Book Summary of Peter Drucker’s “The Practice of Management”

Peter Drucker (1909–2005) was the 20th century’s leading thinker on business and management. He was amazingly prolific—he produced 39 volumes on management and leadership and worked right until his death a week before his 96th birthday.

'The Practice of Management' by Peter Drucker (ISBN 0060878975) Drucker’s The Practice of Management (1954) played a pivotal role in the recognition of management as a professional discipline. Even six decades after publication, The Practice of Management remains relevant for its original, profound, and timeless ideas. Drucker’s conception for the organization as an integral part of society, his elucidation of the nature of managerial tasks, his emphasis on good governance, and his prescription for effective leadership have served managers well over the decades.

Here are some prominent insights from The Practice of Management:

  • Drucker accentuated the need for clarity about the meaning of a business. He argued, “‘what is our business’ is the most important question successful management groups have to address.” In corporate strategy, this inquiry has become the underpinning for business analysis and the formulation of mission statements.
  • A business exists to “create a customer.” Therefore, managers need to query who their customers are and what the business must try to do for its customers.
  • The Practice of Management contributed to a rich analysis of the role of business in society. Drucker proposed that a business exists at three constructs that influence each other and thus establish the organization’s performance, mission, and business definition:
    1. as an economic establishment that produces value for its stakeholders and for the society,
    2. as a community that employs people, pays them, develops them, and coordinates their efforts to increase productivity,
    3. as a “social institution that is deeply embedded in society and values and as such is affected by public interest discussion, debate, and values.”
  • “The manager is the dynamic, life-giving element in every business” who defines the organization’s mission, develops and retains productive teams, coordinates various activities, sets goals, and gets things done.
  • Leadership gives the organization meaning and purpose—leadership defines and nurtures the organization’s central values, creates a sense of mission, allocates resources, and builds systems and processes in pursuit of the organization’s goals.
  • Management entails farsighted thinking about the future state of things and taking appropriate risks to capitalize on opportunities. Additionally, “managing a business must be a creative rather than adaptive task. The more a management creates economic conditions or changes them rather than passively adapts to them, the more it manages the business.”
  • The Practice of Management by Peter Drucker Managers inculcate the dominant cultural norm in the organization through their actions. These values become evident in the decisions they make concerning whom they recruit, whom they retain and promote, the goals they pursue, and the ethical parameters with which they frame their decisions.
  • The Practice of Management popularized the concept of management by objectives (MBO) for the successful execution of an organization’s strategic plan. The MBO process ensures delineation of key objectives, prudent allocation of resources, dedication of effort on key goals, use of real-time feedback, and effective communication. MBO helps managers organize and motivate their employees, promote effective communication, develop employees, measure performance, and increase their sense of empowerment.

The Practice of Management is one of those books that his admirers tend to appreciate more with every successive reading. Drucker’s remarkable virtues as the “father of modern management”—viz., clarity, usefulness, and common-sense pragmatism—are all on display in this book.

Recommendation: Read—it’s the best book you’ll find on the responsibilities, tasks, and challenges that managers undertake. The Practice of Management will have a profound effect on your thinking.

What Do You Want to Be Remembered for?

The Curious History of the Nobel Prizes: Alfred Nobel Changed His Likely Legacy from “Merchant of Death”

Alfred Nobel Changed His Only Likely Legacy from The Swedish scientist Alfred Nobel (1833–96) is most remembered in the awarding of Nobel Prizes every year. The spur for the Nobel Prizes apparently came from a remarkable incident of careless journalism.

Nobel patented the explosive dynamite in 1867. Before long, he became very wealthy as the owner of a vast international explosives empire.

In 1888, Alfred’s brother Ludvig died. A French newspaper wrongly announced Alfred’s death instead under the title “Le marchand de la mort est mort” (Eng. trans. “The merchant of death is dead.”) The article called him the “dynamite king” and reported, “Dr. Alfred Nobel, who became rich by finding ways to kill more people faster than ever before, died yesterday.”

Upon reading this obituary, Alfred Nobel was so distressed at the prospect of how the world possibly could remember him. He wanted to leave a better legacy for himself and rewrote his will. Nobel left 94 percent of his estate to institute five prizes to celebrate the greatest achievements in chemistry, physics, physiology/medicine, literature, and peace. (The “Nobel Memorial” economics prize was instituted in 1968 by the Sweden’s central bank.)

Make a Conscious Intention to Embrace the Spirit of Your Life’s Work

'Managing the Nonprofit Organization' by Peter Drucker (ISBN 0060851147) Peter Drucker (1909–2005,) the 20th century’s leading thinker on business and management, advocated self renewal through the probing question “What do you want to be remembered for?” in his Managing the Non-Profit Organization:

When I was thirteen I had an inspiring teacher of religion who one day went right through the class of boys asking each one, “What do you want to be remembered for?” None of us, of course, could give an answer. So, he chuckled and said, “I didn’t expect you to be able to answer it. But if you still can’t answer it by the time you’re fifty, you will have wasted your life.”

I’m always asking that question: “What do you want to be remembered for?” It is a question that induces you to renew yourself, because it pushes you to see yourself as a different person—the person you can become. If you are fortunate, someone with moral authority will ask you that question early enough in your life so that you will continue to ask it as you go through life.

Your Life’s Work Becomes the Essence of Your Legacy

'Self-Renewal: The Individual and the Innovative Society' by John W. Gardner (ISBN 039331295X) Emphasizing self-renewal and its inhibitors, the American intellectual John W. Gardner wrote extensively about the need to embrace change for personal enrichment and fulfillment. In his seminal Self-Renewal: the Individual and the Innovative Society (1964,) Gardner encourages a sentient attitude toward the future to kindle self-renewal:

For self-renewing men and women the development of their own potentialities and the process of self-discovery never end. It is a sad but unarguable fact that most people go through their lives only partially aware of the full range of their abilities. … Exploration of the full range of our own potentialities is not something that we can safely leave to the chances of life. It is something to be pursued systematically, or at least avidly, to the end of our days. We should look forward to an endless and unpredictable dialogue between our potentialities and the claims of life—not only the claims we encounter but the claims we invent. And by the potentialities I mean not just skills, but the full range capacities for sensing, wondering, learning, understanding, loving, and aspiring.

Idea for Impact: Asking, “What should be your legacy?” is a Great Self-Actualizing Exercise

The English novelist Jane Austen (1775–1817) wrote in Mansfield Park (1814,) “We have all a better guide in ourselves, if we would attend to it, than any other person can be.”

One single spark in your mind has the potential to alter your life forever. Inspire your personal renewal by contemplating the following questions: What do you want to be remembered for, 5-10-20 years from now? What should be your legacy?

Without doubt, you can’t tell your future—you really don’t even know what’s going to happen next. Even if you make a deliberate plan, it probably won’t succeed because reality will regulate your plan. In spite of this life’s uncertainties, reflecting on the question “What do I want to be remembered for?” can help you become more intentional in your behavior and more mindful about your life’s purpose.

Find out What Your Customers Want and Give It to Them

“Nobody asked the dogs what they wanted”

Dog Food Product Once upon a time, a pet-foods company struggled to sell a new dog food product they’d recently introduced to the market.

The company’s CEO called the department heads together to discuss why the new product wouldn’t sell.

The head of production said he’d done everything right; it wasn’t his department’s fault.

The heads of the sales, advertising, finance, packaging, shipping, and distribution departments had done everything right. None of them were to blame.

The CEO demanded, “Darn! What happened? Why won’t our new product sell?”

A junior staffer shouted from the back of the room, “Sir, it’s just that the dogs simply won’t eat our doggone food. You see, nobody asked the dogs what they wanted.”

Idea for Impact: Customer Focus Drives Company Success

Your research and development efforts will be successful only if they’re driven by a thorough understanding of what your customers want. Engage your customers. Pay close attention to their needs in every phase of product/service design including idea generation, product design, prototyping, production, distribution, and service. Remember Peter Drucker’s dictum that “the purpose of a business is to create and keep a customer.”

The Trouble with Targets and Goals

The Trouble with Targets and Goals

'The Balanced Scorecard - Translating Strategy into Action' by Robert Kaplan and David Norton (ISBN 0875846513) In a well-known 1992 Harvard Business Review article as well as a book on translating strategy into action, Robert Kaplan and David Norton explained the need for a “balanced scorecard.” They encouraged leaders to develop tools with which to monitor the performance of any organization. The authors explained, “Think of the balanced scorecard as the dials and indicators in an airplane cockpit. For the complex task of navigating and flying an airplane, pilots need detailed information about many aspects of the flight, like fuel level, airspeed, altitude, bearing, etc.”

Goals are effective apparatus—a persuasive system indicating what achievements matter the most to an organization. Well-defined objectives, expressed in terms of specific goals, often direct an organization’s performance, sharpen focus on the execution of the organization’s strategic and operative plans, and boost productivity.

In terms of an individual within a company, goal-setting is especially important as a way to provide ongoing and year-end feedback. You can give employees continuous input on their performance and motivate them by setting and monitoring targets.

Still, there are four things to look out for when setting and managing targets:

  • Some organizations get so overwhelmed with setting and meeting targets that managers tend to adopt whatever behaviors necessary to meet the goals set by their superiors.
  • In goal-setting, less is more and simple is better Some organizations get carried away and set too many targets. While goals are beneficial, having more of them is not necessarily better. In fact, too many targets can lead to stress, muddled efforts, and organizational atrophy. In this instance, employees feel as if they’re being asked to throw darts in multiple directions all at once. Adding to the confusion, priorities can even conflict with one another—e.g. decreasing production cycle-time while not hiring more workers or buying more equipment. According to a 2011 study by consulting firm Booz (now named Strategy&), 64% of participating global executives reported facing too many conflicting priorities. The celebrated management consultant Peter Drucker famously advised his clients to pursue no more than two priorities at a time:

Develop your priorities and don’t have more than two. I don’t know anybody who can do three things at the same time and do them well. Do one task at a time or two tasks at a time. That’s it. OK, two works better for most. Most people need the change of pace. But, when you are finished with two jobs or reach the point where it’s futile, make the list again. Don’t go back to priority three. At that point, it’s obsolete.

  • Sometimes, organizations can be so eager to reach a target that they institute an overly aggressive system (unreasonable “stretch goals“) in an attempt to drive people to heroic levels of performance. Instead, it’s best to have goals that represent what senior management thinks ought to happen, not the contents of their wildest dreams.
  • When grading an employee’s performance depends heavily upon that individual meeting his targets (e.g. bonuses promised to salesmen who achieve certain revenue targets,) it can pit employee against employee. This tends to create an unhealthily competitive environment with colleagues scrambling over each other to get to the client or show off their achievements to management. Conflicts and rivalry between employees is one of the dominant criticisms of the individual performance rating system and the forced ranking system that many companies currently practice.

Idea for Impact: In goal-setting, less is more and simple is better. A few well-chosen, consequential targets and goals can sharpen an individual’s or an organization’s focus and boost productivity. Too many targets can lead to stress and even disaster.

Humility is a Mark of the Great

Humility is a Life-long Pursuit

“Before destruction the heart of man is haughty, and before honor is humility.”
* The Holy Bible (Proverbs 18:12)

We live in a world that misconstrues the virtue of humility as a sign of meekness, timidity, lack of resolve, and, in general, a personal and leadership inadequacy. Could anything be more imprudent?

As the following narratives of great people will illustrate, humility is the bona fide characteristic of the truly accomplished and well-adjusted people. These great men and women live the life of modesty, unpretentiousness, and supreme confidence. They do not bear a sense of self-superiority and pride.

The Humility of Dr. Albert Einstein

“Einstein taught the greatest humility of all: that we are but a speck in an unfathomable large universe.”
* Time magazine, recognizing Albert Einstein as the Person of the Century

Albert Einstein, Theoretical Physicist, Philosopher Author Sometime in the ’50s, Don Merwin, a producer of the ‘This I Believe’ radio program, visited Albert Einstein‘s home in Princeton, New Jersey. He was to record Einstein speak his essay, “An Ideal of Service to Our Fellow Man” for the program. Don Merwin later recalled his experience: “I started setting up [the bulky tape recorder], and Dr. Einstein, who was a very amiable man, was chatting with me and expressed curiosity about tape-recording, which was fairly new in those days. He said, ‘How does it work?’ I started explaining the electronics of it, the way that the recording heads imprinted a signal on the moving tape. All of a sudden, I froze up. I said, ‘I am lecturing to Albert Einstein on physics!'” [Source: Allison, Jay, et al. (editors) “This I Believe: the Personal Philosophies of Remarkable Men and Women.”]

The Humility of Dr. M. Balamuralikrishna

M. Balamuralikrishna and Gangubai Hangal, celebrated Indian Classical vocalists Look at this 2007 picture from Deccan Herald, via Churumuri. Dr. M. Balamuralikrishna, the 79-year old celebrated Indian Classical vocalist, expresses deep reverence and seeks the blessings of the 96-year old Dr. Gangubai Hangal, another legendary vocalist.

The Humility of Sri Veerendra Heggade

Veerendra Heggade, guardian of the Dharmasthala temple How about this 2009 picture from Karnataka News (via Churumuri?) Sri Veerendra Heggade, the widely respected guardian of a prominent temple in South India, holds an umbrella to shield from sun blaze the chairman of a culture convention at a parade in the latter’s honor.

The Humility of Peter Drucker

Peter Drucker, the 'Father of Modern Management' I have read of many an instance of the humility of Peter Drucker, the most influential management philosopher of the modern era. Here are two anecdotes:

  • Executive-education student Cathy Taylor remembers Peter Drucker conscientiously writing down autograph seekers’ names on a napkin to get the spelling correct before he made the formal inscription.
  • Forbes magazine publisher Rich Karlgaard remembers Peter Drucker “apologizing for taking so long to answer the doorbell at his modest home in Claremont, California. He said he was still adapting to his new artificial knees.”

Call for Action: Try to Practice Humility

Humility is simply the absence of pride. Humility and modesty are the marks of a genuine individual. However, practicing humility is often easier said than done. Deplorably, our society and world of work characterizes humility as significantly antithetical to the impression of the intelligent professional and competent leader. It is rather easy to succumb to the temptation to enhance our ego.

Hard as it may be, try to practice humility whenever an opportunity arises. Here are few remainders to bear in mind.

Sucking up Isn’t a Requirement for Success

Be Resourceful Do not Suck Up

Consider the all-too-familiar boss’s pet employee at an office. He uses flattery, goes out of his way to help the boss, curries personal favors, and constantly tows the boss’s line no matter how unreasonable it is. He never corrects the boss when necessary. He either sugarcoats or withholds information that the boss would rather not hear. Over time, he has perfected the art of stroking his boss’s exaggerated sense of self-worth.

How about leaders who go overboard on their intention to exceed customer expectations and turn out to be “customer compelled?” They bend over backward to fulfill every whim and fancy of their customers to the likely peril of their own organization’s values and priorities.

Sucking up or brown-nosing is widespread approach to win a boss’s approval solely with one’s own self-interest in mind. Consider the consequences of sucking up:

  • An employee that sucks up to his boss loses the respect of his peers and employees. They assume positive discrimination and favoritism because of his ingratiatory behavior. The suck-up recursively promotes sucking up in his organization — he encourages others to establish themselves in his good graces.
  • Suck-ups quickly get into a pattern of slavishly reacting to every impulse of the boss. Without realizing, they become vulnerable to obligations to support their boss. Neither can they set limits on favors, nor do they stand up for themselves or their employees.

Sucking up is not a requirement for success

Be Resourceful, Don’t Suck Up

“One does not make the strengths of the boss productive by toadying to him. One does it by starting out with what is right and presenting it in a form which is accessible to the superior.”
* Peter Drucker, in The Effective Executive

Contrary to popular opinion, a vast majority of promotions are not handed out to employees who are most willing to suck up. Research and empirical evidence proves that employees who are honest, sincere, open, straightforward, and helpful earn management’s respect and attention over time. They move up fast because of their demonstrated ability to make the right choices. In addition, most people can innately distinguish the brown-nosers and differentiate genuine compliments from insincere flattery.

Do not suck up to the boss Do not get me wrong. There is enormous value in being helpful to the boss. After all, making yourself resourceful can go a long way in staying in the boss’s good graces. It can open professional opportunities and increase your access to new ideas, initiatives, and restricted information. However, there is an obvious boundary between doing favors and sucking up. Running an urgent errand when the boss is busy preparing for an important meeting or watching over his pet when he is travelling are well within reason. Compromising your values and priorities just to get on the boss’s side will not get you anywhere in the long term. Try these suggestions:

How to Think and Perform like a CEO: Link the External World with the Internal Organization

A.G. Lafley on the Unique Work of CEOs

A G Lafley Chairman CEO Procter & Gamble In this article (PDF of full article) in the May 2009 issue of the Harvard Business Review, Proctor & Gamble’s Chairman and outgoing CEO, A.G. Lafley reflects on the unique responsibilities of CEOs. What makes this article engaging is that A.G. Lafley uses the context of his commendable achievements at the helm of Proctor & Gamble to elaborate on the teachings of management guru Peter Drucker.

“The CEO is the link between the inside and outside. He alone experiences the meaningful outside at an enterprise level and is responsible for understanding it, interpreting it, advocating for it, and presenting it so that the company can respond in a way that enables sustainable sales, profit and total shareholder return (TSR) growth.”

Drawing from Peter Drucker’s teachings, A.G. Lafley identifies the four fundamental tasks of a CEO. Here is a summary:

  1. Defining and interpreting the meaningful ‘outside.’ Identifying which external stakeholders matter the most. Recognizing where results are most meaningful. Clarifying and communicating the priority of external stakeholders.
  2. Identifying and focusing on the competitive spaces where the organization can win. Inquiring, “What is our business? What should it be? What is not our business? And what should it not be?”
  3. Balancing the present and the future. Determining the optimum balance between yield from present activities and investment in a highly uncertain future. This involves, (1) defining realistic growth goals, (2) creating a flexible budgeting process, and (3) allocating human resources in a way that identifies and develops good people for today and tomorrow.
  4. Shaping the values and standards of the organization. Winning with those who matter most and against the very best.

Think like a CEO, Focus on Organizational Performance

Think and Perform like a CEO I believe that everybody is a CEO. Whatever your span of responsibilities — supervisory, managerial or leadership — you are accountable to the external stakeholders. These stakeholders measure you purely by your ability to identify opportunities and get things done through the resources you have. Here are five essential initiatives to help you think and act like a CEO.

  1. Understand the context of your organization or project. Change your perception away from the minutiae of your organization and seek to understand what your organization means in the broader context and how it fits into the external world. Draw from this external perspective to establish the right directions and align the work of your entire organization with these organizational goals. Differentiate between short-term and long-term opportunities.
  2. Identify the primary external customers — these could be higher-level managers, other groups within your company or a consumer who uses your products. Use this customer standpoint to make every strategic decision and choose the right actions. Connect each initiative to its beneficial results to your customers.
  3. Communicate your direction and priorities to your organization. Help your employees determine where to focus their own efforts and how they eventually fit in the broader context of the external world.
  4. Focus on execution and achieving results. Introduce a culture of accountability. Ensure that each employee actually does live up to the values and goals of the organization.
  5. Coach your employees and develop them. Understand and align their personal values and aspirations to those of the organization, to the extent possible. Per Peter Drucker, “make sure that the performing people are allocated to opportunities rather than only to ‘problems.’ … Make sure that people are placed where their strengths can become effective.” Plan for succession.

[Time Management #2] Time Logging: Log Where Your Time Actually Goes


This article is the second in a series of four articles that presents the basics of diagnosing how you tend to spend your time and how you can develop the discipline of spending your time on what really matters to you. Yesterday’s article established that effective time management is truly not about managing time as such; rather, it is about managing priorities. See full article here.

Time Logging where time actually goes for 'Time Management'

Log How You Spend Your Time

“Effective executives, in my observation, do not start with their tasks. They start with their time. And they do not start out with planning. They start by finding out where their time actually goes.”
-Peter Drucker in ‘The Effective Executive’

Before you begin managing your time effectively, you need to develop an idea of how you spend time currently.

Below is a simple exercise to help you track how you use your hours and minutes during a suitably long period of time, ideally a whole week. If you follow a specific routine everyday, you may be able to approximate your time analysis by doing this exercise for a couple of weekdays and a Saturday or a Sunday. Alternatively, you may choose to do this only during your time at work. Again, more data leads to a more comprehensive analysis; hence, try to log an entire week.

Log where time actually goes -- Time Log Template

  1. Create a simple chart that consists of four columns as in the above illustration. Column 1 contains labels for time intervals, in 10- or 15-minute increments. Column 2 records your activity. Column 3 identifies the project or purpose that activity served. Column 4 rates the effectiveness of time spent. Itemizing all these details is the key to identifying time wasted and time effectively used.
  2. Make as many photocopies of this chart as required for a whole week.
  3. Carry your time log charts around with you wherever you go. Record every activity — significant or insignificant, large or small — during the entire week. Include time spent at your morning ablutions, travel time, time spent chitchatting around the water cooler, time spent helping your daughter with homework, telephone time, time spent on the internet — your sleeping time too.

Time Log Forms

Here are two PDF forms you could download and use:

You need not necessarily stop every 10th or 15th minute to record your activity. You can fill up the relevant rows once every hour or so. If you spend two hours on an airplane, you can mark 12 rows (of 10 minutes each) with a single comment. You need not be very precise: if you spend 7 minutes on the phone with a customer, you can record spending an entire 10 minutes.

Here is what your log should look like.

Log where time actually goes -- Time Log Example

Benefits of Time Logging

The immediate benefit of time logging is that it induces a sense of significance of your time. It compels you into the right mindset to consider habits you need to develop, avoid or change and start using your hours and minutes more effectively.

The more significant advantage is that your time logs will serve as a foundation for structuring your time according to your priorities and thus enable effective time management.

Tomorrow’s article will focus on time-analysis to help you review results from your time logs and prepare you for budgeting time according to your priorities.

Four Questions for Employee Performance Appraisals

Peter Drucker is widely regarded as the “Father of Modern Management,” and one of the most influential management philosophers of the modern era. In “The Effective Executive,” Peter Drucker advocates that a manager focus on an employee’s strengths when appraising his/her performance.

Four Questions for Performance Appraisals

Effective executives usually work out their own unique form of performance appraisal. It starts out with a statement of the major contributions expected from a person in his past and present positions and a record of his performance against these goals. Then it asks four questions:

  1. What has he [or she] done well?
  2. What, therefore, is he likely to be able to do well?
  3. What does he have to learn or to acquire to be able to get the full benefit from his strength?
  4. If I had a son or daughter, would I be willing to have him or her work under this person? If yes, why? If no, why?

Call for Action

Four Questions Managers Can Address in Employee Performance Appraisals Strong performance motivates outstanding performers. Therefore, managers must make it a priority to understand each employee’s motivation and strengths and provide objective, fair and consistent appreciation to keep him/her fully engaged.

Managers, however, often fail to realize the prospect of enhancing employee performance by targeting their efforts on each employee’s strengths. They often resort to deliberating over an employee’s shortcomings, and, thus attempt to develop abilities not inline with the employee’s strengths.

Address the above four questions when preparing the performance appraisal of an employee. These questions enable you, the manager, to reinforce the strengths of the employee and guide a career that focusses on his/her strengths.

The Legacy of Peter Drucker, the Original Management Guru

The Legacy of Peter Ferdinand Drucker

Yesterday was the first anniversary of the death of Peter Ferdinand Drucker, “the father of modern management.”

Drucker is arguably the most influential management philosopher of the modern era. He is the author of about forty books and innumerable essays on managerial skills, management concepts and social analyses. As a consultant, author and speaker for over sixty years, Drucker influenced the thinking of many executives in businesses, not-for-profits and faith-based organizations. Read his detailed biographies here, here and here.

Drucker wrote about many concepts and practices decades before the trends were discernable: knowledge workers, empowering employees, decentralization, management by objectives, focus on results instead of actions, the responsibility of the corporation in society, knowledge-based society, rise of multinational businesses, etc.

Drucker’s writings are devoid of buzzwords and management jargon and easily resonate with his readers. Today, we accept Drucker’s thoughts as conventional wisdom. Consequently, scores of business school courses require reading of his books.

My first exposure to Drucker’s thoughts was when I read his manual The Effective Executiveduring my undergraduate studies. Over the last few years, I have read and re-read many of his books and essays. Drucker’s unique style of expression and simple, clear language have left a deep impression on my pursuits, thoughts and actions. Below is one of my favorite Peter Drucker instructions. See my separate blog post on his inspirational quotations.

Successful leaders don’t start out asking, “What do I want to do?” They ask, “What needs to be done?” Then they ask, “Of those things that would make a difference, which are right for me?” They don’t tackle things they aren’t good at.

On a question about his legacy, Drucker once said that he has “helped a few good people be effective in doing the right things.” Just a few? Drucker’s farsighted insights and timeless thoughts will influence management thought for generations to come.