Peter Drucker used to say that the thing to look out for isn’t the trend, but a change in the trend. He also emphasized that true innovation doesn’t aim to change the future, but to better address the present. Of course, he further argued that as soon as a product or service became profitable, it was time to develop a new one to keep the company viable in the future.

Modern-day observers, on the other hand, often seem to insist that executives must strive to forecast the world of the next decade, to be able to peer around the numerous oddly-angled corners of randomly wandering events and predict what’s coming the other way. They depict innovation as world-changing creativity that alters paradigms and transforms business landscapes. Many of them also encourage companies to put their best people on their best, most profitable, projects. That latter surely makes sense, doesn’t it – reinforcing success?

Drucker would have suggested that in the first two matters these advisors go too far, and in the third not far enough. We generally are unable to predict the future – but we can make it, one step at a time, building or recognizing new markets, developing salable solutions for them – left, right, left, into the future. We don’t try to position our entire companies for markets that we firmly believe will, but don’t yet, exist – this briefs grandly, but begs the question of how to survive from here to there, not to mention the problem of betting the farm on whether you actually turn out to be right.

Identify needs poorly met, unmet, or unrecognized. Determine how these present problems to people today. If you can find a way to step forward to solve them, you are offering an innovation that moves everyone forward. It might be incremental, it might be more fundamental. But it converts present day needs and opportunities into newly existing markets that can be served with newly existing solutions. One step – a meaningful step – at a time. Everyone moving toward new horizons while maintaining intimate contact with the ground.

So, actually, you don’t always need to create the future – just try to pick out the shadow it casts back into the present, and figure out if you can throw some light on it.

You will still become its pioneer. But once you’ve done that, don’t focus your sharpest eyes on the terrain currently occupied; set them to scanning the immediate surroundings for new intimations of problems no one knew were there. If you’re lucky, you’ll bump in to something that foreshadows an opportunity – and be alert enough to recognize it for what it is.

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Today’s tip: Speaking of  how to create change, please see this BNET column by Steve Tobak about sometimes conflicting advice by advisors – you will be interested to see his own advice on what to do about it.

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Technorati Tags: trend, innovation, future, product, service, profitable, executive, creativity, business, project, success, market, solution, pioneer, opportunity, BNET, Steve Tobak, advice, Peter Drucker

We noted yesterday that society has changed dramatically over the past few hundred years, but individual leadership continues to be conceived and cultivated virtually as it has for millennia. What, exactly, has changed, and why has the concept of leadership resisted changing with it?

One major change, of course, has been in how we perceive the principle of sovereignty. It no longer exists exclusively in the person of the sovereign at the top, who had the right to lead, if not actually being viewed as owning, the people. Rather, it now increasingly is understood to arise from those very people, who are expected to appoint – not to serve or follow – administrators.

But there has been another, generally more recent, and perhaps equally profound change: the rise of the modern world of organizations. Peter Drucker first remarked on this notable development. As late as the early 20th century, there was a limited number of what might be called professionally run, ongoing enterprises – even, really, in government.

A number of powerful trends combined to change that dramatically. Now, much of the work of society – even the living of life – is done through organizations conceived, established, and administered by the people themselves.

So here’s the problem: the traditional notion of individual leadership rested on the historic facts of sovereignty residing in the leader, and all instruments or institutions of state and society emanating from, or ultimately organized to serve, that person. But the facts have changed.

Now, both sovereignty, and the sources and purposes of organizations, have been widely distributed among the general population. And yet, the concept of leadership has successfully resisted changing with these new historic facts. It continues to be presented as requiring that authority, power, and purpose be concentrated in the persons of specially designated individual leaders.

Why does this essentially pre-modern – even archaic – view of leadership so successfully persevere in the midst of so fundamental a transformation of the environment that gave rise to it?

That is next. In the meanwhile, have a great weekend – see you on Monday.

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Today’s tip: Speaking of adaption to fundamental changes, please see this piece, from Fox News, about where one college will be holding its graduation ceremony this year: online at Second Life.

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Technorati Tags: society, individual leadership, leadership, sovereignty, sovereign, organization, enterprise, government, leader, institution, authority, power, purpose, adaption, Fox News, Second Life, Peter Drucker

Peter Drucker used to argue that the purpose of a business is to create a customer. He encouraged executives not to try to explain their businesses to their customers, but to let their customers – and potential customers – explain their businesses to them. The business should then organize itself around the results.

Capitalism is the ideal vehicle for facilitating this process. It is often criticized for being selfish, inasmuch as it is built on the presumption that people act out of individual self-interest. But the truth is that this motivation compels providers to be outwardly focused – to orient on the interests of customers. That is, even if the fundamental drive that animates capitalism is self-interest, its operation causes its participants, as Gannon Beck argues, to seek out opportunities for mutual-interest.

Successful businesses in capitalist economies are built from information about customer needs discovered in markets, and the penetration of that information backwards into the organization. They do not arise from the meticulous interventions of central planners emanating out to the markets – or even from singular leaders pronouncing their visions from the summits of their businesses, which then cascade down through the organizations and out to the customers.

One of the great things about free markets is that they will let businesses do it the wrong way round all they want – and they seem to want to do that a lot. Inevitably, some will hit on an idea that is well received by customers, and they will thrive on that for a while. What’s more, they will take the rare good luck as evidence of their rare insight and skill. The markets know how to deal with that. Do central planners?

The really effective companies, though, don’t just market their products or services – they help customers market their needs, and then fill them. Procter & Gamble is perhaps the best-known current practitioner of this type of approach. For such companies, the markets are places to learn not just how they are doing, but about what they are perceived as, and what they need to be.

Is there a parallel, here, between the businesses learning from and organizing their efforts around their customers, and managers and their staffs? What can management learn about its own business (or certainly, about its customers) from its staff? Should the design of a business organization incorporate the needs of its employees – as described by those employees? Around what defining principles should the range of those needs be built, and by what circumscribed?

How can managers and employees use the labor market to discover and enhance their mutual interests?

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This post is a part of a series. You can learn about and link to the other articles here: Conceptualizing capitalism

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Today’s tip: Did you know that there is a relationship between a person’s belief in free will or predetermination, and his or her collaborative spirit or aggression? Please see this fascinating explanation of the research, at PsyBlog.

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Technorati Tags: purpose, business, customer, executive, self-interest, capitalism, information, market, organization, central planner, leader, vision, insight, skill, product, service, Procter & Gamble, manager, staff, management, employee, free will, predetermination, aggression, PsyBlog, Peter Drucker, Gannon Beck

Most managers know who Peter Drucker is. He was particularly quotable, so many also can identify some of the pointers to his ideas: management by objectives, knowledge worker, and the like.

Most people, though – including a good number who pretend to – really know little more than that. There is a presumption that if you want to learn about management you have to, as in many other things, read the latest books. The older stuff is viewed as outdated, overcome by new “discoveries.”

But the principles of management are a good bit sturdier than that. And few people have turned a finer mind to the subject and a keener ability to explain it than has Drucker.

Unfortunately, most modern writers draw from him without attribution – or at least discuss things he wrote about first without acknowledging that. Moreover, since he turned his back on academia in what it views as important ways, it has turned its back on him, as well.

As a result, few managers who have entered the field in recent decades have actually had the requirement or the meaningful opportunity to become acquainted with or to read Drucker directly. The prospect of doing so can seem daunting, since some of his key books are large, and others are specific. It’s hard to know where to start, and there are few good places to go where one can get a decent overview of his thinking that offers both helpful breadth and depth.

Jeffrey Krames‘s new book, “Inside Drucker’s Brain,” is one of those, and perhaps the best. Krames, who has edited and written many books on management, has produced in this one an engagingly readable explanation of the foundation of Drucker’s thinking and the history that led to his remarkable career in – even invention of – the field of management study.

Of particular value is the excellent breakdown and summary of Drucker’s key thinking and principle ideas about management and business. Krames wrote this book after spending an intense day listening to Drucker’s own explanation of those ideas, their genesis and meaning, and his own role in the development of management as a legitimate and important field of separate study and professional practice. Krames supplemented this with his own extensive reading, over the years, of Drucker’s many books, including some re-reading after the interview.

The result is a really excellent primer of Drucker’s work. Each idea receives its own chapter, with a brief explanation, as appropriate, of its place in the development of the field of management and of Drucker’s thinking, a very effective summary of its content amply supplemented with quotations from Drucker’s most memorable writing on that topic, and amplified with enlightening current examples of its enduring relevance.

This book serves the subject well. It is a quick and effective read, well organized to suit the snippets of time available to a manager at any point in his or her career, yet leaving you after each visit with actionable new ideas – and eager to get back to it for more.

Additionally, it acts as a guide to deeper exploration of the subject. Many of you will be encouraged to move into direct reading of Drucker’s work armed with a better knowledge both of what you are looking for and where you will find it. There is even a list of what Drucker himself assessed as his 6 most important books.

It should be noted that Krames has written extensively on other major figures in management, and this fact sometimes appears in a peculiarly distracting way in the book. There is also a tendency, that some other recent authors have adopted as well, to present Drucker’s thinking on individual leadership as more in accord with much of the prescriptions of the modern leadership movement than I think there is good cause to make.

But most will either not notice or not be the bothered in the least by such minor blemishes. And in fact, even those who do notice won’t be at all discouraged by it. There is too much of value in this book.

Jeffrey Krames has produced a marvelous insight into the “Inside of Drucker’s Brain.” I strongly recommend the book – whatever your degree of acquaintance with Drucker, this book will deepen it, and both encourage and make more effective your further reading of his work.

Please do get a copy. You still have plenty of shopping days left to get it as a gift – for yourself and your colleagues and staff – enjoy!

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Today’s tip: Speaking of training and development (which Drucker said is always self-development), did you know that this week is Employee Training Week? Please see this post by Molly DiBianca, of The Delaware Employment Law Blog, for a discussion of the connection between training and engagement at work, as well of some terrific resources for further reading. (If only she had known to include “Inside Drucker’s Brain!”)

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Technorati Tags: manager, management by objectives, knowledge worker, management, Drucker, academia, Jeffrey Krames, training, development, Molly DiBianca, The Delaware Employment Law Blog

Two weeks ago, we discussed the question of management fads, their causes and effects (academics, consultants, management). Author and consultant Ravi Tangri pointed out in a comment that some of the management ideas commonly viewed as fads are actually productive concepts that do much good when properly conceived and applied.

That this is true only adds to the problem. Many of them are nevertheless transformed into fads – not by their inherent worth – but due to their presentation by providers and treatment by management teams.

Many such concepts become fads – passing rapidly into and then out of favor – due to the discovery over time that they, in fact, lack practical value at work. But others that do have such actual usefulness also degenerate into fads due to some of the factors discussed over the past two weeks – poor comprehension, presentation, and application by both providers and consumers.

That some of those in this latter category quietly survive among those who properly understand and employ them only adds a certain misery to the wider issue of the frenzied marketing-oriented character of much management “thinking.”

Speaking of sensible management thinking, Peter Drucker once ascribed this problem to companies that find themselves with excess, expensive management:

Typically such a business goes in for the latest management fads. When “human relations” are in season, it hires psychologists, social workers, and personnel experts and puts everybody through “leadership training.” Two years later everybody talks “operations research” and attends management-science seminars.”

The solution, according to Drucker, is to scale back the ranks of management. We seem to be suffering from excess, expensive management, today. Is it their ranks that are being scaled back as a result?

And, ultimately, who is responsible for this – the development of ill-conceived management fads, the faddish treatment of good ones, and the misdirection of the bill for the consequences of their use or misuse? Is it even the managers themselves, or those charged with supervising them – their boards of directors?

Of course, if the latter is stacked with the former, then we just have another form of excess and expensive management, with no one to trim them back. As we have seen with the government handling of the current crisis, not even the naturally restorative forces of the market will be allowed to do that. So, in the absence of accountability, the fads – fatal and futile – will continue.

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Today’s tips: Of course, everyone with a contending view on this matter insists they are right. But someone has to be wrong; some are even wrong all the time. Please be sure to see Beth Robinson’s insightful look at the problem of kaleidoscoping perspectives.

Then, you will want to read Michael Wade’s explanation of how failing to enter that kaleidoscope can increase the odds that a project will go wrong.

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Technorati Tags: management, fad, consultant, leadership, training, operations, research, Drucker, manager, government, market, accountability, Beth Robinson, Michael Wade, Ravi Tangri

We’ve been looking, over the past few days, at some of Peter Drucker‘s ideas about organizational design. The main lesson of his thinking is in his drive to first principles, and to his relentless effort to understand what we ought to be doing and why, and only then to turn to how we organize ourselves to do it.

While he had a lot to say on this general subject, we will close this topic out, today, with a look at how he conceptualized the sorts of things that organizations do, and how the nature of those things can be used to help us more effectively design them.

Generally, Drucker believed that contribution analyses inevitably reveal four basic classes of activities within an organization. These are result-producing, support, hygiene or housekeeping, and top-management activities. Most of us are familiar with various ways of viewing these, but Drucker had an interesting subcategory of the support type that is of special interest, here. He called its contents “conscience” activities.

Support activities are those that, while necessary, do not in and of themselves produce results that contribute measurably to organizational performance. “Conscience” activities are in this category because while their contribution to end results can’t be measured, they are necessary – even vital. These are the functions of establishing vision and standards, and the means to ensure the expression of these in the organization.

Drucker stressed that these activities are so key that they should be neither subordinated nor combined with any other activity. As a result of their nature and importance, he viewed them as a top-management function. They include everything from strategy to managing people to community responsibilities. Certainly, all of management as a group needs to concern itself with these. But it is essentially a one-person job – rather than that of a staff or department – and its performance best terminates, or originates, in a single individual.

Does that make sense to you? Who do you suppose that individual ought to be? Can a CEO delegate something like this?

On the other hand, is it really a management job – top or otherwise – at all? Doesn’t it more appropriately belong to the board of directors? Indeed, might not this “conscience” activities category be further broken up into those most appropriately assigned to ownership (such as vision and strategy) and those to management (such as management of people and marketing)?

What do you think?

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Today’s tip: Please see this piece from The Economist for an interview with a CEO that suggests many of the good reasons for developing (and hiring) internal talent for this position.

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Technorati Tags: organizational design, organization, vision, standards, strategy, management, board of directors, ownership, Economist, CEO, talent, Peter Drucker

When, in attempting to address a question or solve a problem, rather than solutions you find yourself surfacing additional questions and problems, you are probably on the right track. More than that, you are probably asking the right questions. After all, if the answers come too easily, you likely do not really have a problem at all – or you have the wrong one.

Worse, as noted yesterday, we are often sorely tempted to brush aside what we see as distracting side issues and plunge on ahead to resolve the initially presenting problem. It is surprising how often this happens among management professionals at all levels, and in all sorts of matters – including organizational design. This tendency to ignore questions that pop up while we are in pursuit of immediate solutions is one reason we find the many parts and processes of our organizations straying from each other, and from the strategy that they nominally serve.

As we have seen, Peter Drucker stressed that “structure follows strategy.” He also offered the organizational designer three core questions to address before even getting to the specifics of structure. It is these questions – the sort that force you first to generate and answer others – that help you ensure that you are establishing and preserving that essential link. Here they are:

In what area is excellence required to obtain the company’s objectives?”

How many of you – whether you are a one-person operation or manager of a multinational enterprise – seriously explore this question? Having done so, how many of you actually organize – or reorganize – your processes and operations to facilitate, promote, and advance the quality of that excellence?

In what areas would lack of performance endanger the results, if not the survival, of the enterprise?”

In my experience, this is possibly the least effectively addressed problem in organizational design and operations. We’re not talking here, by the way, about anticipating and mitigating the effects of specific events, such as severe weather or labor disputes. We’re talking about inherent or latent weaknesses (or even the flip sides of strengths) that threaten, through inattention, to widen into organizationally devastating ruptures. You need to do this, and you need to factor what you learn into your organizational design.

What are the values that are truly important to us in this company”?

The fact that this question comes last indicates its importance, rather than its precedence. Mindful that you will be coming to it, your exploration of the previous two will help you better confront it in its turn. Moreover, we’re not talking here about the sort of universal values that belong in your personal character; photos mounted in the lobby of senior managers gazing wistfully heavenward won’t instill them in your organization or in you.

What Drucker is referring to here are values that relate to the work you do and/or the products and services you offer. It could be related to safety, quality, reliability, and the like. The two key elements are that they are something that: 1) you – collectively as an organization – feel strongly about, and 2) can be “organizationally anchored.” That is, they aren’t merely words, but are given force and expression through the very shape and operation of the organization.

In order to answer these questions, you are going to have to ask and answer a great deal more. In the course of doing this, you will be revisiting – or perhaps redesigning – your corporate identity and strategy before returning to your final task – organizational design.

Sounds almost Socratic, doesn’t it?

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Today’s tip: Speaking of processes that stray from purpose, please see this excellent discussion by Eric Brown of how to ask the right questions in order to arrive at the right conclusions.

And speaking of managers who may be responsible for all that disjunction, please see yet another troubling survey uncovered by Nic Paton at Management-Issues with a title that has disturbing organizational design implications: “Get rid of all the managers . . .”

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Technorati Tags: management, professional, organizational design, organization, strategy, excellence, manager, multinational, enterprise, performance, values, product, service, safety, quality, corporate, Eric Brown, Nic Paton, Management-Issues, Peter Drucker

When presented with a problem a common response is to rush to action. Drill right in to a solution and then move on. But that is often the wrong thing to do. It certainly is when considering something as vital as organizational design.

Peter Drucker understood this: “We have learned that the first step is not designing an organization structure, that is the last step.” His concern was that managers first carefully consider what he called the “’structural load’ of the final edifice.”

But what are structural loads? What is it that we want the organizational design to help carry for us, to facilitate and promote the advancement of? Drucker speaks of previous efforts to define these as activities, traditionally differentiated according to the sort of work they did within the organization.

A better way, he argued, is to look at them according to the sort of contribution they make. This casts them in a wholly new light, so that we are able to understand both them – and the organizational design they suggest – more effectively.

But it does something else. It forces on us a new delay, another step to accomplish before we can go in to action in solving our organizational design problem: that is, in order to understand the contribution of the various actions we engage in, we need to affirm the strategy to which they presumably make those contributions.

And that is the key, so infrequently crafted but so indispensable, to effective organizational design. “Structure,” Drucker insisted, simply, “follows strategy.” After all, structure is, itself, merely another contributor to organizational purpose, and thus must accord with the strategy developed for achieving it.

Any assumption about the single best organizational design, or even the best general approach to the topic, is essentially mechanistic – whether it is about regimented hierarchies or free-form structures – if it doesn’t arise from recourse to strategy and the facilitation and integration of its members’ activities and contributions.

Drucker argued that an organization is a social structure intended to accomplish a strategic aim. As for the design determined upon to facilitate that, “Human performance,” he stressed, “is its goal and its test.”

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Today’s tip: Please stop over to Wally Bock‘s Three Star Leadership to see what he identifies as the “money quote” from a recent Carol Hymowitz column in the WSJ.

Please also see these contrasting reports on the progress women are making in the workplace – Management-Issues finds reason for concern in recent research, while John Agno discovers more positive news from the ranks of government.

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Technorati Tags: organizational design, organization, manager, strategy, Wally Bock, Three Star Leadership, Carol Hymowitz, WSJ, women, workplace, Management-Issues, John Agno, government, Peter Drucker

Practitioners and advisors alike tend to fall prey to the same enduring error as the rest of us: they easily believe, or accept the contention, that there is one best way to do things. They may acknowledge that they aren’t following it, that specific personal proclivities or general circumstances mitigate against it, but they believe it exists.

This conviction extends to our current topic of organizational design. Discussions of it tend to center around structural issues – how layered or not, or rigidly process-bound or situationally flexible – or even seemingly social matters – how it should be empowering, freeing individual potential rather than exploitative, and pushing people into fixed, task-centered molds.

This dialogue is quite common, used by gurus and star practitioners to highlight the modern move toward certain free-flowing, “innovative” organizational forms. Typically, this argument takes an evolutionary approach, explaining how survival once was found in hierarchies and now, as the world becomes more complex and sophisticated, is moving beyond them toward flat, “open” organizations.

Peter Drucker found this argument to be disingenuous. He pointed out, for example, that independently operating evolution is not something managers should depend on. “The only things that evolve in an organization,” he noted, “are disorder, friction, malperformance.” Moreover:

The first thing to say about this controversy is that it is simply not true that one of these forms is regimentation and the other freedom. The amount of discipline required in both is the same; they only distribute it differently.”

He meant that well-conceived and -designed structured organizations often actually free employees from burdens, impositions, and distractions, enabling them to give greater personal attention and individual expression to their work. He notes that flexible organizations intended to create this result sometimes unintentionally frustrate it by distributing responsibilities more generally on the employees that have the effect of reducing the benefits of specialization and focus.

So, what to do about that? How do you resolve the apparent dilemma and settle on an approach to take to organizational design? We’ll look at Drucker’s thinking on that topic tomorrow – it’s actually the key point. Please stop by!

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Today’s tip: Speaking of structure and task-organization, these are typically associated with the manufacturing era, which is thought to have long-since passed from the scene in the United States. It is true, of course, that the service sector has dominated in many ways for decades, while it seems that over the same time America has outsourced or otherwise lost its manufacturing capacity. But did you know that it is still the world’s top manufacturer? At least for now. Please see this Financial Times article on the rise of China.

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Technorati Tags: organizational design, guru, evolution, manager, organization, regimentation, freedom, discipline, specialization, focus, structure, task-organization, manufacturing, United States, America, Financial Times, China, Peter Drucker

A recent post about managing with ordinary managers like you and me attracted an interesting comment by leadership expert and author Ben Simonton about Peter Drucker’s legacy in this regard. Unfortunately, due to technical problems that occurred during a recent blog software upgrade, a system restore was required, and that led to the loss of the comment. However, with Ben’s permission, I will summarize and remark on it here.

In reply to my interest in hearing more about his concerns regarding Drucker’s influence, Ben said that he initially looked on him as a true business guru. However, with time and experience, he gained a perspective that dramatically altered this view.

For example, Ben served in the U.S. Navy nuclear program under Admiral Rickover. This afforded him the ability to contrast Rickover’s streamlined style of management with what he saw later in the civilian world, much of which was inspired by Drucker’s systems approach.

The inevitable result, Ben argues, was a layered management structure characterized by formulaic thinking, and resulting in top-heavy bureaucratic organizations. It was American businesses like these that lost so much ground so quickly to the leaner, more goal-focused firms from Japan beginning in the 1970s.

For my part, I feel very strongly about the positive nature of many of Drucker’s ideas and believe the better part of his contributions to be highly constructive, albeit imperfectly implemented. But I certainly welcome Ben’s perspective, and especially his readiness to demand that management figures even – perhaps especially – of Drucker’s stature should be compelled to defend not just their thinking in the abstract, but their results on the ground.

The systems-based approach to management does reflect Drucker’s concern that in the modern age of organizations we must give up our reliance on heroic figures as bosses – and even exceptional ones as managers generally. Rather, he argued, we must find ways to manage our ever-multiplying organizations with the ordinary material available: us.

Ben’s critique of how this turned out is important. But, as many of you know, Admiral Rickover has his own critics.

So the question is, are these our choices: stars or systems? Are there no alternatives, or no better ways of implementing these?

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Today’s tip: Speaking of stars and systems, one of the world’s greatest orchestras has no conductor – a position often used as an illustration of the vital importance of individual leadership. But that doesn’t mean there is no leadership – it just emanates from the purpose of the orchestra and is expressed, when and as appropriate, by everyone. See this brief description of how they do it from the introduction of Wikipedia entry on the Orpheus Chamber Orchestra.

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Technorati Tags: manager, leadership, expert, guru, U.S., Navy, Rickover, management, organization, American, business, Japan, conductor, Orpheus Chamber Orchestra, Bennet Simonton, Peter Drucker