Management as a Liberal Art Research Institute

Loving Drucker, Fearing the Full Drucker

Bo Yang Ph.D.

PUBLISHED:

August 8, 2024

"Although Peter Drucker did not like autocratic management, I must be autocratic about one thing: all employees must learn Drucker's management theories," said Cheng Zhenshuo, the owner of a chemical company in Huangshan, Anhui. Despite the economic downturn in China, his business has grown this year. Like many Chinese bosses, Mr. Cheng enjoys drinking tea, reading Buddhist scriptures, and discussing ancient Chinese classics like Laozi and "Da Xue" in his spare time. However, he believes that Drucker's management theories are more practical for businesses and employees. When Mr. Cheng requires his employees to study Drucker, he refers to Drucker's smart advice on how to work efficiently, such as how managers should manage time, how to hold more effective meetings, and how to motivate partners and employees with high goals. In his view, Drucker's works provide him with a toolbox for "working smarter."


"When the boss is the most powerful person in the company, he should be wary of his own arrogance. If the boss is always smarter than the employees, likes to hear praise, and the employees feel they need to rely on the boss for everything, then despite past successes, the company's future is unlikely to be bright," said Sun Zhiyong, the owner of a high-end furniture company ranked second in China's luxury furniture market. Mr. Sun discovered Peter Drucker earlier than Mr. Cheng. In the early 2000s, to understand Drucker's management theories, he would take the night train from Hefei to Beijing every month, a time when China's high-speed rail was not yet developed. He believes the most important lesson he learned from Drucker is the restraint and caution of power. Among Drucker's "entrepreneur readers," Mr. Sun is one of the few who discovered the theme of "power" in Drucker's books. Over more than 20 years of entrepreneurial life, Mr. Sun has grown increasingly appreciative of Drucker's wisdom: if an entrepreneur enjoys the glory brought by power and thus does everything possible to seize power, it may bring disaster to the enterprise. Because overly concentrated and therefore ineffective power can drain the vitality of the enterprise. However, Mr. Sun discusses this topic very cautiously. He likes to express his views on "power" to familiar entrepreneur friends. But he never allows his topics to go beyond the boundaries of business management. In China, avoiding political discussions is a protective measure for entrepreneurs and their companies.


In today's China, entrepreneurs like Mr. Cheng and Mr. Sun are very typical. Born in the 1970s, they did not receive a complete formal education and built medium-sized enterprises from scratch. They have a clear understanding of their abilities, knowing their success comes from the era, luck, and rich life experiences. They also know these factors cannot guarantee continued success in future competition. To manage their companies more wisely, they need a sound methodology to help them better understand the world, politics, economy, work, and life itself.


Many Chinese entrepreneurs and professional managers need a methodology for work and life. As a result, various methodologies have become hot commodities, creating a huge market. Every year, publishers release a large number of best-selling books on methodologies. Countless training courses are offered online and in high-end hotel conference rooms. Business lecturers sell various methodologies promising success to entrepreneurs. Some claim their wisdom comes from ancient Chinese texts, while others come from the latest research in American business schools. Among these courses, Peter Drucker's management theories are not popular. Compared to those trendy success courses, Drucker's philosophy always seems out of place because Drucker emphasizes responsibility over profit.


Chinese entrepreneurs also like to talk about the word "responsibility." However, most bosses think "responsibility" is a tool to restrain and punish employees. Even if they read the word "responsibility" in Drucker's books, they habitually understand it in their own way. As a result, many employees in Chinese companies do not particularly like their bosses studying Drucker. Therefore, whenever a boss talks about Drucker, employees guess that "this year's workload will definitely be greater." In the boss's dictionary, "responsibility" is synonymous with "work tasks." Bosses like to pat employees on the shoulder and kindly tell them, "Your responsibility this year will be greater than last year."


If these bosses seriously read a few of Drucker's articles, they would likely not enjoy talking about Drucker as much. This is because Drucker's understanding of "responsibility" is completely opposite to theirs. Drucker believes responsibility is primarily about self-awareness and self-discipline. Only by understanding responsibility can people effectively use knowledge and power to create performance. Few entrepreneurs can understand and appreciate Drucker's concepts. When they translate their understanding into action, they find that Drucker can help them lead their companies better.


Therefore, despite being born in the early 20th century and passing away in the early 21st century, Peter Drucker's books are still bestsellers in China.


The China Machine Press is the agent for Drucker's works in China. They have just published commemorative editions of "The Effective Executive" and "Managing for Results." These two books have been popular in China for many years, with many pirated copies circulating. Nevertheless, the latest commemorative editions are still bestsellers. The editors at the China Machine Press are smart. They know Drucker's books have a good market in China, so they actively form marketing teams and use various methods to promote Drucker's works. Usually, these marketing methods are only used for newly published books. However, the editors' cleverness is also reflected in another aspect: they have published the complete works of Drucker, but most of the works have been abridged.


They want entrepreneurs to buy Drucker's books but do not want political censors to notice them.


This brings us to the interesting aspect of Peter Drucker. He was a renowned management theorist, and his books are useful to entrepreneurs and professional managers. However, Mr. Drucker never wrote solely for entrepreneurs, and his interests were not limited to business management. Politics and society were deeply concerned topics for Drucker. He predicted the collaboration between Hitler and Stalin in the 1920s and the collapse of the Soviet Union in the 1980s. His first book was titled "The End of Economic Man."


The China Machine Press published the complete works of Peter Drucker, but this collection does not include Drucker's first book because its theme is totalitarianism. Moreover, you will not find discussions about Stalin, Mao Zedong, and communism in this collection. You can read Drucker's insightful views on Christianity in this collection, but you may find it difficult to understand because the necessary context has been removed.


The editors believe Drucker's books are valuable but also know that unabridged versions are dangerous. Entrepreneurs who like Drucker have similar views. They like Drucker because they found some methodology in one of his books or a particular sentence, but sometimes they also find Drucker annoying because they do not intend to think or discuss politics like Drucker. Discussing politics in China is risky; discussing politics like Drucker is especially dangerous. According to Drucker, the prerequisites for a healthy political environment are:


·                Freedom based on responsibility

·                Power with clear boundaries

·                Vigilance against totalitarianism

·                A diverse social ecology

·                Pluralistic and autonomous social organizations

·                Respect for individual freedom and dignity


Every editor and entrepreneur knows these are dangerous topics.


This is the situation of Peter Drucker in China. People love Drucker, but fear the full Drucker.

By Byron Ramirez Ph.D. February 11, 2025
Peter Drucker escribió extensamente sobre las funciones y responsabilidades de los gerentes y sobre los principios que podrían ayudar a mejorar el desempeño organizacional. En sus obras, Drucker infiere que los individuos que conforman la organización deben cultivar el autoconocimiento, la autoconciencia y desarrollar sus habilidades a través de la aplicación. Aprendemos por primera vez sobre el concepto de la gestión como arte liberal en el libro de Drucker, "The New Realities". En este texto, Drucker se refiere a la gestión como arte liberal: "La gestión es, por lo tanto, lo que la tradición solía llamar un arte liberal - 'liberal' porque trata con los fundamentos del conocimiento, el autoconocimiento, la sabiduría y el liderazgo; 'arte' porque trata con la práctica y la aplicación. Los gerentes recurren a todos los conocimientos e ideas de las humanidades y las ciencias sociales - en la psicología y la filosofía, en la economía y la historia, en las ciencias físicas y la ética. Pero deben enfocar este conocimiento en la efectividad y los resultados." (Drucker, 1989) Drucker argumentó que debemos reconocer que la naturaleza humana es imperfecta, pero que, a través de la observación y la contemplación, y mucha, mucha práctica, la toma de decisiones puede mejorarse. Con el tiempo, a medida que las personas practican la gestión de manera ética y responsable, la comunidad en general se beneficia de las decisiones tomadas en organizaciones responsables y socialmente conscientes. La gestión como arte liberal es un concepto que caracteriza una filosofía, una que se basa en los elementos del conocimiento, el autoconocimiento, la sabiduría y el liderazgo. Esta filosofía implica que cualquier individuo tiene el potencial de crecer y desarrollarse, y convertirse en un gerente efectivo, siempre y cuando este individuo se tome el tiempo para reflexionar, desarrollar habilidades y conocimientos, y adquirir continuamente experiencias que enriquecerán su perspectiva sobre cómo liderar eficazmente a otras personas. Sin embargo, Drucker reconoció que el interés propio interrumpe y, en los peores casos, impide y restringe los esfuerzos de los demás. Como tal, el gerente debe desarrollar la capacidad de observar lo que está ocurriendo dentro y fuera de la organización. Al mismo tiempo, la persona debe desarrollar la autoconciencia y la capacidad de reflexionar sobre su propio comportamiento y las decisiones que toma. Esto incluye analizar cómo las decisiones pueden influir en las acciones y el comportamiento de los demás. Es a través de la autorreflexión y la conciencia que podemos notar lo que ha funcionado, lo que no y lo que podríamos hacer de manera diferente la próxima vez que surja otra situación. Un gerente puede desarrollar inteligencia emocional, utilizando el concepto de Daniel Goleman. Y en el contexto de la gestión como arte liberal, esto es lo que llamaríamos autoconocimiento. Un gerente puede volverse más efectivo y llegar a apoyar el crecimiento y desarrollo de los demás, siempre que aprenda a valorar a las personas por quienes son, y les permita espacio para ser ellos mismos. Pero para hacer esto, el gerente debe aprender a escuchar a los demás, respetarlos y reconocer sus preocupaciones y necesidades. También es importante aprovechar las ideas y sugerencias de las personas para ayudar a encontrar soluciones. Esta es un axioma importante dentro de la gestión como arte liberal. Otro elemento clave de la gestión como arte liberal es la noción de que el individuo debe construir conocimiento. Como tal, la persona debe buscar activamente información, datos, hechos e historias que puedan ayudar a aumentar el conocimiento. Además, podemos mejorar nuestras habilidades gerenciales y decisiones aplicando una perspectiva transdisciplinaria para resolver problemas. La perspectiva transdisciplinaria proporciona al individuo una visión integrada y más holística que combina diferentes puntos de vista de las artes, las humanidades y la ciencia. Drucker postuló que podemos aprender leyendo historia, filosofía y economía, y que la reconciliación de ideas de múltiples disciplinas puede ser beneficiosa para determinar el mejor curso de acción. Drucker sugirió que la consideración cuidadosa de diferentes alternativas y efectos posteriores, contingencias y resultados potenciales, mejoraría las decisiones y permitiría que el individuo se convierta en un tomador de decisiones más efectivo. Según la gestión como arte liberal, es importante que consideremos cómo nuestras acciones influirán en los demás y que asumamos la responsabilidad de nuestras acciones. La gestión como arte liberal postula que las personas se definen a sí mismas (y sirven a la sociedad) a través de la acción responsable. Esto significa que los gerentes efectivos actuarán de manera responsable y con ética, y utilizarán su estatus y poder para promover el bienestar de la organización y su gente. Esto infiere que el individuo actuará con el mejor interés de la organización (y sus partes interesadas) en mente. Actuar con buen juicio, tener lucidez y una mejor comprensión de las situaciones y contextos es lo que llamaríamos ejercer la sabiduría. Para involucrar a las personas y construir mejores organizaciones, y en última instancia contribuir a lo que Drucker llamó una "sociedad funcional", es vital que tratemos a todas las personas dentro de la organización con respeto y dignidad. Y que ayudemos a las personas a crecer y desarrollarse y a encontrar significado en lo que hacen. Así es como se construyen las grandes organizaciones. Esto es lo que llamaríamos liderazgo. Y los líderes dentro de la organización deben ser conscientes de que el mundo evoluciona y que algunas cosas deben cambiar, mientras que otras deben mantenerse. Esto significa equilibrar el cambio y la continuidad y reconocer qué proceso o actividad necesita ser renovado, y cuál otra práctica necesita ser preservada.  La gestión como arte liberal está arraigada en la práctica y la aplicación, en la autorreflexión, en tratar a las personas con dignidad y respeto, y en usar un lente transdisciplinario para ayudar a mejorar las decisiones. Se necesita tiempo para lograr resultados y construir grandes organizaciones. Pero se puede lograr. Y las organizaciones cuyos gerentes pueden practicar y aplicar, y reflexionar y aprender continuamente de sus acciones, tienen más probabilidades de ayudar a construir una mejor comunidad y una sociedad funcional y próspera. Referencias Drucker, Peter F. (2003) A Functioning Society (Routledge, London and New York) Drucker, Peter F. (1989) The New Realities: in Government and Politics, in Economics and Business, in Society and World View (New York: Harper & Row) Goleman, Daniel. (2007) Emotional Intelligence. 10th ed., Bantam Books.
By Karen Linkletter Ph.D. February 7, 2025
“What does ‘Capitalism’ mean when Knowledge governs – rather than Money? And what do ‘Free Markets’ mean when knowledge workers – and no one else can ‘own’ knowledge – are the true assets?” (Peter Drucker, 1999). This issue of my newsletter focuses on features of today’s knowledge work, and what knowledge work might look like in the future. In part one, I discussed some of the challenges associated with measuring knowledge worker productivity. In this installment, I’ll take up Drucker’s concept of “Post-Capitalist Society” and what it might mean for knowledge work in the 21st century. Fear not; this will not be an academic treatise on Marx or Marxism. But central to an understanding of our knowledge-based society is some sense of how previous industrial society was configured and structured. As I argued in the last installment of this newsletter, part of our difficulty with measuring knowledge worker productivity is that we still use the language of industrial capitalism: we measure productivity in terms of output, particularly in quantity. We lack a more modern understanding of what productivity looks like. Why? Marx and Capitalism Marx saw capitalism as a stage in history, as part of a larger pageant of human conflict. In The German Ideology (1845), Marx critiques the idealism of German philosophy as locked in the realm of thought instead of material reality. It is time, he argues, for German philosophers to stop simply criticizing each other regarding implications of spiritual matters (the nature of knowledge, etc.) but rather to address the realities of material life. Marx was reacting to the decline of Hegelian thought, and transformed Hegel’s spiritual dialectic model into dialectical materialism. For Hegel, human development was a process of conflict at the spiritual level, when human understanding is challenged by contradicting experiences and events, leading to a new level of awareness, all guided by “Geist”. Marx took this out of the spiritual realm and grounded it in worldly events; his dialectic model was still one of human transformation and development, but it morphed into a model of class conflict. Dialectical materialism involved observable conflicts in social conditions and economic status that would then be acted upon to create a new social order. Like Drucker, Marx was a social theorist, and was reacting to the dramatic changes he saw happening in his time. Marx and his associate Engels observed the transformation from a rural to an industrial society and the associated social upheavals. Marx and Engels focused on the shift from an economy where value was derived from labor to one that relied on machines and money (capital) to produce the material needs of human beings. The culmination of their efforts was Marx’s massive work, The Capital (Das Kapital), published in three volumes in 1867, 1884, and 1894. The work is an intricate analysis of capitalism as an economic system as well as a social structure. There is no substitute for actually reading the text, but, for our purposes here, Marx had several key points that are germane to our discussion of today’s knowledge society: 1. Labor theory of value : Marx challenged utilitarian viewpoints of value, stating that the value of products lies not in their satisfaction of human wants, but in the human labor used to produce them. Value is in production, not in the end-user’s perception of value. 2. Ownership of means of production : In earlier rural societies (at least those with free labor), labor owned the means of production (its own work). Under capitalism, a ruling class owned the machinery and financial instruments (the capital) necessary to production. They also, in fact, own the labor, as workers no longer have a say in their hours, working conditions, etc. Owners derive unearned income from the labor of workers who are under their control. 3. Alienation: The process of industrial production involves an increasing deskilling of work, meaning workers have less of an association with the larger purpose of the process or output. As labor is divided into more specialized functions, there is increased alienation. 4. Dialectical materialism : As capitalism increases social conflict (class conflict), it sows the seeds of its own demise. It is part of Marx’s historical theory of capitalism as one stage in human development. Eventually, socialism will replace capitalism, and workers will own the means of production, ushering in a new social order. Post-Capitalist Society In 1993, Drucker published Post-Capitalist Society, a book that advances a bold argument about Marx’s theories and the trajectories of history. It was one of his more successful books, and I think he left us with much to think about as we navigate the waters of the new or next knowledge society. Drucker looks back on Marx’s evaluation of capitalism with an historical view, much like Marx looked at Hegelian and other assessments of society in his time. In this sense, Drucker follows in the tradition of European theorists critiquing the ideas of the past, using an historical argument. According to Drucker, the manufacturing economy framed the conversation around society, economics, and politics from the late 1800s to the 1950s. Marx’s labor theory of value dominated discussions, as workers competed to have equal power and voice with owners (capitalists). However, as Drucker argues, the owners of capital (the financial titans of industry) peaked by the First World War, and were replaced by professional managers by the 1950s. The classic dialectic between labor and capital was no longer relevant by the 1950s, as “capitalists” no longer existed. Drucker posits that by the 1970s, “capital” would be in the hands of the workers themselves in the form of pensions, mutual funds, and other collective methods of corporate ownership. According to Drucker, the factors of production were no longer labor or capital, but knowledge by the mid-20thcentury. Knowledge workers owned the capital (pension funds, and later 401ks) and also owned the means/tools of production (knowledge). This perspective upended not only traditional notions of capitalism as viewing labor and capital as the primary inputs for production, but also upset the social order. Moreover, we faced a new economic challenge of measuring productivity in a new way (related to knowledge) but also a social challenge as the old service (manual labor) workers would be left behind. Furthermore, we would face a dichotomy between intellectuals and managers. Both of these conflicts are akin to what Marx alluded to in his reference to dialectical materialism. In essence, while highly critical of Marx, Drucker used a version of Marxist theory to postulate the existence of a “post-capitalist society.” Drucker was no fan of Marx but uses an historical argument and similar language about analysis of inputs (labor and capital, but in Drucker’s case, knowledge). The difference is that Drucker is not engaging in a dialectical process (and not one focused on material concerns alone). According to Drucker, one of the primary reasons that Marx’s worldwide proletarian revolution failed to materialize was the inadequacy of his model of “economic man” (his sole emphasis on material satisfaction as an indicator of society’s wellbeing). Drucker rejected this model of society, arguing for an industrial model of society where the manufacturing plant community provided meaning to the worker. Crucial to defeating the forces of totalitarianism (and Marxism, for that matter) was providing individuals in society with status and function . Status gives people a place in the social structure, whereas function provides individuals with a purpose. Economic meaning was not enough; people needed this larger sense of individual and community meaning. In the early twentieth century, because of the incredible gains in manufacturing productivity, capitalism emerged as the dominant system. However, as society moved away from industrial employment towards knowledge work, this new post-capitalist society presented new challenges – including the possibility for social disorder. Thus, Drucker turned to understanding the “ knowledge society ”, a new stage in human development. According to his analysis, what were the new challenges inherent in this new knowledge society? As we saw in the previous installment of this issue, knowledge worker productivity and its measurement represented one such challenge – one we still face. Drucker also wrestled with questions of worker motivation, social disorder, and compensation disparities. In our next installment, we’ll expand on Drucker’s concerns and see how they might help us understand where we are with our current knowledge society and the challenges we face. 
By Michael Cortrite, Ph.D. February 7, 2025
One cannot manage change. One can only be ahead of it…In a period of upheavals, such as the one we are living in, change is the norm. To be sure, it is painful and risky, and above all, it requires a great deal of very hard work. But unless it is seen as the task of the organization to lead change, the organization…will not survive. Peter Drucker in Management Challenges for the 21 st Century (2001) Alan George Lafley was the CEO of Proctor and Gamble (P&G) from 2000 to 2010 and 2013 to 2016. The Proctor and Gamble Company is a consumer goods corporation headquartered in Cincinnati, Ohio. It was founded in 1837. Today, Proctor and Gamble is healthy and is ranked 55 th in the Forbes Global 2000. In 2000, just before Lafley was appointed CEO, P&G stock dropped by almost 30% in one day, and the next week, it dropped another 11%. P&G lost $85 billion in market capitalization a few months later. Lafley described it as a crisis of confidence; inside the organization, employees were blaming each other, and outside the organization, market analysts and investors were surprised and angry. Retirees were angry over losing half of their profit-sharing nest eggs. The news media used headlines such as “P and G Investor Confidence Shot”, “Trouble in Brand City,” and “Does P&G Still Matter?” It appeared that a major, almost 200-year-old company, was in danger of going out of business. Fortunately, Lafley had the advantage of being familiar with Peter Drucker’s writings and was able to talk with him in person. What follows is an accounting of Lafley's actions using his own experience (P&G was his first CEO job) along with Peter Drucker’s writing and personal advice on sustainability. · One of Drucker’s last works was answering the question, “What is the work of the CEO?” Lafley realized that the CEO is singularly held accountable for the performance and results of the company and acted accordingly. · Trust is needed for sustainability. Trust at P&G had evolved to mean that employees could rely on the company for lifetime jobs. Lafley redefined it as consumers’ trust in the company’s brands and shareholders’ trust in its value as a long-term investment. · The consumer is boss. This mindset was emphasized to all employees. Another more famous Drucker Quote is, “The purpose of a business is to create a customer.” Lafley turned around the company-wide habit of losing touch with customers by emphasizing employees at all levels getting closer to customers. · Lafley listened to Drucker that a company must decide what business you are in (or not in). Lafley took the advice and after careful analysis caused P&G to keep some products and businesses, eliminate some products and businesses, and add some products and businesses. This was also the advice Drucker gave to Jack Welch, General Electric CEO, a few years earlier about streamlining the company by focusing on where to compete and where not to compete. Lafley expanded Drucker’s advice by adding his own statement on sustainability; “We must work on the present to earn the right to invest in the future.” · As published in the Wall Street Journal in January 2005 (The American CEO) Drucker observed that we don’t completely understand the unique role of the CEO; What is the work that only they can do and that they must do? The CEO has the power and the ultimate responsibility for business sustainability. The CEO is the link between the inside of the organization and the outside of the organization. He or she alone experiences the meaningful “outside” the organization and is responsible for understanding it, interpreting it, advocating for it, and presenting it in a way that enables sustainable sales, profit, and total shareholder return. For Lafley, “meaningful outside” can include several stakeholder classes, but it emphasizes the idea that the “Consumer is Boss.” Lafely saw that over the years, P&G employees had been drawn to internal interests, and inward focus is the enemy of growth. It is the CEO’s job to deal with outside stakeholders and have a deep understanding of their competing interests, as well as how those interests correspond with the capabilities and limitations of the organization. And Lafley went to work on reinvigorating focus on “outside the organization stakeholders” while keeping in mind that employees are a company’s most valuable asset. Strengthening relationships with analysts and investors resulted in a better understanding of their wants and needs. · Drucker said that effective CEOs make sure that the performing people are allocated to opportunities, rather than only problems. Lafley took this advice to heart and also reiterated the importance of succession planning. · Avoiding complacency in an organization is a must. The CEO should always ask, “Are we winning with those who matter most and against the very best?” The CEO should ensure that the company’s values, purpose, and standards stay relevant for the present and the future and for the businesses the company is in. CODA When looking at overall company sustainability, the difference in governance between Jack Welch of General Electric and A.G. Lafley of Proctor and Gamble is dramatic This is a potential subject for further research on sustainability. In the leadership literature Lafley is generally rated as a hands-on people person who consistently strived to develop leadership in his employees. He was respectful of employees and valued listening to them. He could be described as a servant leader or a follower of Peter Drucker’s management as a liberal art leadership style. Welch was very competitive and was also described as having a combative and aggressive personality. He stressed shareholder value and the absolute necessity of financial performance. In the name of cost-cutting, he would occasionally order massive layoffs, which caused employee resentment and mistrust. His mantra of “Win at Any Cost” has been said to damage the ethical behavior of employees. When Lafley and Welch were CEOs of their respective companies, the companies thrived. When Welch left GE in 2001 the company had “disappointing results for 2 decades.” When Lafley left P&G in 2016 the company continued to thrive and is still highly rated. Bibliography Silva, A. 2015. What Can We Learn from Great Business Leaders? Journal of Leadership Studies. 23 January 2015. Donlon, J. 2007. Proctor and Gamble. Chief Executive. Iss. 30. December 2007. 58-62. Lafley, A. G. (2009) What Only the CEO Can Do. Harvard Business Review, May 2009
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