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Peter Drucker, The Practice of Management (1954)

 Peter Drucker, The Practice of Management (1954)

Drucker (a German- born American) is the father of modern management (pictured right).

He has written many outstanding books, but this book and Management: Tasks, Responsibilities, Practices are his most influential.

More than any other books they brought to people’s attention the importance of management.

He once said that his life’s work centred on balancing continuity and change in organizations

He died in 2005.


See also...

Peter Drucker in the Management Gurus section. 


Book summary


What is management?

Management is a “practice” that must be evaluated on how well it improves business performance.


How management can improve business performance


1. Maximize the effectiveness of resources

Resources are:Peter Drucker, The Practice of Management (1954)

  • materials.
  • people.
  • money.
  • property.
  • time.

They must be used to create as many customers as possible.


2. Treat employees as human beings

So managers must deliver what they want:Peter Drucker, The Practice of Management (1954)

  • personal development.
  • satisfaction of their needs.
  • information.
  • the right jobs.
  • positive encouragement.
  • participation in decision making.
  • planning and setting objectives (including high performance standards and balancing the short and long-term).
  • motivating and encouraging people to accept change (for example, through communicating and profit sharing).

 Peter Drucker, The Practice of Management (1954)

3. Be led by a customer driven business purpose

The purpose of a business is “to create a customer”.

If it is does this well, it will make a profit. So profit is the result of business success, not its cause.

Because “the customer is the foundation of a business and keeps it in existence”, a business has only two basic functions:


a) marketing

Focusing every organizational activity on creating customers and selling what they want.


b) innovationPeter Drucker, The Practice of Management (1954)

Providing new and better ways to improve customer satisfaction in every organizational activity - for example:

  • new products.
  • better production and design.
  • improving customer benefits (like greater convenience and lower prices).

Marketing and innovation are creative, so:

“managing a business must always be entrepreneurial in character”.


4. Define your business

Any organization must decide what business it is in.

This is determined by customers and what they want.Peter Drucker, The Practice of Management (1954)

Key questions are:

  • who is the customer?
  • what does the customer want and consider to be value for money?
  • what will our business be in the future?
  • what should our business be?

 Peter Drucker, The Practice of Management (1954)

5. Be socially responsible

Management must:

  • consider the organization’s impact on society.
  • try to make corporate strategy socially beneficial as well as profitable.

But a business’s first responsibility is to ensure its survival by making a profit.Peter Drucker, The Practice of Management (1954)

It must make enough profit to:

  • encourage risk taking.
  • contribute to society (through paying taxes).
  • reinvest money back into the business for future expansion.


6. Management by objectivesPeter Drucker, The Practice of Management (1954)

The best way to run an organization is “management by objectives”.

This means managers must be asked to achieve short and long term objectives in eight key areas:


a) market standing

Customer satisfaction (and loyalty) through new or existing products.


b) innovation

New products and improvements in organizational activities and processes.


c) productivity

(utilizing resources to satisfy customers).


d) physical and financial resourcesPeter Drucker, The Practice of Management (1954)

  • raising enough money.
  • ensuring adequate supplies of goods and services.


e) profitability 

Profits made from customer satisfaction and innovation.


f) manager performance and development

(through coaching, training and education).

 Peter Drucker, The Practice of Management (1954)

g) worker performance and attitude 

(employee productivity)


h) public (i.e. social) responsibility

The organization's contribution to society - see point 5

These objectives and activities must be effectively balanced and co-ordinated (via the organization structure), to create as many customers as possible.

Therefore, vital are:

  • inspired teams and individuals working together to achieve customer satisfaction.
  • customer centred vision and values. Peter Drucker, The Practice of Management (1954)

The best managers are driven by a vision of what customers will want .

They are like the stone cutter who says

  • “I am building a cathedral”, not..
  • “I am making a living”, or...
  • “I am doing the best job of stone cutting in the entire country”.


7. Avoid “safe mediocrity”

Every organization faces the danger of “safe mediocrity”.Peter Drucker, The Practice of Management (1954)

This is poor performance resulting from:

  • bureaucracy
  • unchallenging objectives
  • the penalization of creative innovation.

To avoid safe mediocrity, managers must be given:

  • dismissal or demotion for under-performance.
  • rewards (e.g. more money) for learning and better performance - so they mustn’t be penalized for mistakes and nobody blamed (or fired) for them.
  • regular appraisal - feedback on performance from superiors.


Key quotes on customers

The customer is the foundation of a business and keeps it in existence. 

 It is the customer who determines what a business is.


Key quotes on objectives and vision 

There is only one valid definition of business purpose: to create a customer.

Profit is not a cause. It is the result - the result of performance of the business in marketing, innovation and productivity.


Key quote on marketing

Marketing... is the whole business seen... from the customer’s point of view.


Key quote on management

The ultimate test of management is business performance.


Key quote on business ethics

It is vision and moral responsibility that, in the final analysis, define the manager.


Key quote on business success

Managing a business always comes back to the human element – no matter how sound the business economics, how careful the analysis, how good the tools.


Key quote on corporate culture

The enterprise is a community of human beings. Its performance is the performance of human beings. And a human community must be founded on common beliefs, must symbolize its cohesion in common principles.


Key quotes on motivation

What we need is to replace the externally imposed spur of fear with an internal self-motivation for performance

Self-control means stronger motivation.


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