Management - Tasks, Responsibilities, Practices by Peter Drucker

553 Pages·2007·3.16 MB·English

MANAGEMENT
Tasks, Responsibilities, Practices

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 Acknowledg-
ments, 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 per-
mission.

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, 1909-
The 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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Preface:
The Alternative to Tyranny
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 pro-
tection 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 re-
sponse. The alternative to autonomous institutions that function and perform is not free-
dom. It is totalitarian tyranny.
Our society is neither willing nor able to do without the services that only the institu-
tions can provide. And the most vocal among our modern Luddites, the would-be institu-
tion 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 participa-
tory 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 responsi-
bility. 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, hu-
miliation, 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, re-
sponsible 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 man-
agement. 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 man-
agement. But without management there would also be only a mob rather than an institu-
tion. 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 contribu-
tion.
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 organiza-
tion 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 accomplish-
ments 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 func-
tion-focused. They deal with one aspect of a manager’s task. They may deal with manag-
ing 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 man-
agers 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 Mar-
keting”—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 func-
tional background, the mission and purpose of their institution, or the size of their organi-
zation. And this, then, meant a big book, since the manager’s job is big, and the manage-
ment tasks demanding.

Management, the book maintains throughout, is a discipline, or at least is capable of be-
coming 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.
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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 prob-
lems 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 un-
touched fundamental national characteristics throughout the world, such important areas,
for instance, as the relationship between government and business management, the fun-
damentals 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 Amer-
ica, or at least with American businesses and public-service institutions. I have con-
sciously 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, Ja-
pan, 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 manage-
rial approaches to culture and society and to present, especially in the examples and illus-
trations, 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 man-
agers 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 de-
veloped country, tackles a common task (e.g., the determination of profitability, the or-
ganization of work and workers, or the making of decisions) may help the Western man-
ager 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 oth-
ers 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 busi-
ness?”; 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 pur-
suits 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 philosophi-
cal 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 introduc-
tory 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 en-
visage, 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, per-
forming 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 to-
morrow’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; Brit-
ish edition, London, Heinemann, 1946 under the title Big Business); The Practice of
Management (New York, Harper & Row, 1954; London, Heinemann, 1953, and in Mer-
cury and Pan paperbacks); Managing for Results (New York, Harper & Row, 1964; Lon-
don, Heinsmann, 1966, and in Pan paperback); and The Effective Executive (New York,
Harper & Row, 1966; London, Heinemann, 1966, and in Pan paperback). But Manage-
ment, 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 Chap-
ters 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 illus-
tration 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 de-
mand for logic in argument and presentation have benefited every page.
My old friend and former colleague Arthur Lee Svenson, Burlington Industries Pro-
fessor 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 Lon-
don; and E.B. von Wehrenalp of Econ Verlag in Dusseldorf constantly helped with reas-
surance 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
Spring 1973
7
1111
The Emergence of Management
The Society of Institutions—From 1900 to 1970—The Employee Society—The Need
for New Social and Political Theory—Management: The Organ of Institutions—
Responsibility the Essence—From Business Society to Pluralist Society—Why Busi-
ness Management Has to Be the Focus—Business Management the Exemplar—
Business Management the Success Story—The Emergence of Management a Pivotal
Event

_______
D
URING THE LAST FIFTY YEARS, society in every developed country has be-
come a society of institutions. Every major social task, whether economic perform-
ance or health care, education or the protection of the environment, the pursuit of
new knowledge or defense, is today being entrusted to big organizations, designed for
perpetuity and managed by their own managements. On the performance of these institu-
tions, the performance of modern society—if not the survival of each individual—
increasingly depends.
Only seventy-five years ago such a society would have been inconceivable. In the so-
ciety of 1900 the family still served in every single country as the agent of, and organ for,
most social tasks. Institutions were few and small. The society of 1900, even in the most
highly institutionalized country (e.g., Imperial Germany), still resembled the Kansas prai-
rie. There was one eminence, the central government. It loomed very large on the hori-
zon—not because it was large but because there was nothing else around it. The rest of
society was diffused in countless molecules: small workshops, small schools, the individ-
ual professional—whether doctor or lawyer practicing by himself, the farmer, the crafts-
man, the neighborhood retail store, and so on. There were the beginnings of big busi-
ness—but only the beginnings. And what was then considered a giant business would
strike us today as very small indeed.
The octopus which so frightened the grandparents of today’s Americans, Rockefeller’s
giant Standard Oil Trust, was split into fourteen parts by the U.S. Supreme Court in 1911.
Thirty years later, on the eve of America’s entry into World War II, every single one of
these fourteen Standard Oil daughters had become at least four times as large as the octo-
pus when the Supreme Court divided it—in employment, in capital, in sales, and in every
other aspect. Yet, among these fourteen there were only three major oil companies—
Jersey Standard, Mobil, and Standard of California. The other seven were small to fair-
sized, playing little or no role in the world economy and only a limited role in the U.S.
economy.
While business has grown in these seventy years, other institutions have grown much
faster. There was no university in the world before 1914 that had much more than 6,000
students—and only a handful that had more than 5,000. Today the university of 6,000
students is a pygmy; there are even some who doubt that it is viable. The hospital, simi-
larly, has grown from a marginal institution to which the poor went to die into the center
of health care and a giant in its own right—and also into one of the most complex social
8
institutions around. Labor unions, research institutes, and many others have similarly
grown to giant size and complexity.
In the early 1900s the citizens of Zurich built themselves a splendid City Hall, which
they confidently believed would serve the needs of the city for all time to come. Indeed, it
was bitterly attacked by conservatives as gross extravagance, if not as megalomania. Gov-
ernment in Switzerland has grown far less than in any other country in the world. Yet the
Zurich City Hall long ago ceased to be adequate to house all the offices of the city ad-
ministration. By now, these offices occupy ten times or more the space that seventy-five
years ago seemed so splendid—if not extravagant.
The Employee Society
The citizen of today in every developed country is typically an employee. He works for
one of the institutions. He looks to them for his livelihood. He looks to them for his op-
portunities. He looks to them for access to status and function in society, as well as for
personal fulfillment and achievement.
The citizen of 1900 if employed worked for a small family-type operation; the small
pop-and-mom store employing a helper or two; the family household; and so on. And of
course, the great majority of people in those days, except in the most highly industrialized
countries—such as Britain or Belgium—worked on the farm.
Our society has become an employee society. In the early 1900s people asked, “What
do you do?” Today they tend to ask, “Whom do you work for?”
We have neither political nor social theory for the society of institutions and its new
pluralism. It is, indeed, incompatible with the political and social theories which still
dominate our view of society and our approach to political and social issues. We still use
as political and social model what the great thinkers of the late sixteenth and seventeenth
centuries, Bodin, Locke, Hume, and Harrington, codified: the society which knows no
power centers and no autonomous institution, save only one central government. Reality
has long outgrown this model—but it is still the only one we have.
A new theory to fit the new reality will be a long time coming. For new theory, to be
more than idle speculation and vague dreaming, must come after the event. It codifies
what we have already learned, have already achieved, have already done. But we cannot
wait till we have the theory we need. We have to act. We have to use the little we know.
And there is one thing we do know: management is the specific organ of the new institu-
tion whether business enterprise or university, hospital or armed service, research lab or
government agency. If institutions are to function, managements must perform.
The word “management” is a singularly difficult one. It is, in the first place, specifi-
cally American and can hardly be translated into any other language, not even into British
English. It denotes a function but also the people who discharge it. It denotes a social
position and rank but also a discipline and field of study.
But even within the American usage, management is not adequate as a term, for insti-
tutions other than business do not speak of management or managers, as a rule. Universi-
ties or government agencies have administrators, as have hospitals. Armed services have
commanders. Other institutions speak of executives, and so on.
Yet all these institutions have in common the management function, the management
task, and the management work. All of them require management. And in all of them,
management is the executive, the active organ.
The institution itself is, in effect, a fiction. It is an accounting reality, but not a social
reality. When this or that government agency makes this ruling or this decision, we know
perfectly well that it is some people within the agency who make the ruling or the deci-
sion and who act for the agency and as the effective organ of the agency. When we speak
of General Electric closing a plant, it is not, of course, General Electric that is deciding
and acting, it is a group of managers within the company.
Georg Siemens, who built the Deutsche Bank into the European continent’s leading
financial institution in the decade between 1870 and 1880 (see Chapter 49, “Georg Sie-
9
mens and the Deutsche Bank”), once said, “Without management, a bank is so much
scrap, fit only to be liquidated.” Without institution there is no management. But without
management there is no institution. Management is the specific organ of the modern insti-
tution. It is the organ on the performance of which the performance and the survival of the
institution depend.
Management Is Professional
We further know that management is independent of ownership, rank, or power. It is ob-
jective function and ought to be grounded in the responsibility for performance. It is pro-
fessional—management is a function, a discipline, a task to be done; and managers are the
professionals who practice this discipline, carry out the functions, and discharge these
tasks. It is no longer relevant whether the manager is also an owner; if he is, it is inciden-
tal to his main function, which is to be a manager. Eiichi Shibusawa’s Confucian ideal of
the “professional manager” in the early days of modern Japan (see Chapter 2) has become
reality. And so has Shibusawa’s basic insight that the essence of the manager is neither
wealth nor rank, but responsibility.
From Business Society to Pluralism
The rhetoric of the New Left talks of our society as being a big-business society. But this
is as outdated as the rhetoric of the New Left is altogether. Society in the West was a
business society—seventy-five years ago. Then business was, indeed, the most powerful
of all institutions—more powerful even than some governments. Since the turn of the cen-
tury, however, the importance of business has gone down steadily—not because business
has become smaller or weaker, but because the other institutions have grown so much
faster. Society has become pluralist.
In the United States in the 1970s, no businessman compares in power or visibility with
the tycoons of 1900, such as J. P. Morgan, John J. Rockefeller, or—a little later—Henry
Ford. Few people today even know the names of the chief executive officers of America’s
biggest corporations; the names of the tycoons were household words. Not even the larg-
est corporation today can compare in power and even in relative wealth with those ty-
coons who could hold the U.S. government for ransom.
It makes little sense to speak of the “military-industrial complex.” The high level of
defense spending in the United States has for many years been an economic depressant. It
would make more sense to speak of the “military-university complex.” No business to-
day—in fact, no business in American history—has a fraction of the power that today’s
big university has. By granting or denying admission or the college degree, the university
grants or denies access to jobs and livelihoods. Such power no business—and no other
institution—ever had before in American history. Indeed, no earlier institution would ever
have been permitted such power.
In Europe things are only slightly different. Business career, have become respectable
to a degree unknown in 1900. They have gained equality with careers in government, in
academic life, or in the military—all of which ranked socially much higher seventy-five
years ago. But still there is no one in French business today whose influence and power
can compare with that of the DeWendel family of steelmakers in the France of the Third
Republic, or with the power which a few families of the Haute Banque exercised through
their control of the Banque de France and of French money and credit policy. There is no
businessman and no business enterprise in Germany today that can compare in power and
influence with the Krupps and other steel barons of 1900, or with I. G. Farben in the
1920s. There is no business executive in today’s England who can compare in power and
influence with the merchant banking families who, almost down to the 1930s, ran the
Bank of England and, through it, the British Treasury, as family fiefs.
Of all contemporary societies, Japan can most nearly be described as a business soci-
ety. Business management has greater influence in Japan than in any other developed
country. But even in Japan, there is no business manager today and no business enterprise
10