Page 104 - The Drucker Lectures

Managing Large Organizations [ 85

But even more difficult is the subsidiary in Colombia, where,
if you are a pharmaceutical company, Colombia is a developed
market. In fact, the only industry for which developing countries
are fully developed markets is the pharmaceutical for the simple
reason that pharmacy is the only part of modern health care a
very poor country can really afford. It’s the cheapest part, and it
does 60 percent of the job. And so Colombia spends proportion-
ally more per capita on prescription drugs than most developed
countries, and yet it’s a small market because of the small urban
population—roughly similar to one good sales district in a de-
veloped country, let’s say Manchester or Kansas City.
And yet that head of your subsidiary there has to be a distin-
guished man because he will matter a great deal. So he probably
is the most distinguished medical administrator, former dean
of the medical school, and a minister of affairs. How does he
relate to the top? He has to be an equal because he’ll negoti-
ate with the government there now, with the Catholic nun who
buys drugs for Mercy Hospital. You’ll need his input. He’s a very
distinguished man; very few of that caliber could you get into
your own organization. How do you structure him? And so you
have all kinds of new complexities, which make the simple, tra-
ditional structure very hard. Then one has to say, “First, we need
new structural principles.” The answer to it is, “We ain’t got
none. We have patchwork.”
We had in the history of organization two very simple princi-
ples. One is from [French mining engineer and early twentieth-
century management theorist] Henri Fayol, and the other one
was what [General Motors Chairman] Alfred Sloan and then
I codified as “federal decentralization.” And they worked where
they worked like a charm, but they have strict requirements and
severe limitations.
You know, when I first heard of the Bell telephone system,
it was beautifully organized and very simple, a good operating