The practice of Management : Part One

Practice isn't the thing you do once you're good. It is the thing you do that makes you good. Quote from Malcolm Gladwell

We will return to the quote later, but first to the dawn of this golden era of management.

In the early 1950s General Motors (GM) was the largest and arguably one of the most successful companies in the world. Much of the credit went to Alfred Sloan, he was the CEO (Chief Executive Officer) from 1923 to 1956, that is a massive 33 years.

Sloan called in Peter Drucker to do a study on management areas at GM, it was a feather in Drucker’s cap, a notably recognition at this early stage of Drucker’s life by this famous CEO of GM.

It was expected that Drucker would pour adulations on the success of GM and by association in praise Alfred Sloan as the CEO.

However, Drucker did not!

By this time, Drucker had written three books, and one was in the making.

The End of Economic Man 1939

The Future of Industrial Man 1942

The Concept of the Corporation 1946 

The practice of management1954 (in the making)

Important that I give a brief background to Drucker…… he was an ideal of persons to set the stage for this golden era of management…… and given this period he lived through……..two World Wars.

• 1909 born in Vienna, Austria, into a high achieving scholarly family.

• 1931 completes a doctorate at the university of Frankfurt Germany in public and international law. 

• His first post as foreign and financial editor of a Frankfurt city paper General Anzeiger ……this was during the rise of Hitler's Nazi Germany; he wrote a philosophical essay condemning Nazism.

• 1933 he left for England.

• 1937 he left for the USA and continued his reporting on financial and business news.

• 1940 to 1942 he taught at Sarah Lawrence College which led to his appointment as professor of philosophy.

• 1950 to 1972 he was professor of management at New York University Graduate School of business. While at this post, he had this assignment at GM.

Enough background on Drucker for the moment, he was an esteemed Academic, doing research, he was a prolific writer. He was easy to understand writing in simple English………unlike some academics.

Drucker’s Research Report on GM management

The report shocked many that eagerly awaited his findings, see findings below.

• The assembly line: it created inefficiencies, it moved at the pace of the slowest person.

•  It was demotivating, the end result was not seen by most of the assembly line operators. No pride in what was made.

• A plethora of minutiae of checks, rules and controls with layers of bureaucracy. This slowed down decision making. Created adversarial labour relations. This did nothing for creating the self- governing plant. A term Drucker used in his writing.

• There was an absence of decentralized operation. Drucker mentioned that with GM's hierarchy of command and controls they would be slow to respond to a rapid change in the future.

• In summary, the difference between Drucker and GM was, GM saw the workforce force as a cost, in the quest for profits…... Whereas Drucker saw people as a resource, if more absorbed in their jobs, this would result in benefits for both the firm and the staff.

The drama: How would Alfred Sloan react to these findings? Drucker was years ahead of his time …….seeing the dangers of the assembly line and the attitude to staff as only a balance sheet cost. The Japanese showed the way with their Kaizen practice.

The reaction from Sloan was a disappointment, anticlimax, he said nothing, even when his book was published ”My Years with General Motors.” He might have disappointed some people only setting out the scientific credo of GM’s philosophy, he talked little of the people, because in Sloan’s mind people were of insignificant importance relative to the systems GM followed.

The ignoring of Drucker’s criticism by Sloan is explained as:  Drucker’s criticism was more implicit than explicit. Drucker said Sloan had vision rather than perspective and implied that leadership had been sacrificed to the rulebook. This is a quote from my source in relaying this.

The meaning of implicit and explicit. We must understand that implicit means being more diplomatic than being confrontational, as is implied by being explicit. In communication a subject I will present on a blog later. It is important to know the difference between implicit and explicit.

Below is a summary in bullet points of Drucker, on management before  writing his book “ The Practice of Management”.    

 Management as a separate function and discipline, Drucker’s notions:

• social and environmental responsibility of the organisation

• relationship between the individual and the organisation

• role of top management and the decision-making process

• a need for continual training and re-training of managers with the focus on their own responsibility for self-development

• nature of labour relations

• imperatives of community and customer relations.

Drucker’s fourth book “The practice of management”  established Drucker as a leader in his field. It set trends in management for decades and reputations were built by adopting and expanding on the ideas which Drucker set out. The book is still regarded by many as the definitive management text.

Drucker stated that there was only one valid purpose for the existence of a business: to create a customer. He argued that an organisation is kept afloat, not by internal structure, controls, organisation and procedures, but rather by the customer, who pays, and decides what is important. He set out eight areas in which objectives should be set and performance should be measured:

• market standing

• innovation

• productivity

• physical and financial resources

• profitability

• manager's performance and development

• worker's performance and attitude, and

• public responsibility.

The practice of management, the book is probably best-remembered for  Management by Objectives and Self Control (Drucker's term - he didn't coin the MBO acronym).

The book also identified the seven tasks for the practising manager of tomorrow. He or she must:

• manage by objectives

• take risks and allow risk-taking decisions to take place at lower levels in the organisation

• be able to make strategic decisions

• be able to build an integrated team with team members capable of managing and measuring their own performance and results in relation to overall objectives ……self-management.

• be able to communicate information quickly and clearly, and motivate employees to gain commitment and participation

• be able to see the business as a whole and to integrate their function within it and be able to relate the product and industry to the total environment, to find out what is important and what needs to be taken into account. This perspective must embrace developments outside the company's particular market or country and the manager must begin to see economic, political and social developments on a world-wide scale.

Summary

Drucker must be remembered for his inclusive and humanitarian principles that underpinned the functions of management. He was also a scientific thinker, so these principles contributed the universal practices of achieving results for organisations…… Business entities topping the list.    

Part 2 will continue the subject the practice of management and I use Professor Henry Mintzberg as my reference. Like Drucker challenged the management at the time of Alfred Sloan of GM. Mintzberg challenged other aspects of management that he believed were moving away from reality. By the end of Part two, you will see why at the beginning of this blog, I used Malcolm Gladwell’s quote, in high lighting the Practice of Management.

Neil Wright