The Feedback

Feb 212012
 

It’s the era of Big Data but not the era of Big Controls. That is to say, for all the new information we have at our fingertips, we don’t necessarily have the measurements, systems and feedback loops to make sense of it all. Peter Drucker had advice on how to design effective controls, and so we presented his seven specifications and asked what our readers saw in their organizations.

Reader Daniel Pacheco said that consultants make their money precisely on taming the “data flood” that the “operational guy” produces:

How does the consultant do it? He uses his intuition. What if the operational guy uses his intuition? Then the operational guy moves into the strategic mode and does not need the consultant. The consultant will have no work and will have to become the operational guy.

We also considered moves by Apple to monitor its suppliers in China. Is it realistic, we asked, to think that we can set common minimum environmental and labor standards and enforce them around the globe?

Nope, said reader Bob Jack:

The implementation of common labor standards seems to be an impractical idea, and lacks the global institutional framework to achieve them.

Dx Reader was more hopeful:

Establishing common labor standards may be difficult but just because something is difficult, doesn’t mean it is unnecessary—indeed, just the opposite. Sometimes the hardest things to accomplish are the most important.

And reader Ajay thought Apple’s example was a helpful one, if it’s coupled with consumer awareness:

Apple’s initiative of voluntary audits through an esteemed not-for-profit is the best approach to improving labor standards. Apple took a similar voluntary drive to significantly improve its products’ impact on the environment when green organizations pointed out the presence of hazardous compounds. Bigger impact can be made by educating consumers on these subjects and raising general awareness to a level where these concerns become part of buying decisions.

Joe’s Journal: On Bread, But Not Bread Alone

Feb 212012
 

“We already have given up the belief that economic progress is always and by necessity the highest goal. And once we have given up economic achievement as the highest value and have come to regard it as no more than one goal among many, we have, in effect, given up economic activity as the basis for social life. The abandonment of the economic as the socially constructive sphere has gone further. Western society has given up the belief that man is fundamentally Economic Man, that his motives are economic motives, and that his fulfillment lies in economic success and economic rewards.

We have to develop a free and functioning society on the basis of a new concept of man’s nature and of the purpose and fulfillment of society. A basic ethical concept of social life must be developed. It lies in the philosophical or metaphysical field.”

—Peter F. Drucker

The deep recession we have suffered through is depriving a large number of individuals of status and function in life because they are either unemployed or underemployed. These individuals suffer not only economically, but also socially since their connection to society has been broken.

Meantime, at the higher end of income distribution there are a number of people who are doing very well, and for them amassing more money beyond all their needs, just for the sake of doing so, seems empty. As Peter Drucker once said to me: Like manure, it doesn’t smell any better the more you pile it up. It does not bring more happiness. For these people we should provide strong incentives to give to the needy of society.

While the notion of economic man is not an effective basis for organizing society “man cannot live without bread,” even though “man cannot live by bread alone.” And herein lies the paradox. We must try to organize society so there is maximum opportunity for those who wish to enjoy the “right to rise.” At the same time, we must help and protect those who are truly unable to help themselves to find gainful employment.

Unemployment among African Americans, for example, is above 15% and has been so for at least the past four years. The causes are complex, and yet a society can hardly be functioning well when such a large percentage of the population is in despair. Polices that encourage “welfare-to-work” have been effective. Pubic and social sector organizations do exist with the mission of providing people at the lowest economic levels with employable skills.  And the most effective form of financial aid to these unemployed is providing them with opportunities to become employable.

Americans also tend to support charities that show results. For example, there is a torrid love affair between the American people and the Salvation Army. Why? Because it is effective in its social programs, and that can become self-feeding. Results produce contributions and contributions, in turn, can help produce results.

–Joe Maciariello

Uniquely American

Feb 202012
 

A thought from Peter Drucker as we celebrate Washington’s Birthday (a.k.a. Presidents’ Day):

“The phrase which since early days expresses the essence of their own society to Americans is a political promise: the ‘equal chance of every American boy to become President.’ One has only to translate the slogan—for instance, into a promise of ‘equal opportunity for every boy to become Prime Minister’—to see by contrast that it is uniquely American, and this not because the promise of equal opportunities in itself would be absurd, but because the political sphere is the meaningful sphere of social values only in this country. . . . That the American genius is political is therefore the major key to the understanding of America, of its history, and of its meaning.”

George Washington by John Trumbull

Paul Zak on “Drucker on the Dial”

Feb 202012
 

Paul Zak

Today, we bring you an excerpt from our radio show, “Drucker on the Dial.” We hope you enjoy it!

Check out professor Paul Zak’s recent interview on “Drucker on the Dial.” The CGU neuroeconomics professor discusses his extensive research into the role the brain chemical oxytocin plays in helping us determine whom to trust.

Podcast: Play in new window | Download

When Your Rotten Factory Is My Business

Feb 172012
 

Apple has wasted little time. After a bruising New York Times report on hazardous conditions in Chinese factories that produce Apple products, the company announced this week that an outside organization will be inspecting working conditions at the plants and making the findings public.

Some critics of Apple have responded favorably, but others have not. “The auditing has been proven to be weak, and real solutions need a lot more than auditing,” Judy Gearhart, executive director of the International Labor Rights Forum, told the New York Times. “It takes empowering workers.”

We certainly agree that real solutions must recognize how problems are linked in a transnational economy. “If this century has taught one lesson, it is that of interdependence,” Peter Drucker wrote in The New Realities. “No part of the developed world prospers unless all do.”

And prosperity gained by unfair practices threatens all parties, developed or not. If a Chinese company outcompetes a U.S. company because Chinese employees are willing to work for less, that’s one thing. But if a Chinese company outcompetes a U.S. company because Chinese employees are forced to breathe dangerous fumes—whereas a U.S. company would pay for ventilation—that’s another. It rewards endangerment.

It was this race-to-the-bottom dynamic that Drucker warned against when it came to matters such as the environment. “To pollute without paying for it confers a distinct competitive advantage on those who pollute the worst,” Drucker wrote. “To treat environmental impacts as ‘externalities’ can no longer be justified theoretically.”

So what can one do about labor or environmental abuses far away? Drucker saw some precedents for international remedies. “The 19th century cured two of mankind’s oldest scourges by transnational action—the slave trade and piracy on the high seas,” he noted. “It declared both to be common enemies of humanity, the suppression of which was in the interest of any country at any time.”

Drucker also saw some possible examples to follow in the 1930s New Deal. “The United States government abolished child labor despite stubborn opposition by a number of southern states, by forbidding shipment across state lines of goods produced by underage youngsters,” Drucker wrote. “We might similarly ‘quarantine’ polluters and forbid shipment in international commerce of goods produced under conditions which seriously pollute or damage the human habitat.”

Drucker averred, “This will be decried as ‘interference with sovereign nations’—and it is.”

What do you think? Is it realistic to think that there can be common labor standards around the world—and what’s the best way to set and enforce them?

As We Learn That Knicks Sensation Jeremy Lin Was Never Offered an Athletic Scholarship, Never Drafted By an NBA Team, and Dropped By the Golden State Warriors

Feb 162012
 

 

“There is nothing quite so unreliable as a judgment on long-range potential.”

— Peter F. Drucker, 1954

 

 

Control Yourselves, Big Data Dudes

Feb 152012
 

According to a recent piece in the New York Times, we live in an era of “Big Data.” It’s a time of a “data flood” and “data-driven discovery and decision-making.” Some even call it a revolution.

“A report by the forum, ‘Big Data, Big Impact,’ declared data a new class of economic asset, like currency or gold,” the Times noted.

Interesting stuff, to be sure. But we were also taken by the published comment of a Times reader, Danny P. of Warrensburg, Mo. As he wrote: “‘Big Data’ that the article refers to doesn’t have any controls in place, and adequate controls are what allow quantitative study to determine cause-and-effect relationships with any real degree of accuracy. Without those controls, big data becomes nothing more than the bag of letters in Scrabble.”

This was a very Druckerian point to make. For as Peter Drucker saw it, measurements, information systems, feedback loops and the like–what he called, in general, “controls”—need to be carefully constructed if they’re to be effective. In fact, as Drucker explained in Management: Tasks, Responsibilities, Practices, controls should meet seven specific criteria:

1.     They must be economical.  “More controls does not give better control. All it does is create confusion. … The capacity of the computer to spew out huge masses of data does not make for better controls.”

2.     They must be meaningful. As we’ve discussed before, “the events to be measured must be significant either in themselves . . . or as symptoms of at least potentially significant developments.”

3.     They must be appropriate to the character and nature of the phenomenon measured.  This was supremely important. The controls must “bring out clearly what the real structure of events is.” Getting 50 employee complaints a month might seem better than getting 100 employee complaints a month. But if the 100 complaints are dispersed throughout the company and the 50 complaints are targeted against one abusive supervisor, then just looking at numbers can be fatally misleading.

4.     They must be congruent with the events measured. “A measurement does not become more accurate by being worked out to the sixth decimal when the phenomenon is only capable of being verified within a range of 50 to 70%.” (Economists, take note of that one.)

5.     They must be timely. “The time dimension of controls has to correspond to the time span of the event measured.” Don’t do a daily temperature update to gauge global warming.

6.     They must be simple. As we’ve explored in another context, “complicated controls do not work. They confuse.”

7.     They must be operational. Someone has to be able to use the information to do something. “It should never just say, ‘Here is something you might find interesting.’”

Does all the data coursing through your organization meet these seven specifications?

Illustration credit: Adam Howling

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