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
Leadership
5. Babbitt, Democracy and Leadership (20 Mar 2021)
Humanistic disciplines teach man to control his will, for as Burke observed, the less control within, the more without. Forsaking the fostering of individual character and sociopolitical standards risks civilization. Not reason but imagination holds the balance of power between lower and higher nature of man. Criticism must aim for centered judgments, an abiding unity, above the shifting impressions of individuality.
In the long run, democracy will be judged by the caliber of its leaders, effectively a judgment on their vision and imagination. Rome and early 20th-century America alike display ‘psychological imperialism’ – the will to power. Should the aristocratic principle of merit give way to egalitarian denial of principled leadership, parliamentary government will likely fail.
Western decay primarily traces to Bacon (utilitarianism), Rousseau (naturalism), Machiavelli and Nietzsche (imperialism; individual license transformed into will to power), with an assist to Descartes’ substituting demonstrable science (mechanism) for higher will (transcendence) as the definition of reason, and Freud’s corrupting ethics by asserting to refrain is automatically bad. The way back is Socrates (definition), Aristotle (habit), and religion (humility).
Rousseau, Babbitt’s bete noire, flattered mankind by asserting man is naturally good and corrupted only by his institutions. He taught that to pity is to exercise morality and so virtue, and glorified the instinct, the irrational. He denied personal liberty in the Social Contract’s civil religion. Rousseau inspired to violent revolt versus civilization: anarchy today, social despotism tomorrow. By result, since the 18th century Western leaders have increasingly pursued the ‘idyllic imagination’.
The English utilitarians, following Bacon, sacrificed ethics to progress. They identified progress as simple movement toward undefined, far-off events, a projection of idyllic imagining. Ridding politics of theology, as Machiavelli did, entails dispensing with ethics: men cannot be ruthless statesmen and moral exemplars. Nietzsche extended the license of Machiavelli’s prince to all.
The net result is imperialistic leadership, the will to power toward the idyllic. Yet the modern sensibility wishes to be anti-institutional but also enjoy the benefits of religion and humanism. ‘The implication of unity in diversity is the scandal of reason’ – the point of politics is to abstract unity from diversity: e pluribus unum.
The first reply to human torments is not perfect theory but developed character. The problem is to be self-reliant, to develop personal standards, the freedom to act on them, and humility (i.e., will, intellect, imagination in right relation). Greek philosophy failed to adequately address the problems of right conduct guided by higher will. Subordinating the ordinary to the higher is common to all religion. Humility, which came into the West via Christianity, made control of will more important than primacy of the intellect, but the church was less concerned with mediating metaphysics than following Aristotle’s golden mean. In dispensing with pride of intellect, the Christian tended to dispense with reason altogether, whereas the Orient showed little antagonism between the two. Karma (spiritual strenuousness) is to work on one’s highest calling. The Asiatic emphasis on humility as preceding emotion or intellect was a superior approach.
The Socratic thesis is knowledge is virtue, the Baconian that it is power. Confucius was the master of those who will act on will. Burke saw humility as the first of virtues, that tradition is a mechanism for individuals to achieve superior social standards. But he underestimated utilitarianism.
True liberty lies neither in society or nature, but inside: self-control makes one free. Expansive emotion cannot substitute for higher will. To act according to ethical will is to limit. Standards are a matter of observation and common sense; the absolute is a metaphysical conceit. Kant’s freedom to do does not address freedom to refrain.
The highest virtue of social order is justice. To collectively work toward a just order is a higher sense of work; but it is a gathering of individualized work, not minding one another’s business – contemporary ‘social justice’.
Moral realism is refusing to shift the struggle between good and evil from the individual to society. The chimerical equality of social justice is incompatible with liberty, the inner working according to standards, to higher will. That is, equality clashes with humility. Mere humanitarian ‘service’ can’t ward off the will to power. The failings of social justice are the undermining of individual responsibility, the obscuring of practical sense – as evidenced by the use of government power.
The conflict between the liberty of the unionist and the idyllic equality of the Jeffersonian is core to American history. In response to evil, the Puritan begins with inner reform, the humanitarian regulation.