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 General-
Anzeiger 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 Practice

If you know exactly

how to do it, If everything goes well,
but nothing 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 Adapter Rebel

Person
believes as
prescribed by
the culture?

Good
Yes Soldier Maverick

Yes No
Person behaves as prescribed by
the culture?
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 Where are you on the culture map?
Your associates?

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

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

Comfort
Challenge Zone

Low Apathy/Boredom Relaxation

Low High
Skills
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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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