Peter Drucker

Peter F. Drucker – The Peter F. Drucker – The Father of Modern Father of Modern

ManagementManagement “ “Presented By”Presented By”

Goutam SinghGoutam Singh

Alari BasumatariAlari Basumatari

Shubodip MitraShubodip Mitra

Subash kumarSubash kumar

AGENDAAGENDA

Introduction about Peter DruckerIntroduction about Peter Drucker Contributions made Contributions made Relevance in present contextRelevance in present context QuestionsQuestions

Peter Ferdinand DruckerPeter Ferdinand Drucker (1909 – (1909 –

2005)2005)

Management Consultant Management Consultant Born in Kaasberg Born in Kaasberg

(Vienna),Austria(Vienna),Austria Doctorate in International Law, Doctorate in International Law,

Germany Germany 1937 – Moved to U.S 1937 – Moved to U.S Professor - N.Y.University Professor - N.Y.University

(1950-1971)(1950-1971) Professor – Claremount Professor – Claremount

Graduate University (1971 - Graduate University (1971 - 2005) 2005)

CareerCareer . . . . . .

Started as business thinker (1945) – General Motors.Started as business thinker (1945) – General Motors.

created created Concept of Corporation. Concept of Corporation. Author of thirty books.Author of thirty books. Editorial Columnist – Wall Street Journal (1975 – 1995)Editorial Columnist – Wall Street Journal (1975 – 1995) Contributor to Contributor to

- Harvard Business Review. - Harvard Business Review.

- The Atlantic Monthly.- The Atlantic Monthly.

- The Economist - The Economist Consultant to businesses and non-profit organizationsConsultant to businesses and non-profit organizations Awarded Presidential Medal of Freedom by U.S Awarded Presidential Medal of Freedom by U.S

President.President.

Seminal works in Seminal works in management…management…

Concept of Corporation Concept of Corporation The Practice Of Management The Practice Of Management Technology Management and Society Technology Management and Society The changing World of ExecutiveThe changing World of Executive The Frontiers of Management The Frontiers of Management The End of Economic Man The End of Economic Man Peter Drucker on the Profession of ManagementPeter Drucker on the Profession of Management Management Challenges of 21Management Challenges of 21stst Century Century

Ideas through Drucker’s Ideas through Drucker’s WritingsWritings

A profound skepticism about macroeconomic theory. Drucker A profound skepticism about macroeconomic theory. Drucker contended that economists of all schools fail to explain significant contended that economists of all schools fail to explain significant aspects of modern economies. aspects of modern economies.

A desire to make everything as simple as possible. According to A desire to make everything as simple as possible. According to Drucker, corporations tend to produce too many products, hire Drucker, corporations tend to produce too many products, hire employees they don't need (when a better solution would be employees they don't need (when a better solution would be contracting out), and expand into economic sectors that they should contracting out), and expand into economic sectors that they should stay out of. stay out of.

The need for "planned abandonment." Corporations as well as The need for "planned abandonment." Corporations as well as governments have a natural human tendency to cling to "yesterday's governments have a natural human tendency to cling to "yesterday's successes" rather than seeing when they are no longer useful. successes" rather than seeing when they are no longer useful.

The lasting contribution of the "father of scientific management", The lasting contribution of the "father of scientific management", Frederick Winslow Taylor,Although Drucker had little experience with Frederick Winslow Taylor,Although Drucker had little experience with the analysis of blue-collar work (he spent his career analyzing the analysis of blue-collar work (he spent his career analyzing managerial work), he credited Taylor with originating the seminally managerial work), he credited Taylor with originating the seminally important idea that work can be broken down, analyzed, and improved. important idea that work can be broken down, analyzed, and improved.

He wrote extensively about Management by objectivesHe wrote extensively about Management by objectives A company's primary responsibility is to serve its customers. Profit is A company's primary responsibility is to serve its customers. Profit is

not the primary goal.not the primary goal.

Contributions madeContributions made

Drucker’s primary contribution is not a Drucker’s primary contribution is not a single idea, but rather an entire body single idea, but rather an entire body of work that has one gigantic of work that has one gigantic advantage: nearly all of it is essentially advantage: nearly all of it is essentially right. Drucker has an uncanny ability right. Drucker has an uncanny ability to develop insights about the workings to develop insights about the workings of the social world, and to later be of the social world, and to later be proved right by history proved right by history

The timelineThe timeline

It was Drucker who introduced the idea of decentralization It was Drucker who introduced the idea of decentralization -- in the 1940s -- which became a bedrock principle for -- in the 1940s -- which became a bedrock principle for virtually every large organization in the world.virtually every large organization in the world.

He was the first to assert -- in the 1950s -- that workers He was the first to assert -- in the 1950s -- that workers should be treated as assets, not as liabilities to be should be treated as assets, not as liabilities to be eliminated .eliminated .

He originated the view of the corporation as a human He originated the view of the corporation as a human community -- again, in the 1950s -- built on trust and community -- again, in the 1950s -- built on trust and respect for the worker and not just a profit-making respect for the worker and not just a profit-making machine, a perspective that won Drucker an almost godlike machine, a perspective that won Drucker an almost godlike reverence among the Japanese reverence among the Japanese

The timeline….ContdThe timeline….Contd

He first made clear -- still the '50s -- that there is He first made clear -- still the '50s -- that there is "no business without a customer," a simple notion "no business without a customer," a simple notion that ushered in a new marketing mind-set. that ushered in a new marketing mind-set.

He argued in the 1960s -- long before others -- for He argued in the 1960s -- long before others -- for the importance of substance over style, for the importance of substance over style, for institutionalized practices over charismatic, cult institutionalized practices over charismatic, cult leaders. leaders.

And it was Drucker again who wrote about the And it was Drucker again who wrote about the contribution of knowledge workers -- in the 1970s contribution of knowledge workers -- in the 1970s -- long before anyone knew or understood how -- long before anyone knew or understood how knowledge would trump raw material as the knowledge would trump raw material as the essential capital of the New Economy.essential capital of the New Economy.

Some more insights from the Some more insights from the oracle…oracle…

Drucker and MBODrucker and MBO A manager's primary task is to A manager's primary task is to

manage for results by translating manage for results by translating corporate objectives into corporate objectives into departmental, group and individual departmental, group and individual measures of performance.measures of performance.

Drucker and MarketingDrucker and Marketing

His most famous book is “The Practice of His most famous book is “The Practice of Management,” published in 1954. Management,” published in 1954.

Three questions that every company seeking to Three questions that every company seeking to establish a brand must ask itself: establish a brand must ask itself:

““What is our business?” What is our business?” ““Who is our customer?” Who is our customer?” ““What does our customer consider valuable?” What does our customer consider valuable?”

I am more an “insultant” than a I am more an “insultant” than a “consultant”…I scold people for a “consultant”…I scold people for a

fee.fee. Marketing should have just one concern – Marketing should have just one concern –

the customer. the customer. Consider this: “The purpose of business is Consider this: “The purpose of business is

not to make a sale, but to make and keep a not to make a sale, but to make and keep a customer.” customer.”

““The aim of marketing is to know and The aim of marketing is to know and understand the customer so well the understand the customer so well the product or service fits him and sells itself.” product or service fits him and sells itself.”

Best of all: "Marketing is the whole business Best of all: "Marketing is the whole business seen from the customer's point of view." seen from the customer's point of view."

Peter Drucker – “The Information Peter Drucker – “The Information Age”Age”

Competitive advantage is created through Competitive advantage is created through “information-based organizations”“information-based organizations”

Four Critical Areas:Four Critical Areas: Develop rewards, recognition and career Develop rewards, recognition and career

opportunities that stimulate information sharingopportunities that stimulate information sharing Create a unified vision of how the organization will Create a unified vision of how the organization will

share informationshare information Create the management structure that enables Create the management structure that enables

cross-boundary information sharingcross-boundary information sharing Ensure the continuous supply and training of staff Ensure the continuous supply and training of staff

and volunteers that can use the informationand volunteers that can use the information

Learning org- Org DNALearning org- Org DNA

InformationInformationInformationInformationDecision RightsDecision RightsDecision RightsDecision Rights

MotivatorsMotivatorsMotivatorsMotivators StructureStructureStructureStructure

Decision Decision RightsRights

InformationInformation

StructureStructureMotivatorMotivatorss

Strategic Strategic PlanPlan

Clear decision rights and

accountability

Efficient information flows

Strong motivators aligned to goals Lean structures

Weak

information flows

Over-layered structures

Unclear decision rights

Misaligned incentives and measures

Decision Decision RightsRights

InformationInformation

StructureStructureMotivatorsMotivators

Strategic Strategic PlanPlan

Unhealthy versus Healthy

Drucker and the Non-ProfitsDrucker and the Non-Profits

The Drucker FoundationThe Drucker Foundation Non-profit groups can build communities while Non-profit groups can build communities while

providing valuable services and fostering providing valuable services and fostering innovation.innovation.

"Convert donors into contributors." "Convert donors into contributors." Non-profit groups as leaders in the knowledge-Non-profit groups as leaders in the knowledge-

driven enterprises that would characterize all driven enterprises that would characterize all economic activity in the future.economic activity in the future.

•Triple Bottom Line Reporting (TBLR).Triple Bottom Line Reporting (TBLR).

•Market Positioning.Market Positioning.

•Management by Objective (MBO).Management by Objective (MBO).

•Value & Target Costing.Value & Target Costing.

•Strategic Planning.Strategic Planning.

•Market Segmentation.Market Segmentation.

•Knowledge Workers.Knowledge Workers.

•Corporate Governance.Corporate Governance.

•Dynamics of profit.Dynamics of profit.

Relevance of Peter Drucker Relevance of Peter Drucker TheoriesTheories

Organizations are not only an economic Organizations are not only an economic entity but Socio Economic entity.entity but Socio Economic entity.

It Works on Triple Bottom Line Reporting It Works on Triple Bottom Line Reporting (TBLR).(TBLR).

Bottom line 1 : Financial Performance - ProfitBottom line 1 : Financial Performance - Profit

Bottom Line 2 : Environmental Performance – PlanetBottom Line 2 : Environmental Performance – Planet

Bottom line 3 : Social Performance – People (CSR)Bottom line 3 : Social Performance – People (CSR)


Marketing PositioningMarketing Positioning Who is our competitor?? – Aviation Industry ( Air Deccan & Who is our competitor?? – Aviation Industry ( Air Deccan &

Railway), Beverages (Coco cola , Nestle, ITC, Amul) Railway), Beverages (Coco cola , Nestle, ITC, Amul)


Cost

Service quality

Air DeccanSpice Jet

Perceptual Space

Management by objective (MBO)Management by objective (MBO)MBO as a means of managerial self-MBO as a means of managerial self-direction & self control. Here objective direction & self control. Here objective means long term vision.means long term vision.

Long term objectives Annual milestones StrategiesLong term objectives Annual milestones Strategies


TACTICS QUARTERLY OBJECTIVES

Management by objective (MBO)Management by objective (MBO)


Hierarchy of Goals

Company visionCompany vision

Mission statementsMission statements

Strategic objectivesStrategic objectives

Target Costing & Value chain Re-Target Costing & Value chain Re-engineeringengineering Peter defined one of the Peter defined one of the mission to be ‘’what is of value to the mission to be ‘’what is of value to the customers’’.customers’’.


What is of Value to theCustomers?

Target Pricing

Target CostingValue Process Re-engineering

Corporate GovernanceCorporate Governance

Basel II, SOX, Clause 49 of Listing Agreement, Basel II, SOX, Clause 49 of Listing Agreement, Section 292 A of the companies Act, 1956, etc Section 292 A of the companies Act, 1956, etc are all inclusive list of Corporate Governance are all inclusive list of Corporate Governance after Enron, Zerox scandal.after Enron, Zerox scandal.


Knowledge WorkersKnowledge Workers : :

Mr Peter suggested to create smarter Mr Peter suggested to create smarter organizations by hiring the right people, giving organizations by hiring the right people, giving them training they need & providing them them training they need & providing them avenues for sharing their knowledge so it avenues for sharing their knowledge so it benefits the entire organization.benefits the entire organization.


Learning & tech toDeliver and track

training

HR planning,Career planning &Performance mgmt

Knowledgemanagement

SmarterOrganization

Strategic Planning Strategic Planning Peter Drucker categorically mentioned the Peter Drucker categorically mentioned the survival objectives of an organization under survival objectives of an organization under following points :-following points :-

Market StandingMarket Standing Human Resources ManagementHuman Resources Management InnovationInnovation ProfitabilityProfitability Social Responsibility.Social Responsibility.

Business strategy of organizations still Business strategy of organizations still include above points. It still relevant as of include above points. It still relevant as of now.now.


Market SegmentationMarket Segmentation::Mr. Peter explanation of ‘’Who is our customers’’ still Mr. Peter explanation of ‘’Who is our customers’’ still have a relevance in today's age. And it forms the have a relevance in today's age. And it forms the basis of segmentation.basis of segmentation.


Dynamics of profitDynamics of profit::

√ √ Profit is not the only measure of business Profit is not the only measure of business success. Its other unidentifiable factors such as success. Its other unidentifiable factors such as SWOT SWOT analysis, externalities etc are equally imp. analysis, externalities etc are equally imp.

√ √ future cost, cost to cover today's unintended future cost, cost to cover today's unintended operating crisis & tomorrow uncertain innovative operating crisis & tomorrow uncertain innovative decisions. decisions.

√ √ Amt paid towards workers are not cost but investment. Amt paid towards workers are not cost but investment.

Profit is a Profit is a means means not an end. not an end.


Peter Drucker QuotesPeter Drucker Quotes

The art of Leadership is to align the system’s strengths The art of Leadership is to align the system’s strengths and thereby make the system's weakness irrelevant. and thereby make the system's weakness irrelevant.

The most valuable assets of a 21The most valuable assets of a 21stst Century institution, Century institution, whether business or non business will be its knowledge whether business or non business will be its knowledge workers and their productivity. workers and their productivity.

MBO works ---if you know the objectives. 90% of the time MBO works ---if you know the objectives. 90% of the time you don’t.you don’t.

The rate at which organization learn may become the only The rate at which organization learn may become the only sustainable source of competitive advantagesustainable source of competitive advantage..

Questions?Questions?

Thank you for your Patience…….

Peter Drucker

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