Management consultant, educator, and visionary Peter Drucker helped establish the philosophical and pragmatic foundations of modern business practices. The Effective Executive was a groundbreaking text that focuses on one key principle: get the right things done.
I’ve encapsulated all the major (and subtler) arguments in Drucker’s best-selling book below.
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The knowledge worker cannot be supervised closely or in detail. He can only be helped. But he must direct himself, and he must direct himself toward performance and contribution, that is, toward effectiveness.
To yield maximum performance and results from creativity, freedom to think must be present.
The term “knowledge worker” was first coined by Drucker to describe individuals who employ a combination of convergent, divergent, critical, and creative thinking as part of their occupation (e.g. engineers, architects, scientists, lawyers, etc.) In a hierarchy of labor, these individuals are at the top for their capital is their knowledge. In fact, oftentimes, economists have referred to them as “gold-collars.”
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What they do depends on the situation which only they can judge. The responsibility is always mine, but the decision lies with whoever is on the spot.”
In managerial positions, the largest struggle oftentimes are people’s refusal to think. They seek freedom, yet are unwilling to capitalize on it.
Yet, it is the effective executive’s duty to relay these concerns. Oftentimes, people just want permission, even if they know the proper steps to execute.
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But every one of these realities exerts pressure toward nonresults and nonperformance.
1. The executive’s time tends to belong to everybody else. If one attempted to define an “executive” operationally (that is, through his activities) one would have to define him as a captive of the organization. Everybody can move in on his time, and everybody does. There seems to be very little any one executive can do about it. He cannot, as a rule, like the physician, stick his head out the door and say to the nurse, “I won’t see anybody for the next half hour.” Just at this moment, the executive’s telephone rings, and he has to speak to the company’s best customer or to a high official in the city administration or to his boss — and the next half hour is already gone.
2. Executives are forced to keep on “operating” unless they take positive action to change the reality in which they live and work.
The two isolated problems the effective executive counteracts. Drucker maintains that executives should not be focusing on the operational level. In military leadership theory, the progressive hierarchy goes from tactical to operational to strategic leadership. I assume Drucker is insinuating that strategy is the means to effectiveness.
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Organization is a means of multiplying the strength of an individual. It takes his knowledge and uses it as the resource, the motivation, and the vision of other knowledge workers.
The premise of an organization is to accomplish a mission as effectively and efficiently as possible. Without the varying strengths of all individuals, there would be no organization.
But if we could multiple the strengths of every individual within an organization, the organization itself would improve exponentially in every aspect.
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Usually the people who are most important to the effectiveness of an executive are not people over whom he has direct control. They are people in other areas, people who in terms of organization, are “sideways.” Or they are his superiors. Unless the executive can reach these people, can make his contribution effective for them and in their work, he has no effectiveness at all.
Effective executives need to portray exemplary leadership. But leadership itself, according to the military, is defined as the art of influencing and directing people in a way that would win their obedience, confidence, respect, and loyalty in achieving a common objective.
Note how the word “people” is purposively vague. People, not followers, not subordinates.
An effective executive are never confined to a specific branch of an organization, for he recognizes that an organization is like a machine. All the gears and levers need to be intact for proper function.
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Specifically, there are no results within the organization. All the results are on the outside. The only business results, for instance, are produced by a customer who converts the costs and efforts of the business into revenues and profits through his willingness to exchange his purchasing power for the products or services of the business. The customer may make his decisions as a consumer on the basis of market considerations of supply and demand, or as a socialist government which regulates supply and demand on the basis of essentially non-economic value preferences. In either case the decision-maker is outside rather than inside the business.
The success of any organization is contingent upon its integration in the market. Other external forces are always at play. They can either propagate or recede an organization’s effectiveness and performance.
An analogy would be a cart on wheels. If one operates solely within the cart (the organization) and pushes as hard as he could, the cart will not move. No results are achieved within the organization. However, if the individual is on the back of the cart and then pushes, the cart moves as it overcomes friction with the ground (outside factors).
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The less an organization has to do to produce results, the better it does its job. That it takes 100,000 employees to produce the automobiles or the steel the market wants is essentially a gross engineering imperfection. The fewer people, the smaller, the less activity inside, the more nearly perfect is the organization in terms of its only reason for existence: the service to the environment.
The conventional wisdom is that the larger the company, the more complicated its process has to be. In actuality, the converse is true to maximize effectiveness. There’s a reason why startups can pivot so quickly and adapt to changing markets: they focus on the imperative, of producing a minimum viable product, garnering customer feedback, and reiterating constantly. All of these are crucial to the startup’s success.
However, in major corporations, we see many unnecessary systems at play only for the sake of complexity. In fact, numerous books, including The 80/20 Principle and The Lean Startup actually preach against this.
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Unless he makes special efforts to gain direct access to outside reality, he will become increasingly inside-focused. The higher up in the organization he goes, the more will his attention be drawn to problems and challenges of the inside rather than to events on the outside.
Because the higher an individual climbs up the ladder, the more people and processes must be overseen, it is easier to be detached to outside reality. Ultimately, customers are the only thing resulting in an organization’s survival.
Yet, employees must not be neglected too. When treated well, they will reciprocate and treat customers well.
A balance of focus must be struck for the effective executive.
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The mass of the higher animal — its resources, its food, its energy supply, its tissues — serve to overcome and offset the complexity of the structure and the isolation from the outside. The truly important events on the outside are not the trends. They are changes in the trends.
The larger the animal, the larger the needs… at an exponential scale, from energy reserves to structural bone integrity. With the right processes in place though, the large animal can maintain homeostasis for a time.
Yet, it’s essential to double down and focus on what matters to sustain the large animal: food, which is analogous to changes in trends. The larger the organization, the more important it is to adapt.
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The experience of the human race indicates strongly that the only person in abundant supply is the universal incompetent.
Why I love Peter Drucker…
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But we cannot expect to get the executive performance we need by raising our standards for abilities, let alone by hoping for the universally gifted man. We will have to extend the range of human beings through the tools they have to work with rather than through a sudden quantum jump in human ability.
Our brains are placid; new neural connections can develop. Our muscles are resilient; when broken down, they only get stronger. But alas, genes put a cap over our potential in all aspects of life, from athleticism to intelligence.
Yet, the differentiating factor between humans and other animals is our ability to construct tools to aid us in targeting greater heights.
We must exploit this gift.
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One of the weaknesses of young, highly educated people today — whether in business, medicine, or government — is that they are satisfied to be versed in one narrow specialty and affect a contempt for the other areas. One need not know in detail what to do with “human relations” as an accountant, or how to promote a new branded product if an engineer. But one has a responsibility to know at least what these areas are about, why they are around, and what they are trying to do. One need not know psychiatry to be a good urologist. But one had better know what psychiatry is all about. One need not be an international lawyer to do a good job in the Department of Agriculture. But one had better know enough about international politics not to do international damage through a parochial farm policy.
This is one of our cognitive biases: we tend to believe what we do matters more than anything else. By developing these so-called “passions,” we neglect the other things in life that may stimulate the same fulfillment and happiness we seek.
The difference between the lowly worker and the effective executive is that the lowly worker only knows how to design the car. The effective executive, on the other hand, knows how to design the car, manufacture the car, sell the car, and ship the car.
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If one cannot increase the supply of a resource, one must increase its yield. And effectiveness is the one tool to make the resources of ability and knowledge yield more and better results.
10Xing results is the singular thing entrepreneurs preach. Bet on your strengths.
At the same time, the 80/20 principle can be applicable here: by even incrementally improving something by 1%, a domino effect will ensue, and astonishing results will be yielded.
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These are essentially five such practices — five such habits of the mind that have to be acquired to be an effective executive:
1. Effective executives know where their time goes. They work systematically at managing the little of their time that can be brought under their control.
2. Effective executives focus on outward contribution. They gear their efforts to results rather than to work. They start out with the question, “What results are expected of me?” rather than with the work to be done, let alone with its techniques and tools.
3. Effective executives build on strengths — their own strengths, the strengths of their superiors, colleagues, and subordinates; and on the strengths in the situation, that is, on what they can do. They do not build on weakness. They do not start out with the things they cannot do.
4. Effective executives concentrate on the few major areas where superior performance will produce outstanding results. They force themselves to set priorities and stay with their priority decisions. They know that they have no choice but to do first things first — and second things not at all. The alternative is to get nothing done.
5. Effective executives, finally, make effective decisions. They know that this is, above all, a matter of system — of the right steps in the right sequence. They know that an effective decision is always a judgment based on “dissenting opinions” rather than on “consensus on the facts.” And they know that to make many decisions fast means to make the wrong decisions. What is needed are few, but fundamental, decisions. What is needed is the right strategy rather than razzle-dazzle tactics.
Very intuitive thoughts, but to have a business legend preach these practices must mean something.
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An effective decision is always a judgment based on “dissenting opinions” rather than on “consensus on the facts.”
A decision cannot be effective if there is only one outcome outlined. It is just there; no thinking is needed.
On the other hand, this means two things:
- People aren’t thinking creatively and critically. Revolutions are spawned by challenging the status quo. Encourage and foster brainstorming sessions.
- People aren’t voicing their opinions. A supportive, collaborative environment must be provided for full transparency. This must be instilled in the organization’s culture.
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And they know that to make many decisions fast means to make the wrong decisions. What is needed are few, but fundamental, decisions. What is needed is the right strategy rather than razzle-dazzle tactics.
It is far better to not do all that is unnecessary than to do all as efficiently as possible.
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Effective executives, in my observation, do not start with their tasks. They start with their time. And they do not start out with planning. They start by finding out where their time actually goes. Then they attempt to manage their time and to cut back unproductive demands on their time.
Here’s a contrarian perspective: there’s no such thing as time management. You can’t manage time; time ensues indefinitely. Instead, I prefer the phrase, “life management.” How are you going to manage your life in this four-dimensional world, the fourth being time?
Effective executives are then masters of life management.
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We long ago should have learned that it is the demand for capital, rather than the supply thereof, which sets the limit to economic growth and activity.
There was never a businessman that remarked,” Oh, I wish I had less money.” It is also beneficial to have reserves of capital, for experimentation, pilot projects, and customer appreciation.
Outside the corporate world, we’re taught that money does not equate to happiness. While this is true, money provides freedom, and it is this freedom to do what causes fulfillment and happiness that people seek.
In the modern economy, there will never be a cease for a demand of capital.
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Though man, like all living beings, has a “biological clock” — as anyone discovers who crosses the Atlantic by jet — he lacks a reliable time sense, as psychological experiments have shown. People kept in a room in which they cannot see light and darkness outside rapidly lose all sense of time. Even in total darkness, most people retain their sense of space. But even with the lights on, a few hours in a sealed room make most people incapable of estimating how much time has elapsed. They are as likely to underrate grossly the time spent in the room as to overrate it grossly.
A book I highly recommend is The Power of Time Perception, which not only explores this phenomenon, but offers practical advice on how to exploit this.
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I sometimes ask executives who pride themselves on their memory to put down their guess as to how they spend their own time. Then I lock these guesses away for a few weeks or months. In the meantime, the executives run an actual time record on themselves. There is never much resemblance between the way these men thought they used their time and their actual records.
The process is often much more rewarding than the pinnacle. Yet, because we are so focused on achieving that pinnacle, we impose the requirements to attain that apex onto our supposed schedules. We neglect distractions and other trivial and mundane tasks we become caught up in. This causes the time usage disparity.
We often overestimate our productivity, and even when we recognize this and construct more reasonable schedules, Parkinson’s Law still applies. “Work expands as to fill the time avialable for its completion.”
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All the other dinners were “official” functions, each of which wasted several hours. Yet he saw no possible alternative. Whether the dinner honored an employee retiring after fifty years of service, or the governor of one of the states in which the company did business, the chief executive officer had to be there. Ceremony is one of his tasks. My friend had no illusions that these dinners contributed anything either to the company or to his own entertainment or self-development. Yet he had to be there and dine graciously. Similar time-wasters abound in the life of every executive. When a company’s best customer calls up, the sales manager cannot say “I am busy.” He has to listen, even though all the customer wants to talk about may be a bridge game the preceding Saturday or the chances of his daughter’s getting into the right college. The hospital administrator has to attend the meetings of every one of his staff committees, or else the physicians, the nurses, the technicians, and so on feel that they are being slighted. The government administrator had better pay attention when a congressman calls and wants some information he could, in less time, get out of the telephone book or the World Almanac. And so it goes all day long.
The effective executive has countless obligations to adhere to, and it becomes a continuous arduous toll to battle them.
A solution is to set expectations early. If the instilled company culture is fast-paced, it is understandable for the lack of time. Yet, if the company is known for being slow, stagnant, and bureaucratic, ceremonious dinners are similarly expected.
Tim Ferriss’ The Four-Hour Workweek may offer some practical advice as to how to combat mundane necessities.
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Write a report may, for instance, require six or eight hours, at least for the first draft. It is pointless to give seven hours to the task by spending fifteen minutes twice a day for three weeks. All one has at the end is blank paper with some doodles on it. But if one can lock the door, disconnect the telephone, and sit down to wrestle with the report for five or six hours without interruption, one has a good chance to come up with what I call a “zero draft” — the one before the first draft. From then on, one can indeed work in fairly small installments, can rewrite, correct and edit section by section, paragraph by paragraph, sentence by sentence.
Although this may seem like a miscellaneous inclusion, I found Drucker’s statement to be especially relative. All the original great ideas tend to be forgotten, as time moves on.
Additionally, I find that the first draft is the last draft. Sure, incremental improvements can be made, but the underlying substance is the same.
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To be effective, every knowledge worker, and especially every executive, therefore needs to be able to dispose of time in fairly large chunks. To have small dribs and drabs of time at his disposal will not be sufficient even if the total is an impressive number of hours.
The small dribs and drabs of time should not be dedicated to doing the overarching tasks that ensures company growth.
Instead, they should be devoted to self-improvement, from listening to podcasts and audio-books to reading. They can be used to interact with customers on social media. They can be used to answer some quick emails. The smaller things that add up.
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To spend a few minutes with people is simply not productive. If one wants to get anything across, one has to spend a fairly large minimum quantum of time. The manager who thinks that he can discuss the plans, direction, and performance of one of his subordinates in fifteen minutes — and many managers believe this — is just deceiving himself. If one wants to get to the point of having an impact, one needs probably at least an hour and usually much more. And if one has to establish a human relationship, one needs infinitely more time.
The time we spend with another individual is reflective of how much (or little) we seemingly care about them. People, both clients, and employees, like to feel valued; they love to feel important. If Dale Carnegie’s How to Win Friends and Influence People had to be summed up in one sentence, it would be this.
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Moreover, because knowledge work cannot be measured the way manual work can, one cannot tell a knowledge worker in a few simple words whether he is doing the right job and how well he is doing it. One can say to a manual worker, “our work standard calls for fifty pieces an hour, and you are only turning out forty-two.” One has to sit down with a knowledge worker and think through with him what should be done and why, before one can even know whether he is doing a satisfactory job or not. And this is time-consuming.
They do not come in the proper size and shape for the tasks that have to be done in organization — and they cannot be machined down or recast for these tasks. People are always “almost fits” at best. To get the work done with people (and no other resource is available) therefore requires lots of time, thought, and judgment.
Other musings on interacting with people that I found insightful.
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One important reason for this is that a high standard of living presupposes an economy of innovation and change. But innovation and change make inordinate time demands on the executive. All one can think and do in a short time is to think what one already knows and to do as one has always done.
Although it’s more rewarding to chase innovation and change, it’s more practical to bet on current strengths.
That doesn’t mean you shouldn’t pursue lofty dreams though. If you’re audacious and willing to forgo temporary pleasures, especially free time, it might be much more fulfilling to challenge that status quo.
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Effective executives have learned to ask systematically and without coyness: “What do I do that wastes your time without contributing to your effectiveness?” To ask this question, and to ask it without being afraid of the truth, is a mark of the effective executive.
A similar habit that the most successful people have is continuously asking close ones for personal feedback on their character and behaviors. And then hammer down on their strengths.
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But above all, meetings have to be the exception rather than the rule. An organization in which everybody meets all the time is an organization in which no one gets anything done…
Now, however, he satisfies the status needs of his subordinates in a different manner. He sends out a printed form which reads: “I have asked [Messrs Smith, Jones, and Robinson] to meet with me [Wednesday at 3] in [the fourth floor conference room] to discuss budget. Please come if you think that you need the information or want to take part in the discussion. But you will in any event receive right away a full summary of the discussion and of any decisions reached, together with a request for your comments.”
How Drucker approaches meetings.
This offers two benefits:
- People who aren’t needed don’t need to show up, saving time on both ends.
- It still allows for transparency for those who wish to participate but aren’t especially invited.
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The recurrent crisis is simply a symptom of slovenliness and laziness…
Many executives know all about these unproductive and unnecessary time demands; yet they are afraid to prune them. They are afraid to cut out something important by mistake. But this mistake, if made, can be speedily corrected. If one prunes too harshly, one usually finds out fast enough.
Fear of change.
Yet, inaction is complacency is no worse than if the company were dead.
In The 80/20 Principle, Richard Koch presents a similar issue, in which executives fear pruning the 80% that aren’t harnessing superior results for fear of expelling something crucial.
Nonetheless, Drucker brings up a good point: haste unveils the critical.
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In fact, there is not much risk that an executive will cut back too much. We usually tend to overrate rather than underrate our importance and to conclude that far too many things can only be done by ourselves.
Overconfidence can be treacherous for the well-being of yourself, others, and the organization.
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Time-wastes often result from overstaffing.
[On the other hand] a well-managed factory is boring. Nothing exciting happens in it because the crises have been anticipated and have been converted into routine.
Hmmm…
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One should only have on a team the knowledges and skills that are needed day in and day out for the bulk of the work. Specialists that may be needed once in a while, or that may have to be consulted on this or on that, should always remain outside.
Some skills are easily transferable, including communication and organization. One should have both depth and breadth.
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Operating people, however, usually need not the averages but the range and the extremes — product mix and production fluctuations, length of runs, and so on. To get what they need, they must either spend hours each day adapting the averages or build their own “secret” accounting organization. The accountant has all the information, but no one, as a rule, has thought of telling him what is needed.
Never lose the strategic vision in sight. What is it ultimately that you collectively want to accomplish? By reviewing the finish and adapting to conquer it as efficiently and effectively as possible, fewer managerial mistakes will be made.
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After this had been going on for about one year, I finally asked him, “Why always an hour and a half?” He answered, “That’s easy. I have found out that my attention span is about an hour and a half. If I work on any one topic longer than this, I begin to repeat myself. At the same time, I have learned that nothing of importance can really be tackled in much less time. One does not get to the point where one understands what one is talking about.” During the hour and a half I was in his office every month, there was never a telephone call, and his secretary never stuck her head in the door to announce that an important man wanted to see him urgently. One day I asked him about this. He said, “My secretary has strict instructions not to put anyone through except the President of the United States and my wife. The President rarely calls — and my wife knows better. Everything else the secretary holds till I have finished. Then I have half an hour in which I return every call and make sure I get every message. I have yet to come across a crisis which could not wait ninety minutes.”
Self-awareness comes a long way. By recognizing how you best perform, and catering your work environment to those prerequisites, maximum effectiveness is attained.
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Most people tackle the job by trying to push the secondary, the less productive matters together, thus clearing, so to speak, a free space between them. This does not lead very far, however. One still gives priority in one’s mind and in one’s schedule to the less important things, the things that have to be done even though they contribute little. As a result, any new time pressure is likely to be satisfied at the expense of the discretionary time and of the work that should be done in it. Within a few days or weeks, the entire discretionary time will then be gone again, nibbled away by new crises, new immediacies, new trivia.
Discretionary time is often consumed by wholly unnecessary, trivial tasks. Eradicate unforgivingly.
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The great majority of executives tend to focus downward. They are occupied with efforts rather than with results. They worry over what the organization and their superiors “owe” them and should do for them. And they are conscious above all of the authority they “should have.”
When you eliminate expectancies, work itself becomes much more fulfilling. Results are always most important; everything else should be aligned to them.
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The focus on contribution by itself supplies the four basic requirements of effective human relations: • communications; • teamwork; • self-development; and • development of others.
Usually, the underpinnings of effective human relations would include only communication, teamwork, and perhaps development of others.
Interestingly, Drucker includes self-development too. On second thought though, it makes sense. To be receptive of others’ feelings, one has to learn to be self aware himself. To ensure an amiable relationship, one has to learn to be self-disciplined and channel his emotions well.
Additionally, reading self-help books like How to Win Friends and Influence People and The Psychology of Persuasion provide one with the tools necessary to pursue meaningful relationships.
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He probably sees strength in others as a threat to himself. But no executive has ever suffered because his subordinates were strong and effective. There is no prouder boast, but also no better prescription, for executive effectiveness than the words Andrew Carnegie, the father of the U.S. steel industry, chose for his own tombstone: “Here lies a man who knew how to bring into his service men better than he was himself.”
Additionally, sometimes, executives fear attracting top talent and providing all the company secrets, only have them to leave and start ventures of their own. People fear hiring ambition.
However, ambitious people will be the best performers by far. They always want more out of themselves and others. And even if they trek off, the love and care you provide them may just prompt them to come back and work for you full-time. Lastly, your legacy is created, similar to Carnegie’s: of truly creating “men better than [you were yourself].”
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Structuring jobs to fit personality is almost certain to lead to favoritism and conformity. And no organization can afford either. It needs equity and impersonal fairness in its personnel decisions. Or else it will either lose its good people or destroy their incentive. And it needs diversity. Or else it will lack the ability to change and the ability for dissent which (as Chapter 7 will discuss) the right decision demands…
Individuals can acquire very divergent kinds of knowledge and highly disparate skills. But they cannot change their temperaments. A job that calls for disparate temperaments becomes an “undoable” job, a man-killer.
I find the disparity Drucker strikes between these two passages fascinating. On one hand, one should never hire based on personality since it invariably leads to favoritism and conformity. On the other, he proposes that some jobs call for certain temperaments, and that the contrary must be avoided.
I see merit on both sides though, and find it highly situational.
For instance, one shouldn’t hire someone based on personality if one candidate is lazy but efficient and another is hard-working but slow. The deciding factor should solely be who could perform best.
Yet, stock trading on Wall Street requires a certain temperament; it just wouldn’t do the candidate or the company justice to hire one that is impulsive and easily eruptive.
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To be more requires a man who is conceited enough to believe that the world — or at least the nation — really needs him and depends on his getting into power.
Note the difference that an ambitious man requires more from himself. He believes that he himself is needed by the world. Yet, he is not expecting anything in return. The former is laudable. The latter is disastrous.
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Courage rather than analysis dictates the truly important rules for identifying priorities: • Pick the future as against the past; • Focus on opportunity rather than on problem; • Choose your own direction — rather than climb on the bandwagon; and • Aim high, aim for something that will make a difference, rather than for something that is “safe” and easy to do.
You’ll never regret shooting for the stars and missing. Instead, you’ll regret not aiming high enough and landing.
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One of the amazing things about Peter Drucker is his ability to explain difficult concepts in an easy to understand manner.
Oftentimes, I found Peter Drucker to be so insightful that I felt like I would be redundant if I just incorporated my own commentary. Sometimes, the best way to do a masterpiece justice is to just leave it alone.
As a result, I have linked the rest of the quotes and passages that should stand on their own here.
If this provided any value for you, please share with a friend! If you’re looking for another book review, check out my other articles; I’m publishing one a day! Also let me know if there’s any particular book you want me to cover, and I’ll try to do that!
