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The Drucker Forum: A Bridge from the Past to the Future

Posted on November 13, 2012 by David

The "bridge to the future" sounds as it must be giant, modern construction. It might also be a series of smaller scale undertakings using established technologies and existing materials.

A Bridge to the Future

Today I am headed to Vienna to take part in the 4^th Global Drucker Forum, where an essay I wrote earlier this year has won second prize in the manager/entrepreneur category. The Drucker Global Essay Challenge has two categories – students and young managers/entrepreneurs. I must confess that I was uncertain as to whether the term “young” applied to entrepreneurs as well as to managers and I was also concerned that I might not qualify chronologically as “young”. But there was no age limit specified and as every entrant had to submit his or her date-of-birth, I figured, as every entrepreneur should, that one should always let the client say “no”. So I sent my entry off and waited.

Drucker had always been an enigma to me. When I was a manager I had liked a good deal of his advice, but I could never figure out where he was coming from intellectually. My concern was always that fundamentally he was too “left-brained”, a rationalist, or perhaps that his advice lent itself to interpretation in too rational a way. Drucker was well-known for not citing his sources, arguing that the ideas themselves were more important than who came up with them, but this just made my problem worse. What did he mean by “think” in his repeated injunctions to managers to “think through” their issues? Was it an analytical process? Perhaps it was the logic of logical positivism that flourished in Vienna while he grew up there? My concerns were practical as well as philosophical. Take management-by-objectives (MBO), for instance, the approach to management that he helped pioneer and popularize. Participative goal-setting between managers and employees sounds great in theory, but in my experience it rarely seemed to work well in practice, at least not for long. No sooner did one bring MBO into a real organization than the whole logic of the practice was perverted by the presence of power and the absence of trust. If you hadn’t had those kinds of problems before MBO, you certainly did afterward! Divisions and other business units were pitched against each other as “scarce capital” was allocated by the “shareholders’ representatives”. One usually ended up with MBO cascaded down from the top of the organization with every negotiating session bedeviled by the subtle (or not-so-subtle) use of power and endemic mistrust.

The Root of All Evil

I suspect that the emergence of the shareholder value model in the 1970s as the dominant framework in Western management played a major role in the decline in the efficacy of MBO. It created an unnecessarily adversarial climate, where everything was reduced to money. A related problem was (and is) that in most organizations the dual purposes of budgeting – financial forecasting and performance management – are not kept separate. This means that managers get paid for hitting forecasts and so the negotiations over the numbers are all about money and have little to do with the possibilities inherent in the business situation. Worse still, the focus on individual goals and not the system’s goals makes everything personal. Instead of looking “out”, the MBO participants end up looking “in”, negotiating the lowest forecasts that they can get away with and continually thinking about how to game the measurement system. The use of “cookie jars”, “bottom drawers” and “back pockets” becomes critical, as well as the magical ability to produce financial rabbits out of hats. None of this has anything to do with creating value for customers.

Of course Peter Drucker would have been horrified by this perversion of MBO. His concern about the lust for power and its channeling toward productive ends is a leitmotif throughout his writing. He always argued for a systemic approach and contended that the best and only legitimate form of control was self-control, but somehow this message never got through in the companies I saw. MBO never came with a warning label – “Caution: Must be combined with self-control to avoid damaging consequences!” – instead MBO was seen as an unalloyed good. I could understand how it might work in organizations where people were ends-in-themselves, but not in organizations where people were instruments – means to the ends of others. It slowly dawned on me that what was missing was the importance of context. In the right context MBO could work wonderfully well; in the wrong context it could become a tool of oppression and a bad-tempered exercise that operators like auto executive Bob Lutz described (when he was at GM) as “a ritualistic time suck”. I felt encouraged when I read that Honda and other Japanese companies avoid MBO, not because of the inherently communal culture of the Japanese, but because they believe that 85% of their issues are systemic in nature and cannot be addressed by focusing on individual performance.

Drucker as a Social Ecologist

Peter Drucker 1910-2005 Social Ecologist

Things began to fall into place for me when, in the early 1990s, Drucker identified himself as a “social ecologist”. By then I had decided that one had to take a true systems approach to the study of organizations and that the most effective way to do this, at least for teaching practicing managers, was to draw analogies between ecosystems and human organizations and discipline them with systems thinking. So when I read about Drucker and social ecology a few years later everything was starting to click.

By the time I came to write the essay for the 2012 Drucker Global Challenge I had spent four years writing The New Ecology of Leadership: Business Mastery in a Chaotic World. I had reconfigured the field of management and leadership using a “both…and” perspective of “ecologics” to embrace and contain the “either/or” of economics. I argued that contexts mattered, history mattered and narratives mattered. From this perspective all the puzzles that I had experienced in trying to understand where Drucker was coming from just disappeared. For the ecological perspective captured perfectly his constant concern for the relationship between continuity and change at all levels of society.

Many of my academic colleagues in business schools said that they never understood Drucker’s appeal to managers and dismissed him as a man from the past – a relic of fin-de-siècle Vienna. In my essay I argued that he had actually anticipated the future. I suggested that if he were alive today he would be writing ecological rationality and embodied cognition and their implications for management.

In any event, the jury must have liked what I wrote. They praised its “thematic scope and outstanding quality” and awarding me a prize. I was thrilled and honoured. I am looking forward to going to Vienna and exchanging ideas with thinkers from many different backgrounds at this critical time. Chronologically I may be one of the oldest winners of a Drucker award, but there will be no one at the conference who is more impatient with the status quo in the practice and theory of management and more passionate to discuss the directions it might take in the future.