Peter Drucker's continuing relevance for electric cooperatives.

• Author: Boudreaux, Greg
• Position: Biography

Peter F. Drucker died on November 11, 2005 at the age of 95 at his home in Claremont, California. Often called the father of management and the world's most influential business thinker, his work influenced businesses and organizations large and small. Notable corporate giants, including Jack Welch and Bill Gates, acknowledge Drucker's profound influence. He did not, however, work only with large for-profit companies. He consulted at least as much with not-for-profits, and between 1985 and 1989, he was featured in a series of customized workshops developed by NRECA's Bob Kabat for electric cooperative managers and directors.

I was fortunate enough to attend those workshops, where I took extensive notes. I have read many of Drucker's 35 books and his articles that appeared in the Harvard Business Review and the Wall Street Journal. His writings and the thoughts he expressed in the NRECA workshops continue to be relevant to electric cooperatives today. This article attempts to summarize some of Drucker's most significant ideas on corporate management and why they remain so significant for electric cooperatives.

A Very Influencial Life

Peter Drucker was born in 1909 in Vienna, Austria and his distincitive thick accent stayed with him to the end. Throughout his life he met a diverse array of influential individuals. In 1927 Drucker moved to Hamburg, Germany to study law, and in 1929 he began working as a financial reporter for Frankfurt's largest daily newspaper. His first published article was positioned on the front page and announced the American stock market crash. In the early 1930s he published short pamphlets that offended the Nazis. Increasingly worried by the Nazis, Drucker left Europe and in 1937 moved to the United States, working as a correspondent for several British newspapers.

His first published book, The End of Economic Man: The Origins of Totalitarianism (1939) was highly admired by Winston Churchill who made it required reading for every new British officer. His second book, published in 1943, The Future of Industrial Man, brought him to the attention of managers at General Motors. GM invited him to study its corporate structure. The two-year study resulted in publication of The Concept of the Corporation in 1945. In this book Drucker introduced the concepts of decentralized decision-making and managing for the long term by setting a series of short-term objectives, referred to as Management by Objectives. This seminal publication set him on the path to being (as Business Week announced on its front cover) "the man who invented management."

In 1950 Drucker became a professor of management in the graduate business school at New York University and published a series of books, including The Practice of Management, Management: Tasks, Responsibilities, Practices, and The Effective Executive, all of which further expressed his thoughts about what makes managers effective.

In 1971 Drucker left NYU for the Claremont Graduate School, where he remained until 2002. He was said to form warm, friendly relationships with students and to grade all of his students' papers himself--a rare event for distinguished professors. He taught not only management but Japanese art, on which he was a noted authority. (The Japanese revered Drucker as a person and as a thinker of the highest order.) Drucker continued to write well into his 80s, penning such influential books as Innovation and Entrepreneurship, Managing in Turbulent Times, and The Age of Discontinuity. His last completely written "new" book was Management Challenges for the 21st Century in 1999. In 2001 he published The Essential Drucker, a compilation of selected chapters from earlier works. Peter Drucker, the world's most influential business guru, clearly transformed corporate management in the latter half of the 20th century.

The Concept of Management

Drucker's early books were the first in history to systematically analyze the concept of management. He described business corporations as a new kind of social institution requiring a new kind of professional leader. Until the turn of the 20th century, there were only three large organizations in the history of the world: the government, the military, and the church, all of which functioned through centralized command and control principles. Authority and power flowed only from the top tier of the organization.

Frederick W. Taylor, an earlier influential writer on management (1890), had developed a theory of scientific management in which supervisors were taught to break jobs down into individual activities that could be easily taught to unskilled workers. Drucker's work was unique in that he demonstrated how management evolved as a distinct discipline, simultaneous with and related to the development of new large business and not-for-profit organizations that were not centralized, that were not "command and control," and that were not made up of employees performing unskilled activities.

Drucker established that management is a real field that never before existed. It is neither an art nor a science, but a profession, akin to medicine or law, and one that is even more complicated. What is management? As he said again and again, it is about people: "Management's task is to make people capable of joint performance, to make their strengths effective and weaknesses irrelevant." Management defines and communicates common goals and values, by creating the right organizational structure and providing the training and development that employees need to respond effectively to change. Unlike the doctor or lawyer, the manager functions only through others, and in fact, through many others. Management is not simply getting other people to perform, but getting many others to perform in a joint, orchestrated process. This is why it is more complicated. The only real tools the manager has are communication, organizational design, and training and development.

Communication is essential because often people don't easily share or understand the organization's goals or values; the manager must communicate each of these clearly and consistently. Additionally, the manager must also constantly validate that employees (and board members) are interpreting those goals and values in the same way. Organizational design includes functions such as compensation and performance appraisal--functions that Drucker always said must be as simple and straight-forward as possible. Finally, training and development are essential for two reasons: First, no one comes into an organization from school knowing how to work. And second, people must be continually taught (through a focus on lifelong learning) because change is inevitable...