Academy ol Management Executive. 2003, Vol 17, No.

The Practice oi Management:

Reflections on Peter F.
Drucker's landmark book
An Academic Commentaiy by Shaker A. Zahra

The publication of Peter F. Drucker's The Practice productive teams, coordinate various activities, set
of Management in 1954 was a turning point in the goals, and make things happen. The concept of the
development of the discipline of management.' firm and the definition of its business come to life
Hailed since its publication as a great contribution through the various decisions that managers
to the field, this book remains a major classic that make. Understandably, Drucker redefines the role
shapes our thinking about the nature of manage- of the enterprise, focusing on its role in creating
ment as a scholarly field and as a field of practice. growth and profitability. An organization is an im-
This article synthesizes this important book's ma- portant means of putting wealth-creating re-
jor propositions, highlighting Drucker's contribu- sources to productive use, a task that could not be
tions to the field of management. achieved without skillful, decisive, and visionary
The Practice of Management consists of four sec- management.
tions that cover such topics as the nature of man- Unlike Frederick Taylor's view of organizations
agement, the meaning of business, managing and their managers, Drucker's vision of the firm
managers, the structure of management, the man- and its executives recognized the importance of
agement of workers and work, and what it means the external environment.^ Not only is the firm a
to be a manager. The book's 29 chapters combine part of the milieu in which it competes, but it also
insightful analyses of the various roles and re-
contributes to and shapes its external environ-
sponsibilities of management at all organizational
ment. Thus, Drucker's vision for the role of man-
levels, supported with several case studies of lead-
ing companies such as Sears, Ford and IBM. To agement was broader, and more proactive, than
organize the discussion, I will cover Drucker's previously recognized in the literature. This role
analyses of the following areas: (1) The importance far exceeds mere adaptation to the external envi-
of management as a discipline, (2) the value of ronment; it requires visionary thinking about the
management education, (3) the concept of the firm state of things to come and taking appropriate
and definition of business, (4) innovation and en- risks to capitalize on opportunities through inno-
trepreneurship, and (5) organizational leadership vation. Drucker notes that ". . . managing a busi-
and governance. ness must be a creative rather than adaptive task.
The more a management creates economic condi-
tions or changes them rather than passively
adapts to them, the more it manages the busi-
Management as a Discipline and Practice, Not ness."''
A Profession
Drucker views growth as the engine of economic
Drucker views management as a distinct function development and the means by which sharehold-
within the organization. He observes, "The man- ers are rewarded for taking risks. He further em-
ager is the dynamic, life-giving element in every phasizes the need for clarity about the business
business. ... In a competitive economy, above all, definition, arguing that "what is our business is
the quality and performance of the managers de- the most important question successful manage-
termine the success of a business; indeed they ment groups have to address." This issue has been
determine its survival."^ As a distinct group in the the subject of considerable discussion in the field
contemporary enterprise, managers also define of strategy and has become the foundation for
their organization's mission, develop and retain analyses leading to the definition and reformula-
16
2003 Zahia 17

tion of mission statements. It has also contributed and develop competent managers to lead their or-
to a rich analysis of the meaning of the enterprise ganizations. Management education, through de-
and its role in society. This discussion has been gree and non-degree programs, is one of fastest
further enriched by the recognition of the diverse growing industries in developing countries. In-
business objectives that companies must address.^ deed, economic and technological development
These objectives can be tangible or intangible and cannot be attained or sustained without skillful
combine economic and non-economic factors. Eco- managers who provide leadership.
nomic factors, for example, include profitability Table 1 recaps Drucker's key propositions re-
and market standing. The non-economic factors garding the nature of management and its diverse
include the use of national resources, contributed responsibilities.
value, and innovation, among others. Drucker was
among the first to acknowledge the diversity of
organizational goals and to highlight the intricate The Value of Management Education
links between their financial and non-financial Drucker's view of management is inclusive; it is a
components. task that should be performed throughout the or-
Drucker also highlights the importance of man- ganization and within each of its different func-
agement for the success of an organization and tions. This requires training and preparing man-
society. To him, without capable management, re- agers at all levels through effective practice.
sources of production will "remain resources and Recognizing that management can never be an
never become production."^ This is more than a exact science, Drucker views it as "a practice,
transformation process: it requires careful analy- rather than a science or a profession, though con-
sis of the firm's mission, definition of the business taining elements of both. No greater damage could
concept, setting clear goals, and marshalling re- be done to our economy or our society than to
sources to pursue these goals. While management attempt to 'professionalize' management by 'li-
means getting things done through other people, censing' managers, for instance, or by limiting ac-
Drucker also highlights the crucial role of manage- cess to management to people with a special aca-
ment in building the organization that makes this demic degree."^ To be sure, the manager's work is
possible. amenable to scientific analysis, and Drucker sup-
ports formal management education for degree
and non-degree purposes. However, viewing man-
While management means getting things
done through other people. Drucker TABLE 1
also highlights the crucial role of Summary of Drucker's Ideas About Management
management in huilding the and Its Responsibilities
organization that makes this possible.
1. Management is a distinct and Important function that
detGrmines the viability and success of the firm.
Further, Drucker writes, "Management, its com- 2. The managerial task, though amenable lo scientific
petence, its integrity and its performance will be analysis, is practice-oriented. Management education
enhances and sharpens managerial skills.
decisive both to the United States and the free 3. The managerial task combines creative and adaptive
world in the decades ahead.'"^ Drucker also pre- components.
dicts that the demands on management will be 4. There are two entrepreneurial dimensions to management:
rising steadily and steeply, given the changing marketing and innovation. Marketing focuses on
social expectations and the growing complexity of identifying customers. Innovation centers on creating
products, goods, systems, processes, and services. It also
business. These prophetic statements have come requires acquiring and honing the skills necessary to
true as both the quality of management and the develop products, services, etc.
integrity of managers have been instrumental in 5. Managers should follow a systematic decision-making
building and sustaining the growth of the free- process that focuses on: defining the problem, developing
world economy. The collapse of the Soviet Union alternatives, examining the merits and shortcomings of
and the end of the Cold War have also intensified these alternatives, selecting the approach to be followed,
implementation, and using feedback.
the demand for skilled managers, reflecting the 6. Managers are responsible for building the organization
complexity of the contemporary enterprise and and integrating its different functions.
management's acknowledged contributions to the 7. Managers are responsible for developing and leading
West's phenomenal record of success. Developing knowledgeable workers.
countries seeking economic, technological, and so- 8. Integrity is the hallmark of managerial character. Along
cial progress have also found it necessary to train with integrity comes a sense of accountability.
18 Academy of Management Executive August

agement as a profession, Drucker concludes that creates value for society and shareholders. The
managers can learn a great deal through active second is as a human and social organization that
practice. Drucker continues to emphasize the value employs people, develops them, pays them, organ-
of such practical experience today, emphasizing izes them to increase productivity, and as such
the importance of consulting. Drucker states: requires effective governance and management.
". . . management is practice, and a practitioner The third is as a "social institution that is deeply
needs practice. I look at my consulting practice as embedded in society and values and as such is
my laboratory. .. ." Drucker likens management affected by public interest discussion, debate, and
education to medical training: one learns by values."^° These three constructions of the firm in-
doing.^ fluence each other, determining the company's
Two other points are noteworthy about Drucker's performance, mission, and business definition.
views of management education. The first is his Throughout The Practice of Management, Drucker
emphasis that managers, at all organizational lev- highlights the importance of the external environ-
els, are responsible for their career development. ment for the strategic and organizational choices
Consequently, they need to master the various {e.g., structure) that firms make. This link highlights
skills needed to perform their current tasks and the vital role of business in society, a theme that runs
prepare themselves for the challenges created by across several of Drucker's important books. His dis-
changes in technology and social values. The sec- cussions cover the firm's home country as well as
ond point is Drucker's emphasis on managers' re- host countries. This role centers, among other things,
sponsibility to develop and nurture their subordi- on managing the social impacts of the firm's deci-
nates. This message permeates almost every sions and defining what a business can do for soci-
major chapter in the The Practice of Management. ety. Further, Drucker recognizes that social problems
Toward this end, Drucker draws attention to man- can provide important and profitable business op-
agement by example in preparing tomorrow's portunities. Still, Drucker recognizes that certain fac-
leaders. tors might limit the firm's social role. These limita-
tions include resources, skills and competencies,
and obligations to other key stakeholders.
A Dynamic Concept of the Firm and its Business
Definition
For decades, Taylor's concept of the organization To Drucker, the firm is more than an
dominated management's thinking and practice. assemblage of resources; it is a living
Organizations were a means of assembling and social entity, an integrated whole that
processing resources of production efficiently. To is capable of evolution, change, and
ensure efficient operations, organizational deci- transform ation.
sion-making was centralized, and employees per-
formed specialized and often narrowly defined
tasks. Taylor's organizations were hierarchical, Drucker's organization is more focused in its
formal entities whose primary (if not only) goal business definition. The firm is expected to build
was profit making. The command and control func- value by focusing on those areas in which it has
tion was left in the hands of the organization's skills and capabilities. Being focused, the firm is
upper echelon. also expected to foster innovation as a means of
Drucker's description of the firm and its function ensuring profitability and growth. Drucker's firm is
differed significantly from Taylor's views. Drucker also more decentralized, less hierarchical, more
notes that the firm is a social entity with multiple informal and, all in all, a more interesting place in
goals that center on producing and making things, which to work than the companies Taylor had en-
not simply making money. Making a profit and visioned. People, at all levels, are expected to as-
supporting growth are, of course, among the key sume responsibility for their careers and jobs.
organizational goals Drucker highlights. However, They are expected to use their brainpower, in ad-
Drucker sees these as the outcome of, not the rea- dition to their physical skills. Drucker's firm is also
son for, the firm's existence. The firm is a social outward looking and long-term oriented in its de-
institution, one that serves a societal objective and cision-making. To Drucker, the firm is more than an
provides a place in which people lead productive assemblage of resources; it is a living social entity,
careers, make effective use of their talents, and an integrated whole that is capable of evolution,
grow. change, and transformation.
Drucker believes that the firm exists at three In The Practice o/ Management, Drucker high-
levels. The first is as an economic institution that lights the need for clarity about the business def-
2003 Zahra 19

inition. He argues that the first question senior lineate key objectives and allocate resources ac-
management should ask is, "What is our busi- cordingly. Clarity of vision and unity of focus, in
ness?"" Competent management requires decid- turn, can improve the successful implementation
ing which business activities to pursue and which of a company's strategy. MBO also requires man-
activities the firm should avoid or abandon. Per- agers to organize and motivate their employees,
forming this demanding task requires a thorough promote effective communication, develop em-
analysis of customers and markets to determine: ployees, and measure performance. Through these
who the customers are (current and potential); activities, the link between strategy formulation
where they are located; how they buy the firm's and execution is established, enabling companies
products; and how the firm reaches these custom- to leverage their resources and create value.
ers. Management should also clearly define what MBO, as conceived by Drucker, was a revolution-
customers consider valuable and what they look ary process that was widely adopted by companies
for when buying the firm's products. Executives all over the globe. The use of MBO contributed to
also need to examine market structure and trends, improved company performance by focusing on
potential innovations that are likely to change cus- key goals, dedication of effort, use of real-time
tomers' expectations and demand function, the ef- feedback, and effective communication. It also in-
fect of customers' increased market knowledge, creased employees' participation and their sense
and the areas that cause customer dissatisfaction. of empowerment. MBO created a sense of shared
Drucker's firm is international in its focus and responsibility and accountability throughout the
strategy. However, in his later writings, Drucker company, further weakening Taylor's hold on man-
gives more attention to the issues that senior ex- agement thinking. Employees were becoming part-
ecutives must tackle as their firms expand interna- ners in managing the enterprise, capitalizing on
tionally. Drucker highlights the tensions that arise their knowledge and experiences. Participative
in the course of multinational expansion between management was being touted as an effective ap-
economic gains and sovereignty; between profit proach to motivating employees. Still, some found
making and protecting the environment; between this approach too detailed to be responsive to
centralization and decentralization. Drucker also changing market realities. Extensive and constant
discusses the strategic choices multinationals negotiation between management and employees
have to make and what they mean for their man- was also time consuming.'^ Even so, MBO was an
agement. He also observes that these firms have important contribution that challenged executives
multiple top-management teams, corresponding to to prioritize key objectives and manage their com-
the various businesses, countries, and regions in panies accordingly. Table 2 recaps Drucker's con-
which they compete. The multiplicity of these cept of the firm.
teams adds complexity to the organizational struc- Management: Tasks, Responsibilities Practices
ture, creating power struggles within the corpora- assembles a number oi chapters from earlier
tion. Drucker discusses various structural arrange- books, as stated in the companion interview, and
ments that can help to alleviate these problems, therefore offers a comprehensive and articulate
while highlighting the need for each firm to find view of Drucker's ideas. This is especially true
an effective structure that matches its own needs
and circumstances.
Drucker's concept of the firm has two additional TABLE 2
components that make it workable. The first is Drucker's Concept of the Firm
long-term planning by defining the firm's business
concept, allocating resources, and building the or- 1. The firm is outward looking; it is influenced by ils external
environment and shapes that environment.
ganization necessary to pursue its organizational 2. The firm is a social institution, not a mere assemblage oi
goals. The second is the use of management by financial resources. It creates goods and contributes to
objectives (MBO) to actualize the diverse financial society and therefore makes money. Profits and growth are
and non-financial goals that the enterprise might outcomes of the firm's production.
achieve. MBO is required to ensure the success of 3. The firm pursues multiple financial and non-financial
the strategic plans that focus on three issues: strat- goals, adopting a long-term view of the accomplishment of
these goals.
egy formulation, tactical planning, and budgeting 4. The firm emphasizes innovation throughout its different
to ensure successful controls. MBO is an important units and operations.
link in the successful execution of the strategic 5. The iirm is focused. Its management has to clearly answer
plan. The MBO process ensures that everyone in the question: "What is our business?"
the organization knows which goals to pursue. Ap- 6. Senior leadership is important for developing the spirit of
the organization and giving it meaning.
plying an MBO system, executives can clearly de-
20 Academy of Management Executive August

regarding the changing nature of the contempo- mand. Innovation involves the creation of new
rary organization and the sources of value cre- technologies and products to meet emerging mar-
ation. For example, in several books, Drucker notes ket needs. As a major managerial function, inno-
the rise of the knowledge worker and discusses the vation occurs {or should occur) in every part of the
importance of this trend for organizations and their enterprise, not only in engineering or R&D. Every
management. Knowledge workers are highly edu- unit should also have specific goals for innovation,
cated workers, employees, and managers; they even though it might be difficult to fully quantify
rely more on their brainpower than manual labor. these goals. Drucker offers his recipe for nurturing
Management: Tasks, Responsibilities, Practices ad- innovation. Here, too, management is viewed as
dresses this issue in greater depth, highlighting the center of gravity in promoting and sustaining
the role that knowledge plays in creating value for entrepreneurial efforts, as presented in Table 3.
companies and their shareholders. Knowledge
workers spend much of their time creating, pro-
cessing, intepreting, and using information. This Drucker's focus on innovation is one of
has important implications for the design of infor- the central points in The Practice of
mation systems intended to support strategic and
operational decision-making. The rise of the Management.
knowledge worker also influences the role of mid-
dle managers as a key hub of information and its Drucker's focus on innovation is one of the cen-
dissemination throughout the company's opera- tral points in The Practice of Management. Drucker
tions. Drucker also suggests that the rise of the notes that entrepreneurial activities do not just
knowledge worker challenges senior managers to happen; they should be carefully planned, or-
find ways to "invest" (deploy) intellectual capital ganized, and integrated. This view is now widely
so that it will create value. accepted in the literature.^'* Similarly, Drucker ap-
Given the recognition of knowledge as a foun- pears to favor dispersed entrepreneurship where
dation of competitive advantage, these issues different groups and units work on different things,
have received attention in the study of human re- capitalizing on the unique resources, skills, and
source management, international business, and opportunities that exist within individual units.
strategic management. Drucker states the impor- These activities often complement and augment
tance of the intellectual as follows: "The basic fac- those formal and informal activities that occur at
tor in an economy's development must be the rate the firm level. Innovation and other entrepreneur-
of 'brain formation,' the rate at which a country ial activities are important managerial responsi-
produces people with imagination and vision, ed- bilities, but they are also everybody's job.'^
ucation, and theoretical and analytical skills."
Clearly, business schools and firms have an im-
portant role fo play in the formation and effective TABLE 3
utilization of this brainpower. Drucker on Nurturing Entrepreneurship

According to Drucker, building an entrepreneurial company

Innovation and Entrepreneurship as Key requires several managerial activities:
Managerial Responsibilities 1. Setting clear and specific goals for innovation ior each unit
within the organization, as management would do for any
As noted, Drucker's firm is a dynamic, adaptive, functional area (e.g., production).
and evolving being that is intimately connected to 2. Capitalizing on the diversity of the types of innovation.
its external environment. It thrives on and wel- Innovation could take the form oi new products (services),
processes, or systems. Innovations could be radical or
comes change. It also induces change into its mar- incremental, and both have different but complementary
kets and external environment. The Practice of roles in business creation and improving performance.
Management views innovation as vitally impor- 3. Recognizing the multiple sources of innovation within and
tant for value creation in small and well-estab- outside the company and using these sources to develop
lished companies alike. While some equate entre- specific ideas or targets for innovation.
preneurship with independent start-ups, Drucker 4. Supporting innovation through patient investments over a
long period of time. There is a need to promote and harvest
recognizes its crucial value for business develop- innovations, especially in those areas where the pace of
ment and survival in established companies.' ^ technological change is slow.
Thus, regardless of the type oi business or indus- 5. Besides promoting innovation in products (services),
try, Drucker suggests that management has processes, and systems, Drucker emphasizes the need for
distinct entrepreneurial functions: marketing and innovation in the various skills and activities needed to
innovation. Marketing centers on stimulating de- develop and exploit these innovations.
2003 Zahra 21

It is not a coincidence that Drucker's view of the cornerstone in the company's quest for superior
firm mirrors current prescriptions for improved in- financial performance.
novation and entrepreneurship. Drucker's organi-
zations are relatively decentralized and have flat
structures that promote communication, sharing of The "Spirit of the Organization": Leadership and
ideas, and agile action. The central command and Effective Governance
control function that Taylor once envisioned is now One of my favorite chapters in The Practice oi
widely diffused throughout the decentralized or- Management is entitled "The Spirit of the Organi-
ganizational structures that Drucker favors. Mana- zation." Here, Drucker discusses the critical role
gerial tasks, responsibilities, and influence are that senior leaders play in giving the organization
also diffused throughout the company and there- its character and defining its culture. He also ex-
fore provide the coordination necessary to ensure plores the dysfunctional effects of executive com-
coherence and clarity of vision. Entrepreneurship pensation and overemphasis on short-term perfor-
is both a creative and disciplined process. mance. Drucker emphasizes the importance of
Drucker's continued interest in promoting inno- tying rewards to performance so that executive
vation in established companies is evident from compensation is both an incentive and a reward.
the publication of his book Innovation and Entre- He says that integrity should be the litmus test of
preneurship: Practice and Principles in 1985.'^ managerial character. Finally, Drucker questions
Drucker emphasized three essential ingredients for the fallacy of the one-person CEO, favoring the
entrepreneurial management: having a clear market notion of a senior management team. The CEO's
focus, having financial insights, and assembling a job is demanding, and the tasks are countless,
competent top management team. Drucker pays spe- isolating senior executives from market realities. A
cial attention to the issues associated with technol- well-organized top management team can capital-
ogy commercialization—an area that plagued ize on the diversity of the expertise among its
many companies throughout the 1980s and 1990s. members and provide leadership throughout the
These companies have excelled in innovation company.
but have failed to successfully commercialize In The Practice of Management, Drucker tackles
their discoveries.''^ the thorny issue of the relationship between chief
It is remarkable that Drucker formulated and executive officers (CEOs) and their boards, and
popularized such a winning recipe for successful addresses the fundamental issues that surround
innovation in 1954. The integrity of his formula effective corporate governance. Drucker also dis-
remains intact. Indeed, a large body of research cusses effective ways to restructure and organize
has appeared over the past three decades, support- the board, making it an effective instrument of
ing Drucker's emphasis on goal setting for successful governance.2" Table 4 summarizes Drucker's per-
innovation. Research findings also support the im- spective on this complex issue.
portant role of patient investments for successful in-
novation and other entrepreneurial activities.'^ Ac-
cumulating research evidence also shows that TABLE 4
innovation and entrepreneurship are crucial for the Drucker's Views on Effective Corporate
profitability and growth of companies.'^ Governance
One of the key points that emerges from the 1. Boards of directors, in many cases, have become a legal
companion interview with Drucker is the need for fiction—failing to add value. A major part of the reason for
strategic focus to stimulate and nurture innova- this failure is the legal definition of the role of the board.
tion. Drucker highlights the need for an organized 2. One of the CEO's most important tasks is to maintain a
strong board.
process of systematic abandonment whereby the 3. A strong board is composed oi outside directors who have
firm exits operations or businesses where it cannot never served as full-time officers oi the company. Outside
achieve excellence. This process requires compa- directors are better positioned than insiders to monitor
nies to select the criteria by which they define senior management.
excellence, undergo a strategic audit of their oper- 4. We should not expect directors to know all the details of
ations, and select those businesses that will be the company's operations. Directors should have a broad
view of the company, look for patterns, probe senior
retained within the business portfolio. This pro- managers' assumptions and plans, and serve as the
cess gives managers an opportunity to explore "supreme court" as issues arise. Directors are expected to
possible sources of synergy among businesses and come to action at times of crises, if necessary replacing tha
decide how best to invest resources to build those CEO.
units that are retained. As with other parts of a 5. To attract good directors, membership on the board should
business, Drucker emphasizes strategic focus as a be financially attractive.
22 Academy of Management Executive August

Reading through the five items listed in Table 4, New York: Wiley. For an interesting perspective on the powerful
I am struck by the fact that they have become a contributions of Peter F. Drucker to the field in general, see
Business Guru Trading Cards: http://www.Business2.com/
major part of the recommendations currently being gaUery/02,2ia2.3%7c47cl0,00.html. December 29, 2002.
widely debated on reforming corporate gover- •* Drucker, The practice of management, 47,
nance. Over the past two decades in particular, ^Atkinson, A. A., Waterhouse, J. ]., & Wells, R. B. 1997. A
there has been a strong emphasis on clarifying the stakeholder approach to strategic performance measurement.
domain of directors' responsibilities. There has Sloan Management Review. 38: 25-37; Feeman, R. E., & McVea,
been a growing agreement on the desirability of J. 2001. A stakeholder approach to strategic management. In
M. A. Hitt, R. E., Freeman, 8f J. S, Harrison (Eds.). Handbook of
increasing outside directors' representation. Com- strategic management. Oxford, U. K.: Blackwell Publishers: 189-
panies have also provided financial incentives to 207; and Freeman, R. E. 1984. Strategic management: A stake-
directors to attract the most qualified individuals holder approach. Marshfield, MA: Pitman Publishing Inc.
to serve on their boards. Several mechanisms have ^ Drucker, The practice of management, 62-87.
also been put in place to improve directors' access 'Ibid., 4-5.
to accurate and timely information that allows ^bid., 3-10.
^ Erick Schonfeld: Peter Drucker interview—Unabridged.
them to probe management assumptions.2' Yet, re- Business 2.0.http://www.husiness2.com/articles/web.
search findings on the merits of these recommen- '° Drucker, The practice ol management, 50.
dations and efforts are contradictory, helping "Ibid, 49.
perhaps to serve as an important reminder of '^ Management by objectives (MBO) has been the subject oi
Drucker's emphasis that having a strong board is considerable study and discussion. For an overview of this
one of the CEO's most important responsibilities. It approach and its mechanics, see Kotelinkov, V. 2002. Manage-
ment by Objectives. http://vwrw.lOOOventutes.com/business_guide/
is also clear that, when it comes to structuring and m gm t_m bo_m ain.html.
organizing boards, one size does not fit all.^^ '^ Drucker, The practice of management, 39-41. Drucker also
Drucker's central message, therefore, remains the discusses the importance oi having goals for innovation, pp.
same; effective governance is crucial to company 68-71. In addition, Drucker recognizes the various forms oi in-
performance, and strong, independent boards can novation in an established company, pp. 68-69.
help improve the CEO's job performance. '* Amabile, T. M., et al. 1996. Assessing the work environment
ior creativity. Academy of Management Review, 29: 1154-118;
Floyd, S. W., & Lane, P. ]. 2000. Strategizing throughout the
organization: Managing strategic renewal and strategic role
Drucker's central message, therefore, conflict. Academy of Management Review, 25: 154-177; and
Kotter, J. P. 2001. What leaders really do. Harvard Business
remains the same: effective governance Review, 71(11): 3-il.
is crucial to company performance, and '^Birkinshaw, I., & Hood, N. 1998. Multinational subsidiary
strong, independent boards can help evolution: Capability and charter change in foreign-owned sub-
sidiary companies. Academy of Management Review, 23: 773-
improve the CEO's job performance. 795; Birkinshaw, ]. 1997. Entrepreneurship in multinational cor-
porations: The characteristics of subsidiary initiatives.
Strategic Management Journal 18(3): 207-229; Burgelman, R. A.
The Practice of Management: A Grand Vision 1983. A process model of internal corporate venturing in the
diversified major firm. Administrative Science Quarterly, 28:
This article has highlighted five key areas that I 223-244; and Burgelman, R. A. 1994. Fading memories: A process
consider crucial to understanding why Drucker's theory oi strategic business exists in dynamic environments.
The Practice of Management has remained such an Administrative Science Quarterly, 39: 24-56.
'^ Drucker, P. F. 1985. Innovation and entrepreneuiship: Prac-
influential book for 50 years. Drucker's powerful tice and principles. New York: Harper & Row, Publishers, Inc.
ideas have offered a vision for the discipline and " Brown, M. 1997. Performance metrics for a technology com-
practice of management—defining our work, the mercialization program. International Journal of Technology
nature of the managerial task, and the field in Management, 13(3): 229-245; Walsh, S. 2001. Portfolio manage-
general. These insightful ideas, combined with a ment for the commercialization of advanced technologies, En-
lively communication style and clear logic, have gineering Management Journal, 13(1): 33-38; and Zahra, S., &
Nielsen, A. P. 2002. Sources of capabilities, integration and
shaped our thinking. The Practice of Management technology commercialization. Strafegic Management Journal,
is far larger than the various techniques it embod- 23: 377-398.
ies. It is a grand vision for management as a field, '^ Drucker emphasizes the need for such patient investments;
a vision that we should cherish. The practice of management, p. 70. In support oi this position,
see Creating an economic environment for technological com-
petitiveness, 1998, Washington, DC: The institute oi Electrical
Endnotes and Electronics Engineers—United States of America. http:/l
www.ieeeusa.org/forum/POSlTlONS/campete.html.
' Drucker, P. F. 1954. The practice of management. New York: '^ Baden-Fuller, C. 1995. Strategic innovation, corporate en-
Harper & Row, Publishers, Inc. trepreneurship and matching outside-in to inside-out ap-
^ Ibid., 3. proaches to strategy research. British Journal of Management, 6:
^ Wren, D. A. Tbe evolution of management thought. 4th ed. S3-S16; Block, Z., & MacMillan, I. C. 1993. Corporate ventuiing:
2003 Zahra 23

Creating new businesses within the Him. Boston: Harvard Busi- meta-analysis. Academy of Management Journal, 42: 874-687.
ness School Press; Burgelman, R. A. 1983. A model of the inter- For an evaluation of the success of various approaches, see Zay,
action oi strategic behavior, corporate context, and the concept T. C, Sr.. & Zahra, S. 1995, The seven most popular approaches
of strategy. Academy of Management Review, 8: 61-70; to corporate board reform: Myth or reality? Directorship, 21(7):
Burgelman, R. A. 1991. Intraorganizational ecology of strategy 6-10.
making and organizational adaptation: Theory and field re- '"^ There have been several reviews of these findings. One of
search. Organization Science, 2: 239-262; Burgelman, R. A, 1994. the earliest is Zahra, S., & Pearce, ]. 1989. Boards of directors and
Fading memories: A process theory oi strategic business exist corporate financial performance: A review and integrative
in dynamic environments. Administiative Science Quarterly, 39: model. Journal of Management, 15(2): 291-334. Other reviews
24-56; Ireland. R. D., et al. 2001. Integrating entrepreneurship include: Bhagat, S., & Black, B. 1999. The uncertain relationship
and strategic management action to create Iirm wealth. The between board composition and firm performance. Business
Academy of Management Executive, 15(1): 49-63; Zahra, S. A. Laviryer. 54: 921-963; and Dalton, D. R.. et al. 1998. Meta-analytic
1995. Corporate entrepreneurship and iinancial performance: reviews of board composition, leadership structure, and finan-
The case of management leveraged buyouts. Journal of Busi- cial performance. Sfrafegic Management Joumai, 19: 269-290.
ness Venturing, 10: 225-247; and Zahra, S., Neubaum, D. O., &
Huse, M. 2000. Entrepreneurship in medium-size companies:
Exploring the effects of ownership and governance systems.
Journal of Management, 26(5): 947-976.
Shaker A, Zahra is Paul T. Bab-
^° In The practice of management, Drucker discusses the son Distinguished Professor of
characteristics, structures, and processes of effective boards. Entrepreneurship at Babson
This discussion appears in chapter 14, pp. 161-181. Interested College in Wellseley, MA. His
readers might review: Useem, M. 2001. Leading up: Lessons for research centers on the inter-
CEOs in 'managing' their boards. Directorship, 27(10): 1-6. section of corporate, interna-
^' Changes in the composition and roles of directors have tional, and technology dimen-
been the subject of considerable study and analysis. Represen- sions of entrepreneurship. His
tative studies include Zahra, S. 1996. Governance, ownership research, teaching, and service
and corporate entrepreneurship among the Fordjne 500: The have received several awards.
moderating impact of industry technological opportunities. Contact: szahra@i)aibson.edu.
Academy of Management Jaurnal, 39: 1713-1735; and Dalton, D.,
et al. 1999. Number oi directors and financial performance: A