Management as a Liberal Art Research Institute

Peter Drucker's Perspective on Recent AI Developments: Augmenting Human Capabilities

Pooya Tabesh Ph.D.

PUBLISHED:

September 4, 2023

In a world increasingly shaped by technological advancements, Peter Drucker's insights continue to hold relevance. Drucker wrote many pieces about technology, computers and their impact on individuals, organizations, and society (e.g., Drucker, 1967; Drucker, 1970). Were he alive today, Drucker would undoubtedly offer insightful perspectives on the rapid evolution of artificial intelligence (AI) and its impact on various aspects of work, business, and society. In this blog post, my aim is to engage in a creative exercise to envision insights Peter Drucker might have offered if he were alive today. Building on his work, I try to answer the following question:  What viewpoints could Drucker potentially express if he were to provide commentary on the benefits of artificial intelligence (AI)?


AI as an Efficiency and Effectiveness Enhancer

Peter Drucker said, "Efficiency is doing things right. Effectiveness is doing the right thing” (Drucker, 1974). Drucker would concur that AI's surge in popularity is rooted in its transformative potential to boost efficiency across diverse industries. His fundamental belief in the need for businesses to continuously improve their processes and practices aligns with the notion that AI can enhance efficiency by automating time-consuming tasks. Similarly, AI can accomplish many decision tasks with far more accuracy and effectiveness than a human decision maker. Therefore, Drucker would see AI as a great addition to the any manager’s toolbox. AI contributes to successful management by its direct impact on efficiency and effectiveness.   


AI, Strategic Focus, and Creativity

AI's application in time-consuming tasks and less complex decisions resonates with Drucker's concept of task management. Drucker believed that managers should engage only in decision-making regarding non-routine task. For instance, he emphasizes that majority of decisions are routine and can be standardized or delegated to others. In this regard, by using AI for automating time-consuming functions, managers can focus on bigger problems and organizations can liberate their workforce to channel their efforts toward strategic thinking, innovation, and relationship-building. Drucker's writings often stress that strategic vision and creative problem-solving are uniquely human attributes, forming the bedrock of sustainable success.


AI and the Process of Decision-making

Drucker valued systematic analysis in the process of decision making and highlighted the significance of informed decision-making in many of his books. He was, however, pessimistic about computers as actors capable of effective decision making. Back in 1967, Drucker called computers “total morons” because they could not make decisions (Drucker, 1967). Today, the machine intelligence has changed the equation. Therefore, if he were alive today, Drucker would likely commend AI's ability to analyze massive data and unveil hidden patterns that human decision makers might overlook. Nevertheless, he would also caution against blindly trusting AI-generated insights or decisions. Indeed, while he promoted careful analysis, Drucker believed that analysis alone might not generate the best outcomes in every single situation. Therefore, Drucker might advocate for a symbiotic approach to human-AI interactions (e.g., Jarrahi, 2018) where AI-generated decisions are considered alongside human judgment, combining quantitative findings with qualitative understanding.

 

 Value of People and the Augmentation Paradigm

One of the cornerstones of Drucker's management philosophy is the idea that people are the most valuable assets in the organization. In this context, and consistent with the symbiotic paradigm, Drucker would emphasize that AI should be employed as a partner to augment human intelligence, not to replace it. He would likely stress that AI's real potential lies in its ability to collaborate with human professionals, enhancing their problem-solving capabilities. In this view, human judgment continues to be a significant asset in the organization.


Final Thoughts

In a world captivated by AI's potential, Peter Drucker's hypothetical insights would likely underline the importance of responsible AI integration. I speculate that in the age of machine intelligence, his characterization of computers would shift from “morons” to discerning collaborators whose insights merit careful consideration and thoughtful evaluation rather than unquestioning reliance. His visionary perspective would emphasize using AI to complement human strengths, optimizing efficiency, enhancing decision-making, and fostering innovation. In Drucker's view, AI's true value would not lie in overshadowing human intelligence, but in propelling it to greater heights. As businesses navigate new opportunities in the AI landscape, Drucker's wisdom reminds them that technology's impact is most profound when it aligns with and magnifies the capabilities of the human mind.


References

Jarrahi, M. H. (2018). Artificial intelligence and the future of work: Human-AI symbiosis in organizational decision making. Business horizons, 61(4), 577-586.

Drucker, P.F. (1974), Management: Tasks, Responsibilities, Practices, Harper and Row, New York, NY.

Drucker, P. (1970). Technology, management, and society. Routledge.

Drucker, P. F. (1967). The manager and the moron. McKinsey Quarterly, 3(4), 42.

 

The Future of Knowledge Work: What Drucker can teach us

By Karen Linkletter Ph.D. • November 19, 2024
Interview with Karen Linkletter at the 16th Global Peter Drucker Forum 2024  Video Interview

The Specifics of Management of the Knowledge Worker

By Ryan Lee • November 7, 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. • November 7, 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.
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