Why Drucker is more relevant than ever

PF Drucker was arguably the foremost thinker on management and business of the 20th century. Now, at the third annual conference in his name, Stefan Stern finds we need him as much as ever.

by Stefan Stern
Last Updated: 23 Mar 2016

It tells you something about the enduring appeal of one Peter Ferdinand Drucker that, six years after his death a week short of his 96th birthday, hundreds of delegates from around the world were prepared to make the trip to Vienna for last month's third annual Drucker Forum. In a business calendar not exactly underendowed with conferences and grand-sounding events, the Global Drucker Forum is one that actually seems worth the effort.

But why Drucker, still, and now? For one thing, he was extraordinarily prolific, producing 39 books on different aspects of management and working right until the end. He was visionary, predicting future trends ahead of the rest (he came up with the term 'knowledge worker' in the 1960s, for example). He agreed, in advance, with the Canadian writer William Gibson, who famously declared that 'the future is already here, it's just not evenly distributed'. Drucker's take? 'I never predict,' he said, 'I just look out of the window and see what is visible but not yet seen.'

Drucker's work and insights have lasted for a number of reasons. Growing up in Vienna after World War One, he was influenced by a rich blend of intellectual figures. And he learned to be sceptical about politicians and leaders generally, as anyone who was paying attention in the 1930s (that 'low dishonest decade', as WH Auden called it) would have been. In fact he left continental Europe in 1933, heading first to England and soon after to the US, where he was to spend the rest of his life. It was here that he got to grips with modern management, almost inventing it as a category worth studying. His time spent with General Motors in the 1940s led to his ground-breaking book Concept of the Corporation (1946). And from that point, a six-decade-long career was born.

Perhaps delegates came in search of answers to the question, what would Drucker do now? As luck would have it, the author of a book with that very title, Rick Wartzman, executive director of the Drucker Institute at the Claremont Graduate University in California and a Drucker expert, was in attendance to offer some educated guesses.

On top pay, Drucker was clear that paying top executives more than 15 or 20 times what the lowest-paid worker received was a mistake. In 1997 he said: 'In the next economic downturn, there will be an outbreak of bitterness and contempt for the super-corporate chieftains who pay themselves millions.'

As far as the banks are concerned, Drucker would have been withering. Any business has three chief responsibilities, Drucker used to say - to make a profit, to satisfy employees, and to be socially responsible. So that's none out of three for most of them, then.

The ongoing euro crisis would have troubled him most of all. He knew what can happen when economic crisis strikes. Governments fall and extremists exploit the chaos. Political extremism, of left or right, unnerved Drucker, as it did many Europeans of his generation. He would have been appalled by the behaviour of the 'Club Med' countries, and probably sceptical that a credible single currency could really contain so many countries of such varying economic health.

The conference was launched, fittingly, with a video message sent from California by Drucker's widow, Doris, now 100 years old. 'I'm the same age as IBM!' she declared, proudly and accurately (its incorporation occurred on the day of her birth in 1911).

She was followed by business thinker Charles Handy, a mere boy of 79. Handy pinpointed why so many Drucker pilgrims were sitting in the hall that day. There is great unease in business circles, not always discussed out loud, not always admitted to even by the most senior figures. What goes on at the top of those great glass towers in the financial centres, Handy asked, rather poetically. Did it really have anything to do with what Drucker had identified long ago as the real purpose of business: finding and keeping a customer?

And what of business leaders themselves? Sure, they invoked Adam Smith and his recognition that self-interest could be a powerful force for creating wealth. But, Handy said, along with free (if regulated) trade must come another vital aspect: sympathy. Smith saw this as the capacity of every person to 'enter into' the situation of another and bring his own 'sentiment' into play. We see all around us today the consequences of business being conducted in an uncaring manner, in a sympathy-free zone.

Drucker dealt with big ideas but in a practical and down-to-earth way. It was fitting, therefore, that this conference should also be the scene of a vigorous debate on the hottest management idea of 2011 - 'shared value'. In the new year issue of the Harvard Business Review, Michael Porter and Mark Kramer had hurled this concept onto the global management agenda. It has been much talked about since, at the risk of becoming a fad.

At its heart, 'shared value' is not really a fad - it is a relatively simple idea. 'Corporate social responsibility' and 'sustainability' do indeed risk becoming labels to be slapped on corporations as a flimsy PR exercise, Kramer said. What he and Porter are discussing is different. It is about using the power of business to deal with social problems. Dealing, at the level of business units, with knotty issues on the ground. And using the for-profit model to improve people's lives - hence 'shared value'.

Simple and attractive enough. Of course, there is a downside. Once an idea like this becomes popular it gets distorted and turned into a fad, a panacea, whether its authors like it or not. And that tendency was not undermined by Kramer's slightly evangelical style of delivery - more normal perhaps for a US business audience, but a bit much for some European ears.

Adrian Wooldridge, management editor of The Economist, used Druckerian lucidity to challenge the concept. It sounded a bit confused and unclear to him. He probably had a point. After all, 'management by objectives', one of the big Drucker ideas, calls upon managers to maintain focus. But 'shared value', by its very nature, seems almost to invite a blurring of boundaries and objectives (something Porter and Kramer would no doubt deny). The Drucker faithful wanted to believe in shared value, but were not completely convinced.

It was another man from Harvard Business School, Rakesh Khurana, who perhaps best captured the Drucker spirit and embodied it to greatest effect. His talk, too, was rooted in the context of today's financial and economic crisis. But he rejected the idea that this crisis is essentially a matter of human shortcomings and financial miscalculation.

No: something went wrong in management in the 1970s and 1980s and business schools played a large and ignoble part in this, he argued. The emergence of 'agency theory' - the idea that managers in public companies needed to have their pay tied to the share price to 'align incentives' and remove the temptation for managers to run the company for themselves - has been disastrous, Khurana said (as Charles Handy had also said earlier). Bad ideas became institutionalised.

But Khurana went further. 'Agency theory was an attack on managerial authority and legitimacy,' he said. 'It reduced managers to the status of simple servants of the shareholders.' It was as if 'managers had to be bribed to do their jobs ... Agency theory threw out the idea of management as a profession.'

This has proved destructive, Khurana said: a kindergarten appeal to self-interest. Managers need a moral story, he argued, a purpose bigger than themselves. 'Management and business need a moral narrative.' Hence Khurana's energetic work at Harvard to support the spread of the 'MBA oath' taken by students, and the idea that managers should once again aspire to be seen as professionals.

As he spoke, it was possible to sense that a newly reinvigorated Druckerism had taken flight. This is why you bother travelling to conferences: to be stimulated by some fresh, sharp thinking at close hand. But as usual Drucker had got there first. Consider this extract from a book written more than 40 years ago: 'Management is fast becoming the central resource of the developed countries and the basic need of the developing ones ... Management and managers are becoming the generic, the distinctive, the constitutive organs of developed society. What management is and what mangers do will therefore - and properly - become increasingly a matter of public concern rather than a matter for the "experts".'

You suspect that there will be an equally good attendance at the next Global Drucker Forum in Vienna in 2012.

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