Peter Drucker, social science professor of the Claremont Graduate School in southern California, is widely recognised as one of the world’s leading authorities on the design and shape of corporations. A prolific book author, philosopher and business consultant, he has worked as a newspaper reporter, an economist and on advisor to banks as well as government
The knowledge worker today has mobility. The big challenge for an organisation is how can you keep your core people so they want to stay. Your core people have the most mobility.
"One of the great differences between skills and knowledge is that skills change only very slowly, but knowledge always makes itself rapidly obsolete."
Drucker was convinced that beginning late 20th century the world of work will belong to the knowledge worker and the task of managing them, will call for adopting of a new managerial paradigm, acquiring new knowledge, developing new capabilities and skills and adopting practices which were vastly different than those the managers had mastered for managing blue-collared workers. It was simply a new paradigm and he was convinced that the senior management was completely ill prepared to face this new challenge. Leaders therefore were required to learn fast and well to cope with the challenges of fast approaching new, complex world. To throw light on the theme of knowledge worker in the context of the 21st century, Anderson Consulting interviewed Peter Drucker at the time of releasing of his book, Post-Capitalist Society. This insightful, wide-ranging interview is reproduced below. We are sure that the reader will benefit from Drucker’s unique perspective on this new world of knowledge worker.
Knowledge is Power
Can Corporations Keep Their Best “Knowledge Workers?
An interview with Peter Drucker
For half a century, Peter Drucker has been telling the leaders of international business, finance and government what’s wrong and what’s right about the companies they run, the governments they lead and the organisations they pilot. In his latest book,
Post Capitalist Society, he discusses the new role of the worker and the corporation in what he calls, “the knowledge society,?a type of global organisation in which the new artisans are those who work with their minds rather than their hands. Outlook called on Drucker at his home in Claremont to talk about the knowledge workers and the challenges they pose.
AC: You have talked about the knowledge revolution as the new shape of business and indeed, society at large. But lets focus on the workplace ?and the corporation. What will the new corporation look like as a result of this revolution?
Drucker: Some of the things you can already see. I come from a medical family, and it’s a rule that the diagnosis begins with what ails the patient. Where does it hurt? When you look at today’s corporation, you see a tremendous uneasiness among the people who traditionally felt the most secure ?the supervisors and the middle managers. A week ago, I went to a major newspaper, had lunch there, then walked around and talked to them. I am skeptical about today’s newspapers for a very simple reason. I began on my 20th birthday at a newspaper with a circulation of 600,000 and 14 editorial employees. Now, such a paper has an editorial staff of 1,900! And so when I am told they are cutting back to 1,000, I am a little dubious. I am old-fashioned. I don’t quite see what all those folks are doing. There is a great uneasiness among both copy editors and department heads who see themselves basically made unnecessary or redundant by technology, but also because they are putting more and more of the job on the writer ?on the lowest professional level.
AC: Companies are finding they can outsource many jobs of today’s knowledge workers ?relieving these businesses from the burden of training and employing all these people. Yet, aren’t we burning our intellectual capital this way?
Drucker: We must accept that we are going to outsource more and more of the work. Let me give you an example ?the worlds largest hospital maintenance company. Its biggest region is southern California, and a Mexican woman who 25 years ago started with just a broom and a pail runs the southern California area. If she had worked in an ordinary hospital she would still be working there with a broom and a pail. But working for a maintenance company offered her opportunities. That woman encountered an old problem ?how do you make the bed when you can’t move the patient. An old patient lies there in traction with sciatica, so the maintenance woman reasoned she could cut the sheet in half, in fact in three pieces. It’s very easy then. They snap together. You don’t have to move the patient. It cuts making the bed from 12 minutes to 2 minutes. But no hospital administrator, no nurse, no surgeon, would ever have looked at it.
When you outsource you create opportunities, because in that firm that runs your legal library and runs the legal library for 50 law firms, there are opportunities. You run the legal library in one law firm, you will never make partner, I assure you. You create opportunities for people by outsourcing tasks that are not central to your business but may be central to others.
AC: What incentive is there for companies of the future to participate in the process of training knowledge workers if they can go out and buy them fully educated from somewhere else by out-sourcing their functions?
Drucker: In Dusseldorf some months ago, I sat down with the son of an old friend who is just moving out of a very senior position in a big company and into the government. “You in America surprise me,?he said. “You are now talking about the German apprentice training program just when we realises that it cannot be perpetuated.?It is based on the assumption that a young person who has been your apprentice in that combination of apprenticeship and school, then stays with your firm. The assumption was that the firm might fire him because he is no good, but if the firm wants to keep him, he will stay. But 60 percent of them don’t stay anymore. What is happening is very
simple. The big companies train the people for the medium-sized companies and the medium sized ones train them at the minimum because the law says they have to.
The knowledge worker has horizon and mobility. Every year when I come back from
vacation, I go to our university registrar’s office and say, “Give me 25 folders of good students who graduated 10 years ago.?Then I take the telephone and call them. Three out of five people in this country who are college graduates change their jobs in the first five years, that hasn’t changed. But they used to go to another big company. Today, they only go to a big company in the beginning, and for two reasons. The first is the big companies are the only ones who send recruiters. That is a very important reason. And the other reason is they are the only ones who have a training program. After three years of training, practically all of them went to another big company 10 years ago. Now very large groups, perhaps 60 percent, move to a medium-sized or small company. Once you knew that when you went to General Electric, you had a lifetime job. Maybe you only made it to assistant division controller, but you sat there until you were 65, and you retired. Today you know that even the very large company knows no job security.
The knowledge people increasingly see themselves as journeymen who have their tools and can Take them where they find what they need. The knowledge worker today has mobility. The big challenge for an organisation is how can you keep your core people so they want to stay. Your core people have the most mobility.
AC: Aren’t you putting too much power in the hands of these knowledge-worker stars within a company?
Drucker: Stars have power.
AC: Doesn’t that distort corporate management?
Drucker: The largest work forces in this country are the volunteers of non-profit institutions. Ninety million people. There is that young women in Chicago who is a partner in an accounting firm. I am talking of an actual person, who has a husband who is a chairman of a big department at the University of Chicago. She has two small children and she works on the side as financial advisor to her school board in a large Chicago suburb. I said to her, “Jeannie, how can you do that?” And she said, “ You know, I love the accounting job. You can’t imagine how interesting it is. But I haven’t the foggiest idea what my firm really tries to do. The school board, I know.”
I work a lot with volunteers. What attracts, what keeps them? First, they have a clear sense of what the organisation is. And they have a clear sense of their contribution.
Second, a challenge — I can put my knowledge to work. Talk to the people in my executive management program — you get the same complaint. “They don’t challenge me. I don’t make enough of a contribution.” And I ask them, tell me about your job. If there is one thing you want to change, what is it? The one thing they almost always say — a clearer sense of mission. Not more power, not more responsibility, a clearer sense of mission. And make more use of what I know, what I can do.
AC: Can’t you just buy the best person you want; can’t you wipe all that away with money?
Drucker: The best people can get the money they want anyplace. They don’t need you. Even the highest bidder — you could turn the bid of the highest bidder into a bargaining chip.
AC: If the knowledge worker is saying, “ I need more responsibility.” Isn’t it the role of the manager of the knowledge workers to make them feel fulfilled in their jobs?
Drucker: The manager also has to ask, “ What can I learn from you?” And take it seriously. I was with an old client in a pharmaceutical research lab. I have known these people since 1950. Many of them, disciples of mine, organised this lab in the 1950s. They just had a retirement party for the fellow who started it. His successor is a geneticist — but there was no such thing in 1960. And my friend said, “You know I am ready to retire. Everyone now is a microbiologist. Don’t ask me what it is, I don’t know. I’m a pharmacologist. When I began everyone was a pharmacologist. Now, 40 years later, they are microbiologists and biochemists and geneticist and physicists. What are they talking about? My job for the last five years has not been telling them what to do, but learning from them what we can do.” A very wise man. And they have produced good results.
AC: Does it make sense that the knowledge worker is closer to the customer?
Drucker: Yes. This is one of the great differences between yesterday’s production worker and today’s knowledge worker. In 1950, Henry Ford II said to me, “Peter, we have to give the worker a sense of accomplishment.” For the fellow making the hubcaps, twice a week there was a family day and the kiddies came in and Daddy could say, “This is what I make.” So Sunday when he takes the kiddies to the park, they will point to a Ford and say, “Look at the hubcap-Daddy put that on.” Ford gave that up after two or three years. It made no impact whatsoever. It was much too far away from the worker.
I talked with one of the Benetton people on Florence. I asked how they select merchandise. And she said, “That’s not our most important decision. Our most important decision is hiring store managers.” And I said, “How do you hire store managers?” “We look at her, is she fashion conscious?” the Benetton official said. “The rest we can teach her. If she isn’t fashion conscious, she will have no rapport with the customer.
AC: What should be the interaction between the knowledge company, the knowledge worker and the knowledge society we are coming to?
Drucker: Knowledge worker is as big a category as was manual worker, which included everyone from a great cabinetmaker to the ditch digger and everyone in between. If you look at knowledge workers, you may think only people with higher education or researches. But the fastest growing group is what I call technologists, people such as physical rehabilitation worker who works very hard with his or her hands and with a foundation of a very extensive theoretical knowledge. Or the computer repairman who comes to your home to repair computers. Or the technologist in the hospital who does tests of brain waves or lung capacity, all of which is manual work in many ways but
whose foundation is no longer apprenticeship and skill but formal knowledge which you can only really acquire in a school. It’s an enormous bandwidth of specialisation. So you are talking about a very diverse type of group. A substantial part of what you do must be acquired in a formal systematic way in the school. In other words, experience alone — or apprenticeships for that matter — doesn’t do it anymore. And secondly, you cannot supervise these people.
My nephew is a successful radiologist, and when I visited New York City recently, he said, “I cannot see you. I have to go to a course.” Now, he happens to be a professor of radiology at the medical school. I said, “ Are you teaching?” And he replied, “ No, I am going to a refresher course.”
Knowledge makes itself obsolete very fast. This has much to do with the whole way society will function. It will change the whole educational system — shift it to continuing, education of adults, the real center, rather than the kiddies. There is a kind of mobility that is not just mobility in terms of jobs but the ability to shift to switch interests, concerns and values incredibly fast.
AC: It seems that each time there was a major change in the nature of the industrial system there was a major change in the nature of the state, or vice versa. How is our nation, our way of governing, going to change in response to the knowledge revolution?
Drucker: Maybe there are many other factors at work — the tremendous explosion of information, and access to it. Information and money are totally supranational, transnational. What does that do to the state? We have no successor, no substitute for the political institution, which is rapidly becoming impotent. We are at the point where Mr. Major in England practically said government couldn’t do a damn thing about the economy. I don’t think he actually said that, but if he said it, I don’t think he would have surprised many people. Mr. Clinton isn’t ready to say it and the American public isn’t ready to hear it. But I think it won’t be long. The conditions under which the economy can function, its short-term fluctuations, are beyond government, if only because changes take so long. The tasks of government have to be redefined, but not necessarily because of the knowledge explosion. That’s only part of it.
AC: Because of what else?
Drucker: the complexity of a world in which governments have become totally splintered. They try to do everything, and nobody can do everything. And what are the key jobs? The same jobs that 400 years ago the inventor of the national state defined as defense, law and order and minimum control of the basic economy.
AC: The knowledge revolution should be uniting the world, but we seem to be regressing back to a world that is even more fragmented.
Drucker: Maybe because with information becoming really transnational, there is that feeling that your fate is being determined in a place you can’t even find on a map — where is Nagoya, for instance? Yet that is where the decision is being made whether this plant stays open. That feeling of helplessness. In natural disasters, people immediately form local communities. The bomb shelter in London during the Blitz became a community. Maybe that is what we will see. The feeling that the forces that determine my life and my life’s work are so far away that I don’t understand them. Suddenly they matter because they enable you to create this small community with a feeling that we can still make decisions.
Peter Ferdinand Drucker, said to be the man who invented management, died in his sleep on November 11, at the age of 95 in Claremont, California.From 1971 until his death he was the Clarke professor of Social Science and Management at the Claremont University.
The university named its management school after him in 1987. He taught politics and philosophy for more than 20 years when he was a professor of management at New York University of Graduate Business School. He had not actively taught classes since 2003 but remained a consultant to the business school until his death. Besides studying organisations, societies, governments, teaching, writing, Drucker also dedicated time to the service sector founding the New York based Peter F Drucker Foundation for Non-Profit Management known as the leader-to-leader institute from 2003.
Peter Drucker was a teacher, writer and consultant specialising in strategy and policy for businesses and social sector organisations. He consulted with many of the world’s largest corporations as well as with non-profit organisations and with the agencies of the U.S Government. He also worked with Free-world Governments such as those of Canada, Japan and Mexico.
On his death much has been published in the media about his life, his work, his books and his contributions to the discipline of management.
We at CHANGE believe that Peter Drucker’s ideas and thoughts are extremely relevant even today for managers. It is impossible to write about his ideas in the space available to us, but in the article we have listed his major concepts. Also we have provided a repository of Drucker’s work for easy reference to the interested reader.
Some ideas, concepts that Peter Drucker wrote about, namely:
A desire to make everything as simple as possible. According to Drucker, corporations tend to produce too many products, to hire employees they don’t need (the better solution is contracting out), and to expand into economic sectors that they should stay out of.
A belief in what he called “the sickness of government.” Drucker made ostensibly non-ideological claims that government is unable or unwilling to provide new services that people need or want — though he seemed to believe that this condition is not inherent to democracy. Even successful programs, such as US Social Security, long ago ceased to be interesting to an increasingly alienated citizenry.
The need for “planned abandonment.” Corporations as well as governments have a natural human tendency to cling to “yesterday’s successes” rather than seeing when they are no longer useful.
Productivity can be improved through scientific management.
The need for community. Early in his career, Drucker predicted the “end of the economic man” and advocated the creation of a “plant community” where individual’s social needs could be met. He later admitted that the plant community never materialised, and by the 1980s, suggested that volunteering in the non-profit sector might be the key to community development.
Drucker’s basic model for an effective executive can be summarised as follows:
1. Effective executives know where their time goes. They work systematically at managing the little of their time that can be brought under control.
2. Effective executives focus on outward contribution. They gear their efforts to result rather than to work. They start out with the question 'what result are expected of me rather than with the work to be done.'
3. Executives build on strengths-their own strengths, strengths of their superiors, colleagues & subordinates. They do not start out with the things they can't do.
4. They concentrate on the few major areas where superior performance will produce outstanding results. They force themselves to set priorities & stay with their priorities.
5. Effective exectuives finally make effective decisions. They know that this is after all matter of taking the right steps in the right sequence. What is needed is the few but fundamental decisions. What is needed is the right strategy rather than razzle dazzle tactics.
(contributed by- Mr. Atul Natu, Retailing Division)
People remained the focus of Drucker’s work for over 60 years. (He rejected a career in economics for what he considered its lack of interest in human matters.) Management is essentially a social function, Drucker believed.
It is possible to consider his impact under four headings that derive from that people-centered approach.
Concept of the corporation
Though an admirer of great corporations, Drucker nonetheless felt that their inherited structures were too often centralised and rigid. This did not play to the talents and abilities that knowledge workers had to offer. Inefficient hierarchies had to be challenged. This idea influenced General Electric’s restructuring in the 1950s, but its inspiration had come earlier.
Drucker had spent two years studying the structure of Alfred P. Sloan’s General Motors in the 1940s, producing The Concept of the Corporation (1945). Drucker really began the whole conversation about peer groups and about how knowledge and information is shared within an organisation.
Create a customer
The Practice of Management also contains this famous Drucker statement: “There is only one valid definition of a business purpose: to create a customer. Markets are not created by God, nature or economic forces, but by businessmen. The want they satisfy may have been felt by the customer before he was offered the means of satisfying it . . . But it was a theoretical want before; only when the action of businessmen makes it an effective demand is there a customer, a market.”
Drucker was a critic of centralised, dehumanised systems that looked back to “scientific management”. He imagined a new kind of work, one that relied more on the intellectual contribution of employees and less on their basic physical capacity.
But while much of Drucker’s earlier work had considered the valuable contribution employees could make when they were seen as a resource and not merely a cost, it was not until his 1969 publication, The Age of Discontinuity, that he spoke specifically of the “knowledge worker”, a phrase he made his own.
“Though the knowledge worker is not a labourer, and certainly not proletarian, he is not a subordinate in the sense that he can be told what to do; he is paid, on the contrary, for applying his knowledge, exercising his judgment and taking responsible leadership,” Drucker wrote.
He had to wait almost 30 years, until the hype-filled days of the “new economy”, for the term knowledge worker to achieve popular acceptance. But his description of the modern employee, using more brain than brawn, is now conventional wisdom.
He shifted the focus of companies, and got them to see that value was derived not from goods but from intellectual capital. The concept of the knowledge worker lives on, even if people now have more specific job titles to describe what they do.
In one of his last works, Management Challenges for the 21st Century, Drucker returned to the theme: “The most valuable assets of a 20th century company were its production equipment. The most valuable asset of a 21st century institution, whether business or non-business, will be its knowledge workers and their productivity,” he wrote.
Management by objectives
Drucker argued that management, at all levels of a business, lost its way when not adhering to a disciplined pursuit of objectives, both in the long and short term. The impact of this simple assertion has been dramatic.
Drucker first wrote of “management by objectives” in his 1954 work The Practice of Management. The phrase stuck. MBO has been perhaps the most influential of all of his ideas. Who has not had to attend a planning meeting and been confronted by a flip chart with the word “Objectives” written in large letters at the head of the top sheet?
MBO, perhaps because of being almost universally adopted, has also been the most misunderstood of Drucker’s concepts. Criticisms have been made of MBO for many years. In 1970, US psychologist Harry Levinson wrote an article in the Harvard Business Review entitled “Management by Whose Objectives?” in which he argued that MBO failed to take account of employees’ motivations.
Peter Drucker was a Management Visionary and revered as the father of modern management. His teaching, writing, and consulting always stressed being effective, managing people well, being innovative, being entrepreneurial. He also focused on developing strategies to deal with the challenges of an ever-changing world. For example, he was the first one to caution American managers about the impending threat to their well being from the companies of Japan, Korea and China. He was convinced that unless, middle managers become more effective the organisation didn’t have a chance to survive and prosper. So strong was his conviction, that he focused substantial part of his thinking on developing ways and means for improving the effectiveness of middle management. His book, The Effective Executive is an example of his deep concern. In the management field it is a rare phenomenon that a thinker of his stature has concentrated so much on one segment of managers, namely the middle managers.
He wrote in a style that was direct and simple, making himself understood clearly. Many academics thought that he was somewhat trite but the accolades he received, the popularity he had, proved the academics wrong. Once again, it was a question of being effective. He was a thought leader par excellence and many of his theories and insights are so well embedded in the mainstream managerial practice, that it is difficult to imagine a sound practice without them.
He was a life long learner and had mastered the art of learning. In one of his interviews, he informed the journalist that throughout his long learning, teaching career of over 50 years, he has endeavored to prepare a lecture on a new topic every month, write an article every 3 months and write a book every year. Besides management, he was considered an authority on Japanese Art. No wonder his output has been so prodigious!
Peter Drucker has written 42 books in all. 22 deals with management, 19 cover society, economics and politics. 2 are novels and one is an autobiography. He is a co-author of a book of Japanese Paintings. He has been an editorial columnist for the Wall Street Journal, The Atlantic Monthly, The Economist and a frequent contributor to The Harvard Business Review. Three of his articles in the HBR were judged winners of the prestigious Mckinsey Award; and more significantly the article that he wrote at the age of 92 won the McKinsey Award in 2004.
One of the important trend he foresaw was the change in the nature of work itself. Before anyone else he foresaw the advent of the knowledge worker. He predicted the decline in the number of blue-collar worker and substantial increase in the number of workers who he had labeled as knowledge workers. This new breed of workers is using the knowledge to create value for their organisations. He concluded that the task of managing knowledge workers was not the same as that of managing blue-collared workers. The world of blue-collared workers was essentially managed by the thoughts propagated by F.W. Taylor. This so called scientific management depended heavily on time and motion studies for improving productivity.
(Contributed by Mr. Indrapal Singh and Ms. Jui Karandikar)