Consulting Drucker

by William Cohen

  This last statement struck a responsive chord with me. Many times I had seen Drucker respond to a question from a student or one he himself had proposed and then proceed into an hour-long lecture with many twists and turns, which seemed at best to be only tangentially important to the initial question posed. However, after an hour monologue, he would suddenly tie it all together and come up with an amazing and frequently unexpected solution to whatever issue had been raised. Only if you went back and reviewed your notes of his ad hoc lecture could you understand how it all fit together, and I could well imagine him conducting his consulting in this fashion.

  It was also speculated that this process enabled Drucker himself to integrate everything that came into his own reasoning. And in this way he was able to return to the initial problem in such a way as to give to the client an entirely different slant on the issue.

  This method could be surprisingly effective. Dudley Hafner, former president of the American Heart Association, told Beatty that Drucker caused the association to reorganize their entire field operation and redefine themselves as an information organization.7

  The Brain Is for Thinking – Use It!

  Although Drucker was well aware of the use of many innovative methodologies developed over the years for analysing business situations and determining strategies, he made almost no use of them, emphasizing instead thinking through every situation on its own merits. He never taught “portfolio analysis” with the famous quadrants of cash cows, shooting stars, problem children, or dogs, as developed by the Boston Consulting Group (BCG) or the GE/ McKinsey nine-cell version, or any other management or business strategy by rote methods. He was one of the first to point out that the main inputs in the BCG matrix would encourage organizations to grow by acquisition without the needed attention to whether or not the acquiring corporation added valued in managing the assets of the acquired business. At the same time, many corporations were growing and were extremely profitable by concentrating their resources on products or businesses where they could grow in profit even while their size remained stable. Eventually, many of the huge, growing conglomerates based on acquisition failed, and Drucker was proven correct. Not that Drucker opposed acquisition or bigness per se. He was all for acquisition if the acquiring organization had something to offer the acquired, and also if other owned businesses were dropped so that resources would be available to make the new acquisition viable.

  Drucker’s Caution in Applying “Breakthrough” Ideas

  Drucker was well aware of new ideas promoted as breakthroughs, but he was extremely cautious in applying them across the board and without much thought; that is, without thinking through each situation individually.

  Although his association with and learning of management methods in Japan were much appreciated, and his clients in Japan were quick to adopt Drucker’s methods as well, he did not instantly jump on the bandwagon of “Japanese Management”. When it caught on in the US in the early 1980s, it eventually evolved into the Total Quality Management revolution, which spread across the world like wildfire. It’s worth noting that the basic aspects of this style of management – such as ownership and decentralization, and especially leadership – had long been promoted by Drucker already. However, he was highly suspicious of all methods of “management by fad” and found that they were frequently misinterpreted from what the developer had intended.

  Organizations joined the participatory management fad based on Douglas McGregor’s research and his concept of Theory X verses Theory Y, that is, directive versus participatory management. Drucker pointed out that McGregor was merely noting that Theory Y – management with significant participation of the managed – was simply an alternative to the more directive style practised almost exclusively up to that time. He underlined what most adopters missed: that McGregor himself had written that his intent was to describe an alternative management style that could achieve better results under certain circumstances. Drucker suggested that research should be done to uncover exactly what these circumstances were, that participatory management was not the universal answer in all situations, and that the directive form of management should be abandoned in all instances.

  Even Drucker’s friend and strong supporter, Warren Bennis, a distinguished management expert in his own right, failed to heed Drucker’s cautionary advice not to adopt Theory Y’s participatory management as the answer for all management problems in all organizations. Bennis, at the time president of the University of Buffalo, embraced and adopted almost complete participatory management in a totally unsuitable environment. According to Drucker, “the result was tremendous excitement, but also a total failure.”8 This was one of Bennis’ few major mistakes, either as manager or as leader theorist. It probably had one major benefit: it encouraged Bennis to eventually return to his career as a leadership theorist, author, and teacher. He wrote many books and before he died he won many honours in this area and founded the Leadership Institute at the University of Southern California. About his experience in misapplying Theory Y he wrote: “In the end, I wasn’t very good at being a president.”9

  Drucker’s Emphasis on Feelings over Numbers in Decision Making

  Drucker insisted on measuring just about everything, but the results were to be considered informational only. He avoided decision making by numbers, whereby the decision was made for the manager by merely inputting certain data considered crucial to a software program, turning on a computer, and having the answer magically appear. He pointed out that one could gather data on thousands of businesses, including primary factors, even the weather and some elements thought to be relatively insignificant, and finally the results attained. You could then design the software based on your extensive data. You might claim that by inputting your own situational data, you might be able to predict the project results with some high per cent of accuracy, say 92.5%. That’s significant, but may be of little help in a particular situation.

  Drucker maintained that this was still inferior to using your brain, thinking through everything and making your own “gut” decision based on available information, your experience, and knowledge of the nature of your own personnel and organization. He noted that knowledge or instinct of one vital factor might well be decisive and that the computer would never pick it up. He reminded his students and his clients that though a certain program might give accurate outcome results 92.5% of the time, for the other 7.5% of the time the results were 100% inaccurate. In other words, if failure or success was the outcome you sought to predict, and if the end result was part of that 7.5% area, your answer was 100% in error. He recommended managerial gut decisions after considering all the information that could be obtained. Drucker told his clients to make “gut” decisions, but these gut decisions were to be made with the brain. The brain was a better device than a computer and provides its own internal “software” for decision making.

  As a result, Drucker taught management and performed as a management consultant by doing both while considering management as a liberal art. According to classical antiquity, “liberal art” included those subjects or skills that were considered “worthy of a free person” in order to take an active part in civic life. The core included participating in public debate, defending oneself in court, serving on juries, and maybe even most importantly, military service.10 Although most didn’t know it, Drucker was an avid student of military history and military methods. Drucker incorporated interdisciplinary lessons from language, history, sociology, psychology, philosophy, culture, religion, and more into his consulting. However, he also took the ancient injunction about military service to heart and although he never spoke or taught about so-called “marketing or business warfare”, his consulting advice and writings are filled with military examples. Promoting Frances Hesselbein’s 2004 book, Be Know Do, based on the US Army Leadership Manual, Drucker wrote: “The army trains and develops more leaders than all other institutions put together – and with a lower casualty rate.”11

 
; This is the “Drucker Difference in Consulting”, and we will see how Drucker applied all of this in practice in the coming chapters.

  1 No author listed, Cambridge Dictionaries Online, accessed at http://dictionary.cambridge.org/us/dictionary/american-english/ecologist, 1 March 2015.

  2 No author listed. Merriam-Webster, accessed at http://www.merriam-webster.com/dictionary/social, 2 March 2015.

  3 Ibid, accessed at http://www.merriam-webster.com/dictionary/scientist, 2 March 2015.

  4 No author listed, “Peter Drucker,” Wikipedia, accessed at http://en.wikipedia.org/wiki/Peter_Drucker, 2 March 2015.

  5 Drucker, Peter F., Adventures of a Bystander, (New York: HarperCollins, 1978, 1979, 1991) p. 288.

  6 Beatty, Jack, The World According to Peter Drucker, (New York: Free Press, 1998) p.182.

  7 Ibid.

  8 Drucker, Peter F. Management, Tasks, Responsibilities, Practices (New York: Harper & Row: New York, 1973, 1974). p. 235.

  9 Bennis, Warren, quoted in “Warren Bennis 1925-2014: An Appreciation,” Thinkers 50, accessed at http://www.thinkers50.com/blog/warren-bennis-1925-2014-appreciation/ 1 March 2015.

  10 No author listed. “Liberal Arts Education,” Wikipedia, accessed at http://en.wikipedia.org/wiki/Liberal_arts_education, 2 March 2015.

  11 Hesselbein, Frances and Eric K. Shinseki, Be-Know-Do, (San Francisco: Jossey Bass, 2004), back cover.

  Chapter 3

  What We Can Learn from How Drucker Developed as a Management Consultant

  There is a mistaken notion that those who succeed in many activities are somehow gifted and begin with no preparation, right at the top of their game. This isn’t true for anyone in any activity that I can think of, and as this chapter demonstrates, it wasn’t true for Drucker, either. That’s not to say that we can’t see things that clearly helped and cut down on both Drucker’s preparation time for success and the time it took for him to go from “Good to Great,” to borrow Jim Collins’ terminology from his bestselling book. However, even with the right preparation, we shouldn’t expect instant success that immediately puts us at the top in consulting, or in anything else we undertake. There are inevitable setbacks that we will encounter, just as Drucker did… and we’ll determine how to overcome them just as he did, too.

  Did Drucker Always Plan to Become a Management Consultant?

  I read an article once by an author whom I have long since forgotten. He claimed to have come over to the United States from England on the same boat as Drucker in 1937. He said that he and Drucker talked extensively and that Drucker told him that he intended to build a career and achieve great wealth as a management writer and management consultant and that it was all well planned ahead of time. I doubt it. For one thing, it doesn’t sound like Drucker. He didn’t talk about himself that way and share what he was going to do or what he had done. Moreover, Drucker’s first book, The End of Economic Man, had just been written in 1937, but was as yet unpublished. For all he knew, it might have “bombed”. Books do that from time to time. Some of mine have, and some of Drucker’s did, too. Also, Drucker’s first book had little to do with either business or management. And of course, Drucker had no idea what a management consultant was at that point in his life, anyway. We learned that in chapter one.

  What Drucker did want to do was teach. That’s what he had wanted to do all along. If he had any ideas about writing, it was probably political writing, something along the lines of The End of Economic Man while he pursued a career as a Herr Professor in academia. Still, life had already begun to prepare him for consulting, as it does all of us in different ways. It’s just that we don’t stop to think about this preparation or to organize the consulting resources that we have already acquired or can get if we need them. And that’s one of the reasons for this chapter: so you can recognize what you already have that will be useful in the consulting you do and use these resources to help you to reach success, if that is your desire.

  Drucker’s Early Serendipitous Preparation for Consulting

  Serendipitous preparation for consulting is background we may acquire, but never intended to use for the purpose of consulting or anything else. In other words, we got it by accident.

  The word “serendipity” came to us courtesy of an 18th century English author by the name of Horace Walpole. Walpole had discovered a number of unknown facts about various topics by accident through his writing. He had randomly looked through old books and come across some surprising insights. Achieving some success with this procedure, he adopted it as a formal process of discovery and coined the term “serendipity” to describe it. The word itself came from a fairy tale he had once read using this method entitled, The Three Princesses of Serendip. The princesses made all kinds of discoveries by accident. But “Serendip” wasn’t a nonsense word. It’s the ancient name of Sri Lanka, from whence the princesses in the story emanated.1 Congratulations! You too have now uncovered a relatively unknown fact through serendipity.

  The first step in Drucker’s serendipitous preparation for consulting was his father’s insistence on his young son’s serious participation in adult conversation, including with guests to the Drucker household. Drucker hadn’t even entered adolescence when he was pushed in this direction. According to Drucker, these guests even included men of the calibre of Sigmund Freud. Drucker wrote that his father referred to Freud as “the most important man in Europe” and that he met Freud when he was eight or nine years old.2 Here Drucker’s childhood memories may have been imperfect, but it matters not. If a preteen is introduced to an adult and is even allowed to converse with grownups routinely, that has a later effect in self-confidence, the ability to speak in public, and certainly to converse with a variety of individuals of importance, be it Freud or any other adult. If this were truly Freud that he remembered, this would have made quite an impression on Drucker and his friends as they grew to adulthood.

  Now, lest you think “too late, too late – I knew my parents did something wrong in my upbringing,” and you weren’t fortunate enough to have your father introduce you to Freud or a prominent figure like this at an early age, don’t worry about it. I don’t know about your parents, but mine invariably mumbled something about “children being seen, not heard” and I never dared to interject a comment or question in an adult conversation. I don’t think that I was introduced to someone like Freud or allowed to have serious discourse with any adult until I was well into my teens, or maybe even later. But Drucker did have this serendipitous advantage.

  Drucker Misses a Chance at College, But Gets a Serious Education

  Drucker’s parents wanted him to attend college, but this was post-World War I, and Austria had been on the losing side. With jobs difficult to find in Vienna, he persuaded his parents to allow him to sojourn to Hamburg, Germany, where he succeeded in obtaining an apprenticeship in a cotton trading company. At the same time he enrolled in night school at the University of Hamburg and earned a law degree.

  This was his first experience with what is today termed one method of “executive education”, whereby one gets an advanced degree while working. This was something he later believed was critical for the development of a manager, and which he considered more important than the undergraduate degree, which he felt was more useful for socialization. He also began a regimen of voracious reading, devouring books both fiction and non-fiction on a variety of subjects. This too provided good preparation and general knowledge for his future career as a consultant. It also sparked his interest in history and what could be gleaned from it, which, according to Drucker, could and must be applied to the present and future.

  Once asked what management books Drucker read, his widow, Doris, replied, “None, but he did scan them.” According to Doris, Drucker read mainly the newspapers and a lot of history books. His readers can see the results in his writings in which he documents historical happenings from a variety of fields on every page, not only to support his concepts and conclusions but, one suspects, to help reach them.
He retained his ability to use history to illustrate his points in the classroom, and while not always 100% accurate in his recollections, he was 100% interesting. Toward the end of his apprenticeship, he was able to find at least part-time work as a journalist, probably due as much to his reading as his legal education.

  Completing his apprenticeship, he gained admittance to the University of Frankfurt as a doctoral student and continued his journalistic work at the same time. As his students, we once asked him in the classroom why he chose to get a doctorate in international law, since he told us that he never intended to practise law and had little interest in it. “Because it was the easiest, quickest doctorate I could get,” he replied without hesitation. Drucker never minced words. After earning his doctorate, he began correspondence with an uncle at the University of Cologne in the hope of obtaining a teaching position there. However, before he obtained a positive response, Hitler came to power in Germany in 1933.

  Hitler Causes Drucker to Drop Everything

  Drucker left for England almost immediately. Although Drucker was of Jewish descent on both sides of his family, both families had converted and Peter was raised as a Christian. This was fairly common in Austria since the mid-1850s, after the Jews were emancipated. As Drucker sometimes noted, there were many professional officers in the Austrian Army who were Jews, including some of high rank. In fact, in the 1860s the chief of staff of the Austrian Army, General Alfred von Henikstein, was a baptized Jew.3