There is no person who made such a considerable impact on the development of business in the 20th century as Peter Drucker did. In fact, he created such discipline as management and made unpopular position of a manager necessary for the development of business. He was a famous writer, consultant and theorist in the field of management and the strategy for the business and public organizations. Drucker wrote 31 books dedicated to various issues of management. His latest works researched the main issues of contemporary business, which he considered were the information revolution, the new demands of the business, environment for managers, and planning changes. Peter Drucker had 19 doctoral degrees in various universities of the USA, Belgium, Great Britain, Spain, Japan and Switzerland. A number of business schools and funds are named after him (Bedeian & Wren, 2001).
Biography of Peter Drucker
Peter F. Drucker was born in 1909 in Vienna, Austria. He studied at the universities of Austria and the United Kingdom, received a doctoral degree in the field of public and international law. He worked as a newspaper reporter in Frankfurt, Germany, and an economist in one of the banks of London. In 1937, Drucker moved to the U.S. and began to teach politics and philosophy in Bennington College (Drucker & Cohen, 2009).
For more than twenty years, from 1950 to 1971, he has been Professor of Management in the Higher School of business in New York University. Since 1971, Drucker has been Professor of Social Sciences and management at the University of Claremont; later, in 1984, the Graduate School of Management of this University was named after him. He worked as a consultant for many of the largest corporations of the world, the non-profit organizations and the governments of the United States, Japan and Mexico (Drucker & Cohen, 2009).
From the 1940s, he had been writing books on management, many of which have made a revolution in the management of business. He was the author of the thirty-one book, thirteen of which are devoted to the problems of society, the economy and politics, fifteen are devoted to management, two concern the topic of art, one book is autobiographical; Drucker was also a co-author of a book about Japanese painting (Bedeian & Wren, 2001). Drucker worked as a columnist in the Wall Street Journal; his articles were often published in the Harvard Business Review and other magazines.
In 2002, Drucker was awarded with The Presidential Medal Of Freedom which he received from the President George W. Bush. He also held honorary doctorates of many universities of the world. Moreover, he held the position of the Honorary President of the Leader to Leader Institute that he had founded (Drucker & Cohen, 2009).
Drucker changed many jobs, since he began his career 70 years ago. His teaching activities were efficiently combined with the consulting activities, and he was the constant adviser of a number of corporations of the USA, among which were General Electric, Sears, IBM and others.
When Drucker turned 90 years old, he continued to advise, although he rarely left his modest house in Clermont, CA. On 11 November 2005, Peter Drucker died, eight days before his 96th birthday (Drucker & Cohen, 2009).
Drucker’s Contribution to Management
Drucker’s theory focused on entrepreneurial activity and innovation, the role of managers in the organization, the organizational goals and the logic of formation of organizational structures. He was one of the founders of the theory of management by objectives, the developer of the method of case-studies, the initiator of the comparative study of cultures. In his opinion, the specifics of cultures represent a unique formula of success in business. He was also known as a critic of some of the provisions of the school of human relations, which he called the concept of "psychological despotism" and as a researcher of the heritage of the classical school.
According to his concept, the company is a global organization, which current stage of development is caused by the dominance of the trade relations and is defined as "a global trade center" (Drucker, 1974).
He authored a number of well-known and widely-used principles and regulations, such as definition of management "as a problem initiatives" and manager "as a dynamic element of any society." The theses "decentralization of management - a way to streamline the large organization" and "optimization of private functions of the organization does not lead to optimization of the whole" are related to his name (Drucker, 1974).
In the framework of the theory of management by objectives, activities of the formation and the establishment of a system of goals and further work with them are considered the main task of a manager, and system purposes are considered to be the factors, which influence the structure of the organization and ensure its effective functioning and long-term development.
Drucker considered the management by objectives as a necessary element of the activities of the managers of the organization and asserted that their main functions were the formation of purposes and their alignment with the general objectives. Based on the notion regarding a business organization as a system which has many needs, Drucker stated that managers must necessarily take into account the system of goals and reflect it on different levels of the organization (Drucker, 1974).
Drucker linked the emergence of the system of goals with a variety of tasks, solved by the managers in different sectors, as well as with the diversity of the needs of different social groups, both inside and outside the organization, interested in its activities. He formed two theses (Drucker, 1974):
1. The manager cannot effectively maintain the organization, if he is focused only on the economic objective.
2. The manager must improve the system of socially-oriented objectives in organizations, because their survival and successful development depends on the meeting of the diverse needs of social groups.
Proceeding from these thoughts Drucker created an indicative list of goals for organizations (Drucker, 1974):
- definition of a type of the markets in which it operates;
- installation of a certain type of product on the market;
- planning of the profits;
- determination of the required resources, their type and sources;
- satisfaction of the employees’ needs;
- development of management as the main factor of organizational development.
In the framework of this concept, system of the objectives improves the efficiency of activities and creates long-term development strategies of the organization. However, the essence of this system can be reduced to the choice of certain priorities and "balancing" of goals (Drucker, 1974). Finally, goals must be adjusted to the real results, and the correlation of objectives with evaluation of the effectiveness of the organization’s activities must be conducted.
Relevant Ideas of Drucker
Creative function of innovation and entrepreneurship differs in focus and control. Drucker determined an entrepreneurial society, in which innovation and entrepreneurship would be stable, as a normal and necessary phenomenon (Drucker, 1994). Managers are required to treat innovation and entrepreneurship as normal, continuous, daily activities in the practice of their personal work and the work of their organization.
Therefore, “manager-entrepreneur” is in the center of Drucker’s attention. Drucker states that entrepreneurship is more qualitative in nature. Therefore, the entrepreneur is a person that creates essentially new goods or services (Drucker, 1994). In addition, Drucker interprets several spheres of entrepreneurship: small business, corporate entrepreneurship (technological, organizational), entrepreneurship in the social sphere (new approaches to motivation of labour). Peter Drucker allocates the conditions of formation and existence of an entrepreneurial society. The primary goal of state policy and measures to be carried out in the entrepreneurial society is the definition of areas of failure, in which the innovation and entrepreneurial activity do not accumulate successful results. Thus, in his opinion, planning in the traditional sense is not compatible with the business in entrepreneurial economies (Drucker, 1994). Innovative activities should be decentralized and must be flexible and efficient, while being implemented gradually. The author also warns that the development of high technologies should not be considered as the only possible innovation. The most likely result of policies conducive to the development of only high technology can be another expensive fiasco (Drucker, 1994). First of all, high technology is only one of the areas of innovation and entrepreneurial activity, but by no means the only one.
In the modern society, organization must adapt to the continuous and rapid changes of the business environments. Therefore, Drucker’s concept of “manager-entrepreneur” is rather relevant as it makes the manager responsible for various organizational changes, which should make the organization more efficient. Moreover, at a competitive market only innovations and continuous rapid improvement of product, customer service and public relations can ensure that the company would not lag behind its rivals. Finally, on certain markets (IT, design, etc.), functioning as a start-up can ensure the required flexibility and efficiency of the organization as well as increase employees’ motivation.
Peter Drucker defined the paramount task for the entrepreneurial society in order to ensure personal growth, and this task is the continuous training and retraining (Drucker, 2000). Concern for the individuals’ growth and professional career motivates members of an entrepreneurial society to take responsibility for their continuous training and retraining. They can no longer be guided by the idea that the knowledge gained in childhood and adolescence will serve them for the rest of life. The intensity of the renewal of knowledge and skills depends on the level of initial training and the extent of the connection of their professional career with entrepreneurship (Drucker, 2000). For example, the skills acquired as a carpenter in the years of teaching, may serve him faithfully without significant changes during forty years, practically to the end of his economically active life.
However, doctors, engineers, teachers, lawyers, managers, and others should proceed from the fact that the knowledge and skills they had acquired would become obsolete and irrelevant in fifteen years. The specialists of this level should be ready to accept the fact that they would have to actually solve substantially different problems, and in many cases their professional career can develop in a different direction. Drucker’s concept of such a system is known as “the society of knowledge” (Drucker, 2000).
Nowadays information is easier to acquire, however, innovations and development of technologies results in even faster obsolescence of knowledge and skills. Specialists and managers must update their knowledge constantly to ensure the efficiency of the entrepreneurial society. Therefore, this concept is even more relevant today than it was in the times of Drucker.
Irrelevant Ideas of Drucker
Peter Drucker acknowledged the changing nature of the business environment; therefore, his certain ideas are no longer relevant for the contemporary organization.
The absolute number of people without a job is small. However, the fact is that production workers in the traditional industries are concentrated in a few places. They have a limited degree of freedom that is limited to the change of job, place of residence. (Drucker, 1942). They do not have sufficient education, any skills, any social competence or confidence in their own abilities. This category of workers in developed countries forms the layer, the level of education and general culture of which has not undergone any radical changes in the twentieth century (Drucker, 1942). However, these workers are the most lucrative group in an industrial society. If the society does not care about their employment, even providing them with less well-paid jobs, they turn into a purely negative force. This problem is soluble under the condition of transformation of the economy into the entrepreneurial one and creation of new jobs (Drucker, 1942). However, even if the entrepreneurial economy creates new jobs, it is still necessary to carry out the organizational measures for training and employment of redundant workers as they cannot conduct it themselves. In case, these measures are not accepted, it will ensure the growing resistance against innovations, including the means of their salvation (Drucker, 1942).
The problem of the industrial worker’s unemployment in a post-industrial society is still relevant; however, Drucker’s statement about their disability to develop independently is not true in a contemporary society. With the development of high technologies, many courses of qualification improvement are available to workers. They get a vast amount of up-to-date information from the media; therefore, they are prone to new ideas and are able to determine which knowledge are required to improve their life. Moreover, with the further development of the consumers’ society demand on unique products is increased, which has resulted in appearance of new companies that offer unique products. Industrial workers can change their lifestyle and work in an entirely different environment, while applying their skills and knowledge.
Drucker also stated that style of management must be developed separately for each industry (Drucker, 1995). For example, the method of joint participation in the management will be appropriate in industries that are at the forefront of modern technologies. However, this idea must be adjusted to a contemporary society, where the unique style of management must be developed for every company.
Drucker’s main contribution in the modern theory of management is that he was able to gather and systematize the knowledge of many scientists of the problems of control, along with establishing a separate science. Of course, he played a significant role as a development scientist himself; he had a remarkable gift to formulate ideas, which then became the postulates of management associated with the specification and explanation of the processes occurring in the organization on the way to the improvement of its structure, productivity and the satisfaction of the needs of consumers. Taking into account the fact that today the national climatic and natural wealth increasingly loses its former significance for economic growth and for the cultural development of any country, Drucker did not only highlighted the significance of management in a modern society, but also stated that it is transforming into the main decisive factor of the progress of human civilization. In general, Drucker formulated the following principles of management:
1. Management is an integral part of human existence. Without this science, it is impossible to coordinate people’s actions. Management allows making the strengths of the people more effective and weaknesses not decisive.
2. Management is deeply integrated into the culture of any country. Moreover, the impact of cultural and historical traditions of the management plays a crucial role, as well.
3. The task of management is to set such a system of clear and common goals and values, which would stimulate all employees to achieve them.
4. The task of management also includes the provision of the company and its employees with the opportunity to grow and develop. Continuous training and retraining must be implemented at all levels of the organization.
5. Performance of each employee should be based on a personal responsibility.