(EDITOR'S NOTE: In his new book, "Managing for the Future," Peter F. Drucker, one of the world's most influential management thinkers, brings together his view on the new world business order and management imperatives of the 1990s and beyond.
In the first of two excerpts from his book, which appeared in yesterday's Sun, Mr. Drucker delineated five important areas that will bring wide changes in the social and economic environment. Today, he examines the productivity challenge businesses face in the '90s and beyond.
The productivity of the newly dominant groups in the work force, knowledge workers and service workers, will be the biggest and toughest challenge facing managers in the developed countries for decades to come. And serious work on this daunting task has only begun.
Productivity in making and moving things -- in manufacturing, farming, mining, construction, and transportation -- has increased at an annual rate of 3 to 4 percent compound for the last 125 years -- for a 45-fold expansion in overall productivity in the developed countries. On this productivity explosion rests all the increases in these countries in both the standard of living and the quality of life. It provided the vast increase in disposable incomes and purchasing power. But between a third and a half of its fruits were taken in the form of leisure -- something known only to aristocrats or to the idle rich before 1914, when everybody else worked at least 3,000 hours a year. (Now even the Japanese work no more than 2,000 hours a year, Americans around 1,800, West Germans 1,650.) The productivity explosion also paid for the 10-fold expansion of education and for the even greater expansion of health care. Productivity has become the "wealth of nations."
Before the productivity explosion it took at least 50 years for a country to become "developed." South Korea -- as late as 1955 one of the world's truly "backward" countries -- did it in 20 years. This radical reversal of what has been the norm since time immemorial is in its entirety the result of the productivity revolution that started in the United States around 1870 or 1880.
Productivity in making and moving things is still going up at the same annual rate. It is going up -- contrary to popular belief -- fully as much in the United States as in Japan or West Germany.
Indeed, the current productivity increase in U.S. farming -- 4.5 percent to 5 percent a year -- is far and away the biggest increase recorded anywhere at any time. And the U.S. productivity increase in manufacturing during the '80s -- 3.9 percent a year -- was in absolute terms actually larger than the corresponding annual increases in Japanese and German manufacturing, for the U.S. base is still quite a bit higher.
But in the developed countries the productivity revolution is over. There are simply not enough people employed making and moving things for their productivity to be decisive. . . .
And the productivity of the people who do make the difference -- knowledge workers and service workers -- is not going up. In some areas it is actually going down. Salespeople in the department stores of all developed countries now sell, adjusted for inflation, no more than two-thirds of what they sold in 1929. . . .
Tools of production
Knowledge workers and service workers range from research scientist and cardiac surgeon through draftsman and store manager to 16-year-olds who work as carhops in the fast-food drive-in. They even include large numbers of people who actually work as machine operators -- washing dishes in a restaurant, polishing floors in a hospital, pushing computer keys in a claims-settling department of an insurance company. Yet knowledge workers and service workers, for all their diversity, are remarkably alike in what does not work in raising productivity. But there are also important similarities in what does work for these workers. . . .
The first thing we have learned -- and it came as a rude shock -- is that capital cannot be substituted for labor (i.e., for people) in knowledge and service work. Nor does new technology by itself generate higher productivity in such work.
In making and moving things, capital and technology are factors of production, to use the economist's term. In knowledge and service work, they are tools of production. Whether they help productivity or harm it depends on what people do with them, on the purpose to which they are being put, for instance, or on the skill of the user. . . .
The investment in data-processing equipment now rivals that in materials-processing technology -- that is, in conventional machinery -- with the great bulk of it in services. Yet office and clerical forces have grown at a much faster rate. . . . And there has been virtually no increase in the productivity of service work.