Drucker loved to do. And when Handy did find himself at the center of a conversation, he didn’t just answer questions; he asked them—lots and lots of them.

Surely, Drucker would have applauded. “Too many think they are wonderful because they talk well,” he once pointed out. “They don’t realize that being wonderful with people means listening well.”

Yet it wasn’t just Handy’s ability to open his eyes and ears so wide that struck me. It was that he tilted them in as many directions as possible—toward academics, corporate executives, those active in the social sector, and, most avidly, toward artists of all kinds.

“You’ve got to get out of your own box,” says the 75-year-old, whose newly published autobiography, Myself and Other More Important Matters, traces his career as a Shell executive, cofounder of the London Business School, official of the Church of England, BBC broadcaster, and bestselling author. “Otherwise, you stop being creative.”

Broadening Perspectives

To this end, Handy and his wife, Liz, a photographer with whom he often works, abide by a handful of rules when they travel. One is that they use public transportation wherever possible; it serves as a great window into everyday culture. Another is that they always arrange to gather with a group of a half-dozen or so thirtysomethings so that they can get their take on the local scene and, says Liz, “hear their dreams.”

It’s clear why soaking in civilization this way would be of interest to a self-described “social philosopher” such as Handy. It should also be clear why all of us, on a personal level, would benefit from seeing more of the world. What may be less obvious, though, is the need for institutions—whether public, private, or philanthropic—to broaden their perspectives as well.

The first step, of course, is for those running the enterprise to emerge from behind their desks and observe. There are no shortcuts. As Drucker noted more than 40 years ago, “Decision makers need organized information for feedback. They need reports and figures. But unless they build their feedback around direct exposure to reality—unless they discipline themselves to go out and look—they condemn themselves to a sterile dogmatism.”

Looking Beyond Traditional Boundaries

The next step is to be smart about where to look. As Drucker recognized, this often requires peering into less-than-familiar arenas. Through the 1800s and the first half of the 1900s, he wrote in Management Challenges for the 21st Century, “it could be taken for granted that technologies outside one’s own industry had no, or at least only minimal, impact on the industry. Now the assumption to start with is that the technologies that are likely to have the greatest impact on a company and an industry are technologies outside its own field.”

Handy goes even further, advising that companies should roam far beyond their traditional bounds to better understand not just technology but myriad practices and processes. Say, for instance, a manufacturer needs to tap a team of top talent for a project that will be disbanded after a relatively brief period. Handy’s suggestion: Arrange a visit to one of the Hollywood studios. They manage high-end, short-term work all the time.

Get Out There and Listen

Similarly, Handy says, an outfit such as Penguin Books might well be positioned to teach a high-tech company how to outsource intellectual capital more effectively. After all, a publisher’s entire business rests on this model. There are insights to be gleaned, as well, from peeking inside hospitals, theaters, and arts organizations. “Too many companies benchmark themselves against others in their industry,” says Handy. “They should be comparing themselves to totally different organizations.”

Gaining access, he adds, is not as hard as you might suspect: “If you’re not a direct competitor, companies love to tell you how successful they are—and how they do it.”

All you have to do is get out there and listen.

February 28, 2008

Dusting Off a Managing Tome

Of all of Peter Drucker’s achievements—advising captains of industry and heads of state, coining the term “knowledge worker,” winning the Presidential Medal of Freedom—the most remarkable may be this: In 1974, his 800-plus-page tome, Management: Tasks, Responsibilities, Practices, vaulted past The Joy of Sex on the national best seller list.

Last week, HarperCollins released a revised edition of Management. And regardless of whether it winds up eclipsing Bonk, the latest hot-selling volume on the physiology and psychology of sex, I can tell you this: It deserves a spot on every manager’s shelf, much as the Physicians’ Desk Reference can be found in every doctor’s office.

The new edition of Management—slimmed down, though still not exactly svelte at nearly 600 pages—contains updated facts and figures and examples. But more important, it has been tailored to reflect the evolution in Drucker’s thinking and writing in the three decades between the book’s initial publication and his death in 2005.

Devoted Protégé

The person who filled in the gaps is Joseph Maciariello, a professor and longtime colleague of Drucker’s at Claremont Graduate University and the academic director at the Drucker Institute, which I run. As Maciariello describes it, the project was a true labor of love, with an emphasis on the word “labor.”

“This was Drucker’s magnum opus,” he says. “But even though I just tagged along, it is also the biggest thing I’ve ever done.”

Maciariello first happened upon Drucker’s work in the early 1960s when he was helping to design management systems at Hamilton Standard, the old aerospace giant. After a few trips to the corporate library to investigate what had been written about the general discipline of management, Maciariello discovered that it was pretty much a canon of one: Drucker’s 1954 landmark, The Practice of Management, was about the only thing available on the topic.

Maciariello later went on to study economics at New York University. Drucker was teaching there at the time, “but I couldn’t get into his classes,” Maciariello recalls. “My schedule didn’t work out.”

In 1973, Maciariello received his doctorate. That same year, Management was published. Maciariello’s wife, remembering his admiration for The Practice of Management, bought him the new book. He devoured it.

“Drucker was trying to bring The Practice of Management up to date,” Maciariello says. “But I began to see that in spirit, it was the same.” What resonated in particular for Maciariello was Drucker’s “deep, deep concern for the human being.”

A Couple of Epiphanies

In another book, The Ecological Vision: Reflections on the American Condition, Drucker recounts being at a 1934 lecture in Cambridge delivered by John Maynard Keynes. “I suddenly realized,” he wrote, “that Keynes and all the brilliant economics students in the room were interested in the behavior of commodities while I was interested in the behavior of people.”

Reading Management, Maciariello had a similar epiphany. It struck him that the subject he had been focusing on—economics—“lacked flesh.”

“I felt like I was dying in economics,” Maciariello says. “This is not to disparage it. Peter used a lot of economics. . . . But his work was really about bringing out the best in people. This was powerful stuff. It was inspired.”

In 1979, Maciariello came to teach in Claremont, where Drucker was by then on the faculty. The two became friends, and over the years they began to collaborate. In the late 1990s, when Drucker started to cut back on his hours in the classroom, Maciariello developed a Drucker on Management course. They later worked together on two books, The Daily Drucker: 366 Days of Insight and Motivation for Getting the Right Things Done and The Effective Executive in Action: A Journal for Getting the Right Things Done.

It was during the editing of the latter—about six months before Drucker passed away—that Maciariello broached an idea he had long been contemplating: How about revising Management?

Drucker didn’t hold back. “That,” he said in his thick Austrian accent, “is going to be a lot of work.”

Road to Redux

And so it was. Just scrubbing the facts in Management was an arduous process. Despite Drucker’s reputation for being loose with them—“I use anecdotes to make a point, not to write history,” he once said—Maciariello found that he was accurate at least 95 percent of the time.

More daunting, Maciariello says, was trying to understand, in a careful and considered way, the major themes Drucker had concentrated on in the years after Management had first come out. During a nine-month sabbatical, Maciariello pored over the more than 20 books and hundreds of articles that Drucker had written since Management’s debut.

The result is that the redux edition weaves together a lot of original content with Drucker’s later writings on innovation and entrepreneur-ship, the imperative for each individual to “manage oneself,” the crucial role of the nonprofit sector, and, especially, the significance of “knowledge work.” Tellingly, Chapter 4 of the new book is titled “Knowledge Is All.”

An “Overwhelming Sense of Responsibility”

From the opening words of Chapter 1—“Management may be the most important innovation of [the twentieth] century . . .”—the book blends theory and practical application, reminding us that effectiveness is a skill that can be learned and that the health of society depends upon our institutions functioning ably.

“Organizations are far from perfect,” Drucker concluded. “As every manager knows, they are very difficult; full of frustration, tension, and friction; clumsy and unwieldy. But they are the only tools we have to accomplish such social purposes as economic production and distribution, health care, governance, and education. And there is not the slightest reason to expect society to be willing to do without these services that only performing institutions can provide. Indeed, there is every reason to expect society to demand more performance from all its institutions and to become more dependent upon their performance.”

In the end, says the 66-year-old Maciariello, the hardest part of revamping Management was “the overwhelming sense of responsibility, bordering on fear, that I not do harm to Drucker’s legacy.”

On this, Maciariello has more than met his objective. He has not only protected Drucker’s legacy, he has enhanced it for a new generation.

April 24, 2008

AIG and Drucker’s Glimpse
at a Very Dark Place

Soon after I was hired as the director of the Drucker Institute a couple of years ago, one of my board members passed along a short piece that he described as “the keystone” of Peter Drucker’s work and told me to pay close attention to what it said.

It was the preface to the 1973 edition of Management: Tasks, Responsibilities, Practices. Drucker entitled the composition “The Alternative to Tyranny.”

I read it over a couple of times and then zipped off a note to Bob Buford—a cable-TV pioneer, social entrepreneur, author, and a dear friend of Drucker’s—thanking him for having shared the essay with me.

But the truth is, I didn’t really appreciate what it was all about—at least not until this week, when the firestorm erupted over AIG.

Trusting “Large Organizations”

“Our society has become, within an incredibly short 50 years, a society of institutions,” Drucker wrote. “It has become a pluralist society in which every major social task has been entrusted to large organizations—from producing economic goods and services to health care, from social security and welfare to education, from the search for new knowledge to the protection of the natural environment.

“To make our institutions perform responsibly, autonomously, and on a high level of achievement is . . . the only safeguard of freedom and dignity” in a society like ours, Drucker added. “But it is managers and management that make institutions perform. Performing, responsible management is the alternative to tyranny and our only protection against it.”

Frankly, this last passage had always struck me as more than a little over the top. Sitting in sunny Southern California, the prospect of totalitarianism seemed awfully remote. I couldn’t even begin to fathom how we’d ever slip into such a state.

But then AIG, the insurance giant bailed out by Uncle Sam, decided to pay out $165 million in bonuses to many of the same employees who’d wrecked the company’s fortunes in the first place and nearly undermined the nation’s financial system in the process. Suddenly, Drucker’s words made sense.

“Appalled by the Greed”

Let me be clear: I’m not at all suggesting that we’re about to fall into the grip of some twenty-first-century strain of Stalinism. Let me be equally clear that what AIG did—making “all kinds of unconscionable bets” on the housing bubble, as Fed Chairman Ben Bernanke has put it, and doling out these outrageous “retention payments”—should not be countenanced in any way.

And I am confident that Drucker would have felt the same. “I am appalled by the greed of today’s executive,” he declared in 2000, referring to those more interested in generating short-term gains than building sustainable businesses.

Yet Drucker, I think, would not only be disgusted by AIG’s conduct; he would also cast a nervous eye at some of the reaction to it.

Indeed, the fact that so many have been clamoring for the government to abrogate unilaterally the contracts covering those AIG bonuses (maddening as they are); that Representative Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, asserted we should “forget about the legal matter here for a second”; that armed guards have been posted at AIG’s offices in the face of death threats; that a U.S. senator (Charles Grassey—R-Iowa) has called on AIG executives to “resign or go commit suicide”—it all goes to the heart of what Drucker was getting at. When managers are irresponsible, when major institutions fall apart, we as a society leave ourselves open to unforeseen and sometimes extreme responses.

“Crisis of Belief”

Drucker’s unease grew straight out of his early experiences in Europe, where he watched the Nazis rise to power. His first major book, 1939’s The End of Economic Man, explored how “a society built around the market (the major social institution of the nineteenth century) . . . had failed, and that this had ‘destroyed the belief in capitalism as a social system,’” Drucker’s biographer, Jack Beatty, has noted. “The Great War and Depression made this crisis of belief a reality for millions.”

Wrote Drucker: “These catastrophes broke through the everyday routine which makes men accept existing forms, institutions, and tenets as unalterable laws. They suddenly exposed the vacuum behind the façade of society.”

Looking for a miracle, the masses turned toward what Drucker termed the “abracadabra of fascism.”

The U.S., as I said, is certainly in no real danger of sliding into dictatorship. But this week, we got the tiniest glimpse of what Drucker was writing about in that preface to Management—and a warning about what could happen if we keep going down the road we’re on.

If nothing else, we’d be fools to take for granted that our way of life will always be here, undisturbed. “We are learning very fast,” Drucker said in a far-seeing 1996 interview, “that the belief that a free market is all it takes to have a functioning society . . . is pure delusion.”

For me, the AIG debacle has made it plain: As our managers go, as our institutions go, so goes the health of our economy—and maybe our democracy, too.

March 20, 2009

Management as a Liberal Art

I’ve had the opportunity to take part in several conferences and symposiums this summer revolving around topics at the center of Peter Drucker’s teachings: innovation, marketing, service, and volunteering. But it’s the gathering where I am now—surrounded by novelists and poets, instead of corporate executives and social entrepreneurs—that I believe Drucker would have relished the most.

Here, at the Squaw Valley Community of Writers, amid the natural splendor of the California Sierra Nevada, Drucker would have felt truly at home. He considered himself a wordsmith first and foremost. And with 39 books to his name, who could argue? In addition to works such as The Practice of Management and The Effective Executive, Drucker authored two novels: The Last of All Possible Worlds and The Temptation to Do Good.

Yet he also would have loved this place, with its nightly readings of fiction and memoir and social history, because he believed that management, when done right, incorporates lessons from all of these disciplines and many more.

Action and Applications

Management “deals with action and application; and its test is its results. This makes it a technology,” Drucker explained in The New Realities. “But management also deals with people, their values, their growth and development—and this makes it a humanity. . . . Management is thus what tradition used to call a ‘liberal art’: ‘liberal’ because it deals with the fundamentals of knowledge, self-knowledge, wisdom, and leadership; ‘art’ because it is practice and application.

“Managers,” Drucker continued, “draw on all the knowledge and insights of the humanities and the social sciences—on psychology and philosophy, on economics and on history, on the physical sciences and on ethics.”

That too many corporations and other institutions have lost sight of this is painfully obvious today. This is not to imply that if more CEOs and regulators had merely studied Aristotle’s warnings about “the unlimited acquisition of wealth” or digested Dickens’ Little Dorrit, the financial crisis or the Madoff scandal would have been averted. But pausing to consider such wisdom surely couldn’t have hurt.

It’s not that people have stopped writing; by one estimate, a new book of fiction is published in the U.S. every 30 minutes. It’s not that people have stopped reading, either (though more and more are doing so online). The National Endowment of the Arts released a survey last January showing that for the first time in more than 25 years American adults are consuming more literature.

The Nitty-Gritty

The problem is that the broad world of ideas has become largely separated from the world of business.

“What Drucker wanted was for knowledge to ‘no longer be ornamental—to be consumed to refine oneself or to impress others,’” says Joseph Maciariello, the academic director at the Drucker Institute, which I run. “Rather, knowledge is to be brought down to the grimy earth, where we all work, and integrated so that work can be made more productive and more humane.”

Maciariello is spearheading an effort to bring the concept of “management as a liberal art” into the nation’s colleges and universities. The goal is to have business professors integrate the humanities more fully into their classes, while liberal arts majors contemplate “not just applied reasoning and ethics but virtuous living,” as Maciariello puts it, rooted in real results. Ultimately, the intention is for these ideals to transcend the academy and reach the realm of practice.

In the meantime, the creative souls at Squaw Valley have, unbeknownst to them, underscored a few things that all managers would profit from thinking about. For starters, there’s the Community of Writers itself. Founded 40 years ago by novelists Blair Fuller and Oakley Hall, the organization is thriving, thanks in large measure to a strong sense of self. “Community” is not just a throwaway word in the name here, but the very essence of the place. The authors on staff, many of them highly acclaimed, are unfailingly unpretentious and nurturing of the young writers they teach.

“Any organization . . . needs a commitment to values and their constant reaffirmation, as a human body needs vitamins and minerals,” Drucker wrote. “There has to be something ‘this organization stands for,’ or else it degenerates into disorganization, confusion, and paralysis.”

Brilliance Is Not Enough

What has also been made clear at Squaw Valley this week is that work of value never comes easy. “I do not believe in genius,” Dorothy Allison, the best-selling author of Bastard Out of Carolina and Cavedweller, declared the other night. With that, she implored everyone trying to get his or her first book published to keep honing the manuscript—through 19 drafts, if need be—until it’s just right.

Managers could benefit from the same basic advice. “Brilliant men,” Drucker noted, “are often strikingly ineffectual; they fail to realize that the brilliant insight is not by itself achievement. They never have learned that insights become effectiveness only through hard systematic work.”

Finally, and most importantly, there are the books. As I’ve sat and listened to Allison, Dagoberto Gilb, Lynn Freed, and others read from their latest narratives, I’ve been reminded how much literature can shed light on a subject that lies at the very heart of management: the human condition. “I am rereading each summer—and have for many years—the main novelists,” Drucker wrote to a friend in 1997. Among them, he said, were Austen, Thackeray, Trollope, and George Eliot. “I never read management books,” Drucker added. “All they do is corrupt the style.”

I can, of course, think of at least one management writer whose work qualifies as a great exception.

August 7, 2009

Reflecting on Prahalad
Reflecting on Drucker

Peter Drucker liked to ask all kinds of penetrating questions, but in the end, none cut to the core as much as this: “What do you want to be remembered for?”

Among those who surely could have answered with great conviction was C.K. Prahalad, who passed away last week at the age of 68 following a brief illness. Although I didn’t know Prahalad well, my interactions with him left a strong impression: He was a man as gracious and good-humored as he was stimulating and smart.

Among management scholars and practitioners, Prahalad was a giant. An expert on corporate strategy, he advised major companies across the globe. With Gary Hamel, he coined the term “core competencies.” Perhaps his most lasting legacy will be his pioneering work in identifying the poorest of the poor as an untapped market worth as much as $13 trillion. Underlying this insight was Prahalad’s deeply held belief that every business must have a social purpose as it produces a profit.

Not surprisingly, given his extraordinary intellect and influence, The Times of London ranked Prahalad, a professor at the University of Michigan, as the leading management mind in the world.

But tellingly, Prahalad placed another name at the top of his own list of the most important contributors to the field. “We have to pay attention to Drucker,” he told an audience in Vienna last fall. “No other person has had as much of an impact on the practice of management.”

Drucker Distilled

From there, Prahalad deftly distilled Drucker’s decades of writing, an exercise that felt a little like Stephen Hawking breaking down the theories of Albert Einstein or Albert Pujols analyzing Babe Ruth’s swing. The intent, Prahalad explained, was to challenge academics to reconsider the ways in which they research and teach management. Drucker, Prahalad couldn’t help but observe, was so scorned by his business school colleagues that it’s a wonder he ever got tenure.

Yet the handful of lessons Prahalad shared that day weren’t just applicable to those trapped in the ivory tower; he offered plenty for executives to chew on, as well.

The first thing that characterized Drucker’s work, according to Prahalad, was its constant focus on the future. “It’s all about ‘next practice,’ not ‘best practice,’” he said. To figure out what lies ahead—that is, what companies should be doing, not what they are doing—“means you have to amplify weak signals,” Prahalad added. “You have to see new patterns, both of problems and of opportunities.”

For his part, Drucker maintained that he never predicted the future. Rather, he said, “I just look out the window and see what’s visible but not yet seen”—an orientation that makes a lot of sense for thinkers and doers alike.

A second quality of Drucker’s that Prahalad highlighted was his emphasis on results. “Good words are not enough,” Prahalad said. “You must perform.” Or as Drucker himself put it: “The best plan is only good intentions unless it degenerates into work.”

“Action Bias”

When Drucker would get together with a consulting client, he’d often end the session with a challenge: “Don’t tell me you had a wonderful meeting with me. Tell me what you’re going to do on Monday that’s different.” How many of our own meetings end with what Prahalad called “an action bias”?

Drucker’s conception of leadership also caught Prahalad’s eye. Drucker, he stressed, was interested in the tasks of leaders, not their personalities. And the ultimate task is unmistakable: to lift all of those in the organization to higher heights. Today, said Prahalad, the central question is, “How do you influence people who are . . . knowledge workers—not people who will be pushed around because you have power?”

Another attribute of Drucker’s to which Prahalad pointed admiringly was the way he would “look beyond the corporate world” to art, sociology, history, theology, literature, and a host of other subjects to help shape his views. “He was a master at synthesis,” Prahalad said. Although few can match Drucker’s erudition, the message was plain: Most of us would do our jobs better if we stepped outside their limited confines and drew on other areas for information and inspiration.

The trick is to do this without getting tied up in knots. Indeed, as Prahalad remarked, Drucker had a trait that all of us, whether we’re college professors or corporate managers, would do well to emulate: communicating clearly. “Peter tried very hard to make ordinary people understand nuanced, complex ideas,” Prahalad said, noting that most of us, by contrast, take simple ideas and make them needlessly complicated.

Shared Values

Prahalad went on to explore several other themes, including the weight that Drucker placed on innovation and entrepreneurship. But one in particular jumped out at me: Drucker “had constancy of values,” Prahalad said.

Many of these values Prahalad shared. Some have criticized Prahalad’s assertion that the most impoverished people on the planet represent a lucrative market. But this notion was rooted in the unwavering principle that social responsibility lies at the heart of every business. “The bottom line is simple,” he wrote. “It is possible to ‘do well by doing good.’”

As he concluded his talk, Prahalad called Drucker “a gift to the world.” So, too, was Coimbatore Krishnarao Prahalad.

April 23, 2010

Avoid the Economist’s Folly

Peter Ducker was often said to be an economist. He wasn’t. He sometimes referred to economic theory—along with history, sociology, philosophy, theology, art, and literature—as he honed his management principles. And he admired, in particular, the great Austrian economist Joseph Schumpeter, with his entrepreneurial concept of “creative destruction.”

“It is becoming increasingly clear,” Drucker wrote in a 1983 essay, “that it is Schumpeter who will shape the thinking and inform the questions on economic policy for the rest of this century, if not for the next 30 or 50 years.”

But Drucker, whose own doctorate was in international law, couldn’t help but poke fun at practitioners of the dismal science for often being hopelessly out of touch. “In all recorded history,” Drucker once said, “there has not been one economist who has had to worry about where the next meal would come from.”

Get Out of the Clouds

Drucker’s dig sprang to mind recently when I read World Bank President Robert Zoellick’s own pointed comments challenging economists to pull their heads out of the clouds so as to help combat global poverty with greater effectiveness. “Economics, and in particular development economics, must . . . build on its recent focus on empirical evidence . . . but not allow itself simply to chase data down narrow alleyways,” said Zoellick, who is not an economist.

Zoellick’s remarks have stirred up something of a fuss within the field. But his challenge need not be seen merely as an indictment of a single profession. Embedded in his speech, delivered Sept. 29 at Georgetown University, were several Drucker-like lessons that can—and should—be applied to virtually any occupation or organization. One is that we must focus not on activities but on results. Another is that good ideas are not enough; they must be scalable.

But perhaps Zoellick’s most important insight is that we must approach whatever we do with a healthy dose of humility. “Modern portfolio theories,” he noted, “claimed to master the uncertainty of our world.” But as the subprime crisis has made plain, this was utter nonsense. “According to its risk model,” Zoellick pointed out, “one investment bank suffered a loss on several consecutive days that should have occurred only once in 14 life spans of our universe.”

From Successful to Smug

For Drucker, this episode would surely have reminded him of when, as he wrote, adherents of John Maynard Keynes came to regard themselves as “economist-kings” who were “infallible.” They believed that “playing on a few simple monetary keys—government spending, the interest rate, the volume of credit, or the amount of money in circulation—would maintain permanent equilibrium with full employment, prosperity, and stability.”

Yet it’s not just economists who suffer such “righteous arrogance,” as Drucker put it. Many times, he said, “innovators are so proud of their innovations that they are not willing to adapt them to reality.” Other times, past performance can make an organization haughty and lazy. Companies are always at risk of “living smugly off the accumulated . . . fat of an earlier generation,” Drucker warned in his 1954 classic, The Practice of Management.

Last week, at the World Business Forum in New York, Jim Collins echoed this notion, reminding the thousands of executives in attendance that past triumphs can be a dangerous narcotic. “It is when success leads to hubris,” he said, “that the fall begins.”

Open Your Ears

One manifestation of overconfidence is that you begin to close yourself off to different ways of thinking. Zoellick, for one, implored economists to take into account what others have to teach them. “We need to recognize that development knowledge is no longer the sole province of the researcher, the scholar, or the ivory tower,” he said, urging theorists to open their ears to health-care workers, school officials, and business owners who are toiling on the ground in poor nations.

Drucker couldn’t have agreed more. “Far too many people, and especially people with high knowledge in one area,” he wrote, “are contemptuous of knowledge in other areas or believe that being ‘bright’ is a substitute for knowing” what’s actually going on.

Being cocksure can be perilous in another way, too: It makes us stop questioning things. “We must ask ourselves: Have we become trapped by our received wisdoms?” Zoellick said. “Has certainty blinded us to opportunity?”

Outside of economics, Drucker saw many a manager slip into the same trap. “Don’t go by what ‘everybody knows’ instead of looking out the window,” he advised. “What everybody knows is usually 20 years out of date. In political campaigns the ones who look so promising at the beginning and then fizzle out are usually the ones who go by what they believe everybody knows. They haven’t tested it, and it turns out that ‘This was 20 years ago.’”

For those with status or in positions of authority, humbleness doesn’t always come easy. But Zoellick couldn’t have been more forceful about what’s needed in economics—and, by extension, in a host of other arenas, too. “Above all,” he declared, “we must be honest about what we do not know.” Drucker, who knew many, many things, would have been the first to say, “Amen.”

October 12, 2010

Drucker Does Spirituality

Considering that this is the month in which Jews observe Hanukkah, Muslims mark al-Hijra, Buddhists commemorate Bodhi Day, and Christians celebrate Christmas, it is the perfect time to explore a topic that makes many people squirm: the role of religion in the workplace.

Peter Drucker, for his part, never shied from the subject. On one level, he viewed theology as he did most any other discipline, be it art or literature, history or sociology, philosophy or psychology. Because these fields shed light on the way human beings interact, it is incumbent on managers to learn lessons from all of them.

Drucker, for example, turned to the New Testament to explain how difficult it can be to get a message across to someone if it goes against the person’s values or aspirations. “Even the Lord, the Bible reports, first had to strike Saul blind before he could raise him as Paul,” Drucker wrote. “Communications aiming at conversion demand surrender.”

He also found that certain religious institutions were showcases for efficiency and effectiveness. “No other organization to this day equals the Catholic Church in the elegance and simplicity of its structure,” Drucker remarked in an article published in the late 1980s. “There are only four layers of management: pope, archbishop, bishop, and parish priest. Armies have 10 layers, and General Motors close to 20. And what in business is called the ‘central staff overhead’—for the most transnational of all organizations and one serving close to a billion members worldwide—numbers 1,500 people in Rome, far fewer than are employed in the headquarters of the large American corporation.”

A Role for Compassion

But it’s on a much deeper level, Drucker asserted, that religion can have a positive influence on the world of work and, indeed, on the world at large. “Society needs a return to spiritual values—not to offset the material but to make it fully productive,” Drucker wrote in his 1957 book, Landmarks of Tomorrow. “However remote its realization for the great mass of mankind, there is today the promise of material abundance or at least of material sufficiency.

“Mankind needs the return to spiritual values, for it needs compassion,” Drucker continued. “It needs the deep experience that the Thou and the I are one, which all higher religions share.”

Bringing such ideas into the office can be difficult, of course. Some, feeling offended, will undoubtedly push back or run away. “Americans are increasingly concentrated at opposite ends of the religious spectrum—the highly religious at one pole, and the avowedly secular at the other,” Robert Putnam and David Campbell note in their new book, American Grace. (I myself am a semiobservant Jew, who is struggling to make the grand leap from pure reason to true faith.)

Kierkegaard Influence

As for Drucker, he grew up in an Austrian home in which, as he once described it, “the Lutheran Protestantism . . . was so ‘liberal’ that it consisted of little more than a tree at Christmas and Bach cantatas at Easter.” As a young man, he was deeply moved by the Danish religious philosopher Søren Kierkegaard’s Fear and Trembling; after reading it, Drucker determined “that my life . . . would have to have an existential dimension which transcends society.” When he got older, he became a practicing Episcopalian while expressing appreciation for the pastoral megachurch, which he identified as “surely the most important social phenomenon” in late twentieth-century America.

All along, he wasn’t one to call much attention to his own spirituality. But many see it as a strong thread through his work. Drucker’s “practical wisdom” and his unwavering “urge for moral purpose” are “deeply rooted in Christian faith,” concludes Timo Meynhardt, managing director of the Center for Leadership and Values in Society at the University of St. Gallen in Switzerland, in a paper published earlier this year.

Perhaps nowhere is this more evident than in the way Drucker counseled organizations to treat their employees—namely, as assets possessing tremendous value. Big companies “must offer equal opportunities for advancement,” Drucker wrote in Concept of the Corporation. “This is simply the traditional demand for justice, a consequence of the Christian concept of human dignity.”

Akin to the Golden Rule

In a piece that appeared in the magazine Spirituality & Health in 2005, just a few months before Drucker died, Procter & Gamble executive Craig Wynett and T. George Harris, the former editor of Harvard Business Review, suggested that the fundamental Drucker principle, “the marketer is the consumer’s representative,” is built on the Golden Rule, which many trace to sacred sources such as the Torah.

Drucker found religious inspiration, as well, when talking about tolerance and the need to encourage multiple points of view—another hallmark of the best organizations. “I’ve always felt that quite clearly the good Lord loves diversity,” Drucker said. “He created 2,500 species of flies. If he had been like some theologians I know, there would have been only one right specie of fly.”

With that in mind, I wish everyone a wonderful holiday season, no matter what you believe in, or choose not to.

December 17, 2010