Non-fiction: Concept of the Corporation

Overview
Peter Drucker's "Concept of the Corporation" examines the modern, large-scale enterprise through a deep study of General Motors in the mid-1940s. He treats the corporation as both an economic engine and a social institution, asking how such an organization should be structured, led, and integrated into the wider community. The book is equally a field report, a theory of organizational design, and a critique of managerial assumptions that treat production and labor solely as technical variables. Its central claim is that legitimacy and performance depend on balancing power with responsibility, inside the firm across levels of management and labor, and outside the firm in relation to society.

Federal Decentralization
Drucker’s best-known analytic contribution is his articulation of “federal decentralization.” He highlights GM’s divisional structure, semi-autonomous product divisions acting as profit centers, coordinated by a strong general management and supported by central service staffs. He shows how clear allocation of authority and accountability allows local initiative without losing coherence. Top management’s job is not to run operations but to define missions, set policies, allocate resources, and enforce performance controls. Central staff functions provide expertise and standards but must not usurp line authority. The system works only when measures like return on investment and market position are used to judge divisional performance, and when the center resists the temptation to re-centralize decisions that belong near the customer and the product.

Management’s Tasks
The book reframes management as a distinct function with specific responsibilities. Leaders must define the company’s objectives; balance the needs of present operations with the demands of innovation; design structures that fit the business’s logic; and build a pipeline of managers who can be trusted with autonomy. Drucker argues for objective-based control, financial discipline beyond mere volume targets, and clarity about what the business is and should be. He is skeptical of managerial habits that confuse policy with procedure, or measurement with control. Effective controls illuminate; they do not suffocate.

The Corporation as Community
A striking strand is Drucker’s insistence that the corporation is a social community. He criticizes the assembly-line factory for producing alienation and adversarial labor relations, particularly at the plant level. He calls for “industrial citizenship” and a “self-governing plant community,” in which workers have avenues for participation, status, and development. Suggestions range from works councils to broader job design and internal mobility that allows blue-collar employees to build careers. He does not romanticize labor nor condemn management; instead, he argues that enduring productivity requires commitment and meaning, not just compliance and incentives. The company’s obligations to its employees and local communities are integral, not ornamental, to its performance.

Performance and Responsibility
Drucker links performance to the customer and to society. Profit is necessary but not sufficient; it is a test of efficiency, not the purpose of the enterprise. He urges managers to measure the right things, market effectiveness, quality, innovation, alongside financial returns, and to accept the burdens of social power: education, fair dealing, and the stability of communities that depend on the plant. A corporation that ignores its social function invites resistance and loses the trust on which long-run results depend.

Impact and Legacy
The book both codified and popularized the divisional model and shaped the postwar conversation about management as a profession. Its portrayal of federal decentralization influenced generations of executives and scholars. Just as significant, its call for industrial citizenship foreshadowed later debates on employee engagement and corporate social responsibility. GM’s leadership disliked Drucker’s social critique and discouraged internal circulation, yet the analysis traveled far beyond Detroit. The enduring lesson is the unity of organizational design and social purpose: decentralization demands strong values and fair institutions, and economic performance rests on legitimacy earned inside and outside the factory gates.