Leading in a Time of Change

by Peter F Drucker

  I've seen so many people who have no personality except in their product. And that is a problem. But they need to accept that the time to get rid of a product is not when it no longer produces but when somebody says it still has five good years; that's the time to say, "Cut."

  Peter Senge: It seems to me, Peter, we're onto something quite fundamental. I found myself thinking a lot about it as I was reading your Management Challenges book. There really is a difference between creating as an orientation toward life-and, for an organization, toward how it operates-and problem solving. I think our enterprises are so dominated by an ethic of problem solving that it really undermines the notion of creating. Why are organizations, why are managers, so focused on solving this problem and solving that problem? You used the example of the quarterly or monthly report, where all we do is talk about the problems. And in so many recognition and reward systems, the organization says, "Who fixed what problem?" We spend a lot of our time fixing unimportant problems. This basic shift between "are we predominantly creating" or "are we predominantly problem solving" is really a profound one.

  Peter Drucker: It's, in part, the fault of the business schools; and don't underrate their influence in the last fifty years. You can teach problem solving. Also, in part, it's because for forty years the same companies that were there in 1939 still dominated in 1979. So for forty years the job was maintenance. And that's problem solving. If the roof leaks, you put some shingles in; you don't build a new house.

  Peter Senge: I think pointing to the business schools is very appropriate. It seems to me that the roots of this are in our whole educational system. Because, as you point out, it's a lot easier to teach right answers and wrong answers. So children grow up thinking life is about solving the problem and getting the correct answer.

  Years ago, when I was an engineering student, one of my professors told me, "We learn all this stuff in engineering classes, but then there's design, and design is really different. In design there's no right answer and wrong answer; there are trade-offs. And you have to learn to think very differently. You have to deal with constraint and you have to deal with possibility. And you have to put them in balance."

  T here is a difference between creating and problem solving.

  Peter Drucker: I am a little unhappy with all the talk about creativity. To some extent, it's a cop-out to cover up our problem focus. There is no lack of creativity. I have never found any. But we are doing our level best in most organizations to squelch it. There are quite a few exceptions, but, by and large, most organizations are not willing to experiment. Even small businesses find it very hard to experiment.

  I say to my clients, "Don't make a study; go out and try it. Where do you have a market in which you are strong, and it's sufficiently remote? Go ahead and try it out. In three weeks, you'll know ten times as much as you'll know from any study, at a fraction of the cost." They are very reluctant to do it. They love a beautiful, threevolume study with as much computer graphics as you can possibly get. All you have to do is go into the nearest supermarket and try to sell it and see if anybody buys it.

  Frances Hesselbein: For an organization to be a change leader, we've heard Peter Drucker say, it must abandon yesterday and organize for innovation. And that takes a willingness to experiment-and what else?

  Peter Drucker: You have to infuse your entire organization with the mind-set that change is an opportunity and not a threat. That takes hard work. And then you have to have two hands. One is the systematic right hand, where you systematically look at changes. You start out with unexpected success, because that is usually the first indication of an opportunity. And then you look. In Innovation and Entrepreneurship, I outlined the areas in which you look. Demographics is one, technology is one, and there are others. They are different for different businesses. You look at changes that have happened. You ask a basic question: "Would this be an opportunity for us?" Then, if it looks like one, you put a fewone or two-good people to work on it. And then you have to be receptive to what comes in over the transom.

  A11 the talk about lacking creativity is a cop-out. There is no lack of creativity. But we are doing our level best in most organizations to squelch it. Most organizations are not willing to experiment.

  In 1934 or '35, IBM was going bankrupt. It had designed the first accounting machine for banks and had not sold a single one. In 1934 no American bank bought anything! The lawyers had already drawn up the bankruptcy petition for IBM when old man Watson's wife forced him to go to a dinner. Watson found himself sitting next to a middle-aged lady. He described the machine, and she said, "We need three tomorrow. I'm the chief librarian of the New York Public Library, and we cannot keep inventory of our books." He sold her five the next day, and that saved IBM. It's a true story.

  You have to be ready for unexpected opportunities. That is an attitude at the top, somebody who enjoys the unexpected.

  Peter Senge: There's an element that you're talking about that is completely disregarded in formal management education. We're supposed to figure things out. We're supposed to make the machine work and correct problems when they come up. But, in fact, in creating something, a lot of the most important developments are what you didn't expect. And it's how you recognize and deal with surprise that matters. It's a very different mind-set. You have to appreciate the unexpected.

  Peter Drucker: In the next twenty years, that will become absolutely crucial, because there will be a great many surprises, and if every surprise is a threat, we won't be around very long. I'm not saying that every surprise is an opportunity, but every surprise is something to be taken seriously, and not to say, "Well, we didn't plan on it," or "That's not the way things should be," or "It's a coincidence." Ask, "Is it an opportunity?"

  Peter Senge: One of the questions that you need to learn how to ask is, "Is this a relevant surprise?" You look at a surprise and say, "In what way might this be relevant?" If we were out sailing in the middle of the ocean, and the wind changed, that would be a surprise-but it would be a relevant surprise. We would know immediately that our prior course was not nearly as important as dealing with the surprise. The problem in a lot of corporations is that people immediately disregard most of the surprises as being not relevant.

  Peter Drucker: Most problems cannot be solved. Most problems can only be survived. And one survives problems by making them irrelevant because of success. It's amazing how many minor ills the healthy body can stand without any trouble. One focuses on success, especially on unexpected success, and runs with it.

  This is a matter, above all, of placing people. I have learned to take a sheet of paper and list our opportunities and the risks. And then I list the few priorities; one cannot do too much. And then I get a list of the best-performing, ablest people in the organization and try to match them.

  Peter Senge: I think that's one of the most simple and basic lessons for leaders. Find where the energy wants to go and work with it. There's a part of us that wants to correct the people that are wrong, rather than building something that wants to occur. Years ago, when I first started teaching, I had a habit when I was in front of a group of people. There'd be twenty-five people nodding and one person with his arms folded. And who did I put all my attention on? The one person with his arms folded.

  You have to be ready for unexpected opportunities. That is an attitude at the top.

  You have to let that person be there and you work with the people who are really engaged. It's one of the most simple and basic lessons of all leadership in any setting. Where is the energy trying to flow and how do you work with that?

  dentify the top performers, I the ones who are realty engaged-and work with them. The rest will follow.

  Peter Drucker: And add the human law that the gap between the ones at the top and the average is a constant. And it's terribly hard to work on that huge average. You work on the few at the top and you raise them, and the rest will follow.

  I have done a fair amount of work with schools that wo
rk, which are largely parochial Christian charter schools. The difference is a very simple one. In our public schools today, we focus on the problems. The parochial schools focus on the kids who want to learn. That's really all the difference. And they make it possible for those kids to learn, and push them. The rest follow.

  I worked with the late Georg Solti, who raised the Chicago Symphony Orchestra in five years from kind of comfortable mediocrity to being world class. I asked him, "How did you achieve it?" He said, "I looked at 128 members in this orchestra, and the 20 who were top-flight and wanted to excel, and worked with them. Sure, I had to fire a second oboe. But suddenly, the standards, the vision had changed." One runs with performers, one runs with success.

  Peter Senge: It connects to something you mentioned earlier, that there's no shortage of creativity in organizations. The question is: Are we paying attention to the creativity that's there trying to come out? Or are we busy trying to move the whole thing in some kind of lockstep fashion?

  Peter Drucker: My way of describing it is that a substantial majority of executives in all organizations spend most of their time worrying whether we need a fourth carbon copy. Organizations have a gravity. Their weight is constantly being pushed into being program focused and mediocrity focused. One has to fight it all the time.

  There's another subtle problem. The typical kind of daily problem can be fixed very fast. To build from first-class performance to excellence takes a long time; then you see tremendous results.

  Frances Hesselbein: Change was the primary topic of this conversation: the need to welcome change and seize it as an opportunity. But people in organizations also need continuity. According to Drucker and Senge, the challenge is to create a balance between the two.

  Peter Drucker: Today's businesses, especially American businesses, are upsetting people unnecessarily. Not because there is too much change, but because they do not even try to emphasize the continuity, the relationships, the mutual responsibilities, which convert the mob into an organization.

  Peter Senge: You said something that really warrants being emphasized: that we tend to think that people are stressed out because there's too much change. I don't think that's true at all. I think people are stressed because they're profoundly uneasy at what it is they're doing. Not because there's too much change. There's a principle in biology about the history and evolution of species. A famous biologist said, "History is a process of transformation through conservation." It is precisely the way that nature preserves a very small set of essential features that allows everything else to change. As human beings living and working together at some level, we're always asking the question, "What are we preserving?"

  Peter Drucker: And the same biologist would probably have also said that it's by no means an accident that all animals have the same number of heartbeats during their lifetime-forty million? Once nature learned that this is optimum, it preserved it and didn't play around with it. If you look at organizations, what is the equivalent? It is trust, and we are not really doing the things needed to preserve the trust in organizations. Trust basically means some predictability.

  That's the first step. But when you introduce change, it's very important to maintain continuity and the commitment to fundamental values, which don't change. You do things differently, you have to, with different tools, with different markets, but the things you fundamentally are committed to remain the same. They are values; they are not tools.

  That way you help create trust. On that basis, you can have very rapid change and it doesn't upset people.

  Frances Hesselbein: From this discussion of shared values and trust began a conversation about worker satisfaction. During a time of rapid change, bow people feel about their work and their jobs is critical to the health and survival of the organization.

  Peter Senge: We talked about the difference between a traditional organization and a volunteer organization. We tend to think that, in a traditional organization, people are producing results because management wants results, but the essence of a volunteer organization is people producing results because they want the results. It's puzzling that we find that hard to understand, that if people are really enjoying their work, they'll innovate, they'll take risks, they'll have trust with one another because they really are committed to what they're doing and it's fun. W. Edwards Deming used to talk about the right to joy in work. Americans thought this sounded very naive and romantic. It's always puzzled me why people think that's so strange.

  W e are not doing the things needed to preserve the trust in organizations. Trust basically means some predictability. The things you are fundamentally committed to remain the same.

  Peter Drucker: No, it's anything but romantic; it's pure realism. But one reason for our attitude is clearly the legacy of "work is a curse." It is amazing how quickly people go down in retirement; most of them deteriorate. Work is one of the two dimensions of the human being. The other one is love and family.

  I work with not-for-profit communities, and my business friends and clients don't believe me when I tell them that I have learned from the nonprofit more to be applied to business than the other way around. To be sure, nonprofits have to learn to read a balance sheet, but that's fairly easy. But the thing that nonprofits can do is attract and mobilize and hold volunteers, which businesses will have to learn in respect to knowledge workers.

  So many businesses try to duck the problem of managing the knowledge worker by bribing him with stock bonuses and options. We know from experience that it works in good times, but only in good times, but then it boomerangs, terribly.

  We'll have to learn the enjoyment of individuality. We talk a lot about diversity today, but by this we mean something that is not individual at all, that is a group trait.

  I see organizations that have an aesthetic quality, in which you enjoy-not just respectenjoy and actually encourage and take pride in the uniqueness of the individual, as part of the Lord's creation. Not in any religious sense, but in the sense of what Jim contributes is not only his unique knowledge of patent law but his ability to understand what those research people are trying to dothat insight into them. And Jo, who doesn't see human beings at all, contributes a nose for something that could be something if you just raised it a little. That enjoyment of the uniqueness of the individual is aesthetic but it's also spiritual.

  Peter Senge: Peter, as I think about all the things we've talked about today, it would be pretty easy for someone to feel a bit overwhelmed in the present situation because there's not only so much changing, there's so much changing at different levels. We're trying to describe something that's very emergent, very formative. I think we both share the sense that we're at the beginning of something, not the end.

  T he thing that nonprofits can do is attract and mobilize and hold volunteers, which businesses will have to learn in respect to knowledge workers.

  Peter Drucker: I think you're absolutely right. And I think this is what you are talking about: that people are secure if they realize that this time of sudden, unexpected, and radical changes is a time of opportunity. So, I'm very hopeful. No, hopeful is the wrong word; I'm very excited about it.

  Frances Hesselbein: This winds up a far-ranging discussion about change. Peter Drucker has always counseled us to ask, "What will I do differently on Monday morning after watching this tape2" To help us to determine how we will move from wisdom to action, let's review the central ideas in the Peter Drucker and Peter Senge conversation. They explored these points:

  • The discipline of planned abandonment: the need to shed those programs or investments that no longer will grow so that we can devote our energies to new opportunities

  • The need to focus attention on and invest resources in opportunities rather than problems

  • The importance of preserving the values of the institution, so as to create the trust necessary for people undergoing massive change

  • The need for organizations to learn how to recruit and retain knowledge w
orkers

  Perhaps most important, the two agree that the twenty-first century promises to be a time of massive change, a time when our organizations can exploit opportunities and move with new conviction toward higher performance. Indeed, with the focus on opportunity, and a willingness to welcome the unexpected success, each of us can become a leader of change.

  SUGGESTED READINGS

  Drucker, P. F. (1985). Innovation and Entrepreneurship. New York: HarperCollins.

  Drucker, P. F (1998). The Drucker Foundation Self-Assessment Tool. San Francisco: Jossey-Bass.

  Drucker, P. F. (1999). Management Challenges for the Twenty-First Century. New York: HarperCollins.

  Hesselbein, F., & Cohen, P., eds. (1999). Leader to Leader: Enduring Insights from the Drucker Foundation's Award-Winning Journal. San Francisco: Jossey-Bass.

  Hesselbein, F., Goldsmith, M., & Beckhard, R., eds. (1996). The Leader of the Future (Drucker Foundation Future Series). San Francisco: Jossey-Bass.

  Hesselbein, F., Goldsmith, M., & Beckhard, R., eds. (1997). The Organization of the Future (Drucker Foundation Future Series). San Francisco: Jossey-Bass.

  Hesselbein, F., Goldsmith, M., Beckhard, R., & Schubert, R., eds. (1998). The Community of the Future (Drucker Foundation Future Series). San Francisco: Jossey-Bass.

  Hesselbein, F., Goldsmith, M., & Somerville, I., eds. (1999). Leading Beyond the Walls. San Francisco: Jossey-Bass.

  The Peter F. Drucker Foundation for Nonprofit Management. (1998). Excellence in Nonprofit Leadership (Videotape, Workbook, and Facilitator's Guide). San Francisco: Jossey-Bass.