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Chapter One

The Role Of Management

The dynamic element in every business—A distinct and a leading
group-The emergence of management-The free world's stake
in management.

The manager is the dynamic, life-giving element in every business. Without his leadership the "resources of production" remain resources and never become production. In a competitive economy, above all, the quality and performance of the managers determine the success of a business, indeed they determine its survival. For the quality and performance of its managers is the only effective advantage an enterprise in a competitive economy can have.

Management is also a distinct and a leading group in industrial society. We no longer talk of "capital" and "labor"; we talk of 1. management" and "labor." The "responsibilities of capital" have disappeared from our vocabulary together with the "rights of capital"; instead, we hear of the "responsibilities of management," and (a singularly hapless phrase) of the "prerogatives of management." We are building up a comprehensive and distinct system of "education for management." And when the Eisenhower Administration was formed in 1952, it was formed consciously as a "Management Administration."

The emergence of management as an essential, a distinct and a leading institution is a pivotal event in social history. Rarely, if ever, has a new basic institution, a new leading group, emerged as fast as has management since the turn of this century. Rarely in human history has a new institution proven indispensable so quickly;and even less often has a new institution arrived with so little Opposition, so little disturbance, so little controversy.

Management will remain a basic and dominant institution perhaps as long as Western civilization itself survives. For management is not only grounded in the nature of the modern industrial system and in the needs of the modern business enterprise to which an industrial system must entrust its productive resources-both human and material. Management also expresses basic beliefs of modern Western society. It expresses the belief in the possibility of controlling man's livelihood through systematic organization of economic resources. It expresses the belief that economic change can be made into the most powerful engine for human betterment and social justicethat, as Jonathan Swift first overstated it two hundred and fifty years ago, whoever makes two blades of grass grow where only one grew before deserves better of mankind than any speculative philosopher or metaphysical system builder.

This belief that the material can and should be used to advance the human spirit is not just the age-old human heresy "materialism." In fact, it is incompatible with materialism as the term has always been understood. It is something new, distinctly modem, distinctly Western. Prior to, and outside of, the modern West, resources have always been considered a limit to man's activities, a restriction on his control over his environment-rather than an opportunity and a too] of his control over nature. They have always been considered God-given and unchangeable. Indeed all societies, except the modern West, have looked upon economic change as a danger to society and individual alike, and have considered it the first responsibility of government to keep the economy unchangeable.

Management, which is the organ of society specifically charged with making resources productive, that is, with the responsibility for organized economic advance, therefore reflects the basic spirit of the modern age. It is in fact indispensable-and this explains why, once begotten, it grew so fast and with so little opposition.

The Importance of Management

Management, its competence, its integrity and its performance will be decisive both to the United States and to the free world inthe decades ahead. At the same time the demands on management will be rising steadily and steeply.

A "Cold War" of indefinite duration not only puts heavy economic burdens on the economy, which only continuous economic advance can make bearable; it demands ability to satisfy the country's military needs while building up, at the same time, an expanding peacetime economy. It demands, indeed, an unprecedented ability of the entire economy to shift back and forth between peacetime and defense production, practically at an instant's notice. This demand, on the satisfaction of which our survival may well depend, is above all a demand on the competence of the managements, especially of our big enterprises.

That the United States is the leader today, economically and socially, will make management performance decisive-arid adequate management performance much harder. From the peak there is only one easy way to go: downwards. It always requires twice as' much effort and skill to stay up as it did to climb up. In other words, there is real danger that in retrospect the United States of 1950 will come to look like the Great Britain of 188o-doomed to decline for lack of vision and lack of effort. There are evidences of a tendency in this country to defend what we have rather than advance further; capital equipment is getting old in many industries; productivity is improving fast only in the very new industries, and may be stagnant if not declining in many others. Only superior management competence and continuously improved management performance can keep us progressing, can prevent our becoming smug, self-satisfied and lazy.

Outside the United States management has an even more decisive function and an even tougher job. Whether Europe regains her economic prosperity depends, above all, on the performance of her managements. And whether the formerly colonial and raw-material producing countries will succeed in developing their economies as free nations or will go Communist, depends to a large extent on their ability to produce competent and responsible managers in a hurry. Truly, the entire free world has an immense stake in the competence, skill and responsibility of management.

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Excerpted from The Practice of Management by Peter F. Drucker
All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.