Term Paper on "Drucker's Management Principles"

Term Paper 7 pages (2466 words) Sources: 5

[EXCERPT] . . . .

Drucker

21st Century: Drucker's Management & Leadership Principles

21st Century: Drucker's Management & Leadership Principles

Since the turn of the century, the landscape of management may have changed, but the underlying principles remain steadfast. One of the major contributors to the field is the world renowned Peter Ferdinand Drucker (November 19, 1909 -- November 11, 2005) who was an influential writer and management consultant (the Drucker Institute 2011). In 1943, Drucker became a naturalized citizen of the United States. He then had a distinguished career as a teacher, first as a professor of politics and philosophy at Bennington College from 1942 -- 1949, then for more than twenty years at New York University as a Professor of Management from 1950 to 1971 (the Drucker Institute 2011). Over the next 70 years, Drucker's writings would be marked by a focus on relationships among human beings, as opposed to the crunching of numbers. His books were filled with lessons on how organizations can foster the best in people and how workers can find a sense of community and dignity in a modern society organized around large institutions (Drucker & Zahra, 2003). Hence, some of Drucker's key principles are still embraced today.

Situational Assessment: Core Competencies

Karlgaard (2004) asserts that successful leaders do not start out asking, "What do I want to do?" They ask, "What needs to be done?" Then they ask, "Of those things that would make a difference, which are right for me? Be authentic and do not try to be somebody else. Each manager has a unique management style, and he or she should know his or her style intimately. Consequently, this is how he or she accomplishes tasks effectively and efficiently. One should not engage in activities that he or she does not believe in or are competent at. Learn to say no. Effective leaders match the objective needs of their company with the subjective competencies (Drucker & Zahra, 2003). They check and monitor their performance. Such effective leaders write down, "What do I hope to achieve if I take on this assignment?" Chiefly, one must have a baseline to gauge performance and to change the parameters if market conditions warrant adjustments.

Generally, core competencies have been seen as capabilities held by people within a firm that, when applied to create products and services, make a critical contribution to corporate competitiveness (Byrne & Gerdes 2005). Core competencies create sustainable competitive advantage for a company. This competitive advantage allows operating successfully in common environment and creates possibility to split into wide variety of related markets. Additionally, core competencies have a major impact on the features of the product or service, which company offers to customers. Its competence strengths are something the company can do better than a competitor, i.e. company's features, which are valuable, rare, difficult to imitate and difficult to substitute. It can be in the range from product development to employee dedication.

The starting criterion for determining a core competency capability is the question: is it capable of producing sustainable competitive advantage? Conducting a S.W.O.T.T. (strengths, weaknesses, opportunities, threats, and trends of the marketplace) Analysis will help to identify core competencies. Understanding core competencies allows companies to invest in the strengths that differentiate them and set the strategies that unify the entire organization. It is not right to equate a core competence to a specific product or service. Products and services may frequently change and core competencies are the basement on which products and services are based. Therefore, core competences are fundamental aspects of a company, like its culture, values, skills, knowledge, and abilities; therefore, they are not subject to sudden change. Build on your strengths and find strong people to do the other necessary tasks. As a result, they get an enormous amount of things done fast. In other words, do what one does best and let the others handle the rest.

Outsourcing for Performance

With his example of front room and back room of a business, Drucker introduced the concept of outsourcing. He believed that a company should be engaged in only the front room activities that are core to supporting its business. Back room activities should be handed over to other companies, for whom these are the front room activities (the Drucker Institute 2011). In the globalized economy, multinational firms have given rise to local firms able to produce at a low cost and at acceptable quality levels. A growing number of firms have outsourced production and manufacturing activities of all types to these firms, not only to reduce production costs but also to make their organizational structures more streamlined and flexible.

Outsourcing decisions, which originally were limited to production which had a modest technological content and was of marginal importance for the business in question, is increasingly adopted for activities which, requiring core competencies or belonging to the core business, were considered inseparable from the organization and thus not feasible to outsource. Gradually an outsourcing strategy has developed which has found it convenient to outsource even core competencies and functions, such as specialized manufacturing, which require a particular technology, marketing, or product design. Such an outsourcing strategy has a number of advantages, among which quality improvement, a greater focus on managing other core competencies, a greater flexibility, and leverage regarding resources, along with the possibility of entering new markets.

Decentralization for Simplicity

Decentralization tends to lead to simplification. Decentralization is a systematic delegation of authority at all levels of management and in all of the organization. In a decentralization concern, authority in retained by the top management for taking major decisions and framing policies concerning the whole concern. Rest of the authority may be delegated to the middle level and lower level of management. Drucker discounted the centralization or command and control model and asserted that companies work best when they are decentralized (Byrne & Lindsey 2005). According to Drucker, corporations tend to produce too many products, hire employees they do not need (when a better solution would be outsourcing), and expand into economic sectors that they should avoid.

Decentralization is not the same as delegation. In fact, decentralization is all extension of delegation. Decentralization pattern is wider is scope and the authorities are diffused to the lowest most level of management. Delegation of authority is a complete process and takes place from one person to another. Therefore, decentralization is complete only when maximum delegation has taken place. Everything that increases the role of subordinates is decentralization and that which decreases the role is centralization. Decentralization is wider in scope and the subordinate's responsibility increase in this case. On the other hand, in delegation the managers remain answerable even for the acts of subordinates to their superiors.

The "Knowledge" Worker

The most important contribution of management in the 20th century was to increase manual worker productivity. The most important contribution of management in the 21st century will be to increase knowledge worker productivity- hopefully by the same percentage.

Drucker taught that knowledgeable workers are the essential ingredients of the modern economy. In his 1969 book, the Age of Discontinuity, Drucker differentiates knowledge workers from manual workers and insists that new industries will employ mostly knowledge workers. Drucker was clearly prescient about the expanding role of knowledge in an information-based economy.

Peter Drucker predicted that the major changes in society would be brought about by information. He argues that knowledge has become the central, key resource that knows no geography. According to him, the largest working group will become what he termed "knowledge workers." The defining characteristic of these knowledge workers is the level of their formal education. Thus education and development, and to some degree training, will be the central concern of a knowledge society.

The crucial question in knowledge-worker productivity is: What is the task? It is also the one most at odds with manual-worker productivity. In manual work, the key question is always: How should the work be done? In manual work, the task is always given. None of the people who work on manual-worker productivity ever asked: "What is the manual worker supposed to do?" Their only question was: "How does the manual worker best do the job?" This was just as true of Frederick W. Taylor's Scientific Management as it was true of the people at Sears Roebuck or the Ford Motor Company who first designed the assembly line, and as it is true of W. Edward Deming's Total Quality Control. The first requirement in tackling knowledge work is to find out what the task is so as to make it possible to concentrate knowledge workers on the task and to eliminate everything else -- at least as far as it can possibly be eliminated. This requires that the knowledge workers themselves define what the task is or should be -- and only the knowledge workers themselves can do that. Work on knowledge-worker productivity, therefore, begins with asking the knowledge worker: What is his or her task? What should it be? What should he or she be expected to… READ MORE

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