How one man changed business management forever
Peter Drucker was an Austrian-born American management thought leader who, it is no exaggeration to say, revolutionised the perception of business management.
Drucker’s innovative thinking transformed management theory into a considerable discipline amongst sociologists, with the practice of business ethics and morals high up on his priorities. Below, we look at some of the great man’s key theories.
Decentralisation
A common theme across much of Drucker’s enormous body of work was his firmly held belief that managers should delegate tasks in order to empower employees, the decentralisation of management. As he saw it, many business leaders would attempt to take on all responsibilities as a display of power or to maintain a level of control, with the suggestion that they were the only ones capable to undertake those responsibilities. In his ground-breaking 1946 book, ‘Concept of the Corporation’, Drucker stated decentralization was a good thing as it created smaller teams where people would feel that they could make an important contribution. His suggestion to achieve this was to move businesses away from having one central office toward having several more independent, smaller ones.
MBO
MBO is an acronym for Management by Objectives, and was a phrase coined by Drucker in his 1954 book ‘The Practice of Management’. MBO is a measurement by which the performance of employees is considered. The process involves superiors and their subordinates working together to identify common goals, defining each employee’s area of responsibility and expected results, and using these as a plan for a team and to measure its performance. In this way, an organisation’s goals and plans flow top-down and those same goals become personal objectives for each member of the organisation. The system was formulated by Drucker but it was actually one of his students of the class he taught at New York University, George S. Odiorne, who further developed the idea. It went on to be popularised by companies like Xerox, DuPont, Intel, and Hewlett-Packard, who all became great advocates of the practice.
SMART Method
Following on from MBO, Drucker suggested the SMART method as means of checking the validity of a planned objective. The first known mention of this principle was in a 1981 issue of the ‘Management Review’ by George T. Doran. However, it was Peter Drucker who recommended that managers who are implementing MBO goals use this handy mnemonic as the criteria to verify that those objectives are specific in their aim, measurable in order to track progress, assignable to a specific person, realistic in their attainability, and time-related to confirm when its completion should be expected by.
Knowledge worker
In his 1959 book, ‘The Landmarks of Tomorrow’, Drucker suggested “the most valuable asset of a 21st-century institution, whether business or non-business, will be its knowledge workers and their productivity”. More of a term than a theory, knowledge workers are workers whose value is found in their expertise, such as architects, software engineers, lawyers, and those who engage in problem-solving or creative thinking. Whereas in the 20th century organisations focused on the productivity of manual work, Drucker anticipated that in the future (from 1959, remember) knowledge work would become increasingly vital with a focus on handling and using information. He believed that by understanding the needs of the knowledge worker, managers can implement leadership practices that are both consistent and lasting.
Even today, Peter Drucker’s legacy lives on. It is testament to his far-seeing ideas that they are still considered the standard practice in nearly every business in the Western world.
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