Principles & Payments
Drucker, part 2
Friends,
I hope that all is well with you and yours, and that this e-mail finds you on a boat with shoddy connection, in the tropics, three months after I sent it.
Now accepting keynotes for 23Q4-24Q2
Every year, I create three main presentations. For 2024, they are:
What to Do When You Don’t Know What to Do: Adaptive strategy in an age of uncertainty.
Regression Toward the Meme: Why modern leadership falls into old traps - and what to do about it.
The Efficiency Illusion: Uncovering the hidden costs of digital commerce.
If you want to book me for your event, workshop, or corporate speaking slot, just send me an email. To make sure I am available, however, please do so at your earliest convenience; my schedule is filling up fast - and I will be raising my prices on January 1.
More information can be found here.
A couple of updates before we go-go
The second webinar took place yesterday. For those who were unable to attend, the recording may be found here.
Steve and I covered the manifestations of the past in the present, or to put it plainly, some of the things that we do on a daily basis that have a demonstrably adverse effect on our work.
The last webinar will be all about the practical way forward; the ABCDE and ICE frameworks, respectively, negative and adaptive strategy, and tools which we may use to manage complexity and help organizations thrive.
Moving on.
Item of the week randomized time period
The late sir Ken Robinson was an educator, author, and speaker, who has performed (among a great many other greater things) some of the most watched talks in TED history. What most fail to consider, however, is that much of what he argues for is a complexity-coherent approach to education. In this presentation, he highlights the dire need for a learning revolution - one that, much like we have argued here, acknowledges the limitations of the mechanistic view of the world.
There are ideas that all of us are enthralled to, [ideas that] we take for granted as the natural of order of things; the way that things are. And many of the ideas have been formed not to meet the circumstances of this century, but to cope with the circumstances of previous centuries. Our minds are still hypnotized by them - and so, we have to disenthrall ourselves from some of them.
A turn for the worse
Principle or pay?
Last week, as you undoubtedly will remember, we discussed the man who many consider the original management guru: Peter Drucker. When we left the story, he had risen to fame as an outspoken critic of Frederick Winslow Taylor and introduced management by objectives and self-control (popularly abbreviated to MBO).
However, as it turned out, the distance between the number of firms who said that they used MBO and those who actually did was immense, much like it was between those who did and those who considered it a success of any sort. Managers would simply refuse to use the technique, as it immediately caused them to lose the power that scientific management had provided.
Upon realizing that bureaucratic thinking very much remained in practical vogue, Drucker abandoned his previous line of reasoning completely. Suddenly, the laborer had not seen their humanity stripped by the machinery of scientific management, nor had their individuality ceased to exist. On the contrary, his predecessor – now grandiosely labelled “the Isaac Newton of the science of work” – had in fact developed the workers’ potentiality and personality alike.
As far as professional apostasies go, it remains one for the ages.
Part of the reason was that Drucker, much like Taylor before him, had become a management consultant. As such, his salary depended on clients buying his services. If managers simply refused to implement his concepts, there was little use acquiring the requisite training.
In his attempts to appease potential clients, Drucker also revealed that MBO could be (indeed was) every bit as top-down as scientific management had been. Although objectives were supposed to be “negotiated” in theory, they almost never were in practice; one side had all the leverage. Employees were simply forced to set their own goals in accordance with more or less explicit instruction whether they wanted to or not, and accept full responsibility for any failure that followed as a result.
The measurement systems used to track employee performance also relied on quantifiable data just as much as Taylor had done. The rewards and punishments merely added insult to injury - as had been noted at the time. In Management by Whose Objectives? (1970), Harry Levinson, a prominent psychologist who specialized in organizations, noted that that their use in MBO was no different to bribes and bullying; no self-motivation would ever come from it. He was not alone. Other psychologists, such as Abraham Maslow, concurred.
Evidence clearly suggests, then, that despite the many claims at the time (and the common belief to this day), MBO did not actually amount to anything dramatically dissimilar from the scientific management its originator at one point so passionately had polemicized against. It may have had different techniques, but the underlying principles were broadly the same. For all his early-career outspokenness, Drucker was too reliant on his managerial audience to call for revolutionary change such as drastic reduction of their power. Instead he ensured - and continued to ensure - that managerial wills would always be superior to all other wills.
But while his 180 allowed him to regain popularity, and the empowerment of managers enabled him to remain popular, it did not change the fact that MBO failed to improve upon the pedestrian results of scientific management. Certainly, some maintained that it did and even attempted to prove it (much like how economic theorists attempted to prove rather than disprove the ideas of Leon Walras). However, as Jack Kondrasuk demonstrated in Studies in MBO Effectiveness (1981), support for Drucker’s techniques turned out to be inversely related to the degree of research design sophistication. That is to say, the less accurate the research method was, the more likely it was to show that MBO was effective.
Drucker’s disciples had long argued that it took five years for the implemented system to truly come into effect – handy for a consultant, no doubt – but this too was untrue. Any achieved initial gain would evaporate by year three at the latest; once companies realized it did not work, they cut their losses and abandoned it.
And so, in a rather disappointing twist, we learn that Peter Drucker too failed to live up to his billing. Importantly, that is not to dismiss the entirety of his life’s work (that would be silly), but it would be intellectually dishonest not to acknowledge what we have found: once money came into the picture, principles were pushed aside.
Unfortunately, it is a pattern which we have seen and will continue to see. But more on that another time.
Next week, a short essay on life and strategy. Until then, have the loveliest of weekends.
Onwards and upwards,
JP
This newsletter continues below with additional market analyses exclusive to premium subscribers. To unlock them, an e-book, and a number of lovely perks, simply click the button below. If you would rather try the free version first, click here instead.