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Associations Now

What Would Drucker Do?

ASSOCIATIONS NOW, November 2007, Feature

By: Kristin Clarke, CAE

Management guru Peter Drucker wasn’t interested in a standard autobiography. His legacy would be almost a century of wisdom, and he invited strategic consultant Elizabeth Haas Edersheim to capture it for one final book. In The Definitive Drucker, Edersheim shares her 16-month conversation with the master. Here, Edersheim revisits those sessions spent on good decision making and why leaders keep getting it so wrong.
Summary: In his 90-plus years of life, Peter Drucker changed the face of management theory with his systematic, scientific approach toward examining how decisions become actions. Toward the end of his life, he shared his thoughts with strategist Elizabeth Haas Edersheim for her book The Definitive Drucker. Here’s a glimpse inside the master’s mind.

 

To some, Peter Drucker might not have given the appearance of being a decisive pioneer during his 90-plus years. He was always asking questions, listening carefully, and then asking more questions. Frankly, he could drive people crazy with all of those questions. The business leaders who hired him as coach or consultant wanted statements. Directives. Guidance. Rules.

Drucker was, after all, “the man”—the “father of modern management.” People paid him lots of money to help top professionals in myriad industries create, compete, defend, merge, lead, and survive. But Drucker was not someone willing to hand over a to-do list to a desperate CEO or board. On the contrary, he was a well-known “anti-tasker,” a rarity who scoffed at leaders’ penchant for multitasking.

 

“Peter said many times, ‘We each can do only one thing. Maybe you can do two, but you can’t do three. What’s on your plate?’” explains Elizabeth Haas Edersheim, a strategic consultant who spent 16 months before Drucker’s death in 2005 asking him her own set of wide-ranging questions on critical business practices for today and the future. These conversations—which Drucker initiated—are shaped and shared in Edersheim’s new book, The Definitive Drucker (McGraw-Hill, 2007). They are a gift given by the master himself as a deliberate guide to Generation Next and a gentle reminder to Generation Now. 

Not surprisingly, the book is full of questions, for only in answering them can leaders know how to address the important decisions. “A decision is a judgment. It is a choice between alternatives. It is rarely a choice between right and wrong. It is often a choice between two courses of action, neither of which is provably more nearly right than the other,” writes Drucker in The Effective Executive (HarperCollins, 2002), one of his 39 bestselling books.

Edersheim and Drucker talked extensively about decision making as the “chassis that holds the whole together,” which they define as “the organization’s ability to make well-informed decisions about what needs to be done and its resolve to get it done.” But despite unparalleled access to information, decades of documented business prowess, and a wide pool of highly educated professionals, smart leaders—including ourselves—continue to make dumb decisions. Why? More importantly, how can we stop?

“People often don’t have context for what they’re making decisions about,” explains Edersheim, who was one of the first female partners at McKinsey & Company. “[Peter and I] talked quite a bit about, ‘Is this a decision I need to be making? Do I have the right assumptions? Is it a one-off decision for the leadership? Does it fit with the values of the organization? Is this the right time to make that decision?’”

The second reason why smart people make bad decisions is that when they do decide something, “they are very inflexible,” she continues. “They often make a decision as if it’s absolute, and in the world of today, nothing is absolute. They need to be tracking. They need to be asking themselves, ‘Would I make this decision based on what I expect to occur and then look in two or three months at what actually happened?’”

And finally, leaders can make bad decisions—and keep making more until the situation becomes catastrophic—because they refuse to acknowledge the initial poor choice and get on with fixing it. Often, in addition to the obvious factors of ego or fear, the problem is because the decision maker has created a culture in which the right information does not flow up to him or her, especially if that decision maker is the CEO.

“People are trying to make the CEO’s decision work,” Edersheim explains. “They might be in a culture that hides the facts sometimes.” Leaders need to “accrue the right frame for letting people make decisions.” And part of that process is letting go, pushing down, and pulling out.

“Very few decisions need to be the responsibility of top management,” emphasized Drucker, which must have shocked more than a few harried executives.

Edersheim makes the point another way in her book: “[Management] must create a climate with the best chance that everyone in the organization is making the right decisions about the right issues at the right time.” That means a culture in which leaders step back from stepping in, authorizing decisions as far down the management ladder as is wise.

“A lot of decision making is [asking] what’s right when you don’t have all the facts,” Edersheim says—all the more reason to assign authority to “the person as close to that orientation as possible.”

And how to determine that? “The answer is always, ‘Low enough that the decision maker has sufficient knowledge of and experience with the situation or affected function or area, yet high enough that the manager’s authority covers the affected function or area,’” she writes after one of her many sessions with Drucker.

“Who are you going to hold accountable? Who wants to bet on this? Where is the right place for the decision? Those are the questions to ask,” she elaborates. That discipline speeds implementation and generally produces “a better, more informed decision.”

Not everyone agrees that decision-making authority should be dropped down as many rungs as possible, particularly managers who may be territorial or bewildered about what their primary job then becomes. “You absolutely get pushback from that all the time,” Edersheim confirms. “What you’re managing is helping everyone around you succeed, and then the whole does much better. … It’s really about making a team work.”

 

Drucker’s Four Questions on Decision Making

In their exploration of the ever-evolving art of good decision making, Drucker turns again to reflective questioning to guide leaders through this difficult process. He cites four in particular:

1. Have you built in time to focus on the critical decisions? While most CEOs should be making fewer decisions, “taking the time to do justice to” those decisions that are his or her responsibility “cannot be understated,” he told Edersheim, who agreed that “the importance of intuition and judgment (human perception) has never been greater.”

However, she acknowledges the challenge: “We have so little time now that we focus on the urgent, not the important”—such as making sure we understand both the true core of the decision and whether we need to make the decision in the first place.

She recounts Drucker’s conclusions in her book: “Only by taking the time to investigate what the decision really needs to be about can the decision maker distinguish between the symptom and the ailment, between the need for a topical or localized treatment and a systemic or surgical treatment. ‘You don’t make a decision about symptoms when you have a fundamental, underlying, degenerative structure problem. Conversely, you don’t fiddle around with the structure when all you have is an allergic rash.’” 

Drucker worried about “the shock” of unnecessary decisions to an organization’s system and urged leaders to act only when “the condition is likely to degenerate severely or the opportunity is likely to disappear in the face of no action.” He warned leaders against any action “when it is reasonable (not recklessly optimistic) to expect that the condition will take care of itself or that [the organization is] already prepared to act on the opportunity.” More information is needed “when the situation is both unlikely to take care of itself and unlikely to severely degenerate.” 

2. Does your culture and organization support making the right decision, with ready contingency plans? Edersheim explains that Drucker’s goal with this question is to assess whether the organization has values that help people understand how to make tradeoffs that are not just financial. Does the organization reward some risk and recognize that it’s not going to know everything and that there always has to be a backup? Have you heard ideas and perspectives on all sides?

On the subject of alternative viewpoints, Drucker was always firm about the need for leaders to thoroughly vet ideas and strongly encourage animated, even “weird”—as he called them—discussions, especially those potentially debunking long-revered assumptions. He advised leaders to create the kind of what-if environment that helps properly evolve good decisions by actively listening, considering a range of options, and challenging themselves intellectually.

Edersheim recounts a story of how one of Drucker’s clients put that into practice. A company leader faced with a decision had looked at his management team and asked, “Does everyone agree?” When everyone nodded, he had replied, “Then I only need one of you.”

“We all have a lot of assumptions buried in how we think and what we do,” Edersheim says. “In 1985, Peter wrote a letter to someone on the board of [a computer company] and said , ‘Your assumptions about the computer industry have been changed. It’s not ‘IBM’ and ‘IBM’s competitors’ anymore. The Japanese have decided to adopt the IBM standard, so the world will be different. You can’t compete by being something different. Someone on the board needs to challenge those assumptions.’ The board never challenged them, and [the company is] no longer in existence. …  It’s very difficult [for CEOs to move to that mindset], but it’s also what sustainability is about.”

Drucker knew that challenging assumptions could mean questioning leaders in ways in which many employees were not necessarily comfortable. Edersheim points to one of her clients, who became president of a North American organization at which nobody was making any decisions. The client began holding weekly “decision meetings,” so that anyone nervous about a decision could simply bring their concerns to the meeting and say, “Here’s what needs to be done and why.”

“She said, ‘Done! Let’s move on. Done! Let’s move on.’” Edersheim laughs. “Eventually, she didn’t need to have those meetings anymore. People had been afraid to make simple decisions, and you see that in a lot of organizations.”

3. Is the organization willing to commit to the decision once it’s made? Here, Drucker shared a related irony with Edersheim: “The influential player is often the troublemaker.”

Whether the influence comes from rank, verbosity, or whatever, the important takeaway on this problem is to get the troublemaker on board with the decision. “Troublemakers are often leaders, and they’re challengers. ... It’s not a bad thing,” she states.

Edersheim compares the commitment process to creating a tightrope between two places—once you throw it, you want to get there. “But as you begin to get off balance, you need to adjust where and how you’re on that rope. We need to make sure we’re going in the right decision—it’s the ‘Go east, young man’ concept. When you’re heading east, it makes sense, but you might have to modify the road you’re going to take and the tools you’re using.

“All of us second-guess decisions all the time. What’s important is that an organization supports decisions, sets them up to be successful, and—by the way, when they’re not—pulls back then and reevaluates why not. But it’s not every day, all the time.”

4. As those decisions are made, are resources allocated to “degenerate” into work? With this question, Drucker referenced his belief that “strategies are just ideas until you have a team who can execute. Allocated resources are just ideas.” (Hence, Drucker’s terminology: The broad strategy must “degenerate” into concrete tactics—or “work.”) In The Effective Executive (HarperCollins, 2002), he credits good leaders with knowing “that the most time-consuming step in the process is not making the decision but putting it into effect.”

“Peter was very deliberate,” says Edersheim. “… When you make a decision, what are the results you expect? How are you going to track those results, and how are you going to adapt? That was core to almost everything Peter said and did. It was managing for results.”

She points to General Motors’ decision to move into hybrid car production. “They knew they would need to leverage what Toyota had done, and they needed to buy the technology as opposed to start from scratch because the specifications couldn’t be done in time,” Edersheim explains. “[They asked,] ‘What do we need from the organization to really make it work?’ Again, it’s setting things up for success. Very often people don’t ask, ‘What do we need to do to make this work?’ What can everyone do to set this up to win?’”

She and Drucker agreed that one of the best ways to determine whether your decisions have degenerated into properly supportive workis to figure out where your best people are stationed. For example, a client of Edersheim’s had moved its best person to head of purchasing to fix a bad purchasing problem, which was not the most strategic issue for the company.

“That’s not where you want your best person—fixing problems, not creating tomorrow—so look at where you’re allocating your best people. Is that really where you want to be investing for tomorrow? Often, the return is not as great where you want to be tomorrow as it is fixing problems of today, but if you don’t create tomorrow, you won’t get there.”

And “getting there” is exactly what “managing for results”—Drucker’s mantra—is about. Good decision making, meanwhile, is a critical element of managing for the right results at the right time and in the right way—or as Drucker himself wrote, “Doing the right thing—even if not perfectly executed—is far superior to perfectly executing the wrong thing.”

A former deputy editor of Associations Now, Kristin Clarke, CAE, is a writer and researcher for the social responsibility and philanthropic initiatives at ASAE & The Center. Email: kclarke@asaecenter.org 

 

 

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