Peter F. Drucker The Father of Modern Management Venkat ram Prabhash Jha Bikash Gupta

AGENDA

• Introduction about Peter Drucker

• Contributions made

• Relevance in present context

• Questions

Peter Ferdinand Drucker (1909 2005)

• Management Consultant

• Born in Kaasberg (Vienna),Austria

• Doctorate in International Law, Germany

• 1937 Moved to U.S

• Professor - N.Y.University (1950-1971)

• Professor Claremount Graduate University (1971 - 2005)

Career . . .

• Started as business thinker (1945) General Motors.

• created Concept of Corporation.

• Author of thirty books.

• Editorial Columnist Wall Street Journal (1975 1995)

• Contributor to

• - Harvard Business Review.

• - The Atlantic Monthly.

• - The Economist

• Consultant to businesses and non-profit organizations

• Awarded Presidential Medal of Freedom by U.S President.

Seminal works in management

• Concept of Corporation

• The Practice Of Management

• Technology Management and Society

• The changing World of Executive

• The Frontiers of Management

• The End of Economic Man

• Peter Drucker on the Profession of Management

• Management Challenges of 21 st Century

Ideas through Druckers Writings

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

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

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

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

• He wrote extensively about Management by objectives

• A company's primary responsibility is to serve its customers. Profit is not the primary goal.

Contributions made

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

The timeline

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

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

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

The timeline.Contd

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

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

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

Some more insights from the oracle

• Drucker and MBO

• A manager's primary task is to manage for results by translating corporate objectives into departmental, group and individual measures of performance.

• At least once every five years every form should be put on trial for its life .

Drucker and Marketing

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

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

• What is our business?

• Who is our customer?

• What does our customer consider valuable?

• What is the point of bringing a 200 pound body downtown when all you want of it is only 8 pound brain?

I am more an insultant than a consultantI scold people for a fee.

• Marketing should have just one concern the customer.

• Consider this: The purpose of business is not to make a sale, but to make and keep a customer.

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

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

Peter Drucker The Information Age

• Competitive advantage is created through information-based organizations

• Four Critical Areas:

• • Develop rewards, recognition and career opportunities that stimulate information sharing

• • Create a unified vision of how the organization will share information

• • Create the management structure that enables cross-boundary information sharing

• • Ensure the continuous supply and training of staff and volunteers that can use the information

Learning org- Org DNA

• • • HBS review as one of top Business Ideas in 2005

Information Decision Rights Motivators Structure

Unhealthy versus Healthy Decision Rights Information Structure Motivators Strategic Plan 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 Rights Information Structure Motivators Strategic Plan

Drucker and the Non-Profits

• The Drucker Foundation

• Non-profit groups can build communities while providing valuable services and fostering innovation.

• "Convert donors into contributors."

• Non-profit groups as leaders in the knowledge-driven enterprises that would characterize all economic activity in the future.

• The Non-Profits spend far less for results than governments spend for failure

• • Triple Bottom Line Reporting (TBLR).

• • Market Positioning.

• • Management by Objective (MBO).

• • Value & Target Costing.

• • Strategic Planning.

• • Market Segmentation.

• • Knowledge Workers.

• • Corporate Governance.

• • Dynamics of profit.

Relevance of Peter Drucker Theories

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

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

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

• • • • Bottom Line 2 : Environmental Performance Planet

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

Relevance of Peter Drucker Theories

• Marketing Positioning

• • • Who is our competitor?? Aviation Industry ( Air Deccan & Railway), Beverages (Coco cola , Nestle, ITC, Amul)

Relevance of Peter Drucker Theories Cost Service quality Air Deccan Spice Jet Perceptual Space

• Management by objective (MBO)

• MBO as a means of managerial self-direction & self control. Here objective means long term vision.

• Long term objectives Annual milestones Strategies

Relevance of Peter Drucker Theories TACTICS QUARTERLY OBJECTIVES

• Management by objective (MBO)

Relevance of Peter Drucker Theories Hierarchy of Goals Company vision Mission statements Strategic objectives

Tactic #1 AMB Owner Tactic #2 AMB Owner Tactic #3 AMB Owner Tactic #4 AMB Owner Tactic #5 AMB Owner 1st Quarter Objective 2nd Quarter 3rd Quarter 4th Quarter AMB AMB AMB AMB 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter AMB AMB AMB AMB Annual Objective # 1 AMB Owner Strategy # 1 AMB Owner Annual Plan Structure (for each tactic there will be quarterly objectives)

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

Relevance of Peter Drucker Theories What is of Value to the Customers? Target Pricing Target Costing Value Process Re-engineering

• Corporate Governance

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

Relevance of Peter Drucker Theories

• Knowledge Workers :

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

Relevance of Peter Drucker Theories Learning & tech to Deliver and track training HR planning, Career planning & Performance mgmt Knowledge management Smarter Organization

• Strategic Planning

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

• • • Market Standing

• • • Human Resources Management

• • • Innovation

• • • Profitability

• • • Social Responsibility.

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

Relevance of Peter Drucker Theories

• Market Segmentation :

• Mr Peter explanation of Who is our customers still have a relevance in today's age. And it forms the basis of segmentation.

Relevance of Peter Drucker Theories

• Dynamics of profit :

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

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

• Amt paid towards workers are not cost but investment. Profit is a means not an end.

Relevance of Peter Drucker Theories

Peter Drucker Quotes

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

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

• MBO works ---if you know the objectives. 90% of the time you dont.

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

• Questions?

Thank you for your Patience.