The Essential Drucker


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Insights from the all time great management guru Peter Drucker

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  • 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.
  • The Essential Drucker

    1. 1. The Essential Drucker<br />ThirumeninathanMurugan<br />
    2. 2. Who is Peter Drucker?<br />known as the- Father of Modern Management<br />Important contributions – <br />MBO<br />Concept of Knowledge Worker<br />Marketing oriented organization<br />Contributed regularly to <br />Harvard Business Review<br />The Economist<br />Wall Street Journal<br />Fans and Followers include Jack Welsch (GE), Andy Grove (Intel)<br />(1909 - 2005)<br /><ul><li> 25 honorary doctorates
    3. 3. 39 books
    4. 4. Presidential Medal of Freedom
    5. 5. Presidential Citation, NYU
    6. 6. 7 McKinsey Awards from HBR</li></li></ul><li>Purpose of Business<br />Purpose of the business is to satisfy the needs of its customers<br />Some of the questions an organization need to ask frequently are <br />Who is our customer?<br />What should our business be?<br />Planned abandonment -“If we did not do this already, would we go into it now?”<br />The Purpose of a business <br />is to create a customer<br />
    7. 7. Role of Management<br />Everything that affects the performance of the organization is a concern for the management and its responsibility.<br />Traditional models perceive the role of management is internal which is a fallacy<br />The best way to predict the future is to create it. <br />
    8. 8. On Marketing <br />Market standing is important irrespective of increase in sales<br />Market standing to aim for should be optimum and not maximum<br />Technology and End-use are limitations. Customer value and customer decisions to dispose their disposable incomes should be the focus for management<br />The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.<br />
    9. 9. 5 bad habits of organizations<br />Not Invented Here<br />Creaming a market<br />Quality as perceived by self<br />Illusion of a premium price<br />Maximize rather than optimize<br />Until a business returns a profit that is greater than its cost of capital, it does not create wealth — it destroys it.<br />
    10. 10. Effective Decision Making<br />Making good decisions is a crucial skill at every level.<br />
    11. 11. Organization as a human community<br />One does not manage people. They should lead the people.<br />Values are and should be the ultimate test..<br />Knowledge workers are dependent on the organizations to make their work productive.<br />Organizations also take over some of the aspects of a commune as knowledge workers interact, bond and flock together.<br />Rank does not confer <br />privilege or give power. <br />It imposes responsibility.<br />
    12. 12. Management by Objectives<br />Specific<br />Measurable<br />Achievable<br />Realistic<br />Timely<br />SMART goals should be derived from corporate vision and should be set for individuals, teams and departments.<br />Manage for Results<br />Management by objective works - if you know the objectives.<br />
    13. 13. Management by Objectives<br />Jointly Plan<br />Individually Act<br />Management by objective works - if you know the objectives.<br />Jointly control<br />Managers<br />Team Members<br />
    14. 14. Effectiveness vs efficiency<br />Processes and procedures typically help in increasing efficiency but only when the right things are done results are achieved.<br />Efficiency is doing <br />things right; <br />effectiveness <br />is doing the right <br />things.<br />
    15. 15. Knowledge workers<br />Knowledge workers own the tools of their trade.<br />Knowledge society allows upward mobility.<br />What is measured improves<br />
    16. 16. Communications<br />Communication is perception<br />Communication is expectation<br />Communication makes demands<br />Communication and information are different and mostly opposite – yet inter-dependent<br />The onus of making himself/herself understood is on the specialist.<br />The important thing in communication is to hear what is’nt being said<br />