Dignity, Status, and Function: Pay Attention to the New Concerns of Knowledge Workers

Karen Linkletter, Ph.D.

PUBLISHED:

December 15, 2022

The recently averted railroad worker strike reminded me of an important event in history that most people today are probably unaware of. In 1877, rail workers across the United States went on strike, creating what historians now refer to as the Great Railroad Strike. When historians think an event was significant, causing some kind of cultural, economic, social or other upheaval, they designate it with the term “Great” (the Great Depression, the Great Awakening, the Great Recession).


Peter Drucker looked at events of his time through the lens of a social ecologist: someone looking for meaningful change that has already impacted or would impact society in the long run. This change may be in the form of demographic trends, shifting attitudes, or significant events. In hindsight, we know that the 1877 strike was significant although, at the time, it appeared to be a short-lived, albeit violent, worker uprising.  The Great Railroad Strike showed the changing nature of class identity, and what can happen when people feel a loss of dignity, status and function in society. While certainly not a “great” event, the averted 2022 strike is perhaps another event that points to changing attitudes about work and the continued importance of dignity, status and function. I think it presents us with a moment to consider the nature of work in our post-pandemic environment, particularly as many organizations grapple with challenges related to finding and retaining qualified workers – especially knowledge workers.


Before we get to the details of the 2022 railroad strike that didn’t happen, I’ll give a brief summary of the Great Railroad Strike. Economic conditions in 1877 were grim. The United States suffered an economic “panic” in 1873, when the failure of a major investment firm triggered a loss of confidence in the financial markets. The country plunged into a depression, and firms began cutting jobs and wages, raising unemployment and further dampening the economy. The railroads, which were the primary means of transporting goods across the United States, had been a growth industry until the Panic of 1873, and employed large numbers of workers. In May of 1877, the Pennsylvania Railroad, the nation’s largest railroad, cut wages by ten percent, and then cut them by another ten percent the following month. Other railroad companies did the same thing, and also cut the work week down to a couple of days. In July, the Pennsylvania Railroad doubled the size of its eastbound trains with no increase in staff to manage the additional workload. In that month, workers began to rebel, taking control of train switches and preventing cars from moving. Violent strikes began to erupt in cities across the country; Maryland, West Virginia and Pennsylvania called up their state militias to respond to the violence. In some cities, militia members sympathized with the strikers, and joined in. President Rutherford B. Hayes called in federal troops, and in Pittsburgh, these troops fired into crowds of people, killing more than 20 civilians. By the end of July, the strike had subsided, leaving 100 people dead across the country and over a thousand arrested.

The workers received none of their demands (better pay, restored hours), and labor unrest continued in the industry well through the late 1800s. So why was this such a momentous event?


·     Public support: Mark Twain published The Gilded Age: A Tale of Today in 1873. In this novel, he satirizes the wealth inequality that was a feature of American society in the late nineteenth century. The greed and political corruption of this era is well documented; as working-class Americans became increasingly aware of the growing class divisions in society, they sympathized with the railroad strikers. This public opinion fueled an eventual call for labor reform.

·     Multi-industry support: This was the first general strike in American history, where workers from other industries supported the rail workers. The Great Railroad Strike touched a nerve in the growing working class, who felt devalued, increasingly marginalized, and exploited by a wealthy ruling class.

·     Catalyst for unionization: At the time, there were few organized labor unions; organized labor consisted of local brotherhoods of primarily skilled workers. The Great Railroad Strike galvanized workers to organize into more effective unions, such as the American Federation of Labor, to attempt to ameliorate their work conditions, hours, and wages.

·     Power: The Great Railroad Strike showed the power of human action. Without any organization and structure, rail workers were able to cripple the transportation network of the United States. Meat rotted on railroad cars, mail was not delivered – an entire national system of order was brought to a halt by a relatively small group of people wielding enormous power.

 

There are some parallels between the Great Railroad Strike and the averted 2022 railroad strike, and also some remarkable differences. First, the parallels.


·     Essential workers: People in the 1800s paid a LOT of attention to what happened with railroads, because they understood how goods moved through the country, and they felt the impact. The COVID 19 pandemic highlighted the importance of “essential workers,” including those employed in transportation. As supply chain constraints led to shortages of all kinds of goods, from microchips to toys to food items, most Americans, probably for the first time, were unable to purchase some product for lack of supply. During the pandemic, essential workers in health care and grocery stores were heralded as “heroes.” Workers in rail transport received little attention even though that industry experienced enormous upheaval. However, the threat of a strike in 2022 just before the holidays put the railroad industry in the spotlight, showing how, in spite of their small numbers, these workers could inflict considerable damage and pain to the U.S. economy. President Biden cited the devastating effects of a rail strike, pointing to the possible loss of 765,000 jobs. In 1877, railroad workers shut down the economy of the United States in a time where rail transportation was the primary way to ship material interstate. Rail workers were few, but powerful. Today, rail workers are an even smaller portion of the labor force, but they still wield power as essential workers.

 

·     Industry turmoil: In the late 1800s, the United States was in the throes of an economic decline precipitated by a financial panic. The railroads were the primary source of interstate transportation (and also a new, growth industry, and thus their securities were susceptible to price fluctuations). The railroad industry of the 21st century also faced considerable turmoil, including international pressure. Following a steady decline since the 1940s, employment in the railroad sector remained relatively stable from the 1980s until 2018, when employment numbers began to drop. One reason for this decline in jobs was the decrease in shipments of coal resulting from a shift away from fossil fuels. Another reason was the uncertain trade relationships the United States had with key partners, particularly China. Tariff threats between the two countries involving both agricultural products and manufactured goods caused rail companies to reconsider hiring new employees. Company practices also played a role. In the early 2000s, the railroad companies began to pursue a business model that emphasized boosting profits by reducing labor costs. The implementation of precision scheduled railroading (PSR) allowed railroads to operate more efficiently, but it also eliminated the business’s ability to have staffing cushions or manage unforeseen circumstances, such as weather disruptions. Finally, like all industries, the nationwide shutdowns forced by the COVID-19 virus outbreak caused widespread unemployment in the railroads. When the economy began to recovery from the pandemic in 2020, the industry faced staffing shortages, and made increasing demands on workers’ already stressed schedules. Train operators don’t have regular days off; when they return from a trip, they are rotated to the bottom of the staffing list to give them time off. However, if the staffing list is short, workers have little to no time off, and are discouraged from taking any paid leave. With deteriorating work conditions, attrition increased, exacerbating the railroad companies’ already stretched staffing problems. As was the case in many other sectors, the “Great Resignation” impacted the rail business, as older workers opted to retire, and younger workers prioritized work-life balance over wages.  So, as in the late nineteenth century, the industry looked to labor reductions to cope with changes in externalities.

 

·     Lack of dignity, status, and function: In the 19th century, workers felt devalued for a number of reasons. As America industrialized in the early 1800s, skilled workers saw themselves as partners with management; management and labor both had a seat at the table to negotiate work conditions, output, wages, and goals. In a way, these early years of labor reflected Drucker’s idea of Management by Objectives. Each party saw themselves as having responsibility for the organization’s success. However, as industrialization matured in the late 1800s, coupled with immigration of lower-skilled labor, relations between management and labor soured. Growing class division and economic uncertainty fueled the working class’s sense that they were inferior, unvalued, underpaid, and lacking in status and function. The Great Railroad Strike was but the first of many labor actions that reflected this sense of indignity in a country that preached that hard work would equal success. In 2022, dignity for workers of all kinds means not just money. Railroad workers are highly paid, but cannot take time off for personal needs, such as doctor visits. In the 21st century, dignity involves being treated as a human being, not an economic being. Drucker wrote about this tirelessly. We should not be surprised that workers who cannot have time to have a meaningful life outside of work should be unhappy and unproductive. Railroad workers are not merely labor inputs.

 

Now, the historical divergences.


·     Union power: The Great Railroad Strike of 1877 did not involve union participation because there was no railroad union. Today, there are multiple unions representing the various trades associated with railroad work (37 railroads and 12 unions), including machinists, train operators, electricians, blacksmiths, and transportation communication professionals. The interests of all of these parties are not the same. Negotiating a labor agreement requires balancing the desires of all participants and involves compromise. The 2022 agreement was criticized by many – a sign that it was a compromise that involved parties giving in on positions. In 1877, workers had no bargaining power, and violence became the tool of last resort.


·     Unimportance of wages: The Great Strike of 1877 was primarily about wages (and job retention). The workers of 2022 were paid well; the average pay for a train conductor in 2022 was $53,571, and they certainly did not want more hours! The issue in 2022 was about time. As discussed previously, dignity, status and function – aspects that Drucker emphasized from the beginning of his writing – are key in both of these labor actions. In 1877, wages and more hours were valued. Today, workers value time with their families, time to take care of their personal needs, and having a life outside of work, especially if they are an essential worker, stretched to the limit during the pandemic and the years of recovery after. Money is important to cope with inflation and financial stressors, but this strike shows that highly-paid workers can still feel undervalued.


·     Technology: In 1877, the railroads were still relatively new technology. The financial meltdown in 1872 was a result of speculation in railroad securities. By 2022, rail transportation was a very old industry that has undergone major shifts to stay alive and relevant. The railroad industry, like many others, has seen an increased use of technology and a subsequent shift in job requirements for workers. Rather than rely on human eyes for inspecting tracks and equipment, companies use drones and sensors to collect large amounts of information and rely on data analytics to streamline operations and improve safety and efficiency. Positive Train Control (PTC) uses Artificial Intelligence and algorithms to determine the location, direction, and speed of a train on many routes, notifying the train operator of a problem and, if no action is taken, stopping the train. Those tasked with developing and using these new technologies are a new kind of knowledge worker in the rail industry.

 

 

Takeaways


·     Knowledge workers are essential workers too. The pandemic shed light on existing class divisions (as well as ethnic, racial, and gender divides). People celebrated “essential” workers who were visible, working on the front lines. But many other workers were just as “essential,” managing freight traffic to accommodate the shift towards purchasing consumer items during the lockdowns. When the economy reopened, these same workers were tasked with managing supply chain issues. In the 19th century, railroad workers were, for the most part, skilled labor. They are even more so now. We need to think through who is an “essential” worker and what is “knowledge” work.


·     All workers need balance. Workers in the 1800s needed adequate wages and hours to survive – but not to the point of being worked to death. Once unionization provided some control over wages, workers in the late 1800s and early 1900s were pushing for balance. “Eight hours labor, eight hours recreation, eight hours rest” became the rallying cry for an eight-hour work day. Knowledge workers may scoff at such an idea, but for manual laborers in heavy industry, physical labor takes a toll. Today, it is easy for knowledge workers to toil for 12 plus hours a day. But the pandemic created a shift in attitudes about work/life balance. We all need time to manage personal needs (doctor appointments, child care, etc.). Even if work isn’t physically grueling, it shouldn’t prevent us from being human beings.


·     Wages are important in an inflationary environment, but time is more important. Early labor actions fought for better wages and work conditions. Today, wages are important, and lower-skilled workers are fighting for better pay to keep up with the cost of living. Knowledge workers also need to be paid a reasonable wage or salary, especially given our inflationary environment. However, increasingly, time is more valuable to people than money. At some point, the utility of time outweighs the utility of money. The Great Resignation and the threatened railroad strike show that we are seeing this economic tradeoff become more widespread.


·     All workers need a sense of dignity, status, and function. This sounds great. What does it actually look like? It is complicated. In the 1800s, American society began to sort people into an increasingly divided class system, with industrial workers (no matter how skilled) at the bottom. The managerial and professional class began to rise as the new middle class (replacing teachers, tradesmen, and others of the old pre-industrial era), while the wealthy plantation owners and merchants were joined (in many cases surpassed) by a growing upper class of industrial elite. When the working class of the United States sensed a lack of dignity, status and function, they rebelled – and organized. When the organized railroad workers of 2022 sensed a lack of dignity, status and function as a result of years of overwork, they spoke. It seems to me that if managers can grasp the importance of such key aspects of MLA (dignity, status, function), then we can prevent such actions in the future. And, if we can view things through the lens of a social ecologist, we can see the bigger picture, understanding how history can teach us how not to repeat the errors of the past.

 

https://www.digitalhistory.uh.edu/disp_textbook.cfm?smtid=2&psid=3189

https://www.nytimes.com/2022/09/15/business/economy/railroad-workers-strike.html

https://www.aar.org/article/the-future-of-rail/

https://www.bls.gov/opub/mlr/2021/article/employment-in-rail-transportation-heads-downhill-between-november-2018-and-december-2020.htm

https://www.whitehouse.gov/briefing-room/statements-releases/2022/11/28/statement-from-president-joe-biden-on-averting-a-rail-shutdown/

https://raillaborfacts.org/bargaining-essentials/the-parties/

https://www.glassdoor.com/Salaries/railroad-conductor-salary-SRCH_KO0,18.htm

https://www.nelp.org/blog/this-week-in-labor-history-remembering-the-adamson-act/


On Leadership, Legitimate Power, and Influence

By Byron Ramirez, Ph.D. and Bo Yang, Ph.D. • April 23, 2025
When we describe leaders, we often cite the importance of their ability to influence others. For decades scholars have focused their work on studying and describing how this capacity to influence works and why it tends to elicit a positive response from people, who are inspired to follow the leader’s vision. We have read about that mystifying ability to persuade others and guide them towards a common purpose. However, when analyzing the leader there is another aspect we ought to also consider - where does their power originate from, and is this power considered legitimate? What these questions intend to imply is that when we analyze the interactions of leaders and their followers, we should contemplate how their relationship is built, and moreover, how the power of the leader is used to shape those relationships. Let us first discuss what power is and why it is important. Power in its general sense is the capacity to influence, lead, dominate, or impact the actions of others. The German sociologist, Max Weber referred to power as the capacity to create a desired outcome within a social relationship. As such, power enables the leader to influence and lead the actions of people. Legitimate power is often referred to as power that the person derives from formal position or office held in the organization's hierarchy of authority. And it is this notion of authority that helps legitimatize power in the eyes of the follower. For instance, a manager has legitimate power over their subordinates, allowing them to assign tasks. Teachers possess legitimate power in the classroom, enabling them to assign grades and set learning objectives. We can then surmise that legitimate power is based on the authority granted by a position or title. And individuals will comply with requests or decisions made by the person with authority because they recognize the authority of the person holding the position. However, unlike authority, which implies legitimacy, power can be exercised illegitimately. As history shows us, there are plenty of examples where power did not originate simply from a place of authority and legitimacy, and instead flowed from coercion. Joseph Stalin and his Great Terror campaign certainly comes to mind. And although Stalin did have a position of “authority”, much of his power and influence were coercive and deceptive in nature. In fact, Stalin had used his political positions throughout his life to “remove” opponents while bolstering his image in the pursuit of greater personal power. According to biographer Robert Service (2005), Stalin took pleasure in degrading and humiliating people and kept even close associates in a state of "unrelieved fear”. Of course, there are other instances in which coercive power is used to elicit compliance. A more common example of coercive power is a manager who uses threats of demotion or termination to get employees to comply. And so, when we consider the influence a leader (manager) has, we ought to consider the very nature and source of their power. Do people follow the leader because they are truly inspired by the leader’s vision? Or do they follow because they have no other choice? Managers who threaten the job security of others to ensure compliance, leaders who exploit their positions for personal gain, or individuals who rise through favoritism rather than merit – are manifestations of illegitimate power. Regardless of context, illegitimate power tends to erode morale, limit creativity, and foster toxic environments where people operate out of fear rather than purpose. Illegitimate power wields influence without moral justification, ethical values, or the consent of those affected. And because this form of power often derives from manipulation, coercion, intimidation, or exploitation rather than genuine respect for people, it undermines trust, breeds fear, and corrodes the ethical foundations of organizations and communities. Coercive leaders who use threats, punishment, or psychological pressure to force compliance, may certainly achieve short-term results, but at a significant long-term cost. Coercion strips individuals of their autonomy and creates environments of resentment and disengagement. People may comply outwardly, but internally they may withdraw, resist, or leave. Furthermore, coercive leadership discourages open dialogue and constructive feedback, which are essential for innovation, growth, and continuous improvement. When fear becomes the primary motivator, organizations and societies become stagnant, rigid, and vulnerable to collapse. And this brings us to an important question – what does legitimate power look like? On this issue, Peter Drucker offers unique insights. In his first book, The End of Economic Man (1939), Drucker discussed the issue of legitimate power (although he did not use the term legitimate power, but rather the justification of authority). Drucker believed that the power of rulers must possess legitimacy, a tradition that has continued in Western civilization since Plato and Aristotle. In Drucker’s view, legitimate power involves a functional relationship between power, social beliefs, and social realities: does power commit to social beliefs? At the same time, can it effectively organize social reality based on that commitment to create order? In his books, Concept of the Corporation (1946) and The New Society (1950), Drucker began to use both terms legitimate power and leadership simultaneously. Drucker would go on to argue that a government that commits to the well-being of its people can be said to have legitimate power. Over time, Drucker shifted his analysis of legitimate power from the political realm to social organizations. According to Drucker, if the management of a social organization (such as a company) claims that its principal purpose is to benefit employees, this particular focus would constitute an abuse of power. Instead, Drucker argued that the primary mission of an economic organization is to always achieve economic performance, thereby contributing to society – and this is in fact, the source of the legitimacy of corporate management's power. Of course, a company is also a community. For employees, management undoubtedly holds power and must exercise it. However, the legitimacy of management’s power does not come from the commitment to benefit employees, but rather from two functions: 1. Through institutional design and innovation, shaping effective community communication, thereby enabling middle-level and lower-level employees to gain an overall vision of the organization. This allows employees to have a managerial attitude. 2. By setting clear and reasonable performance standards, prompting employees to take responsibility and achieve success through effective work. If management can perform these functions within the organization, then it is considered to exercise legitimate power. In Drucker's early works, exercising legitimate power was almost synonymous with leadership. Drucker was not enthusiastic about discussing the personal style or charm of leaders, and he was even less inclined to associate leadership with a mystifying ability to persuade others, especially if such persuasion appealed to propaganda, indoctrination, or mental manipulation. For Drucker, discussing leadership primarily meant enabling power to function effectively. Therefore, leadership is not a matter of individual leaders' techniques and styles, but rather a matter of the responsibility and function of power itself. We can surmise from these functions that legitimate power aligns with the goals, beliefs, and aspirations of the people being led. Leaders who wield this kind of power do not need to resort to threats or manipulation. Instead, they inspire, guide, and collaborate. Their authority is accepted because it is seen as fair, earned, and beneficial to the collective. It is vital to foster leaders who operate from legitimate power—power that is granted through trust, expertise, shared values, and recognized authority. Legitimate power is grounded in the formal authority granted to a manager through their role within an organization, but its true strength comes from how that authority is exercised. Unlike coercive power, legitimate power is perceived as rightful and appropriate because it is based on clear expectations, mutual respect, and established structures. When managers consistently act with fairness, integrity, and transparency, their authority is more likely to be accepted and trusted by their teams. This creates a healthy power dynamic where employees feel secure in leadership decisions, understand their roles, and are motivated to contribute toward shared goals. Managers can build legitimate power by aligning their actions with the organization's values and demonstrating competence, consistency, and accountability. For instance, making decisions that reflect the organization’s mission and treating all team members equitably strengthens a manager’s credibility. Communication is also key—leaders who listen actively, provide clear direction, and explain the rationale behind their decisions foster trust and buy-in. Investing in personal growth, staying informed, and modeling a strong work ethic all reinforce the perception that a manager has earned their position and is acting in the best interest of the team and the organization. When managers lead through legitimate power, the benefits to the organization are substantial. Teams are more engaged, morale improves, and collaboration increases because people trust the leadership and feel aligned with the organization’s purpose. This creates a positive feedback loop where employees are more likely to take initiative, innovate, and remain committed, reducing turnover and boosting overall performance. In essence, legitimate power forms the foundation of a sustainable leadership culture—one that empowers individuals, strengthens organizational integrity, and drives long-term success. Developing leaders who influence through legitimate power requires a shift in how we define and nurture leadership. It involves prioritizing emotional intelligence, ethical reasoning, transparency, and empathy. Such leaders model integrity and authenticity, aligning their decisions with shared values and long-term visions. They create environments where people feel valued, heard, and empowered. In turn, this fosters loyalty, engagement, and a strong sense of purpose. To build healthier workplaces and more just societies, we must champion leaders who embody legitimate power: those who influence not by fear, but by vision, credibility, and alignment with shared values. This approach not only promotes ethical leadership but also cultivates trust, innovation, and collective well-being. References Drucker, P. F. (1946). Concept of the corporation. New York: John Day Company Drucker, P. F. (1939). The end of economic man: A study of the new totalitarianism. New York: John Day Company Drucker, P. F. (1950). The new society: The anatomy of the industrial order. New York: Harper Service, R. (2005). Stalin: a biography. Belknap Press of Harvard University Press. Weber, M. (1965). Politics as a vocation. Fortress Press.

Helping Civilization Understand Business

By Bo Yang Ph.D. • April 23, 2025
In China, you can see countless interviews with successful entrepreneurs on TV, online, or in magazines. The same is true in the U.S.—probably even more so. I imagine this stylish trend must have originated in America. These interviews often show entrepreneurs sincerely talking about childhood dreams and beliefs they’ve held for decades. They’ll share how they stayed committed to those dreams and step by step made them come true. Over the past few years, I’ve had the chance to meet a few Chinese entrepreneurs—some of whom I had previously seen on TV or in magazines. Once we got to know each other better, they started sharing stories that were quite different from their media narratives. They admitted that their childhoods were hardly filled with grand dreams. What truly pushed them into business were hunger, poverty, cunning—or sometimes, just luck. I am not a nihilist, nor am I trying to say that dreams and beliefs are nothing but marketing gimmicks, exposed through off-the-record conversations. What I mean is: this is a realist world. It’s entirely possible for people to achieve business success through the pursuit of profit, intelligence, hard work, and a bit of luck. Many people don’t fully understand how they even became successful—until they already are. Of course, the world isn’t just about realism. Some people, once successful, begin to seek meaning in their lives. They want to keep doing valuable things—not just by luck, but through genuine understanding. At this point, they need to go back and reexamine what business really means. So what does business really mean? If you asked a Chinese scholar from a thousand years ago, he would most likely say that business is linked to something like original sin. Of course, Chinese culture doesn’t contain the Christian idea of original sin, but when talking about commerce or merchants, scholars would often describe businesspeople as inherently tainted by something spiritually corrupt. If you asked a classical economist like Adam Smith, you’d get a much more generous answer. Classical economists openly accept the profit motive as part of human nature, and they’d go further to say that this motive is a major driver of civilization. The accumulation of social wealth, improved quality of life, and progress of civilization all rely on individuals—driven by profit—to create rules, use their talents, and generate value. After classical economics, this line of thinking became the default lens for understanding business and commercial civilization. Even though Marxism and Nazism have violently attacked the profit motive, modern commercial civilization has not only survived—it has thrived. The great achievement of classical economics was to build a causal relationship between the pursuit of profit and the progress of civilization. But the question remains: is that all there is? The entrepreneurs I know, who fought their way through tough business landscapes, would never doubt the role of the profit motive. But some of them also have a vague sense that business isn’t just about making money. After a few successful ventures, some start to long—consciously or unconsciously—for cleaner businesses, meaningful businesses, even beautiful ones. They may not be able to articulate this impulse, so instead, they go on TV or into magazines and talk about childhood dreams and ideals. These aren’t real memories—they’re symbolic stories. What exactly drives commercial civilization? Peter Drucker agreed with the classical economists, but only halfway—because they only got it halfway right. Drucker never denied the profit motive. But he believed that all successful business activity is a discovery and creation of order. And that’s what makes it so important. Not only do entrepreneurs and managers need to rethink the meaning of business, but ordinary citizens in modern society do too. Drucker’s book Managing for Results, published in 1964, is still seen by many as a hands-on business guide—and rightly so. Few of his works are as focused on practical application, packed with diagrams and terminology. But what’s truly interesting about the book is how, while walking readers through practical operations, Drucker is also helping them rethink what business actually is. He starts right where most businesspeople do—with the desire to make money. But he warns: not every boss who makes money actually understands how they made it—or which products brought in the profit. To figure that out, they have to understand their business as a whole. But doing that means stepping out of personal ego and illusions of success. It means knowing which accounting method reveals the truth. It means identifying which products are making money—and then asking why. And the right way to find out why a product makes money isn’t to ask the product manager, engineer, or designer—it’s to understand the customer’s needs. If the boss and the product manager are serious about understanding the customer, they’ll realize the customer isn’t buying a product—they’re buying value, value that meets a particular need. And customer needs change constantly—just like the weather. Even the smartest people can only partly predict these shifts. The wise approach is to treat change as a given and figure out how to deal with it, manage it, and adapt to it. Once they accept this truth, bosses and managers begin to see the market differently. Results are not things created inside a company—they’re things selected by customers in the marketplace. Profit isn’t wealth created by the company and kept by it; it’s a risk buffer that allows the company to stay in the market. Innovation isn’t a CEO suddenly struck by inspiration; it’s people with entrepreneurial spirit using new combinations of resources to meet customer needs and produce performance. A boss who’s serious about business—and honest about reality—can start out wanting to make money and end up with an entirely new perspective, and a deeper understanding of business. At the end of Managing for Results, Drucker wrote something striking. He believed that not only entrepreneurs and managers need to understand business—they have a responsibility to help the public understand it too. They must become educators in civil society. Even today, in modern, industrialized nations with booming economies, many well-educated citizens still don’t understand business. They look down on it. Some even hate it. They don’t lack conscience—if anything, they’re overflowing with it—but they lack imagination and understanding. They don’t see that business is actually a form of rational exchange and creative mutual benefit between people. And because they don’t understand this, they not only despise business—they become impatient with any kind of rational exchange or creative collaboration. Instead, they get used to imposing their moral preferences on others. That kind of moral arrogance keeps producing hatred and division in modern society. Of course, Drucker didn’t believe business could solve all of society’s problems. But he did believe that the motive behind commercial civilization isn’t only about profit. He also believed that civilized business itself is a form of education for modern society. Because civilization—no matter where it appears—always involves understanding, creating, sharing, and exchanging organizational frameworks. As he wrote: “The economic task, if done purposefully, responsibly, with knowledge and forethought, can indeed be exciting and stimulating, as this book has, I hope, conveyed. It offers intellectual challenge, the reward of accomplishment, and the unique enjoyment man derives from bringing order out of chaos.” Drucker often quoted the British philosopher Alfred North Whitehead (1861–1947). As far as I know, Whitehead may be the only modern philosopher—besides Drucker—who truly understood the beauty of business. In his 1925 book Science and the Modern World, Whitehead wrote something strikingly similar: “Art is not limited to sunsets. A factory—by virtue of its machines, its community of workers, its service to the general public, its reliance on organizational and design genius, and its potential as a source of wealth for shareholders—is a living organism rich with value.” But Whitehead also said something even more important, in The Adventure of Ideas (1933): “Plato was right: The creation of the world—the world of civilized institutions—is the victory of persuasion over force.” And business civilization—especially the kind that Drucker and Whitehead envisioned, one that creates order and beauty—is perhaps the most brilliant demonstration of how persuasion can triumph over conquest.  As Drucker said, it’s not just businesspeople who need to understand this. Every citizen of the modern world should too. Because even now, the opposite impulse is still alive—the desire to replace persuasion with conquest and turn business into a game of domination.

Satya Nadella and the Liberal Art of Management

By Robert Kirkland Ph.D. • April 21, 2025
When Satya Nadella assumed the role of Microsoft’s Chief Executive Officer in February 2014, the company was experiencing the early symptoms of organizational sclerosis. Though still profitable, it had lost ground to more agile competitors in the mobile and cloud sectors. Internally, Microsoft had become fragmented—defined more by turf battles than innovation. The challenges Nadella inherited resembled those Peter Drucker articulated decades earlier in his conceptualization of the Functioning Society of Institutions (Drucker, 1946). Drucker’s view—deeply shaped by the failure of social cohesion in interwar Europe—called for institutions to reorient themselves not just around efficiency, but around meaning, moral purpose, and self-development. Nadella’s Microsoft has arguably become one of the clearest corporate embodiments of Drucker’s philosophy of Management as a Liberal Art (Drucker, 1989). Much of Nadella’s success can be attributed to his emphasis on empathy and cultural reinvention. Prior to his appointment, Microsoft was widely seen as a combative, insular organization (Lohr, 2014). Nadella moved swiftly to change this. In his internal communications and public interviews, he spoke often of empathy—not as a rhetorical flourish, but as a managerial imperative. This commitment mirrored Drucker’s belief that management must engage the whole human being, acknowledging both rational capability and emotional complexity (Drucker, 1989). Drucker emphasized that organizations ought to be places where people grow in both skill and character. Nadella’s redefinition of leadership as empathetic listening and continuous learning operationalized that belief in a modern, corporate context. At the center of Nadella’s early cultural transformation was the introduction of a "growth mindset," a concept he borrowed from psychologist Carol Dweck (Dweck, 2006). Employees were encouraged to ask questions, seek feedback, and approach problems with humility. Drucker had long argued that a functioning institution required the cultivation of self-awareness and wisdom (Drucker, 1993). Nadella, in fostering a company-wide learning orientation, aligned Microsoft's trajectory with the MLA principle that personal development and organizational mission must progress hand-in-hand. The result was an environment that encouraged intellectual humility without sacrificing performance. Equally important in understanding Nadella’s alignment with Drucker’s MLA framework is the redefinition of Microsoft's mission. Under Steve Ballmer, the mission had been tightly product-focused: "a PC on every desk and in every home." Nadella’s version was broader and more aspirational: “to empower every person and every organization on the planet to achieve more” (Microsoft, 2017). Drucker might have called this a shift from a narrow economic mandate to a wider societal purpose. In The Concept of the Corporation, Drucker (1946) warned against corporations existing as islands of profit, detached from community responsibilities. Nadella’s mission reframed Microsoft not just as a tech vendor but as a social actor—a stakeholder in global development. Drucker’s emphasis on function and status within a functioning institution also finds modern expression in Nadella’s restructuring of Microsoft's performance evaluation system. The previous stack-ranking model—which pitted employees against each other—was scrapped (Wingfield, 2013). It had rewarded individual performance over team cohesion, eroding trust and stifling creativity. Nadella implemented a performance system that rewarded collaboration, curiosity, and contributions to others’ success. This pivot acknowledged Drucker’s claim that organizations succeed not when individuals compete within them, but when their actions contribute meaningfully to a shared mission (Drucker, 1989). In accordance with Drucker’s MLA principle that organizations must exist within society—not apart from it—Nadella also led Microsoft into a new era of corporate social responsibility. Under his watch, Microsoft committed to becoming carbon negative by 2030, developed AI tools for accessibility, and began publicly advocating for ethical technology development (Microsoft, 2020). Drucker (1999) asserted that institutions must balance individual rights with societal duties. Nadella’s policies gave concrete expression to this ideal, embedding corporate ethics into strategy, not as appendages but as essential elements of long-term resilience. Crucially, Nadella has approached leadership with the recognition that authority alone does not confer legitimacy. Drucker emphasized the importance of persuasion over coercion, process over fiat (Drucker, 1990). Nadella, rather than enforcing top-down directives, frequently invites employee participation in major shifts. Microsoft’s move into open source software—once unthinkable—was carefully socialized within the organization and presented not as an edict, but as a necessary cultural and business evolution (Miller, 2018). The broader implications of Nadella’s leadership can be understood through Drucker’s transdisciplinary lens. Drucker saw management as a “liberal art” because it required the application of ethics, psychology, history, and even theology in decision-making (Drucker, 1989). Nadella frequently cites literature, philosophy, and biography in his public remarks. His personal reflections often involve moral and philosophical introspection, underscoring Drucker’s belief that leadership is a humanistic endeavor requiring breadth of thought and emotional depth (Nadella, 2017). Despite Microsoft’s technological focus, Nadella’s management philosophy resists technocratic reductionism. His belief that people—not platforms—are the key to innovation affirms Drucker’s warning that effective management is not merely quantitative but judgment-based (Drucker, 1990). Microsoft’s market capitalization under Nadella has more than tripled, underscoring that an ethical, human-centered organization is not incompatible with economic success (Nasdaq, 2024). As Drucker argued in The New Realities, leadership in a knowledge society must move beyond command structures and embrace complexity, diversity, and continual learning (Drucker, 1989). Nadella has not only embraced these values—he has embedded them into Microsoft’s organizational DNA. His leadership demonstrates that Management as a Liberal Art is more than a theoretical framework; it is a viable, proven, and necessary strategy for organizational renewal and social relevance in the 21st century. References · Drucker, P. F. (1946). The concept of the corporation. New York: The John Day Company. · Drucker, P. F. (1989). The new realities: In government and politics, in economics and business, in society and world view. New York: Harper & Row. · Drucker, P. F. (1990). Managing the non-profit organization: Practices and principles. New York: HarperBusiness. · Drucker, P. F. (1993). Post-capitalist society. New York: HarperBusiness. · Drucker, P. F. (1999). Management challenges for the 21st century. New York: HarperBusiness. · Dweck, C. S. (2006). Mindset: The new psychology of success. New York: Random House. · Lohr, S. (2014, February 4). Satya Nadella, Microsoft’s new chief, is a company man. The New York Times. https://www.nytimes.com/2014/02/05/technology/satya-nadella-named-chief-of-microsoft.html · Microsoft. (2017). Our mission. https://www.microsoft.com/en-us/about · Microsoft. (2020). Microsoft will be carbon negative by 2030. https://blogs.microsoft.com/blog/2020/01/16/microsoft-will-be-carbon-negative-by-2030/ · Miller, C. C. (2018, October 22). How Satya Nadella remade Microsoft as an open source company. The New York Times. https://www.nytimes.com/2018/10/22/technology/microsoft-open-source.html · Nadella, S. (2017). Hit refresh: The quest to rediscover Microsoft’s soul and imagine a better future for everyone. Harper Business. · Nasdaq. (2024). Microsoft Corporation (MSFT) stock performance. Nasdaq.com. https://www.nasdaq.com/market-activity/stocks/msft · Wingfield, N. (2013, November 12). Microsoft alters employee review process. The New York Times. https://www.nytimes.com/2013/11/13/technology/microsoft-alters-employee-review-process.html
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