What Your Business Can Learn From Peter Drucker

Who was Peter Drucker?

Peter Drucker was born in Vienna, Austria, in 1909. He attended college and graduate school in Germany in the early 1930s, where he witnessed – and vocally opposed – the Nazis’ ascent to power. Drucker fled to England in 1933 and then to the United States in 1937. During this period, he worked as a financial journalist and an investment analyst. In 1939, he published his first book, The End of Economic Man: The Origins of Totalitarianism, which chronicled the rise of fascism.

Drucker believed the only way to prevent a second coming of fascism was to create a “functioning society,” the cornerstone of which, he said, was strong institutions – including corporations, which he believed had a duty to be as virtuous as they were profitable.

“Management, practiced well, was Drucker’s bulwark against evil,” according to the Drucker Institute, a social enterprise established by Drucker to advance his ideas and ideals.

Drucker laid out his theory – that corporations are as much social entities as they are economic ones – in his second book, The Future of Industrial Man, which caught the attention of General Motors. In 1943, the company invited Drucker to study its internal operations, the result of which was Drucker’s third book, Concept of the Corporation, in which he introduced many of his most influential management theories.

And so commenced Drucker’s prolific career as a management consultant, teacher and author, which spanned more than 60 years until his death of natural causes in 2005.

What is Drucker’s management theory?

“Drucker felt that all businesses need and deserve to be managed well,” explained Drucker disciple Bruce Rosenstein, author of two books about the management guru and his theories: Create Your Future the Peter Drucker Way and Living in More Than One World: How Peter Drucker’s Wisdom Can Inspire and Transform Your Life. “Part of that, he believed, was thinking about the future … He recognized that even if you’re really successful now, you will fail later if you’re not thinking about the future.”

In Drucker’s own words: “Management is doing things right; leadership is doing the right things.”

Peter Drucker’s management theory embodies many modern concepts, including the following:

• Decentralization: Rosenstein said Drucker was focused on decentralizing – or democratizing – workplace management. He wanted businesses to empower their staff so all employees would feel valued and know their contributions and voices mattered. He believed in assigning tasks that inspire workers, rewarding front-line workers with responsibility and accountability, and uniting supervisors and their subordinates to achieve shared organizational goals.
• Knowledge work: Knowledge workers, such as engineers and analysts, are white-collar employees whose jobs require handling or using information. Drucker – who foresaw the knowledge-based economy years before the rise of computing and the internet – placed a high value on workers who solved problems and thought creatively, according to Rosenstein. He wanted to foster a culture of employees who could provide insights and ideas as well as labor.
• Workforce development: Drucker felt strongly that managers should improve and develop themselves and their team members, according to Rosenstein. Investing in employee training is intrinsic to Drucker’s philosophy. For example, he believed external development – via participation in industry trade groups and conferences – is especially valuable.
• Corporate social responsibility: Rosenstein said Drucker was a holistic thinker. Instead of looking at businesses as discrete entities, he saw them as components of a larger social system. In that context, he argued that businesses should see themselves as part of a community and make decisions in that regard – with equal respect for their external and internal impact. Drucker even viewed profits through a social lens: A company is responsible for being profitable, he argued, so it can create jobs and wealth for society.
• Organizational culture: Companies have always had cultures, be they positive or negative, helpful or harmful. But Drucker was among the first to suggest that managers could – and should – shape and change workplace culture. “The spirit of an organization is created from the top,” he said in his book Management: Tasks, Responsibilities, Practices. “If an organization is great in spirit, it is because the spirit of its top people is great. If it decays, it does so because the top rots … No one should ever be appointed to a senior position unless top management is willing to have his or her character serve as a model for subordinates.”
• Customer experience: According to the Drucker Society of Austria, steward of Drucker’s philosophy in his home country, Drucker insisted that businesses have only one real purpose: to create customers. By viewing business operations and opportunities through that lens – the customer, not the business, decides what’s important – he established a predicate for customer-focused companies like Apple, Zappos and countless others that prioritize a great customer experience.

What is management by objectives?

One of Drucker’s most enduring ideas is “management by objectives,” or MBO. Although it has come to mean different things to different people, the definition most agree on is management in pursuit of shared organizational goals.

The idea is simple: Employees at all levels work together to advance the business toward an agreed-upon destination. Each worker has an equal say, sharing their opinions on the destination. From there, teams establish business goals and delegate specific tasks according to skill sets and interests.

The process comprises five basic steps:

1. Managers and team members review and set organizational goals together.
2. Team members distill organizational goals into individual objectives.
3. Managers and team members monitor progress toward individual and shared goals.
4. Managers and team members evaluate performance based on measurable milestones.
5. Team members receive feedback and rewards relative to progress.

For organizations and individuals, Drucker believed in fellow management consultant George T. Doran’s concept of SMART goals – goals that are specific, measurable, achievable, realistic and time-bound.

“It’s the idea that you have to have a sense of where you’re going, what good results look like and how you’re going to achieve them,” Rosenstein explained. “You have to think in a very concrete way about what you want to accomplish so that you can get there, and help other people get there.”

Is Peter Drucker still relevant?

Although Drucker’s ideas are decades old, they feel as fresh today as ever. Consider, for example, one of his most famous pieces of advice: “Look out the window and see what’s visible but not yet seen.”

“Drucker wrote about ‘the future that has already happened,'” Rosenstein said. “Think about self-driving cars, or blockchain, or artificial intelligence. These are things that have already happened but whose full social impact hasn’t yet been realized. Drucker would have argued that your business needs to be thinking now about what those things are going to mean for your business down the road … His advice is timeless. It will still apply years from now – whatever the current trends and technologies are.”

Source interviews were conducted for a previous version of this article.