The obvious: Peter Drucker’s timeless truths on management

This is one post of a series about Peter Drucker. Start here if you want to get the whole story.

If there is only one author you want to read on management, it should be Peter Drucker. He sees management as a holistic human practice. This has two important consequences to his writing. First, he covers and explains the main areas for a succsessful management practice: the organization, the manager’s role within the organization, and the importance of self-knowledge. Second, he writes in a way that is easily understood and actionable while being general. His style emits a (self-)confidence that is contagious. It is about doing. And in fact, mastering the main advice from his top three management books is already enough for a professional quest of a lifetime.

If you do not take the time to even read his three most important books on management, this is my essence of the reading:

1954: The Practice of Management

This book describes the various domains and tasks of buildung and maintaining a functioning business organization. A manager serves his organization. It is only if he has a clear picture of the role and function of his organization that he can make a conscious contribution to the success of the organization. The most important part of the book is Peter Drucker’s famous claim that „there is only one valid definition of a business purpose: to create a customer.“ [1]

Peter Drucker believed that organizations should serve society. In fact, he believed that in the modern age very much of our society becomes enacted through organizations. That’s why he talked about the society of organizations.

Business organizations (as opposed to non profit organizations) serve society in the first place by offering products and services people are willing to pay for. That is: people become a customer. This distinguishes him from other known concepts about the role of business organizations, namely the stakeholder and the maximize-shareholder-value concept. Other stakeholders like owners, the public, and employees are important to Peter Drucker as well, yet he argued that the necessary condition and therefore main service for society is to create customers for the products and services a business organization creates. If that doesn’t work out, a business organization has lost its reason for existence. Regarding the maximizing-shareholder-value theory, Drucker was much more in opposition. He argued that any business organization has to only make enough revenue to cover all cost for continuing its service to society. The cost consist of the cost of production, capital, entrepreneurial insurance premium, innovation and pensions.

Peter Drucker’s second important claim was about the function of an organization. He said: „Any business enterprise has two — and only these two — basic functions: marketing and innovation.“ [2] Marketing is about letting people know and access your product and services, i.e. facilitating the creation of a customer. And innovation is about constantly developing your product and service offer such that you continue to have enough customers. Both of these functions are fundamentally focused on the customers, the external reason for existence of any business. This is a very basic truth about doing business. It is easily forgotten in daily routine.

1967: The Effective Executive

In this second book about management, Peter Drucker focused on the manager as an individual. He explained the approach how an executive can put the advice from his first book into practice. And indeed, Peter Drucker became very practical. He even came up with eight recommendations for action, namely:

1. „Ask: What needs to be done?
2. Ask: What is right for the enterprise?
3. Develop action plans
4. Take responsibility for decisions
5. Take responsibility for communicating
6. Focus on opportunities rather than problems
7. Run productive meetings
8. Think and say ‚we‘ rather than ‚I‘“ [3]

Those recommendations map into the three functions (or jobs-to-be-done) that any good executive fulfills:

Directing

An executive directs, i.e. he provides direction. This is very a conceptual task. Peter Drucker emphasized that it all starts with questions rather than answers: „What needs to be done?“ and „What is right for the enterprise“. Sense making and gaining insights at the start of anything is important for success. Once an executive has a good enough understanding of the situation, he should make the necessary decisions. When there is no obvious path forward people can agree upon, an executive can take a decision nobody else can. This reduces uncertainty and enables an organization to act.

Managing

An executive manages, i.e. he gets stuff done. Peter Drucker mentioned two important things that help to align activity in an organization: run productive meetings and develop actions plans.

Aligning activity creates transparency and commitment. You know and use the different perspectives of people involved in a topic. And you know who is doing what by when.

Leading

An executive leads people, i.e. he lets people grow in their company role. It’s about taking people seriously. The base for this is building a professional relationship. An executive creates an atmosphere of community and ensures that communications flows.

A role fits to an employee when he can use his strength and realize his potential in this role. An executives looks for opportunities, not problems. This last point also applies to directing.

1999: Managing Oneself [4]

Peter Drucker believed very much in responsibility. Responsibility starts even before one becomes an executive. In fact, Peter Drucker declared that everybody should take responsibility for his own career.

Again, he started by emphasizing to ask the right questions. Managing oneself is about reflection. The first two questions are „What are my strengths?“ and „How do I perform?“. They are about personal skills and practical considerations. They help to find and design a role in which one can perform.

Yet even more important and fundamental are the next two questions: „What are my values?“ and „Where do I belong?“. We are strong when we do things we believe in. We are strong when we work with people we connect with. This gives us meaning in our lifes. When we have found a match of our strengths and a good cause, Peter Drucker asked us to define „What [we] should contribute“.

To me, the stance of the whole book is the idea that each of us has a place and a role in this world. It is on us to find out which one and make it happen. Peter Drucker also explained that this doesn’t mean we only care for ourself. To the contrary he explains the we should take „responsiblity for relationships“.
In particular with respect to our boss and our co-workers.

[1] p. 37 in Drucker, Peter: The Practice of Management: HarperBusiness, 2006 (First edition 1954)

[2] p. 37 in Drucker, Peter: The Practice of Management: HarperBusiness, 2006 (First edition 1954)

[3] p. XI in Drucker, Peter: The Effective Executive: HarperBusiness, 2006 (First edition 1967)

[4] Drucker, Peter: Managing Oneself: Harvard Business Review Classics, 2008

Originally published at timmrichter.de on March 26, 2017.