The Invention of Management and the First Corporations

Before meeting Drucker, I had always wondered about how management and the modern day corporation was born. Without prompting, “Professor Drucker” launched into a discussion of just that shortly after my arrival that December, Monday morning.

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 management and leadership ideas and 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 Drucker from telling me story after story from his life. Because we never got to the items that we agreed to discuss in advance, I thought that I did 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 he 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 visa vi other GE leaders). 

The discussion of the birth of modern corporations came about as a result of Drucker’s effort to put 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.    

He 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 U.S., Japan and the United Kingdom. France did not develop as quickly. 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,” continued Drucker.  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 of these. “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 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 Drucker, there was no way to educate managers in the ways of the corporation. That’s what Druckers’ books accomplished. By establishing management as a discipline, he provided the much-needed tools that could transform “non-naturals,” into competent, practicing managers.

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.





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