Book Report: The Effective Executive

Written by Peter F. Drucker, 1967

I have not come across a single “natural”: an executive who was born effective. All the effective ones have had to learn to be effective. — Peter Drucker

Introduction

I was looking for a concise book with some fundamentals for executive leadership, and particularly for something by one of the management “legends” so I could experience some of the history of management science.

While not as short or concise as I expected, The Effective Executive reads much like a series of essays with anecdotes and mantras. This report is a chapter-by-chapter summary of some of the highlighted remarks that I found interesting as I read it. For each chapter I’ve started with a large lead-in quote that captures an important point; I then intersperse a few block quotes from the book along with personal commentary. This is not intended as a review, but rather a collection of insights that I gathered while reading.

The overarching theme of the book is decision-making, which Drucker states as the primary function of executives (and knowledge workers generally, who Drucker considers executives by virtue of their decision-making). Drucker notes that effective executives are really those who know which decisions are the right ones to spend their time on; they then define the requirements clearly and decide objectively with courage.

One surprising note on this book (first published in 1967) is its tone of latent sexism. All references to executives or leaders are explicitly as men. The highlighted quotes here may reflect that.

Chapter 1: Effectiveness can be learned

The fundamental problem is the reality around the executive. Unless he changes it by deliberate action, the flow of events will determine what he is concerned with and what he does.

This chapter focuses largely on time management and the overwhelming demands on any executive. Drucker makes clear that others in the organization will consume all of your time unless you are proactive on the things you spend your time on. This involves prioritizing which tasks and decisions are most important.

If the executive lets the flow of events determine what he does, what he works on, and what he takes seriously, he will fritter himself away “operating.”

In my first six months as CTO, this reality has become very clear. My list of “strategic initiatives” is long, and my progress is slow. Operational duties frequently consume time that should be dedicated to long-range planning and building.

Chapter 2: Know thy time

Effective executives, in my observation, do not start with their tasks. They start with their time.

Drucker recommends that all executives perform a diligent time tracking exercise periodically, in which they track all of their time spent so they can understand how much is being used on less important tasks. Drucker notes that this must be done explicitly; relying on memory will fail to capture much wasted time.

Time is totally irreplaceable.

It occurs to me that time is not a fungible resource like money; it is a one-way flow that elapses and is gone. Therefore, clichés like “time is money” aren’t entirely accurate: time is worth more than money. Jason Fried, co-founder of Basecamp, published a post in which he discusses the difference between time and attention. We may have the time for something, but that doesn’t mean we have the attentional bandwidth to give the task the care that it needs to succeed.

People-decisions are time-consuming, for the simple reason that the Lord did not create people as “resources” for organization.

Like time, people are also not fungible resources; they are unique individuals with a specific set of strengths and weaknesses. Treating them as resources not only casts them in a single dimension and devalues their worth, it misses vast complexity and potential for the benefit of the organization.

To find these time-wastes, one asks of all activities in the time records: “What would happen if this were not done at all?” And if the answer is, “Nothing would happen,” then obviously the conclusion is to stop doing it.

We should just stop doing things that don’t have material impact, period.

Effective executives have learned to ask systematically and without coyness: “What do I do that wastes your time without contributing to your effectiveness?”

Not only should we stop doing wasteful things, we must not be afraid to ask our staff what we do that wastes their time.

In fact, there is not much risk that an executive will cut back too much. We usually tend to overrate rather than underrate our importance and to conclude that far too many things can only be done by ourselves.

As anyone who has taken a good long vacation finds! If you think you are mission-critical to your organization, you’ve either failed to train and delegate to others, or your ego is larger than you realize.

Meetings are by definition a concession to deficient organization For one either meets or one works. One cannot do both at the same time.

While some meetings are important for more than just decision-making (i.e., making sure everyone is on the same page), I find that group meetings almost always have low value for at least one attendee. The needs of the group are often varied and applicable only to subsets at any one time, leaving large segments of the meeting time as a waste for others. Ongoing communication through open channels is a better way to maintain most information, e.g., a Slack channel or asynchronous collaborative tool.

Chapter 3: What can I contribute?

[The effective executive asks] “What can I contribute that will significantly affect the performance and the results of the institution I serve?”

The focus of executive work is on contribution: its content, level, standards, and impacts.

For every organization needs performance in three major areas: It needs direct results; building of values and their reaffirmation; and building and developing people for tomorrow.

These strike me as the right three focus areas for any leadership team: revenue, vision, and people.

The next generation should take for granted what the hard work and dedication of this generation has accomplished.

Probably one of the most conflicting experiences for anyone who has built or created anything: those who use that output take it for granted because it is so essential, and eventually, mundane. Enduring things are like that though — they become ingrained and hence unnoticed.

Chapter 4: Making strength productive

In human affairs, the distance between the leaders and the average is a constant. If leadership performance is high, the average will go up.

This chapter takes the position that focusing on strengths is far more important than focusing on weaknesses. Most corporate performance review cycles are based on identifying weakness and finding solutions, which Drucker considered backwards. He leads with the example of Lincoln’s appointment of General Grant, who was widely known as a heavy drinker but effective commander. When pressed on the issue, Lincoln stated “If I knew his brand, I’d send a barrel or so to some other generals”.

Drucker next gives an example of one of Lee’s generals, who had disregarded orders and upset Lee’s plans:

When [Lee] had simmered down, one of his aides asked respectfully, “Why don’t you relieve him of his command?” Lee, it is said, turned around in complete amazement, looked at the aide, and said, “What an absurd question — he performs.”

Two other interesting notes about organizing for strength. Drucker emphasizes the important of independence for strong staff, as well as organizing and placing people so that weaknesses are a triviality.

The very strong neither need nor desire organization. They are much better off working on their own.
But we can so structure an organization that the weaknesses become a personal blemish outside of, or at least beside, the work and accomplishment.

This next quote has interesting resonance with me because it conflicts with my default tendencies with hiring:

…there is a subtler reason for insistence on impersonal, objective jobs. It is the only way to provide the organization with the human diversity it needs.

I recently read a comment by Eric Elliott about the problem with “culture fit”. He states that we often incorrectly define culture fit as social: “would I want to go grab a beer with this person?” (yes, I do that). Elliott claims that this produces homogenization, damaging diversity. The correct measure of culture fit, he says, is “do they believe in the company values, vision, and goals?” (emphasis mine). We shouldn’t necessarily expect to be friends with all of our coworkers.

Chapter 5: First things first

Effective executives do first things first and they do one thing at a time.

Here Drucker pushes the idea of switching from “being busy” to “achieving results”. He reiterates that if we don’t proactively take control, then our priorities will be defined for us by “operations”:

Another predictable result of leaving control of priorities to the pressures is that the work of top management does not get done at all. That is always postponable work, for it does not try to solve yesterday’s crises but to make a different tomorrow.

We must always fight the inertia of reactivity.

Chapter 6: The elements of decision-making

…to make decisions that have significant impact on the entire organization, its performance, and results defines the executive.

Drucker moves now into how to make decisions, and largely emphasizes fact collection and objectivity.

In an anecdote on the successful history of Bell Laboratories, Drucker has interesting commentary on businesses that rely on research:

It was the first industrial research institution that was deliberately designed to make the present obsolete, no matter how profitable and efficient.
Even today few businessmen understand that research, to be productive, has to be the “disorganizer,” the creator of a different future and the enemy of today.

While not stating that all businesses need R&D in order to stay relevant, Drucker is indicating that those that do need to understand its disruptive intent and embrace that for effectiveness. I love the words “research is the enemy of today”. This says that tomorrow will be hard; that overcoming the status quo will be a battle. But I believe this is a worthwhile fight, because human progress matters. We have the power, if we also have the wherewithal, to create a different future.

Drucker’s discussion here moves into assessing whether any given event is exceptional and can be handled once, or if it is a newly emerging pattern:

Truly unique events are rare, however. Whenever one appears, one has to ask: Is this a true exception or only the first manifestation of a new genus?

All non-unique events (which are the majority) should be addressed with policy and generic solutions so they can be handled effectively in the future. I’m not sure how to resolve this, however, against the current pace of technological change which indicates to me either:

  1. unique events are either more common now, or
  2. many non-unique events may recur but will be resolved differently in the near future

In a prescient nod to the ever-present software “hack” fixes of today, Drucker notes:

One of the most obvious facts of social and political life is the longevity of the temporary.

This tells me that temporary solutions are a plague in most domains of human activity, and should always be regarded with suspicion.

Next, Drucker moves into a discussion of “boundary conditions” — those criteria that effectively form the output requirements for a decision. Drucker takes a refreshingly empirical approach to defining and measuring decisions, using scientific analogies in several areas. No decision is correct if it does not meet the boundary conditions, therefore decisions cannot be made if the boundary conditions are not known.

In a remarkable anecdote, Drucker relays the story of New York power outages in 1965. He explains the the New York Times moved their printing for that night over to New Jersey where power was available. This left them with only an hour and a half to print the papers. However, just as the paper was going to press, the executive editor and his assistants began arguing about the hyphenation of a single word. This argument took 48 minutes to resolve, so only half of the press run was able to be completed. While to most this seems like an egregious waste of time, the boundary conditions of the paper were thus: the New York Times is the standard-bearer for American English grammar. In this light, the decision was correct and aligned with the values of the organization.

In his final discussion on setting decision requirements, Drucker has these comments:

…a decision that has to satisfy two different and at bottom incompatible specifications is not a decision but a prayer for a miracle.
Everyone can make the wrong decision — in fact, everyone will sometimes make a wrong decision. But no one needs to make a decision which, on its face, falls short of satisfying the boundary conditions.

We must know the required outcome of the decision, and that will lead to decisions that at least satisfy the basic requirements — even if it isn’t the right or optimal decision.

Finally, Drucker states that decisions must be actionable or else they aren’t even decisions. The worst we can do as leaders is to make decisions that aren’t acted upon, which is in actuality a different decision, and also shows our team that we aren’t reliable.

In fact, no decision has been made unless carrying it out in specific steps has become someone’s work assignment and responsibility. Until then, there are only good intentions.
No wonder that the people in the organization tend to view these statements cynically if not as declarations of what top management is really not going to do.

Chapter 7: Effective decisions

…we start out with untested hypotheses — in decision-making as in science the only starting point. We know what to do with hypotheses — one does not argue them; one tests them.

Drucker advocates gathering much conflicting advice for a decision, but makes it clear that opinion itself is not valuable; the tenets of a decision option must be testable. He even notes that Alfred P. Sloan was known for prolonging decisions “to give ourselves time to develop disagreement” so they could make sure it was understood from all perspectives.

Drucker draws hard lines about naive decision-making, but also recommends (in different words) that we assume positive intent.

Effective executives know, of course, that there are fools around and that there are mischief-makers. But they do not assume that the man who disagrees with what they themselves see as clear and obvious is, therefore, either a fool or a knave. They know that unless proven otherwise, the dissenter has to be assumed to be reasonably intelligent and reasonably fair-minded.

Of course, one possible course of action for any decision is to not make one. Drucker states:

Every decision is like surgery. It is an intervention into a system and therefore carries with it the risk of shock. One does not make unnecessary decisions any more than a good surgeon does unnecessary surgery.

His guidelines in this regard are:

  • Act if on balance the benefits greatly outweigh cost and risk; and
  • Act or do not act; but do not “hedge” or compromise.

My primary criticism of these guidelines is that the second doesn’t account for iteration. Drucker repeats that half-solutions are no solution, but I think there is a third potential guideline which states “Act in a manner that creates progress if a long-term strategy is being developed” or something similar.

Decisions are often hard and unpleasant, with Drucker noting that many take as much courage as they do judgment, and that most effective decisions tend to be “distasteful”. I don’t think he intends to say that decisions are distasteful because they have conflicting morality, but rather that it is both (a) hard to make objective decisions that conflict with your own opinions, and (b) if sufficient conflict was generated for the decision, some or many stakeholders will not be happy.

Drucker closes the final chapter with an interesting, though largely misdirected discussion of the role of the computer in decision-making. While it was very difficult to anticipate in 1967 how explosively computer technology would grow, it is odd to see him miss the mark in a book that is otherwise full of prescient insights. I refer primarily to his comments on the permanent limitations of computers for decision-making, when in fact modern machine learning techniques are remarkably good at a wide variety of tasks that were formerly thought to be the domain of humans alone.

Conclusion

As I just mentioned, there were a remarkable number of forward-thinking principles in the book that I felt pre-dated many modern technology-based businesses. He also repeatedly emphasized the importance of time management and understanding, the value of people, and the need for empirical, objective decision-making.

He closes with remarks on the accelerating change of business and how to stay the course. I’ll close with them as well, as our inspiration to keep pressing on even though the road is difficult and uncertain:

There is no longer a broad and clearly marked path which the executive only has to walk down to gain effectiveness. But there are still clear surveyor’s benchmarks to give orientation and guidance how to get from one to the next.