Managers, The Core Asset of an Enterprise

Since 2022, a group of four experts from Hyundai Motor Group and other sectors has gathered online every Monday at 7:00 AM for a two-hour intensive study of Peter Drucker’s seminal work, Management: Tasks, Responsibilities, Practices. These sessions serve as a melting pot where diverse field experiences meet profound philosophical insights.

This post is based on our discussion from September 8, 2025, regarding Chapter 29: Why Managers?

Introduction

I deliberated long and hard about which chapter to begin this blog series with. Management covers almost every concept of business. In an era where many business books emphasize “quick tips,” I wondered how to introduce such philosophical content effectively.

Ultimately, I chose Chapter 29, “Why Managers?” as our starting point. We must address this fundamental question before exploring anything else. While the existence of managers seems like a given today, Henry Ford once believed they were unnecessary, viewing them merely as “helpers” to execute his will. History proved him wrong, yet does the mere presence of managers in modern organizations mean the problem is solved? The members of our study group were slow to agree, expressing skepticism instead.

Management systems do not emerge naturally as a company grows; they must be intentionally constructed. Managers face the ongoing mandate of dismantling and recombining their management structure as the environment changes.

Drucker defined this shift as a “Phase Change”. Just as an insect supported by an exoskeleton cannot simply grow into a vertebrate with an endoskeleton without a fundamental structural transformation, an organization must radically change its design principles to survive in a new environment.

Essence of This Chapter by Peter Drucker

Management is Not a Delegation of Ownership: Drucker emphasized that management is an independent “organ,” not a secondary function derived from ownership. When an enterprise exceeds a certain size, “asset management” and “business management” become entirely different dimensions. If an owner refuses to submit to the management structure, even the ownership itself may be jeopardized.

Structures Do Not Evolve Naturally: Management systems do not emerge naturally as a company grows. When complexity reaches a critical threshold, traditional methods inevitably fail. Survival requires replacing the old system with an entirely new structure. Purposely triggering this “Phase Change” is a vital task of a manager.

The Manager is a Resource, Not an Expense: Drucker predicted that as automation advances, the need for managers will only increase. A manager is the most expensive, fastest-depreciating, and most essential resource of an enterprise. While it takes years to build a management team, it remains a fragile link that can collapse instantly from a single poor decision.

Painful Questions for Today’s Leaders (Discussion Highlights)

The Ultimate Goal of the Management: Sustainable Survival

Corporate lifespans are shrinking rapidly. According to McKinsey, the average tenure of an S&P 500 company has plummeted from 33 years to just 16 years over the past six decades—a stark reflection of accelerated technological disruption and aging business models.

The automotive industry is a prime example; after a century of relative stability since Henry Ford, the sector is now facing a total paradigm shift. Tellingly, this transformation is being driven by newcomers like Tesla and Big Tech, rather than traditional incumbents. As Thomas Kuhn noted in The Structure of Scientific Revolutions, old paradigms are often replaced by new ones as the “old guard” fades away. In this light, the failure of legacy firms during a transition is an expected outcome.

Furthermore, AI is challenging the century-old assumption that humans are the sole decision-makers. We agreed that an “intentional redesign” of management structures is more urgent than mere technology adoption. Integrating new solutions into an obsolete structure is as futile as trying to fit vertebrate muscles inside an insect’s exoskeleton.

The Trap of Functional Organizations: Plenty of ‘Technicians’ and ‘Administrators,’ but Few ‘Managers’

In this era of industrial transition, leaders are tasked with solving near-impossible challenges. However, under pressure, many become mired in immediate crises, losing sight of the fundamental question: “What should our company become?” This lack of holistic managerial thinking is a critical vulnerability in a rapidly changing environment.

In traditional manufacturing firms, rigid functional structures often amplify this issue. When leaders can reach the pinnacle of their careers based solely on specialized expertise, they tend to stay within the “fortress” of their own domains. This makes it incredibly difficult for even the most skilled “Technician” or efficient “Administrator” to evolve into a “Manager” responsible for the entire enterprise. The fact that many executives from large corporations struggle to transition into managerial roles in other sectors suggests their domain knowledge has not expanded into universal “managerial competence.”

Ultimately, this is a matter of how we manage the asset known as a “manager.” With the average tenure of new executives at just 1.5 years, it is clear we are treating our most expensive resources as mere consumables. A manager is both the subject who conducts management and an entity that must “be managed” by the organization. We urgently need systems that support leaders to grow continuously and deliver collective results.

Conclusion: Beyond Hierarchy, Focus on ‘Function’

What we need now is not just benchmarking or a reliance on past success. We must build a “design function” that can oversee and lead the transformation of the management structure itself. A sophisticated state of management does not arrive on its own.

We must begin the painful process of dismantling the “inherited methods” of the past and establishing a strategic skeleton unique to our own enterprise. The absence of such reflection is more than mere inefficiency; it is a fatal flaw that decides a company’s survival in times of transition.

Managers must now ask themselves: