What matters is the productivity of nonmanual workers.
In 1881, an American, Frederick Winslow Taylor (1856-1915), first applied knowledge to the study of work, the analysis of work, and the engineering of work. This led to the productivity revolution. The Productivity Revolution has become a victim of its own success. From now on, what matters is the productivity of nonmanual workers. And that requires applying knowledge to knowledge.
But knowledge is now also being applied systematically and purposefully to define what new knowledge is needed, whether it is feasible, and what has to be done to make knowledge effective. It is being applied, in other words, to systematic innovation. This third change in the dynamics of knowledge can be called the Management Revolution. Supplying knowledge to find out how existing knowledge can best be applied to produce results is, in effect, what we mean by management.
Today’s new realities fit neither the assumptions of the Left nor those of the Right. They don’t mesh at all with “what everybody knows.” They differ even more from what everybody, regardless of political persuasion, still believes reality to be. “What is” differs totally from what both the Right and the Left believe “ought to be.” The greatest and most dangerous turbulence today results from the collision between the delusions of the decision makers—whether in governments, in the top managements of businesses, or in union leadership—and the realities.
But a time of turbulence is also one of great opportunity for those who can understand, accept, and exploit the new realities. One constant theme is, therefore, the need for the decision maker in the individual enterprise to face up to reality and resist the temptation of what “everybody knows,” the temptations of the certainties of yesterday, which are about to become the deleterious superstitions of tomorrow. To manage in turbulent times, therefore, means to face up to the new realities. It means starting with the question: “What is the world really like?” rather than with the assertions and assumptions that made sense only a few years ago.
Every few hundred years there occurs a sharp transformation. We cross a “divide.” Within a few short decades, society rearranges itself—its worldview, its basic values, its social and political structure, its arts, its key institutions. Fifty years later, there is a new world. The people born after the transformation cannot even imagine the world in which their grandparents lived and into which their own parents were born.
But today’s fundamental changes, these new realities visible thirty years ago, are actually only beginning and just about to have their full impacts. They underlie the worldwide restructuring of businesses, large and small—mergers, divestitures, alliances. They underlie the worldwide restructuring of the workforce—which, while largely an accomplished fact in the U.S., is still in its early stages in Japan and Europe. And they underlie the need for fundamental innovation in education and especially in higher education. These realities are different from the issues on which politicians, economists, scholars, businessmen, and union leaders still fix their attention, still write books, still make speeches.
Unless power is legitimate there can be no social order.
A functioning society must always be capable of organizing the tangible reality of the social order. It must master the material world, make it meaningful and comprehensible for the individual, and it must establish legitimate social and political power.
No society can function unless it gives the individual member social status and function, and unless the decisive social power is legitimate power. The former establishes the basic frame of social life: the purpose and meaning of society. The latter shapes the space within the frame: it makes society concrete and creates its institutions. If the individual is not given social status and function, there can be no society but only a mass of social atoms flying through space without aim or purpose. And unless power is legitimate, there can be no social fabric; there is only a social vacuum held together by mere slavery or inertia.
Management of an institution has to be grounded in basic and predictable trends that persist regardless of today’s headlines.
The terrorist attacks of September 2001 and America’s response to them have profoundly changed world politics. We clearly face years of disorder, especially in the Middle East. Management of an institution—whether a business, a university, a hospital—has to be grounded in basic and predictable trends that persist regardless of today’s headlines. It has to exploit these trends as opportunities. And these basic trends are the emergence of the Next Society and its new and unprecedented characteristics, especially.
the global shrinking of the youth population and the emergence of the “new workforce”
the steady decline of manufacturing as a producer of wealth and jobs
the changes in the form, the structure, and the function of the corporation and of its top management
In times of great and unpredictable surprises, even basing one’s strategy and one’s policies on these unchanging and basic trends does not automatically ensure success. But not to do so guarantees failure.
Achievement rather than knowledge remains both the proof and aim of management.
The ultimate test of management is performance. Management, in other words, is a practice, rather than a science or profession, although containing elements of both. No greater damage could be done to our economy or to our society than to attempt to professionalize management by licensing managers, for instance, or by limiting access to management positions to people with a special academic degree. On the contrary, the test of good management is whether it enables the successful performer to do her work. And any serious attempt to make management “scientific” or a “profession” is bound to lead to the attempt to eliminate those “disturbing nuisances,” the unpredictabilities of business life—its risks, its ups and downs, its “wasteful competition,” the “irrational choices” of the consumer—and in the process, the economy’s freedom and its ability to grow.
The story of Henry Ford, his rise and decline, and of the revival of his company is what one might call a controlled experiment in mismanagement.
The story of Henry Ford, his rise and decline, and of the revival of his company under his grandson, Henry Ford II, has been told many times. But it is not commonly realized that this dramatic story is far more than a story of personal success and failure. It is, above all, what one might call a controlled experiment in mismanagement.
The first Ford failed because of his firm conviction that a business did not need managers and management. All it needed, he believed, was the owner-entrepreneur with his “helpers.” The only difference between Ford and most of his business contemporaries, in the U.S. as well as abroad, was that, as in everything else he did, Henry Ford stuck uncompromisingly to his convictions. The way he applied them—for example, by firing or sidelining any one of his “helpers,” no matter how able, who dared act as a “manager,” make a decision, or take action without orders from Ford—can only be described as a test of a hypothesis that ended up by fully disproving it. In fact, what makes the Ford story unique—but also important—is that Ford could test the hypothesis, in part because he lived so long and in part because he had a billion dollars to back his convictions. Ford’s failure was not the result of personality or temperament but, first and foremost, the result of his refusal to accept managers and management as necessary and as grounded in task and function rather than in “delegation” from the “boss.”
If you can’t replicate something because you don’t understand it, then it really hasn’t been invented; it’s only been done.
When I published The Practice of Management, fifty years ago, that book made it possible for people to learn how to manage, something that up until then only a few geniuses seemed to be able to do, and nobody could replicate it.
When I came into management, a lot of it had come out of the field of engineering. And a lot of it had come out of accounting. And some of it came out of psychology. And some more came out of labor relations. Each of those fields was considered separate, and each of them, by itself, was ineffectual. You can’t do carpentry, you know, if you have only a saw, or only a hammer, or if you have never heard of a pair of pliers. It’s when you put all of those tools into one kit that you invent. That’s what I did in large part in The Practice of Management. I made a discipline of it.
