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Managing for Results

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Peter F. Drucker is probably the greatest management thinker of the 20st Century. He has been Professor at New York University and at 83 years old still teaches at the Graduate Management School of Claremont University, California. This book is split up in three parts, each consisting of three-to-eight chapters. In the Introduction, Drucker clearly explains the thinking behind this "what to do" book: "It tries to develop a point of view, concepts and approaches for finding what should be done and how to go about doing it."

Part I - Understanding the Business - consists of eight chapters and stresses analysis and understanding. It deals with what Drucker terms "business realities", or the situation most likely to be found in any business at any given time. It discusses the relationship between results, resources, efforts, opportunities and expectations. It further discusses cost centers and cost structure, but also methods for understanding the business from the "outside". Chapter 8 - This Is Our Business - can be seen as a summary for this first and longest part of the book.

Part II - Focus on Opportunity - focuses on opportunities and leads to decisions. It discusses the opportunities and needs in each of the major economic dimensions of a business: making the present business effective, finding and realizing business potential, and making the future of the business today. In particular, this last issue has become a Peter F. Drucker-trademark.

The final part of the book, Part III - A Program for Performance, discusses how to translate insights and decisions into purposeful performance. This sounds simple but it is not. Through fairly short chapter, Drucker explains that key decisions have to be made regarding the idea and objectives of the business, choice of excellences, and points of focus. It also requires a number of strategic choices. Last, but not least, Drucker also discusses the managerial structure required for reaching the right performance. The Conclusion rephrases the thesis on the individual executive and his commitment, in particular on the commitment of top management.

This book was originally published in 1964, but it is still very readable. Yes, perhaps some of the examples are outdated but nevertheless. It draws on Drucker's experience as a consultant with all types of businesses and industries, and this shows itself into the hundreds-and-hundreds of examples throughout the book. And although Drucker makes management sound very simple, he knows that it is not. However, the tools and techniques that he offers in this book are very usable and will save you enormous amounts of time. Highly recommended to all readers interested in management. The book is written in simple business US-English.

This book is very unique by its very applicability across businesses and across time. The focus of the book is to explain the economic realities behind business decisions and explain how to go about systematically analyzing your your business result areas, the inferences to draw upon, and the strategies to plan and implement.

The real force of this book becomes apparent by the very applicability of it in today's scenario of great economic and social change. Concepts like the result areas of business, and managing knowledge as the ONLY crucial economic resource of an organization are most relevant today. The book also explicitly details strategies that can be developed depending on each individual organization in times of change.

This book is a great asset to every manager! I recommend it as one of the best and most comprehensive books on business analysis and strategy.

This relates good basic, but not necessarily obvious rules for getting results. There is some overlap with other Drucker books. But his stuff is worth reading twice, so I'm not complaining. He does seem to contradict himself, however, when he writes that what he's relating can be learned by most anyone. Then elsewhere he relates how "generals" are quite rare, suggesting leaders are born, not made. So, I'm not quite sure what to think of his take on that. But otherwise, he is the management guru of our time, and worth reading.

As the author best puts it: "This is a what to do book. It deals with the economic tasks that any business has to discharge for economic performance and economic results." Of important note is the focus on the ultimate results which Peter stresses as the ultimate measuring stick for any activity the business undertakes.

The book is divided into three main sections. The first one, "Understanding the business", is focused on analysis and understanding. This includes discussing topics such as: revenues, resources, prospected, cost structures, customers etc. The second one, "Focus on opportunity", is focused on opportunities and how to capitalize on them. This includes topics such as: building on strength, business potential. Finally the last section, "A program for performance", focuses on the "conversion of insights...into purposeful performance". This includes discussing: business objective and strategy, organizational structure etc.

A great read on business execution/effectiveness and strategy. What sets this book apart from others is its thoroughness in addressing the various aspects that affect the company's current and future results. Numerous examples of companies are also presented to illustrate the material presented. Highly Recommended!

Below are some excerpts from the book that I found particularly insightful:

1) "There are three different dimensions to the economic task: (1) The present business must be made effective; (2) its potential must be identified and realized; (3) it must be made into a different business for a different future."

2) "...while 90 per cent of the results are being produced by the first 10 per cent of events, 90 per cent of the costs are incurred by the remaining and result-less 90 per cent of the events. In other words, results and costs stand in inverse relationship to each other."

3) "There are several prerequisites for effective cost control: 1) Concentration must center on controlling the costs where they are... 2) Different costs must be treated differently. Costs vary enormously in their character - as do products. 3) The one truly effective way to cut costs is to cut out an activity altogether...4) Effective control of costs requires that the whole business be looked at - just as all the result areas of a business have to be looked at to gain understanding. 5) "Cost" is a term of economics. The cost system that needs to be analyzed is therefore the entire economic activity which produces economic values."

4) "Major cost points fall into four main categories: 1) Productive costs 2) Support costs 3) Policing costs 4) Waste"

5) "Marketing analysis is a good deal more than ordinary market research or customer research. It first tries to look at the entire business. And second, it tries to look not at our customer, our market, our products, but at the market, the customer, the purchases, his satisfactions, his values, his buying and spending patterns, his rationality."

6) "Having reached the end of this self-analysis, the businessman should be able to see what the business is, what it does, and what it can do."

7) "This does not mean that every business has a hidden potential and can turn weaknesses and vulnerabilities into opportunity. But a business that has no potential cannot survive. And a business that fails to search for its potential leaves its survival to chance."

8) "But tomorrow always arrives. It is always different. And then even the mightiest company is in trouble if it has not worked on the future. It will have list distinction and leadership - all that will remain is big-company overhead. It will neither control nor understand what is happening. Not having dared to take the risk of making the new happen, it perforce took the much greater risk of being surprised by what did happen. and this is a risk that even the largest and richest company cannot afford and that even the smallest business need not run. "

9) "Therefore one set of key decisions must be made for the business in all of its dimensions. These decisions are: 1) The idea of the business 2) The specific excellence it needs 3) the priorities."

10) "Whatever a company's program, a) it must decide what opportunities it wants to pursue and what risks it is willing and able to accept. b) it must decide on its scope and structure, and especially on the right balance between specialization, diversification, and integration. c) it must decide between time and money, between building its own or "buying" - i.e., using sale of a business, merger, acquisition and joint venture - to attain its goals. d) It must decide on an organization structure appropriate to its economic realities, its opportunities and its program for performance."

11) "The right structure does not guarantee results. But the wrong structure aborts results and smothers even the best-directed efforts. Above all structure aborts results and smothers even the best-directed efforts. Above all structure has to be such that it highlights the results that are truly meaningful; that is, the results that are relevant to the idea of the business, its excellence, its priorities, and its opportunities."

P.D. is the great author of insight into practical micro-economics.
His first rule of Profit Maxing: Do not entrust an asset to a mediocrity. He uses the Rothschild family as the stronget example: The least capable son of the Old Man was sent where he could do no harm.

This is a great lesson for Government: It is much cheaper to give a salary without power to those who cannot understand than to give such persons authority.

Another great principle he identifies is "Investment in managerial ego."
If you do not recognize this as too real, too omni-present, you have not been within a large organization or have not looked. Soldiers die and lie on hospital or wait-to-die home beds or sit in wheel chairs for this kind of investment. The lure of this investment is so tempting: The illusion that I (or We) know what's best; the lure of Independent Auditing is a waste of time/money/etc (translation: ego). Only when the Federal Government takes this seriously will results to costs change substantially in favor of results.

Investing in the future. In The Hebrew Bible Lot's wife is turned to salt because she looks backward (not to the future); in the Koran Lut's (Lot's) wife is turned to salt because she lags behind, disrespecting her husband. Put money into future profit-makers, not products that are dying. To recognize the future; that's the rub.

Balance the money applied to the benefits expected. When you see this violated, you can recognize future failure. To fund XYZ Junior College like MIT makes no sense economically, no matter how it may make its advocates feel.

P.D. is brilliant. Yet he encounters things valuable beyond economics: he recognizes there are things more important than managerial effectiveness.

This is one of the first business books I read and still one of my favourite. Drucker's philosophy is common sense and focuses on what matters.

Managing for Results is Peter Drucker's forgotten book. Here's a quote from the introduction that describes what it is about.

[The book] "deals with the economic tasks that any business has to discharge for economic performance and economic results. It attempts to organize these tasks so that executives can perform them systematically, purposefully, with understanding and with reasonable probability of accomplishment."

This is Peter Drucker at his best. He offers us a lucid analysis of what to do to increase your business' long term profitability and competitive advantage. Though the language and examples are sometimes dated, the lessons are timeless.

The book is divided into three sections. Part One is "Understanding the Business." You'll learn how to analyze a business in a way that lets you understand what we now call its "business model:" how the business makes money.

Part Two, "Focus on Opportunity," begins with these words: "Analysis of the entire business and its basic economics always shows it to be in worse disrepair than anyone expected." Drucker then offers three questions to ask as the first step in making your business effective and offers the principle of building on strength as the key to success.

The balance of Part Two discusses "Finding Business Potential" and "Making the Future Today." If you've read Drucker's Innovation and Entrepreneurship, you'll see precursors here in a more simplified form.

Part Three lays out "A Program for Performance." The first chapter in the section lays out the key decisions. The chapter on "Business Strategies" suggests four questions that any strategic plan should answer.

"To turn an entrepreneurial program into performance requires effective management." That's what's covered in the chapter on "Building Economic Performance into a Business." Clearly many entrepreneurs of the Internet Bubble era did not read this chapter about turning good ideas into money.

This book should sit within arm's reach, right next to another Drucker classic: The Effective Executive. Read and re-read that book to get better at your personal work. Read and re-read Managing for Results to make your company a success.