Drucker's Management & Leadership Principles for the 21st Century

Introduction

Since the turn of the century, the landscape of management may have changed, but the underlying principles remain steadfast. One of the major contributors to the field is the world-renowned Peter Ferdinand Drucker (November 19, 1909 – November 11, 2005), an influential writer and management consultant (the Drucker Institute, 2011). In 1943, Drucker became a naturalized citizen of the United States. He then had a distinguished career as a teacher, first as a professor of politics and philosophy at Bennington College from 1942 to 1949, then for more than twenty years at New York University as a Professor of Management from 1950 to 1971 (the Drucker Institute, 2011).

Over the next 70 years, Drucker's writings would be marked by a focus on relationships among human beings, as opposed to the crunching of numbers. His books were filled with lessons on how organizations can foster the best in people and how workers can find a sense of community and dignity in a modern society organized around large institutions (Drucker & Zahra, 2003). Many of his key principles are still embraced today.

Situational Assessment and Core Competencies

Karlgaard (2004) asserts that successful leaders do not start out asking, "What do I want to do?" They ask, "What needs to be done?" Then they ask, "Of those things that would make a difference, which are right for me?" Be authentic and do not try to be somebody else. Each manager has a unique management style, and he or she should know that style intimately. This is how one accomplishes tasks effectively and efficiently. One should not engage in activities that he or she does not believe in or is not competent at. Learn to say no. Effective leaders match the objective needs of their company with their own subjective competencies (Drucker & Zahra, 2003). They check and monitor their performance. Such effective leaders write down, "What do I hope to achieve if I take on this assignment?" One must have a baseline to gauge performance and to change parameters if market conditions warrant adjustments.

Generally, core competencies have been seen as capabilities held by people within a firm that, when applied to create products and services, make a critical contribution to corporate competitiveness (Byrne & Gerdes, 2005). Core competencies create sustainable competitive advantage for a company. This competitive advantage allows a firm to operate successfully in its common environment and creates the possibility of expanding into a wide variety of related markets. Additionally, core competencies have a major impact on the features of the product or service a company offers to customers. A competence strength is something the company can do better than a competitor — a feature that is valuable, rare, difficult to imitate, and difficult to substitute. It can range from product development to employee dedication.

The starting criterion for determining a core competency is the question: is it capable of producing a sustainable competitive advantage? Conducting a S.W.O.T.T. (Strengths, Weaknesses, Opportunities, Threats, and Trends of the marketplace) analysis will help to identify core competencies. Understanding core competencies allows companies to invest in the strengths that differentiate them and to set strategies that unify the entire organization. It is not correct to equate a core competence with a specific product or service. Products and services may frequently change, while core competencies are the foundation on which products and services are based. Core competencies are fundamental aspects of a company — its culture, values, skills, knowledge, and abilities — and therefore are not subject to sudden change. Build on your strengths and find strong people to handle the other necessary tasks. In other words, do what one does best and let others handle the rest.

Outsourcing for Performance

With his example of the front room and back room of a business, Drucker introduced the concept of outsourcing. He believed that a company should engage only in front-room activities that are core to supporting its business. Back-room activities should be handed over to other companies, for whom those activities are front-room work (the Drucker Institute, 2011). In the globalized economy, multinational firms have given rise to local firms able to produce at low cost and acceptable quality levels. A growing number of firms have outsourced production and manufacturing activities of all types to these firms, not only to reduce production costs but also to make their organizational structures more streamlined and flexible.

Outsourcing decisions, which originally were limited to production activities with modest technological content and marginal importance to the business, are increasingly adopted for activities that require core competencies or belong to the core business — areas once considered inseparable from the organization and not feasible to outsource. Gradually, an outsourcing strategy has developed that finds it convenient to outsource even core competencies and specialized functions, such as manufacturing requiring particular technology, marketing, or product design. Such a strategy offers a number of advantages, including quality improvement, a greater focus on managing other core competencies, greater flexibility, better leverage of resources, and the possibility of entering new markets.

The Knowledge Worker

Decentralization is not the same as delegation. In fact, decentralization is an extension of delegation. The decentralization pattern is wider in scope, and authority is diffused to the lowest levels of management. Delegation of authority is a complete process that takes place from one person to another. Decentralization is complete only when maximum delegation has taken place. Everything that increases the role of subordinates is decentralization; everything that decreases it is centralization. Decentralization is wider in scope, and subordinates' responsibilities increase accordingly. In delegation, by contrast, managers remain answerable to their superiors even for the acts of their subordinates.

The most important contribution of management in the 20th century was to increase manual worker productivity. The most important contribution of management in the 21st century will be to increase knowledge worker productivity — hopefully by the same percentage.

Drucker taught that knowledgeable workers are the essential ingredients of the modern economy. In his 1969 book The Age of Discontinuity, Drucker differentiates knowledge workers from manual workers and insists that new industries will employ mostly knowledge workers. Drucker was clearly prescient about the expanding role of knowledge in an information-based economy.

Peter Drucker predicted that the major changes in society would be brought about by information. He argues that knowledge has become the central, key resource that knows no geography. According to him, the largest working group would become what he termed "knowledge workers." The defining characteristic of these workers is their level of formal education. Thus, education, development, and — to some degree — training will be the central concerns of a knowledge society.

The crucial question in knowledge-worker productivity is: What is the task? This is also the question most at odds with manual-worker productivity. In manual work, the key question is always: How should the work be done? In manual work, the task is always given. None of the people who worked on manual-worker productivity ever asked, "What is the manual worker supposed to do?" Their only question was, "How does the manual worker best do the job?" This was just as true of Frederick W. Taylor's Scientific Management as it was of the people at Sears Roebuck or the Ford Motor Company who first designed the assembly line, and as it is true of W. Edward Deming's Total Quality Control. The first requirement in tackling knowledge work is to find out what the task is, so as to concentrate knowledge workers on that task and eliminate everything else — as far as it can possibly be eliminated. This requires that knowledge workers themselves define what the task is or should be, and only the knowledge workers themselves can do that. Work on knowledge-worker productivity therefore begins with asking: What is his or her task? What should it be? What should he or she be expected to contribute? What hampers him or her in doing the task, and should it be eliminated?

In most knowledge work, quality is not a minimum threshold or a restraint — it is the essence of the output. In judging the performance of a teacher, one does not ask how many students there can be in his or her class. Instead, one asks how many students learn anything, and that is a quality question. In appraising the performance of a medical laboratory, the question of how many tests it can run through its machines is quite secondary to the question of how many test results are valid and reliable. This is true even for the work of the file clerk. Productivity of knowledge work must therefore aim first at obtaining quality — not minimum quality but optimum, if not maximum, quality. Only then can one ask: "What is the volume, the quantity of work?" This means approaching the productivity of knowledge workers from the standpoint of quality rather than quantity, and it also means learning to define quality in each context.

Conclusion

Some of Drucker's key management and leadership principles are still embraced today. He did not achieve his legacy by engaging in complex data analysis, but by being open, curious, imaginative, and creatively synthesizing. In his brilliant synthesis, Drucker provided more insights to managers and management researchers than simple analysis alone could yield. While Drucker's contributions to the study and practice of management have been enduring, varied, and profound, his book The Practice of Management, which appeared in 1954, stands out as a seminal and timeless source of influence on the field. Many credit this book with making management a legitimate field of intellectual inquiry, thoughtful analysis, and above all, practice. His advice to managers of knowledge workers was that they create a context in which employees can take responsibility for their work. The manager's role, in turn, is to provide guidance where required without being intrusive.