Peter Drucker

Recent selections from around the web that, we think, would have caught Peter Drucker’s eye:

1.  Dirty Medicine: Generic drugs are cheaper—but they’re still supposed to work. That hasn’t been the case at Ranbaxy, an Indian drug company that manufactured critical drugs for people all around the world, including the United States. Much of what Ranbaxy produced was no better than a placebo—or worse. Writing in Fortune, Katherine Eban tells a chilling story of how globalization and trade can be abused to generate profits and evade all accountability.

2.  Leaders Everywhere: A Conversation With Gary Hamel:  The latest McKinsey-Harvard Business Review management prize revolves around a theme that author Gary Hamel calls “Leaders Everywhere.The thought underneath this is that we live in a world where never before has leadership been so necessary but where so often leaders seem to come up short,” Hamel tells the folks at McKinsey & Co. “Our sense is that this is not really a problem of individuals; this is a problem of organizational structures—those traditional pyramidal structures that demand too much of too few and not enough of everyone else.”

3.  With 3-D Printing, the Shoe Really Fits:  The emergence of 3-D printing has some predicting that it will revolutionize manufacturing top to bottom, creating new, small-scale manufacturing with little waste,” Michael Fitzgerald writes at the MIT Sloan Management Review. Some of the more intriguing examples, he finds, come from shoe manufacturers such as Nike and New Balance. Concludes Fitzgerald: “Custom-made suits, long the province of a privileged few who could afford them, now are being churned out by e-commerce sites and pop-up shops. In the long term, there’s reason to think that shoes might go the same direction as suits.”

4.  Dx Comment of the Week: Last week, we asked readers for thoughts on the brouhaha caused by Abercrombie & Fitch CEO Michael S. Jeffries when he said his store goes after the “cool kids” and not everyone else. Reader Katie wrote that targeted marketing strategies are fine—but if you say something childish and alienate parents, then you’re doing your business no favors:

We all know that kids are cruel to each other, but what we don’t expect is for an adult to promote and in a sense validate this behavior. Adults should rise above this and be the voices of reason during this awkward time in adolescence. When someone like a CEO comes out sounding like a 17-year-old himself, it might just turn off the audience he needs most: the parents with the pocketbooks.

Rick Wartzman

In his latest column for Forbes online, Drucker Institute Executive Director Rick Wartzman explores what Peter Drucker would have thought of Google Glass.

“Few products have ever been greeted with as much anticipation—and as much apprehension—as the wearable, Internet-connected specs, which were all the rage at last week’s Google developer conference in San Francisco,” Wartzman writes.

“Drucker,” he adds, “would have well understood both sentiments: the great promise of a device that can connect us in new and exciting ways and the tremendous worry that comes with unleashing on the world a contraption that might well trample upon people’s privacy and otherwise be susceptible to abuse.”

Wartzman notes that certain possible features of Glass, such as facial-recognition technology, are raising particular concerns.

“In the end,” he says, “it is the men and women designing and using the product—and not the machines themselves—who must take responsibility for what Glass becomes.”

Wartzman then cites Drucker, who wrote: “The computer makes no decisions. It only carries out orders . . . and therein lies its strength. It forces us to think, to set the criteria. The stupider the tool, the brighter the master has to be.”

Is it a good sign that Yahoo, in acquiring Tumblr for $1.1 billion cash, has promised “not to screw it up”?

Tumblr’s CEO David Karp

It’s certainly a sign of humility. A joint press release lays out the terms: “Tumblr will be independently operated as a separate business. David Karp will remain CEO. The product, service and brand will continue to be defined and developed separately with the same Tumblr irreverence, wit and commitment to empower creators.”

Many people are not convinced. But others, like Felix Salmon of Reuters, think the deal is on balance a good idea for both parties. “Tumblr is the perfect platform for Yahoo’s brand advertisers to use if they want to start building up relationships with consumers, rather than just bombarding them with banner ads,” Salmon writes. And from the perspective of Tumblr, the company can now outsource “a lot of the gnarly monetization problems” to Yahoo headquarters.

If Yahoo’s sales team can indeed solve some of Tumblr’s problems, that’s an important indication of whether the deal makes any sense. As we’ve noted, Peter Drucker felt that one of the most important considerations in an acquisition is what the purchaser can do for the company it buys, not vice versa.

But there’s one Drucker rule about mergers that Yahoo and its CEO, Marissa Mayer, may have a tough time honoring: to prepare for the possibly imminent departure of Karp and other senior Yahoo executives by having replacements at the ready.

“It is an elementary fallacy to believe one can ‘buy’ management,” Drucker warned. “The buyer has to be prepared to lose the top incumbents in companies that are bought. Top people are used to being bosses; they don’t want to be ‘division managers.’ If they were owners or part-owners, the merger has made them so wealthy they don’t have to stay if they don’t enjoy it. . . . To recruit new top managers is a gamble that rarely pays off.”

So carpe diem—or carpe Karp.

Do you think Yahoo can realistically hold onto Tumblr’s top management?

This week, NBC’s “The Office” came to an end. Many television shows have used the workplace as a setting, but none before “The Office” had made the workplace, with its petty intrigues and awkward moments, the star.

We think Peter Drucker would have found “The Office” amusing (had he owned a TV, that is). But the question we pose now is whether the lead character, Michael Scott, the office boss played by Steve Carell, secretly turned to Drucker for inspiration. (Although Carell departed the show two seasons ago, he is still considered by most fans to have been the heart of the show.)

Peter F. Drucker

Here we offer the original wisdom of Peter Drucker and, courtesy of the website IGN, some of the more memorable lines Drucker seems to have inspired in Michael Scott.

1. On Technology

Peter Drucker: “The popular belief that the new technology will replace human labor by robots is utterly false. ‘I was in charge of an analog computer for some time,’ one of my students told me. ‘I am still appalled by the number of business men who believed that the machine was in charge of me.’” (The Practice of Management)

Michael Scott: “People will never be replaced by machines. In the end, life and business are about human connections. And computers are about trying to murder you in a lake. And to me the choice is easy.”

2. On the Psychology of Compensation

Peter Drucker: “Pay, as we have just seen, becomes part of the social or psychological dimension rather than the economic one. . . . At the least, [workers with increased status] want perquisites.” (Management: Tasks, Responsibilities, Practices)

Michael Scott: “A boss’s salary isn’t just about money. It is about perks. For example, every year I get a one hundred dollar gas card. Can’t put a price tag on that.”

3. On Sensitivity to Foreign Cultures

Peter Drucker: “The American people . . . often fail to understand the behavior of foreign, especially of European, nations.” (Concept of the Corporation)

Michael Scott: “Did you know that in Morocco it is common to exchange a small gift when meeting somebody for the first time? In Japan, you must always commit suicide to avoid embarrassment. In Italy you must always wash your hands after going to the bathroom. This is considered to be polite.”

4. On Winners and Losers

Peter Drucker: “Losers always learn one thing, and that to perfection: resistance against being driven.” (Management: Tasks, Responsibilities, Practices)

Michael Scott: “I absorb information from the strategies of the winners and the losers. Actually, I probably learn more from the losers.”

5. On the Need of a Boss to Be Liked

Peter Drucker: “In every successful organization there is one boss who does not like people, who does not help them and does not get along with them. Cold, unpleasant, demanding, he often teaches and develops more men than anyone else. He commands more respect than the most likable man ever could.” (Management: Tasks, Responsibilities, Practices)

Michael Scott: “Do I need to be liked? Absolutely not. I like to be liked. I enjoy being liked. . . . But it’s not like a compulsive need to be liked. Like my need to be praised.”

What television show do you think has the most to teach us about office life, and what have you learned from it?

Here is this month’s piece on the changing world of work from furniture maker Herman Miller, a company for which Peter Drucker long consulted and that continues to exemplify his principles of innovation and effectiveness.

While change itself has become business as usual for many organizations, managing it has not.

Indeed, the fact that many companies don’t invest enough time, energy or resources in managing change is one big reason that, according to Harvard Business Review, 70% of change initiatives fail.

One key breakdown: a lack of communication—a problem that Peter Drucker well understood. “Balancing change and continuity requires continuous work on information,” he wrote. “Nothing disrupts continuity and corrupts relationships more than poor or unreliable information.”

This is particularly true when it comes to making work-environment changes, whether an organization is doing so to support a new corporate culture or simply because a building lease has expired and there’s a need to relocate employees.

After all, when you change a person’s work setting, you’re doing more than changing furniture. People take their space personally, and all kinds of things run through their heads:Will people think I’m less influential because I no longer have a private office? Now that my boss and co-workers can see me all the time, will they be judging me?

Mollifying these concerns requires a constant flow of information.

Courtesy of Herman Miller

Before the change, it’s helpful to establish a cross-functional “change team” to explain the ways in which the changes are linked to the company’s overall business strategy and goals. This group should also be charged with listening and bringing back information, helping identify sources of anxiety throughout the organization.

Indeed, face-to-face communication is best early in the process. Especially initially, people want to ask real people questions in real time so they can watch body language and assess for themselves whether or not management is being honest. This kind of contact builds trust.

Later in the process, a wide variety of other resources can be deployed. When Sygenta Seeds designed its new headquarters to support a more open, innovative culture, Herman Miller worked with the company to develop a website dedicated to the construction process, previews of a sample workstation, a building fair that showed details of the new building, site tours two weeks before move-in, and a 12-page welcome booklet that was waiting for employees on their desks on move-in day.

Whatever tools you use, the most important thing is to identify the relevant stakeholders and answer the question they all will have: What’s in it for me?

Along the way, be honest and forthright about implications. Trying to sugarcoat the losses from change—and some employees will inevitably feel like they’ve lost something of value—only undermines the trust that companies work so hard to build.

Before, during and even after the change, consciously over-communicate. Make the case for change again and again, at different times, in different places, using different mediums. People will be ready to hear different parts of the message at different points.

In the end, transparency should be at the core of how you manage any change to the workplace environment.

—Tracy Brower, PhD, Director of Performance Environments

Sometimes, being indispensable is bad for your career.

Why? If your boss can’t imagine life without you, then you’re in a dangerous place. “Such an employee may not be groomed for career advancement, but rather incented to stay put,” warns Dawn Klingensmith in the Philadelphia Inquirer. “Perhaps an employee is like his or her right arm and it’s hard to imagine a replacement. But sometimes, when an employee moves on, the departure reveals the boss’s ineptitude.”

The way to avoid what one of Klingensmith’s sources calls “second-lieutenant syndrome” is either to find ways to make sure your boss grooms you for a better job—or take a different position. “Ultimately, a job change may be the only way to get out from under the boss’s thumb,” Klingensmith concludes. “In the next job, the employee should work on becoming indispensable not to his or her immediate supervisor but to the organization as a whole.”

Peter Drucker would have agreed, and he stressed that being a right-hand man or woman is no good over the long term. “Work as a lieutenant or assistant does not adequately prepare a man for the pressures of making his own decisions,” he wrote in The Practice of Management. “On the contrary, nothing is more common than the trusted and effective lieutenant who collapses when he is put on his own.” For that reason, a promising young employee “must be tested in his capacity to manage a whole business effectively”—and “long before he gets to the top.”

Photo credit: Kalense Kid

But Drucker would have gone even further than Klingensmith, for he felt it was not only a subordinate’s responsibility to leave a clingy boss but also an executive’s responsibility to break up such relationships promptly. Drucker explained in People and Performance that effective executives must be on the lookout for any supervisor who says that “Jack Jones” is indispensable.

“They have learned that there are only three explanations for an ‘indispensable’ person like Jack Jones,” Drucker wrote. “He is actually incompetent and can survive only if he his carefully shielded from demands; his strength is misused to bolster a weak superior; or his strength is misused to delay tackling a serious problem, if not to conceal its existence.”

Drucker added: “In every one of these situations, the ‘indispensable person’ should be moved—and soon. Otherwise one only destroys whatever strengths he may have.”

Have you ever seen an employee become “indispensable” in the wrong sort of way? What happened?

Peter Drucker

Recent selections from around the web that, we think, would have caught Peter Drucker’s eye:

1.  Are You Considering a Job with Two Managers?:  Peter Drucker generally considered reporting to multiple managers to be an untenable structure. But, as Priscilla Claman points out at the HBR Blog, having more than one manager is the norm in the world of “matrix management.” What that means is that if you’re a job seeker, be careful to evaluate the relationship between your two bosses and make sure everyone is in alignment. And make sure you like them both. Claman writes: “If you get along great with one manager in the interview, but find the other hard to relate to, that may be a problem that will persist.”

Thanks to the magic of the Internet, when everything is permanent and scandals are forever young, Abercrombie & Fitch finds itself under fire for something its chief executive said seven years ago.

“In every school there are the cool and popular kids, and then there are the not-so-cool kids,” Michael S. Jeffries, CEO of the clothing retailer, told Salon magazine in 2006. “Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. A lot of people don’t belong [in our clothes], and they can’t belong. Are we exclusionary? Absolutely.”

Jeffries added: “Those companies that are in trouble are trying to target everybody: young, old, fat, skinny. But then you become totally vanilla. You don’t alienate anybody, but you don’t excite anybody, either.”

The remarks have sent the online world into a tizzy. Angry people are petitioning on Change.org to ask Abercrombie to stock larger sizes. Writing in the Los Angeles Times, columnist Robin Abcarian called the company’s approach an “obnoxious marketing scheme.”

Obnoxious? Yes, absolutely.

Author Meredith Belbin once wrote of Peter Drucker’s “remarkable ability to temper diplomacy with frankness.” By contrast, Michael Jeffries might do well to temper his frankness with some diplomacy.

But Drucker certainly wouldn’t have had a problem with Abercrombie’s basic business strategy. In fact, he would have appreciated it.

“StandOut” by AzureGothBunny

Drucker liked to point to Marks & Spencer, a British retailer, which mastered the art of customer segmentation when it turned itself from a variety chain into a specialty chain. “The decision enabled it to decide who its customer was and should be; what kind of store it needed and when; what pricing policy to follow; and what market penetration to aim at,” Drucker wrote in Management: Tasks, Responsibilities, Practices.

Another marker came in 1950, Drucker explained. “Just when most everybody had accepted socioeconomic income groups as a law of nature, a new consumer market segmentation . . . appeared, superimposing itself on socioeconomic income groups: segmentation by ‘lifestyles.’”

Among the companies that responded best to the shift was Ford Motor, which profited by cranking out new “lifestyle cars”—Thunderbirds, Mustangs and Mavericks. In other words, the kinds of cars that cool people would drive.

What do you think of Abercrombie & Fitch’s “cool kids” approach?

A new episode of “Drucker on the Dial” is available today.

Host Phalana Tiller talks with Diane Hoskins, co-CEO of Gensler, and Greg Parsons, vice-president of the New Landscape of Work at Herman Miller, about how their companies help others achieve better outcomes through well-designed work environments.

And Forbes online columnist Rick Wartzman delivers a piece on the Big Data revolution.

Subscribe to “Drucker on the Dial” via iTunesU or listen to this episode using the media player below.

Wither the Cube Farm

Peter Drucker viewed Henry Ford as both a visionary and a disaster.

Ford was a disaster because he jealously forced out his brilliant right-hand man, James Couzens, and nearly ran Ford into the ground. Ford was a visionary because he brought cars to the masses and, as Drucker wrote in Men, Ideas, and Politics, “demonstrated that one could raise wages, cut prices, produce in tremendous volume and still make millions.”

Business leaders today continue to demonstrate this—except for the wage part. Median incomes have been stagnant for many years, a fact pointed out by Massachusetts Institute of Technology professor Erik Brynjolfsson in a new interview with McKinsey Quarterly.

“The median household and the median worker in the United States have lower incomes today than in 1997,” Brynjolfsson noted. “It’s entirely possible for technology to advance, to make the pie bigger, and yet for some people to get a smaller share of that pie.”

But, to return to the case of Ford, what if employers simply decided to hand workers a bigger piece of the pie?

The Wall Street Journal ran an excerpt today of a new Ford biography by Richard Snow, who highlights Ford’s sudden decision to raise wages at his factories to $5 a day in 1913. “This at a stroke doubled the prevailing salary for industrial work, and it caused a sensation,” Snow writes.

Henry Ford with a 1921 Model T

One reason Ford’s decision triggered such an uproar (albeit mostly positive) is that it was not, on the face of it, necessary. There was no shortage of workers at the lower wage level, so why give an unforced pay raise—let alone a doubling? The Wall Street Journal had this very question in 1913, tut-tutting that Ford might be applying “Biblical or spiritual principles in the field where they do not belong.”

But there was more to be said for Ford’s decision—which was, in fact, based on a recommendation by Couzens—than met the eye. As Drucker explained in Management: Tasks, Responsibilities, Practices: “Before Ford changed the whole labor economy of the United States with one announcement, labor turnover at the Ford Motor Company had been so high that, in 1912, 60,000 men had to be hired to retain 10,000 workers. With the new wage, turnover almost disappeared.”

It paid off, too. “The resulting savings were so great that despite sharply rising costs for all materials in the next few years, Ford could produce and sell its Model T at a lower price and yet make a larger profit per car,” Drucker wrote.

Not to mention that it helped create a middle-class consumer who in turn could stimulate the broader economy.

What do you think: Would large, unforced wage increases for workers today actually be good for business and the economy?