The Practice of Management by Peter F. Drucker
The Practice of Management by Peter F. Drucker
This book is divided into 6 main parts: Managing A Business; Managing Managers; The Structure Of Management; Management Of Workers And The Worker; What It Means To Be A Manager; and a conclusion.
In Managing a Business, Drucker stresses the importance of the customer , not economic or market forces, in defining a business. He suggests that it is the customer, not forces, that converts economic resources into wealth, and things into goods. He states that “there is only one valid definition of business purpose: to create a customer.” (p.37) Drucker goes on to say that any business enterprise has two basic functions – marketing and innovation. I would argue that there should be other functions to add to this – what about technology or human resources?
Drucker also discusses how a business should be managed – by objectives. Objectives should be set in 8 areas – market standing; innovation; productivity; physical and financial resources; profitability; management performance and development; worker performance and attitudes; and public responsibility. These eight areas would appear to be all encompassing however the last three areas are somewhat intangible and therefore would be difficult to measure performance by.
In Managing Managers, Drucker gives the example of Henry Ford as a way of not managing an enterprise. Ford tried to run his company without the aid of managers and quashed any attempts by his subordinates to think freely and make business decisions. Supervisors were demoted if they tried to make decisions and a culture of mistrust and misrule was embraced. The result of this was that when he died, the company had no managers who could make decisions and plan for the company’s future. Profitability was non-existent. Ford’s successor brought in management from competitors and decentralized and empowered subordinates.
In preventing a tyranny like that of Ford from occurring in other enterprises, Drucker suggests that management should be decentralized and managers should become management by objectives. He builds on this in the subsequent chapter titled “the spirit of an organization”, by suggesting that companies should avoid kicking people upstairs or hoarding good people so as to ensure promotion by superior performance. He supported the philosophy of not entirely promoting from within – in the case of Ford and Sears, sometimes managers from the outside can bring a fresh perspective and new methods of managing.
Drucker suggests that a good organization should make “common men do uncommon things” (p.144) and leadership is “the lifting of a man’s vision to higher sights, [and] the raising of a man’s performance to a higher standard” (p.159). Management should focus on a person’s strengths, not their weaknesses. He stresses the role of a manager is not to make friends and influence people – that is salesmanship.
In developing future managers, Drucker suggests that a firm takes a 10-15 year outlook. This will require looking at the future needs and objectives of the company. He also advocates mentoring – supporting this by suggesting that no one learns more about a subject than the one who has to teach it. In helping others to develop, the mentor is also helping to develop himself. As a trainer, I would wholeheartedly agree with this point as I try to anticipate any conceivable question my students may ask me during a training class.
In the Structure of Management, Drucker suggests that a good manager can only achieve so much if the organizational structure is poor. He defines four sizes of a business – small, fair-sized, large, and very large. He defines the sizes, not by employees, but by the number of levels of management and the decision making flows with the structure. The perfect organization structure should have few levels of management, not so many that a rising manager would not have enough time to fully develop at each level, and yet provide enough promotional opportunities to avoid discouragement of good potential managers. A dysfunctional company may also be spread out into so many different businesses that it loses its common citizenship and its objectives cannot be aligned with the overall business objectives.
In The Management of Worker and Work, Drucker tells the IBM story where during the depression , they decided to maintain employment levels and enlarged the jobs of employees. As a result output actually increased, especially because the workers had job security and thus didn’t feel the need to restrict their output. In order to prevent a surplus of goods, this forced IBM to seek out new markets and new needs both domestically and globally. This made IBM a stronger company during times when most firms would be weaker.
Drucker also reminds us that when employing someone, the manager needs to respect that he or she is not simply employing a pair of hands, he or she is employing the whole man who is not only an employee, but a family man and a member of the community. Therefore it would be unfair to expect work to take over the whole sphere of his being, rather the manager should expect to play only a part in it for that worker to be a happier and more productive employee.
In analyzing the management of workers, Drucker plays down the importance of personnel and human resources management. He argues that it is the worker’s manager who should take a lead in their management because the manager would have a much better idea of what their job entails. Scientific management is also not an advisable approach as this breaks work down into simple motions and Drucker suggests that a person works best when they are able to use judgment and plan their work. The IBM story is a testament to that as they saw an increase in production when employees who previously had to wait hours for the setup crew to set up their machines, were empowered to set the machines up themselves and plan their work. Drucker also sites other examples where the empowerment of workers led to improved production , such as a mail order processing plant and an aircraft engine parts company who employed illiterate workers after the war to put together complex engine parts with the use of flow charts.
When examining how best to motivate employees for peak performance, Drucker suggests that fear as a motivator is gone and questions whether higher standards of performance, and information adequate for self-control, has replaced it. I would argue that they have not entirely mainly due to the fact that most companies do not behave like IBM during times of recession – they cut costs and labor, therefore the fear of job loss is still a very real one.
I particularly enjoyed the point Drucker made about how a dissatisfied worker may actually be a sign that he has pride in his work and simply may be frustrated that he is not able to do a better job and improve his work due to elements beyond his control. In my own workplace, a negative employee opinion survey result was seen in a poor light by management and in hindsight it could be argued that we should have questioned whether we actually had good employees who wanted to be able to do a better job.
I did not agree with the point Drucker makes in chapter 24 in which he suggests that employees have an aversion to profit. He suggests that results seen from profit sharing are inconclusive and what actually would motivate employees better would be job security, like that shown by IBM during economic downturns. I know that during 2002 when my company was experiencing losses, the climate within the company at all levels was a determination to make profits again. This was not done by increasing output, like IBM did, it was by cutting costs for the most part.
In What It Means To Be A Manager, Drucker focuses on the role of a manager and states that the manager has five main objectives:
1. To set objectives and try to balance them between immediate needs and future needs of the company.
2. To Organize – organization of team members so that synergy can be realized.
3. To Motivate and Communicate
4. Job Measurement – measurement of performance so that it can be improved.
5. Develop People – to nurture the manager of the future as well as to build on one’s own skills.
If a manager can fulfill these objectives and make good decisions, then he will be on his way to becoming a successful manager. In order to make good decisions, a manager must define the problem, analyze the problem, develop alternative solutions , decide the best solution, and then convert decision into effective action. By picking the best solutions, the following should be born in mind – risk, economy of effort, timing, limitation of resources. If a decision needs to be sold, then Drucker suggests it is probably the wrong decision, however I would argue that this may be more of a symptom of communication breakdown or lack of involvement of parties who will be affected. In order to gain support for a decision, employees have to understand what change in behavior is expected and they need to be a part of the decision so they can see it as theirs.
In defining the manager of tomorrow, Drucker argues that the manager will need to have knowledge in all areas of the business. He also needs to be able to make more long-term decision-making, objective setting and forecasting. He foresees that new technology will enable managers to create new markets which will result in greater competition. An obvious example of this in today’s society would be the internet.
In order to adapt to future changes, the manager of the future will need to be able to manage by objectives, take more risks for longer periods ahead, make strategic decisions, build teams where each member manages and measures their own performance, communicate faster and clearer, know more functions of the business and also know more about the products and other industries. In order to be able to do this, a manager will require maturity and experience in addition to a formal education. As part of his conclusion, Drucker reminds us not to forget that the enterprise does not exist on its own – it is a part of a wider community and so a manager should always display responsibility to the wider community in all decisions that he makes.
To conclude, I think that Drucker makes some very useful suggestions on how to be an effective manager. I particularly thought that his viewpoint of dissatisfied employees was refreshing. His recommendation that a manager must always find a link between his own departmental objectives and those of the organization are essential for everyone to be moving in the same direction strategically. I did find his paternalistic view of the lower-level workers patronizing at times and his referral to managers as always being male was definitely an indication of the time the book was written. This should not detract however from some very valid points being made and some very useful suggestions on how I can raise my own performance in the workplace to that of a successful manager’s.