Taking Stock

What Peter Drucker has to say about business schools and management education is as original, lucid,and provocative as all his observations have been for the past 5O years.
Taking Stock

Peter Drucker modestly calls himself a management consultant. His disciples call him a hero, a legend, a giant among men. Widely regarded as the seminal thinker on 20th-century business organizations, Drucker has written 32 books that have been published in more than 30 languages. Drucker’s works seem timeless, perhaps because he writes about much more than management or the production of wealth. He also shows how people can lead useful lives and produce greater opportunities and resources for themselves and others.

Born in Austria, Peter Drucker pioneered the study and practice of organizational management more than 50 years ago—long before management as a concept had even entered the business consciousness of the world. He became immersed in the practicalities of organizational management by becoming the most sought-after advisor to CEOs, senior managers, executives, and government leaders from around the world. He originated business concepts such as privatization, outsourcing, management theory, knowledge workers, and the global economy.

Drucker, now 92 years old, is the Clarke Professor of Social Science & Management at the Claremont Graduate University in Claremont, California. In a recent interview, Drucker shared his views on business schools, their effectiveness, and their future.

Knowledge makes itself obsolete every ten minutes. Once you graduate, you have to begin to learn.

What are the three most important lessons that today’s business schools should be teaching tomorrow’s executives?
The first is that they have to learn to take responsibility for themselves. Far too many people still expect the personnel department to look after them. They don’t know their strengths, they don’t know where they belong, they take no responsibility for themselves.

The second is that the most important thing is to look up, rather than down. The focus is still on managing subordinates, when it should be on being an executive. Managing your boss is more important than managing subordinates. And so is asking, “What should I contribute to the organization?”

The final lesson is the need to acquire basic literacy. Yes, you want that accountant to be an accountant, but you also want her to understand what the other organizational functions are about. That’s what I call the basic literacy of the organization. Such literacy is not a matter of taking the right courses, but a matter of practical experience.

We help our students achieve basic literacy by placing them in small teams and sending them out to work in actual organizations. There, they take on projects that make a significant difference to the organization.

I recently sat down with one team that had been working in a fairly large organization two days a week for the last six months on the difficult question of pricing. These were very able people between the ages of 27 and 40 who had at least five years of practical experience. But they had never really seen an organization as a whole. Through their work they were exposed to the entire organization and began to understand that pricing is not just a financial decision or a marketing decision, but requires an understanding of the entire organization, as well as of the market. That’s a lesson you can’t learn in a classroom.

How well do business schools prepare their students?
Only the students themselves can answer that question, and they rarely know until ten years or more have passed. Also, I think that what you mean by management, one cannot learn until one first has several years of practice. Finally, the reality is that management positions will be far fewer in the future, so we should be preparing students for other types of careers as well.

The question, therefore, should perhaps focus on the extent to which we enable students to “get going.” In this respect, I believe that business schools prepare students very well. They give students functional skills that enable them to earn their keep very quickly, if very narrowly. Certainly one of the purposes of undergraduate and typical MBA programs is to help the student get a good first job. I think there is no doubt that MBA programs are effective in that respect. MBA students get very good jobs, better jobs that they would have landed without an MBA. That’s all that can be expected, really. What happens after they land the job is up to each individual person.

You’ve stated that traditional management careers will disappear. What will take their place?
We’ll have to call them executive careers, or careers in organizations. The traditional career path, which takes you from being a professional specialist to being a supervisor of specialists and then a manager—that’s going to be history pretty soon. General Motors, for example, has already reduced its management structure from 28 layers to 15 and will drop to three or four in the not too distant future. Then there is the growth of careers outside the organization, where people are contractors to the organization instead of its employees.

One of the great challenges to the organization will be rewarding and motivating people when the possibility of promotion doesn’t exist. I’ve been working with large companies on initiatives that enable their best people to develop their own businesses within the organization. They become CEOs of their own shows and are rewarded and recognized as such.

I don’t think our business schools are prepared for this reality. Our business schools do not prepare people to take responsibility for their careers.

How will the Internet and related technologies change management education?
First let me say that shying away from Internet-based education because it is too impersonal to be effective is nonsense. Nothing is easier than building feedback and direct contact into the Internet. Yes, it’s true that the way most schools do it, by taking a course that a good professor delivers, filming it, and putting it on the Internet, is impersonal. That doesn’t work. With every new medium, you have to change the message and the format. And you must get feedback.

I recently developed ten one-hour online courses, and we built feedback into the program. Questions are asked, answers are given by the students, and I comment on the answers and give better possible answers or offer other solutions. It took us a long time to work out the process, but our customers think it is our most important feature. They don’t feel the Internet class is impersonal, and it isn’t. It’s no more impersonal than a large lecture class. In fact, it’s more personal.

Regarding the overall impact of such technologies, I think it is too early to tell. For example, I am working with several large consumer-brand companies, and one of the things we are learning is that we will have to move from one method of distribution to three. While the consumer will still buy many items at the supermarket or discount store, some commodities—we don’t know which ones—will be bought, for the most part, online. Some products will be bought online but delivered through the supermarket. So the large consumer goods companies must learn how to distribute their products through three different channels, and we don’t know yet which products will be distributed which way.

The auto industry provides another example of how difficult it is to predict the impact of technology on car sales. We all thought that new cars couldn’t be sold on the Internet, but 60 percent of all new car purchases are now being decided on the Internet. After limiting or eliminating the choices, the car buyer goes to a dealer. Similarly, everybody was quite sure that you could not sell used cars over the Internet, but amazingly enough, that is the area that is growing the fastest.

In the same way, we don’t know yet exactly how the new learning technologies will affect higher education. Online technology will certainly make a difference, but it is just a new way to deliver teaching. It forces you to restructure what you offer. Perhaps the one certainty is that we will develop a number of alternative ways of delivering management education and management learning as a result of the new technologies. For example, online education will most likely play an important role in the delivery of education to already highly schooled adults, an area that represents the frontier of higher education.

Why do you consider highly schooled adults to be the frontier of education?
This is where I think we will see tremendous changes—in the education of older people, especially the education of people who are already at work. Not primarily because of technology— technology is just the enabler—but because the idea of continuous learning is taking over.

Knowledge makes itself obsolete every ten minutes. Once you graduate, you have to begin to learn. And so the continuing education of already highly schooled adults is not only going to provide an additional dimension and an enormous opportunity to higher education, but it will also change what we teach and where we deliver it.

It will revolutionize the way we deliver management education, because that traditional full-time student sitting in the classroom is the wrong recipient for this type of education. A good deal of teaching will still be done in the classroom, but much of it will take place off campus in groups. Much will occur online, and much will be accomplished through self-study. Perhaps the single most important medium will be special tools that are adapted for use at home, with built-in visual and audio feedback mechanisms.

Another factor is that management education is more and more the concern of the employing organization. As a result, management schools will increasingly work with outside organizations to create management education programs that fit the organization’s needs. Quite a number of corporate universities have been founded in the last few years, and not just in large businesses. I am working with the management of two corporate universities that were developed by two national nonprofits. Such organizations see the management school as a resource and as a producer, but not necessarily as the exclusive provider of management education.

In our very small school, Claremont Graduate School in California, there is a constant demand for us to take our courses to various businesses and nonprofits and help them organize offcampus educational programs. They also ask us to help develop nontraditional curricula that are focused and adapted to their needs. A city police department, for example, which is a large and complex organization, has needs that are very different from those of a for-profit business. We have to convince the department not to be too narrow in its programs; but on the other hand we have to adapt the courses to the needs and backgrounds of its people, which are totally different from those of the typical management graduate student.

Business education is not about research. So far, very little of real importance has come out of academia. All of the innovation has come from people like Alfred Sloan or Jack Welch.

What other significant changes do you foresee?
I suspect the next 30 years will be marked by great change in higher education. The past 50 years have been a period of tremendous growth. The school of commerce, which used to be the stepchild of the university, has blossomed into the largest single area of American academia. But the curriculum is basically the same as it was 65 years ago when I first came to this country and saw the first graduate business school at New York University.

After 50 years, maybe one has to rethink the curriculum. In the ’50s and ’60s at NYU, our student enrollment increased 40 percent each year. In such a situation, you don’t have much time to think; but with the period of most explosive growth behind us, I think we will have a little time for reflection. It’s time to develop a new curriculum that reflects the fact that management or business education is now core instead of a minor appendix, and that most people will make their living either working in or with organizations.

What should the new curriculum include?
One area of focus should be on basic literacy, which I mentioned earlier. It is essential that individuals be able to relate their specific skills and areas of expertise to the larger organization—and world—that surrounds them.

I see this need very clearly in my advanced graduate students. A large number of them come to us sponsored by their companies because they are high achievers and successful people, but the emphasis of their careers has been on specialization. As a result, they are overspecialized and don’t know anything about the rest of the universe. Here they are, 36 years old, and after ten years as accountants they are suddenly placed in a management position and realize that they don’t know a blessed thing about anything but tax accounting. What is lacking is the relation of themselves to the universe of knowledge. You have to make your career as a specialist; there is no other way. And yet you need to be able to relate yourself to the universe of knowledge and have basic literacy.

I’m always appalled at how little statistics my students or my clients know; and yet it is a core discipline, a vital area of knowledge. Economics, law, some history, some structure of society and world economy, psychology—these are core disciplines that we may teach a little. For whatever reason, though, the students aren’t able to connect to them.

Another missing element is something that we do not teach—what I call social skills. Unlike the physician or the lawyer, the executive works either in or with an organization. And they need social skills. Otherwise, they are simply not effective in an organization.

There is a great deal of emphasis on leadership today. I am all for it. In fact, I taught what I believe was the first course on leadership in an American university way back in 1952 or so. But what about “followership”? Most people—even the so-called leaders—spend some time being followers and equal partners. What about learning that in an organization one doesn’t begin by asking, “What do I want?” but by asking, “What is needed?” Above all, you cannot manage other people unless you have learned to manage yourself. And we do a very poor job of teaching writing, speaking, and listening, the communication tools on which all effectiveness in an organization depends.

How important is the research university?
As far as management education goes, it is totally unimportant. First, the management school is a professional school, not a Ph.D. mill, and in a professional school the emphasis is on teaching. You look at a law school, and you don’t ask how many papers are usually published. Your first question is what percentage of its students passes the bar exam the first time. In other words, how good is the teaching? You want enough people in your faculty to be intellectually active and to advance knowledge; but you also want them to advance the profession, a goal to which we sometimes pay little attention.

I think basing tenure decisions on peer-reviewed publications is nonsense. It has nothing to do with the business school. Business education is not about research. Sure, we want and need research; but consider the modern medical school, which began in the late 18th century. The emphasis in medical school is not on research and publication but on the ability to treat patients and make a difference in their lives. For its first 100 years, the medical school had no research. Its focus was on the practice of medicine instead. Until 1880, the only innovations in medicine came out of the practice of medicine.

The same is largely true in management. So far, very little of real importance has come out of academia. It has originated from either practitioners or people like myself who teach but consider themselves primarily to be practitioners. My emphasis has been on my consulting work, because that is where I learn. Only in the last few years, with Philip Kotler at Northwestern and Michael Porter at Harvard, have new things of importance come out of the business schools. Otherwise, in the 50 years since World War II most of the so-called research of the business schools has added nothing to the effective practice of management. All of the innovation has come from people like Alfred Sloan or Jack Welch.

Is this focus on research the greatest weakness of today’s management education?
It is a part of the larger problem, which is that there is not enough practical experience on the part of the faculty. As the number of management schools mushroomed in the last 50 years, the model on which they formed themselves was that of the college of arts and sciences. The business schools saw themselves as being looked down upon by arts and sciences and, therefore, tried to become academically respectable.

But arts and sciences at the research university are the wrong models for management education. Management is a practice, like medicine; and the model should have been the medical school, where the bulk of the teaching—especially the most important teaching of the M.D. in his or her residency—is performed by practitioners. The head of ophthalmology education, for example, is a practicing eye doctor who has a flourishing practice and spends two days a week supervising the residents. At Harvard, the students start seeing patients the day they enter medical school.

Unlike medicine, where you can bring sick patients into the classroom, business education does not allow you to bring an organization into the classroom. You can, however, bring experience in through your faculty. Business educators should be out as practitioners where the problems and results are. I’m thinking of one of my most effective colleagues, a wonderful teacher. His own field of expertise is quite narrow. But he works with a number of organizations, and he keeps on growing and keeps on learning. You have to work with an organization to be an effective educator. Doing so stimulates you and forces you to learn.

Fifty-five years ago, I turned down an invitation to join the Harvard faculty. There were many reasons for my decision, but a significant one was that the dean at the time had limited the consulting work of faculty members to one day a week. And I thought that was the worst thing to do. Yes, he had a problem, in that his faculty members spent too much time outside the school and neglected to teach. But he solved it the wrong way.

Should business schools seek accreditation?
Accreditation by itself is meaningless, and yet it is valuable. Accreditation does weed out the people who are trying to make a fast buck by selling degrees. It gives a potential student, and, even more important, his advisor in his company or school, some guidelines for choosing a management school. That advisor, whether he is in the company or the school or college, often has absolutely no way of judging. If the school is accredited, then the advisor knows it at least meets minimal standards. And that is very important, given the number of business schools in existence. Accreditation is a guide. It’s no guarantee that the results are good, but it is a guarantee that they can’t be too bad.

Accreditation also provides some protection to a potential employer. Here is a 24- or 26-year-old just out of school with little or no actual work experience for the employer to judge, but he has graduated from a school that at least has the approval of its peers. There is a price to pay when hiring decisions are based on such criteria—you end up hiring degrees rather than people. But you at least have some protection, some assurance of the type of education the applicant has received, and that is very helpful if you’re uninformed.

Accreditation is basically a brand, and brands do not tell you that the stuff is the best; they tell you it isn’t too bad. That’s an important function.

Christy Chapman, based in Winter Garden, Florida, is a free-lance writer.