Now and again, I find it healthy for my business thinking to exercise an imponderable. I get to consider problems and opportunities in an entirely different manner. It's an exercise that stretches and challenges my present business logic and forces me to think on a more strategic level. Such is
case as I ponder what Peter Drucker, renowned business guru and ‘father of modern management', would do differently if he became CEO of a company in today's environment. What approach would he use? Would his business acumens and tenants play in today's rough and troubled business climate? What pearls-of-wisdom would I glean by reviewing his books and articles? What would he do differently that makes a difference? Peter Drucker has impeccable credentials. Educated in Austria and in England, he holds a doctorate in Public and International Law from Frankfurt University in Germany. He has been honored with many national and international awards citing his continuing and significant contributions to society, economics and businesses. A prolific writer and solid thinker he has written numerous articles on economics, politics and management that, some say, are as relevant today as they were when first written - some more than 25 years ago. With over 30 books to his credit, his insights and views on business and economics have influenced thinking of top management from fortune 500 companies to private enterprises for past 5 decades. Always fresh in his thinking, at 92 years of age, he still dispenses solid business advice.
Peruse just a few of Drucker's writings and it quickly is apparent that he doesn't mince words - his thinking is strong, and served straight up! Basic to his thought process is that enterprises are developed to create wealth, not control costs. Yet, traditional business measurements are woefully inadequate for management to perform firm's basic responsibility - create shareholder wealth! Drucker's view is that management's key responsibility is to help workers to achieve (productivity) and to maximize corporate assets (move capital to most productive use - see: Marketing Tip #407 increase asset productivity). Most enterprises don't know how to accomplish this because they don't have tools that timely provide information necessary to make informed decisions.
After years of practicing, and refining his business thinking, Drucker developed key tools top management will benefit from, if used. Each area brings focus and information to senior managers enabling them to make more informed decisions. There are three categories: baseline information, productivity information, and competency information.
I found them to be thought provoking and worthy of your review. For lack of a better term, I call them Drucker's executive tool kit. After you read on, you may want to compare your business metrics to these and see where you might benefit.
Baseline information - These are very traditional measurements and metrics. They might include cash flow, inventory, revenue, profits, receivable, etc. Fairly routine financial information, needed to run any operation, and easily understood by financial community, but not material enough, or timely enough (most metrics are lagging indicators) to help senior managers make investment decisions or productivity audits. Although these basic metrics are important, more ‘leading' indicators are required. Which brings us to next tool.
Productivity information - This portion of tool kit is vital and includes metrics that deal with productivity of significant resources. A business must make visible productivity of labor pool - both manual and knowledge-based workers. However, this doesn't tell whole story. Measuring productivity requires more than a traditional P&L statement. Today's astute business leaders recognize that profit may or may not create shareholder wealth. That until profit covers cost-of-capital enterprise operates at a loss. Businesses must implement metrics such as (EVA) economical value add (see: Marketing Tip #407 EVA - drive more value into your business!) which is better at providing enterprise with a cleaner picture of its performance in creating or destroying shareholder wealth.
