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MANAGEMENT IS PRACTICE

The basic work and the foundations of management were laid by practitioners and not by academicians, repeats the most influent management writer of the last 60 years.

Interview by Jorge Nascimento Rodrigues, editor of www.gurusonline.tv and www.janelanaweb.com (Portugal). Original version in english. Portuguese version published in the December edition 2001 of the portuguese magazine Executive Digest.
© Peter F. Drucker and Janelanaweb.com

The Economist just published a big (more than 20 000 words) Survey about The Next Society (November 3, 2001) written by Mr. Drucker. It was scheduled to be published the week of the terrorist attack (September 11), but had to be postponed. This is the year when Peter Ferdinand Drucker published THE ESSENTIAL DRUCKER - the book is published or about to be published in a three volume edition in Japan, Korea, Taiwan, China, Brazil (portuguese) and Argentina (spanish), and in a one volume edition in the US, UK, France, Italy, Germany, Poland, Finland, Holland and the Czech Republic. A contract with Russia is pending. Mr. Drucker just sent to Harvard Business Review a big article, tentatively entitled "People are our greatest liability", to be published next year.

One of the things that bother people from Academia was the fact that it was a journalist recorder of trends and a consultant with hands on the corporation life that wrote in the 40´s and 50´s the famous Concept of the Corporation and the "bible" The Practice of Management. Management doctrine comes from this ground and not from the business schools cathedrals?

P.D. - Let's make one self clear about one question - management is a PRACTICE like medicine or the law. And in a practice the basic work and foundations are ALWAYS done and laid by PRACTIONERS and not by academicians. Not until a PRACTICE is very mature can academicians - who are not themselves pratictioners - make major contributions. See the case of medicine: every important contribution, until the mid-nineteenth century, was made EXCLUSIVELY by practicing physicians - most of them, until the 1830ies, without university connection. From Hippocrates (Greece, 460-377 b.C.) to Joseph Lister (antisepsis in 1865) and Robert Koch (bacteriology, Medicine Nobel in 1905). Pasteur himself had no university connection when he made his great contributions. That is, medicine as an organized discipline is at least 2500 years old - but no one but a practicing physician made a major contribution to it until the mid-nineteenth century. Even now the major MEDICAL work - for example, heart surgery and heart transplants - have come out of the practice. The same is true of the law. The greatest work on law is surely the Corpus Juris Civilis, still the foundation of your legal system in Portugal. It is a compilation of the opinions of practicing lawyers! The two great scholars in American Law are respectively Oliver Wendell Holmes and Benjamin Cardozo - both practicing lawyers and judges.

The same applies to Management?

P.D. - Exactly. The founding contributions in Management were made by Frederic Winslow Taylor (EUA); Henry Fayol (France); Walther Rathenau (Germany); Shibusawa (Japan); H. L. Gantt (USA); Mary Parker Follett (USA); Alfred Sloan (USA). Not one had a university connection! In fact, without PRACTICE the academician cannot make a contribution to Management - as shown by the history of the Harvard Business School.

But when people considered you "Mr. Management" - the title Jack Beatty, a senior editor of The Atlantic Monthly, wanted for his 98 book The World According to Peter Drucker -, it seems you were the "founder", the "father" of management discipline...

P.D. - First let me add that MANAGEMENT as a DISCIPLINE was not MY invention - or rather I only carried out what had been asked for a full twenty years earlier. The first MANAGEMENT CONGRESS was held in Prague (Czech Republic today) in the 20's. It was convened by two eminent NON ACADEMICIANS - Herbert Hoover, the future US president and then US Secretary of Commerce, and Thomas Masaryk, the founder and first president of Czechoslovakia. One of them called for the systematic study of a discipline of Management - but no one listened.

Returning to the Business Schools, Harvard for instance is considered one of the "cathedrals" of management theory "production"...

P.D. - The story is this: in the mid-forties the then Dean decreed that Harvard Business School professors were not to do more than one day's consulting a week. Only two were exempt because they had their Harvard appointment before that dean came in - Georges Doriot and Ted Levitt. And it isn't accidental that those two were also the only ones who made major contributions in the next decades. Doriot is both the "father" of production management and of venture capitalism - he actually owned and ran the first venture-capital firm (and he was probably the greatest teacher the Harvard Business School ever had). Ted Levitt is the "father" of Marketing as a discipline (his 1960 article, entitled "Marketing Myopia", published by Harvard Business Review of July/August in that year) - he spent three days a week consulting! But otherwise nothing of any importance to Management came out of Harvard Business School for three decades. Then, in the early eighties, a new dean abolished the ban on practical work. And in no time at all, the Harvard Business School began to produce important work - Michael Porter and Rosabeth Moss Kanter for instance.

So, in the history of Business Schools we had a kind of gap with reality?

P.D. - Business Schools before World War II were largely "Schools of Commerce" and held in very low esteem. So, when after World War II - and especially after 1960 -, the Business School began to grow very fast, it yearned for "respect" by academia. This, unfortunately, meant, especially in the US, a yearning to be "accepted" by the schools of the humanities and the arts (US terms), and therefore to be "research institutions" rather than "professionals schools". One result of this was the mad rush into quantification - I happen to be a very old "quantifier", I wrote in 1929 some of the first econometric papers (one a mathematical model of the stock market, the other a mathematical model of commodity markets). But, in the sixties and seventies the American business schools excluded everything that cannot be quantified, which is most of business and management; and tried to quantify everything, mostly with ludicrous non-results. In the last ten years the pendulum has been swinging back - the situation is changing rapidly. But for twenty years - years of tremendous growth - the US business schools wasted an enormous amount of work and brains on quantifying trivia.

And what was the "driver" of that recent shift?

P.D. - One reason are the executive management programs for mature executives - we, in Claremont, started, in 1972, the first such as degree-giving program. Now there are some 360 in the US alone. The students in these programs simply rejected what the Business Schools offered. It made no sense to them and had nothing to do with their needs and with PRACTICE of management.

There's a lot of people that ignore you were one of the first professors of management...

P.D. - I became the first professor of Management in the US in 1949/50 at the Graduate Business School of New York University. Before that there had been professors of production management (Georges Doriot at Harvard was one), of sales management, of insurance management and so on - but no professor of management as such. And when the Harvard Business School wanted me - in 1947 or 1949 after my book CONCEPT OF THE CORPORATION had appeared - it wanted me as Professor of Human-Relations, rather than as professor of management. That, the then Dean argued (and with considerable reason) would be a total waste since the students - then only about 22 years old and fresh out of undergraduate college - would not be in management positions for at least 10 years by which time they would have forgotten everything they might have learned about Management per se 10 years earlier.

And what changed that mood?

P.D. - First, my book (Concept of the Corporation) - to everybody' surprise, including mine, a huge success - showed that there was a tremendous interest in management; and, second, the New York University's Graduate School of Business (GBA), which before World War II had been a very small school mainly in finance and accounting, suddenly faced an enormous demand from older students and specially from men (no women then) who had made a good career as specialists - for example, as engineers in the telephone company or as loan officers in a big commercial bank - and were now suddenly promoted into executive and management positions without any knowledge or background. And these were older people - around 35 or more - that is people who were going to apply management right away. It also was an evening school so that its students worked full-time and could apply on Monday what they had learned the preceding Friday. And these students wanted management - and there was no book on it except mine. So, GBA came to me - or rather their professor of sales management came to me. I had already accepted a job as Professor of American Studies at Columbia University though I felt uncomfortable with all the faculty feuds - Columbia was and is a typical university which means full of petty feuds and stupid intrigues - something I have never been interested in. So, I took the GBA offer to teach management. Something, by the way, that the University's president did not believe in (as he told me a few years later) - he thought it was a fad. And I too thought that I would teach management a few years and then switch back to History - American History or the History of Technology - and here I am, fifty years later, still teaching Management!

But some of your biographers underline that Academia is not your "love"...

P.D. - To be sure, the university has not been the CENTER of my work - writing has. But I have been a full-time faculty member since 1940 or 1941 - first in two independent colleges, and then as professor and head of the department at the Graduate Business School of New York University - and for several years also teaching as a Visiting Professor at Wharton. And since 1971 at a major Research university, the Claremont Graduate University [in Claremont, where Drucker has come to live and still lives]. At least since 1960, I could have had a senior professorship at any Graduate Management School in the US or in Europe. It's simply that I am not primarily interested in Academia. I love to TEACH - and still do, here in Claremont, despite my years - but Academia is, as I said, not the center of my life and work. Writing is.

How you evaluate the last 50 years' buzzwords - like total quality, excellence, competitive advantage, reengineering, core competencies, and so on?

P.D. - These things - including most of Michael Porter writings- are TOOLS. None is the answer. If they are advertised as such, or bought as such, they turn out to be "fads" - soon they are replaced by the next "girl of the month" (which is what the participants in my EXECUTIVE MANAGEMENT PROGRAM call them). But as tools, most of them are quite useful, and some - like the Six-Sigma approach, or EVA, which I originally called AVA (Added Value Approach) in my 1964 Managing for Results - help greatly. BUT THEY ARE TOOLS, and like every tool they are applicable to one task. They are no universal cures! I cannot use a hammer to cut my toe nails but also cannot use a toe-nail clipper to drive in a nail. And some of these tools are of very limited applicability - as is, for instance, a hedge clipper for a gardener; for other tasks one needs a garden rake, for instance. But still a garden rake is of no use to clip a hedge - something I plan to do tomorrow. By the way the tendency to claim that this or that new tool is the cure - all is typical for an IMMATURE discipline. Bleeding, for instance, was hyped in early 19th century in France as THE CURE for ALL ILLS from an upset stomach to schizophrenia!

So, what's the advice?

P.D. - What I tell my clients: whenever there is a new tool, let some else try it out and learn how to use it rather than be the first one and rush into it. After a few years one knows - because other people have made the mistakes. I admit that I have made exceptions - a few. I have, for instance, urged every one to adopt some of the new accounting (like EVA; or the Activity-Based Accounting; or the Economic-Chain Accounting), but only because a good many of my US clients, and especially my Japanese friends and clients, had successfully used these things long before they became "the rage" in the US.

How you "discovered" the organization concept as central organ of the modern society?

P.D. - I came to that conclusion as a result of my work in the nineteen-thirties and early nineteen-forties on the collapse of Europe - as a corollary of my books The end of economic man, of 1938/9, and The future of industrial man, of 1942/3. I then looked for a new organ of community organization and community integration and began to realize that we were emerging into a SOCIETY OF ORGANISATIONS with management as the new and central organ of the new organizations. As you know, my interest was not primarily in business but in society - and half of my books are not on Management (let alone on business - that is only the center of one of my books: the 1964 Managing for Results), but on History, Society and Community. But the business enterprise was both the most visible and the most accessible of the new organizations - and so I began to study it.

And the knowledge worker?

P.D. - As I told you - management is practice. And so I look out the window and, above all, look at society, since management is a social function. And it became clear, around 1950 or so, that the American population was moving into knowledge work. Before World War II only a small percentage of young people went into the university - and none of them then went into manual work. Education disqualifies for HONEST work - that is its main attraction for education, believe me! After World War II - largely because of the US GI BILL that guaranteed every returning veteran a university education - not to go to the university came to be seen as the exception. When I decided, in 1926, not to go full-time to the university - and I came from a family of doctors and lawyers in Vienna (Austria) - no one called me a "drop out". On the contrary, I was considered a responsible adult. Twenty-five years later, in the early nineteen-fifties, not to go to the university was already considered "dropping out". And it is probably not true- at least until very recently - that work today demanded more education than work demanded in 1910! It is not DEMAND that has created knowledge work and knowledge worker, but SUPPLY.

The "post-capitalist" society as a knowledge society was one of your greatest ideas. But for readers it is difficult to understand the difference with capitalism...

P.D. - And POST CAPITALIST? Very simple. In a capitalist system capital is the critical resource of production; and capital is totally separate from and opposed to "LABOR". In the society into which we are moving very fast, KNOWLEDGE is the key resource. It cannot be bought with money or created by "capital investment". And Knowledge resides in a human being, the knowledge worker. What's in a book or in a data base is at best information - and usually only data. In the knowledge society also the knowledge workers - through their pension funds and retirement funds - are the owners of capital who matter. The super-rich have become economically irrelevant. Capital and Labor thus are becoming one and the same. You may argue - my labor union friends do - that there is still the old "Labor". But, alas, that kind of labor - the traditional blue-collar worker - is a commodity. I can get blue-collar workers - and of excellent quality - any place in the world. That is I can move the production processes that use traditional labor any place and at my terms, PROVIDED I HAVE THE MANAGEMENT KNOWLEDGE. And if I have the KNOWLEDGE I can easily get the money - capital is fast becoming redundant, i.e. is ceasing to be a "resource".

You mean money is no more important?

P.D. - Don't misunderstand me. I AM NOT SAYING that MONEY is becoming unimportant or secondary. In fact, Money was probably MORE important before CAPITALISM (as the great French historian Fernand BRAUDEL has convincingly argued) - also the Old Testament makes it very clear, let alone all medieval literature whether Chaucer or that (horrible) german epic poem Helmbrecht by Meyer or Ronsard. But CAPITAL is not MONEY - it is money as factor of production, and that is no longer a controlling factor.

Ideas like Fukuyama's "end of history" or the most recent "The West Won" (meaning the democratic capitalist model won) launched some confusion in people's mind. Others talked about "clash of civilizations" and the peril of a new middle age. What's your comment?

P.D. - There is an old saying "stupid people make stupid mistakes and intelligent people make intelligent mistakes; and intelligent mistakes are much worse". Fukuyama is easily the most brilliant and most intelligent thinker of today. And so he makes the most intelligent mistakes - every one of his "absolutely certain" predictions has immediately been disproven by events. Simply because he is so brilliant and therefore has infinite trust in his own logical conclusions. I doubt that it ever occurs to him to look out the window. He starts with a Hegelian premise and follows it to its logical and absurd conclusion. About the triumph of democratic capitalism - yes, except in the world of Islam, where it has been a total failure. The total failure of Islam - militarily (against puny Israel), politically and, above all, economically - every Islamic country is relatively poorer today than it was thirty or forty years ago, and most are absolutely poorer - underlies, of course, the present severe crisis. Another Fukuyama "certainties", the end, or at least decline, of domestic disorder, it's been heating up, at least in the US - but also in Spain and, above all, in Japan; and so on.


THE BEST OF KEYNES AND SCHUMPETER

Between Keynes and Schumpeter what is the most "suitable" for today?

P.D. - We surely need a new economic theory - for many reasons. So far we have barely the first nibbles. And both KEYNES and SCUMPETER have a lot to teach us - more in how one THINKS economically than in their specific theories. As economic theory KEYNESIANISM has failed wherever applied - last in Japan these last 10 years. Japanese strictly followed KEYNESIAN economics, creating consumer purchasing power, creating unprecedented huge government deficits and the lowest interest rates EVER seen - without the slightest impact on the economy. And Keynes failed just as completely in the US in the nineteen-thirties or in France under Mitterand. Also, the basic KEYNESIAN model - (a) the national state is the only unit of economics; and (b) equilibrium is the norm [both, of course, traditional 19th/early 20th economics, well ante-dating Keynes] - is totally obsolete. Yet, KEYNES way of looking at an economy and his basic mindset - especially his views of the ends and purposes of economic policy - will have to guide us. Keynes, the theoretician, is totally outdated and disproved; Keynes, the thinker and methodologist, is more important than ever.

And Schumpeter, someone you knew from early years in Austria?

P.D. - He had NO ECONOMIC THEORY as such - he had INSIGHTS. There is no SCHUMPETERIAN ECONOMIC POLICY - except his distrust of politicians. But there are tremendous SCHUMPETERIAN INSIGHTS - that DYSEQUILIBRIUM is the normal state of a healthy economy; that there is NO PROFIT (other than MONOPOLY RENTS) except the profit of the innovator - and that is short-lived; that what we call "profit" is a genuine cost, the cost of capital; and that the Incidence of Taxation is as important as the level of taxation, and probably more important (something by the way, that he learned from an American economist, Seligman - something Schumpeter freely acknowledged). The new economics we need will probably start quite differently from Keynes or from Schumpeter - they may, I suspect, have to start with the GLOBAL economy as the unit (though no one yet knows how to do that). But they have to use both KEYNES' methodology and SCHUMPETER's insights.

© Janelanaweb.com, www.gurusonline.tv, Jorge Nascimento Rodrigues 2001

 
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