MANAGEMENT
AS SOCIAL TASK

Preface:

“Economics takes place in the economy” proclaimed a former German Minister of Economics in the ‘nineties. His statement did not provoke massive objections because the remarks, though dismissed by some as rather unfortunate, were according to the “Zeitgeist” of the past thirty years.

The occurrences of the recent weeks and months have convincingly shown the fatal error inherent in that statement. Economics takes place in society, and global economics takes place in the global society.

Drucker understood this better than anyone else and pointed it out in his comprehensive opus, written in his typically clear language: „None of our institutions exists by itself and is an end by itself. Everyone is an organ of society and exists for the sake of society. Business is no exception. Free enterprises cannot be justified as being good for business. They can be justified only as being good for society.” ²

Peter Drucker was also the first to identify management as a social function and to derive from this definition the fundamental task of the management of organizations. „Management and Managers are the central resource, the generic, the distinctive, the constitutive organ of society … and the very survival of society is depending on the performance, the competence, the earnestness and the values of their managers…What managers are doing is therefore a public concern.” ³

Aware of his responsibility for this insight, he did not stop at documenting his observations and analyses but urged those who are socially responsible to take action, - though not to launch a paradise on earth, but a functioning society which is tolerable for the overwhelming majority of mankind.

Peter Drucker always saw himself as an outsider, and, accordingly was perceived as an outsider. He dismissed the attempts to press him into the mould of a “management guru” or “futurist”, which did not do justice to his work at all. Throughout his life he was first of all a social philosopher, secondly a management philosopher, and finally he called himself a social ecologist: „Concerned with man’s man – made environment the way the natural ecologist studies the biological environment.“ ⁴

He did not think hat he belonged among the scholars in the meaning of the 20th century. Rather he saw himself as a steward of “the moral sciences”. „If it is (the Social Ecology) a science at all, it is a “moral science” – to use an old term that has been out of fashion for 200 years”. ⁵

Inspired by Henry Adams ⁶ he called himself a Christian-Conservative Anarchist.

“A conservative Christian anarchist – yes, that’s me, more or less! The older I get, the more skeptical I am that society can satisfy all of the promises that humanity hopes to realize. I think one of the quintessential experiences of the last 50 years has been our growing disillusionment with “Volksbeglückung” and our gradual recognition that a society can at best be tolerable, but never perfect. Things can be improved, but not perfected. This is a conservative concept, yet also a Christian one, since it emphasizes the individual and his or her belief, while seeking a perfect state of affairs not in the temporal world, but in another. I am a conservative Christian and an anarchist in the sense that I am increasingly wary of governments – no, that is the wrong word – of power. As a philosopher and I make no claim to be one, I have always regarded power as the central problem and the yearning for power – not sex – as mankind’s greatest sin. Sexual desire is not a sin. It is something we have in common with all the animals. So, in this sense, I am an anarchist, but unlike traditional anarchists, I accept the necessity of governance and government. The political philosopher I admire most is Wilhelm von Humboldt, who founded the University of Berlin in 1809. As a young man of 23, he wrote a wonderful book on the mythos of the French Revolution. It contains an essay entitled “Ideas trying to define the Limits of the effectiveness of Government.” This became the focus of my interests. The issue led me to investigate business enterprises and other autonomous institutions within our society that had assumed social tasks and thereby restricted the power of the state. That is why I call myself a conservative Christian anarchist to this day, although in the very specific sense just described.” ⁷

Peter Drucker was more or less understood throughout the world. However, one of the few people who early recognized the importance of Drucker’s work for Management Education was Hans Ulrich, an eminent professor in St. Gallen, Switzerland. Thanks to his efforts Peter F. Drucker was granted an Honorary Ph. D. degree of the HSG in 1970. Disciples of Hans Ulrich, particularly Peter Gomez and Fredmund Malik, have continued what he had started: Training those who after graduation plan to go into management in all thoughts and action guidelines of Peter Drucker.

What is the essence of Drucker’s work, and its importance for our society with its institutions such as business enterprises, government organizations or universities?

It was a singular honour for me to get to know Drucker as a teacher during the last thirty years of this life, and to cherish him as a friend. Starting out from this thoroughly personal background I shall now try to summarize his basic ideas.
What are the main topics and the predominant ideas which shaped Drucker’s view of the world? First, there is an extraordinary sensibility for the significance of language and for the power which flows from it. But at the core of all of Drucker’s thinking – and, running like a red thread, through all his work, - is the problem of society and community. This is the fundament on which Drucker builds his perception of “Management as a social function” and with it the ethics of responsibility.

I shall now briefly outline those basic concepts, followed by a report of a dialog, in which Drucker, from a concrete contemporary point of view, described his perception of a functioning society. My essay ends with a commentary on management education as a social task.

The Significance of Language

“Language is nothing real but it can be effective all the same. It can be a weapon or power” ⁸

„Language is aesthetics and aesthetics is morality“. ⁹

Drucker’s entire work is distinguished by a deep respect for the significance of language and for the respectful way of using it. „The Vienna, in which I grew up, was also the home of Karl Kraus (1874 – 1936), arguably the greatest Master of the German language in this century. And for Kraus language was morality. Language was integrity. To corrupt language was to corrupt society and individual alike”. ¹⁰

Language, according to Drucker, creates community and cooperation and links the two to one another. From this premise arises the social responsibility of knowledge workers – whether they are managers, scientists or management consultants – to make themselves understood by the general public and to use understandable language so as to give everybody access to their knowledge.

Drucker is especially severe with the intellectuals, and in particular with the representatives of the social sciences and economics. „The conceit that science is not „science“ is not „respectable“ unless it is unaccessible, is obscurantism. I consider the obscurantism of today’s intellectuals to be betrayal and treason”.¹¹

At that there are enough examples – at least from the years before World War II – of important social scientists who, through the clarity and transparency of their language acknowledged their social responsibility “as did the first rate historians of that day, as did Reinhold and Richard Niebuhr both, and even the economists of that day. Max Weber wrote simply, clear and accessibly and published in magazines for the laity and even in the daily press – and so did Thorstein Veblen.” ¹²

Peter Drucker always refused to be classified as an intellectual. Of course he was one and in particular an intellectual in the sense of Denis Diderot (1713 – 1784) who, as characterized by Wolf Lepenies, was a “self-ironic advocate of intellectual manners. Diderot’s intellectual does not lead a detached life. For him, the everyday world is neither strange nor distant. Because he knows that man has no life outside society, he wants to fully develop his own sociability, to please his fellow men and to make himself useful. In this way the overestimation of his own abilities is being tamed, and out of the scholar’s alienation from the world arises the obligation for him to contribute to the public value.”  ¹³

Social responsibility, authority which is legitimized by competence, as well as a deep and sensitive understanding for the strengths and the weaknesses, for the potential and the limits of man – these are the fundamental orientations of the intellectual, the scientist and of the social ecologist Peter Drucker. Connected with this is the responsibility in respect to language. „Thus I always thought that the social ecologist has a responsibility to language. Social ecologists need not to be “great” writers; but they have to be respectful writers, caring writers”. ¹⁴

Community and Society – the Key Categories

“With the modern state there has arisen an institution whose very essence is a constant change of form, indeed whose very purpose is to be bearer of the passage of history.” ¹⁵

Peter Drucker has repeated over and over again that management was never the chief object of his interest and of his work. „Management was neither my first nor has it been my foremost concern. I only became interested in it because of my work on community and society“. ¹⁶

Drucker’s first book on Friedrich Julius Stahl’s “Conservative Theory of the State” was published in 1933. Since then Drucker’s writings have addressed the following topics: the interest of social structures and developments. And connected therewith, a continuous search for the possibility to connect continuity and preservation on one hand with change and innovation, on the other hand, as well as the quest for a functioning society which integrates the individual, community and society.

Who had the greatest influence on Peter Drucker’s perception and who decisively formed his thinking? Essentially Conservative-Liberals who, like him, lived in times of great change, and whose main interest was to come close to create a “bearable society” through an effective balance of preservation and renewal.

Of course, there was Stahl (1802 – 1861), but also the Viennese social philosopher Othmar Spann (1877 – 1950), - today unfortunately forgotten, who was a friend of Drucker’s. Likewise, Drucker was influenced by the great British philosopher and statesman Edmund Burke, by James Madison and Alexander Hamilton, among the Founding Fathers of the United States and authors of the Federalist Papers, as well as by the pathbreaking work of Alexis de Tocqueville, the great French social philosopher: Finally, and of great importance for Peter Drucker, was Walter Bagehot, perhaps the greatest British political writer and the famous editor of the “Economist”. Drucker says that he feels closest to him regarding temperament, concept and working method.

Two men stand out as having had the greatest influence on Drucker’s work: the great sociologist Ferdinand Toennies (1856 – 1936) and Wilhelm von Humboldt (1767 – 1835), the political philosopher, statesman and language researcher. „Tönnies was indeed the first and greatest influence on me. I first read him – by pure accident – in Hamburg in 1927 or 1928 when I was a deadly bored Kaufmannslehrling there“. ¹⁷

Toennies’ book “Community and Society” is one of the great monographs of sociology. „Tönnies juxtaposed community, which is focused on being, that is status, with society which is focused on doing, that is function. I argue that the basic institution of society has to be both a community that gives status, and a society that does function.” ¹⁸. Man needs status and function in his social and political life, as he needs air to breathe in his biological life. „Man must have status and function in his society in order to be a person. Without he is either the “caged spirit” of Oriental philosophy, senselessly and meaninglessly caught in a senseless and meaningless life or just “Homo sapiens” and one of the more brutish apes. And only a society that gives status and function to its members can expect their allegiance”. ¹⁹

Drucker knows of course the limitations of the individual and thus also of society. For him, perfection and total fulfilment are illusions. „The demand is however, for efficient rather than for absolute fulfilment, for adequacy rather than for perfection. We deal after all with the social order of men not with that of angels. But there is a point below which the efficiency of social fulfilment may not fall without making society appear despotic, arbitrary, irrational and meaningless. Where this point is we do not know”. ²⁰

Wilhelm von Humboldt strongly inspired Peter Drucker not to stop looking for the limits of government’s effectiveness: „I began to ask the same question: What are the limits of government effectiveness in the early years after World War II and began to ask it with increasing urgency as we went into the Eisenhower administration.” ²¹

Von Humboldt was for Drucker also a pioneering architect of a social order which was able to balance “Conservation” and “Change” in accordance with the dynamics of society. „What Humboldt did was to balance two conserving institutions: a professional and university-trained civil service and a professional army, with two innovating institutions: the research university with complete freedom of research, publishing, and teaching, and the free-market economy on Adam Smith’s prescription. The Monarch – a strong executive, very similar to the way Humboldt saw George Washington in far away America – would preside the four and would serve as the balancing wheel. And, to repeat, this worked for a hundred years.” ²²

Management as a Social Function

“There are three tasks, equally important but essentially different, which management has to perform to enable the institution in its charge to function and to make its contribution:

• the specific purpose and mission of the institution, whether businessenterprise, hospital or university;
• making work productive and the worker achieving;
• managing social impacts and social responsibilities.” ²³
   

During the past hundred years, business enterprises, especially in the developed countries of the West but also in Japan contributed hugely, through their economic achievements, to the fact that the largest proportion of their population could live in material wealth. That means that the management of those enterprises has legitimized itself as a leading elite or, as Drucker calls it: „as one of society’s leadership group“ by providing a large amount of economic products and services for human consumption. However, this is only one aspect of managements legitimacy in a pluralistic democratic society….„Increasingly, in our pluralist society of organizations, it has to be added to its fundamental concern for the quantities of life, i.e. economic goods and services, its concern for the quality of life, that is, for the physical, human, and social environment of modern man and modern community.” ²⁴

Thus, the business enterprise and its top management increasingly receive the task “to make social values and believes, create freedom for the individual and produce the good society. This demand requires new thinking and new action on the part of the manager. It cannot be handled in the traditional manner. It cannot be handled by public relations.” ²⁵

Going back to Drucker’s definition of management’s three dimensions, the social function of the business manager is the following: he has to perform simultaneously three tasks: to achieve economic performance, to make effective the strength of his co-workers as well as to manage social influences and problems; and at the same time to pay equal attention to today’s demands and tomorrow’s challenges. A very complicated task because especially a business manager has to make decisions while he is under perpetual pressure. Because on one side stands the fundamental requirement that „Performance of his function is his first social responsibility. Unless it discharges its performance responsibility, it cannot discharge anything else. A bankrupt business is not a desirable employer and is unlikely to be a good neighbour in a community.” ²⁶

And on the other side stands the effective management of social impacts and problems „because no organ can survive the body of which it serves; and the enterprise is an organ of society and community. Therefore mismanaging social impacts and social problems eventually will destroy society’s support for the enterprise and with it the enterprise as well.” ²⁷

The Ethics of Responsibility

Management means being responsible for the specific performance of an organization, whether it is a business enterprise, a hospital, a theatre, a government department or a research institution.
Management is a profession, and the essence of management is neither wealth nor status but responsibility.
What are the duties which the professional ethics of the manager imposes? What are the duties of the manager in respect to community and society, and how can we define these ethics of responsibility?

Peter Drucker’s concept of ethics has nothing to do with Business Ethics in the sense in which that word has been used for decades in most business Seminars and books, which are about everyday honesty and which warn about cheating, stealing, lying, bribing or accepting bribes. Of course, nobody should do anything of that. To summon call girls for the entertainment of customers also has nothing to do with ethics, that is only a question of one’s demands and taste. „It would indeed be nice to have fastidious leaders. Alas, fastidiousness has never been prevalent among leadership groups, whether kings and counts, priests or generals, or even „intellectuals“ such as the painters and humanists of the Renaissance, or the „literati“ of the Chinese tradition. All a fastidious man can do is withdraw personally from activities that violate his self-respect and his sense of taste.” ²⁸

For Drucker the fundamental rule for the ethics of responsibility is “Primum non nocere”, above all, knowingly not to do harm. Formulated in ancient Greece 2500 years ago, as the prime responsibility of a profession, the Hippocratic oath of the physician, and transferred to the basic orientation of the manager, it says: “Above all knowingly not to do social harm”.

Here too Drucker is not about perfection but about the orientation towards a code of conduct. “There are important areas where managers and especially business managers still do not realize that they have to impose themselves the responsibility of the professional ethic. They still have to learn that it is their job to scrutinize their deeds, words and behaviour to make sure that they do not knowingly do harm.” ²⁹

An essential topic has already been dealt with in the foregoing. “The manager who fails to think through and work for the appropriate solution to an impact of this business because it makes him “unpopular in the club” knowingly does harm. He knowingly abets a cancerous growth. That this is stupid has been said. That this always in the end hurts the business or the industry more than a little temporary unpleasantness has been said too. But it is also a gross violation of professional ethics”. ³⁰

There are other situations where managers through their behaviour and their words tend to cause social unrest and tensions.
Management legitimizes itself above all through its credibility and its authentic behaviour. However, the credibility of our institutions has suffered. This started with the political organizations, beginning in the second half of the past century. Since then business enterprise too has been injured by a substantial crisis of credibility. An increasing loss of credibility of an institution is always linked with a diminishing trust in that institution. Whenever this happens people begin to question the legitimacy of that institution. This leads to a social problem which may cause serious functional trouble for society. „The higher the monkey goes the more of his behind he shows“ is an old British nursery rhyme which Peter Drucker recited innumerable times. The higher up the manager is in a hierarchy, the more is he “under observation”: It does not matter whether the organization is a business conglomerate, a university or an army. „They must expect their behaviour to be seen scrutinized, analysed, discussed, and questioned. So they have to shun actions that cannot easily be understood, explained or justified. Being visible, managers are also examples. They are leaders by their very position and visibility, particularly in top management. Their only choice is their example leads others to right action or to wrong action. Their only choice is between direction and misdirection, between leadership and misleadership. These terms have ethical obligations to give the example of right behaviour and to giving the example of wrong behaviour”. ³¹

Here we do not proclaim the desire for perfect leadership. Something like that does not exist in society nor in an organization, least of all in the individual. Nobody ceases to be a human being when he is picked to become a Director, a mayor or a university president, nobody expects his superior to be “God”, but perhaps to be closer to god than oneself. One expects someone whom one can trust, somebody whose actions reflect what he says. That is, somebody who distinguishes himself by his credible behaviour.

Some examples from the most recent past may make this more clear: The top man of a transnational institution initiates a very important and rational anti-corruption program, and on the other hand he engages in nepotism; the chairman of the board of an important conglomerate announces the dismissal of thousands of workers and at the same time says that he will forgo 10 % of his annual compensation, or the governor of a State criticizes in public the more or less moderate salaries of top management of a State owned enterprise but indulges also his friendship with celebrity millionaires.

Throughout his life Peter Drucker has pointed out that the arguments of many managers worldwide regarding the profit motive have made it impossible for the public at large to understand the economic reality. „Managers constantly complain about the hostility to profit. They rarely realize that their own rhetoric is one of the main reasons for this hostility. For indeed in the terms management uses when it talks to the public, there is no possible justification for profit, no explanation for its existence, no function it performs. There is only the profit motive, that is, the desire of some anonymous capitalists – and why that desire should be indulged in by society any more than bigamy, for instance, is never explained. But profitability is a crucial need of economy and society.” ³²

Above all, not to do social damage sounds relatively modest in comparison with the expensive Corporate Social Responsibility Concepts of today, „but as the physicians found out long ago, it is not an easy rule to live up to. It’s very modest and self-constraint making it the right rule for the ethics of managers need, the ethics of responsibility”. ³³

Ways out of a Wasted Century

In his book “The Future of Industrial Man” published at the beginning of the year 1942 Drucker writes: „The United States as a world power- perhaps as the world power- will certainly have to use her power politically; that is as power. But if the American Century means nothing except the material predominance of the United States it will be a WASTED CENTURY. (Emphasis by Author). Some people today seem to think that it is the destiny of the United States to outnazi the Nazis in world conquest to substitute the Yankee of the master race for Hitler’s Nordics; some even call that “fighting for democracy”. But this way would not lead to America’s strength and greatness but only to her downfall. It would also lead to a solution of the basic social crisis of which this war is but an effect.”  ³⁴

More than 50 years later he told me of his newest plan for a book with the title “Incorrect Reflections on a Wasted Century”. In March 2003, shortly after the invasion of Iraq by the USA I sent Peter a Fax in which I quoted the above and reminded him of a talk we had eight years ago. I ended the Fax by saying “May I conclude that finally the 20th Century wasn’t a wasted century?” His answer arrived promptly:

“Dear Peter,
NO. The only conclusion is that I wasted much of my time not writing the truly important books I should have written. My non written books greatly outnumber my written ones. – And some such as “The wasted century” or “Organizing Ignorance” might have been a great deal more important than the – easier ones – I wrote instead. – We are just now in a very depressing mood – I don’t have to explain it, do I?  ³⁵

For Drucker Hitler, Stalin and Mao, ”the three evil geniuses” of 20th Century, destroyed. They created nothing. – For him this century only proves “the futility of politics”  ³⁶

But the 20th century and particularly its second half, was conspicuous because of significant social change, but it was not the terrible and devastating events of the century which set off the extreme social changes, nor was the process of changing a cause of those dreadful events. „They have proceeded with a minimum of friction with a minimum of up-heaval, and with a minimum of attention from scholars, politicians, the press and the public“. 37

Peter Drucker was the first to realize that these extreme changes not only significantly influenced the structure of our society as a whole but also the economy, the community and politics. „The age of social transformations will not come to an end within the year 2000 – it will not even have peaked by then“.(38) And again it was Peter Drucker who understood the new structural elements which were to define our society. – They are the knowledge worker as the largest group of the employed, and of the knowledge society. Education at the center of the knowledge society. The one-purpose organization, such as the hospital, the university, the business enterprise, the government department and the society of organizations. The management of organizations as a social function, charged to make knowledge productive and to make the manager a member of a group which comprehends its leadership tasks in the society.

These new social structural elements are the decisive forces which have transformed our world not only into a global economy but into a global society. But social change in a global society does not automatically lead to a better society. It requires social and political innovation. The 20th Century did not provide purposeful solutions – on the contrary. The US did not use its opportunity to become effective as a democratic super power.

The Welfare State has simply replaced the old social values by new ones. „The Welfare State has not ended poverty; it has instead turned it into degradation and dependence. It has done so in the domestic as well as in the international society that is through domestic welfare and foreign aid.“  ³⁹

Finally, the predominance of a speculator’s capitalism has led the business enterprise into a deep legitimacy crisis. In 1986 already Peter Drucker asked the question: Can modern democratic society tolerate the subordination of all other goals and priorities in a major institution, such as the public owned corporation to short term gain?“ ⁴⁰ and replied in 1988 “I am for free market even though it doesn’t work too well. But I have serious reservations about capitalism as a system because it idealizes economics as the be – all and end – all of life. It is one dimensional. Today I believe it is socially and morally unforgivable when managers reap huge profits for themselves but fire workers. As societies, we will pay a heavy price for the contempt this generates.”  ⁴¹

What are the conditions that have to be met to make our society a functioning one, and to make it bearable for the largest proportion of the people? At the beginning of the seventies Drucker proposed guidelines which have not lost any of their validity today. „The first is that the economic organization of society, i.e. business and their managers require autonomy and accountability: in the interest of economy; for the sake of strong and effective government; and in the interest of society. “Accountable Enterprise” might be a better slogan than the by now hackneyed “Free Enterprise”. ⁴²

Furthermore a functioning society requires a plurality of elite groups with different values, priorities and life styles, that is, a complex of counter-cultures which respect one another and which are in concurrent co-existence with one another. „It requires alternatives – in careers and career ladders, in point of view, in life-styles otherwise it degenerates into conformity and loses its capacity for change“. ⁴³

And finally a strong and effective government is absolutely necessary for a functioning society. „Government is needed as the political decision-maker, more than ever before perhaps. And at the same time the capacity of government to be the political decision makers is increasingly jeopardized by its weight, size, and bureaucratization. It is increasingly jeopardized by government tendency to take on too many things, to promise too much and to “do” too much.” ⁴⁴

Management Education as a Task for Society

“The university may well offer the most challenging, the most difficult, but also the most needed of all managerial tasks around today.” ⁴⁵

Last year a book was published in the US with the title. “From Higher Aims to Hired Hands”. The author, Rakesh Khurana, is a professor at Harvard. The Subtitle reads “The Social Transformation of American Business Schools and the unfulfilled Promise of Management as a Profession”. His conclusion does not surprise but it is more than sobering. “The delegitimation of managerial authority and the abandonment of the professionalization project in business schools have created conditions in which the ultimate purpose of management and of business schools as institution are now up for grabs.” ⁴⁶

Let us remember that for Peter Drucker management is a social function, a profession with responsibility for society, community and the individual likewise , “a liberal art in which the humanities will again acquire recognitism, impact and relevance, because management deals with people, their values, their growths and development.” ⁴⁷ The scale of those insights confirms that the American Business Schools have indeed taken the wrong turn. But are they the only ones ? Don’t the management schools in Europe and elsewhere also need a careful re-examination of their mission, statements and curricula, because „when institutions lose their legitimacy or find it called in question, the times are ripe for their reinvention. It is more than possible that we live in such times now.“ ⁴⁸ In any case Peter Drucker’s work has to be no longer marginal but belongs in the centre of management education in the future.

OVERVIEW