Lessons From Peter Drucker

Uncovering Drucker's Most Valuable Lesson

Posted: 08/09/2010
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Journalists interviewing me about my books on Drucker frequently ask this question: "What was Drucker’s most valuable lesson?" With so many insights, so many wonderful ideas, so much ethical and moral guidance which might have saved organizations or even countries from financial ruin, I found this an almost impossible question to answer.

For several years my response was something along the lines of, "It all depends." I pointed out that his "most valuable lesson" was situational, and depended primarily on what issue one was looking at. I avoided naming a single lesson which would cover all instances because I couldn’t think of any.

After a recent interview, I rethought this issue and decided I could do a lot better. I reviewed various Drucker prescriptions for a variety of problem areas. Was there a thread of commonality in his recommendations and solutions which might lead to a universal and most valuable lesson?

Drucker’s Many Valuable Insights

If it were an ethical issue, Drucker might respond "Do the right thing, and since the definition of "the right thing" is based so much on so many situational and cultural factors, above all, think it through to ensure that above all you do no harm."

In the Los Angeles area where I live, the small town of Bell with a population of 40,000 came under national scrutiny recently when it was discovered that the City Manager had an annual salary of nearly $800,000 a year. Other top executives were being similarly rewarded. Even City Council members had salaries of over $100,000 a year for their part time positions involving meetings lasting a few minutes each month. All this while employees in the same city government, some in essential services and others making $9 an hour were being laid off due to "budget cutbacks." This was not even a wealthy town. It was and is a working class town.

Drucker thought that extremely high CEO salaries were unethical. Why would an American CEO need to make 300 times that of the lowest level employee if the same ratio of highest paid to lowest paid employee in every other country was no more than 20 to one? He said that this caused immeasurable harm--to the company, the industry, and to society. Drucker advised thinking through the potential consequences.

He predicted that in the United States we would eventually pay a terrible price for this lapse in leadership. Many top executives never forgave him for this particular insight, and many of us didn’t even think much about this issue until the onset of the resent recession.

Drucker on Customer Value

If it were a marketing challenge, Drucker would advise us to think it through to determine what the customer considered value and to be extremely cautious that marketers didn’t substitute their own definition of value for that of their customers or prospects. This is a valuable insight and if you go down the list of failed products, you will find this at the core of many marketing problems.

A young Steven Jobs claimed that the Lisa computer would be successful because it was so much superior technologically to any of its competitors. The Lisa had an advanced system-protected memory, multitasking, a sophisticated operating system, a built-in screensaver, an advanced calculator, support for up to 2 megabytes (MB) of RAM, expansion slots, a numeric keypad, data corruption protection, a larger and higher resolution screen display and more. It would be years before many of those features were implemented in any other computer. Still, Jobs was wrong. All these features resulted in Lisa’s high price of about $22,000 in today’s dollars and buyers opted for the far less expensive, although technologically inferior, IBM at less than a third of Lisa’s cost.

Drucker Thoughts on Promotion and Placement

Drucker had an array of ideas regarding placement and the promotion process. If you put a proven employee in a job in which he failed, Drucker maintained that the failure was that of the manager who put the individual in the job, not the proven employee who was given the assignment. As a corollary, he absolutely abhorred the idea so popular in many organizations of "the whole man concept." That is, you looked for individuals who were well-rounded and minimally acceptable in all facets of their managerial responsibilities. He stated emphatically that at best you’d end up with an organization staffed by individuals who were wonderfully acceptable, but none that were the best in an assigned role. He compared two generals, George Patton and Dwight Eisenhower.

Patton could motivate his soldiers to extraordinary efforts and could accomplish any mission on the battlefield, and he could accomplish this with one of the lowest loss rates of any senior commander. However, Patton couldn’t get along with his allies, and he said and sometimes did some things which were certain to get himself into trouble.

Eisenhower had never even fought on any battlefield and would have been totally lost in Patton’s job. However, he knew how to get senior officers from many different backgrounds and cultures to work together and to minimize their differences and squabbles. He was the best choice for Supreme Commander just as Patton was the best choice for commanding an Army Group in the field. Drucker’s solution? Think it through and staff for strength. Ensure that weaknesses, whatever they are, are irrelevant for that particular assignment.

A Drucker Classroom Lecture Ties Things Together

I thought a lot about all these things. It seemed to me that what Drucker was doing was asking us to think. He was not accepting "common knowledge" or the way things were being done as being correct. In fact, the phrase that I heard him use most in the classroom was "What everybody knows is usually wrong." Drucker never claimed great knowledge about anything, especially in his legendary consulting. Instead he claimed great ignorance, which therefore required him to think and ask questions. And he gave us a story to prove his point.

In response to high losses from German submarines during World War II, the British had developed a design for a cheap cargo ship. These ships were so cheaply built and basic in design that they weren’t even expected to remain in use for more than five years. Moreover they only took about eight months to build, and this was important. British shipbuilders were considered the best in the world, but it still took experts and skilled workers to build a ship, even a vastly simplified design like this one. Britain was fully engaged in all aspects of fighting the war. The manpower, shipyards, and production facilities to build the fleets needed simply didn’t exist.

The U.S. was not yet at war. Still in the Great Depression, the manpower was available. However, the United States did not have a terrific record for merchant shipbuilding. In the previous decade only two ocean-going cargo ships had been built in the United States. The hope was that with the British design, it might take about a year to build each ship. American industrialist Henry Kaiser got the job. Kaiser knew little about shipbuilding and was completely ignorant about cargo ships. However, he looked at the British design and proceeded not with his knowledge and experience, but out of his own ignorance. But he did think about it.

First Kaiser re-designed the assembly process using pre-fabricated parts so that no worker had to know more than a small part of the job and were much easier to train. The British knew that for close tolerances heavy machinery was necessary to cut metal accurately. Kaiser didn’t know this, and anyway he didn’t have heavy machinery. In his ignorance he told his workers to cut the medal using oxyacetylene torches. This turned out to be cheaper and faster than the traditional British methods.

Kaiser thought about it and replaced riveting with welding. It was cheaper and faster. He called his ships "Liberty Ships." He started building them and it didn’t take him a year for each ship. It didn’t even take him eight months. He started building them from start to finish in about a month. Then they got production time down to a couple weeks and for publicity purposes, they constructed one Liberty Ship in just four and a half days. He built almost 1,500 ships. Despite the fact that they were not built to last, a couple were still around and in use almost 50 years later.

How a 61-Year Old Competed in the World’s Toughest Ultra Marathon

The Sydney to Melbourne Ultra Marathon in Australia was regarded as the toughest in the world. It was 544 miles long and took up to seven days to complete, with stops for rest permitted along the way. Most athletes ran all day and rested at night. In 1983, an unknown 61-year-old potato famer by the name of Cliff Young entered the race. Many thought he would be lucky to finish. Young thought about it and realized that he could walk the distance if he chose and wasn’t required to stop over night. So he didn’t. Result: he won, shaving off almost a day from the athlete half his age who came in second place.

What was Drucker’s most valuable lesson? He taught us to think and ask questions.