the essential drucker 2010 v2

The Essential Druckerpresenting the

1The book 2Key Insights

Who is Peter Drucker?• known as the- Father of Modern

Management• Important contributions – – MBO– Concept of Knowledge Worker– Marketing oriented organization

• Contributed regularly to – Harvard Business Review– The Economist– Wall Street Journal

• Fans and Followers include Jack Welch (GE), Andy Grove (Intel)

(1909 - 2005) 25 honorary doctorates 39 books Presidential Medal of Freedom Presidential Citation, NYU 7 McKinsey Awards from HBR

The book

Society

Individual

Management

1The Management

What is management?

• Enabling people to perform• Set the culture• Training & development• Measure performance of self and

the organization• Result is always outside (no

perpetual motion machines )

Dimensions of management

• Economic performance and improve /maintain wealth producing capability of the organization

• Work and worker productive• Social responsibilities

Purpose of business

• Marketing and innovation• What is our business and what

should it be?• Objectives should be– Operational– Selective– Multiple– Should cover areas of survival

InvestorsInnovation

Clients

MarketingProfit

RequirementFinancial

Resources

Employees

Human Resources

Physical resources

SocietySocial

responsibiiityProductivity

• Market standing regardless of sales

• New markets• New products and services in

existing markets• Optimum market standing as

the goal• Product

Innovation• Social innovation• Managerial

innovation• Productivity and

improvement of productivity should be a key focus

Lessons from non-profits• Starts with their customers• Zeal to accomplish mission• Effectiveness of boards – CEO and

board as colleagues• Meaningful achievement• Transformation from non-profit

volunteer to non-paid professional

New Paradigms –Searching for the holy grail– One right org structure– One right way to manage people

Per Drucker -The organization that fits the taskManage for resultsFlat hierarchy

New paradigms• Practice of management –

assumptions– Technology and end use are fixed and

given• Technologies mesh and can impact any

industry• i.e. the definition “electronics company” is a

limitation rather than foundation

– Management’s scope is legally defined.• Economically linked keiretsu

Information• Yield control instead of cost control• Activity based accounting• Price lead costing• Total factor productivity– Economic value added– Benchmarking

ROI / Payback period/Cash flow / Discounted present value

Outsourcing and consulting of information

Why MBO• Un-spelt objectives causes misdirection• Management by drives• MBO– Organizational goals spelt out clearly– Departmental /bu goals are arrived from

org goals– Mgr / individual goals are arrived from

BU/Org goals– Tools like manager’s letter– Self control rather than control from above

Forms and reports

• Should Focus on performance• Should Focus on self monitoring• Control & controlling the

irrelevant should be avoided

Staffing & Promotion

• Manager to be blamed for putting a wrong person in a spot

• Soldier has a right to competent command

• People decisions impact the performance capacity of an organization

• New people in established slots

Staffing & PromotionThink through the

assignment

Evaluate potentially qualified

candidates

Identify Evaluation parameters

Get Peer feedback

Set and clarify performance expectations

• Widow maker • People decisions – as a tool of control– as a tool for organizational culture– as strategy

Staffing & Promotion

The entrepreneurial business

• Special handling for new innovative ventures– Separate new businesses from

established ones– Provide executive cover– Build the desire to innovate in the

organization rather than trying to acquire it

2The Individual

• Effectiveness • Contribution• Know thyself• Time• Effective Decisions• Functioning communications• Leadership as work• Principles of Innovation• The second half-life• The Educated person

Effectiveness

• Operations research and the efficiency of the chef’s kitchen

• Effectiveness - Doing the right thing• Effectiveness is a habit and could be

practiced

Contribution

• Results– Direct results– Building of values and reaffirmation– Building and developing people of

tomorrow• Making the result effective

Know thyself

• Personal strengths should match assignment

• More than that personal values should match with the assignment

Time

• 80-20 – where should I contribute • What could be delegated• -- the recurrent fire fighting• Overstaffing – mal-organization• Consolidating discretionary time

Characteristics of an entrepreneur– Decisive– Decisive even with insufficient data– Decisive even when mistake prone– Decisive but learns from mistakes

even when mistake prone– Tradition counts only when it makes

sense– Owns the result

Effective decisions

• Right and the wrong compromise – baby and the loaf

• Translation to work• Generic problem or exceptional

problem• Start with what is right and make

your compromises• Do not hedge

Leadership as work

Think through org’s missionDefine and establish it clearly…. and

visiblyLeadership as Responsibility and not as

rank or privilegeHold ultimate responsibility for

subordinates actionsPromote / praise / groom subordinatesEarn trust= be an effective manager

Innovation• Dos• Analyze opportunities

– Unexpected success or failures– Incongruity in customer behavior

• Positioning• Keep it simple to make it effective• Aim at leadership

• Donts• Too clever• Innovate for the present

• Innovators are opportunity focused and successful ones become one by defining and containing the risks

3The Society

Organizing principles of Production

Manual=>900 ADChina

MechanicalOccident and Byzantine

Informational

Transformation of society

Family centered trades

Professional training

Knowledge /information based society

Services

Manufactured Products

Primary Products

Manufactured Products

Primary Products

Primary Products

• Some blurred distinction between Socialism! Humanism! And Druckerism– Universal rights and responsibility– Flat structures– Ownership of the means of livelihood

and production– Need of the commune to be

productive

Challenging the statusquo• Welfare state is past --?? Scenario post

2009• Mega state vs. non-profit social sector• Mega state vs. youtube / twitter /

facebook• Learning & constant relearning ->

outliving obsolescence• Drucker hedging ?! his bets ??– Government will NOT become less

pervasive, less powerful, less expensive but will depend more on individuals / organizations to be effective

• From chimney monkeys to the era of Rugmark and beyond– Time – Affluence– Move from subsistence production

to services

So called evils of modernity – is it just widespread reporting of it? And change in our sensibilities?

Key Insights

Purpose of Business• Purpose of the business is to

satisfy the needs of its customers

• Some of the questions an organization need to ask frequently are – Who is our customer?– What should our business be?– Planned abandonment -“If we did

not do this already, would we go into it now?”

The Purpose of a business is to create a

customer

The best way to predict the future is to create it.

Role of Management• Everything that affects the

performance of the organization is a concern for the management and its responsibility.

• Traditional models perceive the role of management is internal which is a fallacy

On Marketing

• Market standing is important irrespective of increase in sales

• Market standing to aim for should be optimum and not maximum

• Technology and End-use are limitations. Customer value and customer decisions to dispose their disposable incomes should be the focus for management

The aim of marketing is to know and understand the

customer so well the product or service fits

him and sells itself.

5 bad habits of organizations

• Not Invented Here• Creaming a market• Quality as perceived by self• Illusion of a premium price• Maximize rather than optimize

Until a business returns a profit that

is greater than its cost of capital, it does not create

wealth — it destroys it.

Effective Decision Making

Effective Decision Making

Making good decisions is a crucial skill at every level.

Organization as a human community

• One does not manage people. They should lead the people.

• Values are and should be the ultimate test..

• Knowledge workers are dependent on the organizations to make their work productive.

• Organizations also take over some of the aspects of a commune as knowledge workers interact, bond and flock together.

Rank does not confer

privilege or give power.

It imposes responsibility.

Management by Objectives

SpecificMeasurableAchievableRealisticTimely• SMART goals should be derived

from corporate vision and should be set for individuals, teams and departments.

• Manage for Results

Management by objective works - if you know the

objectives.

Corporate Vision

Mission Statement

Strategic Objectives

Management by objective works - if you know the

objectives.

Jointly Plan Individually Act

Jointly control

Managers

Team Members

Management by Objectives

Effectiveness vs efficiency

• Processes and procedures typically help in increasing efficiency but only when the right things are done results are achieved.

Efficiency is doing things right; effectiveness

is doing the right things.

Knowledge workers

• Knowledge workers own the tools of their trade.

• Knowledge society allows upward mobility.What is measured

improves

Communications• Communication is perception• Communication is expectation• Communication makes demands• Communication and information

are different and mostly opposite – yet inter-dependent

• The onus of making himself/herself understood is on the specialist.

The important thing in

communication is to hear what is’nt

being said