THE GREAT MANAGEMENT guru Peter Drucker believed that the biggest management challenge of the 21^st century is improving the productivity of knowledge workers. “Workers by brain” are relentlessly replacing “workers by hand” as the dynamos of the modern economy, he argued. Thus, the most valuable companies (Google, Microsoft, and the rest) are almost all knowledge- rather than resource-intensive. Yet we have little idea about how to make them happy and productive.

The average rate of productivity growth is significantly lower in post-industrial societies than it was in industrial societies. The bloated public sector employs ever more paper-shufflers. And productivity seems to be falling in the most important parts of the knowledge economy. Research productivity has declined sharply in software, agriculture, and medicine, the average age of Nobel Prize-winners has risen steadily, and the size of the teams involved in science has increased.

How can we improve this dismal record? This question was at the heart of the 16^th annual Peter Drucker conference which took place in Vienna (Drucker’s hometown) Nov. 14-15. The Drucker conference is now a fixture of the management-business calendar, and this one dealt with a particularly timely subject. The audience was surprisingly pessimistic about the status quo given that so many of them were middle-managers or above — and surprisingly enthusiastic about embracing radical solutions to our current malaise. Here are my (inevitably biased) conclusions from two days of discussion.

We need to start by slaying zombie ideas: the intellectual ghouls that stalk the halls of private and public sector organizations. The most dangerous zombie idea is F. W. Taylor’s theory of scientific management: namely, that managers should replace rule-of-thumb work methods with rules based on the objective study of work; divide work into discrete tasks; provide “detailed instruction and supervision of each worker in the performance of that worker’s discrete task”; measure the worker according to his ability to comply with this ideal; make liberal use of punishments and rewards. This theory is a child of the machine age when managers were the only educated people around, but it survives in a post-industrial age when motivation is a much more important tool than measurement — and may well be revitalized by the AI revolution.

Michele Zanini, the co-founder of the Management Lab, pointed out that this approach suffers from three mortal problems: It rests on the false assumption that managers know more about the job in hand than workers; it demotivates people who are used to managing themselves; and it creates lots of unnecessary levels of management.

Amy Edmondson, of Harvard Business School, argued that scientific management aims to squeeze errors out of the system whereas errors are a necessary part of creative work. Knowledge workers should focus on “failing well” (learning from their mistakes) rather than avoiding all failure. Gianpiero Petriglieri, of INSEAD business school, argued that the most successful knowledge organizations are “homes” rather than industrial machines. They treat their workers as volunteers motivated by the love of what they are doing rather than conscripts who need to be monitored and measured. Everybody in the room seemed to agree that managers are too wont to trespass on knowledge workers’ most important resources — time and attention — with endless meetings and box-ticking exercises.

This sometimes sounded too good to be true. What’s not to like about being “empowered” to do your own thing or skiving off meetings or being “liberated” from intrusive measurements? But what happens if “doing your own thing” means twiddling your thumbs? Or if removing “intrusive measurements” means that organizations slide into bankruptcy? I read Modern History at Oxford University in the late 1970s, before its current regime of micro-management was in place and, though my best tutors were wonderful, the worst were scandalously bad, and could have done, at the very least, with a good kick up the backside.

So “soft” management of knowledge workers can only work if it is coupled with a bit of “hard” management.

Organizations need to devote more energy to hiring the right people, particularly those with the raw ability to thrive in a variety of circumstances. Jeff Bezos liked to ascribe Amazon’s success to its high “hiring bar,” including having one person in the room whose job was to give reasons for not hiring the candidate. They need to create a rigorously meritocratic internal system — promoting high potentials while easing out also-rans. The critics of scientific management are right that nothing is more futile than measuring the wrong things such as the number of e-mails you send or the number of meetings you attend — “mere busyness,” as it were — but there is still a case for measuring the right things such as breakthrough articles or ideas.

The performance of knowledge workers is at its most worrying in the public sector. I hosted a lunch of senior public sector managers from Mitteleuropa and asked them, casually, what proportion of their workforces was surplus to requirements, expecting to hear only complacent answers. The only disagreement in the group was whether the number was one-third or two-thirds.

The public sector has grown remorselessly over recent decades regardless of performance. The British Ministry of Defense now employs more officials than there are service personnel in the Royal Navy and RAF combined. The public sector has also spawned a class of people who do mysterious jobs that didn’t exist a few years ago. High-flying civil servants would undoubtedly profit from more freedom to innovate, as we struggle to adjust the state to new demands and technologies, but reformers also need to wield a more old-fashioned management tool — obliteration.

“Obliteration” is a depressing place to end given the state of the world. So here are two more optimistic ideas that echoed through the conference.

First: Managers should learn how to speak to knowledge workers in their own language rather than in the desiccated language of management-speak. Recognize that knowledge workers are more motivated by the esteem of their peers than by “management goals.” Stroking people’s egos is much more cost-effective than monitoring their every move. And understand that nothing is so precious to a good knowledge worker than being given the time and resources to satisfy their curiosity.

Second: Learn how to harness enthusiasm on a big scale. John Kennedy galvanized the American space program (and with it a cascade of high-tech industries) with his speech at Rice University in September 1962, by setting a specific goal (putting a man on the moon before the decade was out). Too many government missions these days are too vague or open-ended to galvanize activity (improving European competitiveness before the end of days, for example). Governments need to set themselves targets that are both ambitious and concrete. And private corporations need to recognize that their knowledge workers are just that: workers who value knowledge and want to multiply it.

BLOOMBERG OPINION