1) The document summarizes Peter F. Drucker's book "The Practice of Management" which discusses key concepts around managing a business, managing managers, organizational structure, and managing workers and work. 2) It outlines Drucker's view that the purpose of business is to create customers and satisfy their needs through innovation and marketing. Profit is the test of valid business decisions and behavior. 3) Managing requires setting objectives for performance in various areas, balancing short and long-term goals, and making decisions with the future in mind. The structure of management should optimize business performance. 4) Managing workers involves employing their whole capabilities, motivating through responsibility rather than satisfaction,

1. PETER F. DRUCKER’S
THE PRACTICE OF
MANAGEMENT
BUS 8010
Contributors to Strategic Management
Presented by Yi-Ching Wu
November 8, 2011

2. INTRODUCTION:
The Nature of Management

3. The Role of Management
Making Resources Productive:
• with the responsibility for organizing
economic advance
Expressing Basic Beliefs of Western Civilization:
• The possibility of controlling men’s livelihood
through systematically organizing resources
• Human betterment and social justice can be
accelerated by economic change

4. The Job of Management
Managing
Managing A Managing
Worker and
Business Managers
Work
(Part One) (Part Two)
(Part Four)
• The Integrated Nature of Management:
• Management is a “multi-purpose organ”
• Managers should take all three into account when
making management decisions

5. The Challenge To Management
• A concept consisted of:
• Basic pattern of stability and predictability
Automation
• Focusing on the process: stability, cost, effort
• Control the equilibrium during the process
Automation • Automation requires skillful workers and
and the professionals who can make their works
Worker productively and effectively
• New technology demands more managers:
The • Decentralization
Demands on
Management • Flexibility
• Management autonomy

6. PART ONE:
Managing A Business

7. What Is A Business?
General Perception Drucker’s Agreement
• Profitability is not the
purpose of business
• An organization to make a enterprise and business
profit activity
• Maximization of profits • Profitability is the test of
the validity of business
behavior and business
decisions

8. What Is A Business? (cont’d)
The Purpose of a Business
• To create a customer
• The value customers perceive determines what a
business is
The Two Entrepreneurial Functions
• Marketing (not only selling products but satisfying
market needs)
• Innovation
The Enterprise as the Organ of Economic Growth
• The specific organ of growth, expansion and change by
being innovative

9. What Is A Business? (cont’d)
The Productive Utilization of Wealth-Producing Resources
• Labor is not the only productive effort
• The rate of brain formation:
• basic factor of economic development
• produce people with imagination and
vision, education, theoretical and analytical skill
• Some other factors to be concerned (invisible form not
being considered into cost figure):
• Time
• Process mix
• Organization structure and the balance between
activities

10. What Is A Business? (cont’d)
Function of Profit
• Profit is the result and the test of performance
of the business
• Payoff from risk-taking
• Source of risk premium (the “required minimum
profit” to cover potential loss)

11. What Is Our Business
– And What Should It Be?
• Our business is determined by the customer by
satisfying the needs and want
• It is the first responsibility of top management to
ask this question and find the answer
• By understanding and answering this question
correctly, management will be able to develop
and set up objectives to grow the business

12. What Is Our Business
– And What Should It Be? (cont’d)
What Is What Will
What Is What
Who Is the Value to Our
Our Should It
Customer? the Business
Business? Be?
Customer? Be?
Present Future

13. The Objectives of a Business
are needed in every area where performance and
Objectives results directly and vitally affect the survival and
prosperity of the business.
Organize and explain the whole range of business
phenomena in a small number of general statements
Test these statements in actual experience
Predict behavior
Apprise the soundness of decisions when they are still
being made
Enable practicing businessmen to analyze their own
experience and improve their performance

14. The Objectives of a Business (cont’d)
• Market Standing
• Innovation
• Productivity
• Physical and Financial Resources
• Profitability
• Manager Performance and Development
• Worker Performance and Attitude
• Public Responsibility
Objectives of
Performance in 8 Areas

15. The Objectives of a Business (cont’d)
The Time-Span of
Balancing the Objectives
Objectives
• Different areas require
different time-span
• Each business requires its
• Objectives management
own different balance in
needs to balance both short- different time
and long-term future
• Do not stick on budgeting, it
• Managed expenditures is
is just a expression of how
not able to be properly you balance
calculate that requires highly
skilled people to prioritize

16. Today’s Decisions for Tomorrow’s Results
There will always be fluctuations in economy, but
management needs to free its thinking and planning from
dependence on the business cycle
• Trend Analysis:
• Assumption of economic phenomena
• Specific trends that relate to the company’s business
• What events may heavily impact on future economic
conditions based on own judgment
It is managers’ responsibility to provide flexibility for future
decisions whether the economic conditions may change

17. The Principles of Production
Production
(the application of logic to work)
Mass Production
Unique-Product Process
(Old and New
Production Production
Style)
 Each of them has its own basic principles
 Each of them makes specific demands on management

18. PART TWO:
Managing Managers

19. Management By Objectives and Self-Control
Objectives in different areas should be able to contribute
and serve the ultimate goal of the business enterprise
rather then ends in themselves
Specialized work of most
managers
3 Factors of Hierarchical structure of
Misdirection management
Differences in vision and work and
the resultant insulation of various
levels of management

20. Management By Objectives and Self-Control
(cont’d)
• Setting Objectives and Self-Control
Rationale • goals defined by the contribution
Method • each manager develop and set the objective
• managers must know and understand
• the ultimate business goal
• Specific expectation on him
Premise • Measurement of his performance
• Mutual understanding between superiors
and lower managers

21. Management By Objectives and Self-Control
(cont’d)
• Proper Use of Reports and Procedures
Procedures as instruments of
morality
3 Common Procedures as a substitute for
Misuses judgment
Report and procedures as an
instrument of control from above
• Reports and procedures should be kept to a minimum and
used only when they provide efficiency
• They should focus only on the performance needed to be
achieved
• They should be the tool for people to use, not the measure of
people

22. Manager Must Manage
His Job
• Based on a task to be performed to attain the company’s
objectives
• Directed, contributed and controlled by objectives of performance
His Managerial Responsibility
• Determined by the extent to which assistance and teaching are
needed
His Authority
• From the bottom up
• Should be limited to the extent of his authority
Him and His Superior
• Contribute what his superior’s unit needs to attain objectives
• Analyze the task and defined needed activities to attain objectives
• Has responsibility to his subordinate managers

23. The Spirit Of An Organization
Morality
High Demand
Leadership on
Performance
Good
Emphasis on Spirit Systematic
Integrity Appraisal
Rational
Proper
Promotion
Reward
System

24. Chief Executive and Board
• One-man chief executive is no longer able to deal
with the complexity and diversity of his daily work
and future goal
• The chief-executive job must be the job of a team
of several professionals working together

25. Chief Executive and Board (cont’d)
• Organization Chief-Executive Team
• It has to be a “team” rather than a “committee” (no
collective responsibility)
• Each member should have assigned the area in which he
makes final decisions and for which he is responsible
• Deliberation should be joint; decision single
• There will be no appeal from one member of the chief
executive to another
• Whatever any one of them decides is the decision of
the entire management

26. Chief Executive and Board (cont’d)
• The Board of Directors
• Operates by oversight:
• Review
• Appraisal
• Appeal
• Removing existing executives if necessary
• Chief-executive team must work directly with the Board
• Being detached from operations, “look from outside”

27. Developing Managers
What is needed is the development of managers equal to
the tasks of tomorrow, not the tasks of yesterday
• The Principle:
• It must be the development of the entire management group
• It must be dynamic
• How to Develop:
• Specifically assign the responsibility
• Analyze what else have to learn to improve strengths and
capabilities for the future tasks

28. PART THREE:
The Structure of Management

29. What Kind of Structure?
• Organization is not an end in itself but a means to
the end of business performance and results
• Organization structure must be designed to make
possible the attainment of the objectives of the
business for long-run perspective.

30. What Kind of Structure? (cont’d)
• Activity is not a set of “typical” functions
Activities • Identify what work has to be performed, what kind of
Analysis work belong together, and what emphasis each
activity is to be given
• The type of decisions involved:
• The degree of futurity in the decision
Decision • The impact a decision has on other functions, areas or
Analysis the business
• The number of qualitative factors that enter into it
• Whether they are periodically recurrent or rare decision
Relations • Considering both downward and upward, directly
Analysis and indirectly

31. Building the Structure
• Three Structural Requirement
• For business performance
• Least possible number of management levels
• Training and testing of tomorrow’s top managers
To Satisfy
• Two Structural Principles
• Federal Decentralization
• Functional Decentralization

32. Building the Structure (cont’d)
• Federal Decentralization
• Advantages:
• Focusing vision and efforts on business performance and result
• Reducing hidden facts
• Management by objective being fully effective
• Helping the development of tomorrow’s manager
• Testing men in independent command early and a reasonably low
level
• It has to direct to the result (profit)
• Requiring both strong parts and a strong center
• The unit has to be large enough to support the adequate
management
• It should be potential for growth
• There should be enough scope and challenge to the job of
the managers

33. Building the Structure (cont’d)
• Functional Decentralization
• Should be organized to give manager maximum of
responsibility and authority
• Adopt “task force” concept: obtaining maximum of
information and decision
• Another management level for functional managers to
report to
• Connected in series

34. The Small, The Large, The Growing Business
• Size does not change or affect the nature, the
basic problems, and the management of
business
• Size vitally affects the structure of
management, and growth, change in size, is
more influential.

35. The Small, The Large, The Growing Business
(cont’d)
Very Large
Large Business
Fair-Sized Business
Small Business
Business
 The common measurement is the number of employees
 The structure of top management should be the only
reliable criterion of size (whether it provide sufficient
managerial functions to run the business)

36. The Small, The Large, The Growing Business
(cont’d)
Problems of Smallness Problems of Bigness
• Insufficient management • The scope of the chief-
• Family-owned executive job
• Narrowness of outlook • The tendency of its
and constriction of outside management group to
contacts become ingrown and
inbred, smug and self-
satisfied
• The service staffs and
their empire

37. The Small, The Large, The Growing Business
(cont’d)
• Growth is the result of success, but:
• Problems of Growth:
• Management attitude and behavior
• Lack of new competence in top management
• To diagnose the state of growth:
• Analyzing the activities needed to attain objectives
• Analyzing the decisions needed
• Analyzing the relations between management jobs

38. PART FOUR:
The Management of Worker and Work

39. Employing The Whole Man
• The Worker as a Resource
• Able to Co-ordinate
Qualities of Human • Able to Integrate
Being at Work • Able to judge
• Able to Imagine
Motivation Productivity

40. Employing The Whole Man (cont’d)
Demands of Enterprise on Worker’s Demands on the
the Worker Enterprise
• Willingly direct the efforts • Economic returns
• Return as:
toward the goals
• An individual
• Willing dedication • A person
• Active assumption of • A citizen
responsibility for the results • Fulfillment of status and
functions of the job
• Realization of the promises to:
• Willing to accept change
• The individual on which our
society rests
• Justice through equal
opportunities
• Meaningful and serious work

41. Is Personnel Management Bankrupt?
Misconceptions of Personnel
Administration
• Assumption of that people do not want to work
• Seeing the management of worker an work as the job of a
specialist rather then as part of the manager’s job
• Tendency of being “fire-fighting” and see “personnel” as
concerned with “problems” and “headaches”
Limitations of Human Relations
• Belief in “spontaneous motivation
• Lack of and adequate focus on work
• Lack of awareness of the economic dimension of the
problem

42. Human Organization for Peak Performance
Scientific Shift to Integration
Management
• Scientific Management
• Organizing the motions mechanically to do one thing
fast and perfectly
• Integration
• Integrating operations to utilize the human being’s
ability to make a whole out of many things, to judge, to
plan, and to change

43. Human Organization for Peak Performance
(cont’d)
• Organizing People for Work
• Creating an effective work organization
• Performance to be served by the group and its social
cohesion
• Individuals must be organized as a true group
• Placement
• Putting people on the right jobs
• A systematic and continual effort

44. Motivating to Peak Performance
What motivates people is responsibility, not satisfaction
• Careful placement
• High-standards of performance
The
Responsible • Provision of sufficient and needed
Worker information
• Managerial vision resulting in
opportunities for participation

45. Economic Dimension
Internal External
Workers Enterprises
income Wages Cost
Not My Necessity of
Income
Profit
Survival
Consensus?
Management must find some way to get the worker
to accept profit as necessary, or as beneficial and in
his own interest

46. The Supervisor
What Supervisor Needs
• Clear-cut objectives for his own activity
• Authority that goes with the responsibility for reaching
objectives
• Adequate promotional opportunities
• Manager status
What the Job Should Be
• The supervisor’s job must be a genuine management job
• Supervisor must have control over the activities and adequate
personnel to handle
• Companies have to reverse the trend toward narrowing the
supervisor’s authority
• Supervisor’s unit should be much larger in numbers

47. The Professional Employee
• Neither Management nor Labor
• Individual professional contributor, but still work along
with others
• Responsible for his own contribution and result of his own
work
• Responsibility and authority of the teacher
• His objectives derived from his professional goals
• Adapt professional work to the needs of the company
• Can be guided, taught, helped, but not supervised

48. The Professional Employee (cont’d)
• The Needs of Professional Employee
• The objectives of the job have to remain professional
objectives as well as include the maximum of business
objectives (synergy)
• A promotion ladder for individual contributor that
parallels the administrative one
• Carry the same financial incentives
• Must not be supervised, and provide special and
continuous placement efforts
• Recognition as a professional both inside and outside
the enterprise

49. PART FIVE:
What It Means To Be A Manager

50. The Manager and His Work
The Manager’s Tasks
Creating a true whole
that is larger than the Harmonizing in every
sum of its parts, a decision and action
productive entity that the requirements of
turns out more than immediate and long-
the sum of the range future
resources put into it

51. The Manager and His Work (cont’d)
Setting Motivating and
Organizing
Objectives communicating
Being the job of Developing
management people
• He has flexibly use:
• Information (interpersonal skills)
• Time (managing work efficiency by objectives and
supporting superior)
• Man (human resource)

52. Making Decisions
Tactical Decisions Strategic Decision
• One-dimensional • More complicated and
• Find the most economical important
adaptation of known • Should not be taken
resources through problem-solving
• Find the right question
rather than right answer

53. Making Decisions (cont’d)
• Phases of Decision-Making
Converting
Deciding the
Defining Analyzing Developing
upon the Decision
the the Alternate
Best into
Problem Problem Solutions
Solution Effective
Action

54. Making Decisions (cont’d)
• Finding the critical factor by virtual motion
Defining the Problem
• Determining the conditions for its solution
• Classifying the problem
Analyzing the Problem
• Finding the facts
Developing Alternate • No “either-or” approach, be imaginative
Solutions • “Taking no action” should be considered
Deciding upon the Best • Risk, economy of effort, timing, limitations
Solution of resources
Converting the Decision • Communicating to people
into Effective Action • “Our decision”

55. The Manager of Tomorrow
• Manage by objectives
• Take more risks and for a longer period ahead
• Be able to make strategic decisions
• Be able to build an integrated team
• Be able to communicate information fast and clearly
• Be able to see the business as a whole and to integrated
his function with it
• Be able to relate his product and industry to the total
environment, to find what is significant in it and to take it
into account in his decision and actions

56. The Manager of Tomorrow (cont’d)
• Preparation of Tomorrow’s Manager
• General Education
• Adult Education
• Integrity
• The more successfully tomorrow’s manager does his
work, the greater will be the integrity required of him
• Put the common good of the enterprise above his own
self-interest

57. CONCLUSION:
The Responsibilities of Management

58. Conclusion
• Business is the wealth-creating and wealth-producing organ of
our society, and its first responsibility of an enterprise to society
is to make profits and to offset the risk of economic activities
• Management is responsible for make sure that the present
actions and decisions of the enterprise will not create future
public opinion, demands, and policies that threaten the
enterprise, its freedom and its economic success
• Management should assume by virtue of being one of the
leading group in society – responsibilities over and above those
grounded in the business it self