I recently read “The Practice of Management” by Peter Drucker. Drucker (1909-2005) wrote 39 books. Most of his books are centered around business and management, but he also wrote two novels and an autobiography. While I think it is absolutely valuable to read blogs, listen to podcasts and study recent material, The Practice of Management is seen as the first book to look at management as a whole and being a manager as a separate responsibility and therefore a great read. It was published in 1954 (!) and I’m amazed by the number of topics that are already covered in the book that are still perfectly applicable today.
I’ve marked a lot of pages in the book. I want to share a couple of them in this post.
The duty of a business and management
“Management must always, in every decision and action, put economic performance first. It can only justify its existence and its authority by the economic results it produces.” – P7
“It is the first duty of a business to survive.” – P46
I read “Built to Last” and I view this as the absolute core of every company. There is a lot of focus lately on creating the perfect workplace, on work that needs to be fulfilling, etcetera. This quote puts things in perspective: it is the first duty of a business to survive. Without a growing economic performance, the company would not be able to survive.
Drucker adds on this:
“It is the responsibility of management to make it produce the needed minimum profit.” – P60
You could say that this should be a shared responsibility of everyone working in the company, but I agree with Drucker here. Only management can see the bigger picture and it is therefore responsible for making sure the company is climbing the right ladder.
“Altogether, this entire book is based on the proposition that the days of the “intuitive” managers are numbered. This book assumes that the manager can improve his performance in all areas of management […] trough the systematic study of principles, the acquisition of organized knowledge and the systematic analysis of his own performance in all areas of his work and job and on all levels of management.” – P9
Cal Newport compares the passion mindset with the craftsman mindset in his book “So Good They Can’t Ignore You”. The image of the woodworker who is continuously sharpening his skills really matches up with what Drucker writes. A specific task of management is to keep sharpening through systematic study and analysis. For me personally, this is about setting goals, keep asking people around me what I can do better and learning to deal with the feedback received. Take time to study and deliberate practice.
Manage by objectives
“Of course, it is always important to adapt to economic changes rapidly, intelligently and rationally. But managing goes way beyond passive reaction and adaption. It implies responsibility for attempting to shape the economic environment, for planning […]. And while man can never really “master” his environment, it is management’s specific job to make what is desirable first possible and then actual. To manage a business means, therefore, to manage by objectives.” – P12
Being proactive means setting goals and doing everything in your power to meet them. There are always a million things going on that require your immediate attention. However, to really manage a business (and your life, for that matter), means to take control and create a plan. Set objectives and make conscious choices to meet them.
You could say that you as an individual, or while working in a small organization, are flexible enough to adapt quickly to a changing environment and only bigger companies need to set goals to be effective. Drucker sharpens this by saying: “…this means only that it is easier to set innovation objectives in the smaller business - not that the need for objectives is less.”.
Marketing and innovation
“Because it is its purpose to create a customer, any business enterprise has two – and only these two – basic functions: marketing and innovation.” – P37
This is why this is such a great book: even though the landscape of creating and running a business has completely changed, these two functions are still highly relevant. Drucker is very clear: any organization where marketing is either absent or incidental is not a business and should never be run as if it were one. Marketing is broader scoped than you might think: it is market research, market analysis, pricing policies and the service offered to the customer. Basically, marketing is everything from the moment you hold the product in your hands until it is consumed.
But, you say, how does this help me? Splitting a business into these clear compartments helps with setting specific objectives for each of them. It helps adding focus. How are you innovating? What is the current focus of your business? Does the scale turn towards marketing or towards innovation?
Better, not bigger
“It is not necessary for a business to grow bigger, but it is necessary that it constantly grow better.” – P39
After asking what you do and telling them you own a company, the (logical) next question is often: “Oh that’s great! How many people work for you?”. Drucker looks at this from a different perspective. Becoming better is the goal. Growing bigger can be the logical outcome of becoming better, but it is not necessary for the business to exist.
Learned about the “10 times” question a while ago: how can you be 10 times as efficient? How can you be 10 times as good as you are now?
Drucker talks about the “manager’s letter”. Basically, this is a tool where a manager composes a document which contains his responsibilities, goals and his plan for attaining these goals. This tool brings out inconsistencies that any leader will communicate:
“Does the superior demand both speed and high quality when he can get only one or the other?” – P130
Situations like this undermine spirit and performance. The manager’s letter is a tool to bring those out in the open. The end goal is to be as consistent as possible in what you communicate.
Focus on strength
“Nothing destroys the spirit of an organization faster than focusing on people’s weaknesses rather than on their strengths, building on disabilities rather than on abilities. The focus must be on strength.” – P145
In the Netherlands, it it no longer allowed for the Wegenwacht (Dutch guys that come and fix your car on the road when it breaks) to fix your car on the side of the highway. Instead they tow you away to a safe place. This is because other drivers tend to drive where they are looking, and they will be focussed on you while you are stranded there. Dangerous. You will naturally gravitate towards your focus, and whatever you give your focus will grow. Focus on strength and abilities.
Responsibility of development
“Nothing could be more absurd than for the enterprise to assume responsibility for the development of a man. The responsibility rests with the individual, his abilities, his efforts.” – P187
Two messages. First: don’t feel responsible for the development of your managers. Second: you are the only one responsible for your own development. Of course, a company can help by creating the right environment for the individual to grow. It can (and should) make the tools available.
I’m amazed by how much has not changed in 60+ years and how much of the work of Drucker can be used for propelling yourself and your company forward with great speed. Key points: remember your duty, practice deliberately, manage by objectives, cover both marketing and innovation, better not bigger, be consistent, focus on strength and take responsibility for your own development. Can’t recommend this book enough.