How to Apply the World’s Most Effective Management IdeasAdd bookmark
Effectiveness describes the ability to get things done to establish and reach planned goals successfully.
Peter Drucker did that in the classroom, as a writer, and as a management consultant to presidents of corporations, countries, non-profits and entrepreneurs all over the world. He was a genius of the type that appears maybe once in a hundred years or even less frequently. He developed the most effective management ideas seen anywhere. That’s largely why he's known as “The Man Who Created Management” or “The Father of Modern Management."
Peter was my Ph.D. professor and later my friend and mentor. His 39 books published while he was alive described what to do to achieve success in thousands of management situations. His death on November 11, 2005, at the age of 96 was a sad loss, not to just me, but to millions of others worldwide.
Peter Drucker’s Contributions to Management
Drucker’s contributions to management were many and basic. They include the concepts of decentralization, outsourcing and the decisive importance of marketing. In fact, he maintained that businesses had only two functions: marketing and innovation.
He was the only one to make clear a basic truth that few had considered: the purpose of a business, as far as society is concerned, is not to create a profit, but to create a customer, and that it was essential to consider this societal purpose in the construction of any business model.
The Concept of the Knowledge Worker
Drucker invented the term “knowledge-worker,” to describe the modern worker whose work was not primarily physical, but mental. He said that the knowledge worker would become increasingly important due to the demands of high technology. He predicted this more than fifty years ago and it has occurred as he predicted.
He recognized the increased importance of executive education at the graduate level and established an executive Ph.D. program at Claremont University in California. Here, senior executives learned that there was a “Drucker Difference” which was radically different from others.
He emphasized management based on specific liberal arts and moved the financial classification of personnel from classification as a cost to classification as an asset.
Developing Top Executives
The executive Ph.D. program that he co-developed with his dean, Paul Albrecht, and in which he also taught, was one of the first executive Ph.D. programs in the country. He subsequently helped executives grow their institutions, whether they were giant for-profit institutions like General Electric (GE), religious organizations like Saddleback Church or governmental ones including the military.
I was honored to be the first Ph.D. graduate of the program aimed at rising executives with the object of training the manager of the future for higher levels of responsibility in top management. That was forty-five years ago.
It helped me to achieve the rank of general in the Air Force, become a corporate executive at several companies, an entrepreneur, a full time professor at several universities and finally co-founder, president and CEO of an accredited and nonprofit graduate school. It also led to my representing the United States at some interesting international events.
Drucker’s reach was long and his sweep wide. His wisdom helped and inspired international entrepreneurs like Minglo Shao who founded the Drucker Academies of China, K.H. Moon of Korea and Masatoshi Ito of Japan whose name is now shared with Druckers as the name of the School of Graduate Management at the university at which he taught in California.
As mentioned previously, it's noteworthy that the CEO of GE, Jack Welch, caused GE’s already significant net worth to increase 4,000% in the nine years that he served and Fortune Magazine to name Welch “Manager of the Century.” This was not an idol title but had been attained through the specific actions during Drucker’s consulting with Welch shortly after becoming CEO.
Welch and many other leaders would follow principles that maintained that high ethics and social responsibility were not only desirable for an organization, but essential. Moreover that all employees must be treated as if they were volunteers and that part of their duty as corporate leaders was to raise subordinates to perform at an extraordinary level.
Yet, with all his success in explaining what to do, Drucker didn't always detail fully how to apply many of the actions and concepts that he described and promoted in his books. This was done only in his classroom at Claremont where he would spend an entire semester on a single management topic which sometimes extended far past officially allotted time.
Consequently, some of the ideas he introduced in print were misapplied with only partial instruction and the results obtained were less than optimal.
For example, the idea of Management by Objectives (MBO) was not originated by Drucker, but it was he that drew many ideas together and developed and popularized MBO in his 1954 book The Practice of Management. Basically, MBO is a process by which a superior and subordinate in an organization working together arrive at goals for the subordinate over an upcoming time period based on the larger objectives of the superior and what he or she is trying to accomplish in the organization.
Many noteworthy companies adopted MBO and applied it successfully. One of the founders of Hewlett-Packard, Bill Packard, credited MBO as his most successful operating policy and the key to Hewlett-Packard’s success, and he expanded the policy to all of the company’s other units.
But other companies had problems with implementation and didn't achieve the same results. Drucker thought that he understood why it didn’t always work: It was essential that the manager and subordinates know and understand the right objectives. Too often the manager didn't select the correct objectives nor ensure that they were fully understood by the subordinate.
Procedures for Implementing Drucker’s Ideas
Procedures for implementing other Drucker ideas, and in this way, using Drucker’s wisdom, are needed. If you understand Drucker's full procedures you can master any of his concepts and recommendations, including:
- Making management decisions not primarily from detailed quantitative analysis but “from the gut.”
- The five most important questions that you must ask yourself for the future success of your organization.
- Constant innovation being essential, requiring that the organization stop doing yesterday’s process or product even if still profitable.
- What everyone knows is usually wrong; but this can used as a competitive advantage.
- The best way to predict the future is to create it.
- If you want to know what events in your environment or in your market will happen next, you must examine events that have recently already occurred.
- Selling is not a subset of marketing and the two functions of marketing and selling may even be adversarial, but if marketing is done properly, selling may not even be needed and can at least be made much easier.
- Management is not quantitative analysis but liberal art analysis
- Integrity and social responsibility are not just desirable characteristics of management; they are requirements for success.
- If you keep doing what made the organization successful in the past, you will eventually fail...and usually sooner than you think.
- You cannot avoid risk, but you must manage it.
- The best way to approach any problem is not with your knowledge and experience, but with your ignorance.
- There are specific steps for developing important innovations which must be performed completely and in a prescribed order.
- An individual who has had one or more major failures can still succeed brilliantly in the future.
- Strategy is situational and shouldn't be applied by formula.
- Leadership is distinguished from management in that it requires doing the right things; management requires doing things right.
- The leader’s first and toughest decision is the decision to become a leader.
- You cannot manage change; you can only lead it.
- The purpose of an organization is to enable ordinary human beings to do extraordinary things.
- The customer knows what he wants, and you must know it too, though it probably isn’t what you think.
- If you “charge what the market will bear,” you will usually lose the market.
- Business has only two functions: marketing and innovation.
- Treat all subordinates as if they were volunteers, except during a recession.
Drucker concluded that an analysis of past successes will inevitably show that the organization that wins will not necessarily be the one with the greatest wealth or resources, but in how they use the wealth and resources of an organization.
This explains why Steve Jobs, a college dropout, who was incapable of even building a computer board by himself (this was done by his friend, “the Woz,” Steve Wozniak), was able with limited financial resources to compete successfully with computer giant IBM (who had 300,000 employees including hundreds of Ph.D.s, and revenue of $20 billion a year) and other top computer companies, and found a new industry based on the personal computer.