Gems from Peter Drucker

Whilst In Indonesia I thought I should learn from one of the masters what management is REALLY about and what to expect from my team. His work is very solid and fits nicely with the marketing advice of Jay Levinson and the academic research of Professor Sir Michael Marmot (the Whitehall studies). It also helps me re-think the role of Occupational Health within organisations. I hope you enjoy these gems as much as I do and I know I will constantly refer back to them.

Drucker – Management: Tasks, Responsibilities. Practices
Business
‘Every business needs to think through ‘what is our business and what should it be’
‘The first test of any business is not the maximization of profit but the achievement of sufficient profit to cover the risks of economic activity and thus avoid loss.’
There is only one valid definition of business purpose: to create a customer’
‘It is the customer who defines what a business is’
The business enterprise has..only these two..basic functions: marketing and innovation’
“Concern and responsibility for marketing must permeate all areas of the enterprise’
“innovation can be defined as the task of giving human and material resources new and greater wealth-producing capacity’ ‘every managerial unit of business should have responsibility for innovation and definite innovation goals’
‘It is through risk-taking that any business earns its daily bread.’
‘What do we have to do today to deserve the future?’
‘The purpose of an organization is to enable ordinary human beings to do extraordinary things’
‘Every act, every decision, every deliberation of management has economic performance as its first dimension.’
‘Performance is…the consistent ability to produce results over prolonged periods of time and in a variety of assignments.’
‘the test of an organization is the spirit of performance.’
‘The customer never buys a product (or services). By definition the customer buys a satisfaction of a want.’

Management & Performance
‘the ability to organize and lead’
‘Management is tasks. Management is discipline. But management is also people. Every achievement is the achievement of a manager. Every failure is the failure of a manager. People manage rather than ‘forces’ ‘facts’. The vision, dedication, and integrity of managers determine whether there is management or mismanagement.’

‘Managers have responsibilities for specific contributions, part of which is setting objectives, motivating and communicating, planning, organizing, integrating, measuring, and developing people (including him/herself).’
Managers need the following skills:
Effective decision-making
Communication within and outside the organization
The proper use of controls and measurement
Skill in budgeting and in planning work
Skill in using analytical tools
‘Managers must convert society’s needs into opportunities for profitable business.’
The ‘ultimate test of management is performance’.
There are 3 dimensions of Management:
1) Think through and define the specific purpose and mission of the business
2) Make work productive and the worker achieving (I prefer an achiever of goals)
3) Manage social impacts and social responsibilities
“productivity means the balance between all factors of production that will give the greatest output for the smallest effort.’
Focus on Efficacy – are we doing the right things? (ie. reallocating resources to where they can be most productive) as well as Efficiency –are we doing things right?
‘Performance is what counts, and the correlation between promise and performance is not a particularly high one.’
“there is management development tied to the needs of the organisation, and manager development tied to the needs of the individual…the two are different.’
Management development’s ‘purpose is the health, survival and growth of the business’
‘What kind of managers and career professionals will this business need tomorrow in order to achieve its objectives and to perform in a different market, a different economy, a different technology, a different society?’ (very relevant to overseas plans)
A useful tool is a twice yearly manager’s letter to their superior with:
• The manager defines the objectives of their superior’s job and of their own job as they see them
• They set out the performance standards that they believe are being applied to them
• They list the things they must do to attain these goals – and the things within their own units that they regard as the major obstacles
• They list the things that superiors and the company do that help them and the things that hamper them
• They outline what they propose to do during the next year to reach their goals
‘Leadership is lifting a person’s vision to higher sights, the raising of a person’s performance to a higher standard, the building of a personality beyond its normal limitations.’

8 key areas for performance objectives:
• Marketing
• Innovation
• People organisation
• Financial resources
• Physical resources
• Productivity
• Social responsibility
• Profit required
‘the concentration decision is “policy”..in what theatre to fight a war’
Managers always have to manage both work and working….They have to make work productive and the worker achieving.
‘It is responsibility for contributing to the results of the enterprise, not ‘responsibility for the work of others’ that makes a manager.’
‘Managers are the most expensive resource in most businesses – and the one that depreciates the fastest and needs the most constant replenishment.’
Managers taking on a new job should ask ’What specific contribution can my unit and I make which, if done really well, would make a substantial difference in the performance and results of our company?’
‘What information do I need to do my job and where do I get it?’
‘The manager needs to build upward responsibility and upward contribution into the job of subordinates.’
They need to ask: ‘and who depends on information from me, and in what form, upwards, downwards and sideways?

The managers job has 4 key aspects
o The job itself
o The functional definition of the job
o The upwards, downwards and sideways relations
o The information needs and the manager’s position in the information flow

The manager should ask 3 questions:
1) What do I do as your manager, and what does the company do, that helps you most in your job?
2) What do I do as your manager, and what does the company do, that hinders you most in your job?
3) What can you do that will help me, as your manager, do the best job for the company?
Personnel management
“Personnel management is (the) methodical and systematic discharge of all the activities that have to be done where people are employed..their selection and employment; training; medical services, the (health)and safety; the administration of wages, salaries and benefits; and many other.
‘Personnel management has to be done. Otherwise there is serious malfunction. But personnel management activities bear the same relationship to managing people as vacuuming the living room and washing the dishes bear to a happy marriage and the bringing up of children. If too many dirty dishes pile up in the sink, the marriage may come apart. But spotless dishes do not by themselves contribute a great deal to wedded bliss or to close and happy relationships with one’s children. These are hygiene factors. If neglected, they cause trouble. They should be taken for granted.’
‘management means making the strengths of people effective. Neither the welfare approach, nor the personnel management approach, nor the control and fire-fighting approach addresses itself to strengths, however’
‘the purpose of an organisation is to make the strengths of people productive and their weaknesses irrelevant’.
‘an employer has no business with a subordinates personality’ ‘an employee.. owes performance and nothing else.’




Work & working
‘There is ‘work’ and there is ‘working’. They are totally dependent on each other …Yet work and working are quite different. Work is impersonal and objective. .. working is done by a human being, a worker. It is a uniquely human activity. ‘ (Implications for Occupational Health?)
‘Working ..is endowed with distinct physiological, psychological and social needs and characteristics.’
Work is tasks. It needs to be analysed, synthesised, have controls and tools. ‘All work has to be organised into a process of production’
Work must be productive, with feedback and continuous learning.
People work for a living, pride, self-respect, achievement, challenge and stimulation.
The controls are in respect to work’s ..direction; its quality; the quantities turned out; its standard, and its economy.
Control and Controls
“control is a tool of the workers and must not be their master or an impediment to working.’ (fits with Marmot’s work)
Controls = measurement and information vs Control which is direction
Controls are the means, control the needed end (result)
‘People decisions are the ultimate control of an organisation’

Profit
“the concept of profit maximization is, in fact, meaningless’
‘Profit and profitability are…. crucial…Yet profitability is not the purpose of, but a limiting factor on, business enterprise…. Profit is the test of the ..validity’ of ‘the business decisions’
J.B. Say (1767-1832) invented the term entrepreneur as someone who ‘directs resources from less productive into more productive investments and who thereby creates wealth’
‘amongst the most dangerous diseases of an industrial society’ is ‘the misunderstanding of the nature of profit in our society and…the deep-seated hostility to profit’
‘Profit and profit alone can supply the capital for tomorrow’s jobs, both for more jobs and better jobs..profit pays for the economic satisfactions and services of a society, from health care and defense, and from education to the opera. They have all to be paid for out of the surplus of economic production, that is, out of the difference between the value produced by economic activity and its cost.’

The need for planned abandonment
“the decision on what new and different things to do is important; just as important is planned, systematic abandonment of the old that no longer fits the purpose and mission of the business, no longer conveys satisfaction to the customer or customers, no longer makes a superior contribution.’
Hospitals, education, welfare etc need to be supported by successful businesses. Where else would the taxation income come from if the only employer was the state? Where the state provides everything it still need to export as if it were a business.

‘An essential step of deciding what our business is, what it will be, and what it should be is systematic analysis of all existing products, services, processes. markets, end uses, and distribution channels. Are they still viable? Are they likely to remain viable? Do they still give value to the customer? And are they likely to do so tomorrow/ Do they still fit the realities of population and markets, of technology and economy? And if not, how can we best abandon them – or at least stop pouring in further resources and efforts.’
Marketing & innovation
‘Any organisation in which marketing is either absent or incidental is not a business and should never be managed as if it were one.’

Decisions & Communication
With any decision ‘understand the problem’ first before you try to seek an answer.
‘Opinions come first’ not facts in decision-making.
‘The first rule in decision-making is that one does not make a decision unless there is disagreement.’
The effective manager ‘uses conflict of opinion as a tool to make sure all aspects of an important matter are looked at carefully.’
An effective decision ‘has to be “sold” after it has been made.’
Communication is perception (it is the recipient who communicates), expectation, is demanding and is different yet interdependent with information (which is logical and impersonal)
Avoid professional ‘workmanship’ that doesn’t fit with the organizations aims – this is the stone polisher who doesn’t or refuses to realise you are trying to build a cathedral on time and with limited resources.

General
‘Krupp provided his workers with housing, schooling, health care, training, small loans at low interest…..The Krupp firm at Essen might be called the first welfare state. The workers.. gave their loyalty to the firm and family for an entire century’ But ‘’it eventually destroys itself, for it creates expectations which, in the long run, no business enterprise – and no institution – can live up to.’