Post-Capitalist Society (by Peter Drucker)

… This means a radical change in structure for the organizations of tomorrow.

It means that the big business, the government agency, the large hospital, the large university will not necessarily be the one that employs a great many people.

It will be the one that has substantial revenues and substantial results—achieved in large part because it itself does only work that is focused on its mission; work that is directly related to its results; work that it recognizes, values, and rewards appropriately.

What Kind of Team?

There is a second major difference between the productivity of making and moving things and the productivity of knowledge work and service work.

In knowledge and service work, we have to decide how the work should be organized.

What kind of human team is appropriate for this kind of work and its flow?

Most human work is carried out in teams; hermits are exceedingly rare.

Even the most solitary artists, writers, or painters, depend on others for their work to become effective—the writer on an editor, a printer, a bookstore; the painter on a gallery to sell his or her work; and so on.

And most of us work in far closer relationship to our teammates.

There is a great deal of talk today about “creating teamwork.”

This is largely a misunderstanding.

It assumes that the existing organization is not a team organization, and that is demonstrably false.

It secondly assumes that there is only one kind of team; but in effect there are three major kinds of teams for all human work.

And for work to be productive, it has to be organized into the team that is appropriate to the work itself, and its flow.*^⁠1

The first kind of team is exemplified by the baseball or cricket team; it is also the kind of team that operates on a patient in the hospital.

In this team, all players play on the team but they do not play as a team.

Each player on a baseball or a cricket team has a fixed position which he never leaves.

In baseball, the outfielders never assist each other.

They will stay in their respective positions.

“If you are up at bat, you are totally alone,” is an old baseball saying.

Similarly, the anesthesiologist will not come to the assistance of the surgical nurse or the surgeon.

This team does not enjoy a good press today.

In fact, when people talk about “building teams,” they usually mean that they want to move away from this kind of team.

Yet the baseball-or cricket-team has great strengths that should not be discounted.

Because all players occupy fixed positions, they can be given specific tasks of their own, can be measured by performance scores for each task, can be trained for each task.

It is by no means accidental that in both baseball and cricket there are statistics on every player, going back for decades.

The surgical team in the hospital functions much the same way.

For repetitive tasks and for work in which the rules are well known, the baseball team is the ideal.

And it was this model on which modern mass production—the work of making and moving things—was organized, and to which it owes a great deal of its performance capacity

The second type of team is the soccer team.

It is also the team concept on which the symphony orchestra is organized, and the model for the hospital team that rallies around the patient who goes into cardiac arrest at two in the morning.

On this team, too, all players have fixed positions.

The tuba players in the orchestra will not take over the parts of the double basses.

They stick to their tubas.

In the crisis team at the hospital, the respiratory technician will not make an incision in the chest of the patient to massage the heart.

But on these teams, the members work as a team.

Each coordinates his or her part with the rest of the team.

This team requires a conductor or a coach.

And the word of the conductor or coach is law.

It also requires a “score.”

And it requires endless rehearsals to work well.

But, unlike the baseball team, it has great flexibility if the score is clear and if the team is well led.

And it can move very fast.

Finally, there is the doubles tennis team—the team also of the jazz combo or of the four or five senior executives who together constitute the “President’s Office” — in the large American company, or the Vorstand (board of management) in the German company.☨^⁠2

This team has to be small—seven to nine people may be the maximum.

The players have a “preferred” rather than a “fixed” position; they “cover” for one another.

And they adjust themselves to the strengths and weaknesses of each other.

The player in the back court in doubles tennis adjusts to the strengths and weaknesses of the partner who plays the net.

And the team only functions when this adjustment to the strengths and weaknesses of the partners has become conditioned reflex, that is, when the player in the back court starts running to “cover” for the weak backhand of the partner at the net the moment the ball leaves the racket of the player on the other side.

A well-calibrated team of this kind is the strongest team of all.

Its total performance is greater than the sum of the individual performances of its members, for this team uses the strength of each member while minimizing the weaknesses of each.

But this team requires enormous self-discipline.

The members have to work together for a long time before they actually function as a “team.”

These three types of teams cannot be mixed.

One cannot play baseball and soccer with the same team on the same field at the same time.

The symphony orchestra cannot play the way a jazz combo plays.

The three teams must also be “pure”; they cannot be hybrids.

And to change from one team to another is exceedingly difficult and painful.

The change cuts across old, long-established, and cherished human relationships.

Yet any major change in the nature of the work, its tools, its flow, and its end product may require changing the team.

This is particularly true with respect to any change in the flow of information.

In the baseball-type team, players get their information from the situation.

Each receives information appropriate to his or her task, and receives it independently of the information the teammates all receive.

In the symphony orchestra or the soccer team, the information comes largely from conductor or coach.

They control the “score.”

In the doubles tennis team, the players get their information largely from each other.

This explains why the change in information technology, and the move to what I have called the “information-based organization” has made necessary massive “re-engineering.”♰^⁠3

The new information technology underlies the strenuous efforts of American corporations in the last ten years to “reengineer” themselves.

Traditionally, most work in large American companies was organized on the baseball team model.

Top management consisted of a chief executive officer to whom senior functional executives “reported,” each doing a specific kind of work—running the factories, running sales, finance, and so on.

The Office of the President is an attempt to convert top management into a doubles tennis team—made necessary (or, at least, possible) by the advent of information.

Traditionally, work on new products was done in a baseball-type team in which each function (design, engineering, manufacturing, marketing) did its own work, and then passed it on to the next.

In some major American industries, for example, pharmaceuticals or chemicals, this was changed long ago into the soccer or symphony orchestra type of team.

But the American automobile industry retained a baseball-type team structure for the design and introduction of new automobiles.

Around 1970, the Japanese began to use information to switch to a soccer-type team for this work.

As a result, Detroit fell way behind both in the speed with which it introduced new models and in its flexibility.

Since 1980, Detroit has been trying desperately to catch up with the Japanese by changing the design and introduction of new automobiles to a soccer-type team.

And on the factory floor the availability of information—which makes possible, in fact mandatory, the shift to “Total Quality Management”—is forcing Detroit to change from the baseball team, along which the traditional assembly line had been organized, to the doubles tennis team, which is the concept underlying “flexible manufacturing.”

Only when the appropriate type of team has been chosen and established will work on the productivity of knowledge workers and service workers become truly effective.

The right team by itself does not guarantee productivity.

But the wrong team destroys productivity.

¹{On various teams, and especially on the analogy between teams in business and teams in sports, see Robert W. Keidel, Game Plans (New York: E. P. Dutton, 1985).}

²☨ {On this, see also the discussion of the top management job in my Management: Tasks, Responsibilities, Practices (1973).}

³♰ {See The New Realities, Chapter 14.}

The Need to Concentrate

Concentration on job and task is the last prerequisite for productivity in knowledge and service work.

In the work on making and doing things, the task is clearly defined.

The worker shoveling sand, whose task Taylor studied a century ago, was not expected to bring the sand to where he could begin shoveling it.

That was somebody else’s job.

The farmer plowing the field does not climb off the tractor to attend a meeting.

In machine-paced work, the machine concentrates the worker; the worker is servant to the machine.

In knowledge work and in most service work, where the machine (if any) is a servant to the worker, productivity requires the elimination of whatever activities do not contribute to performance.

They sidetrack and divert from performance.

Eliminating such work may be the single biggest step toward greater productivity in both knowledge and service work.

The task of nurses in hospitals is patient care.

But every study, shows that they spend up to three quarters of their time on work, that does not contribute to patient care.

Instead, two thirds or, three quarters of the nurse’s time is typically spent filling out papers.

Whenever we analyze the performance of salespeople in the department store, we find that they spend more than halt their time on work that does not contribute to their performance, that is, satisfying the customer.

They spend at least half their time filling out papers that serve the computer rather than the customer.

Whenever we analyze the time spent by engineers, we find that half their time is spent attending meetings or polishing reports which have very little to do with their own task.

This not only destroys productivity; it also destroys motivation and pride.

Wherever a hospital concentrates paperwork and assigns it, to a floor clerk who does nothing else, nurses’ productivity doubles.

So does their contentment.

They then suddenly have time, for the work they are trained and hired for: patient care.

Similarly, both the productivity and satisfaction of salespeople in department stores shoot up overnight when the paperwork is taken out of their job and concentrated with a floor clerk.

And the same happens when engineers are relieved of their “chores”—draftsman’s work, rewriting reports and memos, or attending meetings.

Knowledge workers and service workers should always be asked: “Is this work necessary to your main task?

Does it contribute to your performance?

Does it help you do your own job?”

And if the answer is no, the procedure or operation must be considered a “chore” rather than “work.”

It should either be dropped altogether or engineered into a job of its own.

Defining performance; determining the appropriate work flow; setting up the right team; and concentrating on work and achievement are prerequisites for productivity in knowledge work and service work.

Only when they have been done can we begin the work on making productive the individual job and the individual task.

Frederick Winslow Taylor is usually criticized for not asking the workers how to do the job.

He told them.

But so did George Elton Mayo (1880-1949), the Australian-born Harvard psychologist who in the 1920s and 1930s attempted to replace Taylor’s “Scientific Management” with “Human Relations.”

Lenin and Stalin did not consult the “masses,” either; they told them.

Freud never asked patients what they thought their problem might be.

And only toward the end of World War II did it occur to any high command to consult the users—the soldiers in the field—before introducing a new weapon.

The nineteenth century believed in the expert knowing the answers.

By now we have learned that those who actually do a job know more about it than anybody else.

They may not know how to interpret their knowledge, but they do know what works and what doesn’t.

And so, in the last forty years, we have learned that work on improving any job or task begins with the people who actually do the work.

They must be asked: “What can we learn from you?

What do you have to tell us about the job and how it should be done?

What tools do you need?

What information do you need?”

Workers must be required to take responsibility for their own productivity, and to exercise control over it.

We were first taught this lesson by American production in World War II.*^⁠1

But, as is well known, the Japanese were the first ones to apply the idea (if only because a few Americans, especially Edwards Deming and Joseph Juran, taught it to them).

After World War II, however, the United States, Great Britain, and Continental Europe all went back to the traditional “productivity by command” approach—largely as a result of strong labor union opposition to anything that would give the worker a “managerial attitude,” let alone “managerial responsibility.”

Only in the last ten years has American management rediscovered the lesson of its own performance in World War II.

In making and moving things, partnership with a responsible worker is the best way.

But Taylor’s telling them worked, too, and quite well.

In knowledge and service work, partnership with the responsible worker is the only way to improve productivity.

Nothing else works at all.

«§§§»

Productivity in knowledge work and service work demands that we build continuous learning into the job and into the organization.

Knowledge demands continuous learning because it is constantly changing.

But service work, even of the purely clerical kind, also demands continuous self-improvement, continuous learning.

The best way for people to learn how to be more productive is for them to teach.

To obtain the improvement in productivity which the post-capitalist society now needs, the organization has to become both a learning and a teaching organization.

¹{ My two books The Future of Industrial Man (1942) and The New Society (1949), were the first to draw this conclusion from the World War II experience.

In them, I argued for the “responsible worker” taking “managerial responsibility.”

As a result of their wartime experiences, W. Edwards Deming and Joseph Juran each developed what we now call “Quality Circles” and “Total Quality Management.”

Finally, the idea was forcefully presented by Douglas McGregor in his well-known book The Human Side of Enterprise (New York McGraw-Hill, 1960), with his “Theory X” and “Theory Y.”}

Restructuring Organizations

Improving the productivity of knowledge workers and service workers will demand fundamental changes in the structure of organizations.

It may even require totally new organizations.

Re-engineering the team so that work can flow properly will lead to the elimination of most “management layers.”

In the symphony orchestra, several hundred highly skilled musicians play together; but there is only one “executive,” the conductor, with no intermediate layers between him (or her) and the orchestra members.

This will be the organization model for the new, information-based organization.

We will thus see a radical shift from the tradition in which performance was primarily rewarded by advancement into command positions, that is, into managerial ranks.

Organizations will have very few such command positions.

We will increasingly see organizations operating like the jazz combo, in which leadership within the team shifts with the specific assignment and is independent of the “rank” of each member.

In fact, the word “rank” should disappear totally from the vocabulary of knowledge work and knowledge worker.

It should be replaced by “assignment.”

This shift will raise tremendous problems of motivation, of reward, and of recognition.

The Case for Outsourcing

Even more drastic, indeed revolutionary, are the requirements for obtaining productivity from service workers.

Service work in many cases will be contracted out of the organization to whom the service is being rendered.

This applies particularly to support work, such as maintenance, and to a good deal of clerical work.

“Outsourcing,” moreover, will be applied increasingly to such work as drafting for architects and to the technical or professional library.

In fact, American law firms already contract out to an outside computerized “database” most of what their own law library used to do.

One driving force behind outsourcing is the need to make service workers productive.

The greatest need for increased productivity is in activities which do not lead to promotion into senior management within the organization.

But nobody in senior management is likely to be much interested in this kind of work, know enough about it, care greatly for it, or even consider it important—no matter how much money is at stake.

Such work does not fit the organization’s value system.

In the hospital, for instance, the value system is that of the doctors and nurses.

They are concerned with patient care.

No one therefore pays much attention to maintenance work, support work, clerical work even though that is where half the hospital’s costs are likely to be.

Nobody from these support activities can expect ever to get into a senior hospital position.

Most of the women who start cleaning hospital floors or making hospital beds, fifteen years later will still be cleaning hospital floors or making hospital beds.

By contrast, the woman who as a senior vice president heads the hospital division of America’s largest maintenance company started as an almost illiterate Mexican immigrant with a pail and a broom fourteen years ago.

But she started working in a hospital where maintenance work had been contracted out to a maintenance company.

As a result, she had opportunities for advancement.

Productivity in the hospitals maintained by this company has almost tripled in the last fifteen years.

The time needed to make a bed, for instance, has been cut by two thirds.

This maintenance company had a financial interest in improving the productivity of its menial jobs.

It had people in executive positions who knew firsthand the work needed to maintain a hospital.

The company was therefore willing to work for years on the redesign of all the tools needed, right down to the bed sheets.

It was willing to invest substantial capital in the new methods.

None of this a hospital would have done.

To make hospital maintenance productive required an outside contractor.

The greatest need for outsourcing—whether of manual work like maintenance, or clerical work like billing—is found in government (see Chapter 8 below).

There, productivity is lowest.

There, also, are the most people employed in such support activities.

But large businesses are not much different.

They, too, require systematic contracting out of service work to organizations whose business it is to do such work.

These contracting organizations offer career opportunities for the people doing such work.

Their executives take such work seriously; they are therefore willing to invest time and money in redesigning the work and its tools.

They are willing, even eager, to do the hard work needed to improve productivity.

Above all, they take the people who do such work seriously enough to challenge them to take the lead in improving their work and its productivity.

Outsourcing is necessary not just because of the economics involved.

It is necessary because it provides opportunities, income, and dignity for service workers.

We should therefore expect within a fairly short period of years to find such work contracted out to independent organizations, which compete and get paid for their own effectiveness in making this kind of work more productive.

This means a radical change in structure for the organizations of tomorrow.

It means that the big business, the government agency, the large hospital, the large university will not necessarily be the one that employs a great many people.

It will be the one that has substantial revenues and substantial results—achieved in large part because it itself does only work that is focused on its mission; work that is directly related to its results; work that it recognizes, values, and rewards appropriately.

The rest it contracts out.

Averting a New Class Conflict

The rapid increase in productivity of the workers making and moving things overcame the nineteenth century’s nightmare of class conflict.”

Now, a rapid increase in the productivity of service workers is required to avert the danger of a new “class conflict” between the two new dominant groups in the post-capitalist society: knowledge workers and service workers.

To make service work productive is thus the first social priority of the post-capitalist society, in addition to being an economic priority.

Knowledge workers and service workers are not “classes” in the traditional sense.

The line between the two is porous.

In the same family, there are likely to be service workers and knowledge workers who have advanced education.

But there is a danger that the post-capitalist society will become a class society unless service workers attain both income and dignity.

This requires productivity.

But it also requires opportunities for advancement and recognition.

The structure of the post-capitalist society will therefore be different from either the earlier capitalist or the socialist society.

There, organizations tried to encompass the maximum of activities.

Organizations of the post-capitalist society, by contrast, will concentrate on their core tasks.

For the rest, they will work with other organizations in a bewildering variety of alliances and partnerships.

Both capitalist and socialist societies were, to use a scientific metaphor, “crystalline” in their structure.

Post-capitalist society is more likely to resemble a liquid.

Post-Capitalist Society

Unimagined FutureS

Post Capitalist Society and Post Capitalist Polity

The Shift To The Knowledge Society

Outflanking the Nation-State

The Third World

Society, Polity, Knowledge

From Capitalism to Knowledge Society

The Management Revolution

From Knowledge To Knowledges

The Society of Organizations concept outline

The Characteristics of Organizations