Peter Ferdinand Drucker (November 19, 1909 – November 11, 2005) was a writer, management consultant, and self-described “social ecologist.” Widely considered to be the father of modern management, his many books and countless scholarly and popular articles explored how people are organized across all sectors of society—in business, government, and the non-profit world. His writings predicted many of the major developments of the late twentieth century, including privatization and decentralization, the rise of Japan to economic world power, the decisive importance of marketing, and the emergence of the information society with its necessity of lifelong learning and the importance of "people of knowledge" in contemporary and future society.
Having experienced the rise of Nazism in Germany in the 1930s, observed the rise and fall of communism, and aware of the problems with capitalism, Drucker had great concern for the future of human society. He recognized that money or financial rewards were not the real incentive to hard work. Human beings are not just biological and psychological beings, but also spiritual; thus, the true motivation for success lies in the spiritual and moral realm. He spoke out against the extreme difference in salaries between workers and CEOs of major corporations, regarding it as morally and socially wrong. Drucker strongly believed that people needed community, meaningful relationships with others, in order to be happy and productive. His insights into the running of successful organizations, expressed in the many writings published during his long career, have been widely read and implemented. He offered many good suggestions as to how organizations, including the non-profit sector, can improve their operations to the benefit of both individuals and the whole. Although Drucker did not have all the answers, and people have not implemented all his ideas, he contributed much to the establishment of a more harmonious and prosperous global society.
Peter Ferdinand Drucker was born on November 19, 1909 in Austria. The son of Jewish intellectuals—his mother, Caroline Bondi, had studied medicine and his father, Adolph Bertram Drucker, was a lawyer—his family lived in a small village named Kaasgraben (now part of Vienna). He grew up in a home where intellectuals, high government officials and scientists, particularly from the Vienna Circle, would meet to discuss new ideas and ideals. Included among the regular guests were influential Austrian economists Joseph Schumpeter, Ludwig von Mises, and Friedrich von Hayek.
After graduating from Döbling Gymnasium, Drucker found few opportunities for employment in post-Habsburg Vienna so he moved to Hamburg, Germany. He first worked as an apprentice at an established cotton trading company, then as a journalist, writing for the Österreichische Volkswirt (The Austrian Economist). While in Hamburg, he spent much time reading novels and history, and discovered the philosophical writings of Soren Kirkegaard, which had a lasting influence on him.
Drucker then moved to Frankfurt where he took a job at the Daily Frankfurter General Anzeiger. While in Frankfurt, he earned a doctorate in international law and public law from the University of Frankfurt in 1931. As a young writer, Drucker wrote two pieces—one on the conservative German philosopher Friedrich Julius Stahl (1932) and another called “The Jewish Question in Germany”—that were burned and banned by the Nazis. In 1933 when Adolf Hitler came to power, Drucker left Germany for England. In London, he worked for an insurance company, then as the chief economist at a private bank. He also reconnected with Doris Schmitz, an acquaintance from the University of Frankfurt. They married in 1934.
The couple permanently relocated to the United States, where Drucker worked as correspondent for several British newspapers, including the Financial Times. He also served as a columnist for The Wall Street Journal and was a regular contributor to Harper's Magazine. He also taught economics part time at Sarah Lawrence College in Bronxville, New York. His career as a freelance writer and business consultant began when he published The End of Economic Man in 1939.
In 1943, Drucker became a naturalized citizen of the United States. He taught at Bennington College as professor of philosophy and politics from 1942 to 1949, then at New York University as a professor of management from 1950 to 1971.
Drucker took on his first of many consulting projects for General Motors, resulting in the publication of his landmark book, Concept of the Corporation (1946). His The Practice of Management published in 1954 was his first popular book about management. He described it as “the foundation of a discipline.” In 1966, he published the now-classic The Effective Executive.
Moving to California in 1971, Drucker developed one of the country's first executive Master of Business Administration (MBA) programs for working professionals at Claremont Graduate University (then known as Claremont Graduate School). There he wrote his magnum opus, Management: Tasks, Responsibilities and Practices, published in 1973. A flow of significant publications continued over the next three decades. From 1971 until his death he was the Clarke Professor of Social Science and Management at Claremont Graduate University. Claremont University's management school was named the Peter F. Drucker Graduate School of Management (later known as the Peter F. Drucker and Masatoshi Ito Graduate School of Management) in his honor in 1987. He taught his last class at the school in the Spring of 2002.
His books have been translated into more than 30 languages. Two are novels, one an autobiography, and he co-authored a book on Japanese painting. He also made eight series of educational films on management topics. He penned a regular column in the 'Wall Street Journal for 20 years and contributed frequently to the Harvard Business Review, The Atlantic Monthly, and The Economist and continued to act as a consultant to businesses and non-profit organizations well into his nineties.
Peter Drucker died November 11, 2005, in Claremont, California of natural causes, at 95. He was survived by his wife Doris, four children and six grandchildren.
Peter Drucker is considered the "father of modern management," a "guru" of business thinking. His work can be seen as going through several stages. Early works, such as The End of Economic Man (1939) and The New Society (1950) are reflections on the nature of industrial society. He then wrote a series of books, including The Practice of Management (1954) that presented his ideas on modern business management. Another group of books discuss the impact of changes in technology, including Technology, Management, and Society (1970), and yet another focus on issues of corporate management, such as The Changing World of the Executive (1982).
Among Drucker's early influences was the Austrian economist Joseph Schumpeter, one of his father's friends, who impressed upon Drucker the importance of innovation and entrepreneurship. Drucker also was influenced, in a much different way, by John Maynard Keynes, whom he heard lecture in 1934 in Cambridge. “I suddenly realized that Keynes and all the brilliant economic students in the room were interested in the behavior of commodities,” Drucker wrote, “while I was interested in the behavior of people.”
Indeed, over the following 70 years, Drucker’s writings were marked by a clear focus on relationships among human beings, as opposed to the crunching of numbers. His books were filled with lessons on how organizations can bring out the best in people, and how workers can find a sense of community and dignity in a modern society organized around large institutions.
Drucker's career as a business thinker took off in 1942, when his initial writings on politics and society won him access to the internal workings of General Motors (GM), one of the largest companies in the world at that time. His experiences in Europe had left him fascinated with the problem of authority. He shared his fascination with Donaldson Brown, the mastermind behind the administrative controls at GM. In 1943 Brown invited him in to conduct what might be called a political audit: a two-year social-scientific analysis of the corporation. Drucker attended every board meeting, interviewed employees, and analyzed production and decision-making processes.
The resulting book, Concept of the Corporation (1945), popularized GM's multidivisional structure and led to numerous articles, consulting engagements, and additional books. However, Drucker's book suggested that the auto giant might want to reexamine a host of long-standing policies on customer relations, dealer relations, employee relations, and more—ideas that GM rejected. GM's chairman, Alfred Sloan, “simply treated it as if it did not exist,” Drucker later recalled, “never mentioning it and never allowing it to be mentioned in his presence.”
Drucker taught that management is “a liberal art,” and he infused his management advice with interdisciplinary lessons from history, sociology, psychology, philosophy, culture and religion. He also believed strongly that all institutions, including those in the private sector, have a responsibility to the whole of society:
The fact is that in modern society there is no other leadership group but managers. If the managers of our major institutions, and especially of business, do not take responsibility for the common good, no one else can or will.
Drucker was interested in the growing effect of people who worked with their minds rather than their hands. He was intrigued by employees who knew more about certain subjects than their bosses or colleagues and yet had to cooperate with others in a large organization. Rather than simply glorify the phenomenon as the epitome of human progress, Drucker analyzed it and explained how it challenged the common thinking about how organizations should be run.
His basic ideas can be summarized in the following points:
Drucker discounted the command and control model and asserted that companies work best when they are decentralized. According to Drucker, corporations tend to produce too many products, hire employees they don't need (when a better solution would be outsourcing), and expand into economic sectors that they should avoid.
Drucker contended that economists of all schools fail to explain significant aspects of modern economies.
Drucker believed that employees are assets and not liabilities. He taught that knowledge workers are the essential ingredients of the modern economy.
Drucker made nonpartisan claims that government is often unable or unwilling to provide new services that people need or want, though he believed that this condition is not inherent to democracy.
Businesses and governments have a natural human tendency to cling to "yesterday's successes" rather than seeing when they are no longer useful.
Early in his career, Drucker predicted the "end of economic man" and advocated the creation of a "plant community" where individuals' social needs could be met. He later acknowledged that the plant community never materialized, and by the 1980s, suggested that volunteering in the non-profit sector was the key to fostering a healthy society where people found a sense of belonging and civic pride.
Management by Objectives (MBO) is a process of agreeing upon objectives within an organization so that management and employees agree to the objectives and understand what they are. Managers must avoid the "activity trap" of being busy with day to day activities; they must remain focused on their purpose.
A company's primary responsibility is to serve its customers. Profit is not the primary goal, but rather an essential condition for the company's continued existence.
This approach worked well in the increasingly mature business world of the second half of the twentieth century. By that time, large corporations had developed the basic manufacturing efficiencies and managerial hierarchies of mass production. Executives thought they knew how to run companies, and Drucker took it upon himself to challenge their beliefs, lest organizations become stale. He did this in a sympathetic way, assuming that his readers were intelligent, rational, hardworking people of good will. If their organizations struggled, he believed it was usually because of outdated ideas, a narrow conception of problems, or internal misunderstandings.
During his long consulting career, Drucker worked with many major corporations, including General Electric (GE), Coca-Cola, Citicorp, IBM, and Intel. He consulted with notable business leaders such as GE’s Jack Welch, Procter & Gamble’s A. G. Lafley, Intel’s Andy Grove, Shoichiro Toyoda, honorary chairman of Toyota Motors, and Masatoshi Ito, honorary chairman of the Ito-Yokado Group, the second largest retailing organization in the world.
Drucker’s insights extended far beyond business. He served as a consultant for various government agencies in the United States, Canada and Japan. And, most notably, he worked with various non-profit organizations to help them become successful, often consulting pro-bono. Among the many social sector groups he advised were the Salvation Army, Girl Scouts, American Red Cross, and the Navajo Indian Tribal Council.
Drucker was not immune to criticism. The Wall Street Journal researched several of his lectures in 1987 and reported that he was sometimes loose with the facts. He was off the mark, for example, when he told an audience that English was the official language for all employees at Japan’s Mitsui trading company.
Critics maintain that one of Drucker’s core concepts, “management by objectives,” is flawed and has never really been proven to work effectively. W. Edwards Deming, whose work on management is considered to have made a significant contribution to Japan's later renown for innovative high-quality products and its economic power, in his 1986 Out of the Crisis, outlined "14 points for management" as the basis for transformation of American industry to one of optimization. These points included the elimination of management by objectives. Deming argued that all slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity should be eliminated, as they only create adversarial relationships. Deming believed that the majority of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the workforce. His solution, therefore, was to eliminate quotas and objectives, and substitute leadership.
Drucker agreed that management by objectives did not always work; however he believed the causes of failure were in the implementation; they were not inherent in the basic procedure: "We can't start talking objectives until we know what they are. The things we desire are not objectives …. Management by objectives works if you know the objectives. Ninety percent of the time you don't."
Drucker did not shy away from controversy, either. Although he helped many corporate executives succeed, he was appalled when the level of Fortune 500 chief executives' pay in the United States ballooned to hundreds of times that of the average worker. He argued in a 1984 essay that CEO compensation should be no more than 20 times what the rank and file make—especially at companies where thousands of employees are being laid off. “This is morally and socially unforgivable,” Drucker wrote, “and we will pay a heavy price for it.”
Drucker's many writings have been read and implemented widely, in businesses large and small, and continue to be a valuable source for management today. Although criticized by some, his "management by objectives" (MBO) has been implemented to great effect in many organizations. Recognizing that objectives for MBO must be SMART (Specific, Measurable, Achievable, Relevant, and Time-Specific) is essential to success. In some sectors such as healthcare, finance, and so forth, ER has been added to make SMARTER (where E=Extendable and R=Recorded).
Drucker anticipated the rise of the social sector in America, maintaining that it was through volunteering in non-profits that people would find the kind of fulfillment that he originally thought would be provided through their place of work, but that had proved elusive in that arena:
Citizenship in and through the social sector is not a panacea for the ills of post-capitalist society and post-capitalist polity, but it may be a prerequisite for tackling these ills. It restores the civic responsibility that is the mark of citizenship, and the civic pride that is the mark of community.
Drucker was a practicing Christian and recognized that today's "megachurches" are "the most important social phenomenon in American society in the past 30 years." In the early 1990s, he told religious leaders that the key question for churches is, "Can we create enough disciples?"
The Peter F. Drucker Foundation for Nonprofit Management was established in his honor in 1990, with Drucker as its honorary chairman from 1990 through 2002. In 2003, it was renamed the Leader to Leader Institute, and continues its mission "To strengthen the leadership of the social sector by providing social sector leaders with essential leadership wisdom, inspiration and resources to lead for innovation and to build vibrant social sector organizations."
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