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Peter Drucker and Management Musings

Now is the anniversary of the economic meltdown that happened in 2008 around this time. There’s been a lot of articles about why, what, when and lessons learned. As spectacular failures are, it is best that we study and learn how to avoid getting into these kinds of situations in the future. At least in the US, there doesn’t appear to be lots of traction to fundamentally change the systemic root causes responsible for the economic carnage that still shakes us today.

I do note that this happens to be the centennial of Peter Drucker if he were still alive today. I’m a big Drucker disciple and this article by Rick Wartzman, the executive director of the Drucker Institute at Claremont Graduate University, in Businessweek is a wonderful common sense piece. What he writes sadly is nothing new, and tragically, nothing much is happening to improve it. The history adages dooming us to failure is illustrated:

George Santayana:
Those who cannot learn from history are doomed to repeat it.
George Bernard Shaw:
We learn from history that we learn nothing from history.

Wartzman lists the following key points:

  • 1. Executives who are preoccupied with their company’s daily stock price or consumed with quarterly earnings targets don’t make very good stewards of the enterprise.
  • How true is this? Even decisions made far down the organization chart are often short-term despite the fact that we know this is not healthy nor productive. Our management failures are deeply rooted and ingrained in doing the expedient at the expense of efficacy. That’s because the latter takes courage which is in short supply that it could be said to be a rare human item. We’re now in the business of following short term gains and becoming no better than our Asian friends here where time frames and attitudes are very much today and the present and lacking the long-term vision and planning that has always been the hallmark and strength of American business and capitalism.

    Build something that outlasts you – that’s the right legacy.

  • 2. Tying individual compensation to short-term gains only exacerbates the problem.
  • Yes, be the fool that bets against human nature. Systems, processes, all must be built to acknowledge the right assumptions about people. That was Alan Greenspan’s colossal failure and hence his legacy will be stained by this incredible oversight. I don’t blame him, lots of folks who should know better have done just as spectacularly bad as him. He’s got good company.

  • 4. High profits don’t necessarily mean that you’re producing anything of genuine value.
  • And apparently nobody cares this is happening. Yes, it’s an indictment on the current economic system, but real capitalists understand this is not sustainable. The whole world is one big bubble.

    “Securities analysts believe that companies make money,” said Drucker. “Companies make shoes.”

    Amen to that.

  • 5. Moving money around isn’t the same thing as producing actual goods and services.
  • This seems so simple and I may be naive and outdated to believe so. But financial instruments do not contribute to long lasting value or development for society. It’s not-tangible as the trillions of “book value” was totally obliterated in mere weeks. If it were real, it wouldn’t have happened.

    In fact, we’re perpetuating the whole Enron fiasco all over again. Please, someone tell me what’s materially different between Enron’s use of “special purpose entitites” and what Barclay just recently announced with its $12bn credit vehicle and which so many other financial institutions have done to date? The only thing I see different is that this time, the governments are okaying it…and somehow that’s just fine.

  • 8. It’s especially hard to avoid those losses when you don’t want to hear any bad news.
  • And this is where the management and leadership bit kicks in – if we don’t make a stand somewhere, then inevitably, we will feel the hurt. As businesses are also social institutions, we must face the fact that senior managers and executives must make hard choices and stand up to them as failure to do so can/will have catastrophic consequences. See Erin Brockevich and others like it which are many, most recently the toxic waters series by New York Times…

  • 10. “Stupid people make stupid mistakes. Brilliant people make brilliant mistakes.”
  • What an indictment of our current educational system to date…

    Go join one of the up-coming Drucker Celebrations happening world-wide.

    Peter Drucker Management Guru

    Peter Drucker Management Guru

    Categories: Leadership, Management
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