The Practical Drucker

William Cohen

• Publisher: AMACOM
• Year: 2013
• ISBN:
  9780814433508
• Topic: Betriebswirtschaft
• Subtopic: Betriebswirtschaftliche Kenntnisse

There is no shortage of books and successful businesspeople who have emphasized concepts such as decentralization, outsourcing, the rise of the knowledge worker, the role of employees as assets, and a focus on the customer. But it was Peter Drucker who years, sometimes decades, first blew the whistle on these indisputably important keys to success. And still today, Drucker is recognized as the inventor of modern management, and continues to influence leaders around the globe. And now readers can benefit from this collection of applicable concepts taken from Drucker's myriad books.Within the invaluable pages of Practical Drucker, readers will find surprising insights and clear guidance on how to: • Engage employees and achieve outstanding performance • Remedy destructive office politics • Handle a crisis • Become better decision makers by questioning assumptions • Determine which leadership style to use in which situation • Do more with less • Steer clear of the biggest traps that leaders fall into • Avoid the five deadly marketing sins • And much moreIn efficient, knowledge-filled chapters, this all-in-one resource has taken the practical wisdom from Drucker's large body of work--including his books, essays, articles, as well as his decades of teaching and consulting--and shaped it together into a set of fresh, vital lessons that will resonate today and for years to come.

PART ONE

People

CHAPTER | ONE

General Business Ethics

Peter Drucker was extremely ethical in his outlook as well as in his actions. On a personal level, he was one of the most principled individuals I have ever met. From both his writing and his classroom lectures, it was clear that he sought to arrive at basic ethical principles that were essential for business. He believed that ethical behavior was an absolute requirement of all organizational leaders, that they should incorporate integrity and ethics into how they conducted their business. First and foremost, he concluded that while followers would forgive an organizational leader much, they would not forgive a lack of integrity in personal dealings. However, Drucker well understood that interpretations of ethics and integrity might vary and therefore it was not easy trying to derive a common point of ethics that would be applicable as general business ethics.

Drucker Investigates Business Ethics

As he grappled mightily to understand ethics, Peter Drucker cast a wide net, beginning with ethical philosophies from the Western tradition and expanding his search both geographically and historically. He did find a single point of complete agreement, and one point only, in which an ethical code of sorts applied universally. (More about that later.) There were usually various types of extenuating circumstances within all ethical interpretations. For example, clemency might be granted to someone who violates a code of ethics under certain circumstances. “Thou shalt not steal” is one of the Ten Commandments. Yet a mother stealing to feed a starving child might be excused as committing a lesser evil for a greater good. Differences in ethics owing to differences in social or cultural mores might also be accepted.

Javier Bardem won an Academy Award for Best Supporting Actor for his role as the villain and killer Anton Chigurh in the movie No Country for Old Men. Asked who Chigurh was, Woody Harrelson's character, Carson Welles, responded: “Anton is a man of principle. But he just doesn't follow the same principles that you and I might agree should be followed.”

In fact, practices of questionable morality by one individual, or a group of individuals, might not only be considered acceptable but also quite ethical.¹ For example, extremists who willingly blow themselves and innocent bystanders up with explosives for their radical version of Islam consider their actions to be ethical, while others might vigorously disagree.

But what about doing things in business that are clearly “unethical”? Can business ethics be defined in this manner? This came up in Drucker's class, and I also found his response in one of his books: “Hiring call girls to entertain visiting executives does not make you unethical. It merely makes you a pimp.”² This brought general laughter in class, but it was clearly representative of Drucker's limitations of business ethics.

Extortion or Bribery

Drucker noted that bribery was hardly desirable from the viewpoint of the victim who was being extorted. It had been made illegal for U.S. companies through a law prohibiting the payment of bribes to obtain foreign contracts. This bribery was cited as a gross violation of “business ethics.”

But Drucker was very clear on this. He thought it was stupid to pay bribes. However, was paying bribes in itself a violation of the law or of business ethics? Most countries have laws against bribery. Yet it is a fact that bribery, as we define it, is routine and expected in some of these countries. Several of the countries recognize “baksheesh” as the traditional way of doing business. Their citizens may ignore any local laws that have been enacted, regarding them as “window dressing” and not part of their own culture.

Drucker noted in his investigation that a private citizen who was extorted into paying a bribe to a criminal might be considered foolish or a helpless victim of intimidation. And certainly paying extortion is never desirable. But this was clearly not an ethical issue on the part of the individual who might be forced to face a greater ethical threat, not to himself, but to members of his family or the general public. He objected to any “new business ethics” that might assert that acts not immoral or illegal if done by private citizens would become immoral or illegal if done in the context of a business organization without examining the circumstances. They might be stupid, they might be illegal, and they might be the wrong thing to do. However, they do not necessarily constitute “business ethics.”

The Ethics of Social Responsibility

Drucker looked closely at casuistry, or rationalization. Casuistry might also be termed cost-benefit ethics, or ethics for the greater good. Essentially it says that someone in power, such as a CEO, a king, or a president, has a higher duty if it can be argued that his behavior confers benefits on others. So, it is wrong to lie, but in the interests of “the country” or “the company,” or “the organization,” it sometimes has to be done. Drucker maintained that this was too dangerous a concept to be adopted as business ethics because a business leader could use it to justify what would clearly be unethical behavior for anyone else.³ Drucker looked further.

The Ethics of Prudence

To be prudent means to be careful or cautious. It is a rather unusual philosophy for an ethical approach, but admittedly it has some benefits.

Drucker gave an example of prudence that pertains to senior military officers. He said that Harry Truman, at the time a U.S. senator, gave this advice to a general officer witness before his committee in the early years of World War II: “Generals should never do anything that needs to be explained to a Senate Committee—there is nothing one can explain to a Senate Committee.”⁴

He thought that Truman's advice may be pretty good for staying out of trouble, but it was not much of a basis for ethical business decision making. For one thing, it doesn't tell a person anything about what the right kind of behavior is. For another, there are decisions that a leader must make that are risky and that may be difficult to explain, especially if things go wrong—but they may nevertheless be the correct decisions to make.

The Ethics of Profit

Though he called it “The Ethics of Profit,” it is not what you might think. Drucker did not say anything about limiting profits. Much to the contrary, he wrote that it would be socially irresponsible, and most certainly unethical, if a business did not show a profit at least equal to the cost of capital, because failing to do so would waste society's resources.⁵ However, the only logical rationale for the justification of “profit” was that it was a cost. His advice was as follows: “Check to see if you are earning enough profit to cover the cost of capital and provide for innovation. If not, what are you going to do about it?”⁶

Although he died just days short of his ninety-sixth birthday in 2005, two years before the onset of the recession he had predicted years earlier, Drucker would have supported those companies defending their profits as necessary for marketing and innovation, two essential (and ethical, Drucker implied) requirements for any business. For, while profit was an ethical goal, its use as a “metric” rested on very weak moral grounds, and as an ethical incentive it could be justified only if it were a genuine cost, especially if this cost was required to maintain jobs and to grow new ones.⁷

Confucian Ethics

Calling Confucian ethics “the most successful and most durable of them all,” Drucker looked to the East for guidance. He maintained an interest in Japan and China, which perhaps explains why the latter was the only country where he allowed an educational institution outside the United States (the Peter F. Drucker Academies of China and Hong Kong) to use his name. In Confucian ethics, the rules are the same for everyone, but there are different general rules that vary according to five basic relationships, all based on interdependence. These five relationships are:

1. Superior and subordinate
2. Father and child
3. Husband and wife
4. Oldest brother and sibling
5. Friend and friend

The “right” behavior in each case differs, so as to optimize benefits to both parties in the relationship. In essence, all have mutual obligations. This concept is not compatible with what is considered business ethics in many countries, including the United States, where one side has obligations and the other side in addition has rights and entitlements.

Though he clearly admired Confucian ethics, which he called “The Ethics of Interdependence,” he concluded that its principles cannot be applied as business ethics because the Confucian system deals with matters between individuals, not between groups.⁸

A “Common Point” for Business Ethics

Primum non nocere is Latin for “above all, do no harm.” It was part of the ancient physician Hippocrates's writings, but it is not the Hippocratic Oath as many (including Drucker) believed.⁹ This simple phrase, Drucker thought, should be the basis of all notions of business ethics, though he did have other corollary conclusions based on his in-depth analysis. So his ethics struggles were not in vain. He concluded that business ethics as we know them today are not that at all. If ever business ethics were to be codified, he felt, they ought to be based on Confucian ethics, focusing on the right behavior rather than on misbehaviors or wrongdoings. In the meantime, organizational executives and practitioners should understand the following things about business ethics:¹⁰

1. There are many different approaches to ethics; none of them are 100 percent compatible with what we really should consider business ethics.
2. Confucian ethics—that is, the Ethics of Interdependence—probably comes closest to the ideal for what might be called organizational ethics.
3. The ethics of personal responsibility from the physician Hippocrates, “above all (or first), do no harm,” is a good basis for business ethics.
4. The mirror test is not bad: “What kind of person do I want to see when I look into the mirror every morning?”

CHAPTER | TWO

Drucker on Engagement

Some years ago, the author of a highly successful business book asked me whether I was interested in co-authoring a book he was working on about engagement. He wanted to tap into my experience as an Air Force general and use a play on words regarding the “rules of engagement” in the book's title.

“Rules of Engagement” has been adopted frequently as a term to describe the regulations under which a particular conflict is to be conducted. In the old days, there were prenegotiated “rules of warfare,” such as those codified under the Hague Convention beginning in 1899. These rules required, among other tenets, that prisoners of war not be mistreated, that someone waving a white flag must be allowed to surrender, and that noncombatants or civilians not be intentionally targeted. However, the complexities of modern combat, politics, and the introduction of advanced technology such as aircraft, both piloted and pilotless, and missiles made new policies advisable. As a result, one side or the other might impose even more stringent rules on its own armies.

Thus, in the Vietnam War, U.S. pilots were prohibited from firing into a village from which they were being fired on, except under very specific circumstances—something that would have been considered ridiculous by the “Greatest Generation” who fought World War II. For people whose lives were at risk, this engagement rule seemed not very appreciative of the danger they faced and the fact that this was serious stuff. In any case, I decided that my being a retired general was insufficient reason to co-author a book. However, the experience served to confirm that the word engagement can have more than its surface meaning.

Business Engagement Is Also Serious Stuff

Use of the term “engagement” in business is fairly recent, only dating to business literature from the 1990s, when Frank L. Schmidt, then a senior scientist with the Gallup Organization, began to study the topic. He applied his unique statistical methodology and published his results in the academic literature, using this terminology.¹

Whatever it was called, Drucker recognized its importance long before it was identified, and he showed how managers could develop it in their workforce. There was no doubt that to contribute significantly to the goals set by the manager, a fully engaged worker was required. The goal and outcome could not be merely performance; they had to be outstanding performance. The difference between performance and outstanding performance is like that between sports participation and an Olympic athlete. It is the difference between amateur acting and an acting performance that approaches Oscar quality.

Drucker said that to attain this level of output, the manager must create what he called “a responsible worker.” Drucker expected an awful lot from the “responsible worker.” The term “engaged worker” seems to be a better description. An engaged worker is one who is committed to contributing to the organization and is willing to exert extraordinary effort in accomplishing tasks important to the achievement of organizational goals. It's no small thing. Every study of engaged employees shows magnitudes of difference in performance between those who are engaged and those who are not.

Satisfaction Does Not Create an Engaged Worker

At one time or another, almost every organization conducts surveys to determine what has been described as “employee satisfaction.” I once spoke on leadership to a large fifty-year-old organization and learned that this organization was in the midst of one of these satisfaction studies. Are these surveys useful? Maybe. They do represent an opportunity for employees to vent their irritants. They give leaders a feel for the major concerns in their organizations at that particular time. They may provide guidance for management decisions. However, as Drucker noted, they have their limitations.

“Employee satisfaction” is not easily defined and cannot be usefully quantified. For example, one cannot say that the fact that 75 percent of employees are satisfied is good, bad, or irrelevant. Even if a preponderance of workers agrees that this organization is a good place to work, that doesn't say much. I have seen satisfaction/dissatisfaction studies misused and so worded as to result in desired responses that then lead to predetermined courses of action.

Drucker's biggest criticism was that “satisfaction” or “dissatisfaction” responses simply aren't adequate and do not result in employee engagement. Even if compensation were an issue, a manager could buy personal responsibility with financial rewards only in a limited way or for a fixed period of time. Therefore, satisfaction alone cannot have a positive impact on generating real personal responsibility or creating an engaged employee. Drucker concluded that even a worker's dissatisfaction with some aspect of his work was far more likely to accomplish this, should he be empowered to initiate action to improve the situation and it caused him to do so. Drucker not only called satisfaction inadequate, he christened it “passive acquiescence.”² That's also when he came up with the term “responsible worker.” Peter expected a lot.

Drucker's Four Paths to an Engaged Worker

If satisfaction isn't key to creating the engaged worker, what is? Although I have seen dozens of methods that promise to result in engaged employees, Drucker found only four, and he stressed that these weren't alternative approaches, but that all four must be used simultaneously to achieve the desired results. These were:³

1. Aiming for careful placement and promotion
2. Demanding high standards of performance
3. Providing workers with information
4. Encouraging workers to acquire managerial vision

Let's take a look at each of these.

Aiming for Careful Placement and Promotion

A systematic, serious, and continual effort to put people in the right jobs is a prerequisite for worker engagement, according to Drucker. Frequently, promotions are made with little discussion or any attempt at soliciting the opinion of other managers. Drucker very much admired the promotion system in the U.S. military, with its formal evaluations emphasizing performance, review, and fairness, and its promotion by a board rather than a single individual. In many cases, promotion made the selectee eligible for further assignment, which was also based on accumulated experience and performance over time. I think he saw this as akin to the system of management by objectives that he developed and taught.

Demand...