Management Challenges for the 21st Century
Peter Drucker

The results of any institution exist only on the outside.

The traditional assumption that the inside of the organization is the domain of management means that management is assumed to concern itself with efforts, if not with costs only. For effort is the only thing that exists within an organization. And, similarly, everything inside an organization is a cost center.

Management must focus on the results and performance of the organization. Indeed, the first task of management is to define what results and performance are in a given organization--and this, as anyone who has worked on it can testify, is in itself one of the most difficult, one oft he most controversial, but also one of the most important tasks. It is therefore the specific function of management to organize the resources of the organization for results outside the organization.

Management exists for the sake of the institution's results. It has to start with the intended results and has to organizthe resources of the institution to attain these results. It is the organ to make the institution, whether business, church, university, hospital or a battered women's shelter, capable of producing results outside of itself.

Management's concern and management's responsibility are everything that affects the performance of the institution and its results--whether inside or outside, whether under the institution's control or totally beyond it.

Schools and training departments are organizations, and they too must shoulder responsibility for what goes on outside their cloistered halls. Were they not so insulated, schools wouldn't need to resort to grades, and it wouldn't be so tough to cost-justify corporate training. Learning organizations need managers (not administrators) who buy into the metrics of the world at large, things such as productivity, happiness, employability, etc.

Why Strategy?

Even organization operates on a Theory ofthe Business, that is, a
set of assumptions as to what its business is, what its objectives are,
how it defines results, who its customers are, what the customers
value and pay for.

Strategy converts this Theory of the Business into performance.
Its purpose is to enable an organization to achieve its desired results in
an unpredictable environment. For strategy allows an organization to
be purposefully opportunistic.

Strategy is also the test of the Theory of the Business. Failure of
the strategy to produce the expected results is usually the first serious
indication that the Theory of the Business needs to be thought through
again. And unexpected successes are often also the first indications
that the Theory of the Business needs to be rethought. Indeed, what is
an "opportunity" can only be decided if there is a strategy. Otherwise,
there is no way to tell what genuinely advances the organization
toward its desired results, and what is diversion and splintering of
resources.

But what can strategy be based on in a period of rapid change and
total uncertainty, such as the world is facing at the turn of the 21st
century? Are there any assumptions on which to base the strategies of
an organization and especially of a business? Are there any
certainties?

There are indeed FIVE phenomena that can be considered
certainties. They are, however, different from anything present
strategies consider. Above all, they are not, essentially, economic.
They are primarily social and political.

These five certainties are:

1. The Collapsing Birthrate in the Developed World.

2. Shifts in the Distribution of Disposable Income.

3. Defining Performance

4. Global Competitiveness

5. The Growing Incongruence Between Economic Globalization and Political Splintering

Collapsing Birthrate in the Developed World has no precedent in all of human history. For at least two hundred years, all innstituions of the modern world and especially all businesses have assumed a steadily growing population. In the West the population has been growing since 1400. And from 1700 on the growth has been very fast--until well after World War II. But increasingly, in all developed conuntries, the strategy of all institutions will have to be based, from now on, on the totallly different assumption of a shrinking population, and especially of a shrinking young population.

Within the next twenty to thirty years the retirement age in all developed countries will have to move up to around seventy-nine or so--seventy-nine being the age that, in terms of both life and health expectancies, corresponds to age sixty-five in 1936, when the U.S, the last Western country to do so, adopted a national retirement plan (Social Security).

Boomers are the first age cohort in human history which did not go into manual work but increasingly into knowledge work. After 30 or 40 years of full-time work, they're not physically worn out. Employing organizations should start experimenting with new work relationships with older people, especially older knowledge workers, right away. The organization that first succeeds in attracting and holding knowledge workers past traditional retirement age, and makes them fully productive, will have a tremendous competitive advantage.

One cannot manage change. One can only be ahead of it. In a period of rapid structural change, the only ones who survive are the Change Leaders.

Abandon yesterday. Free resources from being committed to maintaining what no longer contributes to performance, and no longer produces results. It is not possible to create tomorrow unless one first sloughs off yesterday.

Organized improvement (Kaizen).

Exploit success. Starve problems and feed opportunities.

What We Know About Knowledge-Worker Productivity
Work on the productivity of the knowledge worker has barely begun. In terms of actual work on knowledge worker productivity we are, in the year 2000, roughly where we were in the year 1900, a century ago, in terms of the productivity of the manual worker. But we already know infinitely more about the productivity of the knowledge worker than we did then about that of the manual worker. We even know a good many of the answers. But we also know the challenges to which we do not yet know the answers, and on which we need to go to work.

SIX major factors determine knowledge-worker productivity.

1. Knowledge worker productivity demands that we ask the question: "What is the task?"
2. It demands that we impose the responsibility for their productivity on the individual knowledge workers themselves. Knowledge workers have to manage themselves. They have to have autonomy.
3. Continuing innovation has to be part of the work, the task and the responsibility of knowledge workers.
4. Knowledge work requires continuous learning on the part of the knowledge worker, but equally continuous teaching on the part of the knowledge worker.
5. Productivity of the knowledge worker is not—at least not primarily—a matter of the quantity of output. Quality is at least as important.
6. Finally, knowledge-worker productivity requires that the knowledge worker is both seen and treated as an "asset', rather than a "cost." It requires that knowledge workers want to work for the organization in preference to all other opportunities.

Managing Oneself

More and more people in the workforce—and most knowledge workers—will have to MANAGE THEMSELVES. They will have to place themselves where they can make the greatest contribution; they will have to learn to develop themselves. They will have to learn to stay young and mentally alive during a fifty-year working life. They will have to learn how and when to change what they do, how they do it and when they do it.

Knowledge workers are likely to outlive their employing organization. Even if knowledge workers postpone entry into the labor force as long as possible—if, for instance, they stay in school till their late twenties to get a doctorate—they are likely, with present life expectancies in the developed countries, to live into their eighties. And they are likely to have to keep working, if only parttime, until they are around seventy-five or older. The average working life, in other words, is likely to be fifty years, especially for knowledge workers. But the average life expectancy of a successful business is only thirty years—and in a period of great turbulence such as the one we are living in, it is unlikely to be even that long. Even organizations that normally are long-lived if not expected to live forever—schools and universities, hospitals, government agencies—will see rapid changes in the period of turbulence we have already entered. Even if they survive—and a great many surely will not, at least not in their present form—they will change their structure, the work they are doing, the knowledges they require and the kind of people they employ. Increasingly, therefore, workers, and especially knowledge workers, will outlive any one employer, and will have to be prepared for more than one job, more than one assignment, more than one career.

So far, this book has dealt with changes in the environment: in society, economy, politics, technology. This concluding chapter deals with the new demands on the individual.

Knowledge workers, therefore, face drastically new demands:
1. They have to ask: Who Am I? What Are My Strengths? HOW Do I Work?

For the great majority of people, to know their strengths was irrelevant only a few decades ago. One was born into a job and into a line of work. The peasant's son became a peasant. If he was not good at being a peasant, he failed.

The one way to find out your strengths: Feedback. Whenever one makes a key decision, and whenever one does a key action, one writes down what one expects will happen. And nine or twelve monnths later one then feeds back from results to expectations. I have been doing this for some fifteen to twenty years now. And every time I do it I am surprised. And so is everyone who has ever done this.

• Place yourself where your strengths can produce performance and results.
• Work on improving your strengths. Waste as little effort as possible on improving areas of low competence.
• Don't let intellectual arrogance cause disabling ignorance.
• Remedy one's bad habits.

2. They have to ask: Where Do I Belong?
3. They have to ask: What Is My Contribution?
4. They have to take Relationship Responsibility.
5. They have to plan for the Second Half of Their Lives.

Managing oneself is a revolution in human affairs. It demands that each knowledge worker thnk and behave as a CEO. It also requires an almost 180-degree change in the knowledge worker's thoughts and actions from what most of us--even of the younger generation--still take for granted as the way to think and the way to act.

jaycross@InternetTime.com