Management as a Liberal Art Research Institute

How to Apply Management as a Liberal Art *

William A. Cohen, Ph.D.

PUBLISHED:

Jul 03, 2023

Five years before he died, Peter Drucker revealed his basic belief about management for the first time. What a surprise!  He wrote: “Management is what tradition used to call a liberal art - ‘liberal’ because it deals with the four fundamentals of knowledge, self-knowledge, wisdom, and leadership; ‘art’ because it deals with practice and application.”

 

That’s not what others said. They said that management was a science.  The popular manta was and is “quantitative analysis for business decisions.” Most management practitioners ignored the liberal arts and focused on economics and quantitative analysis.

 

If Drucker is correct, a different approach is desirable. The impacts of ethics and social responsibility in management are not just desirable, they are required. But there’s more emphasis than Drucker’s words. To neglect the fact that liberal arts are necessary in decision-making, problem-solving, and discovery, is also to ignore the fact they have been used and their need proven by scientists for centuries. They have not only verified the liberal arts as effective, but in many cases proven them critical to success. Albert Einstein, a world-renowned scientist who accomplished amazing discoveries in theoretical physics, used not quantitative analysis, but the liberal arts in his work. Einstein’s theory of relativity, for example,  was accomplished by his imagining himself traveling with a beam of light and what was observed to those remaining stationery, not computers and economic analysis.

 

Einstein employed liberal arts in many other discoveries. He was awarded the Nobel prize in Theoretical Physics for four papers  all published in one year, 1905. How he did this he explained in a letter to the London Times dated November 28, 1919. Among these is probably the world’s best known equation, E = MC²,  representing the conservation of energy. He calculated this the same way,  using the liberal arts along with the theory of relativity the same year.  For these four major papers, he was awarded the Nobel Prize in Theoretical Physics. He used the liberal arts. Einstein didn’t use computers, had no lab assistants, and didn’t have a room with chalk-filled blackboards. He was an unknown and did the research while in an entry level position as a patent examiner at the Swiss Patent Office in Bern after receiving his PhD at the University of Zurich.

 

Economics are but One of Many Topics


Drucker demonstrated that though numbers may be a factor in successful profitability in decision-making, there are always other factors which may be significant in a different situation which can be more important and must not be ignored. Ethics and social responsibility are two important examples. Because management is an art and decisions must be made about an issue and environment that are more complicated and subject to more variability than numbers alone, other topics are equally, and sometimes more important. As an art, such work deserves to be accomplished as if you were developing a musical sonata, painting, or sculpture because, that’s pretty much what you’re doing.

 

Drucker’s Approach


When Drucker wrote that management was a liberal art, some thought he was anti-science. He wasn’t. But Drucker frequently found advantages to the use of the liberal arts and sometimes even non-quantifiable factors were more important than “quantitative analyses.” He used quantitative methods when appropriate but did not omit important non-quantifiable facts. For example, he showed that while profitability in business was necessary, maximum profitability might not even be a worthwhile or even an ethical goal, even if it were possible by segmenting the market.

 

Earning a PhD Under Drucker


Ten years after I received my MBA at a first-class business school which prided itself on being arguably the leading school in quantitative management decision making, I entered the PhD program which had been co-developed by Drucker including courses taught only by him and his dean, Paul Albrecht. Their methods differed significantly from other professors. Drucker maintained that at the end of the day, managers make decisions from the gut, and that economics was just one input, and not the only one. He specified four fundamentals necessary for what is now known as Management as a Liberal Art or MLA: 1. Knowledge, 2. Self-knowledge, 3. Wisdom, and  4. Leadership.

 

 

Specific Knowledge, the First Fundamental


Drucker listed the following topics that are traditionally included among liberal arts topics: Humanities, Social Sciences, Psychology, Philosophy, Economics, History, Physical Sciences, and Ethics. Unsurprisingly unique knowledge is frequently generated when someone from a different organization, industry, company, country or specialty joins yours. Drucker’s experience was that the most important innovations tend to arrive in this way. Therefore, any knowledge may be useful in a particular situation for a successful solution. Therefore, potential solutions based on unfamiliar ideas should be welcomed, evaluated, and not ignored regardless of source.

 

Self-Knowledge, the Frequently Overlooked Fundamental


“Self-knowledge” refers to knowledge of one’s own sensations, thoughts, beliefs, and other mental states, but also the state of your organization. Self-knowledge comes from experience, success, failure, observation, and reflection on lessons learned and applied, but also an examination of conditions and resources in your own organization including both strengths and weaknesses.

Two thousand years ago the Chinese philosopher and successful military general, Sun Tzu, wrote: “If I know myself and know my enemy, I need not fear defeat in 100 battles. If I know only myself, I will lose half. If I know only my enemy and not myself, I will lose all.” This says that while knowing your potential competition is important, knowing your own capabilities and limitations may be even more so.

 

 

The Fourth Fundamental is Wisdom


Most believe that wisdom originates from experience, but one must use the experience gained and review results before it can be said that wisdom has been assimilated and demonstrated. Though difficult to acquire, many cultures, including our own, believe in its importance. The Chinese culture, one of the oldest existing cultures assign it a high value. There are also 222 mentions of wisdom in the Jewish Holy Scriptures and wisdom is thought to be a foundation of Jewish thought. Certain wisdom was observed abroad and considered unique in America as early as 1815.

 

In that year, an artistic  work on his impression of this unfamiliar new country was completed by James Barralet, an emigrant of Irish and French origin. He described it simply as “America Guided by Wisdom” and created an engraving representing this concept that still hangs today in the Library of Congress in Washington, DC. Of course, a lot has happened since 1815, and we sometimes make mistakes during wisdom’s formation, but the effort and its results are still self-evident.

 

The Most Important Element of MLA: Leadership


Drucker investigated and found that 50% of the results of management decisions come from leadership, while all other actions contribute smaller individual percentages to constitute the remaining 50%. However, Drucker made it clear that the leadership he recommended must be practiced ethically.

 

A business must be profitable to continue to operate, but society also demands from businesses social responsibility. Drucker constantly pointed out examples. One of his favorites was case of Julius Rosenwald, President and later Board Chair of Sears Roebuck from 1908 until his death in 1932 which was a period of its great growth. He established the Rosenwald Fund, which was the first of its kind and donated millions of dollars in matching funds to promote the vocational and technical education of minority employees, noting that he considered this a duty. In those days this was a highly unusual act.

 

Drucker added that while society expected a company to be profitable it had no expectation or requirement that a company generate maximum profits especially through questionable or unethical tactics.

 

An Art Concerns Practice, Application and Results


As Drucker pointed out, as an art, MLA deals with practice, application, and results.  Contrary to the poor conduct and practices that sometimes appear, Drucker maintained that only the best and highest ethical conduct was acceptable. As Drucker’s former student and remembering his values and teachings, I doubt whether he would change his opinion as to what he believed regardless of what others might think or some of the poor examples of leadership sometimes observed by leaders in well-known business or government .

 

This sets MLA apart and the leadership he demanded is not always easy. Unlike use of mathematic formulae, the learning of which may be confirmed by memorization, paper application, and testing for significance, mastery of MLA can only be demonstrated by application, which includes not only performance, but maintaining ethical values and responsibility. As Doris Drucker, Peter’s widow, said on several occasions “I admired much about my husband, but most of all, I admired the values he believed in and represented.”

 

References

*Adapted from the following with extracts published internationally

Drucker on Leadership by William A. Cohen (Jossey - Bass, 2010

Drucker’s Way to the Top by William A. Cohen (LID, 2019)

The New Art of the Leader, by William A. Cohen (Prentice Hall, 2000)

The Art of the Leader, 3rd edition by William A. Cohen (Pyramid Press, 2018)

The Art of the Strategist (audio version) by William A. Cohen (Harper Collins, forthcoming, 2023-24)

 

 

 

The Specifics of Management of the Knowledge Worker

By Ryan Lee • 07 Nov, 2024
Nowhere is management theory demanded more than in managing the knowledge worker, and yet nowhere is management theory more inadequate in addressing a field’s issues than in knowledge work. This is the point Peter Drucker posited in his work Management Challenges for the 21st Century (1991), and to resolve it he came up with six factors that determine the productivity of the management worker. Among these, his final point that management workers “must be treated as an ‘asset’ rather than a ‘cost’” by any given organization is an important concept1. While it only gradually emerged within management theory over the century, it is crucial for any employer and any government to understand and apply if they are to retain a competitive advantage going into the future. Historically, management theory has been about improving the output of the worker through banal efficiency: how to increase the production of steel per head, how to increase the production of cars per hour, how to minimize deficient products, etc. In all these considerations, the worker is a disposable resource. When he is hired, he is set to a particular task that is typically repetitive and thus easily taught, and when he is not needed because of shortcomings in his work, company difficulties, or automation, he is laid off. Referred to as “dumb oxen”, workers were seen in management theory as machines to have productivity squeezed out of. The shift from a majority manufacturing to service-based economy during the first half of the twentieth century changed this dynamic to some extent. The American postwar economic boom introduced the office worker as a common source of employment. This trend continued throughout the conglomerate era of the 1960s and was helped by the decline of the American manufacturing industry in the 1970s. Now in a stage dominated by service and knowledge work, the American economy must approach management differently. The aforementioned cost-asset shift is a demonstration of why this is so, as Drucker’s emphasis on the knowledge worker’s autonomy means that they wield control, not only within their job but over who they should work for as well. This in addition to the high-capital nature of knowledge workers means that the old management theory approach to labor as disposable will backfire catastrophically for any company that tries it with their knowledge workers. It is also important to remember the demographic trends of the United States, and more so the world, in considering why the cost-asset shift is vital. For all of human history until some fifty years ago, population was considered to be in tandem with economic power, given larger populations yielded larger labor forces and consumer markets. Economic growth was thus also correlated with population growth, demonstrated by the historic development of Europe and the United States and the more recent examples of the developing world. Consequently, the worldwide decline in fertility rates, and the decline in population numbers in some developed countries, signals economic decline for the future. In the labor market, smaller populations mean fewer jobs that produce for and service fewer people. Although the knowledge worker has grown in proportion to the total labor market, these demographic declines will affect knowledge workers as well, meaning employers will have a vested interest in retaining their high-capital labor. To enforce this, the cost-asset shift will have to come into play. The wants and needs of the knowledge worker pose a unique challenge in the field of management. Autonomy, for the first time, can be regarded as a significant factor affecting all other aspects of this labor base. What good does a large salary provide a knowledge worker if they don’t feel that they are welcome at an institution? How would they perceive that their work is not being directed towards productive pursuits at their corporation, especially given the brain work and dedication given to it? Of course, the fruits of one’s labor has been a contentious issue in management ever since compensation and workers’ rights became a universal constant with the Industrial Revolution, but this is augmented by the knowledge worker’s particular method of generating value. Given that Drucker poses their largest asset and source of value as their own mind, they will intrinsically have a special attachment to their work almost as their brainchild. Incentivizing the knowledge worker is also only one part of this picture. Per Drucker, the knowledge worker’s labor does not follow the linear relationship between quantity invested and returned. The elaborate nature of knowledge work makes it heavily dependent upon synergy: the right combination of talent can grow an organization by leaps and bounds, while virtually incompatible teams or partnerships can render all potential talent useless. And the human capital cost of the knowledge worker, both in their parents and the state educating them and in cost to their employers, is astronomical compared to all previous kinds of labor. In conclusion, the needs and wants of the knowledge worker must be met adequately, especially in the field of management. Management must almost undergo a revolution to adapt to this novel challenge, for the knowledge worker is the future of economic productivity in the developed world. Those employers that successfully accommodate the demands of this class of talent will eventually reign over those that do not accept that this is the direction economic productivity is headed.  References Drucker, P. F. (1991) Management Challenges for the 21st Century. Harper Business.

The Wisdom and Continuing Relevance of Peter Drucker

By Michael Cortrite Ph.D. • 07 Nov, 2024
What is wisdom? The dictionary says it is knowledge of what is true and right coupled with just judgment as to action. Jennifer Rowley reports that it is the “ability to act critically or practically in a given situation. It is based on ethical judgment related to an individual's belief system.” (Rowley 2006 p. 255). So, wisdom seems to be about deciding on or doing an action based on moral or ethical belief in helping other people. This clearly describes Peter Drucker and his often prescient ideas For the 100 th anniversary of Peter Drucker’s birth, Harvard Business Review dedicated its November 2009 magazine to Drucker. In one of the articles about Drucker by Rosabeth Moss Kanter (2009 p. 1), What Would Peter Say? Kanter posits that, Heeding Peter Drucker's wisdom might have helped us avoid—and will help us solve numerous challenges, from restoring trust in business to tackling climate change. He issued early warnings about excessive executive pay, the auto industry’s failure to adapt and innovate, competitive threats from emerging markets, and the perils of neglecting nonprofit organizations and other agents of societal reform. Meynhardt (2010) calls Drucker a towering figure in Twentieth Century management. He says no other writer has had such an impact. He is well-known to practitioners and scholars for his practical wisdom and common sense approach to management as a liberal art. Drucker believed that there is no how-to solution for management practice and education. Doing more of “this” and less of “that” and vice versa is not how Drucker suggests managers do their work. Rather, Drucker relies more on morality and the virtue of practical wisdom to solve problems related to organizations. The virtue that Drucker talks about cannot be taught. It must be experienced and self-developed over time. A good example of this is Drucker’s Management by Objectives (MBO). Drucker does not give technical advice on how to initiate MBO. Rather he wisdomizes his moral convictions that integrating personal needs for autonomy with the quest of submitting one’s efforts to a higher principle (helping people) ensures performance by converting objective needs into personal goals. (Meynhardt, 2010). Peter Drucker published thirty-eight articles in the Harvard Business Review (HBR) and seven times won the McKinsey Award presented annually to the author of the best article published during the previous year in HBR. No other person has won as many McKinsey awards as Drucker The former editor-in-chief of Harvard Business Review, Thomas A. Stewart, quotes Peter Drucker; “The few of us who talked of management forty years ago were considered more or less deranged.” Stewart says that this was essentially correct. Harvard Business Review's very mission is to improve management practice. Stewart says this mission is inconceivable without Drucker’s work. Drucker’s work in management planted ideas that are as fruitful today as they ever were. Stewart posits that each year, managers discover extraordinary and immediate relevance in articles and books that were written before they were born or even before their parents were born. Stewart (2016) tries to answer the questions: Why does Drucker’s work endure? and Why is Drucker still relevant? First, was Drucker’s talent for asking the right questions. He had an instinct for being able to not let the urgent drive out the important, for seeing the trees, not just the forest. This allowed him to calmly ask pertinent questions that encouraged clients to find the proper course to take. Secondly, Drucker was able to see whole organizations. Instead of focusing on small particular problems. Ducker had the ability to find the overarching problem as well. Stewart uses Drucker’s 1994 HBR article, The Theory of the Business to make this point. Many people were trying to analyze the problems of IBM and General Motors by looking for root causes and trying to fix the blame. Drucker, on the other hand, argued correctly that the theories and assumptions on which they had managed successfully for many years were outdated. This article is as relevant today as it was in 1994 because Drucker took the “big picture view.” And no one else has ever been so skillful at describing it. Thirdly, starting in 1934, Drucker spent two years at General Motors with the legendary Alfred P. Sloan, immersed in the workings of the automaker and learning the business from within. This allowed him to talk with authority, but he has always stayed “street smart and wise.” This mentoring helped give Drucker the gift of being able to reason inductively and deductively. He could infer a new principle or a theory from a set of data or being confronted with a particular problem; he could find the right principle to apply to solve it. Drucker’s first article published in HBR, Management Must Manage, challenged managers to learn their profession not in terms of prerogatives but in terms of their responsibilities, to assume the burden of leadership rather than the mantle of privilege. Many in the management/leadership field probably found Drucker to be “deranged,” but in 2024, this is important advice for leader (Stewart 2006). Just a few more of Drucker’s ideas that seemed well outside the mainstream when he proposed them but are standard practice today include: Managing Oneself, Privatization, Decentralization, Knowledge Workers, Management by Objectives, Charismatic Leadership Being Overrated, CEO Outsize Pay Packages, and Enthusiasm of the Work of the Salvation Army (Rees, 2014). Clearly, Drucker remains relevant! References: Kanter, R. 2009. What would Peter say? Harvard Business Review. November, 2009. Meynhardt, T. 2010. The practical wisdom of Peter Drucker: Roots in the Christian tradition. Journal of Management Development Vol. 29. No. 7/8. Rees, M. 2014 The wisdom of Peter Drucker. Wall Street Journal. Dec. 12, 2014. Rowley, J. 2006. Where is the knowledge that we have lost in knowledge? Journal of Documentation. Vol. 62, Iss. 2. 251-270. Stewart, T. 2006. Classic Drucker. Editor Thomas A. Stewart. Harvard Business School Publishing Corporation.

Revolutions in Labor Hierarchies

By Ryan Lee • 24 Oct, 2024
A specter is haunting the world – though this time, the dynamics of labor have shifted to the point where this specter cannot resemble a communist force. If Drucker’s works have been any indication, the rise of the knowledge worker is a first in the history of human productivity. This first has, among many other things, overturned the traditional labor hierarchies that have existed since the rise of agriculture. For much of history, societal hierarchies and their subsequent conflicts have been demarcated by the fine line between ruler and ruled – master and slave, lord and serf, bourgeois and proletariat, and so on. The commonality between each of these relationships has been that authority and autonomy has been largely allocated to one side – the ruling – and that the literal toil of labor has been the leverage of the other – the ruled. The rulers instructed the ruled on where to direct their labor, while the ruled prevented their rulers from siphoning too much of their earnings. Such a delicate balance, established in the first agrarian civilizations, was often upset, as shown by history’s account of countless peasant revolts and eradicated kingdoms. In his 1966 essay “The First Technological Revolution and its Consequences”, Drucker established that currently recognizable human lifestyles trace much of their origins back to this first agrarian revolution in affairs. This includes the aforementioned labor hierarchy, which has dictated government policy even into the industrial age. Even through the various industrial revolutions, the evolution of labor only affected the organization of workers, with unions and labor groups giving mass labor a platform to negotiate less violently against their employers. The base demands of labor – better wages, better working conditions – as well as the demands of their employers – more output per head, more efficiency – still belonged to the old ruler-ruled hierarchy, despite the emergence of supposedly modern fixtures of economy like the union. The rise of the knowledge worker threatens to upend this paradigm. Drucker laid out some basic facts about the knowledge worker that are relevant to dealing with this revolution. First, the knowledge worker is far more autonomous than any other kind of worker in history. Management of labor has depended on power resting largely with authority. Autonomy of the worker significantly shrinks the need for this hierarchy. Second, the knowledge worker’s output is augmented by information technology. Drucker identified this as the computer in his time, but artificial intelligence fits this role as well. In previous times, any labor-altering advancements in technology only created more jobs through economic expansion. The Luddites’ archnemesis, the textile machines dominating Britain and the United States in the early nineteenth century, created a plethora of employment through an explosion of demand for consumer goods. The assembly line that threatened the monopoly of high-cost artisans generated jobs for countless factory workers. All these phenomena were driven by the mechanization of work – repetitive work, that is. Even the replacement of the artisan was the simplification of each step of their work into a repetitive task that any unskilled laborer could replicate. However, all these technologies simply made existing manual labor more efficient by subdividing it - an early application of management theory, but one that still required mass labor regardless. The development of the computer and AI poses a distinct form of technological automation, in tandem with the rise of the knowledge worker. For the first time, true automation has become a reality. Drucker noted that the computer, and now AI, can dictate and execute decisions that before would have required a human to do. Pairing this with the autonomy of the knowledge worker, we witness the creation of a system that foregoes the historic one-way direction of command for a more reciprocative structure where workers contribute as much feedback to their institutions as their bosses and the only defining difference in authority between either is the extended foresight required to direct the entire company forward. The United States is in a mixed position to deal with this shift in hierarchy. Historically, it has prescribed all its citizens to be equal and free, however different reality may have been. Individual liberty has been baked into the country’s persona beginning with the Founding Fathers and spanning the defining moments of American history, from the Civil War to the Frontier Thesis of 1890 to the civil rights movement of the 1960s. Thus, the American psyche is better adjusted to welcome the knowledge worker; the view that an American peasant never existed doesn’t exist for nothing. However, other contradictions, such as the centuries-long establishment of slavery and the historic disenfranchisement of particular groups within the United States, will contribute to friction in the transition. If not for being at direct odds with the loosening of hierarchy, these facts will at the very least create tension for the many facets of American society left behind in the deepening dependency on knowledge workers, as has recently been observed with the rise of populism on both wings of the American political spectrum. Drucker was receptive to such potential reverberations, evidenced by his concerns expressed in his work “The New Productivity Challenge” (1991). He acknowledged that however much of a role knowledge and higher service work would contribute to the American economy, the majority of the population would inevitably be outside this ecosystem, especially given the lack of concentrated education and training available to them. In that particular work he proposed that increases in productivity were crucial in maintaining the economic prosperity to generate the social stability that had prevented the oft-violent revolutions of the past. In consideration of the aforementioned hierarchical shift brought to light, the relationships between employer and employee within management theory are also important in defusing any grievances the denied populace has towards their exclusion from high-concentration work. Although service work has progressed in “employee feedback” since the mid 20th century, dissent among lower-paid service workers has risen, leading to unionization conflicts like those at Amazon and Starbucks as well as large waves of “quiet quitting” that came right after the Covid-19 pandemic. Given the prevalence of phenomena like these, management theory should heed Drucker’s warnings in advance and evaluate existing practices in employer-employee hierarchies, not only in the knowledge-worker field but in the wider service worker field as well. For if neglected, this issue shall likely boil over and erupt just as the Revolutions of 1848 manifested the specter of the labor crises sweeping Europe. As the modern maxim goes, institutions must truly adapt to having their employees “be their own boss” more than before, for the benefit of employer, employee, society, and the economy.  References Drucker, P. F. (1966) The First Technological Revolution and its Consequences. Johns Hopkins University Press. Drucker, P.F. (1991) The New Productivity Challenge. Harvard Business Review.
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