TIME The Drucker Difference

Getting Past the Great Ideological Divide in Business Today

In 1946, as unionized workers in America’s steel mills, coalfields, rail yards, auto plants and electrical equipment factories crippled the economy by launching a wave of strikes, Peter Drucker urged the two sides in the great struggle to find some way to get past their deep differences.

“What we need is not an ideology,” he wrote, “but a science—a new science of industrial peace.”

The same might well be said of the defining divide in today’s business world: those who hold that “maximizing shareholder value” is a corporation’s primary mission versus those who believe that companies have an obligation to provide benefit to a multitude of stakeholders.

That this is a clash being waged by individuals who cling to their own dogma and tend to talk right past one another is underscored by a study being released today from the Aspen Institute’s Business and Society Program.

“Often,” says Miguel Padró, an Aspen program manager, “there’s more ideology than pure logic at play here.”

To better understand this dynamic—as well as its myriad nuances, which suggest where common ground may lie—Aspen commissioned the Keller Fay Group, a marketing research firm, to conduct 28 one-hour interviews with corporate executives, investors and scholars about the purpose of the corporation. The study doesn’t identify who said what, but it does list the participants, which included folks from PepsiCo, Kroger, Eli Lilly, the Ontario Teachers’ Pension Plan, BlackRock, Generation Investment Management, Northwestern University, MIT and Harvard.

Many of the views expressed were stark. “Societies that don’t have shareholder value as a goal never succeed,” said one of the interviewees, who added that “the old Soviet Union . . . was the ultimate stakeholder society.” From the other end of the spectrum came this: “Corporations serve society rather than the other way around. . . . To the extent there’s a single mission, it would be a social one. But really, when you unpack that a little bit, you’re talking about a lot of different missions that affect the wellbeing of a range of stakeholders.”

Interestingly, Drucker had problems with each of these positions, at least in their most extreme forms. It was in the 1950s, he noted, that General Electric CEO Ralph Cordiner and some of his peers began to preach “that senior executives were responsible for managing the enterprise ‘in the best-balanced interest of shareholders, customers, employees, suppliers, and plant community cities.’ That is, what we now call stakeholders.”

The trouble was that “Cordiner’s generation and its executive successors did not define what performance and results produce the best balance, nor did they develop any kind of accountability,” Drucker explained. At the same time, he wrote, “boards of directors . . . became increasingly impotent and increasingly rubber stamps for a company’s top management.” And any organization is bound to deteriorate “into mediocrity and malperformance if it is not clearly accountable for results and not clearly accountable to someone.”

By the mid-1970s, this failure had spurred the rise of a new philosophy: putting shareholders first. “It sounds much less noble than Cordiner’s assertion of the ‘best-balanced interest,’ but it also sounds much more realistic,” Drucker observed in a 1991 essay for Harvard Business Review. Yet this, too, had a fatal flaw: “For most people,” Drucker pointed out, “‘maximizing shareholder value’ means a higher share price within six months or a year—certainly not much longer.”

As I’ve written, this has led to all kinds of misguided corporate decisions that, while enabling executive pay to bloat, have done serious damage to both company and society in the long run.

Which brings us to where we are today: one camp pushing a model that didn’t work terribly well decades ago, and the other pushing a model that has degenerated into what McKinsey & Co.’s Dominic Barton disdainfully describes as “quarterly capitalism.”

This would be utterly depressing, except that the Aspen study also contains some glimmers of promise. Notably, more than half of the respondents either strongly or somewhat strongly agreed that the primary purpose of the corporation is to serve customers’ interests—an idea that has been advanced by the University of Toronto’s Roger Martin as ultimately the best means to please shareholders themselves.

“To create shareholder value,” Martin has written, “you should instead aim to maximize customer satisfaction. In other words—and nobody should be surprised by this—Peter Drucker had it right when he said that the primary purpose of a business is to acquire and keep customers.”

Beyond that, according to Aspen, greater accountability for corporate management was “a central concern” among those interviewed, while “long-term value creation appears to be a unifying goal.” Indeed, as Keller Fay put it, “this may be the most surprising—and gratifying—outcome of the study: Some of the most vehement criticisms of short-term decision making emanated from the enthusiastic shareholder-value advocates.”

Can we really shift to a customer-oriented, long-term-focused business culture undergirded by adequate accountability? Not easily. But launching an in-depth dialogue on the topic, as Aspen has done, is an important step toward the way that Drucker wanted companies to behave: “Unlike Cordiner, they do not ‘balance’ anything,” he wrote. “They maximize.” But they do not attempt to maximize shareholder value. Instead, “they maximize the wealth-producing capacity of the enterprise.”

“It is this objective,” Drucker concluded, “that integrates short-term and long-term results and that ties the operational dimensions of business performance—market standing, innovation, productivity and people and their development—with financial needs and financial results.”

All of which seems a lot more like science than ideology to me.

****
A final word: “Everything human beings do,” Drucker wrote, “obsoletes sooner or later.” It is with this in mind, and with bittersweet feelings, that this marks my last “Drucker Difference” column. After more than six and a half years of tying Peter Drucker’s timeless insights to current events—first at BusinessWeek, then at Forbes and now at Time—the moment has come to turn my attention to other priorities and other writing. But don’t be fooled: This shouldn’t be read as a sign that Drucker’s wisdom is no longer relevant. Quite the contrary. So, please, take part in the continuing conversation @DruckerInst. I look forward to seeing you there.

TIME The Drucker Difference

Some Words of Wisdom From Peter Drucker to My Daughter

Dear Emma,

Next week you will graduate from college, a milestone that calls for a little fatherly advice—advice, to be precise, from the “father of modern management.”

So here, with an assist from your own dad, are half a dozen insights courtesy of Peter Drucker, a man who earned his degree more than 80 years ago and then spent the next six decades mulling what it takes to be successful. I must warn you that Drucker believed “education should confer duties rather than privileges.” In other words, none of what I’m about to tell you is going to be easy.

For starters, have the courage to quit your first job. I know, I know. You aren’t even gainfully employed yet and the labor market is brutal, especially for recent grads, and I’m suggesting that you already be prepared to give notice.

But “on the whole,” Drucker wrote, “young people have a tendency to hang on to the first job . . . beyond the time when they should have quit for their own good.” So, as crazy as it might sound, be ready to bolt if you aren’t learning enough, or if you don’t work for an employer that, as Drucker put it, is willing “to heap responsibility on people in junior positions.”

“Your first job may turn out to be right for you—but this is pure accident,” Drucker noted. “Certainly you should not change jobs constantly or people will become suspicious rightly of your ability to hold any job. At the same time, you must not look upon the first job as the final job; it is primarily a training job, an opportunity to analyze yourself.”

Second, Drucker isn’t kidding about analyzing yourself—or “managing oneself,” as he termed it in a famous essay that you and all of your classmates would be smart to read. As you step off campus, now is the time to begin to understand: What are your strengths? How do you perform at your peak? What are the core values that you would never compromise? What kind of work environment would provide the best fit?

And then there is the most important question of all: Where can you make the most meaningful contribution? “Odd as it seems,” Drucker remarked, “you will achieve the greatest results in business and career if you drop the word ‘achievement’ from your vocabulary. Replace it with ‘contribution.’”

Third, as you contemplate contributing, be bold. Stretch yourself. Yet don’t overreach, either. “To aim at results that cannot be achieved—or that can be under only the most unlikely circumstances—is not being ambitious; it is being foolish,” Drucker wrote.

Fourth, steel yourself for plenty of ups and downs as you make your way. In fact, one of the worst things that can happen to a person, Drucker asserted, is “too much success too soon.” One of the best things, meanwhile, is to get knocked around at an early age. It teaches you how to cope.

“Anyone who has been through earlier setbacks has learned that the world has not come to an end,” Drucker wrote. “But the person who comes up against it for the first time at the age of 45 is likely to collapse for good. For the things that people are apt to do when they receive the first nasty blow may destroy a mature person, especially someone with a family, whereas a youth of 25 bounces right back.”

Fifth, take stock regularly and honestly assess how it’s going. Drucker did this every summer, judging his work from the preceding year, “beginning with the things I did well but could or should have done better, down to the things I did poorly and the things I should have done but did not do.” With this unvarnished view, you’ll be well positioned to reset your priorities going forward.

Finally, keep in mind that, while you’re about to receive your diploma, it’s up to you to continue learning. There’s simply no choice in an era where knowledge quickly becomes obsolete.

Drucker liked to tell the story of the man who attends his 40-year college reunion and sees his former professor just as he is about to administer a final exam. The old grad looks at the test and says, “Professor Smithers, these are the same questions you asked us 40 years ago!” Smithers nods and says, “Yes, but the answers are different.”

“We always thought it was a joke. No—this is wisdom,” Drucker explained. “The answers to questions do not remain the same. . . . You learn to do a little better, to push back that infinite boundary of ignorance just a bit.”

Of course, you must never stop learning for another reason, too. It’s the one thing that keeps life interesting. And “boredom,” as Drucker cautioned, “is a deadly disease.”

By offering these guideposts, Drucker’s ultimate intention was clear: for everyone to find “personal satisfaction” and to “feel that she contributes, performs, serves her values and fulfills herself.” Mom and I couldn’t wish for you any more than that.

TIME The Drucker Difference

$3 Billion Silicon Valley Suit Shows How Not to Manage

A Google logo is seen at the garage where the company was founded on Google's 15th anniversary in Menlo Park, California
Stephen Lam—Reuters

In 2006, Google’s Eric Schmidt suggested that his company had the perfect road map to “manage the new breed of ‘knowledge workers’” who now propel so much of the world economy, and especially the digital economy: follow Peter Drucker.

“After all,” Schmidt said, “Drucker invented the term in 1959. He says knowledge workers believe they are paid to be effective, not to work 9 to 5, and that smart businesses will ‘strip away everything that gets in their knowledge workers’ way.’ Those that succeed will attract the best performers, securing ‘the single biggest factor for competitive advantage in the next 25 years.’”

Unless, that is, you and your rivals agree that you won’t try to attract those high-performing folks in the first place, at least not actively.

In a case set for trial next month, Google, Apple, Intel and Adobe Systems have been accused in a class-action lawsuit of colluding to suppress wages between 2005 and 2009 by, among other things, agreeing not to woo each other’s employees. More than 64,000 people are seeking $3 billion in damages.

It will be up to a federal court jury in San Jose, Calif., to decide whether the tech giants violated antitrust law—though the current betting is that a pre-trial settlement is likely. What is already clear is that they violated Drucker.

In documents that surfaced this week, Schmidt and executives from other companies openly discussed their no-poaching agreement. In a March 2007 email, for example, Schmidt assured Apple’s Steve Jobs that a Google recruiter who’d called into Apple had gone against company policy and was being fired for her actions. “Should this ever happen again please let me know immediately and we will handle,” Schmidt wrote. Jobs replied with a smiley face.

Drucker would have found nothing to smile about in any of this. One of the hallmarks of the knowledge age, he pointed out, was the ability of software engineers and other specialists to shift fluidly among different employers.

“Employees who do manual work do not own the means of production,” Drucker wrote in Management Challenges for the 21st Century. “They may, and often do, have a lot of valuable experience. But that experience is valuable only at the place where they work. It is not portable.

“But knowledge workers own the means of production,” Drucker continued. “It is the knowledge between their ears.” The upshot of this reality: “Knowledge workers have mobility. They can leave.”

Among tech companies, one of the principal ways in which employees wind up leaving Corporation A for Corporation B is when they’re directly solicited in a process referred to as “cold calling.” “This form of competition, when unrestrained, results in better career opportunities,” the U.S. Justice Department noted in 2010 when it settled a civil suit with the same companies now embroiled in the class-action case.

It is in restricting cold calling that Schmidt, Jobs and their cohorts revealed something rather remarkable about themselves: They’re just as intent on exercising power over their workers as the old-line corporate dinosaurs that Silicon Valley tends to look down upon.

Drucker would have been the first to tell them that they’d never get away with it. “The center of gravity in employment is moving fast from manual and clerical workers to knowledge workers who resist the command-and-control model that businesses took from the military years ago,” he wrote in 1988 essay for Harvard Business Review.

Perhaps even more on point are Drucker’s words from Landmarks of Tomorrow—the 1959 book that Schmidt cited as an inspiration.

The organization “must never be permitted the dangerous delusion that it has a claim to the loyalty or allegiance of the individual—other than what it can earn by enabling him to be productive and responsible,” Drucker wrote. A company “must never be allowed to consider its relationship to the individual member as an indissoluble union; it must treat it as existing only for a specific purpose and therefore revocable.”

In a new introduction to Landmarks of Tomorrow, written in 1996, Drucker took credit for foreseeing “the shift to knowledge as the new major resource.” But he also acknowledged missing a huge development: “the information revolution.” Drucker said that this oversight was all the more inexcusable given that, at the time, he was consulting for IBM and lecturing to many an audience that the computer was about to upend “the way we were going to do work, be organized, think, and that, indeed, the computer was but a symptom of a basic change—the change from experience to information.”

In the end, Drucker concluded, “if the book were to be given a score as an ‘early diagnosis’” of some of the most significant trends emerging in society, “it would thus not get an ‘A+.’ But it probably deserves an ‘A-.’”

Schmidt and his pals didn’t miss the information revolution, of course. And I’ve praised Google in the past for some of its employee practices. But they whiffed so badly on understanding how to treat knowledge workers in regard to their employment prospects, I’d bet Drucker would give them an ‘F.’

TIME The Drucker Difference

5 Secrets to Being a Great Mentor—From Someone Mentored by the Best

The Encyclopedia of American Business History notes that Peter Drucker was not only “the most important managerial theorist of the 20th century” but also “a mentor to several generations” of executives.

Next week, with the release of Bob Buford’s Drucker & Me, readers will be offered a window into perhaps the deepest of those relationships. From it, there is much to learn.

The book recalls the friendship forged between Drucker, known as the “man who invented management,” and Buford, a cable television pioneer from Tyler, Texas, who later dedicated his considerable intellect and energy to social entrepreneurship and the building of America’s megachurch movement. (Royalties are being donated to the Drucker Institute, which I run.)

Buford’s narrative begins at the end of Drucker’s life, shortly before he died in 2005, at age 95, when Buford realizes that he has come to visit his friend for the last time. From there, after a short introduction to the significance and impact of Drucker’s work, Buford retraces the extraordinary connection that they built over 23 years.

It started with a letter that Buford wrote to Drucker, seeking his counsel on how to improve the performance of a business that was already growing fast. The next thing Buford knew, he was on his way to Drucker’s modest ranch house in Claremont, Calif., for a one-on-one meeting. Things blossomed quickly from there.

“In terms of friendship, we were an unlikely pairing,” Buford writes. “A generation apart in age. One of us spoke English with a heavy Austrian accent. The other spoke Texan. I owned a cable television company. Peter didn’t even own a television. . . . I followed the Dallas Cowboys. He followed Japanese art.”

Yet for all of these differences, the two clicked. Their sensibilities and worldview were totally in sync. “In Peter,” Buford explains, “I found a soul mate.”

In addition to being a charming read, Drucker & Me conveys many management lessons—on relentlessly providing what the customer values, on engaging in “planned abandonment,” on aligning people’s strengths with the work that they’re asked to undertake. But above all, the book is a wonderful guide on how to be a mentor, filled with useful takeaways. Here are five:

First, a model mentor doesn’t just give answers. In Drucker’s case, he had Buford write him a long letter before each of their sessions, ensuring that Buford had carefully thought through the challenges with which he was grappling. When they finally sat down together, Drucker would pepper Buford with questions.

“He wanted Bob to think for himself,” Jim Collins, for whom Drucker was also a mentor, observes in the foreword to Drucker & Me. “The greatest teachers begin with humility, a belief that only by first learning from their students can they be of greatest service to them.”

Second, a model mentor is always fully present, recognizing the tremendous trust he or she has been handed. “Whenever I was with him,” Buford recalls of Drucker, “he was focused. If the minister of Japan called, the minister would have to wait until my meeting ended.”

Third, a model mentor doesn’t shy away when the professional blends with the personal, understanding that someone’s career and the rest of his or her life are often intimately linked. On this score, Drucker & Me contains several dramatic turning points, including the drowning death of Buford’s 24-year-old son, Ross.

As soon as Drucker heard the terrible news, he phoned. “For the next several minutes, we had a very affectionate, compassionate, intensely personal conversation, and his sadness for my losing Ross almost seemed to match my own,” Buford writes. “And then he said something that was remarkable in its candor even as it echoed my own thoughts. ‘Isn’t it a shame that it takes this kind of moment for you and me to have the kind of conversation we just had?’”

Fourth, by truly listening, a model mentor can help introduce a level of clarity that would likely be unattainable otherwise. “Your mission, Bob, is to transform the latent energy of American Christianity into active energy,” Drucker told Buford eight years into their relationship. Writes Buford: “Just like that, he nailed it. He took my meandering thoughts . . . and articulated exactly what I wanted to do.” Indeed, this single insight from Drucker was the spark that Buford needed to create Leadership Network, a highly effective nonprofit that teaches church pastors how to multiply their own impact in the community.

Finally, a model mentor gives permission, encouragement and applause—but also demands accountability. “After a while,” Buford says, that “long rambling letter” he sent before each consulting session with Drucker “became my performance report. I’m not sure he would have allowed me access, at least in the early going, if I had no results.”

In his 1990 book Managing the Nonprofit Organization, Drucker credits two of his first bosses—one at a financial firm, the other at a newspaper—with being ideal mentors in their own right. “They were totally un-permissive and demanding. And they did not hesitate to chastise me,” Drucker recounted. “But they were willing to listen to me. They were sparing with praise, but always willing to encourage.”

Obviously, he learned well, exhibiting these very same traits with Buford. But so, in turn, did Buford learn well.

I know this firsthand. Although we, too, are from different worlds—I’m a Jewish guy from Baltimore, a generation younger than Buford, and much more a basketball than a football fan—we share many core values. And while I would never claim to be as close to Buford as he was with Drucker, his guidance and friendship have been indispensable. He has urged me, along with my staff, to sharpen the Drucker Institute’s mission, leading us to where we are today: “strengthening organizations to strengthen society.” He has pushed us to think bigger and aim higher.

Inc. magazine once called Peter Drucker “the North Star of mentors.” Bob Buford, I can attest, shines awfully bright himself.

TIME The Drucker Difference

Here Is Exactly Why You Wish You Were Self-Employed

In 1952, as the age of the Organization Man dawned, Peter Drucker wrote an article in Fortune titled “How to Be an Employee.”

In it, he dispensed all sorts of advice, including tips on how to communicate with your boss, how to figure out what kind of job is right for you and even how to tell when it’s time to quit. The entire essay was predicated on a major historical shift from an economy once made up of farmers, merchants and craftspeople to one increasingly dominated by large corporations.

“Ours has become a society of employees,” Drucker wrote. “A hundred years ago only one out of every five Americans at work was employed, that is, worked for somebody else. Today the ratio is reversed, only one out of five is self-employed.”

The question now is whether we’re poised to swing sharply back in the other direction—and, if so, what it means.

Certainly, lots of workers seem to be pining for just such a change. A study released today by the online education company CreativeLive suggests that 55% of employed U.S. adults, some 78 million of them, “would jump ship from a traditional job to be self-employed—if they could still pay their bills.” The finding is based on a Harris Poll survey conducted earlier this month of 2,122 people ages 18 and older, 1,120 of whom were employed.

That more than half of American workers would like to strike out on their own says a lot about what folks value in their jobs—and, in turn, what most employers are evidently failing to provide them. It’s also a blunt reminder of the ways in which people’s career expectations have been upended in the decades since Drucker penned that Fortune piece.

“The whole labor market has changed,” says Mika Salmi, CreativeLive’s CEO, noting that the concept of lifetime employment at a single company has gone the way of the typing pool.

This reality, in which it has become common for enterprises to downsize even when they’re solidly profitable, is surely driving some of the growth in self-employment. Indeed, the ranks of proprietors in the United States—owners of businesses who are not wage and salary workers—have practically doubled as the traditional social contract between employer and employee has been ripped apart, rising from 11% of those with a job in 1970 to 21% in 2011, according to an analysis last year by NewGeography.com.

Yet Salmi is convinced that there’s another reason people are so hot to go it alone these days: Their jobs don’t offer a sufficient outlet for their creativity. “People are simply unfulfilled,” says Salmi, whose company provides courses in a variety of areas: photography, video, design, business, audio, music and software.

Some use the skills they acquire through CreativeLive to land a fresh position in their present workplace. Others learn new things so as to pursue a hobby—something Drucker would have advocated, by the way, for the corporate stiff and the self-employed alike. “People who have no life outside their jobs are not the really successful people,” Drucker wrote. “I have seen far too many of them shoot up like a rocket because they had no interests except the job; but they also come down like the rocket’s burned-out stick.”

Meanwhile, many of the 2 million students who have taken a CreativeLive class to date have parlayed the knowledge they’ve gained into starting their own business. Salmi doesn’t have exact numbers, but he says this group of entrepreneurs is clearly a sizable part of his company’s customer base. Feeling hopelessly stuck in a job, “these are people who say, ‘I have to get out of here,’” he explains. “They really want to do something different.”

Harris Poll backs him up. Among its findings: Thirty-six percent of employed adults want to quit their current job in search of something more creative.

Interestingly, Drucker tended to sneer at the idea of “creativity.” “Only the dilettante can afford to forego monotony and to look for ‘creative fulfillment,’” he asserted in Concept of the Corporation, his 1946 landmark. After all, as Drucker observed, most every occupation has plenty of aspects to it that are mind-numbingly dull—even being, say, a concert pianist: “Very few assembly line jobs are . . . as tedious as to practice the scales.”

“It is not routine and monotony which produce dissatisfaction” on the job, Drucker added, “but the absence of recognition, of meaning, of relation of one’s own work to society.”

In this regard, I think Salmi and Drucker are actually saying much the same thing: People are looking for a sense of purpose in what they do. Salmi happens to frame this around “creativity.” Drucker would have used a different C-word: contribution. But both, in the end, would have come to the same place.

“Loyalty can no longer be obtained by the paycheck,” Drucker wrote in a 1992 essay for Harvard Business Review. “The organization must earn loyalty by proving to its knowledge employees that it offers to them exceptional opportunities for putting their knowledge to work.”

Otherwise, they may well bolt—and go hang their own shingle someplace else.

TIME

Your Desk at Work Is Literally a Prison—A Dangerous One

desk office
Getty Images

Peter Drucker cautioned executives not to become “a prisoner of the organization” in which they work. Yet surely he would have admired the way that Rick Raemisch became a prisoner in his.

Raemisch is executive director of the Colorado Department of Corrections, and earlier this year he spent a night in solitary confinement at one his state penitentiaries so that he could get “a better sense” of what such an isolated existence “did to the prisoners who were housed there, sometimes for years.”

The experience was profound. Crammed in a 7-by-13 cell, Raemisch began “feeling twitchy and paranoid.”

“I kept waiting for the lights to turn off, to signal the end of the day,” he recalled in a piece a few weeks ago in the New York Times. “But the lights did not shut off. I began to count the small holes carved in the walls. Tiny grooves made by inmates who’d chipped away at the cell as the cell chipped away at them.”

Raemisch emerged 20 hours later vowing to greatly reduce the use of solitary by stepping up various reforms of the system that already are underway. “Knowing that 97% of inmates are ultimately returned to their communities,” he explained, “doing anything less would be both counterproductive and inhumane.”

Although Raemisch was dealing with a situation extreme in many respects, the basic lesson for any manager is unmistakable: “No matter how good the reports, no matter how good the economic or financial theory underlying them, nothing beats personal, direct observation,” Drucker wrote in Management Challenges for the 21st Century.

“Market research, focus groups and the like are highly valued, and rightly so,” he added. “But still, they always focus on the company’s products. They never focus on what the customer buys and is interested in. Only by being a customer oneself, a salesman oneself, a patient oneself can one get true information about the outside.”

As commonsensical as this may sound, many businesspeople fail to ever venture very far beyond their own desks. Indeed, many don’t really focus on the customer much at all.

Why? In their 2013 book Customers Included, Mark Hurst and Phil Terry of the New York-based consulting firm Creative Good say they routinely run into a litany of excuses. Among them: “There’s not enough time in the project to spend with customers.” “Customers don’t know what they want.” “We already know what customers want.”

There are other traps, as well, including an obsession by many managers with quantitative analysis. “It has become so dominant that companies tend to forget that the world consists not only of quantities but also of qualities,” Christian Madsbjerg and Mikkel Rasmussen write in The Moment of Clarity, published last month.

The two are founding partners of the innovation and strategy consultancy ReD Associates, and the premise of their book is that businesses would be wise to pay much more attention to the human sciences—including ethnography, which they define in part as “an in-depth approach to researching cultures that involves immersing oneself in a particular society.”

“It is good to know that x percent of your customers are satisfied with your company,” they note, “but you also need to know what the experience of interacting with your company is like. It’s helpful to know that x percent of the population has a smartphone, but how are people using the technology?”

Drucker loved to highlight those who figured out these sorts of things—executives such as Irish supermarket pioneer Feargal Quinn. “His secret is that he and all of his company’s executives have to spend two days a week outside their offices,” Drucker wrote. “One day is actually spent doing a job in a supermarket, for example, by serving at a checkout counter or as a manager for perishable foods. And one day is spent in competitors’ stores, watching, listening, talking to the competitors’ employees and the competitors’ customers.”

Then there was Alfred Sloan, who ran General Motors from the early 1920s through the mid-1950s. For two weeks every year, according to Drucker, he used to work in the service department of a GM dealership. “The problem was, no dealer took him back because he was such a very poor mechanic,” Drucker remarked. But this wasn’t the point. Sloan returned to his post with a keener understanding of what the customer valued and with a better sense of where GM’s weak spots were.

Sometimes, assuming the customer’s vantage is the only way to truly understand how all the parts of the organization fit together. This was the reason that Gustav Mahler changed things up at the Vienna Philharmonic in the late 19th century. “He found in the orchestra’s contract that they had to play five evenings,” Drucker recounted, “and he said, ‘No you are going to be on duty five evenings, but you play four. The fifth evening, you sit out in the audience and listen.’”

Quinn, Sloan and Mahler all got it—and Raemisch gets it: There is simply no substitute for stepping into your customer’s shoes, if not his shackles.

TIME The Drucker Difference

Coming Soon to Your Office: Gen Z

Getty Images

As a business consultant and management professor, Peter Drucker observed the attitudes and idiosyncrasies of seven distinct generations: New Worlders, Hard Timers, Good Warriors, the Lucky Few, Baby Boomers, Gen X and even, at the very end of his life, Gen Y. But it’s Gen Z, I believe, that would draw most of Drucker’s interest now.

A new study of this cohort—17 years old and younger—suggests that when it comes to thinking about work, these teens are poised to greatly accelerate certain trends that Drucker had anticipated with a mix of hopefulness and concern. And employers better start preparing for them now.

Although many companies are struggling to integrate millennials into the workplace, “what we’re also seeing right on their tail is another tsunami, potentially just as disruptive,” says Jamie Gutfreund, chief strategy officer at the Intelligence Group, a division of the Creative Artists Agency, which undertook the analysis with an assist from the early-career networking site Intern Sushi. The likelihood of this enormous impact, she notes, has emerged despite the fact that Gen Y, at about 90 million strong in the United States, is nearly twice as big as Gen Z.

Several results in particular grabbed my attention—and undoubtedly would have grabbed Drucker’s.

For starters, 60% of the 14- to 18-year-olds surveyed last April, as part a larger sample of 900 people who responded online, said that “having an impact on the world” is going to be important to them in their jobs. That’s a sharp increase from the 39% of millennials who expressed this sentiment in 2010, when they were in the same age range.

That more and more students are intent on making a real difference with their lives is something that Drucker started to pick up on decades ago—and he advised organizations to seize the opportunity. “Instead of bemoaning that young people are lazy or self-centered,” Drucker remarked in 1989, executives should ask, “‘What do they have?’ They have a tremendous desire to contribute.”

The question now is how they can best be positioned to make good on that desire.

For members of Gen Z themselves, the answer seems to lie in the second significant finding from the Intelligence Group report: They’re bent on accumulating real-world experience, even if this means foregoing a part of their formal education. In 2010, 71% of millennial teens considered earning an advanced degree as one of their life goals. By 2013, that number had fallen to 64% for Gen Z teens.

Also telling: Fifty percent of Gen Y teens in 2010 said they wished they had a hobby that would turn into full-time job. Among Gen Z teens, that has soared to 76%.

“There really are a lot of these younger kids who are figuring out much earlier on what they want to do,” says Shara Senderoff, the co-founder and chief executive of Intern Sushi, which set out a couple of years ago to reinvent how students apply for internships (“the new entry-level job,” in Senderoff’s words) by giving them a platform to tell their stories in more creative ways.

Senderoff and Gutfreund say that this inclination to dive quickly into a work setting, and spend less time in the classroom as well as on frivolous outside pursuits, makes perfect sense in the wake of endless stories about unemployed and underemployed college grads, and anxiety over accumulating mountains of student-loan debt.

Drucker surely wouldn’t have advocated that people get less education at a time when knowledge has become our most vital resource. What’s more, as I’ve made plain, there is overwhelming statistical evidence that a college degree is still the best investment that a young person can make.

Yet what form someone’s ongoing education might take isn’t at all a given. “In the knowledge society, clearly, more and more knowledge, and especially advanced knowledge, will be acquired well past the age of formal schooling and increasingly, perhaps, through educational processes that do not center on the traditional school,” Drucker wrote.

For employers hoping one day to recruit and retain the cream of Gen Z, a real chance exists to develop a whole new model of lifelong learning—a combination of hands-on experience, training and mentoring.

There are risks. Drucker worried, for instance, about tilting too far in the direction of doing. We may “overvalue immediately usable, ‘practical’ knowledge and underrate the importance of fundamentals, and of wisdom altogether,” he warned.

He also would have stressed that it’s not only up to employers to embrace new ways of judging talent and keeping them satisfied; young employees and would-be employees have obligations, as well.

“The decision ‘What should my contribution be?’ . . . balances three elements,” Drucker explained. “First comes the question: ‘What does the situation require?’ Then comes the question: ‘How could I make the greatest contribution with my strengths, my way of performing, my values to what needs to be done?’ Finally, there is the question: ‘What results have to be achieved to make a difference.’”

Drucker, who was born in Austria in 1909, immigrated to America in 1937 and delivered his final university lecture just months before his death in 2005, pointed out that his was the last generation of people in business “who measured their value entirely by experience” instead of by the amount of their education and knowledge.

No one is saying that we’re destined to return entirely to that earlier convention. But it’s fitting somehow that experience may again count for more, now that we’ve reached Z.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser