Approach should be “what does the customer want to buy?” rather than “what do we sell?”Three essential questions –What is our business?What will be our business?What should be our business?These questions when well thought through will form a solid foundation for any business.The corporation’s strategic mission must be translated to :objectives in the following key areas:Marketing ObjectivesInnovation ObjectivesHuman Resources ObjectivesFinancial Resources ObjectivesPhysical Resources ObjectivesProductivity ObjectivesSocial Responsibility ObjectivesProfit Requirements
Factors which affect the performance of the organization whether they are within the control of the organization or outside the control of the organization – they are the responsibility of the management.In the traditional manufacturing mindset, the focus will be on optimizing productivity, optimizing the value chain, increase operational efficiencies. Although this is needed, most of the time, management teams around the world focus highly on this aspect, to the exclusion of all the other important areas.
Sales increase alone will not be a good indicator for the sustainability of an organization. Higher sales with shrinking market share means that the market is expanding fast and there are competitors who are expanding faster than us.Dominance in a market or monopoly in a market will lead to complacence.It will also bring in inertia, which will resist changes and innovation inside the organization.Technology and End-use are limitations. Customer value and customer decisions to dispose their disposable incomes should be the focus for management
The following are the cardinal rules for creating a customer:Creating customer utilityPricingAdapting to customer’s social and economic realityDelivering a service that is of true value to the customerThe 5 bad habits listed above are against these cardinal rules.
PerDrucker, first the nature of the problem needs to be identified. In Six Sigma terms it is known Common Cause (Generic) and exceptional cause (exceptional).Handling exceptions are easy.Generic problems should be handled with policies and procedures so that they are handled as a routine.Identify the boundary conditions under which the problem can be considered as resolved.Identify what is right before starting off making compromises or concessions, otherwise we will never be sure whether we made the right compromises.Once a decision is made, action items should be generated with someone responsible for each action item and a schedule.The results should be analyzed so that the feedback loop is closed, without which future decisions would also be made without the benefits of those “lessons learnt”.
Flatter organization structuresMobilitythe fact that the knowledge workers carry the tools of their trade with them wherever they goAre some of the major reasons why employees should be treated as volunteers.Superior / subordinate mentality is a legacy model which would not work in a knowledge society.In this milieu, values of an individual and the values of an organization increasingly pays an important role . They have an inordinate amount of influence in the career of an individual and the growth of an organization.So an individual or an organization find themselves in scenarios where the values do not match, they should go their own ways.As knowledge workers become highly specialized, they are highly dependent on organizations to make their output productive.Unlike before, where businesses and trades are family owned and families and villages served the social needs of a knowledge worker
Setting of individual objectives, team objectives, departmental objectives and measuring performance against those objectives (i.e. MBO) is one of the key contributions of Peter Drucker.These goals have to be specific, measurable, achievable, realistic and timely.Improve sales should be replaced with Improve sales by 5% YoY as accruals every quarter starting from q2fy10 to q4fy10 is how a good goal statement should be stated.Although efforts count, effort which does not translate into results should be pruned out.
The objectives should be planned jointly by the manager and the employee. The employee is completely responsible for delivering the results and both should get together on a regular basis to control and track the efficacy of the goals, actions taken, and results.
Focus should be on both efficiency and effectiveness. Focus on or the other alone can lead to a dysfunctional
Unlike feudal age, when the landlord provided the place to work or the tools of the trade (like plough horse / oxen owned by the whole village as a community property) or the industrial age, the where the capital provider or the owner provided the tools and the workplace, the knowledge worker owns the tools of his trade and can carry it with him where he goes.In the feudal age, everyone is born into their station in life and there is no upward / downward mobility. Knowledge society enables upward mobility.
As mentioned above for communication to be successful, it has to be understood by the receiver but the onus is always on the expert/specialist to make themselves understood.
Who is Peter Drucker? known as the- Father of Modern Management Important contributions – MBO Concept of Knowledge Worker Marketing oriented organization Contributed regularly to Harvard Business Review The Economist Wall Street Journal Fans and Followers include Jack Welch (GE), Andy Grove (Intel) (1909 - 2005)
What is management? Enabling people to perform Set the culture Training & development Measure performance of self and the organization Result is always outside (no perpetual motion machines )
Dimensions of management Economic performance and improve /maintain wealth producing capability of the organization Work and worker productive Social responsibilities
Purpose of business Marketing and innovation What is our business and what should it be? Objectives should be Operational Selective Multiple Should cover areas of survival
Market standing regardless of sales New markets New products and services in existing markets Optimum market standing as the goal Product Innovation Social innovation Managerial innovation Productivity and improvement of productivity should be a key focus
Lessons from non-profits Starts with their customers Zeal to accomplish mission Effectiveness of boards – CEO and board as colleagues Meaningful achievement Transformation from non-profit volunteer to non-paid professional
New Paradigms –Searching for the holy grail One right org structure One right way to manage people Per Drucker - The organization that fits the task Manage for results Flat hierarchy
New paradigms Practice of management – assumptions Technology and end use are fixed and given Technologies mesh and can impact any industry i.e. the definition “electronics company” is a limitation rather than foundation Management’s scope is legally defined. Economically linked keiretsu
Information Yield control instead of cost control Activity based accounting Price lead costing Total factor productivity Economic value added Benchmarking ROI / Payback period/Cash flow / Discounted present value Outsourcing and consulting of information
Why MBO Un-spelt objectives causes misdirection Management by drives MBO Organizational goals spelt out clearly Departmental /bu goals are arrived from org goals Mgr / individual goals are arrived from BU/Org goals Tools like manager’s letter Self control rather than control from above
Forms and reports Should Focus on performance Should Focus on self monitoring Control & controlling the irrelevant should be avoided
Staffing & Promotion Manager to be blamed for putting a wrong person in a spot Soldier has a right to competent command People decisions impact the performance capacity of an organization New people in established slots
Staffing & Promotion Widow maker People decisions as a tool of control as a tool for organizational culture as strategy
The entrepreneurial business Special handling for new innovative ventures Separate new businesses from established ones Provide executive cover Build the desire to innovate in the organization rather than trying to acquire it
Effectiveness Contribution Know thyself Time Effective Decisions Functioning communications Leadership as work Principles of Innovation The second half-life The Educated person
Effectiveness Operations research and the efficiency of the chef’s kitchen Effectiveness - Doing the right thing Effectiveness is a habit and could be practiced
Contribution Results Direct results Building of values and reaffirmation Building and developing people of tomorrow Making the result effective
Know thyself Personal strengths should match assignment More than that personal values should match with the assignment
Time 80-20 – where should I contribute What could be delegated -- the recurrent fire fighting Overstaffing – mal-organization Consolidating discretionary time
Characteristics of an entrepreneur Decisive Decisive even with insufficient data Decisive even when mistake prone Decisive but learns from mistakes even when mistake prone Tradition counts only when it makes sense Owns the result
Effective decisions Right and the wrong compromise – baby and the loaf Translation to work Generic problem or exceptional problem Start with what is right and make your compromises Do not hedge
Innovation Dos Analyze opportunities Unexpected success or failures Incongruity in customer behavior Positioning Keep it simple to make it effective Aim at leadership Donts Too clever Innovate for the present Innovators are opportunity focused and successful ones become one by defining and containing the risks
Some blurred distinction between Socialism! Humanism! And Druckerism Universal rights and responsibility Flat structures Ownership of the means of livelihood and production Need of the commune to be productive
Challenging the statusquo Welfare state is past --?? Scenario post 2009 Mega state vs. non-profit social sector Mega state vs. youtube / twitter / facebook Learning & constant relearning -> outliving obsolescence Drucker hedging ?! his bets ?? Government will NOT become less pervasive, less powerful, less expensive but will depend more on individuals / organizations to be effective
From chimney monkeys to the era of Rugmark and beyond Time Affluence Move from subsistence production to services So called evils of modernity – is it just widespread reporting of it? And change in our sensibilities?
Purpose of Business Purpose of the business is to satisfy the needs of its customers Some of the questions an organization need to ask frequently are Who is our customer? What should our business be? Planned abandonment -“If we did not do this already, would we go into it now?” The Purpose of a business is to create a customer
Role of Management Everything that affects the performance of the organization is a concern for the management and its responsibility. Traditional models perceive the role of management is internal which is a fallacy The best way to predict the future is to create it.
On Marketing Market standing is important irrespective of increase in sales Market standing to aim for should be optimum and not maximum Technology and End-use are limitations. Customer value and customer decisions to dispose their disposable incomes should be the focus for management The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.
5 bad habits of organizations Not Invented Here Creaming a market Quality as perceived by self Illusion of a premium price Maximize rather than optimize Until a business returns a profit that is greater than its cost of capital, it does not create wealth — it destroys it.
Effective Decision Making Making good decisions is a crucial skill at every level.
Organization as a human community One does not manage people. They should lead the people. Values are and should be the ultimate test.. Knowledge workers are dependent on the organizations to make their work productive. Organizations also take over some of the aspects of a commune as knowledge workers interact, bond and flock together. Rank does not confer privilege or give power. It imposes responsibility.
Management by Objectives Specific Measurable Achievable Realistic Timely SMART goals should be derived from corporate vision and should be set for individuals, teams and departments. Manage for Results Management by objective works - if you know the objectives.
Management by Objectives Jointly Plan Individually Act Management by objective works - if you know the objectives. Jointly control Managers Team Members
Effectiveness vs efficiency Processes and procedures typically help in increasing efficiency but only when the right things are done results are achieved. Efficiency is doing things right; effectiveness is doing the right things.
Knowledge workers Knowledge workers own the tools of their trade. Knowledge society allows upward mobility. What is measured improves
Communications Communication is perception Communication is expectation Communication makes demands Communication and information are different and mostly opposite – yet inter-dependent The onus of making himself/herself understood is on the specialist. The important thing in communication is to hear what is’nt being said