Peter Drucker: The One Book on Management

Practice of Management

“In a competitive economy, above all, the quality and performance of the managers determine the success of a business, indeed they determine its survival.  For the quality and performance of its managers is the only effective advantage an enterprise in a competitive economy can have” (p. 3).

“And yet the ultimate test of management is business performance.  Achievement rather than knowledge remains, of necessity, both proof and aim.  Management, in other words, is a practice rather than a science or a profession, though 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 to people with a special academic degree” (pp. 9, 10).

“[The] economist’s ‘businessman’ — the picture that underlies the prevailing economic ‘theory of the firm’ and the theorem of the ‘maximization of profits’ – reacts to economic developments….But management goes way beyond passive reaction and adaptation.  It implies responsibility for attempting to shape the economic environment, for planning, initiating and carrying through the changes in that economic environment, for constantly pushing back the limitations of economic circumstances on the enterprise’s freedom of action” (p. 11).

“‘[Management] is a multi-purpose organ that manages a business and manages managers and manages worker and work” (p. 17).

“[A] business enterprise is created and managed by people. It is not managed by ‘forces'” (p. 34).

“[A] business cannot be defined or explained in terms of profit” (p. 35).

“If we want to know what a business is we have to start with its purpose.  And its purpose must lie outside of the business itself.  In fact, it must lie in society since a business enterprise is an organ of society.  There is only one valid definition of business purpose: to create a customer” (p. 37).

“Because it is its purpose to create a customer, any business enterprise has two–and only these two–basic functions: marketing and innovation.  They are the entrepreneurial functions” (p. 37).

“Marketing is not only much broader than selling, it s not a specialized activity at all.  It encompasses the entire business.  It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view” (pp. 38, 39).

“[Innovation]…is. the provision of better and more economic goods and services….Innovation goes right through all phases of business.  It may be innovation in design, in product, in marketing techniques.  It may be innovation in price or in service to the customer.  It may be innovation in management organization or in management methods” (pp. 39, 40).

“The enterprise must control wealth-producing resources to discharge its purpose of creating a customer.  It therefore has the function of utilizing these resources productively.  This is the administrative function of business.  In its economic aspect it is called productivity….Productivity means that balance between all factors of production that will give the greatest output for the smallest effort” (p. 41).

“[Profit] is not a cause.  It is the result–the result of the performance of the business in marketing, innovation, and productivity.  It is at the same time a test of this performance…” (p. 46).

“An effective management must direct the vision and efforts of all managers toward a common goal.  It must insure that the individual manager understands what results are demanded of [him or her].  It must insure that the superior understands what to expect of each of [his or her] subordinate managers.  It must motivate each manager to maximum efforts in the right direction” (p. 126).

“Each manager…needs clearly spelled out objectives.  These objectives should lay out what performance the [person’s] own managerial unit is supposed to produce.  They should lay out what contribution [he or she] and [his or her] unit are expected to make to help other units obtain their objectives.  Finally, they should spell out what contribution the manager can expect from other units toward the attainment of [his or her] own objectives” (p. 126).

“The greatest advantage of management by objectives is perhaps that it makes possible for a manager to control [his or her] own performance.  Self-control means stronger motivation: a desire to do the best rather than just enough to get by.  It means higher performance goals and broader vision” (p. 130).

“Each manager should have the information [he or she] needs to measure his own performance and should receive it soon enough to make any changes necessary for the desired results.  And this information should go to the manager himself, and not to [his or her] superior.  It should be the means of self-control, not a tool of control from above” (p. 131).

“Management by objectives tells a manager what he ought to do.  The proper organization of his job enables [him or her] to do it.  But it is the spirit of the organization that determines whether [he or she] will do it” (p. 144).

“The best practices will fail to build the right spirit unless management bears witness for its own professed beliefs every time it appoints a [person] to a management job.  The final proof of its sincerity and seriousness is uncompromising emphasis on integrity of character” (p. 157).

“Leadership is the lifting of a [person’s] vision to higher sights, the raising of a [person’s] performance to a higher standard, the building of a [person’s] personality beyond its normal limitations” (p. 160).

“Only the relationship to [his or her] Creator and that to [his or her] family antedate [a person’s] relationship to [his or her] work; only they are more fundamental.  And together with them the relationship to [his or her] work underlies all of [a person’s] achievements, [his or her] civil society, [his or her] history” (p. 262).

“[Work] must always be organized in such a manner that whatever strength, initiative, responsibility and competence there is in individuals becomes a source of strength and performance for the entire group” (p. 266).

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