Drucker App
Irony in guru's death - By David Nason
ANYONE who has ever been to a business school or held any kind of reasonably senior management job will know the name Peter Drucker.
The Austrian-born US economist and management pioneer who died in California on Friday at age 95 was one of the most challenging thinkers of the 20th century and his books and teachings have had a profound influence on business leaders ever since Concept of the Corporation, his inside look at the operations of General Motors, was published in 1946.
Drucker believed the corporation was the single most important institution in society - one that demanded a community as well as a commercial purpose from those privileged enough to be part of the management class. Over the past 50 years, generation after generation of young, fresh-faced MBA students have lapped this up.
Drucker's guru reputation was enhanced by a remarkable ability to see into the future.
In the 1950s, he predicted that computers would play a major role in global business; in the 1960s he warned that low overheads would eventually give Asia's fast developing economies a massive competitive advantage over the West; and in the 1990s he predicted a community backlash against executive salaries.
It was Drucker who first postulated the view that corporations hired too many people they didn't need and that contracting out work was smarter. And he was one of the earliest advocates of privatisation, saying governments, along with hospitals and universities, were among the worst offenders at failing to accept when activities had become obsolete to the organisation's purpose.
Of course, not everything Drucker believed in was accepted as gospel.
For example, you won't find too many executives who accept his view that bosses be paid no more than 20 times the salary of their lowest paid employees, which probably goes to show that all those fresh-faced MBA students weren't as naive as people might have thought.
Even so, Drucker's most important work - and his most spectacular predictions - were in the area of worker-management relations. In the 1960s, he predicted the decline of trade unions and wrote of an economic evolution that would see "knowledge workers" become fundamental to business success. In 2005, few corporate chiefs would argue with that.
Drucker also called on management to regard workers not as a cost but as a resource. He said bigger profits would flow from treating and paying workers decently and from delegation of authority within the workplace.
Drucker made these observations after the 30 months he spent at GM researching Concept of the Corporation, a period where his thinking greatly influenced Charles E Wilson, the company president.
Wilson's response was to begin work on providing the healthcare and pension benefits that made GM's workforce one of the best rewarded in US industrial relations history. But how things have changed. GM today cites those health and pension benefits as one of the company's biggest problems as it struggles to stay afloat in America's highly competitive auto sector.
So there was quite an irony when Drucker's long and distinguished life ended on the same day that GM and the United Auto Workers formally ratified an agreement to cut the company's healthcare liabilities by $US1 billion a year.
It came after union members voted 61 per cent in favour of a deal that will require retirees, who previously paid nothing for healthcare, to pay $US752 ($1026) per family each year or $US370 annually for an individual.
This will be in addition to new co-payments for prescription drugs.
GM's current workers will have no change to their healthcare plans but will forgo a $US1 per hour pay increase due next year - about $US2000 annually - to subsidise GM's health cover.
The union vote in favour of the deal saw GM's share price jump 4 per cent on Friday to $US23.43.
But after a $US1.6 billion third-quarter loss, eroding sales and market share, junk-rated debt and fears that it will be forced to take on $US12 billion of health and pension liabilities accrued by its former spare parts division Delphi - not to mention a federal inquiry into its accounting practices - GM is far from out of the woods.
This, of course, is particularly bad news for billionaire investor and Las Vegas casino mogul Kirk Kerkorian who has splurged about $US1.6 billion acquiring a 10 per cent GM shareholding. Most of that stock was bought at around $US31 a share, meaning Kerkorian is in the red to the tune of some $US200 million.
Kerkorian is now faced with two choices. Does he cut his losses and run as Drucker, who believed in disposing of obsolete assets, might have done, or does he try and buy the whole box and dice.
If it's the latter, the low share price is to his advantage. The market cap of GM is now just $US13.5 billion, making it ripe for a hostile takeover from someone keen to get their hands on its $US15 billion in cash reserves.
If he goes that way, Kerkorian might still draw some comfort from Drucker, who once said: "The important challenge in society, economics, politics, is to exploit the changes that have already occurred and to use them as opportunities."
ANYONE who has ever been to a business school or held any kind of reasonably senior management job will know the name Peter Drucker.
The Austrian-born US economist and management pioneer who died in California on Friday at age 95 was one of the most challenging thinkers of the 20th century and his books and teachings have had a profound influence on business leaders ever since Concept of the Corporation, his inside look at the operations of General Motors, was published in 1946.
Drucker believed the corporation was the single most important institution in society - one that demanded a community as well as a commercial purpose from those privileged enough to be part of the management class. Over the past 50 years, generation after generation of young, fresh-faced MBA students have lapped this up.
Drucker's guru reputation was enhanced by a remarkable ability to see into the future.
In the 1950s, he predicted that computers would play a major role in global business; in the 1960s he warned that low overheads would eventually give Asia's fast developing economies a massive competitive advantage over the West; and in the 1990s he predicted a community backlash against executive salaries.
It was Drucker who first postulated the view that corporations hired too many people they didn't need and that contracting out work was smarter. And he was one of the earliest advocates of privatisation, saying governments, along with hospitals and universities, were among the worst offenders at failing to accept when activities had become obsolete to the organisation's purpose.
Of course, not everything Drucker believed in was accepted as gospel.
For example, you won't find too many executives who accept his view that bosses be paid no more than 20 times the salary of their lowest paid employees, which probably goes to show that all those fresh-faced MBA students weren't as naive as people might have thought.
Even so, Drucker's most important work - and his most spectacular predictions - were in the area of worker-management relations. In the 1960s, he predicted the decline of trade unions and wrote of an economic evolution that would see "knowledge workers" become fundamental to business success. In 2005, few corporate chiefs would argue with that.
Drucker also called on management to regard workers not as a cost but as a resource. He said bigger profits would flow from treating and paying workers decently and from delegation of authority within the workplace.
Drucker made these observations after the 30 months he spent at GM researching Concept of the Corporation, a period where his thinking greatly influenced Charles E Wilson, the company president.
Wilson's response was to begin work on providing the healthcare and pension benefits that made GM's workforce one of the best rewarded in US industrial relations history. But how things have changed. GM today cites those health and pension benefits as one of the company's biggest problems as it struggles to stay afloat in America's highly competitive auto sector.
So there was quite an irony when Drucker's long and distinguished life ended on the same day that GM and the United Auto Workers formally ratified an agreement to cut the company's healthcare liabilities by $US1 billion a year.
It came after union members voted 61 per cent in favour of a deal that will require retirees, who previously paid nothing for healthcare, to pay $US752 ($1026) per family each year or $US370 annually for an individual.
This will be in addition to new co-payments for prescription drugs.
GM's current workers will have no change to their healthcare plans but will forgo a $US1 per hour pay increase due next year - about $US2000 annually - to subsidise GM's health cover.
The union vote in favour of the deal saw GM's share price jump 4 per cent on Friday to $US23.43.
But after a $US1.6 billion third-quarter loss, eroding sales and market share, junk-rated debt and fears that it will be forced to take on $US12 billion of health and pension liabilities accrued by its former spare parts division Delphi - not to mention a federal inquiry into its accounting practices - GM is far from out of the woods.
This, of course, is particularly bad news for billionaire investor and Las Vegas casino mogul Kirk Kerkorian who has splurged about $US1.6 billion acquiring a 10 per cent GM shareholding. Most of that stock was bought at around $US31 a share, meaning Kerkorian is in the red to the tune of some $US200 million.
Kerkorian is now faced with two choices. Does he cut his losses and run as Drucker, who believed in disposing of obsolete assets, might have done, or does he try and buy the whole box and dice.
If it's the latter, the low share price is to his advantage. The market cap of GM is now just $US13.5 billion, making it ripe for a hostile takeover from someone keen to get their hands on its $US15 billion in cash reserves.
If he goes that way, Kerkorian might still draw some comfort from Drucker, who once said: "The important challenge in society, economics, politics, is to exploit the changes that have already occurred and to use them as opportunities."
posted by professor rat at 5:13 PM
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