Jeffrey Krames has written a remarkable book titled, INSIDE DRUCKER’S BRAIN. In it, Krames shares Peter Drucker’s best management ideas and updates the relevancy of these ideas for today’s marketplace. Krames had a lot of material to work with — Peter Drucker, in his six decades career as a teacher, author, and consultant, wrote nearly 40 business books and countless articles.

The impact of Peter Drucker’s influence cannot be understated. He’s viewed as “The Man Who Invented Management” by the likes of Jack Welch, Tom Peters, and Jim Collins. But Collins has gone beyond just calling Drucker “the leading founder of the field of management.” He has also said Drucker’s “primary contribution is not a single idea, but rather an entire body of work that has one gigantic advantage: nearly all of it is essentially right.” (Whoa.)

Long-time Brand Autopsy readers know I’m a business book junkie. My appetite for biz books stands on the verge of being insatiable. However, I’ve never been able to fully appreciate Peter Drucker’s business writings. I’ve always found Drucker’s books a touch too unapproachable. I get lost in the densely simple language and the dusty examples used in such classic Drucker books like: THE PRACTICE OF MANAGEMENT (1954), MANAGING FOR RESULTS (1964), and THE EFFECTIVE EXECUTIVE (1966).

The beauty of INSIDE DRUCKER’S BRAIN is Krames updates the language and adds modern context to provide clarity and acuity to Drucker’s classic writings. (Krames did a brilliant job!)

For two weeks in December 2008, the Brand Autopsy blog shared summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN in a series of posts called … The IDB Project.

CHAPTER ONE
Opportunity Favors the Prepared Mind (Dec. 9)

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER ONE
Opportunity Favors the Prepared Mind

“Opportunity favors the prepared mind. If opportunity knocks at the door you have to open it. You have to be receptive to it and I was.” — Peter Drucker

Peter Drucker opened the door of opportunity in 1943 when he was asked by General Motors to conduct a study of the company’s management system. At the time, Drucker was a professor of politics and philosophy at Bennington College (Vermont).

He had come to the United States six years earlier from Austria after earning a doctorate degree in public/international law (University of Frankfurt, 1931) and spending a few years as newspaper reporter (The Austrian Economist and Daily Frankfurter). He wrote two books during this time, The End of Economic Man (1939) and The Future of Industrial Man (1942). Drucker’s business experience was limited to short stints as an investment banker and economist in Europe.

While at Bennington College, Drucker was interested in studying the inner-workings of a large corporation. However, no corporation was willing to allow Drucker internal access for such an in-depth study. That is, until the serendipitous phone call from General Motors.

Drucker was prepared for this opportunity and the resulting work, CONCEPT OF CORPORATION (1946), changed the game of business management.

The concept of managing a corporation had always been about top-down decision-making from senior-level executives. After studying General Motors, Drucker learned to believe decentralized decision-making was the recipe for sustained success. He argued employees needed to be viewed not as dehumanized costs, but rather as valuable assets. Drucker went further by writing that employees should be given more responsibility to make decisions in order to create a “self-governing plant community.”

The CONCEPT OF CORPORATION was written over 60-years ago, but its impact can still be felt today. It took a few decades, but by the 1980s, the majority of Fortune 500 companies had implemented some form of decentralized decision-making.

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER TWO
Execution First and Always

“Management must always, in every decision and action, put economic performance first. It can only justify its existence and its authority by the economic results it produces.” — Peter Drucker

Larry Bossidy and Ram Charan wrote the best-selling business book, EXECUTION: The Discipline of Getting Things Done (2002). As Jeffrey Krames points out, “Execution” was a concept Peter Drucker wrote about extensively and much of the Bossidy/Charan book is a rehash of earlier Drucker writings.

Peter Drucker failed to give his concepts catchy names. Instead, he was more concerned about bringing new and worthwhile business concepts to light. Drucker wrote extensively about “execution” … he just didn’t call it that.

Krames summarizes Drucker’s thoughts on execution by sharing six ways managers fail to execute consistently.

1. Failure to Abandon Bad Projects
Drucker once said, “There is nothing so useless as doing efficiently that which should not be done at all.” He was a strong believer in having managers conduct regular performance reviews of products. And an even stronger believer in abandoning projects that fail to meet objectives.

2. Too Much Management Bureaucracy
Having to navigate through unnecessary corporate red tape will stifle the ability of any manager to execute upon good ideas.

3. Poorly Defined Objectives and Business Values
Effective and efficient execution is helped greatly when a business outlines clear project objectives and when the values of a business are not just articulated, but lived.

4. Inappropriate Management Structure
“The right [management] structure does not guarantee results. But the wrong structure aborts results and smothers even the best direct efforts.” (MANAGING FOR RESULTS (1964), Peter Drucker)

5. Poorly Communicated Strategies
If employees do not understand how their individual contributions fit into the overall company strategy, execution will suffer.

6. Not Embracing a Customer-First Point-of-View
In THE PRACTICE OF MANAGEMENT (1954), Drucker wrote, “There is only one valid definition of business purpose: to create a customer.” Companies that embrace and foster an insular corporate culture will result in having employees lose focus of what matters most — the customer.

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER THREE
Broken Washroom Doors

“Every business has its ‘broken washroom doors,’ its misdirections, its policies, procedures, and methods that emphasize and reward wrong behavior, penalize or inhibit right behavior.” — Peter Drucker

No business is perfect. Every business has flaws. Peter Drucker calls these flaws “broken washroom doors.” Obviously, in order for a business to achieve sustained success, it must minimize flaws that “reward wrong behavior” and “inhibit right behavior.”

By 1990, Drucker had turned much of his attention to helping non-profit businesses succeed. He was disenchanted with for-profit businesses because he felt the compensation system had evolved into a broken washroom door.

Drucker strongly believed executives were being wrongly rewarded with excessive stock options and sky-high salaries. He reasoned stock options are inappropriate compensation because they gave executives the incentive to manage for immediate results and not for long-term results. Drucker also bemoaned the escalating pay rate for CEOs. In 2006, the average salary of CEO from an S&P 500 company was 364 times greater than the pay of an average employee [source]. Drucker felt CEO pay should not exceed 20 times the average employee.

According to Drucker, another broken washroom door are the mission statements that attempt to give companies focus. Drucker says, “Mission statements have to be operational; otherwise, it’s merely good intentions.” The more specific a company’s mission statement, the easier it will be to have employees focused on making a worthwhile contribution.

The tendency to burden employees with an array of priorities becomes another broken washroom door. Drucker long-advocated assigning managers no more than two priorities. From his experience, he learned no manager could expertly deliver upon more than two priorities at any given time.

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER FOUR
Outside-In

“The executive is within an organization. Every executive … sees the inside—the organization—as close and immediate reality. He sees the outside only through thick and distorting lenses, if at all. What goes on outside is usually not even known firsthand. It is received through an organizational filter of reports, that is, in an already predigested and highly abstract form.” — Peter Drucker

Peter Drucker warned businesses about the dangers of developing an insular corporate culture. The business reality is, many executives lose perspective of what matters most and fall victim to fire-fighting inconsequential issues rather than addressing fundamental business issues that impact attracting, retaining, and growing customers.

In MANAGING FOR RESULTS (1964), Drucker outlined eight business realities managers must address to develop a customer-driven outside-in perspective.

1. Only Cost Centers Exist Within a Business
Employees do not create sales. Products do not create sales. Processes do not create sales. Only customers create sales. Every department inside a business is a cost center and not a profit center. Drucker says, “It is always somebody outside who decides whether the efforts of a business become economic results or whether they become so much waste and scrap.”

2. Solving Problems Solves Little
Jeffrey Krames summarizes Drucker’s wisdom by writing, “Solving problems can only return the organization to its prior status quo. To achieve results managers must exploit opportunities.” Constantly fire-fighting problems will never allow a company to grow. It is only by finding and taking advantage of opportunities that causes a company to grow.

3. Effectiveness is Better than Efficiency
Drucker once said, “Efficiency is doing things right; effectiveness is doing the right things.” And, Drucker also said, “Doing the right thing is more important than doing the thing right.” Enough said.

4. A Business that Fails to Lead Will Become Marginalized
Genuine market leaders, according to Drucker, must achieve their leadership results in an area that is meaningful to a customer or market. Such as, leadership in product development (think Apple), leadership in customer service (Container Store), leadership in distribution (Wal-Mart), or leadership in bringing ideas to market faster (Zara).

Achieving a leadership position is imperative for a business to stave off becoming marginalized or commoditized. Drucker argues a business “… may seem to be a leader, may supply a large share of the market, may have the full weight of momentum, history, and tradition behind it. But the marginal is incapable of survival in the long run, let alone of producing profits. It lives on borrowed time. It exists on sufferance and through the inertia of others. Sooner or later, whenever boom conditions abate, it will be squeezed out.”

5. Market Leadership is a Temporary Condition
The reality is simple: a business must not become secure in its leadership position. Customers change and markets change. Businesses that fail to adapt to the ever-evolving marketplace will lose their leadership position. Drucker says its normal for businesses “to drift from leadership to mediocrity.” Given this reality, Drucker urges executives to “reverse the normal drift” by focusing the business ”on opportunity and away from problems, to re-create leadership and counteract the trend toward mediocrity, to replace inertia and its momentum by new energy and new direction.” source

6. Decisions Age Quickly
Drucker once wrote, “Any human decision or action starts to get old the moment it has been made.” So true, and so very applicable to business. The job of a manager, then, is “not to impose yesterday’s normal on a changed today; but to change the business, its behavior, its attitudes, its expectations—as well as its products, its markets, and its distributive channels—to fit the new realities.”

7. Misallocation of Resources is Certain to Happen
Drucker contends too many employees are misallocated and required to work on “yesterday” projects and “yesterday” programs that will not result in helping a company achieve market leadership today. He claims executives, working under ”managerial vanity,” are so desperate to turnaround poor-performing products and programs that they allocate resources to solve problems rather than to find new opportunities.

To combat this misallocation reality, Drucker recommends “constant reappraisal and redirection” of resources to improve the effectiveness of a business.

8. A Business is More Effective When it is More Selective
Businesses try too accomplish far too much. They lose concentration and give in to the temptation of being all things to all people. Drucker asserts, “Economic results require that staff efforts be concentrated on the few activities that are capable of producing significant business results. Managers must minimize the amount of attention devoted to products which produce primarily costs.”

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER FIVE
When Naturals Run Out

“When you need large numbers of talented managers, you have to convert management into something that can be learned or taught.” — Peter Drucker

Peter Drucker used the word “natural” to signify a superstar manager. He shared an interesting story with Jeffrey Krames which explains why he used “natural” to mean star performer.

In an interview with Krames, Drucker talked about how, before corporations ruled business, family businesses were the leading businesses. And, family businesses were naturally managed by family members. Drucker said the best of these family managers were “naturals.”

However, at some point, the family business would run out of “naturals” and they would need to look outside the family for managers. A process was needed “… that could transform non-naturals into competent managers.” Thus, making the matter of finding, training, and developing managers a critical business discipline.

Throughout his career, Drucker shared lots of ideas on what makes someone a natural manager.

For example, people who can hire and fire employees without getting emotionally involved are “naturals.” Those who can effectively manage their time to focus supremely on just one or two priorities at a time are “naturals.” People who can make difficult decisions and ask difficult questions at the most opportune time are “naturals.” And, “Naturals” know it is their responsibility to foster a positive and welcoming corporate culture.

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER SIX
The Jeffersonian Ideal

“Everybody from the boss to the sweeper must be seen as equally necessary to the success of the common enterprise.” — Peter Drucker

Beginning with CONCEPT OF CORPORATION (1946) and continuing with THE PRACTICE OF MANAGEMENT (1954), Peter Drucker shared his belief in the Jeffersonian Ideal of equality and empowerment for all employees.

It’s hard for us to believe treating employees as valuable assets (not dehumanized cogs) and giving them the responsibility to make decisions are revolutionary business concepts. But they were when Drucker began writing about business management matters in the 1940s.

In MANAGEMENT: Tasks, Responsibilities, Practices (1973), Drucker shared how he learned lower-level employees were more knowledgeable and competent than senior-level management gave them credit. During World War II, Drucker was conducting research inside a corporation. He was unable to talk with many management-level employees because a lot of them were serving in World War II. Instead, Drucker had to rely on lower-level employees for information. He learned the average worker was smarter and better adjusted than previously thought.

For decades, Drucker trumpeted the importance of engaging and empowering the “knowledge worker.” He viewed corporations as social institutions, not nameless and soulless assembly lines. His writings routinely argued the needs, goals, and strengths of individual employees had to be addressed by corporations. And, corporations needed “to be organized so as to bring out the talents and capacities within the organization.”

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER SEVEN
Abandon All But Tomorrow

“The first step in a growth policy is not to decide where and how to grow. It is to decide what to abandon. In order to grow, a business must have a systematic policy to get rid of the outgrown, the absolute, [and] the unproductive.” — Peter Drucker

Peter Drucker preached “purposeful abandonment.” He felt the best way for a company to grow is to first stop doing what’s not working. That is, abandon projects that fail to deliver results. Abandon products that fail to increase profit. And abandon people that fail to make worthwhile contributions to the company.

Drucker’s “purposeful abandonment” is very similar to Jim Collins’ “Stop Doing List” concept.

In GOOD TO GREAT, Collins brought renewed relevance to “purposeful abandonment” by giving it a catchy name — Stop Doing List. Collins writes, “Take a look at your desk. If you’re like most hard-charging leaders, you’ve got a well-articulated to-do list. Now take another look: Where’s your stop-doing list?” [source]

Collins continues, “Those who built the good-to-great companies, however, made as much use of ‘stop doing’ lists as ‘to do’ lists. They displayed a remarkable discipline to unplug all sorts of extraneous junk.” [source]

For sound advice on what to include in a “Stop Doing” list, we look to Peter Drucker. In MANAGEMENT CHALLENGES FOR THE 21st CENTURY (1999), Drucker shared, “If what looks like an opportunity does not advance the strategic goal of the institution, it is not an opportunity. It is a distraction.” Both Drucker and Collins agree, distractions must be avoided.

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER EIGHT
Auditing Strengths

“Most organizations take their employees’ strengths for granted and focus on minimizing their weaknesses. They [identify] ‘skill gaps’ or ‘areas of opportunity,’ and then pack them off to training classes so that weaknesses can be fixed. But this isn’t development, it is damage control. And by itself damage control is a poor strategy for elevating either the employee or the organization to world-class performance.” — Marcus Buckingham & Donald Clifton (2001)

Psst … decades before Marcus Buckingham became the poster child for “building upon strengths, not weakness,” Peter Drucker heralded the cause. In THE PRACTICE OF MANAGEMENT (1954), Drucker actually launched the strengths movement by writing:

“Nothing destroys the spirit of an organization faster than focusing on people’s weaknesses rather than on their strengths, building on disabilities rather than on abilities. The focus must be on strength.”

“One can only build on strength. One can achieve only by doing. Appraisal must therefore aim first and foremost on bringing out what a man can do … a man should never be appointed to a managerial position if his vision focuses on people’s weaknesses rather than on their strengths.”

“One cannot do anything with what one cannot do. Once cannot achieve anything with what one does not do … Appraisal must therefore aim first and foremost on bringing out what a man can do.”

Drucker revisited the concept of strengths-based development with a must-read Harvard Business Review article (MANAGING ONESELF, 1999). He updates his stance by writing:

“Most people think they know what they are good at. They are usually wrong. More often, people know what they are not good at – and even then more people are wrong than right. And yet, a person can perform only from strength. One cannot build performance on weaknesses, let alone on something one cannot do at all.

“Waste as little effort as possible on improving areas of low competence. It takes far more energy and far more work to improve from incompetence to low mediocrity than it takes to improve from first-rate performance to excellence.”

Also in MANAGING ONSELF, Drucker explains how “measuring feedback analysis” is the best way to discover your strengths. He encourages executives to, at the time they make a key decision, write down the expectations they hope come from that decision. Then after nine or twelve months, compare the actual results with the written-down expectations. It’s a process that worked for Drucker to identify areas he excelled and areas where he struggled to meet expectations.

From my experience, a more scientific way to identify one’s strengths is to use the StrengthsFinder test from Gallup. This online test formed the basis for NOW, DISCOVER YOUR STRENGTHS (2001) and for Tom Rath’s STRENGTHSFINDER 2.0 (2007).

The IDB Project is a series of posts sharing summaries, snippets, and takeaways from INSIDE DRUCKER’S BRAIN (Jeffrey Krames)

CHAPTER NINE
The Critical Factor

“Leadership is not magnetic personality … it is not ‘making friends and influencing people’—that is salesmanship.” — Peter Drucker

Peter Drucker clearly delineated the difference between being a leader and being a manager. He famously riffed, “Management is doing things right; leadership is doing the right things.” The right things for a leader to do, according to Drucker, include these ideals:

1. Courage with Character
It takes courage to practice “purposeful abandonment.” It also takes character to make connections with people who are genuine and compassionate. Natural leaders do both.

2. Articulate a Clear Mission
“The foundation of effective leadership is thinking through the organization’s mission, defining it, and establishing it clearly and visibly. The leader sets the goals, sets the priorities, and sets and maintains the standards.” (THE ESSENTIAL DRUCKER, 2001)

3. Foster Loyalty
A leader must be worthy of receiving loyalty. To be so worthy, Drucker maintains leaders must set their standards high and always live by those high standards. When loyalty is fostered throughout a business, employee morale increases as does employee effectiveness.

4. Make Strengths Stronger
“Nothing destroys the spirit of an organization faster than focusing on people’s weaknesses rather than on their strengths, building on disabilities rather than on abilities. The focus must be on strength.” (THE PRACTICE OF MANAGEMENT, 1954)

5. Hire People Smarter than You
Ineffective leaders worry about their direct reports usurping them. Effective leaders don’t. Effective leaders encourage their direct reports to assume greater responsibility and to make more meaningful contributions to the business. Effective leaders measure their success by the success achieved of the people s/he hires, manages, and promotes.

6. Earn Trust
”To trust a leader is not to necessarily like him. Nor is it necessary to agree with him. Trust is the conviction a leader means what he says. It is a belief in something very old-fashioned, called ‘integrity.’” (THE ESSENTIAL DRUCKER, 2001)

7. Develop People
Peter Drucker understood no business will survive if it is lead by only one leader. A thriving organization needs leaders throughout and not just at the helm. According to Drucker, “The gravest indictment of a leader is for the organization to collapse as soon as he leaves or dies.”