Decomposes the management theorist’s postwar oeuvre, exposing key tenets of his ‘social ecology’. Much influenced by Bagehot, Drucker’s views reflect his time in Weimar Germany as well as his interests in the contemporaneous emergence of management and the knowledge economy. Notable principles:
• The strongest argument for business as a social organization is the function of loss: efficient abandonment
• There are three models of the corporation: the German, which emphasizes the social market; the Japanese, which favors the social; and the American, which prioritizes the economic
• Management creates development, not capital or labor. The proper direction of human energies generates progress and wealth (p. 56), whereas central planning cannot master information and its productive use
• Management is a practice, drawing from other disciplines as well as its own precepts. It must emphasize the whole – focusing on the parts obscures the objective of serving customers
• The question ‘what is our business?’ can be answered only by outsiders, for the purpose lies in society, and its mission is to create customers
• A theory of a business entails assumptions about its environment (society, marketing, custom, technology); its mission (what are the expected results); and its core competencies. A business audit comprises mission and strategy, the relevant market, innovation, productivity, people development, and profitability
• The innovator makes most of the profit, and profit is short lived. Nonetheless, he has best seen the future, which has already happened
• Schumpeter always asks: is there sufficient profit to re-invest? That is, to pay for the cost of creative destruction
• Leadership lifts men to higher ends. Day-to-day management should therefore emphasize strict conduct and responsibility, performance standards, respect for an individual’s work. Leadership multiplies strengths. Its requirements are listening, communicating, not making excuses, and subordinating itself to (its share of) the task (i.e., management by objective)
• Authority and responsibility should be congruent
• The first task in assessing knowledge work is to define quality
• The most effective route to self-renewal is to pursue unexpected success
• Focus on strengths, improve strengths, reduce disabling habits
• Decisions: start with what’s right, not what’s acceptable. There are two compromises, when half is better and when the compromise does not reach the boundary condition. Then build action into the decision: who has to know? who’s to act? what are the objectives of action?
• Managers set objectives, organize, motivate and communicate, measure, and develop people. Manage to objectives, using control, that is the discipline of reaching excellence
• The organizational unit must be single-minded or its members become confused
• To measure knowledge-work productivity, measure EVA (economic value added): value added / expenses. Capital investment should be assessed by ROI, payback, cashflow, and discounted present value