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Management Challenges For The 21st Century

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					MANAGEMENT CHALLENGES FOR THE ST 21 CENTURY
The Central Management Issues of Tomorrow
PETER F. DRUCKER

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MAIN IDEA Business management is currently in the middle of a profound transitional period, and what is successful and accepted today is most likely to be entirely counter productive in the years ahead. Therefore, business managers need to adopt new paradigms and address new challenges arising from the new social, economic and demographic realities of the evolving marketplace. These new conditions can and must force managers to react differently -the policies, procedures and intellectual approaches of the past will no longer be viable. Instead of being frozen in a time warp and attempting to delay the inevitable, the management challenges of the present should be a clear call to action. Only those organizations that move boldly forward, working their way through the myriad of issues that arise, stand any chance of prospering in the future. Therefore, the management challenges of the present should be embraced as opportunities to move forward rather than ties to the past. If nothing else, it’s quite certain the status quo of the current business environment will not be maintained for very long. The future of society as a whole rests squarely on the ability of managers to react successfully to the challenges they currently face.

1. THE CHALLENGE OF NEW MANAGEMENT PARADIGMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2 Managed organizations (whether a business, a church, a university, etc.) lie at the very heart of modern society. The ability of these organizations to attain their own desired results drives society forward. Good management means to be responsible for everything that affects the performance of the organization -- both for the factors under direct control and for those totally beyond it. 2. THE CHALLENGE OF NEW BUSINESS STRATEGIES AND CERTAINTIES . . . . . . . . . . . . . . . . . . . . . . Page 3 Strategies convert the theories on which a business is founded into performance. Good 21st century business strategies will be based on five economic certainties: 1. The birthrate will continue to decline in the developed world. 2. Substantial shifts in the distribution of disposable income. 3. New definitions of good performance will emerge. 4. Global competitiveness will become a key issue. 5. A growing chasm between economic and political realities. 3. THE CHALLENGE TO LEAD CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4 A business organization cannot attempt to manage change. It can only attempt to lead the changes that occur so as to influence the ultimate outcome. Change leaders see change as an opportunity. Becoming a change leader requires: 1. A willingness to attempt to make the future. 2. Systematic methods to identify and anticipate changes. 3. Techniques for introducing internal and external changes. 4. Policies which balance change and continuity. 4. THE CHALLENGE OF THE AVAILABILITY OF MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5 For the 50-years the information revolution has already been running, most of the emphasis has been on collecting, storing, retrieving, transmitting and presenting data. In the 21st Century, there will be less emphasis on data and more on information -- how to redefine tasks using greater amounts of information and how to redefine the organizations carrying out that task. 5. THE CHALLENGE OF KNOWLEDGE WORKER PRODUCTIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6 The most important contribution of management in the 20th Century was to increase manual worker productivity in manufacturing by around fifty-fold. The key management challenge of the 21st Century is to bring about a similar increase in the productivity of knowledge workers. 6. THE CHALLENGE OF BEING ABLE TO MANAGE ONESELF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7 Knowledge workers will have a longer working life than manual laborers. In fact, most knowledge workers will have productive careers of 50 years or longer. Since the average life expectancy of a successful business is only about 30 years, knowledge workers must be prepared to have two or three careers -and to manage themselves rather than follow a pattern set down by an organization. Managing a career will require the knowledge worker to answer the questions: 1. What are my unique strengths? 2. Where do I add the most value? 3. What is my specific contribution? 4. How can I assume responsibility for my business relationship? 5. What will I do with the second half of my life?

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1. THE CHALLENGE OF NEW MANAGEMENT PARADIGMS Main Idea Managed organizations (whether a business, a church, a university, etc.) lie at the very heart of modern society. The ability of these organizations to attain their own desired results drives society forward. Good management means to be responsible for everything that affects the performance of the organization -- both for the factors under direct control and for those totally beyond it. Supporting Ideas A paradigm is a basic assumption about reality. Therefore, paradigms determine what is considered to be a "fact", and what can be disregarded with impunity. Prior to the 1980s, the following management paradigms held: 1. Only businesses are concerned with management philosophies and practices. 2. There is only one right way to manage people. 3. There is only one correct organizational structure. 4. Managers focus solely on internal issues. Since the 1980s, however, the paradigm, the underlying assumptions of management has changed considerably. The old paradigms have actually become obstacles, and they must be replaced. The new emerging paradigms of management are: 1. Management practice does not just apply to businesses. It is valuable in any and all organizations. At the beginning of the last century, almost everyone was engaged in economic activities to survive. In the next century, however, more and more people will move into nonprofit social activities. It is in this area that systematic, principle-based management can produce impressive results. 2. There is no "right" or "wrong" organizational structure. The object is to develop a structure that fits the task. History has shown there is no "right" or "wrong" way to structure an organization. Instead, the structure should be viewed simply as a tool for enhancing productivity -- and whatever enhances productivity and builds on strengths should be adopted. Developing that structure will require a willingness to seek out, to try and to test new ideas. 3. Managers want to lead people rather than manage them -and the only way to do that is to make use of the strengths and knowledge of each individual. Historically, the "Holy Grail" of management was there’s a right way to manage people -- and if you follow that, everything will work out fine. While this sounds enticing, it is totally at odds with reality. The focus should not be on managing people -- it should be centered on getting people to work together to produce more results than they could have by working alone. That requires leadership rather than management.

4. Management policy and strategy should focus exclusively on customer values and distribution of their disposable income rather than being technology- or market segment- based. In the last century, industries formed around new technologies to serve a well defined set of end users. In the next century, new technologies will emerge that will impact a broad number of industries -- and thus significantly changing the target markets. In the new environment, customer values and customer preferences (particularly in relation to the allocation of disposable income) become far more decisive factors than technologies or customer demographics. 5. The scope of management is not limited solely to the organization itself, but should address the entire process by which added value is delivered to to consumers. From that broader perspective, many operational issues, including the possibility of strategic alliances and other synergy adding activities, come under the direct attention of managers rather than being left to chance. 6. National boundaries are now considered as important logistical constraints that must be managed rather than political boundaries the organization must be structured around. Few companies now organize themselves in "domestic" and "international" units. More and more companies organize themselves as transnationals, where individual tasks are organized company wide rather than country wide. 7. There is now a blurring of the lines between management and entrepreneurship. Most entrepreneurs realize without management skills, they will not succeed. Similarly, most managers know that unless they innovate, they will be overtaken by competitors. Thus, instead of having managers that focus on internal issues, most organizations expect their current generation of managers to concern themselves with how best to use the resources available to achieve external results in the broader marketplace. And, the new paradigm is to hold managers directly responsible for how the organization performs in the marketplace. Key Thoughts ‘‘Basic assumptions about reality are the paradigms of a social science, such as management. They are usually held subconsciously by the scholars, the writers, the teachers, the practitioners in the field. Yet those assumptions largely determine what the discipline assumes to be reality. For a social discipline such as management, the assumptions are actually a good deal more important than are the paradigms for a natural science. The paradigm -- that is, the prevailing general theory -- has no impact on the natural universe. A social universe has no "natural laws". It is thus subject to continuous change. And this means that assumptions that were valid yesterday can become invalid and, indeed, totally misleading in no time at all. What matters most in a social discipline such as management are therefore the basic assumptions. And a change in the basic assumptions matters even more.’’ -- Peter Drucker

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2. THE CHALLENGE OF NEW BUSINESS STRATEGIES AND CERTAINTIES Main Idea Strategies convert the theories on which a business is founded into performance. Good 21st century business strategies will be based on five economic certainties: 1. The birthrate will continue to decline in the developed world. 2. Substantial shifts in the distribution of disposable income. 3. New definitions of good performance will emerge. 4. Global competitiveness will become a key issue. 5. A growing chasm between economic and political realities. Supporting Ideas Organizations with effective strategies can be optimistic because a sound strategy will enable the organization to achieve desired results, even if the external or market conditions are unpredictable. In essence, strategy is the ultimate test of business theory. A sound 21st century strategy will be built around five key principles which are certainties: 1. The birthrate will continue to decline in the developed world. As a result, the labor pool will shrink, the median age of the marketplace will increase and there will be enormous pressure to rework immigration laws between countries. As a result, government instability will increase and radical changes in retirement practices will occur. Any company which develops ways to productively utilize knowledge workers past the historical retirement age will have a tremendous competitive advantage. 2. Substantial shifts in the distribution of disposable income. Instead of focusing on market share, organizations should analyze what share of disposable income is being spent on the products and services they sell -- and whether that share is increasing or decreasing. For growth industries, innovation and taking risks needs to be stressed. For mature industries, flexibility and ability to change rapidly are critical. For mature industries, cost reductions and improvements in quality and service take center stage. Effective organizations will base their operational goals on shifts in the way disposable income is allocated to their industry. 3. New definitions of good performance will emerge. In the United States, pension funds now own about 40- to 60-percent of all publicly listed corporations. These funds are focused entirely on the future revenue stream that will become available -- on their income as owners. Therefore, the long-term welfare of the business enterprise will be far more important than short-term returns, the welfare of the workers or any other factors. The criteria by which corporate performance is evaluated will be changed dramatically and irrevocably. 4. Global competitiveness will become a key issue. Business organizations can no longer afford to evaluate themselves solely on the basis of comparative performance against all other domestic competitors. Instead, organizations will have to measure themselves against the leaders in that industry anywhere in the world. Global

competitiveness will not just be a nice goal to think about -it will become a necessity. This has the flow-on effect that companies will no longer be able to build factories to exploit cheap labor or other benefits. Since the cost of labor now makes up a declining proportion of total costs, low productivity by comparison with similar manufacturing operations anywhere in the world cannot be adequately offset. To survive, companies and other organizations will have to measure their performance by worldwide standards rather than by local standards if they are to succeed. 5. A growing chasm between economic and political realities. Managers have to live and perform in an environment defined by three overlapping constituencies:

Global Economy

National or Regional Economy

Political Realities

To make progress, business managers should avoid initiatives that are politically driven or based on national or regional economies. Instead, the organization should keep its focus on the issue of global competitiveness -- as ultimately that is the only criteria that will matter over the longer term. In the near-term, however, managers should be realistic about currency fluctuations. These exchange rates will become increasingly volatile as countries manipulate them for political ends. The ability to manage currency exposure will become very important. Key Thoughts ‘‘These realities do not tell an institution what to do, let alone how to do it. They raise the questions to which strategy has to find the answers for the individual institution. And there are questions that strategy so far has rarely, if ever, considered. But unless an institution starts out by considering these new realities, it will not have a strategy. It will not be prepared for the challenges that the next few years, if not the next few decades, are certain to raise. Unless these challenges can be met successfully, no enterprise can expect to succeed, let alone to prosper, in a period of turbulence, of structural change and of economic, social, political and technological transformation.’’ -- Peter Drucker ‘‘Failure of the strategy to produce the expected results is usually the first serious indication that the Theory of Business needs to be thought through again. And unexpected successes are often also the first indications that the Theory of Business needs to be rethought. Indeed, what is an "opportunity" can only be decided if there is a strategy.’’ -- Peter Drucker

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3. THE CHALLENGE TO LEAD CHANGE Main Idea A business organization cannot attempt to manage change. It can only attempt to lead the changes that occur so as to influence the ultimate outcome. Change leaders see change as an opportunity. Becoming a change leader requires: 1. A willingness to attempt to make the future. 2. Systematic methods to identify and anticipate changes. 3. Techniques for introducing internal and external changes. 4. Policies which balance change and continuity. Supporting Ideas Looking at the requirements to become a change leader: 1. A willingness to attempt to make the future. This requires a management attitude to move company resources away from what worked yesterday towards what might work tomorrow. Effectively, this is the systematic and structured abandonment of every product, service, distribution channel and customer when they no longer make a meaningful contribution to current profits. To compliment the structured abandonment policy, a change leader also needs to have an continuous improvement plan in place -- by which all of the organization’s processes are required to improve at a realistic, sustainable and achievable level year by year. Change leaders also need to focus on exploiting new opportunities vigorously. When new and innovative services, products or processes have been developed, the change leader is totally committed to exploiting those opportunities to the fullest -- with the most able and best performing people in the company being responsible. 2. Systematic methods to identify and anticipate changes. Change leaders need to have in place a systematic policy for innovation. At regular intervals, the company must identify all "windows of opportunity" for the organization to apply innovation to its products, services or processes. In short, the organization must have a willingness to create change. Opportunities to change may arise by examining: Unexpected successes and failures Incongruities in processes or client behavior Enhancements in process technologies Industry or market changes Demographic trends The availability of new information The traps which should be avoided in this process include: Persuing potential innovations that are not aligned with the realities of the marketplace and the broader business community. Confusing "novelty" with "innovation". A novelty creates only amusement. A genuine innovation, by contrast, adds value that customers will acknowledge -- and pay for. Confusing "action" with "direction" -- that is, doing something just to be different rather than doing something because a more innovative option is available.

3. Techniques for introducing internal and external changes. For almost every breakthrough product or service, markets and applications emerge in entirely different fields from those originally envisaged. Change leaders recognize this, and are therefore willing to run substantial test programs to identify how the consumer will actually react to and use the new products and services. In practical terms, change leaders need two separate budgets: An operating budget for the expenditure required to maintain the existing business enterprise. A future budget for expenditure of new items designed to be exploited by the organization in the future. Without an ongoing commitment to funding the new changes, the effort is unlikely to produce results of any significance. Ideally, the future budget will be around 10- to 12-percent of the organization’s total expenditure, and will be maintained in both good times and bad rather than varied up and down as part of the business revenue cycle. 4. Policies which balance change and continuity. There is a natural bias in any organization towards continuity. Change leaders, however, develop internal and external systems that provide continuity where it is needed (particularly with staff) offset by a willingness to try new systems. Achieving this balance is exceptionally difficult in practice. High levels of communication are required to keep everyone fully informed. The organization culture must see change as a positive and desired objective. Compensation arrangements, recognition programs and conditional reward programs must be adjusted to reflect the changes taking place. Key Thoughts ‘‘To try to make the future is highly risky. It is less risky, however, than not to try to make it. A goodly proportion of those attempting to do so will surely not succeed. But, predictably, no one else will.’’ -- Peter Drucker ‘‘In a period of upheavals such as we are living in, change is the norm. To be sure, it is painful and risky, and above all it requires a great deal of very hard work. But unless it is seen as the task of the organization to lead change, the organization -- whether business, university, hospital and so on -- will not survive. In a period of rapid structural change, the only ones who survive are the Change leaders.’’ -- Peter Drucker ‘‘One thing is certain for developed countries -- and probably for the entire world. We face long years of profound changes. The changes are not primarily economic changes. They are not even primarily technological changes. They are changes in demographics, in society, in philosophy and, above all, in worldview. It can be confidently predicted that a large number of today’s leaders in all areas, whether business, education or health care, are unlikely still to be around in thirty years hence, and certainly not in their present form. But to try and anticipate the changes is equally likely to be unsuccessful. These changes are not predictable.’’ -- Peter Drucker

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4. THE CHALLENGE OF THE AVAILABILITY OF MORE INFORMATION Main Idea For the 50-years the information revolution has already been running, most of the emphasis has been on collecting, storing, retrieving, transmitting and presenting data. In the 21st Century, there will be less emphasis on data and more on information -- how to redefine tasks using greater amounts of information and how to redefine the organizations carrying out that task. Supporting Ideas When computers were first introduced in 1950, most people expected its main users to be universities and the military. Some people forecast it may have some application in clerical chores for businesses, but nobody back then identified the one area in which computers have had their greatest impact -- in the field of operational tasks. By now, computers have completely revolutionized how people perform their duties. In the next century, computer technology will move forwards to helping managers make better decisions in the creation of value and wealth. That is, with better information, the management of the organization itself will be enhanced. The most valuable information, from a management perspective, is not what’s happening within the organization. What’s happening outside in the broader marketplace is of far greater management importance. That’s the raw material from which new products, new services and new processes that create added value will be developed. The availability of electronic technology to deliver, store and analyze information more effectively than before means that organizations can learn what information they need and how to get it. Once that happens on a broader scale, organizations will begin to use information as a key resource. A manager’s information system, to be worthwhile, will have these traits: 1. A system for organizing and storing all other information. This can take the form of key events, identifying exceptions to expected outcomes, setting thresholds to differentiate between background noise and something significant, unusual events or reports and so forth. The key is that the manager needs to organize the information in a way that makes sense from their perspective -- not from the viewpoint of the information technology specialist who sets up their system, or the company’s Chief Information Officer. 2. A consistent way to eliminate data that is not relevant. 3. A means by which outside information can be sourced that is of the same quality the manager would gather by going there in person. In fact, the manager’s information system will also be equally applicable to the needs of all knowledge workers within the organization. Each of them will need to follow a similar route if they are to be as effective as possible in the organization.

From an organization’s perspective, what type of information adds value? 1. The ability to calculate costs on an activity-basis rather than a cost-basis. Cost accounting measures what it costs to do something -that is, the sum total cost of all the individual component parts. Activity-based accounting goes further. In addition to the actual costs, it also records the costs of not doing -- for example, the cost of machine down time, the cost of waiting for necessary parts, the cost of inventory waiting to be shipped, the opportunity cost of not pursuing some other commercial activity. Activity-based costing thus gives better information, which can then be used to manage results rather than simply trying to control costs. 2. Calculation of the entire value chain. To compete successfully, companies must understand where costs are incurred in the entire value chain -- not only within their own organization but elsewhere in the chain as well. This allows organizations to sustain their competitive position -- since no new market entrant will be able to come in and exploit a cost advantage nobody else is aware of. It also allows outsourcing arrangements, alliances and joint ventures to be entered into. 3. Information for wealth creation. Business enterprises are paid to create wealth, not solely to control costs. To do that effectively, four types of management information is required: 1. Foundation Information Cash-flow, liquidity, financial ratios -- the established set of financial diagnostic measurements. 2. Productivity Information Measures such as economic value added, benchmarking, productivity of manual labor, service work and knowledge-based work. 3. Competence Information Performance measures of how effectively the organization is expanding its core competencies through innovation, ongoing training, and so on. 4. Resource Allocation Information How the organization is applying its key resources -- usually capital and people. 4. Competitive market intelligence. An organization which gathers the four types of wealth creation information can use them to direct their tactics. The real key, however, is to develop a system to gather this type of information about the broader environment -- markets, customers, non-customers, technology, finance and the world environment. Armed with that type of market intelligence, an organization can then develop effective strategies -- which, in turn, will then be turned into effective tactics within the organization.

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5. THE CHALLENGE OF KNOWLEDGE WORKER PRODUCTIVITY Main Idea The most important contribution of management in the 20th Century was to increase manual worker productivity in manufacturing by around fifty-fold. The key management challenge of the 21st Century is to bring about a similar increase in the productivity of knowledge workers. Supporting Ideas All the economic and social gains of the 20th century, including the emergence of the "developed" countries, were made squarely on the back of increases in the productivity of manual workers as newer and better tools became available. (The distinction still applies today, in fact -- the underdeveloped countries are those that have not yet made their manual workers productive). Comparable work on increasing the productivity of knowledge workers is just getting underway. Knowledge worker productivity is determined by six factors: 1. Flexibility and some ambiguity. In knowledge work, the key questions are usually: What should the task be? How are you going to contribute? What impediments can be eliminated? In manual work, the key question is usually: How should the work be done? For most manual work, the outcome had a direct bearing on the best methods to use. In knowledge work, obtaining quality results is the objective, and how that is achieved is up to the worker, since there will usually be a number of alternatives available. 2. Responsibility. Knowledge workers have to manage themselves, and accept responsibility for their own productivity. That requires autonomy and accountability. 3. Innovation. Knowledge work requires ongoing innovation to be incorporated. The innovation process for knowledge work is more dynamic and constant, than is ever realized for manual labor. 4. Continuous learning and teaching. Knowledge workers must continually be upgrading their skills and learning new techniques. They also must have the means to teach those new skills to others, including their coworkers, if everyone is to stay synchronized. 5. A focus on quality. Manual labor focused predominantly on quantity. That’s a moot point for knowledge work, where quality of the result is far more important than the quantity of results. 6. An asset rather than a cost. Manual workers have always been viewed (economically) as costs of production -- which should be controlled and ultimately reduced wherever and whenever possible. In essence, any manual laborer is equivalent to any other who has been trained to the same degree.

Knowledge workers, by contrast, own what they use on behalf of their organization. The knowledge they have is part of the company’s assets -- and it’s totally portable. If the knowledge worker goes to work somewhere else, those assets go with them. Therefore, knowledge workers are an asset than should be managed and preserved, rather than a cost that should be minimized. Increasingly, organizations will need knowledge workers more than knowledge workers will need the organization. There is also a category of worker who does part manual work and part knowledge work. These people are "technologists". For example, a surgeon is actually a technologist -- he or she uses specialist knowledge of the highest possible quality to plan an operation which is then carried out. Technologists will most likely be the largest group of knowledge workers in the future. They are essentially the 21st century successors to skilled workers and craftsmen. Countries that focus on training technologists can gain and sustain a meaningful competitive advantage over those countries which have a culture that physical labor must be menial labor. To make a manual worker productive, all that has to be done is: 1. Provide them with the right tools. 2. Tell, or teach, exactly what has to be done. 3. Let them go to it. Making a knowledge worker productive usually requires: 1. A change in focus from telling to learning. 2. An ability to try a pilot program out first. 3. Enough time and patience to work through all the issues. 4. A scale up from the pilot to the entire organization. Since the developed countries will have fewer people entering the workforce in the coming century than the undeveloped countries will have, knowledge workers will need to increase their productivity at least as quickly as the manual workers increase theirs. Otherwise, the emerging nations will quickly overtake their more developed neighbors. With the increase in the importance of knowledge workers to the overall operation of the organization, new corporate governance issues will arise. In essence, instead of satisfying the shareholders, it will also become desirable for companies to satisfy the requirements of the knowledge workers on whom the company’s successes will be built. The entirely logical result of this is that the sustainable competitive advantage of organizations in the 21st century will be built squarely on their ability to attract and retain the best knowledge workers. Key Thoughts ‘‘Knowledge worker productivity is the biggest of the 21st century management challenges. In the developed countries it is their first survival requirement. In no other way can the developed countries hope to maintain themselves, let alone to maintain their leadership and their standards of living.’’ -- Peter Drucker ‘‘The only possible advantage developed countries can hope to have is in the supply of people prepared, educated and trained for knowledge work. There, for another fifty years, the developed countries can expect to have substantial advantages, both in quality and in quantity. But whether this advantage will translate into performance depends on the ability of the developed countries -- and of every industry in it, of every company in it, of

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every institution in it -- to raise the productivity of the knowledge worker and to raise it as fast as the developed countries, in the last hundred years, have raised the productivity of the manual worker.’’ -- Peter Drucker ‘‘What does "capitalism" mean when knowledge governs -rather than money? And what do "free markets" mean when knowledge workers -- and no one else can "own" knowledge -are the true assets? Knowledge workers can neither be bought or sold. They do not come with a merger or acquisition. In fact, though the greatest "value" they have no "market value" -- that means, of course, that they are not an "asset" in any sense of the term. These questions go far beyond the scope of this book -- let alone far beyond the author’s competence. But it is certain that the emergence of the knowledge worker and of the knowledge worker’s productivity as key questions will, within a few decades, bring about fundamental changes in the very structure and nature of the economic system.’’ -- Peter Drucker ‘‘This is a call for action. These challenges are not arising out of today. They are different. In most cases they are at odds and incompatible with what is accepted and successful today. We live in a period of profound transition -- and the changes are more radical perhaps than even those that ushered in the "Second Industrial Revolution" of the middle of the 19th century, or the structural changes triggered by the Great Depression and the Second World War. Reading this book will upset and disturb a good many people, as writing it disturbed me. For in many cases, the new realities and their demands require a reversal of policies that have worked well for the last century and, even more, for a change in the mindset of organizations as well as individuals.’’ -- Peter Drucker ‘‘The issues this book discusses, the new social, demographic and economic realities, are not issues that government can successfully deal with. They are issues that will have profound impact on politics; but they are not political issues. They are not issues the free market can deal with. They are also not issues of economic theory or even of economic policy. They are issues that only management and the individual can tackle and resolve. They are surely going to be debated in the domestic politics of every developed and every emerging country. But their resolution will have to take place within the individual organization and will have to be worked out by the individual organization’s management -- and by every single individual knowledge worker (and especially by every single executive) within the organization.’’ -- Peter Drucker ‘‘The most valuable assets of a 20th century company were its production equipment. The most valuable asset of a 21st century institution, whether business or nonbusiness, will be its knowledge workers and their productivity.’’ -- Peter Drucker ‘‘Economic development outside the western world since 1950 has largely been based on copying what the United States did in World War II, that is, on applying scientific management to making the manual worker productive.’’ -- Peter Drucker

6. THE CHALLENGE OF BEING ABLE TO MANAGE ONESELF Main Idea Knowledge workers will have a longer working life than manual laborers. In fact, most knowledge workers will have productive careers of 50 years or longer. Since the average life expectancy of a successful business is only about 30 years, knowledge workers must be prepared to have two or three careers -- and to manage themselves rather than follow a pattern set down by an organization. Managing a career will require the knowledge worker to answer the questions: 1. What are my unique strengths? 2. Where do I add the most value? 3. What is my specific contribution? 4. How can I assume responsibility for my business relationship? 5. What will I do with the second half of my life? Supporting Ideas The five key questions for career management are: 1. What are my unique strengths? More people know intuitively what they’re not good at than take the time to analyze where their strengths lie. Yet it is only by performing in areas of strength that good performance can be built. Historically, people tended to go into the same line of work as their parents or close associates. In the next century, however, there are far more choices, and people will be far more likely to go into professions that match their strengths. To find your strengths, use a feedback analysis: Whenever you face an important decision, write down what you expect to happen as a consequence of your choice. Then review it 12 months later. Within two or three years, your strengths will become apparent, as will your weaknesses. You can use a feedback analysis to: 1. Concentrate on your strengths -- to produce more. 2. Work on improving skills and acquiring knowledge. 3. Avoid the arrogance of ignorance in specific areas. 4. Remedy bad habits. 5. Avoid areas where failure is more likely. 6. Identify high competence areas that should be built on. The feedback analysis is also useful in evaluating how you like to get things done -- and how your personality traits are reflected in your work habits. How you absorb new ideas and information -- readers absorb information most effectively in writing, while listeners take in most from audible presentations. How you learn -- by reading, by writing things down, by speaking in front of a group, etc. Whether you work best in a group or by yourself. Whether you work best as a leader or a subordinate. The most successful people put themselves in situations which match their personalities as closely as possible. This also extends to personal value systems -- high achievers gravitate to organizations that share similar value systems and ethics.

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2. Where do I add the most value? To decide this, many people follow a process of elimination -- they start by identifying where they don’t belong and keep on doing that until they come to a option which aligns with their strengths, personality and value system. By and large, most successful careers are not planned beforehand. More frequently, people prepare so they can successfully exploit any opportunities they come across that match their personalities. 3. What is my specific contribution? This is the link between knowledge and results -- action. A smart person trying to determine what contribution they can make will look for a balance between the answers to these questions: 1. ‘‘What does the situation require?’’ 2. ‘‘How can I make the greatest contribution?’’ 3. ‘‘What results have to be achieved to make a difference?’’ This will then logically lead to action conclusions: specifics about what to do, where to start, what goals to set and when those goals should be achievable by. 4. How can I assume responsibility? To manage oneself requires taking responsibility to build business associations that add value to the entire organization. That requires: Treating other people within the organization as individuals, and working with them in ways they find most effective rather than expecting them to adapt to you. That way, you can make use of their strengths, their ways of working and their values. Becoming a good communicator. If you can get other people to understand what you’re trying to do, why you’re trying to do that and what results to expect, they’re far more likely to be in a position to contribute meaningfully than they otherwise would. Organizations are built on trust rather than force. That requires people to understand understand each other if they are to trust each other. Taking responsibility for building sound relationships and alliances with other workers thus becomes of great importance. 5. What will I do with the second half of my life? Manual workers become physically and mentally exhausted by the end of their work careers. To them, a retirement engaged in leisure activities is highly desirable -- a Nirvana of sorts. Knowledge workers, by contrast, are still at this same point physically able to continue. The challenge lies in providing the mental stimulus to try something different, and to grow in a different direction. Therefore, increasingly, knowledge workers in the 21st century will embark on second careers when their first careers become too routine or repetitive. The second career choices are: 1. Move from one organization to another. For example, instead of being the financial controller of a mid size corporation, the knowledge worker might become the treasurer of a hospital or nonprofit group. Or they might even launch out into an entirely new field within the new organization. The motivator here is the challenge of trying to do something different, to learn and apply some new skills. 2. Create a parallel career. These knowledge workers continue working in their original

careers, but scale back their time commitments. In their spare time, they then perform similar roles on a part-time basis with other organizations, or start consulting. These people are motivated by the chance to make a difference in the lives of other people outside their normal circle of influence. 3. The ‘‘social entrepreneurs’’. While still fulfilling their main business responsibilities, these people start other organizations dedicated to social challenges they are aware of. These people love the work they’re doing but no longer find it challenging -- therefore, they challenge themselves to make the world a better place than they found it. The significant point is that knowledge workers need to begin planning their second careers long before they reach that point. They can then begin doing the groundwork, so when the time is right, the second career launch can go smoothly and effortlessly. There is another benefit to the second career approach. If a serious setback occurs in the knowledge worker’s life, having a second career option available may be very smart. It might provide worthwhile options right at the moment of greatest need. Key Thoughts ‘‘The very great achievers, a Napoleon, a Leonardo da Vinci, a Mozart, have always managed themselves. This in large measure made them great achievers. But they were the rarest of exceptions. And they were so unusual, both in their talents and in their achievements, as to be considered outside the boundaries of normal human existence. Now even people of modest endowments, that is, average mediocrities, will have to learn to manage themselves.’’ -- Peter Drucker ‘‘Knowing where one belongs makes ordinary people -hardworking, competent but mediocre otherwise -- into outstanding performers.’’ -- Peter Drucker ‘‘Managing oneself is a revolution in human affairs. It requires new and unprecedented things from the individual, and especially from the knowledge worker. For in effect it demands that each knowledge worker think and behave as a Chief Executive Officer. It also requires an almost 180-degree change in the knowledge worker’s thoughts and actions from what most of us -- even of the younger generation -- still take for granted as the way to think and act.’’ -- Peter Drucker ‘‘The changes discussed in this book go way beyond management. They go way beyond the individual and his or her career. They actually deal with the future of society.’’ -- Peter Drucker

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