The brain is for thinking, use it!
In this month's Lessons from Peter Drucker, Dr William Cohen gives an insight into effective managing consulting and the importance of taking the time to think through every situation.
Although Drucker was aware of the use of many innovative methodologies developed over the years for analyzing business situations and determining strategies, he made almost no use of them, emphasizing instead thinking through every situation on its own merits.
He never taught, “portfolio analysis” with their famous quadrants of cash cows, shooting stars, problem children, or dogs as developed by the Boston Consulting Group (BCG) or the GE/McKinsey nine cell version, or any other version of management or business strategy by rote methods. He was one of the first to point out that the main inputs in the BCG matrix would encourage organizations to grow by acquisition without the attention needed as to whether the acquiring corporation added valued in managing the assets of the acquired business.
At the same time, many corporations were growing and were extremely profitable by concentrating their resources in products or businesses where they could grow in profit even while their size remained relatively small.
"Eventually, many of the rapidly growing conglomerates based on acquisition failed, and Drucker was proven correct."
Not that Drucker opposed acquisition or increasing in size. He was all for acquisition if the acquiring organization had something to offer the acquired and if other owned businesses were dropped so that resources would be available to make the new acquisition viable.
Drucker’s emphasis on feelings over numbers in decision making
Drucker insisted on measures in just about everything but the results were to be considered primarily informational. He avoided decision making by numbers whereby the decision was made for the manager by merely inputting certain data considered crucial to a software program, turning on a computer, and having the answer magically appear.
He pointed out that one could gather data on thousands of businesses, including primary factors, even the weather and some elements thought to be relatively insignificant and before the results were finally attained. You could then design the software based on your extensive data. You might claim that by imputing your own situational data you might be able to predict the project results with a high per cent of accuracy, say 92.5 per cent. That’s significant, but the significance may be of little help in a particular situation.
Drucker maintained that this was still inferior to using your brain, thinking through everything and making your own decision based on available information, your experience and knowledge of the nature of your own personnel and organization. He noted that your knowledge or instinct of one vital factor might well be decisive and that the computer would never pick it up.
He reminded his students and his clients that though a certain program might give accurate outcome results of 92.5 per cent for that time, for the other 7.5 per cent of the time the results were 100 per cent inaccurate. In other words, if failure or success was the outcome you sought to predict, if the end result was part of that 7.5 percentage area, your answer was 100 per cent in error.
He recommended managerial gut decisions after considering all the information that could be obtained. Drucker told his clients to make “gut” decisions, but these gut decisions were to be made with the brain.
"The brain was a better device than a computer and is associated software by itself for decision-making."
The most difficult aspect of being a Drucker client
I heard once that the manner in which he provided his consulting was the most difficult thing about being a Drucker client. One Drucker client expressed it this way: “We had been accustomed to hiring consultants to whom we told what we wanted done or asked them to solve a specified problem. They then went off and returned after some time with mounds of data and reports. We were told exactly with what we were to do. And if we didn’t understand it, they were happy to explain themselves in more detail and to answer our questions. Drucker did none of that.
He would begin by asking us questions which we were expected to answer. If the engagement was an all-day event, he might lecture on various topics which seemed to have nothing to do with our problem. We had to think through logically to get to solutions ourselves which we would have otherwise completely overlooked.”
*Adapted from the book Peter Drucker on Consulting: How to Apply Drucker’s Principles for Business Success by William Cohen (LID, 2016), also titled Consulting Drucker: Principles and Lessons from the World’s Leading Management Consultant (LID, 2017) and syndicated elsewhere.