Since writing The End of Economic Man 58 years and 27 books ago, Peter F. Drucker has continued to demonstrate his gift for articulating the emerging issues of the day -- and making them meaningful to the here-and-now work of managers. He recently spent several hours talking with Leader to Leader managing editor Paul Cohen about what is changing -- and what is not -- in the world of work, society, and organizations.
Leader to Leader: Peter, let me ask you first what changes you see on the horizon that will have the most impact on our working lives?
Peter F. Drucker: Recently, I spent the day with the human resources people of 20 large Japanese corporations. I had reviewed a list of questions they sent me, and I began by saying there is one important question you have not asked: How will you run a company in 15 years when the retirement age will be 75? This shocked them out of their socks because most Japanese companies have yet to raise the retirement age to 60. Japan has been the youngest of the developed countries; 10 years from now it's going to be the oldest. And there is no way it can possibly support all those retired people; even loyal, faithful, obedient Japanese citizens will balk at handing over half their pay to people in reasonably good physical and mental shape.
In this country, we are talking about balancing the budget by the year 2003. That is sheer nonsense. No matter what Congress agrees on, by the year 2003 or so, with our present retirement age of 65, let alone an enormous number of early retirements, we will be totally bankrupt. If our present trends continue, we will have about 3.3 people in the labor force for every retired person above 65. We cannot expect a larger proportion of adults in the labor force -- we already have the highest proportion in recorded history. We are not going to go back to sending 11-year-old kids to work (though I do hope they spend fewer years in graduate school when they get older. I'm still an optimist on that point).
But for the last 20 years, in all developed countries the most privileged segment of the population has been older people in retirement. And it is by no means a new observation that older people become self-centered.
So we have a tremendous challenge. We have never had a demographic revolution as fast and as thorough as that of the last 100 years. In 1900 or so, fewer than 1 in 20 people in the entire world did not do manual work. And fewer than 1 in 20 lived in a city with a population over 100,000. Today, in developed countries the proportion of people who do manual work is down to between 1 in 4 or 1 in 5 people in the work population. Half the people in the world live in cities with populations over 100,000. From an average work life span of about 25 years only a century ago, we now need to keep people working 50 years, so they can support themselves and we can maintain a growing economy. So, barring another world war, the great political issue in every developed country will be the age issue.
And it is not only a political issue. That people even in well paid jobs choose ever earlier retirement is a severe indictment of our organizations -- not just business, but government service, the universities. These people don't find their jobs interesting. Like a neighbor of mine, an engineer with a fairly responsible position in a major company: he took early retirement at about age 54 and is now spending his time playing golf, fishing, and driving around in an RV.
Barring another world war, the great political issue in every developed country will be the age issue.
L2L: But don't companies provide an incentive for early retirement?
PFD: Yes -- and he took it. How boring that job must have been for him to prefer pulling an RV! No, fiscally, it is simply inevitable that full retirement with pay will be given at a later and later age. It's a matter of simple arithmetic. But this means rethinking job structure. On the one hand, people need to work longer. On the other, believe me, people at 60 should step out of decision-making positions by and large. Why? Partly to keep opportunities for younger people open.
One of the challenges ahead is how to continue to use older, professional contributors. Among older workers -- 55 years or more -- a substantial minority wants to keep on working. So you will see a tremendous amount of experimentation. But this is going to create political and social conflict in every developed country. And nobody really sees it. People see it as an economic issue, and that's the least of it.
L2L: How does an aging workforce play out as a management issue?
PFD: The fellow who works in a steel plant and takes early retirement at age 55, after 35 years, is physically worn out from very heavy physical work. And he is willing to sit for 20 years on a pier in St. Petersburg and dangle a fishing line in the water -- maybe. But the sales manager who works 35 years is not physically worn out. We are not facing up to the demand to make knowledge jobs interesting, challenging. Somehow we make them dumb. In large part because we put so much emphasis on promotion. And by definition, promotion is for one out of ten. So you disappoint a great many.
This emphasis on promotion is a post-World War II phenomenon resulting from earlier demographic changes. For example, between 1950 and 1975, in the major New York banks, 27 years went from being the length of time you served before being eligible to become a vice president, to being the age at which you could become vice president. When I first came to this country as a newspaper writer in the '30s, you did not become a vice president of a New York bank until you were 50, just as you did not become a full professor until that age -- except perhaps in mathematics or physics. Now, of course, banks and major corporations have armies of vice presidents.
L2L: Are you suggesting that many high-level managers are not adding value to the organization?
PFD: It's more than that. We have put too much emphasis on promotion and have not challenged people. But, look, it can be done. Let me give you an example. I know a young man, 25, about to become first trumpeter in a major symphony orchestra. He is not going to be a conductor, not going to be first violinist. And nothing makes him happier than the idea of playing the trumpet for the next 50 years. What does the symphony orchestra do to satisfy people who will never get promoted that General Motors does not do for its engineers or its other professionals?
And it's not just business. I've been around academia for a long time and only a small minority of the really good people don't get tired of it. At age 43, the rest retire on the job, go into mid-life crisis, and either take to the bottle, have a torrid affair with a 19-year-old, or go into psychoanalysis. Of the three cures, psychoanalysis costs the most and takes the longest; otherwise, the results are pretty much the same. And yet there is that small minority who have inner resources, who still keep on. Many of the others wanted to, but the university system wouldn't allow them to; they had to become overspecialized. We have come to organize knowledge work very much on the model of industrial mass production.
L2L: Is it the manager's job not only to see that the work gets done but to see that it's challenging?
PFD: I think we are going to have to learn to develop more kinds of working options. For example, a friend of mine was the chief financial officer of a very substantial company. When he was 58, they offered him the chief executive job, and he said, "No, that has to go to a younger man." He is now working with 15 small companies. Twice a month, he discusses their management problems with their chief executive officers and their financial people. When they have a financial problem, he comes in and, of course, charges them; otherwise they wouldn't listen to him. And he turns that money over to charity. He's blissfully happy. He took the initiative himself. But one can learn from that. These are the kinds of challenges we need. And we need to provide them much earlier so that people want to stay involved but can also be mobile.
L2L: Are you saying older managers should leave their organizations and set themselves up as freelancers?
PFD: Let me put it differently. For 150 years, from 1850 on, society moved inexorably towards being a society of organizations. In 1900, nobody worked in an "organization." It's a 1950s term. Lots of people were employed -- hired hands on the farm, domestic servants, journeymen in their shop, but they worked for a master, not an organization. And the work was very personal.
Since then the organization has become the organizer -- though not necessarily the employer. Now we have all kinds of dangerous liaisons. One of the things to understand about outsourcing is that the woman who works for the hospital, cleaning floors, is very bored by the job. But if she works for ServiceMaster, an outsourcing company, she's very excited by it because people listen to her, people challenge her. She is expected to improve the job and gets paid for doing it -- whereas before no one would listen. These days, her supervisor had a broom in her hands only five years ago. So the outsourcing people have a great strength in making what we might call a dead-end job much more challenging, because they take it seriously.
L2L: What will the organization of tomorrow and the executive of tomorrow look like?
PFD: Perhaps this is not one question but two, for the simple reason that the executive may change more than the organization does. Charles Handy predicts that by the year 2000, practically nobody in the U.S. or U.K. will be an employee. I think that's overreaching slightly. But the trend is clear: the employee society of organizations is mutating.
In ten years the Fortune 500
list will probably not exist.
I met with a very big company not long ago -- around 80 or so on the Fortune 500 list. They expect to be number 5 on that list in 10 years, and I shocked them by saying I don't think that list will exist, so the goal is meaningless. That list basically assumes that everything you do is under your roof and is owned by you and run by you. But already in many companies, most work is done through alliances, joint ventures, minority participation, and very informal agreements which no lawyer could possibly handle. They are on the order of, "Joe, you are better on this than I am; you do it." Or, "Joe, neither you nor I should do that; let's get Mary."
This company's CEO is a well-known amateur science historian, and I told him, "You'd better stop studying the history of science and start studying the history of tribes, because that's what you're going to be. You're going to be the elder chieftain of the Cherokees." And they have no authority other than that arising from wisdom and competence and accomplishment.
So you will have to learn not to run a business but to build a business. That means you will have far fewer employees but God knows how many people who work with you. And that's the organization. The young biochemist probably doesn't want to become a manager; seven years from now, he wants to be back at the university. And yet, during those seven years, nobody's going to tell him what to do. Either he knows what to do, or you better get rid of him. And you have no promotion opportunities for that fellow, but you have to reward, and recognize, and pay him properly. So you better stop talking about managers and talk about executives. "Manager" still implies to most of us somebody who has people working for him or her.
L2L: How does one learn to manage partnerships, joint ventures, and outside contributors? These things aren't taught in business school, are they?
PFD: Far from it. The present people in organizations are still stuck in the 19th-century model of the organization. When big business first emerged throughout the industrial world around 1870, it did not emerge out of the small businesses of 1850 -- it emerged independently. The only model available, the most successful organization of the 19th century, was the Prussian Army, which had just been reorganized and had learned from the inability of the Americans in the Civil War to organize, transport, and communicate with masses of people. It was the first modern organization. It defeated the Austrians in 1866, who had a much larger and better- armed army, and then, four years later, defeated the French, who were even better armed. The Prussians succeeded because they had created an organization. They were the first ones to use modern technology effectively, which in those days meant railroad and telegraph. Business copied the command and control structure of the Prussian army, in which rank equaled authority. We are now evolving toward structures in which rank means responsibility but not authority. And in which your job is not to command but to persuade.
Authority is based on expertise
and the respect and responsibility that go
with it, not on ability to pull rank.
A friend of mine in his late 40s or early 50s runs the worldwide leasing operations for one of the world's big banks. He visited me on his way to a conference in which he was presenting his business to the top brass. And he told me, "You know, I have thought through this business, and the way the bank wants to go about it is the wrong way. I'm going to present the way I am going to go. They can fire me, but they can't order me to do it their way. As long as I run it, I have to run it the way I know is right." And he was not being arrogant; he was simply being factual. His authority is based on expertise and the respect and responsibility that go with it, not on his ability to pull rank.
L2L: Doesn't managing these new relationships assume a large degree of trust on the part of an organization -- that it's working with people who know more about some aspects of the business than it does?
PFD: First, it assumes a different attitude. You don't start out with what's best for you but with what's best for them. You see yourself not as the boss but as the conductor. Good orchestra conductors are exceedingly autocratic. But they do not see themselves as the boss. They see themselves as the servant of the score. I've talked to a good many conductors, and they all say "My job is to make the orchestra hear the score the way I hear it." Partly because no conductor knows how to get a single note out of a clarinet. Only the clarinetist knows that. All a conductor can say is, "First clarinet, I would like to have this a little louder, or a little slower, or a little softer." That authority is a command authority, but it rests on the ability of the conductor to share, to communicate.
Thank God, he is back to being the
old unbearable SOB and we know
what to expect. We can trust him again.
Then comes trust. Trust has to be built on the conviction that this conductor, this coordinator, this executive creates a partnership -- and then you have trust. Trust very largely means there are no surprises. My best story about trust is from World War II. I did a fair amount of work with one of the world's nastiest human beings. He was a first-rate inventor and about as horrible and miserable a person as I've ever encountered. He was unspeakable. This was 1946, right after the end of the war, and the start of sensitivity training -- which I persuaded him to go to. I thought I had made a contribution to humanity. And he came back totally convinced, overflowing with human kindness and caring, and I felt very good. Three weeks later, I ran into his chief engineer and said, "Joe, how is so-and-so doing?" He said, "It is impossible, I don't think we can stand it any longer. He comes into the office in the morning and says "Good Morning,' and we spend the rest of the day worrying about whether he meant it or not." Three weeks later I ran into the same chief engineer, again, and asked if things had gotten any better. He said, "Thank God, he is back to being the old unbearable SOB and we know what to expect. We can trust him again."
L2L: You mentioned the conductor's artistic vision. Certainly, social sector organizations organize themselves around a vision or mission. How important is it for other organizations to consciously do that?
PFD: We know that knowledge people have to be managed as if they were volunteers. They have expectations, self-confidence, and, above all, a network. And that gives them mobility, which is probably the greatest change in the human condition. A very short time ago, if you were the son of a peasant, you were going to be a peasant. Even in this country, social mobility was almost unknown. Now, every one of the young people I know has his or her resume in the bottom drawer, which no blue collar worker ever did.
So accept the fact that we have to treat almost anybody as a volunteer. They carry their tools in their heads and can go anywhere. And we know what attracts and holds volunteers. The first thing is a clear mission. People need to know what their organization stands for and is trying to accomplish. The second thing is responsibility for results, which means appraisal and review. And the third thing is continuous learning. I learned those lessons from our friend Frances Hesselbein. And business is going to have to learn it too. A few are beginning to, but not many yet.
So what does mission mean? Don't expect a 29-year-old or 33-year-old engineer to embrace a financial objective as a statement of mission. People want to know what their organization is here for and how they can contribute. It doesn't have to be anything very highfalutin, but it has to be concrete. I have known the Coca-Cola Company for a long time, and most of their people are totally dedicated. I know no other company that has such a strong feeling of community. Their mission is "Beat Pepsi." That's enough. But if you don't share that mission, you don't last long at Coca-Cola.
L2L: With all the changes you have seen in the last 50 years, and all the management practices that have come and gone, what do you see that remains true? What management practices will always apply?
PFD: Of the little we know, most of it will apply. The question is, will we reach a point where we apply it? We don't, yet. But the first constant in the job of management is to make human strength effective and human weaknesses irrelevant. That's the purpose of any organization, the one thing an organization does that individuals can't do better.
The second constant is that managers are accountable for results, period. They are not being paid to be philosophers; they are not even being paid for their knowledge. They are paid for results. Management is not a branch of philosophy but a practice. Which is very hard to get across in the university. The management schools try to be academically respectable. But they face a very tough 10 years, largely because they will have to re-think what they are trying to do and why. But what remains is that managers and management must deliver results, and results are not quite as easy to define in an organization. The balance between short term and long term, for instance, will remain a constant challenge.
And the last thing to say about what remains constant -- actually, it will become even more relevant -- is that people in developed societies will become increasingly dependent on access to an organization. Because they are specialists, they need access to the specialized knowledge of others in order to do a job.
L2L: How will people's dependence on an organization affect the organization itself?
All institutions, including
governments, churches, universities,
and so on, will become more
interdependent, more market- and
PFD: All institutions, including governments, churches, universities, and so on, will become more interdependent, more market- and customer-driven. Today it is a world of infinite choices. With churches, it used to be that you were born into a denomination and stayed there. In the fast-growing pastoral churches, which are the most significant social development in this country, 90 percent of the members were not born into the denomination. So competition in all realms is acute.
And yet there are new monopolies which we haven't yet taken into account. For example, we let one institution control access to careers and livelihood in a way no earlier society would have -- the college and university are major gatekeepers. That's why you have all those fights about admission. Because, for better or worse, and I think it's for worse, the Bank of America isn't going to hire anybody for a training position who doesn't have a college degree. It's asinine, but that's beside the point; it's a fact.
L2L: People always seem to be responding to change after it has happened. What advice do you give on how to anticipate change?
PFD: Look out the window. Literally. You know how painters are traditionally taught painting? The teacher places a flower vase, which looks deceptively simple to paint, on the table and tells the youngster to paint the vase. The teacher comes and looks at it and says turn around, bend down, look at what you have painted upside down through your legs. That is the traditional way to teach to see.
So look at our assumptions about technology or markets -- suppose the opposite were true. Is there any evidence? Challenge your assumptions. This is basically looking at the vase upside down. Make yourself capable of doing this by building organized abandonment into your system. By asking yourself every few years, If we weren't doing what we now do, would we want to start doing it? And if the answer is "probably not," then maybe it isn't the right thing to do anymore. This is not very difficult. It's a habit more than a skill. But it's a habit you have to practice.
|Copyright © 1996 by Peter F. Drucker. Reprinted with permission from Leader to Leader, a publication of the Leader to Leader Institute and Jossey-Bass.
Drucker, Peter F. "The Shape of Things to Come" Leader to Leader. 1 (Summer 1996): 12-18.
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