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MANAGEMENT Tasks, Responsibilities, Practices PETER F. DRUCKER TRUMAN TALLEY BOOKS / E.P. DUTTON / New York 1 Copyright © 1986 by Peter F. Drucker. All rights reserved. Printed in the United States of America. Much of the material in this book has been published elsewhere in slightly different form;...

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PETER F. DRUCKER

TRUMAN TALLEY BOOKS / E.P. DUTTON / New York

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Copyright © 1986 by Peter F. Drucker. All rights reserved. Printed in the United States of America. Much of the material in this book has been published elsewhere in slightly different form; see Acknowledgments, page ... Chapter 18, “Paying the Professional Schools” (originally titled “Professional Schools Ought to Reap Some of Their Graduates’ Earnings”), copyright © 1982 by The Chronicle of Higher Education. Reprinted with permission. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system now known or to be invented, without permission in writing from the publisher, except by a reviewer who wishes to quote brief passages in connection with a review written for inclusion in a magazine, newspaper, or broadcast. Published in the United States by Truman Talley Books • E.P. Dutton, a Division of New American Library, 2 Park Avenue, New York, N.Y. 10016

Library of Congress Cataloging-in-Publication Data Drucker, Peter Ferdinand, 1909The frontiers of management. Includes index. 1. Management.

2. Industrial management.

I. Title HD38.D7713

1986

658

86-8004

ISBN 0-525-24463-8 Published simultaneously in Canada by Fitzhenry & Whiteside Ltd., Toronto COBE DESIGNED BY EARL TIDWELL 10 9 8 7 6 5 4 3 2 1 First Edition

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It is fashionable today to talk of a revolt against authority and to proclaim that everybody should “do his own thing.” This, then, I have to admit, is a most unfashionable book. It does not talk about rights. It stresses responsibility. Its focus is not on doing one’s own thing but on performance. Our society has become, within an incredibly short fifty years, a society of institutions. It has become a pluralist society in which every major social task has been entrusted to large organizations—from producing economic goods and services to health care, from social security and welfare to education, from, the search for new knowledge to the protection of the natural environment. It is understandable that the sudden realization of this change in the crystal structure of society has evoked an angry response, “Down with organization!” But it is the wrong response. The alternative to autonomous institutions that function and perform is not freedom. It is totalitarian tyranny. Our society is neither willing nor able to do without the services that only the institutions can provide. And the most vocal among our modern Luddites, the would-be institution wreckers, the highly educated young people, are even less able to do without the large organizations than the rest of us. For it is only in the large organizations that there exist plentiful opportunities to make a living through knowledge, to make a contribution through knowledge, and to achieve through knowledge. 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. But it is managers and management that make institutions perform. Performing, responsible management is the alternative to tyranny and our only protection against it. Management is work, and as such it has its own skills, its own tools, its own techniques. A good many skills, tools, and techniques are discussed in this book, a few in some detail. But the stress is not on skills, tools, and techniques. It is not even on the work of management. It is on the tasks. For management is the organ, the life-giving, acting, dynamic organ of the institution it manages. Without the institution, e.g., the business enterprise, there would be no management. But without management there would also be only a mob rather than an institution. The institution, in turn, is itself an organ of society and exists only to contribute a needed result to society, the economy, and the individual. Organs, however, are never

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defined by what they do, let alone by how they do it. They are defined by their contribution. Most books on management are books on the work of management. They look at management from the inside. This book starts with the tasks. It looks at management first from the outside and studies the dimensions of the tasks and the requirements in respect to each of them (Part One). Only then (in Part Two) does it turn to the work of the organization and the skills of management, and (in Part Three) to top management, its tasks, its structures, and its strategies. I myself have for many years been deeply interested in the management sciences, that is, in the manager’s logical and analytical tools. But there are no equations in this book, no graphs, no mathematical formulas, not even a table. The stress throughout the book is not on how to do, let alone on how to make the tools to do it. Even when discussing skills, even when discussing the management sciences themselves, the stress is on accomplishments and results. This book is task-focused throughout. This book is also manager-focused. The starting point was the question, What does the manager have to know, or at least to understand, to be equal to his task? The many, many books on management are skill-focused, discipline-focused, or function-focused. They deal with one aspect of a manager’s task. They may deal with managing a business or a hospital or with managing people, with tools, e.g., controls, or with specific problems. They deal with the author’s particular area of concern or expertise, rather than with the tasks of the manager. This book was designed to be different. It was designed to take as starting point and as principle that informs the entire work the manager’s needs rather than the author’s own knowledge or special areas of interest. This explains what is included and what is left-out. This is a long book—though I dislike long books. And yet it is not a comprehensive book, but highly selective. A good many readers, I am sure, will complain that this or that important topic is not even mentioned; many more will undoubtedly criticize the author’s decision to stress one topic while playing down another. Undoubtedly the author’s own judgment and his own preferences played a part. But I have at least tried to decide what belongs in this book and how much importance to give to it by an objective set of criteria, developed as the result of years of working closely with managers on all levels, with managers in large and small businesses, and with managers in business and in non-business service institutions. What every manager needs to know has been included in this book. What not every manager needs to know, however important or interesting, has been excluded, or at least given only cursory treatment. This explains why such topics as “Managing Money in the Business” or “From Selling to Marketing”—to name two chapters I had in my first draft—are not to be found in the book, or why, to give another example, the management sciences are treated in one short chapter only. It explains, however, why a good deal of space has been devoted to top management and to the relationships between structure and strategy—topics that are not commonly considered in a book on management. It was not my intention to include every problem any manager might conceivably have to face. But it was my intention to include those areas of concern with which all managers can expect to deal and in which all managers have to be literate regardless of their functional background, the mission and purpose of their institution, or the size of their organization. And this, then, meant a big book, since the manager’s job is big, and the management tasks demanding. Management, the book maintains throughout, is a discipline, or at least is capable of becoming one. It is not just common sense. It is not just codified experience. It is at least potentially an organized body of knowledge. This book tries to present the little we know so far. But it also tries to present the much larger body of our organized ignorance, that is, the areas in which we know that we need new knowledge, in which we can define what we need—but in which we do not as yet possess the knowledge. 4

Indeed, these areas of organized ignorance are perhaps the core of this book. For in management we have clearly outgrown the knowledge that had been painfully amassed in what one might call the Heroic Age of Management—the fifty years before World War II—by a few men and women working mostly in isolation and sustained by vision and faith rather than by public acclaim. It was this knowledge that the management boom of the twenty-five years between World Was II and 1970 popularized, disseminated, and made effective over most of the world. Now we know that even in the areas in which we have a little knowledge, we do not know enough. There are new tasks in these areas for which we are not yet equipped with tested, proven approaches and tools. New areas of challenge and new management problems have arisen, where we have done little work so far and where we have so far only ignorance rather than even a modicum of knowledge. This book attempts to identify and define these areas. But it also attempts to develop at least first approaches to these areas, to think through policies, principles and practices to accomplish the new tasks and to satisfy the new challenges. This book tries to equip the manager with the understanding, the thinking, the knowledge, and the skills for today’s and also for tomorrow’s job. While management is a discipline—that is, an organized body of knowledge and as such applicable everywhere—it is also “culture.” It is not value-free science. Management is a social function and embedded in a culture—a society—a tradition of values, customs, and beliefs, and in governmental and political systems. Management is—and should be— culture-conditioned; but, in turn, management and managers shape culture and society. From the beginning management was polycentric. Management as a discipline and management as a practice were tackled from the beginning by men of many nationalities and races. It was a temporary aberration in the years of the management boom to forget this and to believe instead—against all evidence—that management was an American specialty, if not an American invention. Today it is obvious again that management is polycentric. The management boom has not Americanized management. It has left untouched fundamental national characteristics throughout the world, such important areas, for instance, as the relationship between government and business management, the fundamentals of managing people, or the structure of top management. There surely is no “management gap” today between Western Europe or Japan, and the United States (if there ever was one). This book is based on my experience, especially as a consultant, and mainly in America, or at least with American businesses and public-service institutions. I have consciously attempted during the last fifteen years to expand my horizon and to work with managements outside the United States (especially in Great Britain, Western Europe, Japan, and Latin America). I have tried to study management outside the United States as well as inside. While the book still has a strong American flavor—inevitably so—I have tried to relate managerial tasks, managerial work, managerial organization, and managerial approaches to culture and society and to present, especially in the examples and illustrations, management as worldwide rather than as confined to this or that country. I have particularly stressed the Japanese experience—not only because far too few managers in the West understand Japanese management and organization, but also because an understanding of the often very different ways in which Japan, the only non-Western developed country, tackles a common task (e.g., the determination of profitability, the organization of work and workers, or the making of decisions) may help the Western manager to understand better what he himself is trying to do.* The basic conviction of this book throughout is that each country’s managers can and need to learn from the best others have to offer. *

For this reason I have also included a separate listing of books on Japanese management in the Bibliography.

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Management is tasks. Management is a discipline. But management is also people. Every achievement of management is the achievement of a manager. Every failure is a failure of a manager. People manage rather than “forces” or “facts.” The vision, dedication, and integrity of managers determine whether there is management or mismanagement. There are no anecdotes in this book; every illustration or example is intended to drive home an essential point. But in presenting cases and examples, I have also tried to make the reader aware of the men, and especially of the practicing managers, who first tackled major management jobs: Georg Siemens of the Deutsche Bank, for instance, first working out a century ago the function and structure of top management; Theodore N. Vail of the American Telephone Company, a little later, first thinking through “What is our business?”; or Thomas Watson, Sr., trying—and at the same time not trying—to make his little IBM become capable of growing into a big company. But the book always tries to integrate man and task. It tries to deal with objective and impersonal tasks but also with the human requirements, skills, and basic attitudes needed to perform these tasks. “Le style c’est l’homme” may apply to a writer. But in other pursuits style tends to be manner rather than substance. There is not much talk of style in this book. But there is stress on character. In the last analysis management is practice. Its essence is not knowing but doing. Its test is not logic but results. Its only authority is performance. This is therefore not a philosophical book even though it deals with fundamentals. It grew out of practice. And it centers on practice. “From Management Boom to Management Performance” is the title of the introductory section of this book. It could have been the title of the book itself. In the next decade managers will have to meet far greater performance demands than most of them can envisage, and in all areas. A great deal more will depend on their performance than the prosperity or even the survival of their own company or institution. For, to repeat, performing management of our institutions is the only alternative to tyranny in our pluralistic society of institutions. And the aim, the motive, and the purpose of this book are to prepare today’s and tomorrow’s managers for performance. In its aim, its scope, and its approach this book differs from my earlier management books: Concept of the Corporation (New York, John Day, 1946; new edition 1972; British edition, London, Heinemann, 1946 under the title Big Business); The Practice of Management (New York, Harper & Row, 1954; London, Heinemann, 1953, and in Mercury and Pan paperbacks); Managing for Results (New York, Harper & Row, 1964; London, Heinsmann, 1966, and in Pan paperback); and The Effective Executive (New York, Harper & Row, 1966; London, Heinemann, 1966, and in Pan paperback). But Management, while in every respect a new book, did, of course, evolve out of my earlier work. And I have not hesitated to draw on my earlier work where appropriate. The heaviest debt is owed to The Practice of Management. Direct borrowings from this earlier book are confined to a few pages in Chapters 4, 5, 6, 7, 34, and 36. But Chapters 20, 29, 31, and 50 also develop ideas that were first presented in The Practice of Management. At the most, however, such material accounts for one-twentieth or so of the text of this new volume—and primarily for basic concepts such as the question “What is our business?”; Business Objectives; Management by Objectives and Self-Control; and the elements in the work of the manager, which were first introduced in The Practice of Management twenty years ago and have since become fundamental tenets of management and key concepts. A word might be said about the use of cases and examples in this book. Wherever a company (or a public-service agency) is identified by name in the book, everything in the example or illustration is taken from published and universally accessible sources, whether the company’s own statements and reports or reports on it in the public press. The interpretation in every case is, of course, mine; but the facts are in the public domain. Wherever a company—or an industry—is not specifically identified by name I have 6

used—always with the company’s knowledge and consent—private information, whether obtained in the course of consulting work or, more often, through personal acquaintance, discussions in management meetings and seminars, or private correspondence. In every such case the company (or industry) has been so carefully camouflaged that even people in the company itself will probably not recognize it. The one thing the reader can be sure of if he reads of a “hardware manufacturer in the American Midwest” is that the company is not a hardware company and is not located in the Midwest. The facts given in the illustration are reported faithfully and accurately; the specific company where they occurred is carefully concealed. Acknowledgments To my wife, Doris, belongs the credit for whatever clarity and consistency this book may have. She took time out from her own work to read the draft carefully and several times. Her incorruptible ear for cliché, non sequitur, and bombast, and her uncompromising demand for logic in argument and presentation have benefited every page. My old friend and former colleague Arthur Lee Svenson, Burlington Industries Professor of Economics and Management at the University of North Carolina, consistently helped with encouragement and criticism throughout the long months of gestation. I did not always welcome his exhortation, “Try again; you can do better.” But the book owes a great deal to it—and so do I. My publishers: Cass Canfield, Jr., of Harper & Row in New York; S. Ishiyama of Diamond-Sha in Tokyo; John St. John and Malcolm Stern of William Heinemann in London; and E.B. von Wehrenalp of Econ Verlag in Dusseldorf constantly helped with reassurance and advice. Above all, they never lost patience with me even though I missed deadline after deadIine. Dorothy Demke, Jean H. Kidd, and Jerrie Pulis typed countless drafts, coped with my atrocious handwriting and with inexhaustible patience suffered with me through all the stages of the work. They deserve my warmest thanks. The people to whom this book owes the most cannot be mentioned by name. They are my clients—and clients—have a right to privacy. Still, this book would not be possible if a great many executives—in businesses and in non-business service institutions in the United States, but also in Europe Japan, and in Latin America—had not taken me into their confidence and, had not allowed me to share in their concerns and to work with them on their problems. It is the experience gained in this work and these relationships that made this book possible. Peter F. Drucker Claremont, California Sprin...