Drucker begins the symposia by emphasizing that many functions within a business are being farmed out to contractors, and that the trend will continue into the future. Fundamentally, the organizational model is in the process of being restructured, and Drucker notes that when the first new organization arose, the only permanent, large organization example was the military. The military, he says, is organized on the assumption that there is no information, and when information is brought in, it is found that many layers of management are not management layers at all--instead, they are relays meant to amplify the faint signals that come from the top and the bottom. Wide income differentials between the bottom and top employees in an organization make social cohesion impossible. With enormous top salaries, one cannot have performance, and Drucker cites J.P. Morgan as an example. He proceeds to note that, over the last few decades, business has been managed so as to make promotion the main reward, and the question is now how to make the job meaningful. Too much satisfaction has been taken out of the job and invested in the promise of promotion, and this practice needs to be reversed. According to Drucker, the organization of tomorrow will have to be able to convey three things to every member of an organization, specifically, the quality or general view of the organization, an understanding of markets and marketing, and the dynamics of technology. All employees in organizations will be forced to learn the new theory of manufacturing, and whether or not one is in the manufacturing sector is irrelevant. No matter the particular variety of industry in question, it assumes that the only cost that is variable in any production process is time--all other costs are fixed, including materials. What most people still see as quality control is really social organization in a plant. Low cost and total rigidity, or high cost and flexibility, were thought to be mutually exclusive in the past, but it is now known that an organization can practice both. Marketing considerations will have to be put into manufacturing, and thinking through logistics will have to take place in future organizations. Building flexibility into the process is part of organization structuring, and looking upon organization design as something that has to fit a specific firm is a requirement for organization success. Drucker highlights that the concern with organization first began during the period after World War I, followed by another period after World War II. Today business is entering a new period of acute concern with organization and the forcing mechanisms will be three, namely, the shrinkage or disappearance of levels and layers of management, the need to learn how to manage where an organization does not have command and control, and the new manufacturing theory of production, which is really a theory of human organization. In this new scheme, the practitioners will be the innovators, and not the theoreticians.
Drucker, Peter F. (Peter Ferdinand), 1909-2005 New York University New York University. Graduate School of Business Administration Symposia Contracting out Contract labor Military Organizational Innovation Organizational effectiveness Organizational change Organizations Information Salaries J.P. Morgan & Co Promotions Mission statements Marketing Market segmentation Marketing channels Marketing research Technology Technological innovations Manufacturing processes Manufacturing industries Time Production costs Quality control Social organization Logistics World War I World War II Postwar economic studies Postwar world Management by objectives Management Management science Production (Economic theory) Production and logistics Production management Social cohesion and cultural pluralism Management theory
Source
Original recording, April 26, 1990; Drucker Archives; Box 68
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