Tuesday, 1 May 2012

Management Challenges for the 21st Century - Peter F. Drucker


Management Challenges for the 21st Century
by Peter F. Drucker - A Review

© Walter J. Geldart, M. Eng., M. Div. - September, 1999


Peter F. Drucker, in his new book, Management Challenges for the 21st Century, provides insightful and timely information for individuals and organizations alike as they work toward common goals in the next one hundred years. 1
Drucker reviews the seven major assumptions that have been held by experts in the field of management for most of the 20th century, and shows why they are now obsolete. He goes on to give eight new assumptions for the 21st century, ones that are essential for viewing the roles of individuals and management in both profit and not-for-profit organizations.
Neither individuals nor organizations can be successful if they stick with the old assumptions, according to Drucker, just as the horse and carriage can no longer compete with the automobile. If Drucker is right, then this has major implications for individuals, organizations, and management consultants who would use process models, personality type theory, and ideas of human consciousness to improve individual, team, and organizational performance.
Personality type theories such as the MBTI® or Enneagram Personality Types similarly describe typical patterns of consciousness that result from strongly held preferences in individuals - fixed habitual mind-sets. And organizations themselves can be described in terms of Type theory. 1b Commenting from the point of view of psychology and personality theory, we demonstrate in our review of the six chapter of Drucker's new book how the analysis of one of this century's leading management thinkers is consistent with a model of information-sharing that values 'whole type'.

Chapter One - Management's New Paradigm

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section two
The Seven Old Assumptions of Management
There is a critical difference between a natural science and a social discipline, according to Drucker. The physical universe displays natural laws that describe objective reality. Natural laws are constrained by what can be observed, and these laws tend to be stable or change only slowly and incrementally over time. "A natural science deals with the behavior of OBJECTS. But a social discipline such as management deals with the behavior of PEOPLE and HUMAN INSTITUTIONS. The social universe has no 'natural laws' of this kind. It is thus subject to continuous change; and this means that assumptions that were valid yesterday can become invalid and, indeed, totally misleading in no time at all." 2 Drucker identifies the following old assumptions for the social discipline of management. 3
Three Old Assumptions for the Discipline of Management

1. Management is Business Management
2. There is - or there must be - ONE right organization structure.
3. There is - or there must be - ONE right way to manage people.
Four Old Assumptions for the Practice of Management

4. Technologies, markets and end-users are given.
5. Management's scope is legally defined.
6. Management is internally focused.
7. The economy as defined by national boundaries is the "ecology" of enterprise and management.
According to Drucker, six out of seven assumptions (2, 3, 4, 5, 6, and 7) were close enough to reality to be useful until the early 1980s. However, all are now hopelessly outdated - "they are now so far removed from actual reality that they are becoming obstacles to the Theory and even more serious obstacles to the Practice of Management. Indeed, reality is fast becoming the very opposite of what these assumptions claim it to be." 4
We observe with personality type theory that the old assumptions are associated with a management style that emphasizes concreteness (S), principles (T), and systematic planning (J). The old paradigm is an STJ model, as has frequently been mentioned by Pat Dinkelaker and John Fudjack in articles appearing at this site. 5 Drucker confirms that this is the case.
Assumption 6 in particular - "management is internally focused" - arises out of the preferences and biases of the I-S-T-J Personality Type, widely reported by the MBTI for business managers. In a study of the MBTI Type distribution of participants in the Center for Creative Leadership, the ISTJ (18.2%) and ESTJ (16.0%) are indentified as accounting for more than one-third of the participants. Among the group of 26,477 people, 29.1 % reported extraverted thinking, and 21.3 % reported introverted sensation. The ISTJ is described as "respecting and relying on internally stored data about reality and actual events", while the ESTJ is described as decisively, logically, and efficiently structuring the external environment to achieve specific goals. 6
The description of the ISTJ goes a long way toward explaining how basic assumptions about reality operate in the old-paradigm organization that Drucker is describing: "They are usually held subconsciously by the scholars, the writers, the teachers, and the practitioners in the field. Yet, those assumptions largely determine what the discipline .....assumes to be REALITY." 7
The Eight New Management Assumptions
Drucker identifies the following new assumptions for the social discipline of management. 8

1. Management is NOT only for profit-making businesses. Management is the specific and distinguishing organ of any and all organizations. 2. There is NOT only one right organization. The right organization is the organization that fits the task.
3. There is NOT one right way to manage people. One does not "manage" people. The task is to lead people. And the goal is to make productive the specific strengths and knowledge of each individual.
4. Technologies and End-Users are NOT fixed and given. Increasingly, neither technology nor end-use is a foundation of management policy. They are limitations. The foundations have to be customer values and customer decisions on the distribution of their disposable income. It is with those that management policy and management strategy increasingly will have to start.
5. Management's scope is NOT only legally defined. The new assumption on which management, both as a discipline and as a practice, will increasingly have to base itself is that the scope of management is not legal. It has to be operational. It has to embrace the entire process. It has to be focused on results and performance across the entire economic chain.
6. Management's scope is NOT only politically defined. National boundaries are important primarily as restraints. The practice of management - and by no means for business only - will increasingly have to be defined operationally rather than politically.
7. The Inside is NOT the only Management domain. The results of any institution exist ONLY on the outside. Management exits for the sake of the institution's results. It has to start with the intended results and organize the resources of the institution to attain these results. It is the organ that renders the institution, whether business, church, university, hospital or a battered woman's shelter, capable of producing results outside of itself.
8. Management's concern and management's responsibility are everything that affects the performance of the institution and its results - whether inside or outside, whether under the institution's control or totally beyond it.
Drucker's new set of assumptions recognizes complexity and avoids old either-or categories. The new organizational assumptions show the need for a balance between S and N (sensing vs intuition) that will facilitate the perceiving of new realities. Assumption 7 calls attention to the need for forging a new balance between E and I (external attention vs internal attention).
Another new management assumption involves how managers are to deal with people. "One does not ‘manage' people," Drucker says, "The task is to lead people. And the goal is to make productive the specific strengths and knowledge of each individual." In the past two decades personality type theory, as exemplified by the MBTI®, has made a signficant contribution toward our capacity to think of individuals in this way in the work place - as diverse and unique. In recent years, the enneagram has joined the MBTI in this effort. 9

If the old leadership style is largely STJ, then new leadership will need to create a new balance - with more attention on outside objects (E), more openness (P), more consideration for others (F), more recognition of other possibilities (N), and more 'intentional moving' (M) 9a to get the right facts from the right things at the right place at the right time. The implications for how personality type can be used in organizations is clear. Whether followers or leaders test as one type or another is beside the point. People need to learn to make choices with ALL of their faculties, everyday. And they will need practice in this, and coaching - to smooth out the rough edges.
Chapter 2 - Strategy - The New Certainties

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section three

Strategy converts an organization's set of assumptions into performance by allowing it to be purposefully opportunistic. According to Drucker, strategies must consider the following five new certainties that are more social and political, rather than economic. 10

1. The Collapsing Birthrate in the Developed World.
2. Shifts in the Distribution of Disposal Income.
3. Defining Performance.
4. Global Competitiveness.
5. The Growing Incongruence Between Economic Globalization and Political Splintering.
Performance and actions are observable behaviors. Strategic models must account for these purposefully opportunistic or intentional actions. This means that strategic models must include all three philosophical object types and their information. 11 Only two types are typically included in the natural sciences (matter has no intentionality or will), and in the social sciences.
The three types of objects that engage human consciousness in any work or play situation are - real objects in the world (which are independent of mind), subjective objects (that exist within the minds of persons), and intentional object information that humans exchange via language, sign, and symbol. In addition to the commonly used four Jungian functions (sensing, intuition, thinking and feeling), a fifth moving function of intentionality is needed. These Five Functions are the minimum set to account for strategic information transmitted or received between people in conversational interaction. 12 13

Chapter 3 - The Change Leader

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section four
Change is the norm in our present situation - "But unless it is seen as the task of the organization to lead change, the organization - whether business, university, hospital and so on - will not survive. In a period of rapid structural change, the only ones who survive are the Change Leaders." 14 Drucker gives four requirements for change leadership.

1. Polices to make the future.
2. Systematic methods to look for and to anticipate change.
3. The right way to introduce change, both within and outside the organization.
4. Policies to balance change and continuity.
'Neither studies nor computer modeling are a substitute for the test of reality,' according to Drucker. So what he recommends as the right way to introduce change is the piloting of new or improved systems. Drucker sees change and continuity as two poles rather than mutually exclusive opposites. In order to be a change leader it is necessary to have internal and external continuity.
People and organizations need to develop the practice of balance in management. People and organizations may have a preferred, habitual, or biased way of adapting that are described by type theory. In spite of this, a Whole Process perspective is needed so that new management assumptions, strategies, and change leadership practices may be implemented in a more balanced and effective way.
Chapter 4 - Information Challenges

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section five
Drucker describes the new information revolution that is gaining momentum as follows.

So far, for fifty years, Information Technology has centered on DATA -their collection, storage, transmission, presentation. It has focused on the ‘T' in ‘IT'. The new information revolutions focus on the ‘I'. They ask, ‘What is the MEANING of information and its PURPOSE?' And this is leading rapidly to redefining the tasks to be done with the help of information and, with it, to redefining the institutions that do these tasks." 15
It is now necessary to define information, new ideas, and new paradigms. More data, more technology, and more speed is not needed from IT. Data is not information until it is organized in meaningful patterns. Drucker gives some popular methods of organizing management data. 16

1. Key Events on which performance hinges primarily.
2. Probability Theory to identify events outside a normal probability distribution.
3. Threshold Phenomenon to screen data until is passes a threshold of significance.
4. Pay attention to unusual events and determine their significance.
5. Direct impartial observations by outsiders is essential.
Outside information is needed because misinformation or wrong data may be inadvertently supplied by an organization's own people in their rush to meet expectations. A few years ago, before the financial collapse in mainland Asia, there was widespread misinformation of this sort regarding investment conditions.
This gets to the heart of information processes, and personality type theory. If S-T-J organizations are located far away from the real customers and suppliers, how is a balanced view possible? If both headquarters and branch offices follow the older S-T-J model, how can balance be achieved? What practices encourage more balance with the parallel N-F-P poles of information? How do management personality type norms affect management assumptions, strategies, change leadership, and information challenges? Drucker advises top management to "go outside"!

Chapter 5 - Knowledge-Worker Productivity

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section six
Drucker reviews the history of manual-worker productivity in manufacturing during the 20th century (which saw a fifty-fold increase) and speaks to the need for new methods that will make the improvements in knowledge-worker productivity that will be required in the 21st century.
Frederick Winslow Taylor's (1856-1915) pioneering study of manual labor in manufacturing processes is credited for the revolution in manufacturing efficiency that took place at the time. 17 According to Drucker, Scientific Management, Industrial Engineering, and even Total Quality Management by W. Edwards Deming (1900-1993) are rooted in the basic strategy that Taylor articulated. Taylor's principles for manual-worker productivity emphasized effective and efficient motion of the object to ensure the most successful outcome. The object, its necessary and sufficient motion in time and space, and the manual worker's movements are integrated to achieve control over manufacturing variables and meet requirements for a quality product. The manual-worker in manufacturing conforms to the needs of the job.
The knowledge-worker has a different job description from the manual-worker on a production line. Drucker identifies these six major factors for knowledge-worker productivity in the future. 18

1. The knowledge-worker's question is "What is the task?"
2. Knowledge-workers have to manage themselves and have autonomy.
3. Continuing innovation has to be part of the work, the task and the responsibility of knowledge workers.
4. Knowledge work requires continuous learning, and continuous teaching by the knowledge worker.
5. Productivity of the knowledge worker is not primarily a matter of quantity of output. Quality is at least as important.
6. Knowledge workers must be treated as "assets" rather than a "costs". They must prefer to work for the organization, over all other opportunities.
The "care and feeding" of autonomous individual knowledge-workers will become more and more important as new management assumptions replace old ones. These new assumptions will require new process models of human consciousness. Manual-worker productivity was made possible by Taylor's four dimensional object-motion-time-task study. We must assume that three and four dimensional knowledge-task modeling will be needed for similar breakthroughs in knowledge-worker productivity in the 21st century.

Chapter 6 - Managing Oneself

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The first six chapters covered changes in the environment: in society, economy, politics, technology. The concluding chapter focuses of the individual. Drucker discusses five demands on knowledge-workers. 19

1. They have to ask: Who Am I? What are my strengths? How Do I work?
2. They have to ask: Where do I belong?
3. They have to ask: What is my contribution?
4. They have to take Relationship Responsibility.
5. They have to plan for the Second Half of their Lives.
Drucker believes the only way to find out one's strengths is through what he calls feedback analysis - "Whenever one makes a key decision, and whenever one does a key action, one writes down what one expects to happen. And nine months or twelve months later one feeds back from results to expectations. I have been doing this for some fifteen to twenty years now. And every time I do so I am surprised. And so is everyone else who has done it." Drucker gives this advice for using feedback analysis - 20

1. Concentrate on your strengths. Place yourself where your strengths can produce performance and results.
2. Work on improving your strengths. The feedback analysis shows where to improve skills, and get new knowledge. One can usually get enough skill or knowledge not to be incompetent in it.
3. Identify areas where intellectual arrogance causes disabling ignorance.
4. Take action to remedy bad habits that inhibit effectiveness and performance.
5. Be on the lookout for failures due to bad manners and lack of common courtesy.
6. Do not take on jobs and work assignments where there is little talent and little chance to be even mediocre in performance. Use your energy to make a competent person into a star performer.

Like one's strengths, how one performs is individual. It is personality. It surely is formed long before a person goes to work. And how a person performs is a given, just as what a person is good at is a given. It can be modified, but is unlikely to be changed. And just as people have results by doing what they are good at, people have results by performing how they perform. ...A few common personality traits usually determines how one achieves results. 21
After addressing the questions, What am I good at, and How do I work? - Drucker asks us to consider: Am I a listener or a reader? How do I learn? and What are my values? He emphasizes the importance of knowing whether one is primarily a reader or a listener. Presidents Roosevelt, Truman, and Johnson were listeners, while Eisenhower and Kennedy were readers. Learning methods include taking notes, hearing oneself talk, writing, and doing. The key to higher performance is to act on your knowledge of how you learn best.
Talking and writing are information transmitting functions, while listening and reading are information receiving functions. All of these conversational functions are examples of the intentional object type that must be included in any new information model, and accomodated by personality theory. 22
Drucker advises persons to work on their strengths in order to maximize performance. This is not unlike the advice Jung offers, that the individual should focus on the development of his DOMINANT mental function. Generally, an individual's Jungian functions have a preference order (such as N-T-F-S for an NT Rationalist). It is not a good idea for the individual to try to develop his or her inferior fourth function as a second function. Rather, the second and third functions can be developed without interfering with the goals of the superior function. The fourth function, which tends to work automatically without conscious intention, will emerge as a more consciously available function in the second half of life.

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Drucker's book is useful for knowledge-workers and organizations who will face new challenges in the 21st century. I recommend it for freshly minted graduates as they enter the work force; they can benefit from Peter Drucker's wisdom at the beginning of their careers. But I also recommend it to seasoned veterans who want to clearly see the path ahead in order to respond more adequately to new management challenges.
There is a surprising overlap between issues raised by the new management paradigms, and articles published here at 'The Enneagram and the MBTI'. Conscious use of our human functions and faculties - so that we may improve how we acquire information, make decisions on the basis of such information, and then act effectively - is a common goal for individuals and organizations alike.

1. Peter F. Drucker, Management Challenges for the 21st Century, Harper Business, 1999. 207 pages.
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1b. See Patricia Dinkelaker and John Fudjack, "On 'Typing' Organizations, Theories, and Other Non-human Entities - 'Nested Frames' Versus 'Functional Preference Orders'", at http://tap3x.net/EMBTI/j3frames.html. back to text

2. Ibid., pages 1-2.
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3. Ibid., page 5.
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4. Ibid., page 5.
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5. John Fudjack and Patricia Dinkelaker, "Toward A Diversity of Psychological Type in Organization", in "The Dimensions of Human SPACE - Personality Type, Organizational Form, and the Structure of Human Consciousness", at http://tap3x/ENSEMBLE/, October 1994. See also 'A Conversation with Lenore Thomsom Bentz', at http://tap3x.net/EMBTI/j2dialogues.html#lenore, October 1998.
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6. Isabel Briggs Myers, Mary H. McCaulley, Naomi L. Quenk, Allen L. Hammer, MBTI® MANUAL - A Guide to the Development and Use of the Myers-Briggs Type Indicator®, Third Edition, Consulting Psychologists Press, 1998, pages 326-327.
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7. Drucker, page 1, paragraph 1.
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8. Ibid., pages 5-40.
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9. Don Richard Riso and Russ Hudson, The Wisdom of the Enneagram, Bantam, 1999, 389 pages.
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9a. I suggest that a 'fifth function' needs to be added to Jung's four original functions. For a description of this, please see John Fudjack's article, "Geldart's Fifth Function - an ingenious strategy for reconciling the Enneagram and MBTI, in 'The Enneagram and the MBTI - an Electronic Journal', at http://tap3x.net/EMBTI/journal.html, July 1998.
The intentional object type is represented by the action of a moving function. Body language is one example of moving function. Here body movement and expressions convey the intentions on a person's mind. Talking and listening, writing and reading communicate information by moving functions that modulate the information carrier.
Talking is represented by moving vocal cords to modulate air with sounds that have meaning. These transmitted air movements are received by ears that vibrate to reproduce the original sound. This is the principle of the telephone. If someone hears the sounds and listens to what they mean in their commonly held language convention - the moving functions have conveyed the intentional object type.
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10. Drucker, pages 43-44.
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11. Mortimer Adler, the prominent American philosopher, has written extensively about the serious logical errors made by omitting the third type of object (intentional) that can be held in people's minds. (see Mortimer J. Adler, Adler's Philosophical Dictionary, 125 Key Words for the Philosopher's Lexicon, Scribner, 1995, pages 39-46.)
The 'intentional' object type is a combination of real and subjective object types. Real objects exist in the world whether human's are present or not. The real objects that humans think of is called a real object type. A subjective object exist within one person. The subjective objects that humans think of is called a subjective object type. If two people communicate with each other and are able to share what is on their mind - about real or subjective object types - then the intentional object type exists in their minds. It is a creation by word, sign, or symbol. Only humans have libraries and language to accomplish this.
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12. John Fudjack, "Geldart's Fifth Function - an ingenious strategy for reconciling the Enneagram and MBTI, in 'The Enneagram and the MBTI - an Electronic Journal', at http://tap3x.net/EMBTI/journal.html, July 1998.
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13. Walter J. Geldart, "Why the 'Enneagram of CONSCIOUSNESS'?", in 'The Enneagram and the MBTI - an Electronic Journal', at http://tap3x.net/EMBTI/jconsc.html,
July 1998.
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14. Drucker, page 73.
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15. Ibid., page 97.
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16. Ibid., page 127-130.
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17. Ibid., pages 136-137.
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18. Ibid., page 142.
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19. Ibid., page 164.
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20. Ibid., pages 165-168.
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21. Ibid., page 169.
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22. Communication fails when people do not know or understand what is on another person's mind. If people do not engage in dialog for the purpose of understanding - then it is very easy for ONLY the 'real' and 'subjective' objects types to exist. There is no closure or meeting of minds. Knowledge transfer for autonomous knowledge workers requires dialog to reach understanding. Adler recommends the Socratic method of inquiry to achieve dialog.
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