Drucker was different to other management gurus. He did not even like to be called a guru but preferred a scientific description of his work and to be referred to as a “social ecologist”. This described the study of people and their behavior in organizations.
’Fad’ systems
Drucker was aware of new fads which became popular, but he was extremely cautious in applying them without thinking through each individually as to whether it made sense to employ it in a particular situation.
Although his close association with and analysis of management methods and philosophies in Japan gained him numerous insights, and managers in Japan frequently adopted many of Drucker’s ideas, he did not instantly jump on the bandwagon of “Japanese Management” when it took hold in the US in the early 1980s.
He maintained that any culture had to apply what worked best for it, and what worked out perfectly in one might not in another. He was highly suspicious of the kind of systems which Fortune Magazine termed “management by fad”.
His discoveries and conclusions were important and far from intuitive. They were powerful, effective and also frequently controversial. For example, encouraging a client to sell or close profitable businesses is hardly music to anyone’s ears, but that was the recommendation to Jack Welch when he became CEO of General Electric and Drucker became his consultant.
Drucker’s counterintuitive advice brought in billions
Drucker told Welch to sell or close profitable GE businesses to gain resources to invest in newer businesses that had more potential. This was far from intuitive and created detractors and enemies who called Welch “Neutron Jack”, after the neutron bomb, which left structures standing while it killed the inhabitants.
This may have contributed to Welch’s willingness to explain Drucker’s role as a consultant and this situation fully, something that many clients and consultants tend not to talk about but prefer to keep confidential to avoid lawsuits or expose tactics to competitors. Fortunately for us, by mutual agreement Welch released the explanation.
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Drucker called this his “abandonment theory” and considered it necessary for successful innovation and expansion. He said that older businesses, even if still profitable, would tend to consume resources and dominate the efforts of some of his best people while newer businesses, no matter if of greater potential, would be ignored.
Welch did as Drucker recommended. Though criticized and berated by the business press and even many academics, he thereby increased GE’s market value from US$12bn in 1981 when he became CEO, to US$410bn upon his retirement nine years later.
He had made an astounding 600 acquisitions in emerging markets which brought GE a fortune. When he retired, he was awarded the largest retirement package in history and Fortune Magazine named Welch manager of the century.
A completely different approach to consulting
Drucker also differed greatly in his consulting model from any other management consultant and his method is rarely practiced today. Drucker claimed that his methods of analyzing issues, solving problems and making recommendations were not based on his knowledge and his experience, but rather his lack thereof and ignorance in a specific business or industry.
This required him to ask a lot of questions to his clients to unearth the critical information and encourage the maximum amount of employees in the organization to solve their own problems. He said that his client’s managers were the true experts, not him. This unusual mind-set and its procedures for consulting explain a lot.
The trials and tribulations of being a Drucker client
I once heard that the way Drucker provided his consulting was the most difficult and unusual aspect about being a Drucker consulting client. One client expressed it this way:
“We had been accustomed to hiring consultants to whom we told what we wanted done and they sold us on their expertise. Then they went off and returned after a time with piles of data and reports and, before the era of Power Points, stacks of overheads which represented their work and their detailed solution to our problem.
“They presented themselves as having unique knowledge which others lacked. It is not that their solutions flopped, but they were routine. Drucker would begin with asking us questions which we were expected to answer and discuss. In the process, we had to think through the problem. This generated solutions which were frequently unique and we would have otherwise overlooked. At first this this was uncomfortable, but eventually we began to appreciate his system and found it of great value.”
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Chinese philanthropist and successful billionaire businessman Minglo Shao, who founded Drucker Schools all over China with Drucker’s encouragement, also contributed the money to start and run the MBA-granting, accredited and nonprofit California Institute of Advanced Management, of which I served as president for five years.
He told me that he would visit Drucker in his home occasionally and Drucker would ask him questions about various issues regarding the developments of his businesses and foundations in China and elsewhere. However, though Drucker asked questions which opened new insights and guided him as to what he would do, Drucker never told him how to do anything. He had to work that out himself.
The most difficult action is to think
Although Drucker was aware of many innovative methodologies for analyzing business situations and developing strategies, he made almost no use of them. Instead, he emphasized thinking through every situation on its own.
For example, he never taught portfolio analysis with its famous quadrants of cash cows, shooting stars, problem children or dogs as developed by the Boston Consulting Group (BCG) or the GE and McKinsey nine cell version, or any other version of management or business strategy by rote system.
He developed few special systems himself and these were integrated with a philosophy of integrity and social responsibility which were required in the implementation of everything he did.
Feelings may be more important than numbers
Drucker insisted on measuring everything but the results were to be considered informational, not quantitative analysis for business decisions made solely by numerical calculation. He avoided decision-making made solely by inputting certain data into a software program, turning on a computer and having the strategy instructions automatically appear.
He pointed out that although one could gather data and develop a program based on thousands of business experiences, the information could be incomplete. Designing software based on extensive data and inputting data unique to your situation might predict results with some high percentage of accuracy and still fail in your situation.
Drucker maintained that computer-generated answers were inferior to using the human brain and making a ’gut’ decision based on integrating all available information, personal experience knowledge of the personnel involved and their leadership and integrity.
He noted that personal knowledge or instinct of one single but vital factor might well be decisive and that a computer might never consider it. Also, he reasoned that though a certain program might produce accurate results a high percentage of the time, for the remaining percentage the results were 100 percent inaccurate.
He recommended that managerial decisions made with “a gut feel” after considering all the information that could be obtained and integrated by the brain should not be ignored. This method however should not be employed frivolously and without thought. The brain was a better device than a computer or maybe the better computer of the two.
The application of Drucker’s consulting and management practices were based on four basic principles:
- Questioning and gathering information from all sources, including managers and their subordinates.
- Using the human brain rather than “management by fad” depending on the situation.
- Gathering all the information possible and using computers, but having the manager and not a machine or a methodology make the final decision.
- Maintaining high integrity and social responsibility in all decision-making
Has your business ever fallen victim to “management by fad”? Let us know in the comments below.