Tuesday, June 13, 2006

Peter Drucker on Managerial Courage

Harvard Business School Working Knowledge Newsletter

Back in 1963, renowned management guru Peter F. Drucker wrote a Harvard Business Review classic on How To Manage for Effectiveness. His comments are as pertinent today as they were then.

Druker asks, "What is the manager's job?"

His answer: "To direct the resources and efforts of the business toward opportunities for economically significant results."

But, as Druker points out, "The bulk of time, work, attention, and money first goes to 'problems' rather than to 'opportunities,' and, secondly, to areas where even extraordinarily successful performance will have minimum impact on results."

The fundamental problem is how frequently managers confuse the difference between "effectiveness" and "efficiency." They struggle to distinguish between "doing the right things and doing things right." Quoting Peter Drucker, "There is surely nothing quite so useless as doing with great efficiency what should not be done at all." Yet, how often do real world managers pursue "efficiency" with little, if any, regard for "effectiveness?"

In business enterprises "a very small number of events -- 10 percent to 20 percent at most -- account for 90 percent of all results, whereas the great majority of events account for 10 percent or less of the results." A handful of customers produce the bulk of all orders. A handful of products produce the bulk of all sales. A few top sales people generate most new business. A handful of production runs account for most of a plant's output. A few researchers in the laboratory produce nearly all the important innovations. And so on and so forth.

The most crucial requirement for effectiveness is "managerial courage." The manager's toughest job is to accept one basic truth: Every product and every activity of business begins to obsolesce as soon as it is started. Every product, every operation, and every activity of a business should, therefore, be put on trial for its life every two or three years. Each should be considered the way we consider a proposal to go into a new product, a new operation or a new activity. One question should be asked of each: "If we were not in this already, would we now go into it?" And if the answer is "no," the next question should be: "How do we get out and how fast?"

Peter F. Drucker (1909-2005) was perhaps the most influential management thinker ever. It's beneficial to reflect back on his profound wisdom.


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