Peter Drucker's Way to the Top

by William Cohen

  Most countries have laws against bribery. Yet it is a fact that bribery, as we define it, is frequently routine and expected in some countries. Many would perceive that the promise, or at least the understanding, of the Japanese CEO mentioned in Drucker’s first example is that the act of his rewarding government officials who had helped his company while they were in office was a form of bribery. But managers and government officials in Japan understand the difference, and that the CEO in the case mentioned just wanted to do what was considered an ethical duty. Other countries that expect ‘baksheesh’ as the traditional way of doing business frequently ignore any laws that may have been enacted as ‘window-dressing’ for countries that do not have this as part of their culture, such as the US. One marketing executive from a major Western country (not the US), told me once that the company routinely paid bribes to secure business in many situations and that, in one case, they had to pay twice when the official they paid the first time had been deposed. The alternative was that a competitor from another country got the business. They considered paying bribes a cost of doing business.

  Drucker also noted that a private citizen who was extorted to pay a bribe to a criminal, say for ‘protection’, would be considered a helpless victim of intimidation. Certainly, extortion privately or corporately is never desirable. But he felt that this was not an ethical issue on the part of the individual forced to pay. Of course, the law is the law and we would be well-advised to follow it whether we agree or not. Drucker did, despite his occasional disagreement such as that there is no such thing as business ethics, in which actions were acceptable that would not be ethical in private life.

  Drucker did not think that a corporation should be viewed differently, and he strongly objected to this ‘new business ethics’, which asserted that acts that are not immoral or illegal if done by private citizens became immoral or illegal if done in the context of a business organization. They might be stupid, they might be illegal, and they might be the wrong things to do; however, corporations forced to pay bribes were not violating ‘business ethics’. He predicted that that law was a feelgood law that would not be rigorously enforced. It was an attempt to punish the victim for something demanded by the perpetrator and in some cases in which the perpetrator was acting in accordance with what was considered ethical in that country. Although this was not the case with All Nippon Airlines, other practices in Japan may be ethical, such as showing understanding and appreciation for lowly paid government employees after their retirement.

  I looked at the result of this law to see if it was effective in reducing bribery. Scholars have found that the act discourages US firms from investing in foreign markets. There have been other amendments to allow for other criticisms and to loosen the law. The amendments provided certain defences against finding violations of the act. For example, when is the bribe considered a gift and is therefore acceptable? The law now reads when the gift is lawful under the laws of the foreign country and that the gift is a bona fide and reasonable expenditure or for the performance or execution of a contract with the foreign government.12

  Of course, Drucker had no sympathy for business executives who misled, deceived, or cheated customers, stockholders, the government or employees. He didn’t think they had bad business ethics, however. He just didn’t think that they had any ethics at all.

  WHAT EXACTLY DID DRUCKER BELIEVE?

  Ethics is a code of values which might differ in different societies and cultures “on the other side of the Pyrenees”. According to Drucker, a differing codes should be respected so long as they did not violate one’s own code of ethics or morality in the course of its practice. So, a Japanese executive might reward a government employee in thanks for something his company received after the government employee’s retirement in Japan, but not for his company’s operations in another country. However, if the other country’s customs, practices, or laws were so abhorrent to his own ethics, he could not do business there or would suffer a lack of integrity.

  Integrity speaks to adherence to this code of values. One must practise it with consistency. That is, there can be no situational ethics, no codification for special purposes, and therefore no special business ethics or situational ethics.

  If ever business ethics were to be codified, Drucker thought they ought to be based on Confucian ethics, focusing on the right behaviour rather than misbehaviour or wrongdoing.

  Drucker felt that managers should incorporate the following when they practise their personal philosophy of ethics:

  • The ethics of personal responsibility from the physician Hippocrates: primum non nocere, which translates from the Latin to, “above all (or first) do no harm”.13,14

  • The mirror test: what kind of person do I want to see when I look into the mirror every morning?15

  1. Cohen, William A. A Class with Drucker (New York: AMACOM, 2008).

  2. Drucker, Peter F. Management: Tasks, Responsibilities, Practices (New York: Harper & Row, 1973), 367.

  3. Drucker, Peter F. The Changing World of the Executive (New York: Truman Talley Books, 1982), 245

  4. Ibid.

  5. Drucker, Peter F. and Joseph A. Maciariello. The Daily Drucker (New York: Harper Collins, 2004), 126.

  6. Ibid.

  7. Ibid., 86

  77. Drucker, Peter F. The Changing World of the Executive (New York: Time Books, 1982) p, 256.

  8. Ibid. 248-254.

  9. “Lockheed Bribery Scandals”. Wikipedia, https://bit.ly/1O9rLSc, accessed 26 August 2017.

  10. Galbraith, Kate. “A. Carl Kotchian, Lockheed Executive, Dies at 94”. The New York Times, 22 December 2008. https://nyti.ms/2LQviKv; and Robert Lindsay, “Kotchian Calls Himself a Scapegoat”. New York Times, 3 July 1977. https://bit.ly/2AFr96U.

  11. Drucker, The Changing World of the Executive, 242.

  12. Seitzinger, Michael V. “Summary.” Foreign Corrupt Practices Act (FCPA): Congressional Interest and Executive Enforcement, In Brief. 15 March 2016. https://bit.ly/2LWMY6l. Accessed 28 August 2017.

  13. Drucker, The Changing World of the Executive, 366-375.

  14. Although Drucker, and others, declare primum non nocere to be part of the Hippocratic Oath, this is not true. See “Primum non nocere”. Wikipedia, https://bit.ly/1F3eczW, accessed 2 March 2018

  15. Drucker, Peter F. Management Challenges for the 21st Century (New York: Harper Business, 1999), 175-176

  CHAPTER 6

  WHAT YOU NEED TO KNOW ABOUT KNOWING YOUR STUFF

  It takes far more energy and work to improve from incompetence to mediocrity than it takes to improve from first-rate performance to excellence.

  – Peter F. Drucker

  It seems basic, but Drucker thought far too many managers spent more time on office politics than they did on knowing what they were supposed to know. I don’t think that he intended that managers needed to be like the television character Doc Martin, who got ahead based on sheer ability, ignoring completely how he treated or interacted with his patients, or bedside manner.

  Of course, one can go too far in the other direction. David Hack-worth started his career as a private and was commissioned in combat from the ranks during the Korean War. He wrote several books on his military experiences and was especially known for his outspoken opinions about how the Army should operate. He maintained that an effective combat officer shouldn’t put on the airs of ‘a perfumed prince’. This was an opinion shared by many and probably would have been approved by Drucker. Hackworth also thought that the stresses of combat needed a controlled release and believed that the Army should sponsor a legal brothel for combat soldiers for this purpose, ignoring individual religious or moralistic beliefs, to fulfil what he perceived to be his soldiers’ needs, while lessening the danger of disease. Would Drucker have agreed? This is such a major moral issue that could lead to such huge abuses that I think Drucker would have believed that the resulting problems and controversy would have outweighed any advantages of such a solution.

&nb
sp; Drucker thought that extremes of any kind were bad. The real behaviour which top individuals of any profession should practise is that they know and understand what they are doing. General Groves built the Pentagon, an office building with 17 miles of corridors, and then the atomic bomb during World War II, without office politics, or being a ‘perfumed prince’, or establishing brothels. Although he had no experience in leading either project when he got the assignment, he took the time and made the effort to learn what was required to succeed. Experienced or not, he learned and knew his stuff without going to extremes and though most subordinates in the latter case were PhDs in physics, while he held no graduate degrees, he mastered enough to isolate the isotopes and not only complete the project successfully and develop the weapon but to participate in target selection.

  THERE IS NO SUBSTITUTE FOR VICTORY OR FOR SUCCESS

  During World War II, the US Army conducted a study to find out what soldiers thought about their leaders. It was the first time any army had ever done this to such an extent, with several million subjects surveyed. The best and the brightest did this research, including professors from Harvard, Princeton, and the University of Chicago. They asked: “What are the most crucial factors associated with good leadership?” The most frequent answer these researchers received was: “That the leader knows his stuff.”1

  Why is it important that a general knows his stuff? Because without knowing, he can’t be successful. Moreover, this injunction worked for those in other professions too. It will attract others to you. Everybody wants to be in an organization that is successful and is winning. Perhaps General of the Army Douglas MacArthur said it best: “There is no substitute for victory.”

  During World War II, someone on the other side, a German combat leader, said something similar. In 1943, Captain Wolfgang Luth spoke to a graduating class of naval cadets. Captain Luth was one of the most successful submarine commanders in the German Navy.

  During World War II, 39,000 officers and men served in Germany’s U-boat force. Only 7,000 survived. If you saw the award-winning movie Das Boot, you know under what difficult conditions these men, and our own, lived and fought. Just surviving a U-boat patrol was a severe challenge for any submarine crew. Yet, beyond mere survival, during three years of war Luth led 12 patrols and sank close to 250,000 gross tons of allied shipping. He was 600 days at sea in his submarine during which he set a record for 203 days at sea on one patrol. Not surprisingly, this amazing submarine captain held Germany’s highest decorations for valour.

  Luth’s topic for these future naval officers at this graduating class was leadership on a U-boat. Captain Luth covered many areas in his lecture: the dos and don’ts, the life of the submariner, discipline. At times, he indicated that the captain’s actions were matters of judgement – that another commander might have acted differently and still been successful. On one aspect of leadership, however, he said there was only one right answer.

  “Crews will always prefer the successful commander, even though he may be a fathead, to the one who is consideration itself, but sinks no ships,” he stated.2 Like the conclusion from the US Army study, Captain Luth found a single characteristic that any leader of any organization must have. A leader has to know his stuff. This and not being a perfumed prince, or any form of posturing, or office politics can lead to success. Only knowing one’s stuff. There is no other way.

  British Field Marshall Montgomery, one of the leading English generals during World War II, and the man who defeated the famous German General Erwin Rommel in North Africa and won for himself the title of “Montgomery of Alamein”, says the same. “The morale of the soldier is the greatest single factor in war and the best way to achieve a high morale in war-time is by success in battle. The good general is the one who wins his battles with the fewest possible casualties; but morale will remain high even after considerable casualties, provided the battle has been won and the men know it was not wastefully conducted.”3

  KNOWING YOUR STUFF IS AS IMPORTANT IN BUSINESS AS IN BATTLE

  You’d think that knowing your stuff would be obvious in either military or civilian life. Yet, unfortunately some don’t ‘know their stuff’ to the extent that they should, and don’t seem to care. Drucker recognized this. It is true because their emphasis is less on becoming an expert, learning their trade, than on getting ahead. This leads to a focus on office politics and other aspects of the management scene rather than office expertise. It is equally true that several management books fall into this same trap in advising their readers. They fail to emphasize that a leader becomes the real leader of his organization when everyone in the organization recognizes that the leader knows what to do, not because the leader knew how to be promoted to the job.

  Few follow leaders because they are good at office politics. They follow leaders because they are good at what they do. There is no substitute for a leader investing his or her time into becoming an expert. As an article in Fortune proclaimed: “Forget about fighting over titles and turf – it’s what you know (and how you use it) that really counts.”4

  In 1994, Gordon M. Bethune took over as CEO of an ailing Continental Airlines that had twice filed for bankruptcy. In a little over a year, he built a $650 million cash reserve, and took Continental’s position from last place on-time take-off performance to number two of all airlines. That’s an important part of customer satisfaction. When he was younger Bethune had attended night school to graduate from high school. Bethune knew his stuff and how to use what he knew. He attended five colleges and finally got his bachelor’s degree from Abilene Christian University. Starting out as a mechanic in the Navy, by the time he became CEO of Continental, he was both a licensed pilot and a mechanic. In fact, he was licensed to fly multi-engine jet planes. Few airline presidents, if any, could say that. He sometimes took delivery of the company’s jet aircraft from Seattle and flew them to Houston where Continental was headquartered. No other airline president was able to do this. Continental needed such a leader. When Bethune took over as President of Continental Airlines the troubled airline was headed towards bankruptcy for the third time.

  Bethune knew something that his predecessors had missed, and that Drucker knew well. It’s not what the supplier believes is the most important value, but the customer’s belief. Cost per available seat mile is an important metric for profit in the airline industry, but if the customer isn’t satisfied with the product or service, this metric is almost irrelevant.

  Bethune was elected chairman of the board of directors only two years after his hiring. Continental went from being ranked last in every measurable performance category to winning more awards for customer satisfaction than any other airline in the world. Business Week magazine named Bethune as one of the top 25 global managers. Under his leadership Continental’s stock price rose more than 2,000%. Other accolades: Fortune magazine named Continental among the 100 Best Companies to Work for in America for six consecutive years and Most Admired Global Airline five times.5

  THE FOUR ASPECTS OF KNOWING YOUR STUFF

  Drucker knew that there were four main aspects to knowing your stuff. These are:

  1. Know your people

  2. Become an expert at what you do

  3. Learn from every experience, whether successful or a failure

  4. Never stop learning.

  KNOWING YOUR PEOPLE MEANS KNOWING THEM AS INDIVIDUALS

  Regardless of your job, you have an awful lot to learn about your people. Moreover, there are a lot of people to know. They include those who may report to you, those at your level and in other organizations who you work with (including in other companies), those higher up in the organization including your boss, and of course, your customers. Whew! That’s quite a job. Furthermore, each is different and has a unique way of doing things. This fact constitutes one of the most fascinating, yet challenging aspects of knowing stuff about them.

  Every single person thinks differently and may be motivated by different stimuli. Psychologist Car
l Jung found that, faced with exactly the same situation, each of us have different preferred ways of acting, decision-making, or getting a job done.

  Isabel Myers and her mother, Katherine C. Briggs, organized Jung’s theoretical work about how different types of people like to work into a conceptual framework and a psychometric questionnaire called the Myers-Briggs Type Indicator. Based on a preference for alternatives in decision-making and the answers to a battery of questions, individuals are classified into one of 16 different personality types. Amazingly, these 16 personality types determine much about how each individual lives, loves, and prefers to work.

  The Myers-Briggs Type Indicator or MBTI has become one of the world’s most used research survey tools, everything from job preference to finding a mate. However, the MBTI is not a success indicator.

  There are successful people in every single one of the 16 categories. The main lesson to be learned from MBTI is that we are all human beings. We have had different experiences in life and have different beliefs and values. To influence, work with, lead, and do anything else with people you need to know and understand these differences.6 Drucker maintained that one of the first things you have to learn about a new boss is whether he or she is a listener and prefers to hear things from you, or a reader and prefers to get information in a report. According to Drucker, get it wrong and you’ll probably fail no matter what you know. If you are wondering how you find out, according to Drucker this is easy, you ask.