Monday, April 18, 2011

The Practice of Management by PETER F DRUCKER

The book that impressed me the most is "The Practice of Management" by Peter F Drucker. I happenned to buy this book from the book store of the Indian Institute of Science one day and have ever since been reading it every now and then and every time I lay my hands on this book and read a chapter from it the entire matter looks all anew as if I had never read it before. Peter Drucker has written many books on Management and Management theory and I must have gone through all of them except the book "Concepts of a Corporation" a copy of which I could not get inspite of making fervent searches even at the library of IIM Bangalore. Barring this book which I have not seen for myself "Practice of Management" continues to be by my observation the best treatise from Drucker and seems to be driven from first hand experience of a young Drucker. Note that this book was first published in 1954. What makes this book so special ? Even after so many decades and the world having undergone many changes far reaching in nature every other decade this book of Drucker is ever green and increasingly relevant. Azim Premji constantly seeks views from this book when in Managerial dilemma and for good reason every single person of some stature in Business must take time to read and also implement ideas contained there-in. Drucker has written about Management with a high degree of originality and observation and this is not another book on Management and to write views on Management and address Managerial problems with deep conviction puts Drucker on a totally different plateau. His words are prophetic and has lessons for every one and it is very rare that some one like this crops up and breaks the many ceilings and mental blocks that exist and tries honestly to break many a confusion around Managerial approaches and thinking.

Let me see if I can summarise almost instantly some of the tenets in the book that I can readily remember. The focus of Business is to create a customer and the objective is to avoid loss as against maximization of profit;Innovation and marketing are the two key drivers of business; Management is an organ of Business; The concept that Manager is a person in charge of another persons work is too narrow a definition and Manager integrates people into purposeful performance. Management by Objectives tells a Manager what he should be doing but it is the " spirit of the organization" that draws right work out of a person and it is the spirit that drives and makes a man perform beyond the call of duty; Economic performance is the most important yard-stick of managerial performance and non-performing manager who consistently underperforms must be removed from the present task; Any person who has provided faithful service to an organization for a considerable period of time must not be un-cermoniously removed but given another task;Life and death decisions within an organization must be reviewed at multiple levels; jobs differ from each other by the level of judgement needed; professional employee is a person who wants to become an expert in some feild or calling and must be managed differemtly and should not be directed or controlled; The chief executive's job is too complex to be performed by a single individual and it possibly needs a team working at the top each of whom who have identical powers; character as against intelligence is the most important aspect of a manager and if he lacks in integrity he ruins people and performance; and in family run companies there must be an iron clad rule not to appoint family members to key jobs of responsibility without proper testing because it is a vicious practice.

True Drucker was talking of an era where there were large-scale organizations so to speak and the world was not globalized as it is today; Many of the issues outlined by him are relevant but business organizations of modern times have morphed itself into a totally different format and conventional manufacturing through use of technologies and its growth and market pressures will be much localised and characterized by fewer people than before. Manufacturing will move into hubs where markets readily exist and will move away from there if markets were to shift is the emerging order of the day; Also if I can legally buy and assemble products manufacturing from scratch would be bygone. Such changes are defanitely emerging and what we see is only the beginning of that churn. Contrast this with centralized manufacturing of yester years where large scale manufacturng existed at one place and products shipped to markets.

The greatness of Drucker lies in his uncanny ability to put on paper what he thought is right and also to diagonize ills of Managerial practices and any one who willfully ignores them on having gone through them is either a mis fit to management or shoud be banned from business and its constituents in some form ; Drucker to me has rightly dissected the ills and perils of a business fundamentally as a intramural and an extramural social organization. This is of paramount importance and significance contrasting it with the more banal approach of business of creating or induction of profit. Any organization that consistently sways itself away from his observations which are by and large wholesome is destines to some form of doom. Nevertheless business and its components of changed like the (growth of Human Resources Development today) and we have in a crucible various success and failure stories and their repercussions to learn from.

I assume upon myself the temerity for a while to possibly make some some kind of re-understanding of what Drucker has written in relation to modern concept and would like to start from what Drucker calls the " Spirit of an Organization". Here Drucker is very special because he had the conviction to coin a phrase which has both profundity and scope. I would say that in modern times the "Spirit of an Organization" must become " The conciousness of an Organization". Conciousness transcends spirit and encapsulates the entire organization and can be collectively created and can result in some measure in the conversion of the wrong spirited to the right spirited. It is the conciousness of the organization that drives people in the right direction and has the innate ability to make the ordinary do the extraordinary and the extraordinary not only help the ordinary but also deal rightly with him. It is the conciousness that creates collective spirit; It is through conciousness that organization become long-lasting ; It is the conciousness that is long pervading and improves the character of organizations; It is conciousness that creates an Organizational Brand and it is conciousness that improves Productivity and the absence of which makes work a daily monotony and labour continues to be fruitless to the psyche and labor continues to be labor with no organizational and integrated vision. Any organization lacking in it will find survival and operating in the market difficult and routine and without neads renewal and transformation.

Consciousness of an organization must be all pervading and strategic force that effortlessly produces organizational performance; Consciousness must integrate people ; Consciousness must create a moral force where the people of the organization experience intrinsic leadership; consciousness must exhort the collective within the organization to perform and willingly so beyond the call of duty; consciousness must create a sense of respect among the people within the organization and a sense of team work. Consciousness must be futuristic and enjoin the human force of the organization to see and create a renewed and progressive future. It is through the right consciousness that organizations exist; thrive and re-invent itself from time to time. It is the right consciousness that prevents people from acting in bad faith with one another or towards the organization and makes people work for an organization with involvement with optimum pay; It is consciousness that removes short-term and long-term fears and it is consciousness that creates intrinsic leadership and an environment where leaders begin their initiation creation and credibility.

Having written so much about the "Consciousness of an Organization" as against its spirit let me go to what Drucker has written as the two most important aspects of an organization which also Drucker calls drivers; They are namely Marketing and Innovation. Marketing somewhere according to Drucker is the creation of a customer and making products for his needs. Here again Drucker has the ability to crystallize some fundamentals of Business. This is what the Japanese probably did ....... constant innovation. We are in an era where Marketing is incidental and Innovation a constant activity and the question is in what way they contribute to the bottomline. Her I feel the need to add Operations. If I have the wherewithal by any sort to possibly reframe what Drucker wrote I would defanitely say that Operations and Marketing in that order are drivers of modern organizations in the internet era and innovation runs through both of them and this is what is possibly what the modern man calls "Supply Chain Management"; By running Operations especially well organizations can look forward to many kinds of advantages and premium in the modern world. Just for a moment why i the original approach of Drucker needs to be reframed- the answer to that is simple- In the modern day Internet does the speaking what Marketing used to do before. This has created a quantum leap in the need for faster operations and difficulty faced in Operations. Innovation becomes essential on both these fronts in an aggressive manner if at all corporations have to keep pace with their growth and demands. What a pronounced and large scale deviation from the world of the yester years.

Drucker has rightly pointed out somewhere where he calls "fallacy of the one man chief executive" and rightly said that the chief executive's job is too complex for one man to handle and he like any other individual has only 24 hours in a day. Here he proposes the concept of many people or few people working in tandem and taking over the complex role of a chief executive. This has been tried by some corporations with limited success with some of them reverting to the old mode. The concept of joint ceo's seem to be apt for the family run organization and may work well and could be a less propitious one for any other kind of organization until or unless the very system in which the organization runs is fine tuned from the grass-root level for a joint CEO kind of disposition. This is not some thing any corporation can instill overnight and see results at the same time. What is the problem with the single man ceo of today? The problem can be seen in the way his job is seen and the manner in which he is selected. The fundamental question that any organization has to answer is that - Is the CEO's job a staff position or a line position. In the staff function he works more like a administrator and Manager and if it is a line function he works like any line manager who burn extra energy to get things done, The tragedy and paradox of modern society is that it ruins well performing line managers who were otherwise very successful and comfortable in their earlier roles by making them one day the CEO to the detriment of all stake holders only to be may-be tolerated and removed there upon. Modern society understands work and getting results but does not understand management and its role , behavior and dynamics leading to Organizational crisis.

What then is the solution ? Dividing the job among a few people does not seem viable but defanitely the solution some where is how the ceo is selected and if an ongoing mechanism exists in building the managerial and administrative machinery of the future. For one some where the job of a ceo is not to be treated as a line function and on the contrary must be a totally staff function and his job largely delegated to tested people down the line who work as a combination of line and staff managers. If at all an organizational hierarchy exists an organization will morph as we come down the hierarchy from a total staff role to a totally line role and the worker handling a specific work on the shop floor has a line job meaning that he complete the results he is supposed to within the time frame. As we come down from a ceo to the ordinary worker work becomes increasingly less logically complex and more time bound.

The tragedy if you may call with modern day CEO is his view of his job and its execution as a line function and such a person is selected to the job simply because he has built a good track record as a so called performer only suddenly realizing on the ceo function that he is limited in skills and schema to handle the ceo function.

Another key contribution of concepts of Drucker to managerial thinking is the concept of "MBO" which drucker calls "Management by Objectives"; The many decades of the past were spent by business in a largescale mis-understanding and mis-application of this concept to the peril of many. Many people were removed from organizations as a result- some decisions might have been correct but many vastly erroneous. Management somewhere is a combination of multiple factors that have to be effectively synchronized. Was MBO wrong? May not be , but its improper application is. I have myself seen the improper application of MBO in the field of selling where a large city is demarkated into territories and sales men given exorbitant targets with improper tools and analysis only to be removed later for the non-accomplishment of the goals only to lose the man who then goes into another organization where-in he is found to make a better or improved contribution in some new role or dimension. I have seen people who achieve targets using malicious methods and there are very many who adopt such tactics; May be these practices are not totally taboo to business. But still there is something grossly erroneous which needs correction in some kind or form. I have only one significant question to ask Business? How long do you want to be in Business? Many strategies emanate from an answer to this question which must be largely unequivocal. If you want to last a generation then MBO may not be the right choice. What then is the right choice ? A basic unwavering respect for people and the ability to put people on tasks and periodic assignments where-from they can make profound contributions to an organization. Such an approach creates the kind of stability needed for right kind of progress and market dominance. MBO which was apt in the 50's where industry was fledgling and a positive concept has today become negative which needs review and appraisal. Should we do away with targets ? Do away with excessive targets or improper targets and have an fairly reasonable way arrive at a target to be achieved. Excessive targets can be damaging even for the most proficient and MBO was not designed to set a route towards a wrong practice.

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