Drucker’s method for solving a client’s problem

Peter Drucker had a reputation as an amazingly effective management consultant. He charged as much as $10,000 per hour for his work, which was donated to his foundation. I learned his methods first-hand in the classroom and I have taught them to students all over the world. Mostly he used a simple and straightforward methodology. I do not know whether this was entirely his methodology or if he adapted and perfected it, but I also found it discussed in one of his books.

Define the central problem

That you cannot get ‘there’, meaning to solve a problem effectively, until you diagnose the problem accurately is obvious. I use the word diagnose, a medical verb, intentionally. If a medical doctor makes an incorrect diagnosis and applies the wrong treatment or prescribes the wrong medicine, the patient’s condition can be worsened. In any case, he or she is unlikely to be cured. It is the same with management consulting and yet many leap right into grappling with the issue without stopping first to thoroughly understand and diagnose the problem completely and correctly. That is the ‘there’ in any problem situation.

To define the problem, you need to uncover the central problem that is causing the symptoms, which are usually more obvious such as poor sales declining profits or a high level of personnel turnover.

Defining the central problem in any particular situa­tion is the single most difficult, yet most important, task in any con­sulting process. If you correctly identify the central problem in a situation, you can usually find several different ap­proaches that may work in solving it. However, if the wrong problem is identified, even a brilliant idea will not help and may cause the situation to worsen. One of the major errors made in defining the central problem is confusing the symptoms with the problem. For example, low profits or sales are not usually the central problem, but symptoms of something bigger that is causing the symptom.

Also, a consulting engagement may reveal more than one issue. The object then is to locate the main problem, the one that is more important than any other and is therefore ‘central’ and may be causing several of the other problems. If you find more than one central problem in any situation, you can use Drucker’s procedure to handle each one separately.

Write out a brief, even a one sentence definition if possible. Be aware, however, that even if you have spent some time in both identifying the problem and wording it as concisely as possible, in many, if not most cases you will have to go back and modify it as learn more through analysis.

Also, be careful not to word the problem as if it were the solution, by consciously or unconsciously assuming that one course of action is cor­rect before you complete the analysis. Your goal at this point is to word the problem sentence broadly enough that you will not overlook a potential solution, but not so general as to be meaningless.

Try not to word your statement so that only two alternatives are possible. For example, do not ask the question, “should a new product be introduced?" as a central problem. That allows for only two alter­natives: yes or no. Occasionally there are some situations where only two alternatives need to be analyzed. Usually, how­ever, you can reword the problem statement in a way that opens it up to more than two courses of action.

Be careful about making your problem statement too long by incorporating unnecessary additional factors. Even if these factors are interesting and mildly associated with the issue, they can make the problem statement unwieldy, awkward and confusing.

With these cautionary notes in mind, you can begin formulating your problem statement. Drucker learned to help to find the central problem by asking lots of questions of his clients. This is probably where his well-known ‘Five Questions’, (beginning with “what business are you in?”) came from. Phrase it as a question, beginning with who, what, when, where, how, or why. Or you may start with an infinitive, such as "to determine the best source for borrowing $xxx,xxx”.

Drucker knew all of this and after considerable experience, did not even need to write it all out. In many situations he simply asked the question or questions of a client, and they were able to get to this important central issue rapidly. Drucker spent a lot of time fine-tuning the central problem. He knew that working on the wrong problem was not only a waste of time but it also meant a waste of resources and almost invariably resulted in, at best, a less optimal solution.

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Determine the relevant factors

Relevant factors may include facts, estimates, speculations, assumptions, time and money limitations and more. All of these factors must be documented, and many should be tested before they are even listed. In addition, their relevancy should not be ignored. Even though there will be many factors associated with any situation, you should determine and list only those that are relevant to the central problem you described.

List alternative courses of action

Although it is theoretically possible to have an alternative with no disadvantages, this is highly unlikely. If this were the case, the solution would be self-evident and a problem-solving analysis procedure like this would not be needed except perhaps to double check your initial thinking.

All alternatives have both advantages and disadvantages. Jack Welch probably sold off some valuable companies using the requirement he established, that all of GE’s businesses had to be or be capable of becoming first or second in its market. Welch knew that there could be mistakes and there were enormous risks as well. However, this simple alternative solution for determining which businesses GE would pursue and which would be sold or closed increased the company’s value by 4,000 per cent in nine years.

Discuss, compare and analyze each alternative solution

During the analysis, you must essentially compare the relative importance of each alternative’s advantages and disadvantages with every other alternative. Some alternatives have few disadvantages, but no great advantage either. In any case, you need to think it through and document your thinking. This helps this essentially ‘left-brain’ method to be especially effective in explaining the final conclusions and recommendations to others after a clear solution is developed.

Here is a test of the clarity of the logic of your solution and the clarity of your thinking:

Show the entire written document up to this point to someone who is unfamiliar with the problem. Have this individual read everything down to your discussion and analysis. Then ask what his or her conclusions are. If they are identical or almost the same as yours, you have correctly worded your discussion and analysis. If his conclusions are different than yours, you need to make your analysis clearer.

Recommend the solution

Finally, list the recommendations that resulted from your previous discussion, analysis and conclusions. Do not add any expla­nations as they belong in the previous section. Also, do not list new recommendations based on information not included in your analy­sis. The recommendations should be based solely on your previous discussion and analysis. If you think they are needed, go back and add them to your entire analysis or even return to rewording your central problem.

Ensure that your recommendations solve the central problem as you wrote it. If your recommendation does not solve the problem as you wrote it, something is either wrong with your recommendation or you need to reword your central problem.

In this last section, just state your recommendations as to what your client should do to solve the central problem that you have identified and defined. If you are presenting this orally, your client will ask additional questions but if this is a written report, your client may contact you for additional information. It is better to deal with potential questions, whether orally or in writing, without being asked.

If you have done the analysis cor­rectly, there will rarely be a need for much explanation as your reasons will be obvious from your discussion and analysis.

Did Drucker do all of this in his head? I doubt it. There are limits even to genius. Knowing him, he did not allow for chance. Except for the rarest of general consulting issues, he would have had things well worked out with his notes ready and would have been fully prepared with his questions, even if he did not use presentation slides.

This article was adapted from Consulting Drucker by William A. Cohen (LID, 2018) and syndicated internationally.