Tuesday, August 30, 2011

Inside Drucker's Brain

Inside Drucker's Brain
by Jeffrey Krammes



Peter Drucker is said to have created modern management science. This is a heavy statement given many academics before him were working on management. His achievement was his ability to built on the theories of others like Adam Smith, Frederick Taylor and he turned management studies into a coherent science. This book, unlikely other biographies, does not give a detailed account of Drucker's life. The materials in the book are the record of an interview with Drucker when he was over 90. It is a recapitulation of the theories and thoughts of Drucker and is an useful overview and reference.

Managers know very well the concepts put forward by Drucker. Management by objectives, vision and mission, partnership and leadership are all in the present management text books in use. While it is a good revision of these management topics, there are a few more points in the book which have caught my mind.

The first is a brief account of the evolution of corporations. Companies started small and were managed by royalties, aristocrats, and rich families. Before the 20th centuries, there were usually only two layers in a company: the top management of family members and then a large group of skilled and unskilled labour. Middle management was non-existent. At the beginning of the 20th century, Du Pont grew so big that some middle managers were required. Numbers were limited because the demand was small and the supply of talents was short.

The coming of age of the middle management exploded after the second world war when the economy took up pace. In particular, the cause could be attributed to the GI Bill of Rights passed in 1944. The US Government would pay for college and offer business loans to all returning servicemen. An enormous number of people who would never have thought of going to college went to college. By the time the bill ended in 1956, 7.8 million World War II veterans had attained college education. This enormous amount of knowledge workers created the scene of ample supply of talents which fueled the rapid deployment of middle management in all corporations.

The other point is the interest of Drucker on non-profit organizations. This is a problematic area where management is generally poor. Drucker worked extensively with many non-profit organizations like hospitals, churches, etc. I think this is a warning to their administrators, especially the volunteers. He pointed out many did not realize that the competitive environment of non-profit organizations was more severe than the competition for goods. Non-profit organizations usually have impractical and non-actionable mission statement. They are not measured by profit as a good indicator, and thus they do not have a bottom line. The wrong perception is that as long as they can get charitable donation then business can go on. Many do not have good strategy and continue to engage resources to areas where there is no good results.

Drucker had a vision on information technology. He foresaw a fourth information revolution where the use of IT would shift from the use of technology to the provision of information. This is particular true for managers whose main concern is not only the use of IT on production and service delivery, but actionable information, especially of the outside, to facilitate strategy formulation. Mangers will request from the IT department and the finance department not just piles of statistical reports, but answers and reasons on strategic questions. The fourth information revolution will not be the advancement of technology, but a change of concept on the use of information.

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