by Rick Wartzman “It is my job to ask questions,” Peter Drucker liked to tell his consulting clients who, of course, were always looking for answers instead.
And so I thought it fitting to begin drawing this 3rd Global Peter Drucker Forum to a close with a question that has been gnawing at me ever since the conference agenda began taking shape some months ago:
Why are so many of the clearly worthwhile aims that we’ve talked about over the past two days—balancing (or, better yet, integrating) profit and social responsibility; fostering a workforce that is deeply fulfilled, fully engaged and highly productive; teaching the next generation of managers not only how to do well, but also how to do good—so incredibly difficult to achieve?
Lord knows, we’ve been talking about these things for long enough now.
There are, for instance, echoes of Mark Kramer’s call for “creating shared value” in Drucker’s own landmark book, The Practice of Management (and, later, in some of Drucker’s other works, as well).
Like Kramer and his co-author, Michael Porter, Drucker believed strongly that companies must look for ways to contribute to the larger community while tackling key business objectives. “It is management’s . . . responsibility to make whatever is genuinely in the public good become the enterprise's own self-interest,” he advised.
But that was in 1954. More than half a century ago.
Why is this vision taking so long to realize more fully?
K.H. Moon, the former CEO of Yuhan-Kimberly, gave a wonderful presentation yesterday on how the consumer products company not only became so successful financially, but also established itself as an important pillar in the Korean community and put itself in a position to be an environmental champion.
Among the keys for Yuhan-Kimberly (many of them, by the way, based on Moon having consciously applied Drucker’s 40- and 50-year-old wisdom): being truly people centered, establishing trust up and down the supply chain, promoting 360-degree innovation, and turning the organization into a hothouse of lifelong learning.
But, again, Yuhan-Kimberly’s phenomenal success begs the question: Why is this company the exception in Korea (and, for that matter, around the world)? Why don’t more businesses—indeed, why don’t most businesses—behave this way all the time?
As for reforming management education, the challenges we’re grappling with aren’t new, either. It wasn’t long after World War II, in fact, that business schools began to focus more and more on quantitative methods and the teaching of management as a science, absent the human dimension that had once stood at the center of the academy’s approach.
By the late 1970s, as Rakesh Khurana so eloquently told us, our places of higher learning had reached a new low, abandoning the concept of professionalism that, to quote from Rakeash’s work, “had always rested on combining mastery of specific knowledge with adherence to certain formal or informal codes of conduct and, even more fundamental, to an ideal of service.”
It’s no wonder that Drucker came to liken some of our most elite MBA programs to “Fagin’s School of Pickpockets and Prostitutes.”
Now, more than six decades into a problem that has only gotten worse, the question remains: Why do we think that things are suddenly going to change?
Why is it so hard to build institutions that are, well, a little more Drucker-like?
There are, as we know, no simple answers to any of this. But I do have a few observations—and, ultimately, what I hope will serve as something of a call to action for each of us.
For starters, when it comes to what the Forum dubbed “the internal side of value creation,” many have long struggled with the basics—in particular, getting the most out of our people—because, let’s face it, it’s just not easy to maximize joint performance in any organization, especially at a time of great turbulence and rapid change.
Drucker was only half-joking when he said that “most of what we call management consists of making it difficult for people to get their work done.”
That this is all so tough isn’t surprising, really. We’ve heard over the last couple of days about the wonders of Moore’s Law and microprocessors and rocket ships. But reaching such great technological feats is easy compared with figuring out how human beings are wired.
Managers, being human (well, most of them, anyway), are inherently flawed creatures. So, too, are those who report to them. We will always be up against this sobering reality—at least, as Drucker might say, as long as we’re on this side of the Pearly Gates.
As many of our Forum speakers articulated, we see these human flaws exposed, most plainly at times, in our relentless pursuit of profit. But this, too, is not a recent phenomenon.
In the 1950s, General Electric—greatly influenced by the hand of Peter Drucker—told its employees that it would begin to measure eight results areas—all of them of equal importance. Along with profitability, productivity, market position and product leadership, GE’s then-CEO Ralph Cordiner added to the list personnel development, employee attitudes, public responsibility and balancing short-range and long-range goals.
More than five years after these eight goals were announced, Donald Webb, one of the GE managers responsible for their implementation, wrote a note to his files. This is what it said:
“The general feeling is that [the eight results areas] is all good theory, but when the chips are down and the bosses are actually making a determination affecting their compensation or survival, there will be only one measurement that counts and it will be the figure at the bottom of their profit-and-loss statement.”
That was written in 1957.
Since then, as we’ve been reminded often over the past two days, the pressure to pursue profit above all has grown steadily more immense.
Our culture has come to view the marketplace as sacrosanct, perverting the teachings of Adam Smith, as Charles Handy made clear. “Shareholder value” continues to trump a broader “stakeholder” approach at most corporations. What Drucker called the "symbol economy," where businessmen play only with numbers” has in many respects eclipsed the real economy.
Along the way, some of our sharpest minds have forgotten that ringing up high profits—especially in the short term—doesn’t necessarily mean that anything of real value has been produced.
It is worth noting, in this regard, that Lehman Brothers reported record earnings in 2005, 2006 and 2007. By 2008, it had collapsed, bringing to mind Drucker’s insight: "Stupid people make stupid mistakes. Brilliant people make brilliant mistakes."
These are not forces one easily brings to heel. Greed is an awfully powerful thing (especially when it is reinforced by armies of well-paid lobbyists). By the end of his life, Drucker was so tired and disgusted by what he was seeing—decrying obscene levels of CEO pay and declaring that “absolute shareholder sovereignty . . . violates many people’s sense of justice”—that he turned much of his attention to the social sector.
So what, then, are we to do?
Should we just give up, particularly when you consider how long we’ve been trying to push for change?
More than ever, I think, we have a real opportunity to do just what the title of the Forum suggests: shape the future.
It is certainly important to keep things in perspective, as we’ve been helpfully reminded here. Much of the world is much better off than it was 40 or 50 years ago. There are many, many good models to build on, and we’ve heard about some of them: at GE and Ingersoll Rand and Novartis and elsewhere. We must be careful not to over-romanticize the past or demonize the present.
And still, it is not hyperbole to say that capitalism really is at a crossroads. Some might even argue, pretty convincingly, that it’s at the edge of a cliff.
But that could be just the opportunity we’re looking for. People who have been complacent or apathetic or otherwise frozen tend to finally act when they feel themselves nearing the edge of a cliff.
We see this instinct kicking in now in all sorts of ways, whether it’s through the millions who’ve read Natsumi Iwasaki’s novel, with its Drucker-like ideals; or the Occupy Wall Street protests; or Rosabeth Moss Kanter’s new piece in Harvard Business Review in which she lays out the case that companies need to view themselves as enduring institutions, not merely money-generating machines.
Interestingly, Moss Kanter once accused Peter Drucker of being a utopian for believing that corporations should strive for many of the very same things she herself is now urging: a common purpose, a long-term view, the emotional engagement of employees, and community building.
At the time, Drucker pushed back, saying that he wasn’t looking for a utopian society, merely a functioning one. What the financial crisis has laid bare is that Drucker’s bedrock philosophy couldn’t have been more spot on: We live in a society of organizations. If those organizations are poorly managed or irresponsible—or, God forbid, both—society suffers. Communities suffer. Real lives suffer.
Many of you have probably heard the expression: “People are like teabags. You don't know strong they are until you put them in hot water.”
Well, we’re all in a little hot water now.
As more of us seek answers and begin to act, we must remember that there are no shortcuts to take here, especially when it comes to doing right by those inside our organizations.
All of us, as managers, as leaders, need to rededicate ourselves, first and foremost, to the fundamentals: to creating a workplace that offers a real sense of dignity and fulfillment to everyone on staff; to pushing authority and responsibility as far down into the organization as possible; to building on people’s strengths, so that their weaknesses become irrelevant; to creating avenues for growth and the acquisition of new knowledge.
K.H. Moon mentioned an old Drucker tool, “The Manager’s Letter,” as a practical way to move in this direction. My Institute recently dusted off “The Manager’s Letter” (the use of which is explained, by the way, in The Practice of Management) to help ensure that each of our individual employee’s objectives are aligned with the whole of the organization; that the organization is doing all it can to help, and not hinder, our people in their work; and that ideas are bubbling from the bottom up, instead of the top down.
Drucker recommends having employees write a “Manager’s Letter” to his or her boss twice a year. We’ve found it so effective for unleashing the power in our little organization that we’ve taken to using it quarterly.
Jack Bergstrand, the author of the Drucker-inspired book Reinvent Your Enterprise, has devised his own set of tools to help lift knowledge-worker productivity. During his breakout session yesterday, he vividly described some ways for everyone across an organization to understand, as he put it, “here’s where we want to go, and here’s how we’re going to get there.”
Others offered all kinds of concrete suggestions: Maybe you want to join the Swiss Dialogue or borrow Peter Gomez’s model and create your own—an American dialogue or an Austrian dialogue or a Brazilian dialogue or an Indian dialogue.
Maybe you want to go back and tweak the incentive structure in your organization so that you’re rewarding people for more than simply hitting the numbers.
Maybe this Forum has inspired you, as it was suggested, to go take a course somewhere and broaden your understanding of the world.
Whatever it is, think about one thing you’ve learned here over the last two days. Take it back to your organization. And act on it.
Even more than process, we need courage. We need the courage to stick to our values—and to walk away from any organization (whether it’s our own; or that of a partner; or even a customer) when we see them being violated.
We need the courage to honor Drucker’s dictum—above all, do no harm—even when we’re being pressed to turn a blind eye.
We need the courage to abandon yesterday and to try new things—to innovate, perhaps at the Bottom of the Pyramid, where there is a great opportunity, in Deepa Prahalad’s words, for “managers to reimagine their role as agents of change.”
We need the courage, as well, to promote “shared value” in our companies and to make sure that our organizations understand that this is part of our core business strategy, not some off-to-the side CSR campaign or PR gimmick.
And when people inside and outside the organization push back and say that this all sounds too quixotic and pie-in-the-sky and moralistic—and, undoubtedly, some will—be prepared. You think Adrian Wooldridge was rough on Mark Kramer; try advancing this idea before a group of skeptical colleagues inside your organization.
Yet try you should.
Yes, Peter Drucker laid out the broad concept of “shared value” 50-plus years ago. And, yes, some businesses have always turned social problems into business opportunities. So, in one sense, there’s nothing new here.
But now, Kramer and his team are building on this foundation, providing new academic rigor and lots of rich examples—demonstrating tangible results all across the globe—which show how turning a profit and curing social ills are not only compatible but mutually reinforcing.
By making “shared value” more explicit—by turning it from something done by default into something done by design—it can accelerate the trend and maybe, as Mark expressed, turn it from mere glimpses of progress into a real movement (a movement at least as powerful as that of “shareholder value”).
Finally, we need faith. The good news, at least as I see it, is that our young people give us a lot of reason to have faith. And I’m not just talking about the Drucker Challenge winners or Wake Forest University students we have with us.
They are, in many ways, symbolic of a whole generation whose members, according to poll after poll, are searching for real meaning in what they do and are more interested in contributing to the common good than any group of young people since the 1930s.
Reach out to someone who is young. Teach them. Learn from them. Make sure your organization is responsive to their desire to give back.
If we want, we can ignore all of this. It’s easy to hide inside organizations and to ascribe whatever happens to the corporation itself, to the faceless, anonymous enterprise. Those glass towers of which Charles Handy spoke.
But as Drucker told us, “The organization, like every collective, is a legal fiction. It is individuals in the organization who make the decisions and take the actions which are then ascribed to the institution.”
So what will you do as an individual in your organization? Richard Straub began this Forum by invoking the challenge Peter Drucker used to issue to his consulting clients: What will you do different on Monday?
We now come full circle. I know it’s getting late on a Friday. But before you leave here, I ask you , please, to take two minutes—literally, two minutes—and jot down the one idea you’re going to take back to your office and put into practice. Write down when you’re going to do this by; if you don’t give yourself a deadline, it won’t happen. And write down one more thing as well: What results do you hope to achieve?
For as Drucker liked to say, “The joy is in the results.”
Thank you very much.