Peter Drucker: Father of Modern Management

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In a lifetime that spans nearly a century, Peter Drucker is one of America’s foremost experts on the subject of change. Widely known as the father of modern management, he has advised governments and corporations throughout the world, written dozens of books that have been translated into numerous languages, and penned a column for The Wall Street Journal. In this episode of World of Ideas, Drucker examines some of the stiff challenges facing America.


TRANSCRIPT

BILL MOYERS: [on camera] Good evening, I’m Bill Moyers. The man you’re about to meet studies change, and he’s become one of America’s foremost experts on the subject in a lifetime that nearly spans the 20th century. He was born a subject of the Emperor of Austria-Hungary. That same year, 1909, an airplane crossed the English Channel for the first time. the U.S. Postal Service had just riled Congress over its extravagant purchase of some automobiles to help deliver the mail. The trustees of Harvard Law School refused to let a woman in to study with the men, and people were complaining because movie tickets sometimes cost as much as a dime. The world’s really changed since then, and it’s changing yet. The 21st century is just around the comer, but the new realities are not waiting for the calendar to change. Join me for a conversation with Peter Drucker.

[voice-over] Although his autobiography is called Adventures of a Bystander, Peter Drucker is anything but. Known as the father of modern management, he came to this country in 1937, and pioneered in his field with a study of General Motors. In the 50 years since, he has advised governments and major corporations throughout the world. Drucker has written 22 books that have been translated into 20 languages, and he also finds the time to write a column for The Wall Street Journal. He has taught at Bennington College, New York University’s graduate business school, and, for the past 17 years, at the Claremont Graduate School, which recently named its celebrated Management Center after him. In a recent series of lectures, Drucker has been examining the new realities facing America on the eve of the 21st century. At his home near the Claremont campus, I talked with Peter Drucker about a few of his major concerns.

{interviewing} Looking at all the men who have come and gone in the White House since you’ve lived in this country, what have you learned about presidential leadership?

PETER DRUCKER: That it can be exercised in a great number of ways. FDR and Harry Truman and Eisenhower were very different people. I think that’s the main lesson. And the second one is, “Beware charisma.”

BILL MOYERS: Charisma? Why?

PETER DRUCKER: Yes. It is the great delusion of the century. the most charismatic leaders in history were named, respectively, Hitler, Stalin and Mao. What matters is leadership; charisma is almost always misleadership.

BILL MOYERS: Misleadership?

PETER DRUCKER: Yes.

BILL MOYERS: Why? What does it do to us?

PETER DRUCKER: Partly because it covers up the lack of substance, partly because it creates arrogance, and partly because it creates paranoia if you’re not successful.

BILL MOYERS: Then, what are the qualities of leadership that we ought to expect in a president?

PETER DRUCKER: Well, if you look at the ones that have been successful, they thought through what the assignment is. They thought through what the one job is that really has to be done, instead of having a problem. And it’s certain firmness. There is only one objective, and only one standard anytime; demanding of themselves and demanding of others a very high standard. And it’s a creation of trust because “you mean what you say” is maybe the wrong word because FDR never meant what he said, but everybody always knew exactly what he meant. He didn’t say it, but people trusted — you knew you couldn’t trust for personally, he was as slippery as an eel, and treacherous, but you knew you could trust that he was going to accomplish what you knew he was going to accomplish.

BILL MOYERS: They have a goal.

PETER DRUCKER: They have a goal. I am very dubious about all the president’s challenge about “leadership” because what people really want is somebody who substitutes manner for substance.

BILL MOYERS: You think that’s happening?

PETER DRUCKER: I think it’s always happened. We’ve always had actors.

BILL MOYERS: Ceremony instead of accomplishment?

PETER DRUCKER: But I think there is a lot of desire for, “Let’s not face up to tough ones. Let’s paint them over.”

BILL MOYERS: Doesn’t the real leader say, we’ve got some hard choices — it’s almost a cliché now — and educate us to make those choices.

PETER DRUCKER: Yes. Leadership is performance, and not personality.

BILL MOYERS: Performance

PETER DRUCKER: Yes.

BILL MOYERS: What you accomplish.

PETER DRUCKER: What you accomplish and what you enable or force others to perform. There’s that great function of making incredible demands, not making it easy for people. Those unbelievable demands which, whether it was FDR, or Truman, or Eisenhower, or any of the people in business, or the educational people I’ve seen who were first rate, make on themselves and on others. Believe me, I have yet to see a performer in a leadership position who is a nice guy. We have reached the point where armaments have become totally counterproductive worldwide, not just economically, but militarily. Nobody seems to realize that this is the longest period in the history of the world without war between major powers. And yet nobody thinks we live in a peacetime period.

BILL MOYERS: And you said in one of your lectures the other night that we are back to a period like that, I think you said, in the —

PETER DRUCKER: Before 1700.

BILL MOYERS: Yes. When the soldier, no matter what his virtue, was a burden on the economy of society.

PETER DRUCKER: And, yes, it’s very clear that one of the major reasons why the Japanese are ahead in civilian technology is that their engineers and scientists work on designing automobile doors, and ours work on missiles.

BILL MOYERS: Do you believe this enormous spending on armament is harming civilian economies?

PETER DRUCKER: There is no doubt about that, but it’s also harming civilian society.

BILL MOYERS: In what way?

PETER DRUCKER: Well, you know, there was that old saying of the French Revolution that the army is the school of the nation. If you look at what happens in countries that are being run by the military, it’s not a school you’d want, really, for your children, would you? What happened in Brazil or Argentina or Chile, or any other place where the army took over, and had to take over, those countries were collapsing. the army can no longer train or teach civil virtues or even civil skins. Armaments have become economic, and don’t get me wrong, I used to work, don’t ask me for how many years, as an adviser to the Pentagon. But unilateral disarmament is the most dangerous thing we could possibly do. So we are in a very critical period where you have to use building up military power so that you can build it down. This was Mr. Reagan’s one real success?

BILL MOYERS: One of his successes?

PETER DRUCKER: The only one, I would say, that is a real success of the Reagan Administration, is that he built up military strength with the right hand so that he could then get a real cut in military strength for the left hand. And my one criticism is that he got chicken. When announced in Reykjavik that by the end of this century all nuclear arms should be abolished everybody said, “He’s senile. He doesn’t know what he’s talking about” I have a suspicion he knew perfectly then what he was talking about. He knew that you needed a very big Utopian goal. He always says he admires FDR, and I will never forget when Franklin D. Roosevelt announced that we will build 30,000 fighter planes. I was on the task force that worked on our economic strength, and we had just reached the conclusion that we could build, at most, 400. And we thought, “For goodness sake, he’s senile.” Two years later we built 50,000. I don’t know whether he knew or whether he just realized that unless you set objectives very high you don’, achieve anything at all.

And I think Mr. Reagan made a serious mistake, when everybody jumped on him and ridiculed him, he should have said, “Children, you’re going to eat your words,” instead of backtracking; because, I think, we need somebody who says, “We have reached the point where we have to work seriously to use military strength to get out of that trap we have put ourselves in.” It’s not only a burden on the economy. And quite clearly it is Mr. Gorbachev’s main reason for wanting to cut back armaments, because otherwise he can never have his economy straightened out; not just because of the money, but because 80% of all good engineers and scientists work for the defense effort.

BILL MOYERS: Do you think we need to make a step back in order to have the kind of economy that will carry us into the 21st century healthily?

PETER DRUCKER: I don’t really want to call it a step back. I think it’s a step forward because the funny thing is that a step back gets us into armaments being the instruments of adversarial relations, and I think that the only way out is to see that there is a common interest that transcends national boundaries. Cutting back, I think, is what is going to get us there. And this is not optimistic. For the first time since, make it the 17th century, with the exception of extreme pathologies like Germany and Italy in the 20s, we have again private armies. They are now called terrorists, and they cannot be controlled. Let me say, it doesn’t really matter whether Russia and the U.S. cut back on atomic bombs, one atomic bomb in a post office box in New York City triggered by remote control would be all we need. And biological and chemical weapons are much less controllable, much more dangerous.

BILL MOYERS: Imagine them in the hands of the drug cartels, who also have their own private armies.

PETER DRUCKER: Precisely. And I think this threat is going to force governments to realize that if they don’t work together to control arms, they are on the point of losing control. And the last thread, the last remnant of national sovereignty, which is control of defense, is being very undermined by the fact that modern arms — you can probably make them on the back of your stove.

BILL MOYERS: You are one of the three foreigners whom the Japanese consider responsible for the recovery of their economy.

PETER DRUCKER: Largely because I knew Japanese art.

BILL MOYERS: How’s that? I don’t understand.

PETER DRUCKER: It’s through Japanese art that I got a rapport, and understood them, and knew what that fellow didn’t tell me. You know, the most important thing in communication is to hear what isn’t being said. And when that fellow in my first seminar said something, I could give him an answer. He said, “How come you understand?” And I said, “You told me.” Well, I somehow understood them.

BILL MOYERS: Because of your interest in art?

PETER DRUCKER: I think. so. I said to them three things. I said, “First, don’t do anything that doesn’t fit; don’t do anything that does not fit your tradition — it won’t work. What are the elements in your tradition that can be building blocks of a modern society? And the second thing,” I said, “is that you have to learn to treat people as a resource.” Japan, as you perhaps know, had the worst history of contempt for people of any society. And I said, “You have to change that. From now on people are a resource, and you have to ask not what is the cost, but what is the yield.”

BILL MOYERS: And what is it?

PETER DRUCKER: The yield, what they can produce. “And the third thing,” I said, “is that a business exists because the consumer is willing to pay you his money. You run a business to satisfy the consumer.” That isn’t marketing. That goes way beyond marketing. But I helped them a lot with management structures, the technical things, but my important contributions were very simple. Things that I’ve been saying to my American clients there’s only one difference. My American clients were very happy, but didn’t do a dam thing the Japanese did it.

BILL MOYERS: Do the Japanese have better leadership than we do?

PETER DRUCKER: No. there are certain things that — let me see, they don’t suffer from certain of our disabilities. They don’t have the financial pressures on very short-term results because the banks control. The banks have no interest in company profiles. That’s changing very rapidly now that the Tokyo Stock Exchange has been so successful, and since the performance of Japanese companies is becoming as near-sighted, as short-sighted as ours for the same reasons. Secondly, they have spent much more time on people than we do. Lifetime employment where you can’t fire anybody forces top management to look at people much more carefully than we do.

BILL MOYERS: And they constantly retrain them, too, don’t they?

PETER DRUCKER: Yes. The top people in any large Japanese company don’t do any work. They sit and do two things. They relate to government, to the industry, and they watch the younger people. And here is the 25-year-old, by the time he’s 32 top management knows all about him. He can only be promoted by seniority until he’s 45, then suddenly, overnight, the goats and the sheep are separated and you either stay a middle manager or you get into top management where you are going to stay until you are 505. And the third thing to say is that they have so far had the luxury of a totally protected country, which is that you concentrate on a very few areas, and that’s where you put all your energies. Whereas, we have to cover the whole waterfront, plus the defense, and it’s very hard for us to concentrate.

If you look, the Japanese have done very well in automobiles, in steel, in consumer electronics, all industries of the 20s, and chips, semiconductors. they’ve done nothing in telecommunications, so far. Despite efforts, they are barely coming along in pharmaceuticals; they’re just beginning. And in computers they have laid an egg because they concentrated on the wrong thing; on the big, huge mainframe, not the PC. these probably were their priorities. But they concentrated on a very small number of areas where they saw special opportunities. the markets were already established by the West, so by doing a little better what the West was already doing well, you could get ahead. And the West, they simply didn’t have to worry because they don’t let anybody in.

BILL MOYERS: Should we be afraid of the Japanese? Just this morning there was a big story here in Los Angeles about the Japanese now owning 40 percent of downtown Los Angeles.

PETER DRUCKER: No, but we are going to shift very fast to reciprocity. Europe is going to lead the way where we are going to say to the Japanese, the Koreans, “You are no longer underdeveloped countries. From now on it’s strictly reciprocal. If you let us in, we let you in. If you don’t let us in, we won’t let you in.” We are in a very funny situation which, by the way, politicians have a terribly hard time to understand. And the public, too. Everybody thinks, for instance, that American industrial production has done very badly the last 15 years. It actually increased steadily and at a pretty fast rate every year except 1981.

It’s manufacturing and blue-collar employment that’s going down. The two things are growing apart. And there has been no social group in the history of the world that has risen as fast as the blue-collar mass production worker, and no group that’s come down as fast. For 40 years the economically most rational thing to do was not to finish high school. To finish high school was economically a waste. If you dropped out in your junior year, and the priest gave you a letter to the foreman in the plant and said, “Joe’s a good boy,” six months later in the steel plant or the automobile plant, you made more money than you could possibly make getting a college degree.

BILL MOYERS: And today?

PETER DRUCKER: That’s gone. Today, the only access is through the schools, through sitting on your rear end for very long years. We may not be very intelligent, I am not a great believer in the diploma, but that’s a fact.

BILL MOYERS: What’s in store for the average worker in this new world.

PETER DRUCKER: I think that you see less, or rather a gentler, transition than I had expected a few years back. Partly because the average age is so high so that there is a lot of early retirement which is now, if we have no inflation, reasonably well-cushioned for most of them; partly because there is an enormous flexibility in the American working force. The real problem is not economics, believe me. Economics is almost unimportant. The real problem is social status. the real problem is power has gone.

BILL MOYERS: What do you mean?

PETER DRUCKER: The real problem is that the easy access to working class life. The other day I was in a meeting with some of my UAW friends. We talked about this. And one of the very able union men said, “My members, they are concerned about the recreation vehicle and the vacation cottage in the north woods” and so on. And the other fellow broke in and said, “Joe, I think that’s a second worry; their major worry is that they now see that their children cannot make that kind of living becoming a worker; that they now have to sit and sit and sit and get the degree in cost accounting,” and I chant in and said, “And never do an honest day’s work in their life.” And he said that’s exactly the way they feel. It is —

BILL MOYERS: And is that the future?

PETER DRUCKER: That the honest work of yesterday has lost its social status, its social esteem.

BILL MOYERS: I read just the other day, Peter, that it now takes two incomes in a family to equal the purchasing power that one check bought in about ’71, ’72.

PETER DRUCKER: That is not quite — well, we have had inflation and all wages have risen a little lower than inflation, that is just as true for anybody else. But don’t say purchasing power, say standard of living. Because our expectations have risen incredibly.

BILL MOYERS: So, what advice do you give young people out there listening? They’re trying to get ready for the 21st century.

PETER DRUCKER: Know your strength. The most important thing is to know what you are good at, and very few people know that. All of us know what we are not good at. What are you good at? And the reason why so few of us know it is that what we are good at usually comes so easy. You know, you sweat over what’s hard to do. What we are good at, learn to feedback, to build learning into your life. That’s the first thing. And the second thing is know when to change. There are certain situations in which you don’t stay. A situation which corrupts; you don’t stay.

BILL MOYERS: Better to go off the board on your own, even if you’re not sure there’s water down there.

PETER DRUCKER: And if you no longer learn anything, if it no longer challenges you. If you feel, “I got only 20 years to retirement,” then get out. And the last thing I say, accept the fact that with modern life expectancies, if you are knowledgeable, you will have a second career. Yesterday’s farmer, at age 43, was physically broken, literally so — before electricity — hit by a horse, beaten by horse, with that heavy physical labor he was an old man at age 43. His great-grandson who sits behind a desk with a spreadsheet, the greatest occupational hazard is hemorrhoids. And 20 years as a market researcher for the toy company is too long. Then you begin to play games. The typically degenerative diseases of early middle-age — the bottle; the affair with the 19-year old; or the psychoanalyst’s couch. Of which the psychoanalyst’s couch costs the most and takes the longest. The results are the same, pretty much. When you reach that point, change careers. You need to be repotted. You need new challenges.

BILL MOYERS: So, do you look forward to the 21st century?

PETER DRUCKER: 1 don’t know from where I’m going to watch it, but I look forward to it from wherever I will be to watch it. But I’m exceedingly happy that I’m not 20 again. It’s a very harsh world for young people.

BILL MOYERS: Harsh?

PETER DRUCKER: Yes.

BILL MOYERS: In what way?

PETER DRUCKER: First, too many opportunities, and too much pressure. Everybody has to have a success, has to be a success. This was not so in my time. If you were born a farmer’s son, you were a farmer. If you were born a blue-collar worker’s son, you were a blue-collar worker, in most cases, even in this country which had more mobility than any other. Sometimes when I look at the young, at my grandchildren, and the kind of choices they have at age 17, it’s putting too much of a burden on them. It’s not allowing them to experiment It’s not allowing them to be young. It’s not allowing them to make mistakes. That’s a very harsh world, in which you can’t be foolish.

BILL MOYERS: [voice-over] From his home in Claremont, California, this has been a conversation with Peter Drucker. I’m Bill Moyers.

This transcript was entered on April 2, 2015.

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