Peter Drucker is often referred to as “the founder of modern management,” making large impacts through his work in management consulting, teaching, and writing 39 books. He also wrote for the Wall Street Journal, The Economist, and The Harvard Business Review. This influential guy knew how to keep busy, and there are some helpful business lessons from Peter Drucker that every current, future, or active manager and entrepreneur should know.
Drucker was a business thinker and believed “that in modern society there is no other leadership group but managers. If the managers of our major institutions, and especially of business, do not take responsibility for the common good, no one else can or will.”
He built relationships with a lot of business executives at large corporations like IBM, GM, GE, Sears, The Salvation Army, and the American Red Cross. Although his analysis of GM caused a bit of a stir, his beliefs were well received during the latter half of the 20th century.
Drucker received several awards in his lifetime, most prominently the Presidential Medal Of Freedom, the Presidential Citation at NYU, and seven McKinsey Awards from The Harvard Business Review. He passed away in 2005 at the age of 95 and remains well respected for his influence and teachings on management theory.
Drucker’s Business And Management Lessons
Action should follow thought. Things move fast in the business world and pressure can make us act hastily and irrationally. Drucker believed that acting without thinking is the cause of every failure. Although everybody makes mistakes and we can get up and try again, we’ll have fewer roadblocks if we are more mindful about the actions we take.
The crucial third sector. The three main sectors are the government, private, and non-profit. Drucker believed in the global importance of non-profit organizations because of the economic impacts they make on countries all over the world. I tend to agree. There are incredible foundations and NGOs that fight for human rights, environmental protection, education, and medical research that make much larger impacts than those found in the government.
Community. Another one of the business lessons from Peter Drucker is the importance of community. He believed that volunteering supports better communities because of the positive affects it has on people. Although there are skeptics out there on corporate volunteering, I am a supporter. Not every business cares about their public perceptions when it comes to sponsorship or community outreach, but I certainly admire those who are involved and show their support.
Decentralization. Drucker believed in simplification when it came to business. From his research, he felt many companies expanded too far into irrelevant sectors and suffered from over hiring and producing too many products. He said companies work best when they are decentralized.
Focus on the front end. It’s hard to imagine a business that doesn’t outsource these days. Drucker encouraged companies to focus on “front room” activities and hire other companies to perform “back room” functions, which lead to what we now know as outsourcing. I have a tendency to be stubborn when it comes to business and want to be able to do everything myself, but that is inefficient and just leads to too much stress. We need to recognize our strengths and let others step in where we are weak.
The value of people. One of Peter Drucker’s core management philosophies is that knowledgable people are a company’s most valuable resource. Employees should be respected and treated as the true assets that they are, not as liabilities. It’s also the responsibility of management to train and support workers so they can perform at their best while also giving them ample space and freedom.
I’m a big proponent of this business lesson from Peter Drucker because I’ve been both a manager and an employee. I’ve seen how smooth the wheels turn and how fast the train can go when the right people are on board working together. If even just one malefactor gets on board however, the entire train starts to break down quickly and will eventually derail if that bad apple isn’t booted off.
Don’t be too clingy. Just because a business did something great in the past, it can’t assume it is best off clinging to that success and be resistant to change. It’s natural to want to stick with what has worked in the past, but there is often a need for “planned abandonment” when market trends and customer needs change. If a product or service is no longer useful or in demand, it’s time to hang your hat on project x and start on project y.
Customer Service. We all certainly know the importance of customer service, especially since we are on the receiving end with businesses all the time. But profitability can often start to take priority over customer service, and that’s when things can get dicey. Drucker believed that customer service should be the primary goal of a business, not profits. However that is sometimes a lot easier said than done. I certainly know plenty of rude and difficult clients that are a challenge to handle, and serving their needs over profitability certainly isn’t always my priority! But I do think that in general, businesses who are able to provide high quality customer service will do very well financially with enough time and persistence.
MBO. Peter Drucker is also well known for the principle management by objectives (MBO). It’s a fancy sounding phrase for working with employees to set and achieve goals. The better an employee understands his/her role and has clearly defined objectives, the better the outcome. Drucker also believed that managers should make sure that these employee objectives are in line with those of the company, and provide the necessary support for employees to achieve their goals.
Peter Drucker Quotes
- “Efficiency is doing things right; effectiveness is doing the right things.”
- “Time is the scarcest resource and unless it is managed nothing else can be managed.”
- “The best way to predict the future is to create it.”
- “Management by objective works – if you know the objectives. Ninety percent of the time you don’t.”
- “There is nothing so useless as doing efficiently that which should not be done at all.”
- “Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.”
- “Follow effective action with quiet reflection. From the quiet reflection will come even more effective action.”
- “The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”
- “Management is doing things right; leadership is doing the right things.”
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Updated for 2016 and beyond
Poor Student says
I took a couple of management classes, and I follow the trends in the market of which companies are thriving at the moment and how they do that. I definitely agree that companies have to constantly be innovative. Nowadays things move fast and if we only stick to old practices we will be left behind.
I’ve also noticed that flat structures are becoming more and more popular, especially in the Bay Area. Times are changing!
I find that myself and many people have studied management and best practices, but then run in to red tape, tradition and old school thought in the business world. A lot of times you have training and meetings to do better, but then once things get tight, it’s back to the old methods and bottom line.
Good practices are best reflected at the top and not just talked about but put in to action as well. Takes time and effort, but keeps a company productive and customer service focused.
Yeah it’s funny that when I was in a more junior role, I didn’t think my company had any politics at all. But the higher I climbed, I realized how foolish I was to think that. Now all I see is red tape and old methods so I’m really hoping my next job will be more forward thinking!
Jason@Islands of Investing says
I’ve only read the odd article or two from Peter Drucker, so this is a fantastic summary for me to read. I’m a huge supporter of the value of people, and am lucky to be part of a great team where I get to see how well this works when everyone feels valued and supports each other. The customer service one is a huge one for me too, especially working in consulting. I learnt some great lessons early on about what can happen when you put your own personal needs or feelings first instead, or take a short term focus with the client, which have really helped me focus on what customer / client service really means, and how much ‘goodwill’ it can create in the long run.
I’m glad to hear you enjoyed the post. I totally agree on the importance of feeling valued. The worst is feeling overworked, underpaid, and unhappy!
I remember studying Drucker in Grad school a long time ago. I think he was most famous for his management by objectives. When I worked in the corporate world, it iwas very important to tie everyone’s goals to the company goals. It still works!
Yes he’s quite a popular topic in grad school. Aligning our goals with the company’s is definitely beneficial and not something we always think directly about. It can be a pain writing SMART goals during formal reviews once or twice a year, but it’s helpful to keep us motivated and shows management how well we are performing against our peers and developing over time too.