What Would Peter Say? by Rosabeth Moss Kanter The continuing relevance of the Drucker perspective. Read the HBR In Brief • Print • Email • Purchase Article • Text Size • Decrease Font Size • Increase Font Size Heeding the wisdom of Peter Drucker might have helped us avoid—and will help us solve—numerous challenges plaguing communities around the world: restoring trust in business in the wake of accounting scandals and the global financial crisis; attracting and motivating the best talent without creating crippling financial commitments; addressing societal problems such as climate change, health care, and public education; dealing with trouble spots in central Asia and the Middle East. If Peter Drucker were here today, what would he have to say about such pressing matters? His first comment might be “I told you so”—and he would have every right to say that. In remarkably prescient writings, he pointed to important trends and looming disasters. He took a broad look at the context surrounding organizations, noting jarring events he called discontinuities. Next, since the signs of difficulties ahead were there all along, he might follow up by telling us, “Look at the underlying systems.” Drucker rarely named or blamed individuals; he saw root causes in the design of organizations—in their structures, processes, norms, and routines. He would remind us that it is the responsibility of executives to challenge that design while being mindful of their companies’ ultimate purpose. Then he might finish by asking leaders a few provocative questions: “What is your mission? What should you stop doing? Where has the drive for short-term efficiencies undermined long-term effectiveness? What should be your objectives and guiding principles?” My credentials for channeling Peter Drucker stem from early in my career—the first time I spoke on a panel with him, more than 25 years ago in Brussels. They extend beyond his death to the Drucker fingerprints I found in my multinational research for my latest book, SuperCorp. Managers everywhere, especially in Asia, described Drucker encounters as pivotal in making their enterprises well run and helping their countries develop. Drucker’s Early Warnings In the process of identifying the tasks of managers, Drucker laid out their responsibilities in guiding organizations to endure in a world of change. Here are some of the critical issues he anticipated. The bonus brouhaha. Drucker would not have been surprised that incentives to take excessive risks contributed to the recent global financial meltdown. Back in the mid-1980s, he warned about a public outcry over executive compensation—a main theme on the U.S. government’s agenda following the fall of banks in 2008. More than 20 years ago, Drucker pointed to a top-to-bottom ratio that was then rushing past 40 to 1. Just before his death, the ratio was greater than 400 to 1. Drucker was not against wealth accumulation, but he was a pragmatic about the work of organizations and society. He held that the role of executives was to coordinate the actions of others whose motivation (and thus compensation) was necessary to get the job done. But he also held that pay should be associated with performance; that was a major point of management by objectives, perhaps his best-known practical management contribution. Listening to Drucker might have headed off some of the excesses associated with Wall Street in general and with AIG in particular, in which bonuses not only were decried for their amounts but also were often uncorrelated with company results. He argued that knowledge workers—a rising proportion of employees—should be motivated by a sense of purpose and not just by money. And he defined performance broadly, to encompass responsibilities to a wide range of stakeholders in addition to shareholders. He stressed that ensuring the long-term health of the company—and eschewing short hits that jeopardize the future—is executives’ primary job. Auto industry woes and creative destruction. Drucker came close to predicting the fall of General Motors, the company he had praised early in its career for its decentralized organizational structure. Years ago, he warned of troubles ahead if GM executives remained stuck in memories of previous successes and failed to ask his famous “what to stop doing” question. GM was an iconic example of failure to see the need for significant innovation; its structure had become ossified, and its top management couldn’t consider a change. Drucker was influenced as a child in Austria by his father’s friend Joseph Schumpeter, the economist whose concept of creative destruction defined generations of entrepreneurs. Innovation and entrepreneurship were central to Drucker’s theories. He distinguished between efficiency, which managers could achieve by doing more of the same with less effort or lower cost, and effectiveness, which involved setting the right goals and transforming organizations as conditions changed. Copyright © 2009 Harvard Business School Publishing Corporation. All rights reserved.