Peter Drucker on Management: Three Themes

Cornelis A. “Kees” de Kluyver Masatoshi Ito Professor of Management Peter F. Drucker and Masatoshi Ito Graduate School of Management Claremont Graduate University Claremont CA 91711 October 2009

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About Peter F. Drucker
 Born in Vienna on November 19, 1909  Ph.D in law from Frankfurt University in 1931  Became senior editor at the Frankfurter GeneralAnzeiger when he was just 21  Marrried Doris Schmitz in London in 1937  Moved to the U.S. shortly thereafter; became professor at Sarah Lawrence and Bennington colleges and a correspondent for the Financial Times.  In 1950, Drucker began a twenty-one year stint as a professor at the Graduate Business School of New York University. He established himself as a consultant to major corporations, with early clients including General Motors and Sears Roebuck.  In 1971, Drucker moved to Claremont Graduate University in Claremont, California where he would serve as professor of social sciences and management for over 30 years.
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About Peter F. Drucker
 Well before his passing in 2005, Drucker was already widely recognized as the most important thinker of his time on how organizations ought to be managed. He influenced leaders and organizations as diverse as Google, General Electric, the Girl Scouts, and the United Farm Workers.  Drucker‟s contributions extend well beyond business – he called himself a "social ecologist": a close observer of the way humans are organized across all sectors - in business, but also in government and in the nonprofit world.  Drucker wrote 39 books and hundreds of articles in publications from The Wall Street Journal and the Economist to Harper's Magazine and Harvard Business Review.
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Let us begin with a few comments on
The importance of theory and practice The importance of candor

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The importance of theory and practice

Theory
If you know exactly how to do it, but nothing goes well

Practice
If everything goes well, but nobody knows why

In our company we have managed to combine theory and practice: nothing goes well, and nobody knows why
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The importance of candor
 Jack Welch in his book Winning • “Lack of candor in the workplace is the biggest dirty little secret in business”

 This is a major reason why most organizations perform well below their potential

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Three Major Themes
Philosophy
Corporate Responsibility and Profit Management as a Liberal Art Strategy and Purpose

People, Performance and Culture Roles/ Contributions
Manager Leader Entrepreneur
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Corporate Responsibility and Profit
“A business that does not show a profit at least equal to the cost of capital is irresponsible; it wastes society‟s resources. Economic profit performance is the base without which business cannot discharge any other responsibilities, cannot be a good employer, a good citizen, a good neighbor. But economic performance is not the only responsibility of a business anymore than educational performance is the only responsibility of a school or healthcare the only responsibility of a hospital”
Source: Drucker, Managing in a Time of Great Change
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Corporate Responsibility and Profit
Drucker: For Business
• Profit is not an objective, it is a result • Objective is to serve customers • Stakeholder value, not shareholder value!

Even Jack Welch changed his mind
• GE wants to be known as “The Good Company”

Capital is no longer the key scare resource
• So why should shareholders have primacy?

Knowledge, talent and commitment are Key today
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Management as a Liberal Art
“Management is what tradition used to call a liberal art – “liberal” because it deals with the fundamentals of knowledge, self knowledge, wisdom, and leadership: “art” because it deals with practice and application”

Source: Drucker, The New Realities

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Management as a Liberal Art
Drucker: Management is not a science It is a practice
• It draws on science • But also on arts and the humanities

It is critical to all sectors
• Business • Non profits • Government

All sectors are key to a functioning society
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Strategy and Purpose
“ „Who‟s the customer?‟ is the first and the crucial question in defining business purpose and business mission. It is not an easy, let alone, an obvious question. How it is being answered determined, in large measure, how the business defines itself. The consumer – that is the ultimate user of a product or service – is always the customer”
Source: Drucker, Management: Tasks, Responsibilities, Practices

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Strategy and Purpose
Drucker‟s Three Big Questions:
What is our Business? Who is the Customer? What does the Customer consider Value?

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Management is about Human Beings
“The task of management is to make people capable of joint performance, to make their strengths effective and the weaknesses irrelevant. This is what organization is all about, and it is the reason that management is the critical, determining factor.” Source: Drucker, The New Realities

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Management is about Human Beings
Performance depends on people
Build on each person‟s strengths

Make their weaknesses irrelevant
• Complementary strengths of team members • Educating and training them for growth • Repositioning people when necessary

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Management is about Human Beings
Engage the full person
Unleash latent human potential Open the individual to
New possibilities Other people‟s ideas New cognitive connections

Enable greater self-control
The discipline to think strategically Motivation from within  strong will

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Management is about Human Beings
Candid feedback
Valid assessments
• 360 feedback

The A method of hiring
• A players: finding and keeping them • Collins – Who‟s on the Bus?

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Extending Drucker: From “people” to “Culture”

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Understanding Organizational Culture Key to Management Effectiveness
Culture: The beliefs and values that people in an organization have in common
The new discipline of “appreciative inquiry” builds on Drucker‟s advice What are the strengths of the organization to build on?

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Understanding Organizational Culture Key to Management Effectiveness
Culture as a Palm Tree
Level 1: Shared behavior

Level 2: Shared justifications and rationalizations

Level 3: Cultural Roots (Shared beliefs/values)
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Where are you on the culture map? Your associates?
No
Person believes as prescribed by the culture?

Adapter

Rebel

Yes

Good Soldier

Maverick No
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Yes
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Person behaves as prescribed by the culture?

Where are you on the culture map? Your associates?
Adapter Rebel

No
Person believes as prescribed by the culture?
Q1: What is the % in each corner in your organization? (Total=100%) Q2: What should be the % in each corner in your organization? (Total=100%)

Yes

Good Soldier Yes
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Maverick
No
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Person behaves as prescribed by the culture?

Culture Question: Over the past five years……
 What are the two decisions, events or incidents in your company that generated the greatest concern and controversy?
1. _____________________ 2. _____________________

 Why the concern or controversy?  Did any two beliefs or values come into conflict? If so, which one prevailed?

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Three Roles/Contributions
Manager

Leader
Entrepreneur

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A Scorecard for Managers….
“ The „bottom line‟ measures business performance rather than management performance. And the performance of business today is largely a result of the performance of management in years past. … The future of business is largely formed by present-management performance in four areas:
 Performance in appropriating capital  Performance in people decisions  Performance in innovation  Strategies versus performance

Source: Drucker, Managing in Turbulent Times
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What do managers contribute?
Drucker: A Manager is
• Someone who is responsible for the work of others • Gets better results fasters and with fewer resources

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How?
1. Planning and budgeting 2. Hiring/retaining the best person for each position 3. Ensuring each hierarchical position adds value 4. Abandoning wasteful, unnecessary work 5. Ensuring people‟s skills, effort and the support they receive match their job challenges
 Is this the case for yourself?  For the people for whom you are responsible?
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Focus on Contribution
“The great majority of executives tend to focus downward, They are occupied with efforts rather than with results. They worry about what the organization and their superiors “owe” them and should do for them. And they are conscious above all of the authority they “should have”. As a result, they render themselves ineffectual. The effective executive focuses on contribution. He looks up from his work and outward toward goals. He asks: “What can I contribute that would significantly affect the performance and the results of the institution I serve?””
Source: Drucker, The Effective Executive
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The GE “crossroads” model
Source: The Leadership Pipeline, Charan, Drotter and Noel (2001)

Turn #6 Turn #5

Turn #4
Turn#3

Turn #2 Turn #1

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Where are you on this map?
See: Mihaly Csikszentmihalyi (2003)

High

Anxiety

Flow

Challenge

Comfort Zone

Low Apathy/Boredom Low
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Relaxation

Skills

High
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Leadership IS Responsibility
“All the effective leaders I have encountered – both those I worked with and those I merely watched – know four simple things: a leader is someone who has followers; popularity is not leadership, results are; leaders are highly visible, they set examples; leadership is not rank, privilege, titles or money, it is responsibility”
Source: Drucker, The Essential Drucker

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What do leaders contribute?
1. Develop a clear sense of purpose and align all the stakeholders with the purpose
• •

What is the purpose? Why is it important? Why should anyone care? How will we achieve the purpose?
 Strategy and Execution

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What do leaders contribute?
2. Create change
• • • • Change people‟s mindset and behavior Strategic hiring of new blood Removal of old blood (poisonous) Role modeling by the leaders
 Words aligned with deeds  “Walk the talk”

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Exploiting Innovative Ideas
“There are four specifically entrepreneurial strategies aimed at market leadership: being “Fustest with the Mostest”; “Hitting Them Where They Ain‟t”; finding and occupying a specialized “ecological niche”; and changing the economic characteristics of a product, a market or an industry.”

Source: Drucker, Innovation and Entrepreneurship

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What do entrepreneurs contribute?
Exploration and exploitation of new business opportunities
• Independent entrepreneurs • Corporate entrepreneurs
Top, middle, bottom Distributed entrepreneurship

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What do entrepreneurs need to be successful?
Means Motive Opportunity

Recipe for “crime”!

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Thank You

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