Explore BrainMass

Peter Drucker on the Society of Organizations

Drucker offers the following statement in conclusion to his writings on the Society of Organizations: "The challenge that faces us now, and especially in the developed, free-market democracies such as the United States, is to make the pluralism of autonomous, knowledge-based organizations redound both to economic performance and to political and social cohesion."

What is Drucker saying with this quote? Do you agree or disagree? Does business really have other societal obligations besides making a profit?

Solution Preview

When Adam Smith put forward his philosophy of the 'invisible hand,' he said that if organizations and individuals were allowed to pursue their own interests, in a free and open market, competition would lead to innovation and more efficient use of resources. Ultimately, he believed that fair competition would lead to better and more affordable products for consumers, making everyone better off.

Peter Drucker took this philosophy, and strongly believed that it meant several things. For one, organizations ultimate responsibility wasn't to create profits for shareholders - their ultimate responsibility was to consumers (to create better and more affordable products for consumers). Profitability is a means to an ends, it gives a firm the basis for competition and allows the firm to remain a gong concern - and reinvest in better products and services.

He also strongly believed in the need for decentralization and corporate autonomy (businesses being able to make their own decisions, without too much interference from government). Like Adam Smith, he believe free and fair competition was the best way to ensure innovation and better use of resources.

In his earlier writings, he also believe in the death of the 'economic man.' The idea of the economic man is that all men and women see business as a way of pursuing their own interests. He recognized that human beings are not entirely self-interested, and had strong social needs. He believed that if organizations rejected the idea of the solely economic man, they would evolve themselves into 'plant communities,' places where employees and managers not only earned an income (met their economic needs), but also fulfilled their social needs.

Despite some community initiatives (and a lot of rhetoric), businesses today still play primarily an economic role in society. Drucker's heart still believes the world would be a better place if businesses were also a place for people to meet their social needs - where they could volunteer, be engaged in their community, and build a sense of civic pride. However, he stopped writing about this ...

Solution Summary

This solution explains Drucker's beliefs on the role of business in society, and the role that individuals play in both the businesses they work in and the communities they live in. It also provides a number of definitions and explanations for the concepts used in the quote provided. I strongly believe in Drucker's philosophy, and I explain how his philosophy reinforces Adam Smith's concept of 'the invisible hand.' This solution is 1216 words.