Business Management and the Modern Day Corporation

Jeffrey Krames

Before meeting Peter Drucker, I had always wondered how business management and the modern day corporation were born. Without prompting, Drucker launched into a discussion of just that shortly after my arrival that Monday morning, in December 2003.

First a bit of background: The topics Peter Drucker chose to discuss with me during our day together gave me the impression that he viewed me as his biographer, even though I told him what I was writing was something quite different. My goal, I told Drucker, was to shine the spotlight on his most seminal business management and leadership ideas, update them with modern examples and then show how they can be applied in today's hyper-competitive global marketplace.

Still, none of this stopped Peter Drucker from telling me story after story from his life. He talked about how he "fell into business management totally by accident." He also described his unlikely rise in popularity in the 1950s and 1960s, but also talked of his hot and cold relationship with academia. The critics panned him for his first business book, Concept of the Corporation (1946), claiming that it was not fit for government or economists. One reviewer suggested that Peter Drucker find a new line of work! However, his first books were immediate bestsellers in Japan and the United States. But because Peter Drucker did not climb his way to the top the way academics do (e.g. publishing articles, writing cases), the elite of the academic world thumbed their noses at the promising new scholar. "What I did that was most important," Drucker told me, "was to establish business management as a social discipline."

Because Peter Drucker and I never got to the items that we agreed to discuss in advance, I thought that I had done a poor job interviewing him. However, as I transcribed the interview over the next many months (with his thick accent and hearing problems, it took forever to transcribe the interview), I realized that Drucker had given me more than I had hoped for. He gave me a rare glimpse into his thought process, including stories and lessons that he had never revealed before (such as his assessment of Jack Welch in comparison to other GE leaders).

The discussion of the birth of modern day corporations came about as a result of the effort Peter Drucker put toward his career and contributions into context. He thought the best route was to take me back to the birth of the modern day corporation, providing details of when and where they was created, structured, etc.

Peter Drucker began by tracing the advent of the modern day corporation back to the 1870s and 1880s. The really large corporations came after the Civil War. Somewhat coincidentally, large companies were created simultaneously in the United States, Japan and the United Kingdom. France did not develop as quickly. Peter Drucker said France "held on to family companies longer than any of the major powers."

"There had been managers all through the ages but they were very few and far between," Peter Drucker said. Before the large corporation was born, the most gifted members of the family ran the family business. Drucker referred to the best of these as "naturals," born leaders. "But suddenly," he said, "you could no longer depend on the supply of naturals, [since they were so few]. You could only depend on the supply of naturals when the demand is low. But when you need large numbers of talented managers, you have to convert business management into something that can be learned or taught. And that's what I did."

In other words, when there were too many companies to be managed by members of the family, there was a sudden need for hundreds and then thousands of managers. But before Peter Drucker, there was no way to educate managers in the ways of the corporation. That's what Drucker's books accomplished. By establishing business management as a discipline, he provided the much-needed tools that could transform "non-naturals" into competent, practicing managers.

And that is what Drucker’s books continue to do to this day. Drucker’s books continue to sell well around the globe, even making bestseller lists in places for the first time. That’s because Peter Drucker is as much a mindset as a methodology.

Tom Peters, lead author of In Search of Excellence—one of the two books that launched the modern day boom—sums it up nicely when he says, "no true discipline of management existed before Drucker."