Peter Drucker on the problems now facing managers
| San Francisco
Should managers change their operating strategies to adjust to the reduction in the US inflation rate?
That assumes we are rid of inflation, which I personally don't believe. Not with a projected federal budget deficit of . . . $160 billion . . . if you count off-budget borrowing.
But the belief in continued (high levels of) inflation is so widespread it is likely to be wrong. The great problem for the businessman is to maintain liquidity. . . .
What sort of decline in interest rates should managers expect?
(Of the Reagan administration's) forecast of a 10 percent interest rate within six months, I wouldn't say it is impossible, but it is unlikely, (since) so many (corporations) have to come to the market for borrowing quite soon. They are overborrowed.
How can managers compete more effectively with Japan?
Everybody is very bullish on Japan. I am not. . . . Their government spending is getting totally out of control. And yet they have no defense spending. It won't take much to push Japan into defense spending. . . . The Russians are building up more in the North Pacific than in any other area.
The fundamental premise on which the Japanese economy has operated in the postwar world suddenly doesn't work anymore - before when the Japanese economy was in any trouble, exports have pulled it out. This time exports are not pulling the economy. . . . Probably because . . . tax rates are beginning to be too heavy a brake on the economy.
How can the automotive or other key industries be revitalized?
There is nothing wrong with the auto industry except demographics. The number of cars sold is a direct function of the number of people reaching driving age (which has been going down).
So what can managers in Detroit do?
They can do a great deal, but they are all unpopular things like automate, replace workers, and get spare parts made in Malaysia (and other lower-wage countries). (Still), the auto industry may be turning around. Twenty-five years ago everyone knew the railroads were dying, and now we have seven strong lines.
In your last book (''The Changing World of the Executive''), you suggest that companies perhaps should not recruit intensively for business school graduates. You note that members of the baby-boom generation will be disappointed in promotions due to overcrowding on the career ladder. How are businesses coping? American wheat. He also accused the US government of creating difficulties for Australia over possible sale of wheat to India and Indonesia.
First you find a great many people who are not bidding for those hot shot MBAs (from top-name schools). People are hiring from lesser schools. The main difference between (Harvard and Boston University, for example) is that Boston doesn't have such a strong alumni association. . . . Also, you can send (the Boston University business school graduate) to a plant. He may not be enchanted, but he accepts. If you try to do this with the Harvard MBA, he quits. He has to be staff assistant to the president.
You also suggest broadening the content of jobs so that young people do not have to be constantly promoted to remain challenged. Are companies moving back to that?
We are getting there. What do you do with young people? The opportunuties (for rapid promotions) are not there. What are companies doing about this?
At one time there were no training positions. There were real positions filled by trainees.
Look at the telephone company. . . . It is totally revamping the way it treats young people. (It is giving them) much bigger challenges by moving them around (in various departments).
You have observed that federal law allows top executives to be forced to retire at age 65, while other managers cannot be forced out until age 70. You predict some managers will avoid the top slots as a result. Is this happening?
You do see people at age 55 managing not to get the top spot to avoid an automatic cutoff. On the one hand . . . for 20 years they wanted the big job so bad they could taste it. But an executive told me recently, ''I am in line for Bob So-and-So's job when he retires. Bob does not want to go and I do not want to be there (retired) in nine years.'' But it doesn't happen very often.
You also contend companies should make better use of executives who are at or near retirement age. Are companies moving on this?
I do see a few companies thinking seriously about what to do with senior people. My wife is on the board of directors of a high-technology company and she is over 70. When her term on the board came to an end, the chairman came and said, ''Doris, we want to keep you as an honorary board member (at a reduced income).'' You see more and more of this. What you don't see yet is the individual himself taking the responsibility (for helping design a new role).
I have another friend who was managing partner of a large consulting firm. Now 60, at age 58 he got out of managing and became ''of counsel'' to the firm. He is working with former clients on what they can do when they retire.
You note that nonprofit organizations need to systematically withdraw from ''yesterday's efforts'' so they have the resources to meet today's needs. Are there ways to have successful programs for training managers in nonprofit organizations?
Don't have a separate program. Do what we do (at Claremont's) executive management program, (where mid-career students) come 60 percent from business and 40 percent from the nonprofit sector. What difference is there in managing people at a hospital or at General Motors?
Isn't one difference that the hospital aims to break even and GM wants to make a profit?
The hospital that breaks even is bankrupt. . . . The idea that nonprofit institutions do not have to provide for the needs of tomorrow is one reason why they are in trouble. . . . It is far easier to sell 50,000 more widgets than to get more money (for a nonprofit organization).