The Frontiers of Management:

Author : Peter F Drucker

The changed World economy:

With in last ten or fifteen years three fundamental changes has been occurred.

1. The primary –products economy has come “uncoupled” from the industrial
economy. Capital movement rather than trade in goods and service have become
the engines and driving force of the world economy.

2. To increase manufacturing production in developed countries has actually come

to mean decreasing blue-collar employment. As a result labor cost are becoming
less important as a “ comparative cost “ in competition.

3. The third major change is the emergence of the symbol economy –capital
movements exchange rates and credit flow as the flywheel of the world economy
in the place of the real economy.
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Japanese way of doing business:

You don’t do business in Japan. Business is not an “ activity”; it is a “commitment“

The purchasing agent orders goods to be sure. But he commits himself to a supplier,
And to a relationship that is presumed to be permanent or at least long –lasting. Until
the newcomers proves itself committed, the purchasing agent will not buy it wares no
matter how good their quality or how cheap there price.
IBM, Citibank, Coca-Cola and Swiss Chocolates are the western businesses that lead
market in Japan.

Picking People the basic rules:

1. Looking for a number of a potentially qualified people.

2. What are the strength each posse and assign the job towards their strength.
For instance a person may be excellent qualified for the technical aspects of a
job, but if the assignment requires above all the ability to build a team and this
ability is lacking then the fit is not right.
3. One executive judgment alone is worthless, because all of us have first
impressions, prejudices, likes and dislikes.
Twilight of the first line supervisor:

Automation is one of the forces drastically altering the supervisor’s role. In an

automated process, workers cannot be supervised; each worker has to be pretty much
in control of the process has to understand it, know how to program the machines he
is responsible for the reset them. In an automated process the worker switches from
being an operator to being a programmer. Instead of a supervisor he needs and
assistant. He needs information and continuous training. He needs some one to make
sure that parts and supplies arrive on time and in proper sequence. He needs
coordination with other parts of the process.

Jobs and growing mismatch:

Changes in jobs and their content are also creating mismatches in management.
Technology is one factor. We know how to train people to do technology such as
engineering or chemistry, but we do not know how to endow managers with
technology and it dynamics, the opportunities its offers and it impact on product and
process markets, organization structures and people.
Today even a medium sized company have an environmental specialist one assistant
treasurer who does nothing but manage cash and liquidity and tries to protect the
company against foreign-exchange losses and another one who watches over costly
benefits programs.

Getting Control of staff work.

Since the 1950’s at many major manufacturing companies staff employment has
grown five to ten times as fast as the number of “ operating “ people in production
engineering, accounting, research, sales and customer service. The unchecked growth
and excessive power of service staff is considered by practically all our foreign critics
to be a serious weakness of industry and major cause of its poor performance.

The information based organizations:

The information-based structure is flat with far fewer levels of management than
conventional ones require. When a large multinational manufacturer restructured
itself around information and its flow it found that seven of its twelve levels of
management could be cut out.
The information based structure makes irrelevant the famous principle of the span of
control, according to which the number of subordinates who can report to one
superior is strictly limited with five or six being the upper limit. Its place is taken by a
new principle ---I call it as span of communications: the number of people reporting
to take responsibility for their own communications and relationships, upward,
 sideways and downward control. “ Control “ it turns out is the ability to obtain
information. Information provides that in depth, and with the greater speed and
accuracy than reporting to the boss can possibly do.
The information based organization does not actually require advanced “ information
technology”. All it requires is willingness to ask, who requires what information
when and where? With nothing more hi tech than the quill pen,

Union Flexibility:

The old delusion persists that “ capitalists” pay wages out of the “ profits “—despite
the fact that wages and salaries in a developed economy account for some thing likes
85 percent of revenues and profits for at most 5 to 6 percent. Most labor still see the
work force as homogeneous and as composed of adult males who work full time and
who are the sole breadwinners in their families. Finally that the value of the benefit is
not determined by how much it does for the beneficiary to the employee, but by how
much it cost the employer; if a given benefit costs the employer more it is
automatically seen as a victory of Union. These assumptions were perhaps defensible
thirty years ago. First the large part of the wage needs to flexible instead of being
fixed: It needs to be geared to performance, to profitability and productivity.

The Five Rules of Successful Acquisitions:

There are five simple rules for successful acquisitions:

1. An acquisition will succeed only if the acquiring company thinks trough what it
can contribute to the business it is buying not what the acquired company will
contribute to the acquirer. The acquiring company may contribute in
management, technology, or strength in distributions.
2. Successful diversification by acquisition like all successful diversification
requires a common core of unity. In social science jargon, there has to be a
common culture or at least a cultural affinity.
3. No acquisitions work unless the people in the acquiring company respect the
product the market and customers of the company they acquire.
4. Within a year or so the acquiring company must be able to provide top
management for the company it acquires.
5. Within the first five year of the merger, it is important that a large number of
people in the management groups of both companies receive substantial
promotions across the lines.

The innovative organization:

The innovative company understands the innovation starts with and ideas.
Executives in innovative organizations demand that people with the ideas think
through the work need to turn an idea into a product, a process, a business or a
technology. These executives know that it is as difficult and risky to convert a small
idea into a successful reality as it to make a major innovation. They aim at innovation
a new business. It means creation of new value and new satisfaction for the customer.