Lessons From Peter Drucker

The 10 biggest management lies that Drucker exposed

William Cohen, Ph.D.
Posted: 08/04/2014

Okay, maybe I shouldn’t call them "lies." Maybe "untruths" or "myths" would be kinder, gentler, or more tactful, but the fact is an awful lot of people teach, maintain, and even today, buy into these, and Drucker exposed them and proved them wrong. Consider the following:

#1: Quantitative analysis will give you the answer. All you need to do is believe and follow your results.

Several generations ago I earned my MBA at the University of Chicago. I was required to take quant course after quant course which put to shame even my bachelor’s degree in engineering, and that from a school that had taught the first engineering program in the U.S.!

But Drucker found that even with the best quantitative analysis, QA was topped by politics and people. He pointed out that even if figures told you that 99% of the time those that took a certain action would end up with one result; if you were in the 1% exception you would be 100% wrong in your decision. He urged managers to use quantitative analysis as but one input to their decision-making.

#2: There is always a right answer

There isn’t always a right answer, and that’s why managers are expected to use their judgment. Drucker didn’t tell the following anecdote, but it certainly illustrated his point. A lawyer made a representation before a judge in a divorce case. The judge nodded his head in agreement and commented "That’s right." The attorney for the other side immediately objected and made his own argument before the judge. The judge nodded his head in agreement again and once gain commented "That’s right." Where upon lawyer number one jumped back in and said, "Judge, we can’t both be right." "That’s right, too," observed the judge. So what was the real right answer?

#3: Soft skills like leadership are next to worthless.

To re-word slightly a comment frequently but mistakenly attributed to legendary (American) football coach Vince Lombardi, "Leadership isn’t everything, it’s the only thing." In fact, before Drucker became the first to distinguish between leadership and management (Management is doing things right; leadership is doing the right things"), Drucker wrote way back in 1947 "Management is leadership." He knew that leadership was really the only thing that managers did that was essential.

#4: If you want to become successful get an MBA or a DBA.

Drucker wasn’t against education or against either of these degrees. He felt that the more education and preparation for management, the better. However, he was well aware that having either degree, even from the best business schools, guarantees nothing. He was quick to point out that he himself possessed neither an MBA nor a DBA, and that his own doctorate in law was specifically selected because it was the easiest type of doctorate degree to obtain in Germany in those days.

Today he might have pointed out that Jeffrey Skilling, who drove Enron into the ground, had a Harvard MBA, while Steve Jobs of Apple, who revolutionized computing and portable technology, didn’t even have a college degree except of the honorary type.

#5: Everyone knows what is right; just follow the majority’s opinion.

Being an avid observer of human nature, which he deemed to be of upmost importance in management, Drucker was amazed to discover that not only was this wrong, but that it was almost perfectly wrong.

He was fond of pointing out that "What everybody knows is usually wrong." I’ve based much of what I have been able to accomplish on his exposure of this myth and what I have learned from this common, but erroneous, assumption.

My first book, written more than 30 years ago, became a best seller mostly because I pointed out that in most cases the procedures that everyone knew should be followed to get a job were wrong. Two years ago I started a nonprofit university offering an MBA with innovations such as free textbooks, consulting instruction and application, under the general direction of a Harvard Law School graduate with extensive consulting experience working for McKinsey & Company. In every course we offered face-to-face electronic interaction with professors from Harvard, Yale, Columbia, MIT, Princeton and other top schools, leadership and communication training and more. The price? About $15,000 (U.S.) complete and its not offered online. Of course everyone will tell you it can’t be done at that price. But Drucker was right, we did it anyway, and graduated our second cohort in June of this year.

#6: Avoid or lower risk whenever you can.

Drucker said that without risk, nothing really important gets done and that attempts to reduce risk usually result in failure. The biggest military invasion of all time, the D-Day invasion of Nazi-occupied Europe was one gigantic risk with the most terrible consequences for failure. It succeeded. Another invasion, The Bay of Pigs, a CIA sponsored and U.S. funded invasion of tiny Cuba was a total fiasco. Afterwards President Kennedy ordered an investigation. Some of the primary reasons for failure uncovered included inadequate aircraft and pilots, limitations of armaments, and limited air attacks, all in order to lower the risk of U.S. sponsorship being uncovered and to enable plausible deniability.

#7: If you want good people you’ve got to be willing to pay for them.

Drucker warned that constantly rising executive financial compensation in the U.S. was unnecessary and would lead to greed, poor leadership, and disastrous consequences for the country. The salary of top executives at that time was something like 200 times the income of the lowest paid employee. And by the way, that ratio is much worse today.

Defenders of the system said that it was necessary to pay these amounts to get quality executives and that their responsibilities in number of subordinates and in dollar sales was enormous and required extremely high pay. Drucker noted that many executives were paid these exorbitant salaries while their corporations were losing money and while they were discharging employees. He noted that top generals in the military might be responsible for billions of dollars in equipment and could be responsible for the lives of tens of thousands or more subordinates. Yet they were and are paid far less. A top U.S. general today makes about $230,000 a year. That’s far less than the multi-million dollar pay of many top business executives.

#8: Decisions made from the gut are usually bad.

Drucker repeatedly said that managers need to learn to make decisions from the gut. He felt that this is what they got paid for. They need to integrate their education, experience, character, judgment, and in the capabilities and experience of their subordinates as well as the resources available, the general situation each faced and other factors that rested below the level of consciousness. That this is why quantitative analysis of anything is only one input among much else that cannot be easily quantified.

#9: If you have a good product, marketing is unnecessary.

Drucker found that any business has only two necessary functions: innovation and marketing. Presumably a good product means something better than that offered by a competitor. That comes from innovation. Steve Jobs was not an engineer or scientist. What he did was to understand the possibility of the concept of the personal computer. Previously giant IBM and other large computer corporations, with all their engineers and scientists had not seen this. But Jobs, without even a college education, did. So he innovated out of his garage with fellow computer pioneer, Steve Wozniak.

"Build a better mousetrap, and the world will beat a path to your door" is a phrase erroneously attributed to Ralph Waldo Emerson, a 19thcentury American essayist. We know that even the attribution is wrong because the mousetrap wasn’t invented until 1889, seven years after Emerson’s death. The fact is, unless the world knows about that better mousetrap, you haven’t a prayer, regardless whether Emerson authored the phrase or not.

The first key player Jobs brought on after Apple sold a little product was Mike Markkuta, an experienced marketer. He had made millions as a marketing manager for Fairchild Semiconductor and retired at the ripe old age of 32. Drucker knew that without marketing you have no business, and so did Jobs.

#10: The purpose of a business is to make a profit.

How can anyone possibly argue with the truth of this untruth? It sounds like a no-brainer. When I first heard Peter utter these words I thought it was some sort of altruism he was trying to promote. I accepted it not because it made any immediate sense, but simply because it came from Peter Drucker. Later I examined it much closer and saw where he was coming from and had to agree with his logic. Drucker reasoned that society entrusted wealth producing resources to a business enterprise in order to satisfy the wants and needs of the consumer. Therefore in any business the customer was the foundation. Without a customer there could be no business as the customer alone gave employment.

Profit, then, was a support function. It gave incentive to those who invested their time, money, and/or resources in the enterprise. Further, it enabled the two basic functions of innovation and marketing. Without these two, the enterprise would have no customers and would die. Therefore profit, like oxygen, was necessary for a business’ survival. But profit was the not business’ purpose.

When a genius speaks, you listen to what he says. Drucker spoke, and in the process changed much of how we look at management forever.

William Cohen, Ph.D.
Posted: 08/04/2014

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