While reading an article by Theodore Levitt titled Marketing Myopia, I came across a reference to Peter Drucker’s Principles of Management and Concept of a Corporation and I thought I must read them. Principles of Management was not available on Amazon India, but there was Practice of Management, also by him. Concept of a Corporation was exorbitantly priced, as has become quite common on Amazon India, and so I ordered Practice of Management as well as Michael Porter’s Competitive Advantage.
A cursory glance through both the books when they arrived told me that they couldn’t possibly be the original books written by their respective authors, as I posted on LinkedIn and Twitter and also mentioned in a recent blog post. I have finished reading Drucker’s book and I am quite certain it cannot be something he could have written. However, the book got me thinking about what Peter Drucker would have made of today’s world of business and work. I am not talking of just automation and the information age we are living in, since he had written about that as well, considering he passed away only in 2005. I am referring to the after-effects of the 2007/8 financial crisis, the technological disruption since, the advent of social media, the gig economy, the effects of the pandemic, etc.
I did not want to write a review of Practice of Management, since that would not be fair to Drucker. But I thought it might be worth writing about what he would have thought of today’s world of work, based on what else I have already read of him years ago and some of what he shares in this book. The book takes a single view of his about the purpose of business and tries to weave a management narrative around it. We all know he said that the purpose of business is to create a customer, as I have also written in an article before.
In that context, he writes in the book that there are two functions in an organization that are entrepreneurial: marketing and innovation. I find that strange because he has written elsewhere that innovation has to go beyond a function and that it must pervade through the entire organization. He has written before about companies trying to set up a separate cell/division for innovation, which in his mind is the worst thing to do.
He writes about management by objectives, but doesn’t say how to arrive at those objectives and keep to them. In my long experience in the advertising and brand communications industry in India, I can tell you that articulating objectives clearly and getting agreement on them are the hardest things to do. Usually, they either merely hint at a broad goal or vision, or else they end up describing a task, neither of which is surely what Drucker means by objectives.
Strangely in a book about the practice of management, he makes no mention of his own anticipation of the rise of the managerial class as “knowledge workers” that he saw so early in his career. By the term he clearly meant to differentiate between workers who toil at a factory with their hands and manual skills and those who would work using their knowledge, use of information, analytical skills and problem-solving techniques.
And finally, how is it that in a book on the practice of management, Drucker completely fails to mention the importance of organization culture? When it is he who famously said that “culture eats strategy for breakfast” and always stressed its importance. You don’t find the words organisation or management culture anywhere in the entire book!
Anyway, on to what Drucker might have made of today’s world of work, disrupted as it is by technology as well as a financial crisis and now a pandemic.
The short-termism of management
Peter Drucker did witness some of the short-termism of American management, I am sure, including the paramount need to meet or beat analysts estimates quarter after quarter. Nothing could be more important than that, especially when the compensation packages of senior management are tied to stock performance. In fact, it was those fat cat salaries and bonuses particularly at Wall Street banks, that brought on the 2007/8 financial crisis.
But what about the excesses of the 2010s, with soaring profits, excess liquidity fuelling the markets, and share buybacks when real innovation and investment in the business was suffering. Drucker would have been among the first to point out that excessively focusing on the short term would eventually catch up with companies, when they would find themselves out-competed by other industry players, or else face diminishing returns. And that it was critical to focus on replenishing a business’s reservoir of ideas and intellectual property through innovation.
He had written plenty about American automobile companies, for example, failing to innovate and build smaller, fuel-efficient cars when Japanese car companies were stealing a march on them in the US market.
Innovation – in-house or via acquisitions
We are now in a world where innovation is touted as the most important part of business, but few in fact invest in R&D of their own for periods long enough to yield real and meaningful innovations. The easiest solution seems to be to acquire smaller start-ups that are innovating, and then earn through their IP and patents. In fact, it wouldn’t be wrong to say that innovation in itself is becoming an industry spawned by millions of small, highly innovative ventures. A lot of it is funded by venture capital (think Softbank’s One Billion Fund) and angel investors, but these are eventually bought out by private equity or large corporations.
Drucker’s own view that innovation cannot be the function of a particular division or team of people would have surely rubbed up against this current trend. What is happening nowadays is almost tantamount to outsourcing innovation! I think Drucker would have warned companies of the long-term dangers of pursuing a strategy of acquiring ideas rather than building your own. Perhaps he would have stressed the importance of in-house innovation as a means of building internal capacity and increasing the capabilities of the organization on a sustainable basis.
Customer-orientation vs sales funnel
Wonder what Peter Drucker would have thought of the digital age, fuelled by inventions such as the smartphone and other technologies that use the internet. And of social media becoming a marketing channel.
I think he might have welcomed this development, while warning us of its dangers. The latter would include not merely people’s addiction to their devices and what it does to our lives, but also the problems inherent with technology becoming a sales funnel. While he would have welcomed the ability of the internet and digital technology to connect us halfway across the world, social and digital media becoming sales and distribution channels is perhaps too intrusive. Besides, I am not sure he would approve of internet cookies tracking us all over the internet!
Overall, he would perhaps advise companies to balance their long-term objectives with their short-term needs and to resist relying so much on the internet sales funnel, at the risk of forgetting the customer at the other end.
Automation and AI – the disappearance of the middle-level manager
While Drucker has written about automation both at the factory and in offices, I am not aware of his views on the internet and on artificial intelligence, in particular. He was foresighted enough to see that automation would continue to replace tasks that are routine and repetitive and that it would help to raise productivity. He also saw it as a way for people freed of those tasks to move on to better and higher things, perhaps reskilling for new jobs and taking companies to higher growth.
However, the current phase of automation with machine learning (AI) is going to be markedly different in that it is possible for machines to not just perform routine, repetitive tasks or to compute, but that these will be of a hitherto unmatched order. Indeed, robots or humanoids are already capable of cognitive skills making it entirely possible for them to replace humans in several kinds of jobs.
While factory workers are fewer and better skilled, and senior and top management jobs are secure for now, plenty of jobs at middle manager level could be at risk, depending on how companies are structured and what roles people perform. Even if machines don’t replace them, companies will soon find that certain roles and job functions have become redundant, thanks to access to superior technology. These could very likely be jobs of a supervisory, record-keeping, coordinating nature, removing several layers of people performing such tasks in organisations.
Companies might celebrate the arrival of the flat organization structure they had been yearning for, but in Drucker’s view it would probably be the responsibility of companies to prepare their people for such a future. He might have advised them to relook at their organization structures and the need for certain roles, and at the same time advised top management to make it their responsibility to make their people fit for new roles.
The gig economy – where is any management here?
This has probably been the biggest fall-out of the 2007/8 financial crisis, when millions of people lost their jobs overnight, and at the wrong time. For this was also when the internet was revolutionizing business and entirely new kinds of companies were being born. There were few full-time, permanent jobs available forcing people to do several part-time gigs at the same time.
The gig economy thrives on the fact that the new internet-driven companies have little need for full-time, highly skilled employees at all levels. In fact, it is an extreme illustration of what the automated world of work I just described above, can be like. Highly skilled tech coders and the like form the upper crust and below them we have an army of foot-soldiers, whose job is to merely deliver the goods. Whether it is an Uber driver, or delivery personnel, these are the people who make the new-age internet businesses work.
In the middle of a raging debate in the US on whether gig workers should be considered employees, Peter Drucker would have probably weighed on the side that companies should indeed consider them to be employees and treat them as such. The fact that they moonlight for several companies doesn’t make them any different from consultants, even if the nature of work is of an infinitely lower order.
Work from home and its impact on organisation culture
Speaking of the gig economy, one is forced to also consider the informal nature of work that has crept in, thanks to the Covid-19 pandemic. Working from home, previously unthinkable in most organisations has now become a fact of life. At least for the more privileged of employees, such as managers. For the better part of the past couple of years, companies have asked their employees to work from home for the sake of their health and for limiting the spread of the virus.
I am not in favour of working from home, even though I have worked from home for the past 15 years or so, just putting down my thoughts and ideas on brands and writing for my blog. I work alone, and since it hasn’t been bringing me any income, it doesn’t count as work from home in the sense that it is now understood in the world of business. Having worked full-time out of offices in advertising and brand communications for my entire career, I am a firm believer in work belonging to the office, despite technology blurring the lines between work and leisure.
During the pandemic, WFH has made people change their way of working and living, while at the same time lowering costs for companies whether it be in terms of office rentals or transportation costs. While it is eminently possible to do certain types of work from home, and to even hold meetings over video-conferencing channels, the question is whether it has an adverse effect on organization culture over long and sustained periods of time.
I tend to think that Peter Drucker’s view would be that while it is unavoidable in these circumstances, management should do everything possible to ensure that the “sense” of the organization is preserved in every way possible. And that although home can never substitute office, the work systems, processes and culture are maintained as much as possible. He might even have advised top management to confer with employees via video-conferencing on a regular basis, so that the cultural fibre of the organization is maintained.
In many ways then, the job required of management itself has changed in the past couple of decades. On the one hand, it has become less about one’s own work or supervising subordinates’ work. And on the other, it calls for greater teamwork across disciplines and functions.
That is not to say that professional competence doesn’t matter; rather that professional specialists are required to develop well-rounded generalists’ perspective sooner.
It is said that in tomorrow’s world of work, it will not be skill-based employment, but skill-biased employment that will dominate the business landscape. Drucker can rest assured, that his knowledge workers are on a steady march forward.