28 SEP — Harmonize the Immediate and Long-range Future
A manager must, so to speak, keep his nose to the grindstone while lifting his eyes to the hills—quite an acrobatic feat.
A manager has two specific tasks.
The first is creation of a true whole that is larger than the sum of its parts, a productive entity that turns out more than the sum of the resources put into it.
The second specific task of the manager is to harmonize in every decision and action the requirements of the immediate and of the long-range future.
A manager cannot sacrifice either without endangering the enterprise.
If a manager does not take care of the next hundred days, there will be no next hundred years.
Whatever the manager does should be sound in expediency as well as in basic long-range objective and principle.
And where he cannot harmonize the two time dimensions, he must at least balance them.
He must calculate the sacrifice he imposes on the long-range future of the enterprise to protect its immediate interests, or the sacrifice he makes today for the sake of tomorrow.
He must limit either sacrifice as much as possible.
And he must repair as soon as possible the damage it inflicts.
He lives and acts in two time dimensions, and is responsible for the performance of the whole enterprise and of his own component in it.
ACTION POINT:
Develop a system of performance measures that will lead to maximizing the total wealth-producing capacity of your organization.
Include both short-term measures and long-term measures, as well as quantitative and qualitative measures.
Management: Tasks, Responsibilities, Practices
7 MAR — Creating a True Whole
Create a true whole greater than the sum of its parts.
A manager has the task of creating a true whole that is larger than the sum of its parts.
One analogy is the task of the conductor of a symphony orchestra, through whose effort, vision, and leadership individual instrumental parts become the living whole of a musical performance.
But the conductor has the composer's score; he is only interpreter.
The manager is both composer and conductor.
The task of creating a genuine whole also requires that the manager, in every one of her acts, consider simultaneously the performance and results of the enterprise as a whole and the diverse activities needed to achieve synchronized performance.
It is here, perhaps, that the comparison with the orchestra conductor fits best.
A conductor must always hear both the whole orchestra and, say, the second oboe.
Similarly, a manager must always consider both the overall performance of the enterprise and, say, the market research activity needed.
By raising the performance of the whole, she creates scope and challenge for market research.
By improving the performance of market research, she makes possible better overall business results.
The manager must simultaneously ask two double-barreled questions:
"What better business performance is needed and what does this require of what activities?"
And "What better performances are the activities capable of and what improvement in business results will they make possible?"
Management: Tasks, Responsibilities, Practices
Connect to
Peter Drucker Social Political Ecologist
13 FEB — The Nature of Freedom
Freedom is never a release and always a responsibility.
Freedom is not fun.
It is not the same as individual happiness, nor is it security or peace or progress.
It is a responsible choice.
Freedom is not so much a right as a duty.
Real freedom is not freedom from something; that would be license.
It is freedom to choose between doing or not doing something, to act one way or another, to hold one belief or the opposite.
It is not "fun" but the heaviest burden laid on man:
to decide his own individual conduct as well as the conduct of society and to be responsible for both decisions.
"The Freedom of Industrial Man,"
The Virginia Quarterly Review
26 JAN — A Social Ecologist
For me the tension between the need for continuity and the need for innovation and change was central to society and civilization.
I consider myself a "social ecologist," concerned with man's man-made environment the way the natural ecologist studies the biological environment.
The term "social ecology" is my own coinage.
But the discipline itself boasts an old and distinguished lineage.
Its greatest document is Alexis de Tocqueville's Democracy in America.
But no one is as close to me in temperament, concepts, and approach as the mid-Victorian Englishman Walter Bagehot.
Living (as I have) in an age of great social change, Bagehot first saw the emergence of new institutions:
civil service and cabinet government, as cores of a functioning democracy, and banking as the center of a functioning economy.
A hundred years after Bagehot, I was first to identify management as the new social institution of the emerging society of organizations and, a little later, to spot the emergence of knowledge as the new central resource, and knowledge workers as the new ruling class of a society that is not only "post-industrial" but post-socialist and, increasingly, post-capitalist.
As it had been for Bagehot, for me too the tension between the need for continuity and the need for innovation and change was central to society and civilization.
Thus, I know what Bagehot meant when he said that he saw himself sometimes as a liberal Conservative and sometimes as a conservative Liberal but never as a "conservative Conservative" or a "liberal Liberal."
ACTION POINT: Are you and your organization change agents? What steps can you take to both change and balance change with stability?
The Ecological Vision
27 MAY — Management: A Practice
The test of any policy in management … is not whether the answer is right or wrong, but whether it works.
The GM executives believed that they had discovered principles and that those principles were absolutes, like laws of nature.
I, by contrast, have always held that principles of this kind, being man-made, are at best heuristic.
This has been the one point on which my approach to management has always differed from that of the writers or theoreticians on the subject—and the reason, perhaps, that I have never been quite respectable in the eyes of academia.
I do believe that there are basic values, especially human ones.
But I do not believe that there is "one correct answer."
There are answers that have a high probability of being the wrong ones—at least to the point where one does not even try them unless all else has failed.
But the test of any policy in management or in any other social discipline is not whether the answer is right or wrong, but whether it works.
Management, I have always believed, is not a branch of theology but, at bottom, a clinical discipline.
The test, as in the practice of medicine, is not whether the treatment is "scientific" but whether the patient recovers.
Concept of the Corporation
25 SEP — Controls Should Focus on Results
What today's organization needs are synthetic sense organs for the outside.
Every social institution exists to contribute to society, economy, and individual.
In consequence results exist only on the outside—in economy, in society, and with the customer.
It is the customer only who creates a profit.
Everything inside a business creates only costs, is only a "cost center."
But results are entrepreneurial.
Yet we do not have adequate, let alone reliable, information regarding the "outside."
The century of patient analysis of managerial, inside phenomena, events and data, the century of patient, skillful work on the individual operations and tasks within the business, has no counterpart with respect to the entrepreneurial job.
We can easily record and therefore quantify efficiency, that is, efforts.
It is of little value to have the most efficient engineering department if it designs the wrong product.
And it mattered little, I daresay, during the period of IBM's great expansion in the fifties and sixties how "efficient" its operations were; its basic entrepreneurial idea was the right, the effective one.
The outside, the area of results, is much less accessible than the inside.
The central problem of executives in the large organization is their insulation from the outside.
What today's organization therefore needs are synthetic sense organs for the outside.
If modern controls are to make a contribution, it would be, above all, here.
Management: Tasks, Responsibilities, Practices
2 JAN — Identifying the Future
The important thing is to identify the "future that has already happened."
Futurists always measure their batting average by counting how many things they have predicted that have come true.
They never count how many important things come true that they did not predict.
Everything a forecaster predicts may come to pass.
Yet, he may not have seen the most meaningful of the emergent realities or, worse still, may not have paid attention to them.
There is no way to avoid this irrelevancy in forecasting, for the important and distinctive are always the result of changes in values, perception, and goals, that is, in things that one can divine but not forecast.
But the most important work of the executive is to identify the changes that have already happened.
The important challenge in society, economics, politics, is to exploit the changes that have already occurred and to use them as opportunities.
The important thing is to identify the "future that has already happened"—and to develop a methodology for perceiving and analyzing these changes.
A good deal of this methodology is incorporated in my 1985 book Innovation and Entrepreneurship, which shows how one systematically looks to the changes in society, in demographics, in meaning, in science and technology, as opportunities to make the future.
The Ecological Vision
The Age of Discontinuity
12 MAY — The Manufacturing Paradox
How do you get far more output with far fewer workers?
The most believable forecast for 2020 suggests that manufacturing output in the developed countries will at least double, while manufacturing employment will shrink to 10 to 12 percent of the total workforce. What has changed manufacturing, and sharply pushed up productivity, are new concepts, such as "lean manufacturing.":
Information and automation are less important than new theories of manufacturing, which are an advance comparable to the arrival of mass production eighty years ago.
The decline in manufacturing as a creator of wealth and jobs will inevitably bring about a new protectionism, once again echoing what happened earlier in agriculture.
The fewer farm voters there are, the more important the "farm vote" has become.
As numbers have shrunk, farmers have become a unified special-interest group that carries disproportionate clout in all rich countries.
Managing in the Next Society
9 JAN — The New Corporation's Persona
In the Next Society's corporation, top management will be the company.
Everything else can be outsourced.
Increasingly, in the Next Society's corporation, top management will, in fact, be the company.
This top management's responsibilities will cover the entire organization's
direction, planning, strategy, values, and principles;
its structure and relationships between its various members;
its alliances, partnerships, and joint ventures; and
its research, design, and innovation.
Establishing a new corporate persona calls for a change in the corporation's values.
And that may well be the most important task for top management.
In the half century after the Second World War, the business corporation has brilliantly proven itself as an economic organization, as a creator of wealth and jobs.
In the Next Society, the biggest challenge for the large company and especially for the multinational may be its social legitimacy—its values, its mission, its vision.
Everything else can be outsourced.
Managing in the Next Society
The Next Society (Corpedia Online Program)
17 JAN — Management: The Central Social Function
Noneconomic institutions need a yardstick that does for them what profitability does for business.
Nonbusiness institutions flock in increasing numbers to business management to learn from it how to manage themselves.
The hospital, the armed service, the Catholic diocese, the civil service—all want to go to school for business management.
This does not mean that business management can be transferred to other, nonbusiness institutions.
On the contrary, the first thing these institutions have to learn from business management is that management begins with the setting of objectives and that, therefore, noneconomic institutions, such as a university or a hospital, will also need very different management from that of a business.
But these institutions are right in seeing business management as the prototype.
Business, far from being exceptional, is simply the first of the species and the one we have studied the most intensively.
Noneconomic institutions need a yardstick that does for them what profitability does for the business.
"Profitability," in other words, rather than being the "exception" and distinct from "human" or "social" needs, emerges, in the pluralist society of organizations, as the prototype of the measurement needed by every institution in order to be managed and manageable.
The Ecological Vision
10 FEB — Modern Organization Must Be a Destabilizer
Only a society in dynamic disequilibrium has stability and cohesion.
Society, community, and family are all conserving institutions.
They try to maintain stability and to prevent, or at least to slow, change.
And yet we also know that theories, values, and all the artifacts of human minds do age and rigidify, becoming obsolete, becoming afflictions.
Yet "revolutions" every generation, as was recommended by Thomas Jefferson, are not the solution.
We know that "revolution" is not achievement and the new dawn.
It results from senile decay, from the bankruptcy of ideas and institutions, from a failure of self-renewal.
The only way in which an institution—whether a government, a university, a business, a labor union, an army—can maintain continuity is by building systematic, organized innovation into its very structure.
Institutions, systems, policies, eventually outlive themselves, as do products, processes, and services.
They do it when they accomplish their objectives, and they do it when they fail to accomplish their objectives.
Innovation and entrepreneurship are thus needed in society as much as in the economy, in public service institutions as much as in business.
The modern organization must be a destabilizer; it must be organized for innovation.
Managing in a Time of Great Change
The Ecological Vision
Innovation and Entrepreneurship
2 MAR — Test of Innovation
Measure innovations by what they contribute to market and customer.
The test of an innovation is whether it creates value.
Innovation means the creation of new value and new satisfaction for the customer.
A novelty only creates amusement.
Yet, again and again, managements decide to innovate for no other reason than that they are bored with doing the same thing or making the same product day in and day out.
The test of an innovation, as well as the test of "quality," is not "Do we like it?"
It is "Do customers want it and will they pay for it?"
Organizations measure innovations not by their scientific or technological importance but by what they contribute to market and customer.
They consider social innovation to be as important as technological innovation.
Installment selling may have had a greater impact on economics and markets than most of the great scientific advances in this century.
The Frontiers of Management
Management Challenges for the 21st Century
4 JUL — Communicate and Test Assumptions
The theory of the business is a discipline.
The theory of the business must be known and understood throughout the organization.
This is easy in an organization's early days.
But as it becomes successful, an organization tends increasingly to take its theory for granted, becoming less and less conscious of it.
Then the organization becomes sloppy.
It begins to cut corners.
It begins to pursue what is expedient rather than what is right.
It stops thinking.
It stops questioning.
It remembers the answers but has forgotten the questions.
The theory of the business becomes "culture."
But culture is no substitute for discipline, and the theory of the business is a discipline.
The theory of the business has to be tested constantly.
It is not graven on tablets of stone.
It is a hypothesis.
And it is a hypothesis about things that are in constant flux—society, markets, customers, technology.
And so, built into the theory of the business must be the ability to change itself.
Some theories are so powerful that they last for a long time.
Eventually every theory becomes obsolete and then invalid.
It happened to the GMs and the AT&Ts.
It happened to IBM.
It is also happening to the rapidly unraveling Japanese keiretsu.
Managing in a Time of Great Change
26 MAR — Management of the Multinational
The multinationals of 2025 are likely to be held together and controlled by strategy.
Statistically, multinational companies play much the same part in the world economy today as they did in 1913.
But they have become very different animals.
Multinationals in 1913 were domestic firms with subsidiaries abroad, each of them self-contained, in charge of a politically defined territory, and highly autonomous.
Multinationals now tend to be organized globally along product or service lines.
But like the multinationals of 1913, they are held together and controlled by ownership.
By contrast, the multinationals of 2025 are likely to be held together and controlled by strategy.
There will still be ownership, of course.
But alliances, joint ventures, minority stakes, know-how agreements and contracts, will increasingly be the building blocks of a confederation.
This kind of organization will need a new kind of top management.
In most countries, and even in a good many large and complex companies, top management is still seen as an extension of operating management.
Tomorrow's top management, however, is likely to be a distinct and separate organ: it will stand for the company.
Managing in the Next Society
5 SEP — Focus on Contribution
The question "What should I contribute?" gives freedom because it gives responsibility.
The great majority of executives tend to focus downward.
They are occupied with efforts rather than with results.
They worry over what the organization and their superiors "owe" them and should do for them.
And they are conscious above all of the authority they "should have."
As a result, they render themselves ineffectual.
The effective executive focuses on contribution.
He looks up from his work and outward toward goals.
He asks: "What can I contribute that will significantly affect the performance and the results of the institution I serve?"
His stress is on responsibility.
The focus on contribution is the key to effectiveness: in a person's own work—its content, its level, its standards, and its impacts; in his relations with others—his superiors, his associates, his subordinates; in his use of the tools of the executive such as meetings or reports.
The focus on contribution turns the executive's attention away from his own specialty, his own narrow skills, his own department, and toward the performance of the whole.
It turns his attention to the outside, the only place where there are results
The Effective Executive
Management Challenges for the 21st Century
18 SEP — Managing Oneself: Revolution in Society
Managing oneself is based on these realities: Workers are likely to outlive organizations, and the knowledge worker has mobility.
Managing oneself is a REVOLUTION in human affairs.
It requires new and unprecedented things from the individual, and especially from the knowledge worker.
For, in effect, it demands that each knowledge worker think and behave as a chief executive officer.
It also requires an almost 180-degree change in the knowledge workers' thoughts and actions from what most of us still take for granted as the way to think and the way to act.
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.
For every existing society, even the most "individualist" one, takes two things for granted, if only subconsciously: Organizations outlive workers, and most people stay put.
Managing oneself is based on the very opposite realities.
In the United States MOBILITY is accepted.
But even in the United States, workers outliving organizations—and with it the need to be prepared for a second and different half of one's life—is a revolution for which practically no one is prepared.
Nor is any existing institution, for example, the present retirement system.
Management Challenges for the 21st Century
10 JAN — Management as the Alternative to Tyranny
The alternative to autonomous institutions that function and perform is not freedom. It is totalitarian tyranny.
If the institutions of our pluralist society of institutions do not perform in responsible autonomy, we will not have individualism and a society in which there is a chance for people to fulfill themselves.
We will, instead, impose on ourselves complete regimentation in which no one will be allowed autonomy.
We will have Stalinism rather than participatory democracy, let alone the joyful spontaneity of doing one's own thing.
Tyranny is the only alternative to strong, performing autonomous institutions.
Tyranny substitutes one absolute boss for the pluralism of competing institutions.
It substitutes terror for responsibility.
It does indeed do away with the institutions, but only by submerging all of them in the one all embracing bureaucracy of the apparat.
It does produce goods and services, though only fitfully, wastefully, at a low level, and at an enormous cost in suffering, humiliation, and frustration.
To make our institutions perform responsibly, autonomously, and on a high level of achievement is thus the only safeguard of freedom and dignity in the pluralist society of institutions.
Performing, responsible management is the alternative to tyranny and our only protection against it.
Management: Tasks, Responsibilities, Practices
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shows how the pioneers in this field went back to look at old data but to look at it with new perceptions and could now see new things.
for topics or phrases.