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The Wisdom of Peter

Drucker from A to Z
Known widely as the father of management, Peter Drucker
formulated many concepts about business that we now
take for granted. On the 100th anniversary of his birth, we
take a look at Drucker's contributions, from A to Z.

By Leigh Buchanan | Nov 19, 2009

The Drucker Institute, Claremont Graduate University

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Peter Drucker was known to gently chide ambitious acolytes

to replace their pursuit of success with the pursuit of
contribution. Certainly few people contributed as much to
Twentieth Century business, social, and political thought as
Drucker, who was born 100 years ago--on November 19, 1909--in
a suburb of Vienna.

Known widely as the father of management, Drucker immigrated

to the United States in 1937. In a career that produced 39 books,
as well as lectures, classes, consultations, and even movies,
Drucker anatomized the functioning (and dysfunctioning) of
companies. It would be easier to list the ideas he didn't
promulgate in some form than those he did. (As far as we know
he never weighed in on Secret Santa or pets in the workplace.)
Much of the business lexicon bruited about in offices--from
"knowledge worker" to "management by objective"--can be
traced to Druckerian coinage. For decades harried CEOs have
restructured their work lives based on Drucker's almost zen
insights about efficiency and time management. His
pronouncements on customers, marketing, and profitability
deserve to be framed and hung in every corner office to remind
business leaders where their priorities should lie.
Encountering Drucker for the first time, readers may dismiss as
obvious his observations on subjects like motivating workers and
encouraging innovation. But such observations were far from
obvious when Drucker first made them; and if they seem so now
it is because his wisdom and clarity compelled so many
companies to act as he advised. "What I find is that whenever I
think I have got a really creative idea, if I go back [to] Peter's
books I always find he already said it first," said One-Minute
Manager author Ken Blanchard during a celebration of the
centary at Claremont University's Peter F. Drucker
and Masatoshi Ito Graduate School of Management. Drucker had
the ears of CEOs, heads of state, and major philanthropists.
Corporate titans likeGeneral Electric and Toyota were swayed by
his ideas. "Drucker gave us the language, the metaphor, the lens,
the understanding of the role of management as the critical
function," said Good to Great author Jim Collins at
the Claremont event.

In honor of the centenary, we have compiled an alphabetical list

of some people, places, and concepts drawn from the life and
works of Drucker.

Abandonment: Jim Collins earns applause when he lectures

about his "stop doing" list. Jack Welch gained fame for shedding
businesses in which General Electric wasn't first or second. But it
was Drucker who first suggested that choosing what not to do
was a decision as strategic as its opposite. Drucker's theory of
"purposeful abandonment" exhorted business leaders to quickly
sever projects, policies and processes that had outlived their
usefulness. "The first step in a growth policy is not to decide
where and how to grow," he told author Jeffrey Krames in 2003.
"It is to decide what to abandon. In order to grow, a business
must have a systematic policy to get rid of the outgrown, the
obsolete, the unproductive."

Bystander: Though he bestrode the management world like a

Colossus, Drucker was less assuming than many of today's mega-
wattage gurus. An early advocate of servant leadership, he both
valued and practiced humility, describing himself as a
"bystander" who is "on the stage but not part of the action." Even
his quasi-autobiography,Adventures of a Bystander, refracts
Drucker's life through the stories of people he had known, such
as Sigmund Freud and Henry Luce.

Customers: Having trouble formulating a mission statement?

Let Drucker boil it down for you: "The purpose of business is to
create and keep a customer," he argued. And: "What does our
customer find valuable?" is the most important question
companies can ask themselves. This focus helped reorient
marketing away from advertising and onto a higher plane.

Decentralization: Little fish learn to be big fish in little ponds.

Drucker favored decentralized organizations because they create
small pools in which employees gain satisfaction by witnessing
the fruits of their efforts, and nascent leaders can make mistakes
without bringing down the business. When Drucker laid out
these ideas in the mid-1940s, the command-and-controllers who
dominated corporations were not amused. Today, of course,
"stovepipe" organizations--those that remain--are widely
maligned for their failure to make the most of human and
information resources.

Effectiveness: Perhaps the most revelatory insight in the

history of time management tore the bottom out of Frederick
Taylor's time-and-motion studies: "Efficiency is doing things
right," Drucker wrote in The Effective Executive. Effectiveness is
doing the right things." What's true for individual managers is
also true for organizations, which often squander time and
resources trying to improve processes for products not worth
producing. The solution? See "abandonment," above.

Future: Drucker dismissed attempts to label him a "futurist,"

insisting that "the best way to predict the future is to create it"
and "the only thing we know about the future is that it will be
different." Still, his forecasting tended to be spot-on. Among
other things, he anticipated the rise of Japan, the importance of
computers, and the backlash against executive pay. His method
was to study significant events that had already occurred and had
predictable effects going forward. Or to use Drucker's elegant
oxymoron: "the future that has already happened."

General Motors: Drucker's Concept of the Corporation(1945)

was arguably the first drop in what would become a deluge of
organizational and management studies. The corporation in
question was GM, to which Drucker was given the kind of access
for which today's business scholars would sell their grandmas up
the river. Drucker's conclusions about corporate structure and
management style and their effect on worker productivity and
morale were enormously influential--although they so annoyed
then-CEO Alfred Sloan, that he pretended the book didn't exist.

Hitler: Drucker's first book, The End of Economic Man, was a

study not of management but of totalitarianism. Living
in Germany during Hitler's rise (two pamphlets he wrote--one
praising a German-Jewish philosopher and one roundly
condemning the National Socialists--were banned and burned by
the Nazis), Drucker was achingly aware of the worst government
and society could dish out. His later writing can be interpreted as
a lifelong quest for functional, principled institutions.

Innovation: Thomas Edison would get no pushback from

Drucker on his 1 percent inspiration-99-percent-perspiration
formula. Drucker believed that innovation--"the specific function
of entrepreneurship"--must be methodically ferreted out, and he
posited seven likely places to find it: in unexpected occurrences,
incongruities, process needs, new knowledge, demographics,
perceptions, and changes in industries and markets. The crucial
characteristic of innovators is focus. Even Thomas Edison,
Drucker pointed out, "worked only in the electrical field."

Japan: The Japanese found much to love about Drucker in the

1960s, as industrial giants like Toyota embraced his theories on
the primacy of employees and ideas about marketing--a
comparably nascent discipline there. The admiration was
mutual, with Drucker praising such Japanese practices as
lifetime employment (though he later conceded the need for
greater flexibility) and deliberative decision-making followed by
quick action. Among Drucker's great passions was Japanese art,
which he both collected and lectured on extensively.

Knowledge workers: The term "knowledge management" has

that PC era smell. But almost 20 years before the founding
of Microsoft, Drucker coined the term "knowledge worker" to
describe the growing cadre of employees who labored with their
brains rather than their hands. Drucker explained that
knowledge workers require a new style of management that
treats them more as volunteers or partners than as subordinates.
He predicted correctly that the ability of leaders to motivate
these founts of productivity--"the most valuable asset of a
21st century institution"--would become a cornerstone of
competitive advantage.

Lifelong learning: Another Peter--Senge--popularized the

concept of "learning organizations" in the 1980s. But learning
organizations are predicated on learning individuals. Drucker
called teaching people how to learn "the most pressing task" for
managers, given the perpetual expansion of skills and knowledge
that are products of the information economy. He personally
eschewed the designation "guru"--which suggests one who
counsels--casting himself rather as a student. True to form,
Drucker every year assigned himself a topic about which he knew
nothing and made it the subject of intense study.

Marketing: Drucker was born in 1909, the same year

that Henry Ford famously declared, "Any customer can have a
car painted any color that he wants so long as it is black."
Drucker's theories of marketing--the "distinguishing, unique
function of business"--amount to an extended refutation of that
attitude. The aim of marketing, in Drucker's view, was to "know
and understand the customer so well that the product or service
fits him and sells itself." Innovation, which Drucker considered
the other basic function of business, is responsible for the
creation of those self-selling products.

Non-profits: What's better than a run on Thin Mints? Being

declared the best-run organization in America by the world's
preeminent business thinker. In 1981, Drucker bestowed that
encomium on the Girl Scouts USA, one of many non-profits with
which he worked closely over the years (others included
the American Heart Association andThe Salvation Army).
Drucker was a passionate proponent of the social and economic
importance of non-profits, which he deemed the "most
distinguishing feature" of American society. He created a set of
management principles specifically for that sector, and urged
businesses to draw lessons in establishing a mission and
motivating workers from the non-profit world.

Objectives: In the daily scrum of business, employees become

so focused on what they're doing they forget why they're doing it.
And off the rails they go. In The Process of Management (1954),
Drucker called this "the activity trap" and proposed
"management by objective" as a way to avoid it. With MBO,
employees participate in setting goals and are then evaluated on
how they fulfill those goals. Managers can focus on the "what"
rather than the "how." "Management by objective works--if you
know the objective," Drucker wrote. "Ninety percent of the time
you don't."
Profitability: Drucker was all for profit--but not for profit
maximization. He viewed healthy margins as a necessary
condition for the social good of wealth creation. Yet profits are
not the purpose of an organization but rather a constraint: not
the reason to behave in a particular way but rather a test of
whether the business is behaving appropriately. "If archangels
instead of businessmen sat in the directors' chairs, they would
still have to be concerned with profitability, despite their total
lack of interest in making profits."

Questions: In effective organizations, employees know their

roles. And Drucker was acutely aware of his. "My job is to ask
questions," he once informed a consulting client, according to an
article in Business Week. "It's your job to provide answers." In
this Socratic style, Drucker inspired a generation of business
leaders to wax introspective about their organizations. Any
journey of self-exploration, he believed, should begin with five
essential questions. "What is our mission? Who is our customer?
What does the customer value? What are our results? What is
our plan?"

Respect: For more than 60 years, Drucker preached that

workers are assets not liabilities, and should be treated with
respect. (Pick up your Daily Dilbert or watch an episode of The
Office, then judge how persuasive he was.) Drucker reimagined
the organization as a human community and the job of
management as preparing people to perform and then getting
out of their way. That attitude wasn't just nice. Given that
knowledge skills are more portable than manual ones, it was also
smart. "Themanagement of knowledge workers should be based
on the assumption that the corporation needs them more than
they need the corporation."

Schumpeter: Drucker really understood entrepreneurs, an

appreciation spawned in part by the work of Austrian
economist Joseph Schumpeter. Schumpeter introduced the idea
of creative destruction: the necessary collateral damage that
occurs when entrepreneurs--whom he called "wild spirits"--
breach established markets. Entrepreneurs drive progress and
create wealth, Schumpeter believed, a mantra Drucker took up in
his own copious writings on innovation. "The entrepreneur
always searches for change, responds to it, and exploits it as an
opportunity," Drucker wrote.

Time management:"Time is the scarcest resource, and unless

it is managed nothing else can be managed."In a sense, much of
Drucker's writing about effective organizations boils down to
time management. If time is the insurmountable constraint,
deciding how to use it becomes is the most strategic of decisions.
On a more personal level, Drucker suggested managers measure
how they spend their time and compare that with how they
should be spending it, then make the requisite modifications. His
overarching question: "What needs to be done right now for the
business?"

Universals: Drucker faulted business literature for raising

performance expectations unrealistically high, demanding that
managers be mathematical and creative, adept at decision-
making and analysis, and in possession of excellent people skills
and a firm grasp of organizational dynamics. "What seems to be
wanted is universal genius, and universal genius has always been
in short supply," he observed. "The experience of the human race
indicates strongly that the only person in abundant supply is the
universal incompetent."

Vienna: Drucker grew up in a small suburb of the city named

Dobling, where his parents--a government official and a doctor--
hosted soirees for scientists and intellectuals. Living near the
starry seat of the Hapsburg monarchy, the family was able to
attract prominent economists and political philosophers like
Joseph Schumpeter, Friedrich August von Hayek, and Ludwig
Heinrich Edler von Mises, whose conversation instilled in
Drucker a lifelong curiosity and interest in ideas.

Welch: The chemical combustion that birthed "Neutron Jack"

Welch was set off in a meeting with Drucker in 1981. Drucker
posed two questions to Welch, who had just been named General
Electric's CEO: "If you weren't already in this business, would
you enter it today? And if not, what are you going to do about it?"
Those questions inspired Welch's dramatic restructuring of
General Electric, including the elimination of many low-growth
businesses and 240,000 positions. From there, Welch rebuilt GE
into a hugely successful, market-leading corporation with an
employee-development program ambitious enough even for
Drucker.

X-ray: How do you know when it's time for the next Next New
Thing? In Managing for Results (1964) Drucker introduced the
concept of a "business x-ray"--a tool for determining innovation
strategies. Companies use the x-ray to evaluate the life cycles of
their existing offerings. They then identify the gap between those
offerings' expected future performance and their own larger
goals. Finally, they fill that gap with--what else?--innovation.
"The entrepreneurial achievement must be large enough to fill
that gap and timely enough to fill it before the old becomes
obsolescent," Drucker wrote.

Yardsticks: With his emphasis on results, Drucker was bullish

on metrics. But he worried that managers often measure the
wrong things (for example, things unrelated to the leader's
desired outcome) or that they measure too much, or that they
express their measurements in the wrong way. When evaluating
management effectiveness, he touted one metric (or "yardstick"
as he often it) above others. That yardstick: productivity, which
Drucker defined as "the degree to which resources are utilized
and their yield."

Zen: In 1998, when the writer Harriet Rubin interviewed

Drucker at his home forInc., he showed her this passage from a
book on Japanese art: "The Zen-inspired painter seeks the 'truth'
of a landscape, like that of religion, in sudden enlightenment.
This allows no time for careful detailed draftsmanship. After
long contemplation, he is expected to be able to seize inner truth
in a swordlike stroke of the brush...." Similarly, Drucker
achieved enlightenment through quiet observation, waiting
patiently until he saw an idea whole, then rendering universal
truth in the swift space of a sentence. Thus was the essence of the
master.