Peter Drucker - Business Organization - Economic Function - Social Responsibility

In the book, In The End of Economic Man, published in 1939, Drucker explained what had happened when central European managers had failed to meet social responsibilities. The managers had valued people only for their labor and treated them as factors of production. As they were treated like things, people had felt isolated and governed by irrational, "demonic forces" that do not think of their weillbeing. Society had ceased to be a community of individuals bound together by a common purpose in various institutions.

In a desperate situation, some were drawn to Marxism, which in turn undercut traditional values and institutions and paved the way for Fascist dictatorships. Both Fascism and Marxism, as Drucker saw them, were escapist; they could thow out established order using existing discontent as leverage but never fulfill human needs.

People need a society that could provide freedom, "status," and "function," and it is the task of business managers to help create such a society by shaping the workforce into the industrial citizens and the company into a community.

In subsequent works, particularly in The Future of Industrial Man (1942), Concept of the Corporation (1946), and The New Society (1949), Drucker emphasized that only satisfying work could fulfill the needs of individuals for autonomy, security, dignity, usefulness, belonging, and peer respect. Work was needed as much to provide "status and function" as income. People will be frustrated when managers valued labor only as a commodity. Through responsible acts of "citizenship" by manager and worker alike, the social and the economic needs of the individual, could be brought into "harmony" and thus fulfilled in the business organization.

In the case of managerial goals, Drucker acknowledged that economic goals must come before social ones. If the firm went bankrupt, managers would be unable to sutain the corporate community. Corporate "survival" depended on making a profit that not only covered costs but provided insurance against future risks. To make such a profit, managers must "create" customers by providing them with useful products and services.

The primacy of economic performance, however, should not obscure the thought that the business corporation was "as much a social organization, a community and society" as it was "an economic organ." In the "new society," which was an employee society, the firm had a responsibility to realize social values and fulfill individual needs.


Drucker expanded his ideas in later years by insisting that managers select socially responsible goals for the enterprise. He rejected the power of the market and the notion that a "hidden-hand" in the marketplace naturally converted "private vices" into "public virtues." He had never believed that competition automatically solved social problems. He diagreed with Milton Friedman's argument that businessmen should stick to "business" and should refrain from appointing themselves guardians of the common good. According to Drucker, business men were running social organizations that could help society and realize "social values." Like anyone else, they also had "a self-interest in a healthy society," and so they should follow normal ethical imperatives. Moreover, for Drucker, managers were the only true "leadership group" in modern society. If they did not "take responsibility for the common good," then no one else could or would.

Reference
Stephen P. Waring, "Peter Drucker, MBO, and the Corporatist Critique of Scientific Management" in
http://www.ohiostatepress.org/books/Complete%20PDFs/Nelson%20Mental/10.pdf

Source:
http://nraomtr.blogspot.com/2011/11/peter-drucker-business-organization.html

Peter Drucker on Scientific Management - Industrial Engineering

"Scientific management is our most widely practised personnel management concept" said Peter Drucker in his book The Practice of Management. The concepts of scientific management underlie the actual management of worker and work in American Industry.

"Scientific management is our most widely practised personnel management concept" said Peter Drucker in his book The Practice of Management. The concepts of scientific management underlie the actual management of worker and work in American Industry. The core of scientific management is the organized study of work, the analysis of work into its simplest elements and the systematic improvement or design of each of these elements. Drucker emphasized that scientific management has both basic concepts and easily applicable tools and techniques to carry out it intended job. Its contribution is visible in the form of higher readily measurable output.

Scientific management is a systematic philosophy of worker and work. As long as industrial society endures, we will not forget the insight that human work can be studied systematically, can be analyzed, can be improved by work on its elementary parts. Scientific management was a great liberating and pioneering insight. Without it a real study of human beings at work would not have been possible. Scientific management or industrial engineering has penetrated the entire world. Yet is has been stagnant for a long time. From 1890 to 1920 Scientific Management produced one brilliant insight after the other and creative thinkers like Taylor, Gantt and Gilbreths. During the last thirty years, it has given us little. There are exceptions like Mrs Lillian Gilbreth and the Late Harry Hopf.

According to Drucker, the lack of progress is due to two blind spots. One was the thinking that each element has to be done by one worker. Taylor saw the need to integrate and Harry Hopf certainly advocated it. According to Drucker, IE has not provided good integration tools or concepts, both individual elements and the special qualities of each man.

The second blind spot according to Drucker is insistence on divorce of planning and doing.

Drucker concluded his discussion of the topic with the statement, 'We must preserve the fundamental insights of Scientific Management - just as we must preserve those of Human Relations. But we must go beyond the traditional application of Scientific Management, must learn to see where it has been blind. And the coming of the new technology makes this task doubly urgent."


References

Peter Drucker in his book The Practice of Management, First Edition, 1955, Current Print 2006, Butterworth Heinemann, .pp.273-281

Source: http://nraomtr.blogspot.com/2011/11/peter-drucker-on-scientific-management.html

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