How to apply Peter Drucker’s most effective management ideas

Effectiveness describes the ability to get things done and to establish and reach planned goals successfully. Peter Drucker did that in the classroom, as a writer and as a management consultant, to presidents of corporations and countries, non-profits and entrepreneurs all over the world.

He was a genius of the type that appears perhaps once in a hundred years, or even less frequently. He developed the most effective management ideas seen anywhere. That is largely why he became known as “The Man Who Created Management” or “The Father of Modern Management”.

Drucker was my PhD professor and later my friend and mentor. His 39 books published while he was alive described what to do to achieve success in thousands of management situations. His death was a sad loss, not to just me, but to millions of others worldwide when he died on 11 November 2005 at the age of 96.

What were Drucker’s contributions to management?

Drucker’s contributions to management were many and basic. They include the concepts of decentralization, outsourcing and the decisive importance of marketing. In fact, he maintained that businesses had only two functions: marketing and innovation. He was the only one to make clear a basic truth that few had considered: the purpose of a business, as far as society is concerned, is not to create a profit, but to create a customer, and that it is essential to consider this societal purpose in the construction of any business model.

What is the concept of the knowledge worker?

Drucker coined the term “knowledge worker” to describe the modern worker whose work was not primarily physical, but mental. He said that the knowledge worker would become increasingly important due to the demands of technology. He predicted this more than 50 years ago and it has occurred as he predicted.

He recognized the increased importance of executive education at the graduate level and established an executive PhD program at Claremont University in California. Here, senior executives learned that there was a “Drucker Difference” which differed radically from others. He emphasized management based on specific liberal arts and moved the financial classification of personnel from classification as a cost, to classification as an asset.

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How to develop top executives?

The executive PhD program that he co-developed with his dean, Paul Albrecht, and in which he also taught, was one of the first executive PhD programs in the country. He subsequently helped executives grow their institutions, whether giant for-profit institutions like Jack Welch’s General Electric (GE), of which he was CEO, or religious organizations like Rick Warren’s Saddleback Church or even governmental ones, including the military.

I was honored to be the first PhD graduate of the program aimed at rising executives, with the object of training the manager of the future for higher levels of responsibility in top management. That was 45 years ago. It helped me to achieve the rank of general in the Air Force, become a corporate executive at several companies, an entrepreneur, a full-time professor at several universities, and finally co-founder, president, and CEO of an accredited, non-profit graduate school, which led to my representing the US at a number of international events.

Drucker’s reach was long and his sweep wide. His wisdom helped and inspired international entrepreneurs, including Minglo Shao who founded the Drucker Academies of China, K.H. Moon of Korea, and Masatoshi Ito of Japan whose name is now shared with Drucker as the name of the School of Graduate Management at the university where he taught in California.

As mentioned previously, it is noteworthy that Jack Welch, who as CEO caused GE’s already significant net worth to increase 4,000 percent in the nine years that Welch served, prompting Fortune Magazine to name Welch “Manager of the Century”. This was not an idol title but had been attained through specific actions during Drucker’s consulting with Welch, shortly after becoming CEO.

Welch, along with many other leaders, would follow principles that maintained that high ethics and social responsibility were not just desirable for an organization, but essential. Moreover, they knew that all employees must be treated as if they were volunteers and that part of their duty as corporate leaders was to raise subordinates, so that it was viewed as a distinct project and that part of the ongoing leadership task for leaders of any organization was to help ordinary people perform at an extraordinary level.

What was Drucker’s problem?

However, with all his success in explaining what to do, he did not always detail fully how to apply many of the actions and concepts that he described and promoted in his books. This was done fully only in his classroom at Claremont where he would spend an entire semester, including overtime lectures, on a single management topic, which sometimes extended far past officially allotted time.  Consequently, some of the ideas he introduced in print have been misapplied with only partial instruction and the results obtained were less than optimal.

For example, the idea of management by objectives (MBO) was not originated by Drucker, but he was the one to draw many ideas together, developing and popularizing MBO in his 1954 book, The Practice of Management. Essentially, MBO is a process by which a superior and subordinate in an organization work together to arrive at goals for the subordinate over an upcoming period of time, based on the larger objectives of the superior and what he or she is trying to accomplish in the organization.

Many noteworthy companies adopted MBO and applied it successfully. One of the founders of Hewlett-Packard, Bill Packard, credited MBO as his most successful operating policy and the key to Hewlett-Packard’s success. Packard expanded the policy to all of the company’s other units.

Other businesses, however, had problems with implementation and did not achieve the same results. Drucker thought that he understood why it did not always work. It was essential that the manager and subordinates know and understand the right objectives. Too often, the manager did not select the correct objectives or ensure that they were fully understood by the subordinate.

What are some procedures for implementing Drucker’s ideas?

Procedures for implementing other Drucker ideas, and in this way using Drucker’s wisdom, are required. If you understand Drucker’s procedures in full, you can master any of his concepts and recommendations, including:

• Making management decisions not based primarily on detailed quantitative analysis but ‘from the gut’.
• The five most important questions that you must ask yourself for the future success of your organization.
• The essential nature of constant innovation requires that the organization stop working with yesterday’s process or product, even if still profitable.
• What everyone knows is usually wrong; but this can be used as a competitive advantage.
• The best way to predict the future is to create it.
• If you want to know what events will come next in your environment or market, you must examine events that have already occurred recently.
• Selling is not a subset of marketing, and the two functions of marketing and selling may even be adversarial. If marketing is conducted properly, however, selling may not even be needed and can at least be made much easier.
• Management is not quantitative analysis but liberal art analysis.
• Integrity and social responsibility are not just desirable characteristics of management; they are requirements for success.
• If you keep doing what made the organization successful in the past, you will eventually fail, and usually sooner than you think.
• You cannot avoid risk, but you must manage it.
• The best way to approach any problem is not with your knowledge and experience, but with your ignorance.
• There are specific steps for developing important innovations, which must be performed completely, and in a prescribed order.
• An individual who has had one or more major failures can still succeed brilliantly in the future.
• Strategy is situational and should not be applied by formula.
• Leadership is distinguished from management in that it requires doing the right things; management requires doing things right.
• The leader’s first and toughest decision is the decision to become a leader.
• You cannot manage change; you can only lead it.
• The purpose of an organization is to enable ordinary human beings to do extraordinary things.
• The customer knows what he wants and you must know it too, although it is probably not what you think.
• If you “charge what the market will bear”, you will usually lose the market.
• Business has only two functions: marketing and innovation.
• Treat all subordinates as if they were volunteers as, aside from during a recession that is what they are.

Drucker concluded that an analysis of past successes would inevitably show that the organization that wins will not necessarily be the one with the greatest wealth or resources, but the one that applies its wealth and resources correctly.

This explains why Steve Jobs, a college dropout who was incapable of even building a computer board by himself (this was done by his friend “the Woz,” Steve Wozniak), was able with limited financial resources to compete successfully with computer giant IBM, with 300,000 employees including hundreds of PhDs and revenue of $20bn a year, as well as other top computer companies, and founded a new industry based on the personal computer.