DEATH OF A GIANT

Gone, Gone, Gone Is Peter Drucker  -- But Not Forgotten

The death of Peter Drucker on November 11, at age 95, was duly noted by the press throughout the world, as well as by many learned and serious bloggers. I take his death personally, because although we never met (but corresponded occasionally), no business philosopher did more to shape my thinking than he did. And I know I’m not alone in this. Following is one such obituary from Adam Smith, Esq. (Bruce MacEwen), one of the more erudite of the bloggers. My own comments follow his.

November 12, 2005

Peter Drucker, 1909-2005

Peter Drucker, the management uber-guru who hated the term "guru," died at home in Claremont, California yesterday "of natural causes," a phrase all too rarely heard in our Big Medical Science era.  I'll leave the recitation of the facts of his life to the capable hands of The New York Times and the FT, but his passing deserves a word because of his vast and continued insight and perspective.  In these days of embarrassingly vapid "management" books (I won't name too many names, but Jack Welch, Lee Iacocca, and Donald Trump will give you my drift), Drucker was a sage for the ages.  Over 66 years, he wrote 35 books which were translated into 30 languages.

"Peter could look around corners," philanthropist Eli Broad, who knew Drucker for 30 years, said Friday. "He would say things that seemed rather simple but in fact were very profound. He saw the future."

Drucker's views stemmed from his focus not on corporations in the abstract, or buildings and machines, processes and systems, not in creating elaborate economic or managerial theories:  Drucker's focus was on people. Management's job was to chart a course and get out of the way. People were not an expense but a resource.

Interestingly, another business legend of the 20th Century, Warren Buffett, operates on the same principle (from a profile of him in today's WSJ):

Mr. Buffett believes that managers of these companies ought to be left to run their businesses without interference from him, and without having to hew to any unifying corporate strategies or goals. "We delegate to the point of abdication," Mr. Buffett says in Berkshire's Owner's Manual, a six-page manifesto posted on the company's Web site.

Famously, Drucker was also skeptical of grand predictions.  He was anchored in the concrete:

"There is only one valid definition of business purpose: to create a customer," he said 45 years ago. Central to his philosophy was the belief that highly skilled people are an organization's most valuable resource and that a manager's job is to prepare and free people to perform. Good management can bring economic progress and social harmony, he said, adding that "although I believe in the free market, I have serious reservations about capitalism." (from The Washington Post)

And here are some words of wisdom particularly germane to lawyers, information junkies that we are. The message is to be exceedingly selective about what you're doing as a firm leader (from a 1996 Forbes interview):

"Leaders communicate in the sense that people around them know what they are trying to do. They are purpose driven--yes, mission driven. They know how to establish a mission. And another thing, they know how to say no. The pressure on leaders to do 984 different things is unbearable, so the effective ones learn how to say no and stick with it. They don't suffocate themselves as a result. Too many leaders try to do a little bit of 25 things and get nothing done. They are very popular because they always say yes. But they get nothing done."

In 1999, the WSJ published the following on the occasion of his 90th birthday. It can scarce be bettered:

"Drucker is famous for a series of questions: What is our business? Who is the customer? What does the customer value? The answers to those questions, asked by generations of managers around the globe, became known as "the theory of the business."

        The most distinctive hallmark of the managerial mindset is that it operates from that theory. Major decisions and initiatives all become tests of the theory. Profits are important in part because they tell you whether your theory is working. If you fail to achieve the results you expected, you re-examine your model. It is the managerial equivalent of the scientific method, starting with hypotheses which are then tested in action, and revised when necessary."

Pay a bit of heed this weekend; we will be exceedingly fortunate to see someone of half his stature again. 

                                                Adam Smith, Esq. (http://www.bmacewen.com/blog/)

Reading the many descriptions of Drucker’s works reminds me of how much of my own thinking  was shaped by my reading his many works. Readers of The Marcus Letter who also know Drucker’s work may have already surmised this, and while every writer strives to be original, those original ideas were shaped by others, as well as by experience. He taught me first that, “There is only one valid definition of business purpose: to create a customer.” In these pages, in my books, in my consulting practice, I have often preached an  adaptation of this – the idea  that lawyers and accountants are really in the marketing business, and the practice of law or accounting is what lawyers and accountants do to fill the channels opened by marketing.

During my years in investor relations, and as the author of several leading books on the subject, I’ve echoed his creed – value and service first, profit later. For those willing to take the leap out of outworn tradition, it works.

Mr. Drucker believed in delineating objectives as a foundation for charting a business’ course. He believed that business leaders should ask, “What is our mission? Who is our customer? What does the customer value? What are our results? What is our plan?” If you didn’t read it first in Drucker, then you might have read it here or in my books. All I did was expand on it for professional services, even when professionals were not ready to think that way.

He believed that knowledge workers were the foundation of the contemporary business, and that this meant new business models were needed to make the best use of people. Employees, he said, were a resource, not a cost – a heresy in his time, but now understood and accepted.

He believed that good managers were the true heroes of the century. I believe that too of the leaders of our accounting and law firms, and strive to make good managers out of accidental managers.

For these and many other reasons, then, I take the loss of Peter Drucker personally. Maybe, if all professionals did as well, we would have better professional firms, and thereby, better clients.

Goodbye,  Mr. Drucker.

The Following, courtesy of Bruce MacEwen, appeared in The Wall Street Journal…

The Rules of Executive Class

By PETER F. DRUCKER

An effective executive does not need to be a leader in the sense that the term is now most commonly used. Harry Truman did not have one ounce of charisma, for example, yet he was among the most effective chief executives in U.S. history. Some of the best business and nonprofit CEOs I've worked with over a 65-year consulting career were not stereotypical leaders. They ranged from extroverted to nearly reclusive, from easygoing to controlling, from generous to parsimonious. What made them all effective is that they followed the same eight practices:

• Ask "What needs to be done?" Failure to ask this question will render even the ablest executive ineffectual. Jack Welch realized that what needed to be done at General Electric when he took over as chief executive was not the overseas expansion he wanted to launch. It was getting rid of GE businesses that -- no matter how profitable -- could not be No. 1 or No. 2 in their industries.

• Ask "What is right for the enterprise?" Note that the question is not what's right for the shareholders, or the executives, or the employees. Those are all important constituencies who need to support a decision, or acquiesce in it, if the choice is to be effective. But if a decision isn't right for the enterprise as a whole, in the long run it won't be right for any of the individual stakeholders.

• Develop action plans. The action plan is a statement of intentions rather than a commitment. It should be revised often, because every success creates new opportunities. So does every failure. Napoleon allegedly said that no successful battle ever followed its plan. Yet Napoleon also planned every one of his battles, far more meticulously than any earlier general had done. Without an action plan, the executive becomes a prisoner of events.

• Take responsibility for decisions. This is particularly important when it comes to hiring or promoting people. If after promoting a person, the decision has not had the desired results, executives don't conclude that the person has not performed. They conclude, instead, that they themselves made a mistake. In a well-managed enterprise, it is understood that people who fail in a new job, especially after a promotion, may not be the ones to blame.

• Take responsibility for communicating. Effective executives make sure that both their action plans and their information needs are understood. Specifically, this means that they share their plans with and ask for comments from all their colleagues -- superiors, subordinates, and peers. At the same time, they let each person know what information they'll need to get the job done. The information flow from subordinate to boss is usually what gets the most attention. But executives need to pay equal attention to peers' and superiors' information needs.

• Focus on opportunities, not problems. In most companies, the first page of the monthly management report lists key problems. It's far wiser to list opportunities on the first page and leave problems for the second page. Unless there is a true catastrophe, problems are not discussed in management meetings until opportunities have been analyzed and properly dealt with.

• Make meetings productive. Every study of the executive workday has found that even junior executives and professionals are with other people -- that is, in a meeting of some sort -- more than half of every business day. Making a meeting productive takes a good deal of self-discipline. It requires that executives determine what kind of meeting is appropriate and then stick to that format. It's also necessary to terminate the meeting as soon as its specific purpose has been accomplished. Good executives don't raise another matter for discussion. They sum up and adjourn.

• Think and say “we. Executives know that they have ultimate responsibility, which can be neither shared nor delegated. But they have authority only because they have the trust of the organization. This means that they think of the needs and the opportunities of the organization before they think of their own needs and opportunities. This one may sound simple. It isn't, but it needs to be strictly observed.

I'm going to throw in one final, bonus practice. This one's so important that I'll elevate it to a rule: Listen first, speak last.

Mr. Drucker is a professor of social science and management at the Peter F. Drucker and Masatoshi Ito Graduate School of Management at Claremont Graduate University. This  commentary is adapted from his article "What Makes an Effective Executive" in the June issue of the Harvard Business Review.

To which add the words of two people who are themselves giants – Gerry Riskin (the Edge Group) and Tom Peters, on Gerry Riskin’s  remarkable web site… (http://www.gerryriskin.com/law-firm-management-180-one-icon-explains-another-icona-in-passing.html.

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