Divided We Fall

Feb 032012
 

In his new book, Coming Apart, American Enterprise Institute scholar Charles Murray argues that the United States is cleaving as never before.

Murray divides Americans by income into two groups—the top 20% and the bottom 30%, and presents a host of data to make the case that, more and more, these castes are culturally isolated from each other. They watch different TV shows, eat different foods and live in different clusters. The top live old-fashioned middle-class lives, while the bottom live unstable, atomized lives.

“The truth is, members of the upper tribe . . . have low divorce rates, arduous work ethics and strict codes to regulate their kids,” David Brooks wrote recently in the New York Times, as he summarized Murray’s book. Meantime, members of the “lower tribe” are plagued by high rates of divorce, single parenthood and joblessness. (To eliminate race as a complicating factor, Murray confines his study to white Americans.)

Murray, a libertarian, sees reduced government as a solution. Regardless of whether one agrees with such a remedy, however, the problem remains. How does the U.S. regain cohesion and offer dignity to the bottom 30%?

Peter Drucker, as we’ve noted, greatly valued the habits of middle-class American life, but he considered its preservation to be a significant challenge—especially at a time when the labor force has split into two main cohorts: knowledge workers and service workers.

Illustration credit: Andy Davey

“The rapid increase in the productivity of the workers making and moving things overcame the 19th century’s nightmare of ‘class conflict,’” Drucker wrote (as he explored a theme we’ve taken up before). “Now, a rapid increase in the productivity of service workers is required to avert the danger of a new ‘class conflict’ between” them and their knowledge-worker cousins.

“Knowledge workers and service workers are not ‘classes’ in the traditional sense,” Drucker added. “The line between the two is porous. In the same family, there are likely to be service workers and knowledge workers who have advanced education. But there is a danger that . . . society will become a class society unless service workers attain both income and dignity. This requires productivity. But it also requires opportunities for advancement and recognition.”

Is the United States segmenting into two castes?  If so, what can be done about it?

The Drucker Exchange to Post Blog Items in Six Languages

Feb 032012
 

Hello ¡Hola Olá こんにちは 您好 안녕하세요 नमस्ते

We’re proud to announce that once a month, the Drucker Exchange will feature select posts in six languages: Chinese, Hindi, Japanese, Korean, Portuguese and Spanish.

These posts, translated from the English-language originals, will appear on the first Friday of every month beginning today and are available by clicking on each of the flags under Global Dx (at right).

“Our readership is clearly a global one, and being able to provide content in more languages will help us connect to our growing audience around the world,” said Phalana Tiller, the Drucker Institute’s communications manager. “We have seen that about every three minutes, someone somewhere in the world Tweets about Peter Drucker,” Tiller continued. “It’s important for us to try to engage with the ever-expanding universe of Drucker-like thinkers, beyond the boundaries of the English language.”

We hope you enjoy this new feature, whatever your tongue.

Managing Without Managers

Feb 022012
 

Guest post by Dr. Paul ZakThis piece is the first of what will be monthly contributions to the Drucker Exchange by neuroeconomist Paul Zak, our colleague at Claremont Graduate University. For those who might dismiss some of our thinking as the “soft side” of management, Paul puts “hard science” behind it.

The cover story of last December’s Harvard Business Review investigates a maverick company without job titles or promotions. “Yeah, yeah, some Silicon Valley start-up with a bunch of 20-somethings working and living in a rented mansion,” you think. Nope. How about the largest tomato products company in the U.S. with $700 million in revenue? Oh, and two-thirds of its “colleagues” are seasonal employees who drive the trucks and sort the tomatoes. All without job titles.

The company is called Morning Star, and the folks there invited me to visit three of their facilities in California’s Central Valley last fall. I wanted to find out how they manage without managers.

Beyond the cacophony of moving trucks and production lines whisking tomatoes around with water and steam, one thing jumped out at me: Every colleague I spoke to seemed engaged and happy.

Morning Star’s founder, Chris Rufer, has designed a self-management system where everyone drafts an annual Colleague Letter Of Understanding (CLOU) and presents it to his or her work group. The letter states how each colleague will create value for the group and support the group’s goals. Then, colleagues receive feedback from those around them on how well they are meeting their goals. Anyone can order equipment or materials they need at any time, but must present the bill to their work group and justify the purchase when each group’s profit and loss calculation is done. In fact, Rufer pays colleagues to attend a basic accounting course so they can understand the company’s finances.

Here’s the secret: When no one carries the title of “manager,” every colleague becomes a manager of his or her peers–and a manager of oneself. Self-management works for the same reason that there is not a police officer on every corner: As social creatures we constantly monitor others and ourselves for appropriate behaviors. Rufer and colleagues have harnessed our social nature to empower employees by cutting out layers of management. This lets him pay a premium to colleagues who fit into the company’s self-management model.

It sounds simple, but my laboratory experiments reveal why putting self-management into practice can be difficult. Self-management depends crucially on trust. My work shows that the neurochemical oxytocin is the brain’s trust signal. Hierarchy, high stress and fear inhibit the release of oxytocin, and Morning Star has eliminated much of these. Interestingly, moderate stress (like when one needs to meet a production goal) increases the release of oxytocin when the action occurs as a group.

Does it work? In the last decade, Morning Star has had double-digit revenue growth, and its annual colleague turnover rate is close to zero.

The last article Peter Drucker wrote for the Harvard Business Review was provocatively titled “Managing Oneself.” The colleagues at Morning Star have certainly taken Drucker at his word and put his ideas into practice.

–Paul Zak

You can also check out Paul’s popular TED Talk below.

Rank Favoritism?

Feb 012012
 

Unless we’re absolutely sure we’re at the top, most of us don’t like being ranked against our peers. But many companies like to rank their employees from best to worst, promoting the top and even going so far as to fire the bottom.

“The method, sometimes called ‘rank and yank,’ was pioneered by Jack Welch when he ran General Electric Co. from 1981 to 2001, and was rapidly adopted by other firms,” The Wall Street Journal explained this week. “Today, an estimated 60% of Fortune 500 firms still use some form of the ranking, though they might use gentler-sounding names like ‘talent assessment system’ or ‘performance procedure.’”

Of course, the system has its detractors. “Critics of forced ranking say that it demoralizes workers and fosters backstabbing and favoritism,” the Journal noted.

So, is forced ranking something we should stop? Peter Drucker (who, as we’ve pointed out, had very strong ideas about performance reviews) would probably say no. In The Frontiers of Management, Drucker observed that most companies (this was in 1985) didn’t like to measure productivity among white-collar workers, claiming that such as assessment was nearly impossible. “But this is simply not true,” Drucker countered. “The yardsticks we have may be crude, but they are perfectly adequate.” And they had to be deployed, for on the global stage “the competitive battle will be won or lost by white-collar productivity.”

He was also a fan of Welch’s, crediting him with having “the courage of a lion.” In Management Challenges for the 21st Century, Drucker wrote approvingly that General Electric, during Welch’s tenure, had “created more wealth than any other company in the world” and that much of the credit was due to its success in organizing information about performance. A “focus on the innovative performance of the business” became a “major factor in determining compensation and bonuses of the general manager and of senior management people of a business unit,” and, similarly, an analytical look at performance data was helpful in “deciding on the promotion of an executive, and especially of the general manager of a business unit.”

Still, Drucker did sound a cautionary note about performance measurements: They only work if they quantify the right things. “Businesses usually define performance too narrowly—as the financial bottom line,” Drucker wrote. “If that’s all you have as a performance measurement and performance goal in the business, you are not likely to do well or survive very long.”

What do you think: Should we keep ranking and yanking, or is it time to yank ranking?

The Feedback

Jan 312012
 

When we learned that several bigwigs at Davos seemed prepared to chuck capitalism, or at least modify it heavily, we had to ask our readers if they agreed. Should we replace modern capitalism with something else—and, if so, what?

Reader Greg Zerovnik suggested that rather than adjust capitalism, we may need to adjust ourselves. He wrote:

Capitalism is good at what it does. However, many societies appear to be ill-equipped to provide ethical and moral standards to effectively resolve the dilemma of what to do with the fruits of capitalism.

That is a separate issue altogether. We see China struggling with this. New power elites and a growing middle class are clearly emerging. Yet people are failing such simple tests as helping a fellow citizen lying injured on the street.

Reader Nathan, meanwhile, doesn’t see too much that’s seriously broken:

No system is or ever will be perfect, because we live in a world where humans are flawed. Unless everyone is always honest and selfless, the system will always have some type of flaw or problem. Ultimately, freedom is what should be pursued and practiced, and capitalism seems to promote this much better than any other system I know.

Perhaps reader ron gaesser offered the most succinct synthesis of these views:

What present day capitalism lacks is the ethical dimension that [Peter] Drucker seems always aware of.

That—plus space tourism, at least for now.

Joe’s Journal: Feedback Through the Ages

Jan 312012
 

“Whenever a Jesuit priest or a Calvinist pastor does anything of significance (for instance, making a key decision), he is expected to write down what results he anticipates. Nine months later, he then feeds back from the actual results to these anticipations. . . . I have followed this method myself, now for 50 years. It brings out what one’s strengths are—and this is the most important thing an individual can know about himself or herself. It brings out where improvement is needed and what kind of improvement is needed. Finally, it brings out what an individual cannot do and therefore should not even try to do. To know one’s strengths, to know how to improve them, and to know what one cannot do—they are the keys to continuous learning.”

—Peter F. Drucker.  

I am convinced that knowing one’s strengths it is indeed “the most important thing an individual can know about himself or herself.”

Peter Drucker believed that the Jesuits, a Catholic Order founded by St. Ignatius of Loyola, and the Calvinist’s, a Protestant Reform movement founded by John Calvin, both in the mid-16th century, developed a very valuable technique called “Feedback Analysis” to help their priests and ministers find their strengths and grow into what they were called to be. The global impact of both orders is at least partially the result of priests and ministers applying this technique to manage themselves.

Drucker applied Feedback Analysis to his own life and work. I witnessed this during the time I overlapped with him at Claremont Graduate University. Initially, for example, I did not understand why Drucker rarely served on committees. Once I heard his explanation it made perfect sense to me. He had an incredible ability to focus on certain topics, and he made deep commitments of his time and energy to select people and organizations. Why? It was those topics, people and organizations where his strengths allowed him to make the biggest contribution.  Feedback Analysis helped him to allocate his time and to abandon those opportunities where he was likely to be less effective. He simply concluded that most committee work did not fit his strengths and calling. This is a lesson for each of us.

There are many good books to help us find our strengths. But none provides any better advice than applying Feedback Analysis. Moreover, I learned that Drucker had little interest in the psychological analysis that many of these books suggest.  It’s not that he did not believe they were helpful; he did. Still, they’re not as effective as the kind of Feedback Analysis this passage recommends.

As you can tell, I am enthusiastic about the advice Drucker offered here. I am using this technique myself, and I am trying to make adjustments in my work and life all of the time. I commend Feedback Analysis to you, as well. It is backed up by the wisdom of the ages.

You Can’t Judge a Book…

Jan 302012
 

Crown Books is dead. B. Dalton Bookseller is dead. Borders is dead. And Barnes & Noble is breathing with difficulty.

“Inside the great publishing houses . . . there is a sense of unease about the long-term fate of Barnes & Noble, the last major bookstore chain standing,” the New York Times reported over the weekend. “No one expects Barnes & Noble to disappear overnight. The worry is that it might slowly wither as more readers embrace e-books.”

It’s a fair worry. Barnes & Noble may indeed wither. But books, Peter Drucker pointed out, are a funny business.

“When TV appeared in the early ’50s and more and more Americans began to spend more and more their time in front the tube . . . ‘everyone knew’ that book sales would drop drastically,” Drucker wrote in Innovation and Entrepreneurship. “But instead of collapsing, book sales in the United States have soared since TV first came in. They have grown several times as fast as every indicator had predicted.”

Why?  “No one quite knows what really happened,” Drucker said. “Books are still as rare in the typical American home as before. Where, then, do all these books go? That we have no answer to this question does not alter the fact that books are being bought and paid for in increasing numbers.”

Illustration credit: Jonathan Gibbs

A subsequent bizarre twist was the success of retailers like Amazon.com (a subject we’ve explored previously). “Twenty-five years ago it was generally believed that within a few decades the printed word would be dispatched electronically to individual subscribers’ computer screens,” Drucker recalled in Managing in the Next Society. “But anyone who 20 years ago predicted the business of Amazon.com and barnesandnoble.com—that is, that books would be sold on their Internet but delivered in their heavy, printed form—would have been laughed off the podium.”

The bottom line: “One never knows how a new distribution channel will change what is being distributed and how customer values will change.”

So, as fast as the market for e-books is growing and as imperiled as physical books may appear to be, perhaps the old dead-tree editions will prove more durable than “everyone” is inclined to think.

What’s your take? Is the market for physical copies of books destined to wither away—or will the business continue to defy conventional wisdom?

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