Peter Drucker: Guiding Light to Management

It wasn’t long after the lecture from his boss about spending more time watching people than reading books that Peter Drucker fell in with the Dutch businessman and his four wives.

The man was an important client of Drucker’s employer, an English banker, and was in need of a house in the English countryside. Find me one with several wings, he implored the startled Drucker, his escort, one for each wife and room for the future.

Drucker had seen these women and was bewildered. Each looked just like the other. Round, blonde and buttery.

No woman should be forced to bear more than three children, the businessman explained. It isn’t healthy. So, after his first wife had borne her third, he divorced her and married again, a performance he would repeat three times, each time inviting the ex-wife to live with him in her own wing.

And the women’s resemblance? Simple, the man said, one sticks to what works.

Since that day some 50 years ago, Peter Ferdinand Drucker also has been sticking to what works.

Guiding Principles

Through 21 books, hundreds of articles and thousands of lectures and consultations, the Clarke professor of social sciences at Southern California’s Claremont College hasn’t wavered in articulating what for several generations of businessmen, Girl Scout leaders, hospital administrators and civil servants are guiding principles:

Business is people. Management is responsibility. The purpose of a business is to create a customer. Profit is not a reward but a cost of doing business. Management is not technique but discipline. Simplicity always works best. Business has only two basic functions, marketing and innovation. Maximizing strengths is more important than minimizing weaknesses. Asking the one right question is far more important than having all the answers.

“Peter Drucker is a guiding light to a whole lot of us,” said Intel Corp. President Andrew S. Grove. “When I see an article of his . . . I drop everything else and read it on the spot.”

At age 75, Drucker is recognized the world over as the writer, teacher and visionary who discovered and formulated management, which in turn made possible the teaching of management in schools. Or as Drucker himself puts it, the man who “looked at the modern organization and found it worth studying.”

Required Reading

His books are required reading at hundreds of businesses worldwide. Celestial Seasonings Chairman Mo Siegel listens to Drucker cassettes while bicycling or driving to work. Copies of Drucker’s management books are on shelves in every Girl Scout council office in America. And Ameron Inc., a big construction products company, drew heavily upon Drucker’s teachings in formulating its own published management-philosophy guide.

Students of management come from far corners of the earth to study under Drucker at Claremont. And executives flock to his home in the shadows of California’s San Gabriel mountains to pay for his advice. He is in such demand that he is already accepting appointments into 1986.

And yet, 39 years after his place in history was secured with the publication of his still widely read study of General Motors, “The Concept of the Corporation,” Drucker in a sense is only now being discovered.

Because he uses business and his own highly original mind rather than scientific studies as his laboratory, because he is masterful at reducing complex concepts to simple ideas easily adaptable to real-life problems, and because he sticks to what works rather than to what is popular or supported statistically, Drucker has been largely ignored by the business schools that supply management talent to American enterprise.

Thomas J. Peters, the co-author of the hugely successful “In Search of Excellence,” says he earned two advanced degrees, including a Ph.D in business, without once studying Drucker. William Ouchi, a UCLA organization studies professor and author of the 1981 best seller “Theory Z,” says he has never read a book by Drucker and sees no need to because Drucker’s work isn’t published in scientific journals. And esteemed management professors at schools nationwide say they don’t bother reading or teaching Drucker because he is superficial, but they generally decline to say that on the record.

Discovering Contribution

But with the onslaught of management best sellers, businessmen and management specialists alike are discovering the depth and breadth of Drucker’s contribution.

“It is frustratingly difficult to cite a significant modern management concept that was not first articulated, if not invented, by Drucker,” said James O’Toole, a University of Southern California management professor who edits the school’s quarterly management magazine. The current issue is partly devoted to a retrospective on Drucker and has sold more copies than the five previous issues combined, O’Toole said.

“Reading these other books is like Drucker warmed over,” said Richard O’Neill, a Santa Monica executive recruiter who once studied under Drucker at Claremont.

To understand why Drucker wins such high praise from so many corners, take a stroll through any bookstore.

Pick up the current best seller “Intrapreneuring,” by Gifford Pinchot. It tells big companies how to encourage entrepreneurship, a call to arms first articulated by Drucker in his 1954 classic, “The Practice of Management.”

Find a copy of Ouchi’s “Theory Z,” which retraces the characteristics of Japanese management that Drucker analyzed in his 1971 book “Men, Ideas and Politics.” John Naisbitt’s ideas in his 1982 book “Megatrends” are strikingly similar to those stated succinctly by Drucker in his 1969 best seller “The Age of Discontinuity.”

Said It 30 Years Ago

Even “In Search of Excellence” contained little that Drucker hadn’t said 30 years earlier.

“I had considered at least a little of what Bob Waterman and I had written in ‘In Search of Excellence to be new,’ ” Peters said in the USC retrospective. But upon rereading “The Practice of Management” book, “to my amazement . . . I found everything we had written (was) in some corner or other” of that book.

Drucker lives with his wife Doris, a physicist and entrepreneur, in a modest one-story house on a quiet residential street in Claremont. He answers his own phone, which rings incessantly; pecks out his books and articles on a typewriter, in two-finger fashion; works alone despite having hundreds of clients, drives a Toyota sedan and walks as often as possible to the college, where he teaches management and Japanese art.

As writer John J. Tarrant pointed out in his 1976 biography of Drucker, the man is a study in contradictions. He is a European who made his name primarily studying U.S. organizations and is most revered in Japan. He is a teacher who says he teaches best when he learns from his students. He is best known for his sweeping statements on business but is most effective because his writings are full of minute details drawn from real companies and real people.

He writes about business through parables taken from history, music, art and religion. He has written more than a dozen books on management but says his favorite work is his 1948 essay on Soren Kierkegaard, the 19th-Century philosopher credited with being the father of existentialism, a piece that brought Drucker to the attention of 20th-Century intellectuals. His writings come alive with real people but he is uncomfortable with people, much preferring to address ideas.

Clearly, it is his ideas he wants people to remember, not him.

“This man doesn’t have a pompous bone in his body,” said Intel’s Grove, an admirer.

Dispassionate Manner

The voice on the phone is always the same, “This is Peter Drucker.” The cadence is slow and measured. Monotonous, even, a quality that has put more than one student to sleep. The manner is friendly but dispassionate.

And 48 years after his arrival in this country, the voice still gives away Drucker’s heritage. Austrian. Viennese to be exact.

Actually, Drucker is a Dutch name. Printer, it means. And in fact, Drucker’s ancestors printed Bibles and other religious books in Holland.

But Drucker’s father, Adolph, was a high-level civil servant in the Austrian government service, a lawyer and an outspoken liberal. His mother, Caroline, was one of the first women in Austria to study medicine.

Peter, by all accounts, was precocious but only an average student. “My mind,” he recalled during a recent interview, “was cluttered with trivia but not with the sort of details you’re tested on in school.”

Nor is he one to learn from failures, something he discovered one day when he accompanied a classmate to a piano lesson taught by Artur Schnabel, the famous Austrian pianist and composer. After listening to several pieces, all remarkable for their technical virtuosity, Schnabel faulted the student for playing what she thought she should have heard instead of what she did hear.

Schnabel demonstrated. Only then did Drucker, and the student, hear the difference.

Learn From Success

“I realized then that I do not learn from mistakes. I have to learn from success.” And he advises his clients to do the same--focus on the opportunities, don’t dwell on the problems.

But for brief stints as a clerk in a Hamburg export firm, a securities analyst in a Frankfurt merchant bank and an economist at a London merchant bank after his departure from Germany upon the Nazis rise to power in 1933, Drucker has never been a businessman. He studied political science, political philosophy and law and has earned a living for nearly 55 years with his pen.

In fact, he corrects anyone who calls him Dr. Drucker with this rejoinder, “it’s Mr. Drucker; I’m just an old journalist.”

That moniker held little appeal for his father. “Peter, a journalist?” his father inquired upon hearing of his son’s intended career. “Isn’t it a little early? One does that after one has failed at everything else.”

Historical Perspective

That he came not out of business or engineering, as many management writers have, but out of political science, political philosophy and economics, gave him the historical perspective to see 40 years ago what others didn’t--that “something had happened during World War II that could not be explained.”

U.S. business was terribly unprepared for the war, recalls Drucker, a student of history, and yet it “poured out the products; the response was phenomenal.”

He began to ask questions. “It became obvious to me that the answer was management--not that anybody knew at the time what it meant.”

What also was fairly obvious to Drucker was that this phenomenon, the large corporation, “had to be seen and studied as a social and political phenomenon rather than as an economic one alone.” In short, it had to be managed, it had to perform and it had to act responsibly.

That teaching has remained constant throughout Drucker’s long and prolific career.

It pervaded his widely read study of the General Motors and his three later books in which he defined management as a practice unto itself: “The Practice of Management,” which founded management as a discipline that could be taught; 10 years later, “Managing for Results,” which established business strategy as a discipline, and in 1966, “The Effective Executive,” which established a discipline of self development and behavior.

New Management Book

The same thread of discipline, performance and responsibility is woven through what he considers his fourth important management book, “Innovation and Entrepreneurship.” Due out this month, the book (published by Harper & Row) draws upon his 30 years of writings and teachings on the subject and presents innovation and entrepreneurship as a discipline. They are, he says, “part of the executive’s job.”

“Until now, you’ve had a lot of anecdotes, a lot of ‘gee whiz, ma, no hands’ stuff and a lot of ‘God gives it to his children in their sleep’ stuff. But that’s not enough. So this book . . . tries to set a foundation for what you might call a discipline of modern innovation.”

Why now? Certainly innovation and entrepreneurs are topical. Books and articles abound on the subject and they are the current buzz words in management circles.

But Drucker stresses that this isn’t a fad, noting with characteristic candor, “fads annoy me.” In fact, “it was pretty clear to me fairly early on in the ‘50s that managements would have to learn entrepreneurship and innovation.”

Didn’t Make Sense

Drawing on his historical sense and versatility with several disciplines, he explains why he thinks the timing is right: The Kondratieff wave should have been rearing its ugly head “and yet we are creating more jobs than ever; it made no sense.”

This requires some explanation.

Nikolai Kondratieff was a Russian economist executed on Josef Stalin’s orders in the mid-1930s because his econometric model predicted, accurately, that collectivization of Russian agriculture would lead to a sharp decline in farm production.

Every 50 years or so, Kondratieff theorized, a long technological wave crests and economies go through predictable crises followed by 20 years of stagnation. Since the Great Depression began 55 years ago, another economic catastrophe is due, the theory goes.

But Drucker noticed that something in the United States seemingly offsets the wave. That something, he argues, is “a profound shift from a managerial to an entrepreneurial economy,” which so far, he says, is mainly a U.S. phenomenon.

The book goes on to explain how all U.S. organizations can make themselves entrepreneurial, urging all businesses to make innovation and entrepreneurship an ongoing part of their activities.

Radical Suggestions

But his most radical suggestions in the book are these: Exempt new and growing ventures from taxation and permit them to charge the government for the cost of regulations, reports and paper work.

Is he serious? Drucker, after all, in addition to having a highly original mind and a tendency to be ahead of his time (and thus, some of his most important ideas have had belated impact because they were premature) doesn’t shy away from an occasional outrageous comment.

“I figure they have as much chance as I have arguing with a truck on a freeway ramp.”

Some businesses, having sought out advance copies of his new book, are already putting its teachings to work.

At Polaroid, manager Joline Godfrey said she has been trying to sell the company on an idea that runs counter to Polaroid’s culture and was having a hard time articulating it--until she picked up Drucker’s new book. One of the methods described there articulates “precisely what I have done in developing this new business, only now I understand it much better.”

General Electric executive James P. Baughman says the new book, like most of Drucker’s, “isn’t the first or the last work on the subject but it’s an excellent call to arms, and that’s how he’s most valuable to us--as a visionary.”

But Drucker’s role as visionary, sensing the sweeping significance of events, is but one side of the man and his teachings.

Memory for Details

Equally appealing and instructive is the flip side. His memory for details is encyclopedic. He remembers entire conversations from 30 years ago. He remembers his grandmother, who played piano for Brahms and under the baton of Gustov Mahler, labeling the shelves on her kitchen cabinets for “cups without handles” and “handles without cups.” And he remembers being instructed by his parents to “remember today; you have just met the most important man in Austria and perhaps in Europe” after meeting, at age 8, Sigmund Freud.

“I’m pedantic,” he agrees.

It is 15 minutes into what will be a four-hour conversation, and Drucker is on a roll. What began as a discussion on how he came to found the practice of management has moved on to the finale of Mozart’s famous opera, “Le Nozze di Figaro;” to great Japanese artists; to Gen. George Marshall’s leadership qualities, and to his nominee for the greatest manager of all time: the fellow who managed the building of the first pyramid in Egypt some 4,500 years ago.

“You cannot imagine what a feat it was” to keep 3,000 or 4,000 laborers working and fed and to haul enough blocks between floodings of the Nile. And they did it in almost no time. They didn’t have much time. After all, few of these Pharaohs lived very long and it had to be finished before the king died.”

Moving on to the 20th Century, Drucker discusses his nominees for the most remarkable managers of our time: Intel’s Grove, for his nimble conversion from a physicist to a top corporate manager; retired Citicorp Chairman Walter Wriston, for building Citibank into “the one institution that understands that finance no longer has to do with money but with information;” Frances Hesselbein, the executive director of the Girl Scouts of America, for rejuvenating the Girl Scouts, an ailing organization eight years ago, by studying U.S. demographics and changing the group’s focus, and to former NASA chief James E. Webb for putting several teams into space.

Saw the Real Problem

“Jim Webb’s great strength,” Drucker said, “was that he realized that the things that everybody thought were the obstacles (to putting man in space), the scientific, engineering feats, were subordinate to the problem of the organization of thousands of high-knowledge specialists. Nobody ever mounted an opera with 4,000 prima donnas and no supporting cast, but that’s basically what he did. That’s management.”

If parables are one of Drucker’s teaching tools, the stupid question is the other.

“Well, gentlemen, what is your business?” he is said to have asked the directors of a company that had hired him as a consultant and paid him to thoroughly study their business.

The startled and slightly offended chairman is said to have replied, “the manufacture of glass bottles.” Whereupon Drucker, who delights in shaking people out of their ruts with the seemingly stupid question, countered, “no, you are in the packaging business.”

With that single exchange, legend has it, the directors recognized their mistake and changed the company’s entire approach.