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Column

Peter Drucker

Peter Drucker on CEO Power

Two management gurus sitting and talking about leadership, circa 1982. A tribute to Peter Drucker.

Ed. Note: Peter Drucker, the renowned management thinker of the last century, died on Nov. 11 at the age of 95. No slouch as a management guru himself, Prof. Warren Bennis, founding chairman of The Leadership Institute at the University of Southern California and the author/co-author of 27 books on leadership, interviewed Drucker for Directors & Boards in 1982. The following is an excerpt from that interview. Copies of the entire article, titled “The Invention of Management,” are available to e-Briefing subscribers by e-mailing editor James Kristie with your fax number.

Warren Bennis: How do you get people to know their strengths?

Peter Drucker: I’ll tell you how--by asking them. The normal personality is not, as most schools see it, a B- across the board. It is an A+ in one area and C- in everything else, at best. But people don’t look at themselves that way. Only great teachers do; they work on pupils’ strengths. Incidentally, don’t ask people what they’d like to do because there is no correlation--what people really love to do and what they’re good at doing has zero correlation.

Bennis: Then is one of the definitions of a really first-rate manager someone who can help identify strengths in his group and orchestrate them?

Drucker: Yes. But you also need occasional leadership--somebody who can go in and cut. There are managers who are good at that but cannot nurture; they are the ones who have to do something, even though it is clear that if they leave a situation alone, it will take care of itself. The opposite weakness is the inability to face the fact of degenerative disease where you must cut radically. One has to be able to do both.

Bennis: How significant is the CEO in creating the style of an organization?

Drucker: Middle management will outlive a CEO. There are very few CEOs who have a life span of more than five to eight years. As CEO you do all the good you can do in three years. After that, organizational arthritis sets in.

Bennis: Yes, it’s very tough after that.

Drucker: Also, organizations have a style that isn’t easy to change. Anybody who came into General Electric, for example, and tried to make GE into a different organization would make a big mistake. You are not going to make GE into an organization that is managed bottom-up. GE is close to a military mold, but, more important, it has fundamental respect for the authority of knowledge. You can get your juniors to write the first draft, but not the finished one. They demand the authority of leadership from their bosses. There is no way to change it. And you are not going to make Sears Roebuck into an organization that values anything but being a good merchant -- unless there is a severe catastrophe.

So a CEO can do two things which everybody in the organization knows are overdue, if he does them fast. He can clean out deadwood up to a point; and he can make one basic decision to change the business. Peter Grace made one basic decision when he became CEO, which was to get out of shipping and out of South America -- and it took him 20 years of hard work to carry it out.

And Reginald Jones, when he became CEO of GE, made two decisions: He finished the reorganization that Ralph Cordiner started, and he put GE back into innovation. He did those in 10 years with a human quality that made him beloved in GE. The GE organization just loved that integrity of his, that personal compassion, the decency that was so much a part of him.

Whenever I see somebody who is about to become a CEO I say, “You’ll make one big decision, and don’t make it a small one. One gets hanged for a sheep as well as for a lamb. Do the one really big thing you can accomplish in 180 days. After that, your secretary will have more power than you have.”

Bennis: Peter, what will be the biggest management changes in the 1980s?

Drucker: Several things. First, we will all learn that modern economies are owned by and run for the employees and that the only property right in a modern society are the rights in the job. Every manager I know still sees, in his mind’s eye, that “labor” is the unskilled, preliterate sharecropper, black or white, who streamed into the munitions plants in 1917. But by 1990 we will have learned, I hope, what the Japanese learned from us. We taught it to them: People are a resource and not a cost. The Japanese have accepted that idea and we haven’t.

Second, we will learn, especially through the new multinationals, that there are only two ways that management controls: One is through people decisions and the other is through access to the market.

Third, by 1990 I think managers won’t be afraid of the computer anymore -- but won’t be enamored of it either. My grandson was in complete control of the telephone when he was six years old. Now, at age eight, through computer games, he is in complete control of a computer, but he’s not enamored of it.

Finally, managements will realize that boards of directors can become effective and, therefore, had better be treated properly. They should be built to perform. Most managements still have the idea that the board is something the law forces you to have and they try to keep it in a cage like a nice pussycat. But it can become a tiger, and then you had better make sure it’s your tiger.