Documente Academic
Documente Profesional
Documente Cultură
P E T E R F. D R U C K E R , 1 9 0 9 2 0 0 5
GM knew all this but simply could radically changed the companys the-
The Theory of not believe it. (GMs union still doesnt.)
Instead, the company tried to patch
ory by acquiring a large distributor of
generic and nonprescription drugs. He
the Business things over. It maintained the existing
divisions based on income segmenta-
did so without a crisis, while Merck
was ostensibly doing very well. Simi-
>> Excerpted from SeptemberOctober 1994
tion, but each division now offered a larly, a few years ago, the new CEO of
T
he root cause of nearly every car for every purse.It tried to compete Sony, the worlds best-known manu-
one of these [business] crises with lean manufacturings economics facturer of consumer electronic hard-
is not that things are being of small scale by automating the large- ware, changed the companys theory
done poorly. It is not even scale, long-run mass production (losing of the business. He acquired a Holly-
that the wrong things are some $30 billion in the process). Con- wood movie production company and,
being done. Indeed, in most cases, the trary to popular belief, GM patched with that acquisition, shifted the orga-
right things are being done but fruit- things over with prodigious energy, nizations center of gravity from being
lessly. What accounts for this apparent hard work, and lavish investments of a hardware manufacturer in search of
paradox? The assumptions on which time and money. But patching only con- software to being a software producer
the organization has been built and is fused the customer, the dealer, and the that creates a market demand for
being run no longer t reality. These are employees and management of GM it- hardware.
the assumptions that shape any orga- self. In the meantime, GM neglected its But for every one of these apparent
nizations behavior, dictate its deci- real growth market, where it had leader- miracle workers, there are scores of
sions about what to do and what not to ship and would have been almost un- equally capable CEOs whose organiza-
do, and dene what the organization beatable: light trucks and minivans. tions stumble. We cant rely on miracle
considers meaningful results. These as- Traditionally, we have searched for workers to rejuvenate an obsolete the-
sumptions are about markets. They are the miracle worker with a magic wand ory of the business any more than we
about identifying customers and com- to turn an ailing organization
petitors, their values and behavior. They around. To establish, maintain,
are about technology and its dynamics, and restore a theory, however,
about a companys strengths and weak- does not require a Genghis
nesses. These assumptions are about Khan or a Leonardo da Vinci in
what a company gets paid for. They are the executive suite. It is not ge-
what I call a companys theory of the nius; it is hard work. It is not
business. being clever; it is being consci-
Whenever a big organization gets entious. It is what CEOs are
into trouble and especially if it has paid for.
been successful for many years people There are indeed quite a
can rely on them to cure other types of 1. What is the managers job? It is to true of markets, end uses, and distribu-
serious illness. And when one talks to direct the resources and the efforts of tive channels. It is equally true of sales
these supposed miracle workers, they the business toward opportunities for efforts: a few salesmen, out of several
deny vehemently that they act by economically signicant results. This hundred, always produce two-thirds or
charisma, vision, or, for that matter, sounds trite and it is. But every analy- more of all new business. It is true in
the laying on of hands. They start out sis of actual allocation of resources and the plant: a handful of production runs
with diagnosis and analysis. They accept
that attaining objectives and rapid
growth demand a serious rethinking of
the theory of the business. They do not
Unfortunately I know of
dismiss unexpected failure as the result
of a subordinates incompetence or as
no procedure or checklist
an accident but treat it as a symptom of
systems failure. They do not take credit
for managerial courage.
for unexpected success but treat it as a
challenge to their assumptions. efforts in business that I have ever seen account for most of the tonnage. It is
They accept that a theorys obsoles- or made showed clearly that the bulk of true of research: a few men in the labo-
cence is a degenerative and, indeed, time, work, attention, and money rst goes ratory produce all the important inno-
life-threatening disease. And they know to problems rather than to opportuni- vations, as a rule.
and accept the surgeons time-tested ties, and, secondly, to areas where even This is part of the last and most cru-
principle, the oldest principle of effec- extraordinarily successful performance cial how to do it requirement: the
tive decision making: A degenerative will have minimal impact on results. courage to go through with logical de-
disease will not be cured by procrasti- 2. What is the major problem? It is fun- cisions despite all pleas to give this or
nation. It requires decisive action. damentally the confusion between ef- that product another chance, and de-
fectiveness and efciency that stands spite all such specious alibis as the ac-
between doing the right things and countants it absorbs overhead or the
doing things right. There is surely nothing sales managers we need a full product
quite so useless as doing with great ef- line. (Of course, these are not always
Managing ciency what should not be done at all.
Yet our toolsespecially our accounting
unfounded alibis, but the burden of
proof of every alibi rests with those that
for Business concepts and data all focus on ef-
ciency. What we need is (1) a way to
plead it.) It would be nice if I did, but
unfortunately I know of no procedure
Effectiveness identify the areas of effectiveness (of
possible signicant results), and (2) a
or checklist for managerial courage.
What I have sketched out in this arti-
>> Excerpted from MayJune 1963
method for concentrating on them. cle is the managers real work. As such
I
do not propose to give here a full- 3. What is the principle? That, too, is it requires that he attack the problem of
blown science of management eco- well-knownat least as a general propo- increasing business effectiveness sys-
nomics, if only because I have none sition. Business enterprise is not a phe- tematically with a plan of action, with
in this already, would we now go into success. The temptation to content one- a board committee. And they have
it? And if the answer is no, the next self with the goodness of our cause what is rarer still: a board whose perfor-
question should be: How do we get out and thus to substitute good intentions mance is reviewed annually against
and how fast? for results always exists in nonprot preset performance objectives. Effec-
organizations. It is precisely because of tive use of the board is thus a second
this that the successful and perform- area in which business can learn from
ing nonprots have learned to dene the nonprot sector.
clearly what changes outside the orga- [H]owever common professional
What Business nization constitute resultsand to focus
on them.
management becomes and profes-
sional CEOs are now found in most
Can Learn from The experience of one large Catholic
hospital chain in the Southwest shows
nonprots and all the bigger ones
nonprot boards cannot, as a rule, be
Nonprots how productive a clear sense of mission
and a focus on results can be. Despite
rendered impotent the way so many
business boards have been. No matter
>> Excerpted from JulyAugust 1989
the sharp cuts in Medicare payments how much nonprot CEOs would wel-
S
tarting with the mission and its and hospital stays during the past eight come it and quite a few surely would
requirements may be the rst years, this chain has increased reve- nonprot boards cannot become their
lesson business can learn from nues by 15% (thereby managing to break rubber stamp. Money is one reason. Few
successful nonprots. It focuses
the organization on action. It de-
nes the specic strategies needed to
attain the crucial goals. It creates a dis-
Many nonprots now have
ciplined organization. It alone can pre-
vent the most common degenerative
what is still the exception in
disease of organizations, especially large
ones: splintering their always limited re-
business a functioning board.
sources on things that are interesting
or look protable rather than concen- even) while greatly expanding its ser- directors in publicly held corporations
trating them on a very small number vices and raising both patient-care and are substantial shareholders, whereas
of productive efforts. medical standards. It has done so be- directors on nonprot boards very often
The best nonprots devote a great cause the nun who is its CEO understood contribute large sums themselves, and
deal of thought to dening their orga- that she and her staff are in the business are expected to bring in donors as well.
nizations mission. They avoid sweep- of delivering health care (especially to But also, nonprot directors tend to
ing statements full of good intentions the poor), not running hospitals. have a personal commitment to the or-
and focus, instead, on objectives that As a result, when health care deliv- ganizations cause. Few people sit on a
have clear-cut implications for the ery began moving out of hospitals for church vestry or on a school board un-
work their members perform staff medical rather than economic reasons less they deeply care about religion or
and volunteers both. The Salvation about ten years ago, the chain pro- education. Moreover, nonprot board
Armys goal, for example, is to turn soci- moted the trend instead of ghting it. members typically have served as vol-
etys rejectsalcoholics, criminals, dere- It founded ambulatory surgery cen- unteers themselves for a good many
licts into citizens. The Girl Scouts help ters, rehabilitation centers, X-ray and years and are deeply knowledgeable
youngsters become condent, capable lab networks, HMOs, and so on. The about the organization, unlike outside
young women who respect themselves chains motto was: If its in the patients directors in a business.
and other people. The Nature Conser- interest, we have to promote it; its then Precisely because the nonprot board
vancy preserves the diversity of natures our job to make it pay. Paradoxically, is so committed and active, its relation-
fauna and ora. Nonprots also start the policy has lled the chains hospi- ship with the CEO tends to be highly
with the environment, the community, tals; the freestanding facilities are so contentious and full of potential for
the customers to be; they do not, as popular they generate a steady stream friction. Nonprot CEOs complain that
American businesses tend to do, start of referrals. their board meddles. The directors,
with the inside, that is, with the organi- Many nonprots now have what is in turn, complain that management
zation or with nancial returns. still the exception in business a func- usurps the boards function. This has
A well-dened mission serves as a tioning board. They also have some- forced an increasing number of non-
constant reminder of the need to look thing even rarer: a CEO who is clearly prots to realize that neither board nor
outside the organization not only for accountable to the board and whose CEO is the boss. They are colleagues,
customers but also for measures of performance is reviewed annually by working for the same goal but each
having a different task. And they have set of skills; human and social relation- ues on the organization. Only a focused
learned that it is the CEOs responsibil- ships; or the organization itself. In short, and common mission will hold the or-
ity to dene the tasks of each, the it must be organized for constant ganization together and enable it to
boards and his or her own. change. The organizations function is produce. Without such a mission, the
The weakening of the large corpora- to put knowledge to work on tools, organization will soon lose credibility
tions board would, many of us pre- products, and processes; on the design and, with it, its ability to attract the very
dicted (beginning with Myles Mace), of work; on knowledge itself. It is the people it needs to perform.
weaken management rather than nature of knowledge that it changes fast The diversity that is characteristic of
strengthen it. It would diffuse manage- and that todays certainties always be- a developed society and that provides its
ments accountability for performance come tomorrows absurdities. great strength is only possible because
and results; and indeed, it is the rare Unlike community, society, or of the specialized, single-task organiza-
big-company board that reviews the family,organizations are purposefully tions that we have developed since the
CEOs performance against preset busi- designed and always specialized. Com- Industrial Revolution and, especially,
ness objectives. Weakening the board munity and society are dened by the during the last 50 years. But the feature
would also, we predicted, deprive top bonds that hold their members to- that gives them the capacity to perform
management of effective and credible gether, whether they be language, cul- is precisely that each is autonomous
support if it were attacked. These pre- ture, history, or locality. An organization and specialized, informed only by its
dictions have been borne out amply in is dened by its task. The symphony or- own narrow mission and vision, its own
the recent rash of hostile takeovers. chestra does not attempt to cure the narrow values, and not by any consider-
sick; it plays music. The hospital takes ation of society and community.
care of the sick but does not attempt to Therefore, we come back to the
play Beethoven. old and never resolved problem of
Indeed, an organization is effective the pluralistic society: Who takes care
The New only if it concentrates on one task. Di-
versication destroys the performance
of the Common Good? Who denes it?
Who balances the separate and often
Society of capacity of an organization, whether it
is a business, a labor union, a school,
competing goals and values of societys
institutions? Who makes the trade-off
Organizations a hospital, a community service, or a
house of worship. Society and commu-
decisions and on what basis should they
be made?
>> Excerpted from SeptemberOctober 1992
nity must be multidimensional; they Medieval feudalism was replaced by
S
ociety, community, and family are environments. An organization is a the unitary sovereign state precisely be-
are all conserving institutions. tool. And as with any other tool, the cause it could not answer these ques-
They try to maintain stability more specialized it is, the greater its ca- tions. But the unitary sovereign state
and to prevent, or at least to pacity to perform its given task. has now itself been replaced by a new
slow, change. But the modern Because the modern organization is pluralisma pluralism of function rather
organization is a destabilizer. It must composed of specialists, each with his than one of political power because it
E
ver since the new data processing nities are likely to arise will become in-
tools rst emerged 30 or 40 years creasingly urgent.
ago, businesspeople have both It may be argued that few of those
overrated and underrated the information needs are new, and that is
importance of information in largely true. Conceptually, many of
the organization. We and I include the new measurements have been dis-
myself overrated the possibilities to cussed for many years and in many
the point where we talked of computer- places. What is new is the technical
generated business models that could data processing ability. It enables us to
make decisions and might even be able do quickly and cheaply what, only a around a skeleton: information, both the
to run much of the business. But we also few short years ago, would have been corporations new integrating system
grossly underrated the new tools; we laborious and very expensive. Seventy and its articulation.
saw in them the means to do better years ago, the time-and-motion study Our traditional mind-set even if we
what executives were already doing to made traditional cost accounting possi- use sophisticated mathematical tech-
manage their organizations. ble. Computers have now made activity- niques and impenetrable sociological
Nobody talks of business models mak- based cost accounting possible; with- jargon has always somehow perceived
ing economic decisions anymore. The out them, it would be practically business as buying cheap and selling
greatest contribution of our data pro- impossible. dear. The new approach denes a busi-
cessing capacity so far has not even been But that argument misses the point. ness as the organization that adds value
to management. It has been to opera- What is important is not the tools. It is and creates wealth.
tions for example, computer-assisted the concepts behind them. They convert
design or the marvelous software that what were always seen as discrete tech-
architects now use to solve structural niques to be used in isolation and for
problems in the buildings they design. separate purposes into one integrated
Yet even as we both overestimated
and underestimated the new tools, we
information system. That system then
makes possible business diagnosis, busi-
Managing
failed to realize that they would drasti-
cally change the tasks to be tackled. Con-
ness strategy, and business decisions.
That is a new and radically different
Oneself
>> Excerpted from MarchApril 1999
cepts and tools, history teaches again view of the meaning and purpose of
A
and again, are mutually interdependent information: as a measurement on mazingly few people know
and interactive. One changes the other. which to base future action rather than how they get things done.
That is now happening to the concept as a postmortem and a record of what Indeed, most of us do not
we call a business and to the tools we has already happened. even know that different
call information. The new tools enable The command-and-control organi- people work and perform
us indeed, may force us to see our zation that rst emerged in the 1870s differently. Too many people work in
businesses differently. might be compared to an organism held ways that are not their ways, and that al-
Traditional cost accounting measures together by its shell. The corporation most guarantees nonperformance. For
what it costs to do a task, for example, to that is now emerging is being designed knowledge workers, How do I perform?
everyone with whom they work, managers to focus on the business satisfaction, and productivity of the
whether as subordinate, superior, col- rather than on employment-related knowledge workers on whose perfor-
league, or team member. And again, rules, regulations, and paperwork. To mance their own results depend.
whenever this is done, the reaction is al- spend up to one-quarter of ones time on
ways, Thanks for asking me. But why employment-related paperwork is in-
didnt you ask me earlier? deed a waste of precious, expensive,
Organizations are no longer built on scarce resources. It is boring. It demeans
force but on trust. The existence of and corrupts, and the only thing it can
possibly teach is greater skill in cheating.
What Makes
trust between people does not neces-
sarily mean that they like one another. Companies thus have ample reason
to try to do away with the routine
an Effective
It means that they understand one an-
other. Taking responsibility for rela- chores of employee relations whether
by systematizing employee manage-
Executive
tionships is therefore an absolute ne- >> Excerpted from June 2004
cessity. It is a duty. Whether one is a ment in-house or by outsourcing it to
A
member of the organization, a consult- temps or to a PEO. But they need to be n effective executive does
ant to it, a supplier, or a distributor, careful that they dont damage or de- not need to be a leader in
one owes that responsibility to all ones stroy their relationships with people in the sense that the term is
coworkers: those whose work one de- the process. Indeed, the main benet of now most commonly used.
pends on as well as those who depend decreasing paperwork may be to gain Harry Truman did not have
on ones own work. more time for people relations. Execu- one ounce of charisma, for example,
tives will have to learn what the effec- yet he was among the most effective
tive department head in the university chief executives in U.S. history. Simi-
or the successful conductor of the sym- larly, some of the best business leaders
A
knowledge-based work- requires rehearsing the same passage in parsimonious.
force is qualitatively differ- the symphony again and again until the What made them all effective is that
ent from a less-skilled one. rst clarinet plays it the way the conduc- they followed the same eight practices:
True, knowledge workers tor hears it. This principle is also what They asked,What needs to be
are a minority of the total makes a research director in an industry done?
workforce and are unlikely ever to be lab successful. They asked,What is right for the
more than that. But they have become Similarly, leaders in knowledge-based enterprise?
the major creators of wealth and jobs. businesses must spend time with prom- They developed action plans.
Increasingly, the success indeed, the ising professionals: Get to know them They took responsibility for decisions.
survival of every business will depend and be known by them; mentor them They took responsibility for commu-
on the performance of its knowledge and listen to them; challenge them and nicating.
workforce. And since it is impossible, ac- encourage them. Even if these people They were focused on opportunities
cording to the laws of statistics, for an are not traditionalread, legalemploy- rather than problems.
organization to hire more than a hand- ees, they are still a capital resource for They ran productive meetings.
ful of better people, the only way that the organization and critical to its busi- They thought and said we rather
it can excel in a knowledge-based econ- ness performance. The administrative than I.
omy and society is by getting more out tasks that are involved with employee Weve just reviewed eight practices of
of the same kind of people that is, by relations can, and should, be system- effective executives. Im going to throw
managing its knowledge workers for atized and that means they can, per- in one nal, bonus practice. This ones so
greater productivity. The challenge, to haps should, become impersonal. But important that Ill elevate it to the level
repeat an old saying, is to make ordi- if employee relations are being out- of a rule: Listen rst, speak last.
nary people do extraordinary things. sourced, executives need to work closely
Temps and especially PEOs [profes- with their PEO counterparts on the Reprint R0602J
sional employee organizations] free up professional development, motivation, To order, see page 167.