The belief: a call for personal contribution

This is one post of a series about Peter Drucker. Start here if you want to get the whole story.

While I got to know Peter Drucker as a thinker on management, he was in fact more interested in the individual and his place in community and society. What does it take for each of us to live a good life? And how should a society look like in order to advance the happiness of humankind?

In his own words:
„I only became interested in [management] because of my work on community and society. […] All my other management books deal with the corporation as human effort and as social institution“ [1] (emphasis from Peter Drucker).

There are three domains at which Peter Drucker puts his lens:

• the individual
• the community, that is the social interaction on a personal level
• the society, that is the impersonal abstract idea of people living together, forming a system that has repercussions on the individual and his behaviour in the community

As an individual, Peter Drucker gets his virtue out of Christian faith. This is his starting point for everything. In particular, he claims that responsibility comes with capability. The responsibilty bears fruit if an individual can make a contribution to the larger whole. Because individuals with faith want to make such a contribution, they are in „need for […] a community in which the individual has status, and a society in which the individual has function.“ [2]

This interplay of individual, community, and society in Peter Drucker’s thinking becomes visible in his writing about organizations and politics.

Organizations

‚The delusion of profits‘ is a great 1975 Wall Street Journal article from Peter Drucker. The starting point of any economic activity is serving humankind to live a better life: „The most satisfactory definition of economic progress is a steady rise in the ability of an economy to invest more capital for each new job and thereby to produce jobs that yield a better living as well as a better quality of work and life.“ [3]

The economy serves society, not the other way round. The modern economy is organized by organizations. And business organizations exist to create value for their customers. This is their function. In doing so, they should not try to maximize profits, but make enough revenues to cover all cost. The cost are:

• Cost of production
• Cost of capital
• Cost of entrepreneurial activity, i.e. risk insurance premium
• Cost for future products and jobs, i.e. ability to adopt the organization and its services
• Cost of pensions

To the extent an organization fulfills its function, individuals with a role in that organization have a function as well. Making a contribution in that organization leads to status within the organization and the community of the individual.

Peter Drucker was one of the first to emphasize that the modern worker is a knowledge worker. Knowledge work is too complex to be steered like industrial factory work. Therefore the knowledge worker has the responsibilty for his own contribution. This again shows Peter Drucker’s thinking that responsibility comes from capability. It applies in particular to managers. Peter Drucker was one of the advocates of management as a profession. The notion entails the following elements:

• a professional ethos of responsibility
• a commitment to meritocracy
• a need for continuous practice and learning
• a belief in practical wisdom rather than ideology

These are all elements I also experienced as a north star within my time at McKinsey. No wonder, as Marvin Bower, the longtime managing director of McKinsey, was a good friend of Peter Drucker.

Politics

Peter Drucker’s thinking about politics shows a similar interlinking of the individual, the community, and society.
Yet, within the political realm, his confessions come across much more forcefully:

In 1942, he claims that „man in his social and political existence must have a functioning society just as he must have air to breathe in his biological existence.“ [4] So the starting point is again the individual. He attributes the panic at that time to the breakdown of society. And he believes the „only way to overcome it is by restoring a society with social values, social discipline, social power, and social organization.“ [5] This is his political agenda.

He continues: „In a functioning society, power is exercised as authority, and authority is the rule of the right over might. But only a legitimate power can have authority and can expect and command that social self-discipline which alone makes organized institutional life possible.“ [6]

So where does the legitimacy come from? For Peter Drucker the source is „Christian love, faith, and humility.“ [7] This is an individual belief that is practiced within a community. He puts it in contrast with Enlightment. His role model of great political institutions and government is the American revolution of 1776. „The fundamental difference between the free and constructive Anglo-American liberalism of the nineteeth century, and the absolutist and destructive liberalism of the Enlightenment and of our Liberals today, is that the first is based on religion and Christianity while the second is rationalist.“ [8]

He claims that „the great discovery of the Enlightenment was that human reason is absolute.“ [9] While I strongly disagree with that claim (more about this in a later post), the discourse of the 19th and early 20th century about rational thinking was certainly governed by the belief in absolute truth and the ability of calculating everything. Within that context, it makes sense to conclude that „every liberal movement […] contains the seeds of a totalitarian philosophy.“ [10]

Absolute truth is something Peter Drucker refused. His thinking was based in the practical wisdom of lived experience. That’s why he was so fond of the way politics was done by the American revolution:

• Have the modest stance that „no man or group of men is perfect or in the posession of Absolute Truth and Absolute Reason“ [11] as a starting point. So the principle was that of a mixed government with distributed and balanced powers.
• Be conservative not in a way that preserves the past at all cost, but keep what works and improve on it
• Do not belief in great blueprints or panaceas, but look for pratical solutions that work within the frame of general principles
• Finally, accept reality as a basis and refrain from predicting the future. So prefer „the simple, cheap, and common to the complicated, costly, and shiny innovation. It is common sense pitted against Absolute Reason, experience and conscientiousness against superficial brilliance.“ [12]

With regard to government, this practical wisdom leads to the question of purpose as a starting point for politics: what is the job a government needs to get done in order to serve society and thus each of us?

Peter Drucker’s answer: „The purpose of government is to make fundamental decisions, and to make them effectively. The purpose of government is to focus the political energies of society. It is to dramatize issues. It is to present fundamental choices.

The purpose of government, in other words, is to govern. This, as we have learned in other institutions, is incompatible with ‚doing‘. Any attempt to combine governing with ‚doing‘ on a large scale, paralyzes the decision-making capacity.“ [13]

He also believed that a strong government needs strong politicians as leaders; as much as organizations need strong managers. A role model to Peter Drucker was Winston Churchill: „What Churchill gave was precisely what Europe needed: moral authority, belief in values, and faith in the rightness of rational action.“ [14]

Peter Drucker’s belief system is a mix of faith, science, and practical wisdom. He looked for capability, legitimation, and contribution. He put them together in a way of a man of the 20th century. At the same time, he surfaced with great insight before others the big narratives that would govern our thinking in the 21st century. I will describe those in the next post.

[1] p. vii in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[2] p. viii in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[3] Wall Street Journal Feb 5, 1975. Link: http://online.wsj.com/public/resources/documents/WSJ_Drucker_delusion.pdf

[4] p. XV in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[5] p. XV in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[6] p. XXIII in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[7] p. 7 in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[8] p. 7 in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[9] p. 6 in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[10] p. 6 in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[11] p. 19 in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[12] p. 21 in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[13] p. 78 in Drucker, Peter: A functioning society: Transaction Publishers, 2011

[14] p. 36 in Drucker, Peter: A functioning society: Transaction Publishers, 201

Originally published at timmrichter.de on March 26, 2017.