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What_if_Peter_Drucker_were_your_CEO
| What if Peter Drucker were your CEO
Now and again, I find it healthy for my business thinking to
exercise an imponderable. I get to consider problems and
opportunities in an entirely different manner. It's an exercise
that stretches and challenges my present business logic and
forces me to think on a more strategic level. Such is the case
as I ponder what Peter Drucker, renowned business guru and
‘father of modern management', would do differently if he
became CEO of a company in today's environment. What approach
would he use? Would his business acumens and tenants play in
today's rough and troubled business climate? What
pearls-of-wisdom would I glean by reviewing his books and
articles? What would he do differently that makes a difference?
Peter Drucker has impeccable credentials. Educated in Austria
and in England, he holds a doctorate in Public and International
Law from Frankfurt University in Germany. He has been honored
with many national and international awards citing his
continuing and significant contributions to society, economics
and businesses. A prolific writer and solid thinker he has
written numerous articles on economics, politics and management
that, some say, are as relevant today as they were when first
written - some more than 25 years ago. With over 30 books to his
credit, his insights and views on business and economics have
influenced the thinking of top management from fortune 500
companies to private enterprises for the past 5 decades. Always
fresh in his thinking, at 92 years of age, he still dispenses
solid business advice.
Peruse just a few of Drucker's writings and it quickly is
apparent that he doesn't mince words - his thinking is strong,
and served straight up! Basic to his thought process is that
enterprises are developed to create wealth, not control costs.
Yet, traditional business measurements are woefully inadequate
for management to perform the firm's basic responsibility -
create shareholder wealth! Drucker's view is that management's
key responsibility is to help workers to achieve (productivity)
and to maximize corporate assets (move capital to most
productive use - see: Marketing Tip #407 increase asset
productivity). Most enterprises don't know how to accomplish
this because they don't have the tools that timely provide the
information necessary to make informed decisions.
After years of practicing, and refining his business thinking,
Drucker developed key tools top management will benefit from, if
used. Each area brings focus and information to senior managers
enabling them to make more informed decisions. There are three
categories: baseline information, productivity information, and
competency information.
I found them to be thought provoking and worthy of your review.
For lack of a better term, I call them Drucker's executive tool
kit. After you read on, you may want to compare your business
metrics to these and see where you might benefit.
Baseline information - These are very traditional
measurements and metrics. They might include cash flow,
inventory, revenue, profits, receivable, etc. Fairly routine
financial information, needed to run any operation, and easily
understood by the financial community, but not material enough,
or timely enough (most metrics are lagging indicators) to help
senior managers make investment decisions or productivity
audits. Although these basic metrics are important, more
‘leading' indicators are required. Which brings us to the
next tool.
Productivity information - This portion of the tool kit
is vital and includes metrics that deal with the productivity of
significant resources. A business must make visible the
productivity of the labor pool - both manual and knowledge-based
workers. However, this doesn't tell the whole story. Measuring
productivity requires more than a traditional P&L statement.
Today's astute business leaders recognize that profit may or may
not create shareholder wealth. That until profit covers the
cost-of-capital the enterprise operates at a loss. Businesses
must implement metrics such as (EVA) economical value add (see:
Marketing Tip #407 EVA - drive more value into your business!)
which is better at providing the enterprise with a cleaner
picture of its performance in creating or destroying shareholder
wealth.
EVA fundamentally measures the value added over all costs,
including the cost of capital. This provides a simple, easy
method for non-financial managers to understand if their
decisions regarding programs and investments make economic sense
to the enterprise. EVA metrics can also improve the
effectiveness of compensation or bonus programs normally used to
enhance worker productivity. EVA allows a business to
objectively determine if the task (programs, new product, etc.)
creates or destroys shareholder value.
Competence information - Perhaps one of the more
esoteric of measurements Drucker talks about, but none-the-less
equally as important is competence information. A business must
find ways to measure and constantly analyze their core
competence. At minimum, businesses should do this as a part of
their yearly planning exercise. Marketing folks call it a SWOT
analysis - strengths, weakness, opportunities and threats.
However, I would suggest quarterly would be more appropriate.
The core competency of any business determines its ability to be
a market leader. In other words leadership is the ability to do
something other companies in your field cannot or find extremely
difficult. Core competency blends together customer value with
the enterprises' special ability to produce or service customers
better than any competitor.
Companies that already get this point use benchmarking as a tool
to determine trends in core competency. They determine what
their special ability is and objectively compare it to direct
and emerging competitors. On-going analysis (monthly is not
unusual for certain companies) track and trend what is working
and not working in the market place. What works should be
straightened. What doesn't work needs further review, and may
provide an indication that your customers are losing value in
your offering or finding degradation in your core competency.
Either way, it becomes an early warning that a change is
occurring in your targeted customers' valuation of your product
or service. You may then, more effectively, redirect corporate
assets to meet this threat. This brings added opportunity and
continued leadership.
Final Thoughts Peter Drucker as the CEO. Of course it can't
happen, but it stimulated me into thinking of possibilities that
I may not have otherwise thought about. There is no
‘silver-bullet' that magically transforms your business,
but hopefully this article presented a thoughtful blend of
Drucker's wisdom, experience, and knowledge wrapped in his
pragmatic approach and directed at motivating you to focus on
creating shareholder wealth.
You might find a new book from John E. Flaherty, Peter Drucker:
Shaping the Managerial Mind - How the World's Foremost
Management Thinker Crafted the Essentials of Business Success
worth the read. It helped to shape some of my thoughts as I
wrote this piece.
Drucker is quoted as saying, "Efficiency is doing things right;
effectiveness is doing the right things. " Which is your
business doing and what measurements are you using that give you
this truth?
About the author:
Frank Williams is a marketer and astute businessman. With many
post graduate courses in management, leadership, marketing and
technology to his credit, Williams is widely respected speaker,
author and technologist. He has significant knowledge in
marketing strategies and sales development programs and is the
founder and CEO of Global Marketing, Inc. - a leader in
business, marketing and sales consulting
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