Managing Ignorance: The Passing of Peter Drucker


Farewell Peter Drucker.
The biggest business thinker of them all is gone. Perhaps business will start listening to him now. A sad day.
from the NY Times:
Peter F. Drucker, the political economist and author, whose view that big business and nonprofit enterprises were the defining innovation of the 20th century led him to pioneering social and management theories, died yesterday at his home in Claremont, Calif. He was 95.
His death was announced by Claremont Graduate University.
Mr. Drucker thought of himself, first and foremost, as a writer and teacher, though he eventually settled on the term “social ecologist.” He became internationally renowned for urging corporate leaders to agree with subordinates on objectives and goals and then get out of the way of decisions about how to achieve them.
He challenged both business and labor leaders to search for ways to give workers more control over their work environment. He also argued that governments should turn many functions over to private enterprise and urged organizing in teams to exploit the rise of a technology-astute class of “knowledge workers.”
Mr. Drucker staunchly defended the need for businesses to be profitable but he preached that employees were a resource, not a cost. His constant focus on the human impact of management decisions did not always appeal to executives, but they could not help noticing how it helped him foresee many major trends in business and politics.
He began talking about such practices in the 1940’s and 50’s, decades before they became so widespread that they were taken for common sense. Mr. Drucker also foresaw that the 1970’s would be a decade of inflation, that Japanese manufacturers would become major competitors for the United States and that union power would decline.
For all his insights, he clearly owed much of his impact to his extraordinary energy and skills as a communicator. But while Mr. Drucker loved dazzling audiences with his wit and wisdom, his goal was not to be known as an oracle. Indeed, after writing a rosy-eyed article shortly before the stock market crash of 1929 in which he outlined why stocks prices would rise, he pledged to himself to stay away from gratuitous predictions. Instead, his views about where the world was headed generally arose out of advocacy for what he saw as moral action.
His first book (“The End of Economic Man,” 1939)was intended to strengthen the will of the free world to fight fascism. His later economic and social predictions were intended to encourage businesses and social groups to organize in ways that he felt would promote human dignity and vaccinate society against political and economic chaos.
“He is remarkable for his social imagination, not his futurism,” said Jack Beatty in a 1998 review of Mr. Drucker’s work “The World According to Peter Drucker.”
Mr. Drucker, who was born in Vienna and never completely shed his Austrian accent, worked in Germany as a reporter until Hitler rose to power and then in a London investment firm before emigrating to the United States in 1937. He became an American citizen in 1943.
Recalling the disasters that overran the Europe of his youth and watching the American response left him convinced that good managers were the true heroes of the century.
The world, especially the developed world, had recovered from repeated catastrophe because “ordinary people, people running the everyday concerns of business and institutions, took responsibility and kept on building for tomorrow while around them the world came crashing down,” he wrote in 1986 in “The Frontiers of Management.”
Mr. Drucker never hesitated to make suggestions he knew would be viewed as radical. He advocated legalization of drugs and stimulating innovation by permitting new ventures to charge the government for the cost of regulations and paperwork. He was not surprised that General Motors for years ignored nearly every recommendation in “The Concept of the Corporation,” the book he published in 1946 after an 18-month study of G.M. that its own executives had commissioned.
From his early 20’s to his death, Mr. Drucker held various teaching posts, including a 20-year stint at the Stern School of Management at New York University and, since 1971, a chair at the Claremont Graduate School of Management. He also consulted widely, devoting several days a month to such work into his 90’s. His clients included G.M., General Electric and Sears, Roebuck but also the Archdiocese of New York and several Protestant churches; government agencies in the United States, Canada and Japan; universities; and entrepreneurs.
For over 50 years, at least half of the consulting work was done free for nonprofits and small businesses. As his career progressed and it became clearer that competitive pressures were keeping businesses from embracing many practices he advocated, like guaranteed wages and lifetime employment for industrial workers, he became increasingly interested in “the social sector,” as he called the nonprofit groups.
Mr. Drucker counseled groups like the Girl Scouts to think like businesses even though their bottom line was “changed lives” rather than profits. He warned them that donors would increasingly judge them on results rather than intentions. In 1990, Frances Hesselbein, the former national director of the Girl Scouts, organized a group of admirers to honor him by setting up the Peter F. Drucker Foundation for Nonprofit Management in New York to expose nonprofits to Mr. Drucker’s thinking and to new concepts in management.
Mr. Drucker’s greatest impact came from his writing. His more than 30 books, which have sold tens of millions of copies in more than 30 languages, came on top of thousands of articles, including a monthly op-ed column in The Wall Street Journal from 1975 to 1995.
Among the sayings of Chairman Peter, as he was sometimes called, were these:
¶”Marketing is a fashionable term. The sales manager becomes a marketing vice president. But a gravedigger is still a gravedigger even when it is called a mortician – only the price of the burial goes up.”
¶”One either meets or one works.”
¶”The only things that evolve by themselves in an organization are disorder, friction and malperformance.”
¶”Stock option plans reward the executive for doing the wrong thing. Instead of asking, ‘Are we making the right decision?’ he asks, ‘How did we close today?’ It is encouragement to loot the corporation.”
Mr. Drucker’s thirst for new experiences never waned. He became so fascinated with Japanese art during his trips to Japan after World War II that he eventually helped write “Adventures of the Brush: Japanese Paintings” (1979), and lectured on Oriental art at Pomona College in Claremont from 1975 to 1985.
Peter Ferdinand Drucker was born Nov. 19, 1909, one of two sons of Caroline and Adolph Drucker, a prominent lawyer and high-ranking civil servant in the Austro-Hungarian government. He left Vienna in 1927 to work for an export firm in Hamburg, Germany, and to study law.
Mr. Drucker then moved to Frankfurt, where he earned a doctorate in international and public law in 1931 from the University of Frankfurt, became a reporter and then senior editor in charge of financial and foreign news at the newspaper General-Anzeiger, and, while substitute teaching at the university, met Doris Schmitz, a 19-year-old student. They became reacquainted after waving madly while passing each other going opposite directions on a London subway escalator in 1933 and were married in 1937.
Mr. Drucker had moved to England to work as a securities analyst and writer after watching the rise of the Nazis with increasing alarm. In England, he took an economics course from John Maynard Keynes in Cambridge, but was put off by how much the talk centered on commodities rather than people.
Mr. Drucker’s reputation as a political economist was firmly established with the publication in 1939 of “The End of Economic Man.” The New York Times said it brought a “remarkable vision and freshness” to the understanding of fascism. The book’s observations, along with those in articles he wrote for Harpers and The New Republic, caught the eye of policy makers in the federal government and at corporations as the country prepared for war, and landed him a job teaching at Sarah Lawrence College in Bronxville, N.Y.
Writing “The Future of Industrial Man,” published in 1942 after Mr. Drucker moved to Bennington College in Vermont, convinced him that he needed to understand big organizations from the inside. Rebuffed in his requests to work with several major companies, he was delighted when General Motors called in late 1943 proposing that he study its structure and policies. To avoid having him treated like a management spy, G.M. agreed to let him publish his findings.
Neither G.M. nor Mr. Drucker expected the public to be interested because no one had ever written such a management profile, but “The Concept of the Corporation” became an overnight sensation when it was published in 1946. ” ‘Concept of the Corporation’ is a book about business the way ‘Moby Dick’ is a book about whaling,” said Mr. Beatty, referring to the focus on social issues extending far beyond G.M.’s immediate operating challenges.
In it, Mr. Drucker argued that profitability was crucial to a business’s health but more importantly to full employment. Management could achieve sustainable profits only by treating employees like valuable resources. That, he argued, required decentralizing the power to make decisions, including giving hourly workers more control over factory life, and guaranteed wages.
In the 1950’s, Mr. Drucker began proclaiming that democratic governments had become too big to function effectively. This, he said, was a threat to the freedom of their citizens and to their economic well-being.
Unlike many conservative thinkers, Mr. Drucker wanted to keep government regulation over areas like food and drugs and finance. Indeed, he argued that the rise of global businesses required stronger governments and stronger social institutions, including more powerful unions, to keep them from forgetting social interests.
According to Claremont Graduate University, Mr. Drucker’s survivors include his wife, Doris, an inventor and physicist; his children, Audrey Drucker of Puyallup, Wash., Cecily Drucker of San Francisco, Joan Weinstein of Chicago, and Vincent Drucker of San Rafael, Calif.; and six grandchildren.
Early last year, in an interview with Forbes magazine, Mr. Drucker was asked if there was anything in his long career that he wished he had done but had not been able to do.
“Yes, quite a few things,” he said. “There are many books I could have written that are better than the ones I actually wrote. My best book would have been “Managing Ignorance,” and I’m very sorry I didn’t write it.”

Herb Kelleher: The Complete Interview

Here’s the best executive interview I’ve read in a long time. It took place back in 2003, but it reminds us why Southwest Airlines has succeeded where so many others have failed.
A few excerpts:
“We’ve never tried to lecture other companies as to how they should behave, what kind of environment they should try to create, because there are a hundred roads to Rome and you can get to Rome by any one of those roads. But our focus has always been on the well-being and the joy that we want our people to experience.
“I just always have felt that people should be natural in their behavior, that they should be able to derive enjoyment from whatever they do. When they derive enjoyment they tend to work together better, they tend to be more productive. One time a ramp agent wrote me, he said, Herb, I’ve caught on to what you’re doing, you’re making work fun – and home is work. Now, I’ve never repeated that to anybody because I thought that wouldn’t make me very popular in certain quarters but he did get it. And you know I don’t think that in order for people to be effective they have to act like automatons.
“We don’t hire a great many people in management positions from other airlines, but we have hired some over the years where we felt that the expertise was required as we grew. And it’s interesting to see their response because they get into the Southwest environment and for awhile they are like a new dog in town, just kind of sniffing around, because they want to see if this is legitimate, whether it’s genuine, whether it’s heartfelt. And after about six months, I would say, you get either one of two reactions: they feel liberated for the first time in their business lives and they say, “Hey, this is for real. I can say what I want to. I can joke. I can be friendly with people.” Or in some cases they say, “This makes me feel very insecure, the fluidity of it is daunting to me. I need a more structured environment than Southwest Airlines has in order for me to be comfortable.”
“one of the things that I want to tell you with respect to a mission statement is that a lot of people hire outside people to prepare their mission statements. My suggestion is that if you need someone outside your company to prepare a mission statement for you, then you really don’t know what your mission is and you probably don’t have one.
“the thing about it is that a group got together and said, We want to define spirit. And I said, I don’t think you want to do that. Because Wordsworth said, “It’s murder to dissect.” And I think it’s murder to dissect to take a concept like that and make it too narrow and make it confining and a strait jacket instead of as expansive as anybody wants it to be. So we’re not going to define it. As long as it’s a positive attitude, that’s the Southwest Airlines spirit. Don’t chain it. Don’t put it in jail.
“we’ve said we’re in the customer service business and we happen to operate an airline. But then any business is about providing great customer service to the people you serve. We just happen to be in one branch of the customer service business. And if you have a great customer service organization it doesn’t matter whether you’re flying people or selling steel or cleaning houses or whatever it might be.
“when we built this building I said give me an interior office because fundamentally bureaucrats scrap over space, which in and of itself I think should be somewhat meaningless, physical space. It’s the space between your ears that should be the important thing. So I did say, I want an office without a window, away from a corner.
Read the complete interview here.
We should all be so lucky to work with a leader like this!

The Green Business Plan Contest

ECOnomics: The Environmental Business Plan Challenge: GE and Dow Jones are looking for great business ideas that combine environmental innovation and profitability, because they truly believe that “green” business represents good business.
So if you’re a university student, an MBA candidate or a confident entrepreneur, submit your business idea and you could win $50,000. If you have an enterprise to help the earth, it’s time to get it off the ground.
Contest begins: Saturday, October 15, 2005 12:01 AM (ET)
Deadline for entries: Thursday, December 15, 2005 11:59 PM (ET)
Open to residents of the 50 United States and the District of Columbia who are 21 years of age or older.
Enter here >>

Trying to Understand the Riots in France

Two articles from BusinessWeek on the trouble in France:
– “Sarkozy Googles as Paris Riots” and
– “The Economics Fueling the French Riots
The articles are written from a “US viewpoint.” A comment left behind the second article is worth noting:
I did not expect BusinessWeek to come out with such a biased article, very pro-American. Very hypocritical as well. France’s social politics is set up to not “leave people behind” and give them an opportunity instead of straight poverty. The only thing that America does offer unemployed youngsters a job in the Army to support their own politics/shake-up/disrespect of Muslim countries; that attitude fuels Muslims worldwide with anger towards all Western societies, including France. The problem isn’t just unemployment but it’s more about France’s ancient “social class differences” and the non-white immigrant population doesn’t like to be called “scum” (a French minister’s outraged response to the first riots). This was written by a white guy from the Netherlands.
Another view from Parapundit: French Muslim Rioting Hits Yet Another High
I’m not sure what to think about all this craziness. The “white guy” in the Netherlands pretends he lives in a color-blind society. The BusinessWeek folk think it’s about unemployment rates. And the french politician is just covering his behind. I should ask Doug Smith.
UPDATE: Economist article

Oil Industry: Profits Happen

Do you buy this? The WSJ reports:
The chiefs of five major oil companies defended the industry’s huge profits Wednesday at a Senate hearing where lawmakers said they should explain prices and assure people they aren’t being gouged.
There is a “growing suspicion that oil companies are taking unfair advantage,” Sen. Pete Domenici (R., N.M.), head of the Senate Energy and Resources Committee, said as the hearing opened in a packed Senate committee room. “The oil companies owe the country an explanation,” he said.
Lee Raymond, chairman of Exxon Mobil Corp., said he recognizes that high gasoline prices “have put a strain on Americans’ household budgets” but he defended his companies huge profits, saying petroleum earnings “go up and down” from year to year. Exxon Mobil, the world’s largest non-state-owned oil company, earned nearly $10 billion in the third quarter.
COMPANY- PROFIT- REVENUE
BP $6.46 billion, +34% $97.73 billion, +46%
Chevron $3.59 billion, +12% $54.46 billion, +34%
ConocoPhillips $3.8 billion, +89% $49.7 billion, +43%
Exxon Mobil $9.92 billion, +75% $100.72 billion, +32%
Royal Dutch Shell $9.03 billion, +68% $76.44 billion, +8%
Smells like Enron to me. Maybe we need a 10% environmental tax and fight global warming, which of course doesn’t exist.

The Fortune Under the Pyramid


From the Economist:
“For workers from poor countries who venture abroad to earn a better living, sending money home to relatives can be hugely expensive. Such remittances have become an important source of income in many developing countries, dwarfing other inflows of capital from overseas such as foreign direct investment and multilateral aid. But if the money is being sent, say, from America to Venezuela, charges can amount to as much as 34% of the sum involved, according to Dilip Ratha of the World Bank.
“Why are the poor so badly served? The easy answer, that people who have little money do not make suitable clients for sophisticated financial services, is at most a half-truth. A better explanation, this survey will argue, is that the poor have been hurt by massive market and regulatory failure. Fortunately that failure can be, and increasingly is being, remedied.”
Read the article here.
All I know is that when money trickles down to the poor, it usually gets siphoned off by a middleman, or the neighborhood mafia.

Daniel Yankelovich: Poll This, America

A great interview from S+B.
Daniel Yankelovich – the “father of the public opinion poll” – says:
“…attitudes were replaced in the 1960s and 1970s by unenlightened self-interest: Win at any cost. Strip away regulations and constraints. Anything that isn’t illegal is OK. Conflict of interest isn’t a real issue, except for a few straitlaced dummies. Everybody bends the rules, and you have to do so to survive. Someone caught in an ethically
questionable situation might say, “Well, I didn’t do anything wrong. I didn’t break the law.” For someone from my generation, ethics doesn’t have anything to do with breaking the law. Essentially, there was a dumbing-down of morality that came in with the baby boomers in the 1960s.”
Hello! Maybe he’s been reading On Value and Values!

Douglas K. Smith: On Value and Values

Doug Smith’s latest blog entry: “Thick We’s” takes a hard look at how we’ve lost track of what matters:
“We lead dual lives — pursuing value over values from 9 to 5 and the reverse during the remainder of each day.”
and
“Today, the vast majority of those organizations pursue value over values. Others — and the less powerful ones — pursue values over value. Neither of these strategies are sustainable. Churches, schools, non-profits and so forth cannot sustain themselves by ignoring and being blind to value. But — and this is by far the more serious challenge — neither can for-profit organizations (whether Wal-Mart or GM or Roche — or a small bookstore or cleaners or barbershop) sustain itself if value — if profits, wealth, shareholder value or winning — is the trump card for every single serious issue and question on the table. Eventually, that approach eviscerates and hollows out the values — social, political, spiritual, environmental, medical, legal and others — on which the very value pursued rests.”
Want to know more? Check out Smith’s book.

Catfish as Large as a Grizzly Bear?

Fishermen in northern Thailand have netted a fish as big as a grizzly bear, a 646-pound Mekong giant catfish, the heaviest recorded since Thai officials started keeping records in 1981.
Unfortunately, the fish did not get away:

The fish was caught and eaten in a remote village in Thailand along the Mekong River, home to more species of giant fish than any other river. Local environmentalists and government officials negotiated to release the record-breaking animal so it could continue its spawning migration in the far north of Thailand, near the borders of Thailand, Laos, Myanmar and China – also known as the “Golden Triangle.” But the fish, an adult male, later died. The species is declining, which fishermen in the region blame on upstream dams and environmental deterioration. And that’s the real story.
More from the WWF here.

Family Values: Costco vs. Wal-Mart

Let’s compare some workplace statistics, as reported by the companies…
Employees covered by company health insurance
Costco 82%
Wal-Mart 48%
Insurance-enrollment waiting periods (for part-time workers)
Costco 6 months
Wal-Mart 2 years
Portion of health-care premium paid by company
Costco 92%
Wal-Mart 66%
Annual worker turnover rate
Costco 24%
Wal-Mart 50%
Read more about this here.
The Wal-Mart people need to go read Doug Smith’s On Value and Values.
Why does Wal-Mart want this? This is not a PR problem, Wal-Mart. It’s a values problem. Again, read Doug Smith.