Peter F. Drucker and The Next Society Part 2: How a New Global Workforce Will Shape Strategy
Politicians who claim they will bring manufacturing jobs back to the U.S. should read the works of Peter F. Drucker. Keep Drucker’s observations of the “Next Society” in mind as they have a direct impact on strategy, innovation and leadership.
This article presents Peter F. Drucker’s observations on what he called the “Next Society,” as explained in “Managing in the Next Society,” (2002) and in an earlier book, “Managing in a Time of Great Change” (1995).
Drucker referred to the “Next Society” as the major social changes that will surely impact and trickle down to all business strategy. These included; The 4th Information Revolution, Changing Demographics, The Steady Decline in Manufacturing, Transformation & Splintering of the Workforce, and Political Instability and Social Unrest.
[Read Part 1 to learn about The 4th Information Revolution and Changing Demographics]
In addition to the rise of the Internet and technology and changing demographics, the decline in manufacturing will play an equal part in posing threats and intensifying competition (as well as creating opportunities) for certain economies. The following outlines the final three social changes from Drucker’s “Next Society”:
Steady Decline in Manufacturing
Drucker predicted that there will be a steady decline in manufacturing as a provider of wealth and jobs. According to Drucker, economically, manufacturing is becoming marginal in developed countries. This has actually been occurring for the last several decades throughout the world. Politicians who claim they will bring manufacturing jobs back to the U.S. should read Drucker.
Drucker had observed the following major changes taking place in the manufacturing sectors of developed countries.
First, labor costs as a percent of total manufacturing costs have declined from 30% of total manufacturing costs to 12 to 15% of total manufacturing costs in the last 40 years.
The implication of this, according to Drucker, is that developing countries will no longer be able to compete solely on the basis of cheap labor costs.
Second, manufacturing output will double in developed countries by 2020 but at the same time and due to information technology, manufacturing employment will decrease. As an example, manufacturing employment as a percent of the total workforce in the U.S. has already decreased from 30% to 15% in the last 40 years and manufacturing employment is estimated to comprise less than ten to 12% of the workforce by 2020.
The same trend in decreasing manufacturing employment can also be seen in other developed countries in Europe as well as in China. Government studies on China have reported that since 1995, manufacturing employment has dropped 18%, mining employment has declined 35% and agriculture down 22%. Drucker concluded that the manufacturing sector would be a declining producer of wealth in terms of the percentage of a country’s GDP.
This will drive protectionism as countries attempt to protect their domestic manufacturing industries. Was Drucker predicting this topic for the 2016 campaign speeches? How to convince labor unions, anti-globalization activists, and self-serving politicians that this is the real world of the 21st Century needs to be addressed.
Despite China’s accession to the WTO in 2001, China continues to experience U.S. protectionism efforts relative to its steel, electronic appliances, furniture, textiles, and other industries through the execution of the “safeguard” provisions agreed to by China as a requirement for its WTO membership.
Subsidies to U.S. domestic impacted industries will also be used to foster protectionism. Some argue that we probably need to exit most of our trade agreements, such as NAFTA, and consider border taxes and other tariffs to protect domestic industries.
Drucker was against such protectionist policies citing the lack of competition, decreased innovation and, as a result, causes the decline of an industry. He cited the machine tool industry which no longer exists in the U.S. as a direct result of such protectionist policies.
Transformation & Splintering of the Workforce
The workforce in developed countries is transforming from manual to knowledge workers, and into two groups: younger and older employees, and then into other groups consisting of full-time employees to outsourced employees and consultants. The need to work beyond normal retirement age is also occurring. Much of this was covered in one of my previous articles on "Leading Millennials."
As a result of changing demographics, workforces will be comprised of young workers and older workers. This is also because people will continue to work beyond the normal retirement age as a result of better healthcare (maybe as Drucker wrote this before the ACA?). Full-time employees of an organization will also change to a combination of full-time employees and outsourced employees who will belong to a human resources staffing company, or they may be independent contractors.
There will also be knowledge workers as discussed in a previous article. This later mobile workforce will present challenges to human resources departments since existing policies presently do not take into consideration the splintering of the workforce as Drucker described.
Managing and leading non-employees will also create the need for creative leadership on the part of management to ensure the retention of these groups, and their motivation, commitment, and performance.
As Drucker pointed out, they will have to be treated as “partners,” not employees, and few managers know how to do that today. Once again, refer to my articles on "Leading Millennials" as well as "Leading the Knowledge Worker" which addressed this issue.
Political Instability and Social Unrest
Drucker felt the first several decades of the 21st century would be one of political instability and social unrest. He commented that this would be the norm throughout the world and in fact is occurring now in Europe, Africa, Latin America, Southeast Asia, the Middle East, parts of the old Soviet Union, and even in Hong Kong and on Mainland China, although not covered by the international press.
One need not elaborate on this – just throw a dart on a map of the world.
Keep Drucker’s observations of the “Next Society” in mind as they have a direct impact on strategy, innovation and leadership. One of the key “takeaways” (or more simply, "what to understand”) here would have to be changing demographics and the opportunities and problems this will create.
Companies will need to really examine changing demographics and their impact on business. This must be done now since as previously mentioned, Drucker observed these changes are taking place now – "The Next Society” is here.
Robert W. Swaim, Ph.D. © 2017
Cape Canaveral, Florida
Dr. Robert W. Swaim was a colleague and personal friend of Drucker’s for nearly thirty years and worked with him for five years prior to his death to develop both the Drucker EMBA and Executive Development Programs for China. He spent 10 years living in Beijing and teaching these programs. He is the author of the "Strategic Drucker-Growth Strategies and Marketing Insights from the Works of Peter Drucker," John Wiley & Sons (2009). He was recently recognized by the University of Pittsburgh Joseph M. Katz Graduate School of Business and College of Business Administration for his lifetime achievements. Dr. Swaim presently resides in Cape Canaveral, Florida.