Peter Drucker

What Knowledge Workers Want Most: Management-by-Exception

September 23, 2024 By Nagesh Belludi Leave a Comment

What Knowledge Workers Want Most: Management-by-Exception Peter Drucker called them ‘knowledge workers.’ These professionals possess specialized skills, are inherently driven, thrive on challenges, and require a high degree of independence to convert raw data and ideas into valuable knowledge.

What distinguishes knowledge workers is their strong desire for autonomy and the freedom to confront complex problems head-on. Their brilliance truly shines when they maintain control over their work processes and decision-making.

Micromanagement? That’s a non-starter for knowledge workers. Their productivity soars when they’re entrusted with the essential tools, authority, and the room they need to carry out their tasks.

Above all, what truly fuels the passion of knowledge workers is a compelling vision of the future that drives them to be active contributors. By nurturing intrapreneurship and providing opportunities to experiment with innovative ideas and calculated risks, managers can unlock their full potential.

Through the management-by-exception approach, managers only need to step in when they notice a significant misalignment with organizational priorities or when results start to falter, striking the perfect balance between guidance and autonomy.

Idea for Impact: Don’t apply traditional management methods to knowledge workers.

How Can You Contribute?

June 22, 2020 By Nagesh Belludi Leave a Comment

The celebrated management guru Peter Drucker urged folks to replace the pursuit of success with the pursuit of contribution. To him, the existential question was not, “How can I achieve what’s been asked of me?” but “What can I contribute?”

Drucker wrote in his bestselling The Effective Executive (1967; my summary,)

The great majority of executives tend to focus downward. They are occupied with efforts rather than with results. They worry over what the organization and their superiors “owe” them and should do for them. And they are conscious above all of the authority they “should have.” As a result, they render themselves ineffectual. The effective executive focuses on contribution. He looks up from his work and outward toward goals. He asks: “What can I contribute that will significantly affect the performance and the results of the institution I serve?” His stress is on responsibility.

The focus on contribution is the key to effectiveness: in a person’s own work—its content, its level, its standards, and its impacts; in his relations with others—his superiors, his associates, his subordinates; in his use of the tools of the executive such as meetings or reports. The focus on contribution turns the executive’s attention away from his own specialty, his own narrow skills, his own department, and toward the performance of the whole. It turns his attention to the outside, the only place where there are results.

Peter Drucker: Focus on Contribution - How Can You Contribute? Pursuing contribution versus—or as well as—success pivots you away from self-focus and helps engage in meaningful relationships with your employees, peers, and managers.

In his celebrated article on “Managing Oneself” in the January 2005 issue of Harvard Business Review, Drucker clarified,

Throughout history, the great majority of people never had to ask the question, What should I contribute? They were told what to contribute, and their tasks were dictated either by the work itself—as it was for the peasant or artisan—or by a master or a mistress—as it was for domestic servants.

There is no return to the old answer of doing what you are told or assigned to do. Knowledge workers in particular have to learn to ask a question that has not been asked before: What should my contribution be? To answer it, they must address three distinct elements: What does the situation require? Given my strengths, my way of performing, and my values, how can I make the greatest contribution to what needs to be done? And finally, What results have to be achieved to make a difference?

Idea for Impact: Take Responsibility for Your Contribution

Focusing on contribution instead of efforts is empowering because it compels you to think through the results you need to deliver to make a difference and identify new skills to develop. “People in general, and knowledge workers in particular, grow according to the demands they make on themselves,” as Drucker remarked in The Effective Executive.

Lessons from Peter Drucker: Quit What You Suck At

March 1, 2018 By Nagesh Belludi 1 Comment

The essence of leadership is risk- and opportunity-assessment and resource allocation. It follows that one of the persistent responsibilities of leadership is to mull over each individual and organizational endeavor and investigate, “Do we produce results that are meaningful and profitable enough for us to justify investing our resources to this purpose?”

Jack Welch’s Strategy for General Electric: #1 or #2 Businesses Only

When Jack Welch became CEO of General Electric (GE) in 1981, he set out to make GE “the world’s most competitive enterprise.” However, the company was a hodgepodge of many businesses—some unrelated or irrelevant, several unprofitable, and a few at the brink of failure.

Management pioneer Peter Drucker famously advised Welch to ask of each constituent of the GE business portfolio he now presided over, “If you weren’t already this business, would you enter it today? And, if the answer is no, what are you going to do about it?”

Welch’s responded with his legendary dictum that every GE division be—or become—the leading or the runner-up business in its respective industry, or plan to exit it completely.

Welch argued that in many markets, the number three, four, five, or six players suffered the most during cyclical downturns. On the contrary, number one or number two businesses could protect their market share by way of aggressive pricing approaches or by developing new products. Welch’s approach portended the emergence of oligopolies in many industries.

The resultant strategic focus eventually led to an immense restructuring of GE. Welch sold or discontinued dozens of divisions—including computers and time-shares. Over the next decade, he cut nearly one in four jobs at GE, warranting the nickname “Neutron Jack.”

By year 2000, GE had reached dominance or near dominance in most of its business markets across the globe.

Peter Drucker on Strategic Reprioritization

Explaining this method of strategic reprioritization, Drucker wrote in Post-Capitalist Society (1993,)

To turn around any institution—whether a business, a labor union, a university, a hospital, or a government—requires always the same three steps:

Abandonment of the things that do not work, the things that have never worked; the things that have outlived their usefulness and their capacity to contribute;

Concentration on the things that do work, the things that produce results, the things that improve the organization’s capacity to perform; and

Analysis of the half successes, half failures. A turnaround requires abandoning whatever does not perform and doing more of whatever does perform.

Drucker further elaborated on abandonment as the keystone for strategic reprioritization in his Five Most Important Questions (2015,)

To abandon anything is always bitterly resisted. People in any organization are always attached to the obsolete—the things that should have worked but did not, the things that once were productive and no longer are. They are most attached to what in an earlier book I called “investments in managerial ego.” Yet abandonment comes first. Until that has been accomplished, little else gets done. The acrimonious and emotional debate over what to abandon holds everybody in its grip. Abandoning anything is thus difficult, but only for a fairly short spell. Rebirth can begin once the dead are buried; six months later, everybody wonders, “Why did it take us so long?”

Idea for Impact: Assess What Endeavors Must Be Intensified or Abandoned

Don’t do—or continue to do—something just because it’s been a tradition, custom, or habit. Strengthen, abandon, or stay on. Align your efforts with your mission, your values, and the results you want to achieve.

If you abandon something important mistakenly, you can quickly pick up where you left off.

Invest your precious resources where the returns are rich.

Figure out what’s vital and stay focused, even if you have to cut your losses (read about sunk costs.)

Death to Bureaucracy

September 6, 2017 By Nagesh Belludi Leave a Comment

Bureaucracy can suck the life out of any organization by rewarding complacency and inertia.

Efficient managers are annoyed with the speed of bureaucracy. Internal rules and policies for making and approving decisions slow down managerial undertakings. In a world where fast, disruptive innovation has become foremost, any company can ill afford the time or expense of operating with bureaucratic mindsets.

Management pioneer Peter Drucker’s enduring condemnation of bureaucracy, formalities, and rules and regulations hit the peak with his ground-breaking editorial called “Sell the Mailroom,” first published in the Wall Street Journal in 1989 and then republished in 2005.

At a time when the great majority of businesses were engaged in making an effort to improve the efficiency of support staff, Drucker brashly advocated that bureaucratic support should be eliminated by outsourcing their work to outside contractors. Drucker observed,

In-house service and support activities are de facto monopolies. They have little incentive to improve their productivity. There is, after all, no competition. In fact, they have considerable disincentive to improve their productivity. In the typical organization, business or government, the standard and prestige of an activity is judged by its size and budget—particularly in the case of activities that, like clerical, maintenance, and support work, do not make a direct and measurable contribution to the bottom line. To improve the productivity of such an activity is thus hardly the way to advancement and success. When in-house support staff are criticized for doing a poor job, their managers are likely to respond by hiring more people. An outside contractor knows that he will be tossed out and replaced by a better-performing competitor unless he improves quality and cuts costs.

Idea for Impact: Drop unnecessary work.

An Old Joke about Accounting and Leadership

September 1, 2017 By Nagesh Belludi Leave a Comment

A man in a hot air balloon gets lost over Nebraska. He has no idea where he is or where he is going. He does not see anybody… nothing but farmland as far as the eye can see.

Eventually, he sees a woman down in a field. He goes down and cries out to her, “Where am I? I’m already an hour late for an appointment!”

She hollers back, “You’re at 42 degrees 15 minutes and 4 seconds North latitude and 98 degrees 12 minutes 15 seconds West longitude.”

The man yells out, “You must be an accountant.”

“Hmm … how did you guess?”

“Your information is absolutely precise and accurate … but totally useless.”

“You must be an executive.”

“Yes … but how do you know?”

“You’re higher up, you do not know where you are, you do not know where you’re going, you’re over-scheduled, and you blame your subordinates—someone below you.”

Reference: A Year with Peter Drucker by Joseph A. Maciariello

You Too Can (and Must) Become Effective // Summary of Peter Drucker’s The Effective Executive

May 30, 2017 By Nagesh Belludi Leave a Comment

Peter Drucker (1909–2005) is widely regarded as the most outstanding thinker on the subject of management theory and practice. He was amazingly prolific—he produced 39 volumes on management and leadership and worked right until his death a week before his 96th birthday.

Drucker’s The Practice of Management (1954) played a pivotal role in the recognition of management as a professional discipline. In this influential book (see my summary here,) Drucker explained what management is and how managers do their jobs.

In his bestselling The Effective Executive (1967,) Drucker defined effectiveness as getting the right things done and efficiency as making resources productive. His pivotal message was that effectiveness must be learned because effectiveness is every manager’s job. That’s what are managers get paid for—“the executive is paid for being effective.” Moreover, “Effective executives know that their subordinates are paid to perform, and not to please their superiors.”

Five Practices of the Effective Executive

Drucker devotes five chapters of The Effective Executive to five practices that have to be acquired to be effective. Introducing these effectiveness practices, Drucker writes, “Whenever I have found a person who—no matter how great in intelligence, industry, imagination, or knowledge—fails to observe these practices, I have also found an executive deficient in effectiveness.”

Effectiveness Habit #1—Know Where Time Goes: “Time is the scarcest resource, and unless it is managed nothing else can be managed.” In addition, “Effective executives know where their time goes. They work systematically at managing the little of their time that can be brought under their control.” Using the three-step time logging, time analysis, and time budgeting practice, effective executives know where there time goes. They exert themselves to make certain that they invest their time in line with their values and priorities.
Effectiveness Habit #2—Focus on Contribution: Whatever your span of responsibilities—supervisory, managerial or leadership—you are accountable to your ‘external’ stakeholders. These stakeholders measure your performance solely by your ability to identify opportunities and get things done through the resources you have. Drucker writes, “Effective executives focus on outward contributions. They gear their efforts to results rather than to work. They start out with the question, ‘What results are expected of me?'” Effective executives have a clear understanding of their contribution and their results.
Effectiveness Habit #3: Make Strengths Productive: “Effective executives build on strengths—theirs and others. They do not build on weaknesses. They do not start out with the things they cannot do.” Effective executives understand and build on the strengths of themselves, their team, and their organization to make everyone productive and to eliminate weaknesses. The only weaknesses that have a bearing—and must be remedied—are the ones that hinder effective executives from exercising their strengths.
Effectiveness Habit #4: Live Priorities: “Effective executives concentrate on superior performance where superior performance will produce outstanding results. They force themselves to stay within priorities.” Setting priorities is easier; the hard part is sticking to the decision and living the priorities. To get things done, focus on one task at a time or two at the most; three is usually impractical.
Effectiveness Habit #5: Systemize Decision-Making: “Effective executives make effective decisions. They know that this is a system—the right steps in the right sequence. They know that to make decisions fast is to make the wrong decisions.” For Drucker, decision-making was a matter of wisdom and sound judgment—making a choice between alternatives but seldom between mere right and mere wrong. “The sooner operating managers learn to make decisions as genuine judgments on risk and uncertainty, the sooner we will overcome one of the basic weaknesses of large organizations—the absence of any training and testing for the decision-making top positions.”

Idea for Impact: Teach yourself to become effective. Commit these five tasks to memory and practice them. Read The Effective Executive—it will have a profound effect on your performance.

Book Summary of Peter Drucker’s ‘The Practice of Management’

February 21, 2017 By Nagesh Belludi 5 Comments

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.

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.”
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?

February 17, 2017 By Nagesh Belludi Leave a Comment

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

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

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

April 22, 2016 By Nagesh Belludi 1 Comment

“Nobody asked the dogs what they wanted”

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

March 17, 2015 By Nagesh Belludi Leave a Comment

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.
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.

Peter Drucker

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Peter Drucker on Strategic Reprioritization

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Five Practices of the Effective Executive

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

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

Your Life’s Work Becomes the Essence of Your Legacy

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

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“Nobody asked the dogs what they wanted”

Idea for Impact: Customer Focus Drives Company Success

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