Peter Drucker - Toward a More Gentle Marketplace

Sixty years ago a generation of gifted Europeans had to recreate their lives in the United States, having been driven abroad by Hitler. Peter Drucker was one of them. His sense of “otherness” endowed him, like so many of his fellow émigrés, with a sense of detachment and a critical eye: “Neither actor nor member of the audience,” he writes in his 1978 memoir, Adventures of a Bystander. Through intuition, common sense and a lifetime spent in asking questions (“My greatest strength as a consultant is to be ignorant and ask a few questions”), Drucker found simple solutions to complex problems. Turning his attention to the marketplace, he transformed it into a more ideal working environment. He became one of the most influential management thinkers of the 20th century.

Peter Drucker’s childhood was nourished by the vibrant, secular and intensely intellectual milieu of ‘Jewish Vienna’ in the first quarter of the 20th century. This special environment may have inspired his unconventional and creative life, a life of eclectic interests. The son of Jewish intellectuals, he was born in Vienna in 1909. His father was head of exports in Austria’s government and routinely invited economists and civil servants to dinners on Mondays while his mother hosted parties for medical colleagues later in the week. “We never invited businessmen to the house,” was Peter’s ironic remark, after he had long established himself as a management guru.

Photo: Joan Weinstein

His classroom instruction paled in comparison to his stimulating home life. He claimed that he encountered only two first-rate teachers during his youth. They were sisters and both taught fourth grade: One taught him to set goals and organize while the other inspired him with warmth and laughter - two attributes which were critical for his professional achievements. By the time Peter was fourteen, he was determined to skip college and leave Austria, which he found depressingly mired in the past. He went to Germany in 1927, drifting among a number of jobs, including banking, consultancy, academic law and journalism. By 1931 Drucker had completed his doctorate in International and Public Law at the University of Frankfurt. With the Nazis in power, Drucker moved to London in 1933. Four years later, in 1937, he left for the United States with his new bride, Doris Schmidt.

There he found a home in academia teaching politics, philosophy and economics and made his mark upon corporate life in the 20th century marketplace. Evaluating his influence is difficult, however, because so many of his ideas have passed into conventional wisdom. His writings on the importance of knowledge workers and empowerment may sound a little banal today, but not so in the 1940s or when they were first put into practice in the Anglo-Saxon world in the 1980s. Asked which management books he paid attention to, Bill Gates once replied, “Well, Drucker of course.”

 
Photo: Joan Weinstein

Drucker defined himself as a writer and teacher, and he eventually settled on the term, social ecologist. There is no single area of academic management theory that he identified with exclusively. He eschewed constructing theoretical systems like some fellow academics and preferred reading Jane Austen to doing multivariate analysis. He liked to keep his mind fresh by taking up a new subject every three or four years: Psychology, Asian art, or musicology. His curiosity and his urge for constant change and renewal also translated into his understanding of economic notions of what worked. He viewed innovation, constant change and turmoil as the true constants of a progressing economy.

For Drucker, big business and nonprofit enterprises were the defining innovation of the 20th century. Although he defended the need for businesses to be profitable, he argued that management could achieve sustainable profits only by treating employees like valuable resources, not like costs. That, he said, required guaranteed wages, decentralization of power to make decisions which would include giving hourly workers more control over factory life. His study of the structure and policies of General Motors, Concept of the Corporation, became an overnight sensation when it was published in 1946.

His constant focus on the human impact of management decisions did not always appeal to executives, but they could not help but notice how it led him to foresee many major trends in business and politics. In the 1990s, for example, Mr. Drucker warned of a backlash from the extraordinary rise in CEO pay. “In the next economic downturn, there will be an outbreak of bitterness and contempt for these super corporate chieftains who pay themselves millions.

In every major economic downturn in U.S. history, the villains have been the heroes during the preceding book.” In the 1950s, he predicted the rise of Japan as a major economy, an astonishing insight when many experts thought the country would forever be a nation of small farmers and manufacturers of cheap, shoddy goods. Then, in 1987, when Japan’s roaring economy was the envy of the world, Mr. Drucker saw trouble ahead. “The pillar of their success - lifetime employment - is becoming an almost insurmountable barrier to flexibility,” he said.

His 2001 guide, The Essential Drucker, contains a number of management lessons, for example:
In every single business failure of a large company in the last few decades, the board was the last to realize that things were going wrong. To find a truly effective board, you are much better advised to look in the nonprofit sector than in our public corporations. Managers should never promote an employee on the basis of his or her potential, but based only on performance.

Drucker spawned two huge revolutions at General Electric - first when GE followed the radical decentralization he preached in the 1950s, and again in the 1980s when Jack Welch rebuilt the company around Mr. Drucker’s belief that it should be first or second in a line of business, or else get out. Mr. Drucker is also cited as a muse by both the Salvation Army and the modern mega-church movement.

He suggested to evangelical pastors that they create a more customer-friendly environment (hold back on the overt religious symbolism and provide plenty of facilities). Bill Hybels, the pastor of the 17,000-strong Willow Creek Community Church in South Barrington, Illinois, has a quotation from Mr. Drucker hanging outside his office: “What is our business? Who is our customer? What does the customer consider value?” Drucker believed that voluntary organizations have many lessons to teach business corporations. They are often better at engaging the enthusiasm of their volunteers - and they are better at turning their “customers” into “marketers” for their organization.

Peter Drucker died in November 2005 at the age of 95 (a week before his 96th birthday.) Survivors include his wife, Doris, four children and six grandchildren.

He also left behind around 35 books in more than 30 languages: 15 on management, 16 on economics and politics, two novels and one autobiography. He also wrote thousands of articles, including a monthly op-ed in the Wall Street Journal.