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http://www.inc.com/articles/2009/11/Drucker.html

The Wisdom of Peter

Drucker from A to ZKnown widely as the father of management, Peter Druckerformulated many concepts about business that we now take for granted. On the 100th anniversary of his birth, wetake a look at Drucker's contributions, from A to Z.

By Leigh Buchanan | Nov 19, 2009

The Drucker Institute, Claremont Graduate University

 

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Inc's Small Business Success

Inspiring company profiles and best practices for smart

business owners

Peter Drucker was known to gently chide ambitious acolytes

to replace their pursuit of success with the pursuit of 

contribution. Certainly few people contributed as much to

Twentieth Century business, social, and political thought as

Drucker, who was born 100 years ago--on November 19, 1909--in

a suburb of  Vienna.

Known widely as the father of management, Drucker immigrated

to the United States in 1937. In a career that produced 39 books,

as well as lectures, classes, consultations, and even movies,

Drucker anatomized the functioning (and dysfunctioning) of 

companies. It would be easier to list the ideas he didn't

promulgate in some form than those he did. (As far as we know he never weighed in on Secret Santa or pets in the workplace.)

Much of the business lexicon bruited about in offices--from

"knowledge worker" to "management by objective"--can be

traced to Druckerian coinage. For decades harried CEOs have

restructured their work lives based on Drucker's almost zen

insights about efficiency and time management. His

pronouncements on customers, marketing, and profitability deserve to be framed and hung in every corner office to remind

 business leaders where their priorities should lie.

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Encountering Drucker for the first time, readers may dismiss as

obvious his observations on subjects like motivating workers and

encouraging innovation. But such observations were far from

obvious when Drucker first made them; and if they seem so now it is because his wisdom and clarity compelled so many 

companies to act as he advised. "What I find is that whenever I

think I have got a really creative idea, if I go back [to] Peter's

 books I always find he already said it first," said One-Minute

 Manager author Ken Blanchard during a celebration of the

centary at Claremont University 's Peter F. Drucker

and Masatoshi Ito Graduate School of Management. Drucker hadthe ears of CEOs, heads of state, and major philanthropists.

Corporate titans likeGeneral Electric and Toyota were swayed by 

his ideas. "Drucker gave us the language, the metaphor, the lens,

the understanding of the role of management as the critical

function," said Good to Great author Jim Collins at

the Claremont event.

In honor of the centenary, we have compiled an alphabetical list

of some people, places, and concepts drawn from the life and

 works of Drucker.

 Abandonment: Jim Collins earns applause when he lectures

about his "stop doing" list. Jack Welch gained fame for shedding

 businesses in which General Electric wasn't first or second. But it

 was Drucker who first suggested that choosing what not to do

 was a decision as strategic as its opposite. Drucker's theory of 

"purposeful abandonment" exhorted business leaders to quickly 

sever projects, policies and processes that had outlived their

usefulness. "The first step in a growth policy is not to decide

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 where and how to grow," he told author Jeffrey Krames in 2003.

"It is to decide what to abandon. In order to grow, a business

must have a systematic policy to get rid of the outgrown, the

obsolete, the unproductive."

Bystander: Though he bestrode the management world like a

Colossus, Drucker was less assuming than many of today's mega-

 wattage gurus. An early advocate of servant leadership, he both

 valued and practiced humility, describing himself as a

"bystander" who is "on the stage but not part of the action." Even

his quasi-autobiography, Adventures of a Bystander , refractsDrucker's life through the stories of people he had known, such

as Sigmund Freud and Henry Luce.

Customers: Having trouble formulating a mission statement?

Let Drucker boil it down for you: "The purpose of business is to

create and keep a customer," he argued. And: "What does our

customer find valuable?" is the most important question

companies can ask themselves. This focus helped reorient

marketing away from advertising and onto a higher plane.

Decentralization: Little fish learn to be big fish in little ponds.

Drucker favored decentralized organizations because they create

small pools in which employees gain satisfaction by witnessing

the fruits of their efforts, and nascent leaders can make mistakes

 without bringing down the business. When Drucker laid outthese ideas in the mid-1940s, the command-and-controllers who

dominated corporations were not amused. Today, of course,

"stovepipe" organizations--those that remain--are widely 

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maligned for their failure to make the most of human and

information resources.

Effectiveness: Perhaps the most revelatory insight in the

history of time management tore the bottom out of Frederick 

Taylor's time-and-motion studies: "Efficiency is doing things

right," Drucker wrote in The Effective Executive. Effectiveness is

doing the right things." What's true for individual managers is

also true for organizations, which often squander time and

resources trying to improve processes for products not worth

producing. The solution? See "abandonment," above.

Future: Drucker dismissed attempts to label him a "futurist,"

insisting that "the best way to predict the future is to create it"

and "the only thing we know about the future is that it will be

different." Still, his forecasting tended to be spot-on. Among

other things, he anticipated the rise of Japan, the importance of 

computers, and the backlash against executive pay. His method

 was to study significant events that had already occurred and had

predictable effects going forward. Or to use Drucker's elegant

oxymoron: "the future that has already happened."

General Motors: Drucker's Concept of the Corporation(1945)

 was arguably the first drop in what would become a deluge of 

organizational and management studies. The corporation in

question was GM, to which Drucker was given the kind of accessfor which today's business scholars would sell their grandmas up

the river. Drucker's conclusions about corporate structure and

management style and their effect on worker productivity and

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morale were enormously influential--although they so annoyed

then-CEO Alfred Sloan, that he pretended the book didn't exist.

Hitler: Drucker's first book, The End of Economic Man, was a

study not of management but of totalitarianism. Living

in Germany during Hitler's rise (two pamphlets he wrote--one

praising a German-Jewish philosopher and one roundly 

condemning the National Socialists--were banned and burned by 

the Nazis), Drucker was achingly aware of the worst government

and society could dish out. His later writing can be interpreted as

a lifelong quest for functional, principled institutions.

Innovation: Thomas Edison would get no pushback from

Drucker on his 1 percent inspiration-99-percent-perspiration

formula. Drucker believed that innovation--"the specific function

of entrepreneurship"--must be methodically ferreted out, and he

posited seven likely places to find it: in unexpected occurrences,

incongruities, process needs, new knowledge, demographics,

perceptions, and changes in industries and markets. The crucial

characteristic of innovators is focus. Even Thomas Edison,

Drucker pointed out, "worked only in the electrical field."

Japan: The Japanese found much to love about Drucker in the

1960s, as industrial giants like Toyota embraced his theories on

the primacy of employees and ideas about marketing--a

comparably nascent discipline there. The admiration wasmutual, with Drucker praising such Japanese practices as

lifetime employment (though he later conceded the need for

greater flexibility) and deliberative decision-making followed by 

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quick action. Among Drucker's great passions was Japanese art,

 which he both collected and lectured on extensively.

Knowledge workers: The term "knowledge management" has

that PC era smell. But almost 20 years before the founding

of Microsoft, Drucker coined the term "knowledge worker" to

describe the growing cadre of employees who labored with their

 brains rather than their hands. Drucker explained that

knowledge workers require a new style of management that

treats them more as volunteers or partners than as subordinates.

He predicted correctly that the ability of leaders to motivatethese founts of productivity--"the most valuable asset of a

21st century institution"--would become a cornerstone of 

competitive advantage.

Lifelong learning: Another Peter--Senge--popularized the

concept of "learning organizations" in the 1980s. But learning

organizations are predicated on learning individuals. Drucker

called teaching people how to learn "the most pressing task" for

managers, given the perpetual expansion of skills and knowledge

that are products of the information economy. He personally 

eschewed the designation "guru"--which suggests one who

counsels--casting himself rather as a student. True to form,

Drucker every year assigned himself a topic about which he knew 

nothing and made it the subject of intense study.

Marketing: Drucker was born in 1909, the same year

that Henry Ford famously declared, "Any customer can have a

car painted any color that he wants so long as it is black."

Drucker's theories of marketing--the "distinguishing, unique

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function of business"--amount to an extended refutation of that

attitude. The aim of marketing, in Drucker's view, was to "know 

and understand the customer so well that the product or service

fits him and sells itself." Innovation, which Drucker consideredthe other basic function of business, is responsible for the

creation of those self-selling products.

Non-profits: What's better than a run on Thin Mints? Being

declared the best-run organization in America by the world's

preeminent business thinker. In 1981, Drucker bestowed that

encomium on the Girl Scouts USA, one of many non-profits with which he worked closely over the years (others included

the American Heart Association andThe Salvation Army ).

Drucker was a passionate proponent of the social and economic

importance of non-profits, which he deemed the "most

distinguishing feature" of American society. He created a set of 

management principles specifically for that sector, and urged

 businesses to draw lessons in establishing a mission andmotivating workers from the non-profit world.

Objectives: In the daily scrum of business, employees become

so focused on what they're doing they forget why they're doing it.

 And off the rails they go. In The Process of Management (1954),

Drucker called this "the activity trap" and proposed

"management by objective" as a way to avoid it. With MBO,

employees participate in setting goals and are then evaluated on

how they fulfill those goals. Managers can focus on the "what"

rather than the "how." "Management by objective works--if you

know the objective," Drucker wrote. "Ninety percent of the time

 you don't."

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on the assumption that the corporation needs them more than

they need the corporation."

Schumpeter: Drucker really understood entrepreneurs, an

appreciation spawned in part by the work of Austrian

economist Joseph Schumpeter. Schumpeter introduced the idea

of creative destruction: the necessary collateral damage that

occurs when entrepreneurs--whom he called "wild spirits"--

 breach established markets. Entrepreneurs drive progress and

create wealth, Schumpeter believed, a mantra Drucker took up in

his own copious writings on innovation. "The entrepreneuralways searches for change, responds to it, and exploits it as an

opportunity," Drucker wrote.

Time management:"Time is the scarcest resource, and unless

it is managed nothing else can be managed."In a sense, much of 

Drucker's writing about effective organizations boils down to

time management. If time is the insurmountable constraint,

deciding how to use it becomes is the most strategic of decisions.

On a more personal level, Drucker suggested managers measure

how they spend their time and compare that with how they 

should be spending it, then make the requisite modifications. His

overarching question: "What needs to be done right now for the

 business?"

Universals: Drucker faulted business literature for raisingperformance expectations unrealistically high, demanding that

managers be mathematical and creative, adept at decision-

making and analysis, and in possession of excellent people skills

and a firm grasp of organizational dynamics. "What seems to be

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 wanted is universal genius, and universal genius has always been

in short supply," he observed. "The experience of the human race

indicates strongly that the only person in abundant supply is the

universal incompetent."

 Vienna: Drucker grew up in a small suburb of the city named

Dobling, where his parents--a government official and a doctor--

hosted soirees for scientists and intellectuals. Living near the

starry seat of the Hapsburg monarchy, the family was able to

attract prominent economists and political philosophers like

Joseph Schumpeter, Friedrich August von Hayek , and LudwigHeinrich Edler von Mises, whose conversation instilled in

Drucker a lifelong curiosity and interest in ideas.

 Welch: The chemical combustion that birthed "Neutron Jack"

 Welch was set off in a meeting with Drucker in 1981. Drucker

posed two questions to Welch, who had just been named General

Electric's CEO: "If you weren't already in this business, would

 you enter it today? And if not, what are you going to do about it?"

Those questions inspired Welch's dramatic restructuring of 

General Electric, including the elimination of many low-growth

 businesses and 240,000 positions. From there, Welch rebuilt GE

into a hugely successful, market-leading corporation with an

employee-development program ambitious enough even for

Drucker.

X-ray: How do you know when it's time for the next Next New 

Thing? In Managing for Results (1964) Drucker introduced the

concept of a "business x-ray"--a tool for determining innovation

strategies. Companies use the x-ray to evaluate the life cycles of 

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their existing offerings. They then identify the gap between those

offerings' expected future performance and their own larger

goals. Finally, they fill that gap with--what else?--innovation.

"The entrepreneurial achievement must be large enough to fillthat gap and timely enough to fill it before the old becomes

obsolescent," Drucker wrote.

 Yardsticks: With his emphasis on results, Drucker was bullish

on metrics. But he worried that managers often measure the

 wrong things (for example, things unrelated to the leader's

desired outcome) or that they measure too much, or that they express their measurements in the wrong way. When evaluating

management effectiveness, he touted one metric (or "yardstick"

as he often it) above others. That yardstick: productivity, which

Drucker defined as "the degree to which resources are utilized

and their yield."

Zen: In 1998, when the writer Harriet Rubin interviewed

Drucker at his home for Inc., he showed her this passage from a

 book on Japanese art: "The Zen-inspired painter seeks the 'truth' 

of a landscape, like that of religion, in sudden enlightenment.

This allows no time for careful detailed draftsmanship. After 

long contemplation, he is expected to be able to seize inner truth

in a swordlike stroke of the brush...." Similarly, Drucker

achieved enlightenment through quiet observation, waiting

patiently until he saw an idea whole, then rendering universal

truth in the swift space of a sentence. Thus was the essence of the

master.