In his book, “The Effective Executive“, Peter Drucker discusses his views on what “effectiveness” is for knowledge workers, and how they can maximize their effectiveness. I read this book in 2015 and found it enlightening. Since then, I’ve been meaning to summarize my notes in order to re-read it. I’ll share my book notes below. My hope is that you’ll purchase a copy of the book yourself, since Drucker’s anecdotes really bring his lessons to life.
To provide background on Peter Drucker, he is an academic and consultant who was one of the earliest to begin studying management. Beginning his academic career post-World War 2, he studied, consulted and wrote about management continuously until his death in 2005. His life spanned the apex of the age of labor, the rise of massive business organizations, the emergence of the knowledge economy, the transistor paving the way for the information age, and the rise of the Internet. Given his perspective, his writing always strikes me as taking the long view on issues and avoids the momentary hype. On the one hand, everything has changed. On the other, human nature has not changed.
Ever since I read a collection of Drucker’s articles in 2007, I have been a big fan of his. What I appreciate most about him is that he takes a philosophical approach to thinking clearly about business, simplifying away distracting minutiae to get at the heart of things. His writing is plain and his explanations are crystal clear. There is no hand waving and obfuscation in his books. To illustrate, Drucker writes that the core purpose of a business is to create a customer. “Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.” Looking at a business school curriculum, one might be led to believe that business is about accounting, strategy, organizational behavior, advertising, etc. However, at the very core, if a business can’t create and keep a customer, every other supporting activity is effectively rearranging deck chairs on the Titanic.
My notes:
A. Effectiveness Can Be Learned
For starters, the book’s title is a bit deceptive, because it focuses on all knowledge workers, not just top level executives. Drucker suggests that a knowledge worker is an executive “if, by virtue of his position of knowledge, he is responsible for a contribution that materially affects the capacity of the organization to perform and to obtain results.” Oftentimes, a knowledge worker has the deepest knowledge of his or her area of the company, so higher-up’s must defer to that knowledge worker’s understanding and judgment. Also, the work that a mid-level manager performs for his or her area may be similar in breadth to the work that the CEO performs, but for a subset of the company’s operations.
The knowledge worker gets paid for “effectiveness,” by which Drucker defines as “getting the right things done.” As a stylized example, if a company must choose between investing to build either Product A or Product B, that company’s knowledge workers may not necessarily be designing or building the product, but they must influence the company to make the optimal choice with the knowledge they have.
Providing historical context in the book’s first edition in 1967, Drucker suggests, “up to recent times, the major problem of organization was efficiency in the performance of the manual worker who did what he had been told to do. Knowledge workers were not predominant in organization. In fact, only a small fraction of the knowledge workers of earlier days were part of an organization. Most of them worked by themselves as professionals … Today, however, the large knowledge organization is the central reality.”
Effectiveness must be learned. Nobody is born innately effective.
Four realities of executives:
– Their time belongs to everyone else
– They are forced to keep operation, e.g. being in reactive mode, unless they take positive action to change their reality – to set their priorities differently, to change what things are done and how they are done
– They exist within an organization – so they must rely on other people to get things done better with the information that they provide
– They often do not have a clear view of the outside – they’re trapped in their organization’s way of seeing things. However, results exist only outside of the organization – with the value derived by the customers. Everything inside the organization is cost and effort, which must necessarily generate results on the outside.
The important outside facts are often qualitative, and cannot be captured in data. The important information is not the trends themselves, but the changes in the trends. It’s important not to over-rely on information that can be converted to computer-based data and logic.
Strong organizations must be built on the backs of effective people of normal ability, not heroic geniuses. “What seems to be wanted is universal genius, and universal genius has always been in scarce supply.” The experience of the human race indicates strongly that the only person in abundant supply is the universal incompetent. We will therefore have to staff our organizations with people who at best excel in one of these abilities. And they are more than likely to lack any but the most modest endowment in the others.”
Five key practices of effective executives: (this list outlines the book’s next chapters)
– Knowing where their time goes – and managing their precious little time carefully
– Focus on outward contribution
– Build on strengths – of themselves and others in the organization
– Focused effort on areas of leverage – concentrate on the few major areas where superior performance will produce outstanding results
– Make effective decisions – using a rigorous decision process
B.) Know Thy Time
Time is the limiting factor. Every executive will have more demands on his or her time the higher up they are. Most of these demands are a waste of their time.
“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.” (Alan note: I will commit to starting to keep a time journal for the next 3 months)
“I have yet to see an executive, regardless of rank or station, who could not consign something like a quarter of the demands on his time to the wastepaper basket without anybody’s noticing their disappearance.”
Three step process for managing time better:
1. recording time – using a time journal to analyze where your time is spent
2. managing time
– First, identify your time wasters: a. things that don’t need to be done, b. things that can be delegated, c. things that you do to waste other people’s time.
– Next, identify the time wasters in your organization: a. recurrent crises, b. overstaffing, which is signaled by political feuds, c. malorganization, which is signaled by an excess of meetings, and d. malfunctions of information, e.g. information not being communicated accurately, information in the wrong form
3. consolidating time – most important executive tasks require a single large stretch of time devoted to it, otherwise the time is wasted. Consolidating time means chunking out large chunks of time for such discrete tasks.
Working with people requires time. Most people are time wasters. Knowledge workers require a lot of time, in order to maintain relationships to keep them motivated.
Decisions about people / staffing are the most important decision that an executive can make. These decisions should be made slowly and deliberately. “But without exception, [the effective executives] make personnel decisions slowly and they make them several times before they really commit themselves.”
C.) What Can I Contribute?
“The great majority of executives tend to focus downward. They are occupied with efforts rather than with results … The man who focuses on efforts and who stresses his downward authority is a subordinate no matter how exalted his title and rank. But the man who focuses on contribution and who takes responsibility for results, no matter how junior, is in the most literal sense of the phrase, ‘top management.’ “
“The focus on contribution turns the executive’s attention away from his own specialty … It turns his attention to the outside, the only place where there are results … He therefore will also come to think in terms of the customer, the client, or the patient, who is the ultimate reason for whatever the organization produces … As a result, what he does and how he does it will be materially different.”
“Knowledge workers do not produce a ‘thing.’ They produce ideas, information, concepts. The knowledge worker, moreover, is usually a specialist. In fact, he can, as a rule, be effective only if he has learned to do one thing very well; that is, if he has specialized. By itself, however, a specialty is a fragment and sterile. Its output has to be put together with the output of other specialists before it can produce results … This means that he must think through who is to use his output and what the user needs to know and to understand to be able to make productive the fragment the specialist produces.”
“The man of knowledge has always been expected to take responsibility for being understood. It is barbarian arrogance to assume that the layman can or should make the effort to understand him.”
“The only meaningful definition of a ‘generalist’ is a specialist who can relate his own small area to the universe of knowledge.”
Due to specialization and their existence within an organization of knowledge workers, executives’ effectiveness comes only through good working relationships. Key to these relationships are:
– Communications – good expectations setting, asking subordinates what they think they should contribute, which is usually different from what the manger thinks
– Teamwork – understand who uses their outputs, and working as a team in that regard
– Self development
– Development of others
Effective meetings – “The effective man always states at the outset of a meeting the specific purpose and contribution it is to achieve … He always, at the end of his meetings, goes back to the opening statement and relates the final conclusions to the original intent.”
D. Make Strength Productive
On staffing issues, the effective executive “does not make staffing decisions to minimize weaknesses but to maximize strength.”
“Whoever tries to place a man or staff an organization to avoid weakness will end up at best with mediocrity … Strong people always have strong weaknesses too … The executive who … tries to avoid weakness rather than make strength effective is a weak man himself. He probably sees strength in others as a threat to himself.”
“Human excellence can only be achieved in one area, or at the most in very few.”
Set impersonal job objectives and measure against them. “It is the only way to provide the organization with the human diversity it needs … To tolerate diversity, relationships must be task-focused rather than personality-focused. Achievement must be measured against objective criteria of contribution and performance. This is possible, however, only if jobs are defined and structured impersonally … Structuring jobs to fit personality is almost certain to lead to favoritism and conformity … One implication is that the men who build first-class executive teams are not usually close to their immediate colleagues and subordinates.”
Four rules for staffing for strength effectively
– Understand that all jobs are designed by fallible people. “… do not start out with the assumption that jobs are created by nature or by God.” Some jobs are designed poorly to be “impossible jobs.” “The rule is simple: Any job that has defeated two or three men in succession, even though each had performed well in his previous assignments, must be assumed unfit for human beings. It must be redesigned.”
– “Make each job demanding and big. It should have challenge to bring out whatever strength a man may have … This, however, is not the policy of most large organizations. They tend to make the job small.”
– “Start with what a man can do rather than what a job requires. This, however, means that they do their thinking about people long before the decision on filling a job has to be made, and independently of it.”
– “To get strength one has to put up with weaknesses” … It is “delusion that two mediocrities achieve as much as one good man.”
Performance appraisals must focus on past performance, they cannot focus on future potential. Key questions for performance appraisals:
– What has he / she done well?
– What, therefore, are they likely to do well?
– What do they have to learn / acquire to get the full benefits from their strength?
– If I had a child, would I be willing to let them work under this person? Why or why not?
“Every people-decision is a gamble. By basing it on what a man can do, it becomes at least a rational gamble.”
Managing one’s boss is critical to making the most use of one’s own strengths. Making the strength of the boss productive is key to a subordinate’s own effectiveness.
“In every area of effectiveness within an organization, one feeds the opportunities and starves the problems … Weakness only produces headaches – and the absence of weakness produces nothing.”
E. First Things First
“If there is any one ‘secret’ of effectiveness, it is concentration. Effective executives do first things first and they do one thing at a time.”
“The more an executive focuses on upward contribution, the more will he require fairly big continuous chunks of time … Yet to get even that half-day or those two weeks of really productive time requires self-discipline and an iron determination to say ‘No.’ “
“The people who get nothing done often work a great deal harder. In the first place, they underestimate the time for any one task. They always expect that everything will go right. Yet, as every executive knows, nothing ever goes right.”
Slough off the past. Stop doing tasks inherited from the past that have stopped being productive. “Yesterday’s successes, however, always linger on long beyond their productive life … Above all, the effective executive will slough off an old activity before he begins a new one … Systematically sloughing off the old is the one and only way to force the new.”
New tasks are risky, so it’s best to bring people experienced in the organization to build the new tasks. Bringing new people into the organization for this purpose introduces an extra element of risk, since they do not know the old tasks.
“Typically, there will then be no time for the most time-consuming part of any task, the conversion of decision into action. No task is completed until it has become part of organizational action and behavior. This almost always means that no task is completed unless other people have taken it on as their own, have accepted new ways of doing old things or the necessity for doing something new, and have otherwise made the executive’s ‘completed’ project their own daily routine.”
“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.”
F. The Elements of Decision-Making
“Effective executives do not make a great many decisions. They concentrate on the important ones … They are, therefore, not overly impressed by speed in decision-making … They know that the most time-consuming step in the process is not making the decision but putting it into effect … This means that, while the effective decision itself is based on the highest level of conceptual understanding, the action to carry it out should be as close as possible to the working level and as simple as possible.”
The elements of a decision process: (more detail below)
a. The clear realization that the problem was generic and could only be solved through a decision which established a rule, a principle
b. The definition of the specifications which the answer to the problem had to satisfy, e.g. boundary conditions
c. The thinking through what is “right”, that is, the solution which will fully satisfy the specifications before attention is given to the compromises, adaptations, and concessions needed to make the decision acceptable
d. The building into the decision of the action to carry it out
e. The feedback which tests the validity and effectiveness of the decision against the actual course of events
a. “The generic always has to be answered through a rule, a principle. The exceptional can only be handled as such and as it comes.”
Four types of occurrences requiring decisions:
– Generic and frequent – e.g. a production process that produces outputs which are out of spec, causing customer problems
– Generic and infrequent – e.g. a merger and acquisition offer
– Unique and infrequent (rare) – e.g. thalidomide poisoning of babies in 1950s. But are these truly unique?
– Unique and infrequent => Generic and infrequent – The “unique and infrequent” event is only the first manifestation of a new type of generic problem, which a rule or principle can be applied to as a solution.
“By far the most common mistake is to treat a generic situation as if it were a series of unique events; that is, to be pragmatic when one lacks the generic understanding and principle. This inevitably leads to frustration and futility.”
“Equally common is the mistake of treating a new event as if it were just another example of the old problem to which, therefore, the old rules should be applied.”
“Almost as common is the plausible but erroneous definition of the fundamental problem.”
“Or the definition of the problem may be incomplete.”
“The effective decision-maker, therefore, always assumes initially that the problem is generic. He always assumes that the event that clamors for his attention is in reality a symptom. He looks for the true problem. He is not content with doctoring the symptom alone. And if the event is truly unique, the experienced decision-maker suspects that this heralds a new underlying problem and that what appear as unique will turn out to have been simply the first manifestation of a new generic situation. This also explains why the effective decision-maker always tries to put his solution on the highest possible conceptual level.”
b. What the decision must accomplish / Boundary conditions – not always easy to find and intelligent people often disagree on what they are
“Defining the specifications and setting the boundary conditions cannot be done on the ‘facts’ in any decision of importance. It always has to be done on interpretation. It is risk-taking judgment. Everyone can make the wrong decision … But no one needs to make a decision which, on its face, falls short of satisfying the boundary conditions.”
c. Choose what is right vs. what is acceptable – because you will have to compromise later
Two kinds of compromise situations
– “Half a loaf is better than no bread”
– Cutting a baby in half, such as in Judgment of Solomon
d. Converting the decision into action – most time consuming step
“No decision has been made unless carrying it out in specific steps has become someone’s work assignment and responsibility. Until then, there are only good intentions.”
Distinct questions to convert decisions into actions:
– Who has to know of this decision? (often overlooked)
– What action has to be taken/
– Who is to take it?
– What does the action have to be so that people who have to do it can do it? (often overlooked)
“The action must also be appropriate to the capacities of the people who have to carry it out.”
e. Feedback on the decision
The most reliable feedback is to go look for oneself. Second most reliable is to send a trusted aide. Never rely on what a responsible subordinate tells you.
G. Effective Decisions
“A decision … is rarely a choice between right and wrong. It is at best a choice between ‘almost right’ and ‘probably wrong’ – but much more often a choice between two courses of action neither of which is provably more nearly right than the other.”
“One does not start with facts. One starts with opinions … To determine what is a fact requires first a decision on the criteria of relevance, especially on the appropriate measurement. This is the hinge of the effective decision, and usually its most controversial aspect.”
“The understanding that underlies the right decision grows out of the clash and conflict of divergent opinions and out of te serious considerations of competing alternatives.”
A rigorous decision method must recognize that we begin with opinions, which are untested hypotheses that we must test as scientifically as we can.
“Whenever one analyzes the way a truly effective, a truly right, decision has been reached, one finds that a great deal of work and thought went into finding the appropriate measurement … The effective decision-maker assumes that the traditional measurement is not the right measurement. Otherwise, there would generally be no need for a decision; a simple adjustment would do. The traditional measurement reflects yesterday’s decision … Finding the appropriate measurement is thus not a mathematical exercise. It is a risk-taking judgment … Effective executives therefore insist on alternatives of measurement – so that they can choose the appropriate one.”
“One does not make a decision unless there is disagreement.” Three main reasons for insistence on disagreement:
– It’s the only safeguard against the decision-maker becoming a prisoner of the organization – e.g. someone trying to fight for their own interests by influencing the decision
– Disagreements alone can provide alternatives to a decision – decisions without alternatives are gambles
– Disagreements stimulate the imagination. (Alan note: reference Daniel Kahneman’s “pre-mortem”, asking the working group making the decision, “Let’s say we make this decision and it fails in 12 months. Why would it have failed?”)
“The effective decision-maker does not start out with the assumption that one proposed course of action is right and that all others must be wrong. Nor does he start out with the assumption, ‘I am right and he is wrong.’ He starts out with the commitment to find out why people disagree … The effective executive is concerned first with understanding. Only then does he even think about who is right and who is wrong.”
A final question is whether a decision is even necessary, or if we should do nothing. “Every decision is like surgery. It is an intervention into a system and therefore carries with it the risk of shock … One has to make a decision when a condition is likely to degenerate if nothing is done. This also applies with respect to opportunity.”
“Act or do not act; but do not ‘hedge’ or compromise. The surgeon who takes out half the tonsils or half the appendix risks as much infection or shock as if he did the whole job. And he has not cured the condition, has indeed made it worse.”