Consulting Drucker Page 3

  When the Peter F. Drucker Foundation for Nonprofit Management was established in 1990, I was invited to become a member of its advisory board. The foundation was set up to help NPOs learn from other NPOs and from managers and scholars to improve their NPO. I attended several annual meetings of the board and made presentations on how nonprofit organizations can develop exciting, creative solutions to social problems.

  Peter and I exchanged letters from time to time. What impressed me was that Peter always wrote letters by hand. He used neither a typewriter nor a personal computer to do so. Of course, he may have used these appliances on other occasions, but he never used them for his private letters to me.

  For a period, The Drucker Foundation operated under the name of the Leader to Leader Institute. More recently, Frances Hesselbein’s board asked her to give the foundation her own name. I know that she did this under pressure. Peter was at first also unwilling to set up a foundation with his name and finally agreed on the condition that his name be removed some years later. His modest character showed itself in such gestures.

  Each time I met with Peter, I was stimulated by his overwhelming knowledge of history and his prescient insights into the future. I cannot imagine how he acquired his vast knowledge in such a wide variety of fields.

  I think of Peter as a rare Renaissance man who is one of the most remarkable persons that I have had the pleasure to know.

  Philip Kotler,

  My Adventures in Marketing

  About Philip Kotler

  Philip Kotler is currently the S. C. Johnson Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University. He is the author of over 58 marketing books, including Marketing Management, Principles of Marketing, Kotler on Marketing: How to Create, Win, and Dominate Markets, and Marketing: From Products to Customers to the Human Spirit.

  Professor Kotler is the recipient of numerous awards including 23 honorary degrees and other honours. He was the first person to receive the “Leader in Marketing Thought” award from American Marketing Association. In a survey of 1,000 executives conducted in 25 countries about the Most Influential Business Writers/ Management Gurus by The Financial Times, Kotler ranked fourth after Peter Drucker, Bill Gates, and Jack Welch.

  Chapter 1

  The World’s Greatest Independent Consultant

  When Peter Drucker was my professor – and even later when an unexpected friendship developed – I never thought that I’d write about his principles and concepts, or anything about him. I didn’t want to be mentored by him in the traditional sense either. I can’t really say why. It may have been my own stubbornness or some desire to “make it on my own” without the help of anyone else. Even after I managed to achieve a modicum of notoriety from my own work, I frequently (almost subconsciously) quoted Drucker in my speeches, taught Drucker in the classroom, and applied his ideas frequently. But I avoided what I considered taking advantage of having been his student, and later his friend.

  My First Book about Drucker

  It was in 2007, two years after his death, when for the first time I finally sat down to write specifically about what I had learned from Drucker. This in-depth introspection resulted in A Class with Drucker (AMACOM, 2008) and gave me tremendous insight as I realized, perhaps for the first time, how much I owed Drucker intellectually, and the tremendous impact his ideas had had on my own thinking.

  He once wrote to the head of the search committee at a major university that had proposed to hire me, writing that he, along with other faculties, had learned from me at least as much as they had been able to teach me. I’m not sure if this was entirely complimentary, as it might have referred more to my stubbornness and inability to learn what he attempted to teach, rather than any special information or insights that he and other faculties had gained from having to put up with me in their classes.

  I did not consider myself a superior student in any way. Peter’s partner in developing one of the first – if not the first – PhD programme for working executives was his dean, Paul Albrecht. Paul’s wife, Bernice, and my wife, Nurit, had hit it off and Bernice had been literally talking “out of school”. After a party at my house, Nurit told me, “Paul says you are brilliant, but lazy.” I answered immediately that either she or Bernice must have misunderstood what Paul had actually said. I told her it was far more likely that he had said the exact opposite: that I worked very hard, but was rather dull-witted.

  It was not until I started writing this earlier book (A Class with Drucker), that I realized the enormous extent of Peter’s intellectual gifts to me personally. My first book on Drucker was followed by several others: Drucker on Leadership (Jossey-Bass, 2010), Drucker on Marketing (McGraw-Hill, 2013) and The Practical Drucker (AMACOM, 2014).

  These invariably resulted in a number of interviews and what seemed like endless questions. There was much still unknown and misunderstood about this towering management genius and how he was able to do what he did and what he had actually recommended to his consulting clients that brought success to them and fame to himself. In attempting to answer these questions, it is important to understand that Peter Drucker was not only a great management teacher. While he is known as the “father of modern management”, he was also the most celebrated independent management consultant – ever. Yet little was publicized about this aspect of his contributions – his consulting and how it was conducted. Nor, in this context, even what he recommended and what he did not. As he himself maintained to all who would listen, virtually all his ideas came from his consulting. He said that his clients and their organizations were his laboratories, conjuring up images of Drucker at work in a white coat with the smell of pungent chemical compounds or the sparks of electrical activity in the background—not too far afield from the famous Frankenstein movie scene. Despite the attraction and mystery of this imagery, the consulting aspect of his legacy is little explored. But the history of Drucker’s work as a consultant is not the point of this book. It is application that Drucker sought again and again, and the application of Drucker’s consulting practices is what this book is about.

  How to Make It Big as a Consultant

  How to Make It Big as a Consultant (AMACOM) is the only book I’ve written on the subject of consulting. It went through four editions (1985, 1991, 2001, and 2009) and was published in many languages. It was also named as “Best Business Book of the Year” in 1985 by the Library Journal. That book did not exclude Drucker. In fact, the latest edition includes numerous references to him. However, it did not specifically seek to apply his principles or consulting methodologies. Yet Drucker was at his most extraordinary in the consultant’s role. Jack Welch, called “Manager of the Century” by Fortune magazine in 1999,1 is one of the best-known CEOs to acknowledge Drucker contributions to his success.

  Drucker Swings into Action as a Consultant

  Legendary General Electric CEO Jack Welch sat down with management consultant Drucker shortly after Welch became CEO of GE in 1981. Drucker posed only two questions, but they changed the course of GE’s future. Those two questions were worth billions of dollars over the course of Welch’s tenure as CEO. The first question was: “If GE weren’t already in a business, would you enter it today?” Then Drucker followed up with, “And if the answer is no, what are you going to do about it?” Welch decided that if GE couldn’t be number one or number two in a market, the business would have to be fixed, sold, or closed.2 His actions afterward earned Welch the unflattering title of “Neutron Jack” for eliminating employees while leaving the buildings standing. However, as confirmed by Welch, that strategy – based on his consultation with Drucker and the questions Drucker asked – were the core secrets of his fantastic success at General Electric during his tenure. This included increasing GE’s stock value 4,000% during his tenure.

  Drucker not only consulted for large corporations as an independent. He consulted for small businesses, non-profits, and governments all over the world, the milita
ry, and many churches. However, unlike others, he had no giant consulting firm or an extensive staff. He was a sole practitioner in the true sense of the word, and even as a worldwide celebrated expert in continual demand, he answered his own phone. Call Drucker’s home telephone and you’d hear a voice in a Viennese accent answer intoning, “This is Peter Drucker.” Drucker answered his own telephone and his consulting office was in his home.

  He did not always accept consulting assignments, either. He wrote about advising one organization, which had sought his advice on leadership, that they should consult ancient wisdom and read Xenophon, a 2,000-year-old text that he said was “the first systematic book on leadership, and still the best”. Nor did he always charge for his services. Minglo Shao, a wealthy Chinese entrepreneur and owner of numerous businesses worldwide and co-founder of the California Institute of Advanced Management (of which I had the honour to be founding president, and now president emeritus), flew to Claremont, California, several times a year to consult with Drucker. But despite numerous offers from Shao, Drucker refused to accept a penny for his advice. He wanted only for Shao to use the knowledge he gave him to help China as it began to develop democratically and entrepreneurially.

  Many of my own techniques and concepts originated with ideas from Peter Drucker. I just didn’t realize it myself until I sat down with my notes from my time as his student and reflected on what he taught. The debt I personally owe Peter – and Peter is what he asked all his students to call him – for pushing me in the right direction and showering me with his wisdom, ideas, and friendship is significant. This is most emphatically true of everything we taught at the special graduate school specifically founded as a non-profit to offer an affordable MBA based on Drucker’s concepts.

  How Drucker Got His Start as a Management Consultant

  Drucker didn’t plan to become a consultant. I know this because he told his students that his first experience in consulting started not long after arriving in this country. Previously, Drucker had been a newspaper correspondent and journalist, as well as an economic analyst for a bank and an insurance company. However, having a doctorate (though not in management, but in international and public law), Drucker’s intellectual gifts were mobilized for World War II in 1942.

  He was told that he was to work as a “management consultant”. He said that he had no idea what a management consultant was. Drucker even checked a dictionary, but the term couldn’t be found. He said he went to the library and the bookstore. “Today,” he told us, “you will find shelves of titles on management. In those days, there was almost nothing. The few books didn’t include the term, much less explain it.” He asked several colleagues and had no better luck. They didn’t know what a management consultant was either.

  On the appointed time and date Drucker proceeded to the colonel to whom he’d been assigned, wondering all the while exactly what he was getting into. As he told the story, I imagined a serious-faced receptionist asking him to wait and an unsmiling sergeant arriving, probably armed, to escort him to the colonel. This must have been a little intimidating for a young immigrant in the US, who not too many years earlier had fled from Nazi Germany, where much of the population was adorned in one uniform or another.

  He was led into the office by yet another stern-faced assistant. The colonel glanced at Peter’s orders and invited him to be seated. He asked Drucker to tell him about himself. He questioned Drucker at some length about his background and education. But though they seemed to talk on and on, Drucker did not learn what the colonel’s office was responsible for, nor was he given any understanding as to what he would be doing for the colonel as a management consultant. It seemed as if they were talking round and round with no purpose.

  Drucker was more than a little uncomfortable dealing with the colonel. He hoped that he would soon get to the point and explain exactly what kind of work Peter would be involved in. He grew increasingly frustrated. Finally, Drucker could take it no longer. “Please, sir, can you tell me what a management consultant does?” he asked respectfully.

  The colonel glared at him for what seemed like minutes, but was probably only a few seconds, and responded: “Young man, don’t be impertinent.”

  “By which,” Drucker told us, “I knew that he didn’t know what a management consultant did either.”

  But Drucker knew that the person who had made this assignment would know what was expected of a management consultant. And from reading about Arthur Conan Doyle’s character, Sherlock Holmes, while he was living in England, he knew what a “consulting detective” did. Equipped with that knowledge and the assumption that the colonel did not know anything about management consulting, Drucker started to ask the colonel direct questions about his responsibilities and problems. In some ways this was the foundation of Drucker’s unique modus operandi in all his work, including consulting: he asked questions. These questions led to additional questions, and eventually the colonel himself reasoned what he wanted done. Drucker then laid out some options about how this work should be accomplished, and got the colonel’s agreement to proceed. The colonel was not only well satisfied, he was clearly relieved. He accepted Drucker’s proposals in their entirety. This proved to be Drucker’s first successful consulting engagement. So, Peter Drucker was not only the father of modern management; but he may have also been the father of modern independent management consulting as well, at least with this colonel.

  Later he told me that the man in the office, (or was it cubical?) next to his was Marvin Bower, who later became managing director of McKinsey & Company in its years of major growth. The New York Times called McKinsey & Company “the most prestigious consulting firm”, with 9,000 consultants worldwide. Drucker had direct connections to consulting from the beginning, even if at first he didn’t know it.

  Drucker’s Peculiar Advice about Almost Everything

  You may think it strange, but Drucker didn’t believe in business ethics. He urged his clients to be ethical. However, he made it clear that what was ethical and what was not differed among cultures and that there was no such thing as “business ethics” – only ethics. “Procuring prostitutes for visiting executives didn’t make you unethical,” he said. “It did, however, make you a pimp.”5

  He once told the story of a large Japanese company that wanted to open a plant in America. After an investigation of many locations in several different states, a suitable site was located. So important was this operation that a special ceremony was scheduled that included the governor, many senior state officials, and the CEO from Japan.

  The Japanese CEO spoke fairly good English; however, to ensure that everything would be understood correctly, the company hired an American Nisei, or second-generation woman of Japanese descent, to translate his speech into English.

  With dignity and in measured tones, the Japanese CEO began to speak, noting the great honour it was for his company to be able to locate their new plant in this particular state in the United States, with mutual benefits to his company and the state’s citizens. He also discussed the benefits to the local economy and to Japanese-American friendship. Then, nodding in the direction of the governor and other state officials, he said “Furthermore, Mr Governor and senior officials, please understand that we know our duty. When the time comes that you retire from your honoured positions, my corporation will not forget and will repay you for the efforts that you have expended in our behalf in giving us this opportunity”.

  The Japanese-American interpreter was horrified. Instantly she made a decision to omit these remarks in her English translation. The Japanese CEO, who understood enough English to realize what she had done but little of the American culture to understand why, continued his speech as if nothing had happened. Later, when the two were alone, the executive asked the interpreter, “How could you exclude my ethical reassurances to the governor and officials? Why did you leave this important part out of my speech?” Only then could she explain, to his amazement, that what is ethical – even a duty
– in Japan is considered unethical and corrupt in the United States.6

  Consulting and the California Institute of Advanced Management

  In 2010, I cofounded and was appointed president of the nonprofit California Institute of Advanced Management (CIAM). CIAM is a graduate university granting a single degree: an MBA in Executive Management and Entrepreneurship. However, we developed an interchangeable online programme and a doctorate as well, and in all cases, CIAM applies Drucker’s mandate of learning through application. For example, students learn how to apply theory by doing actual consulting in every one of the 12 courses required – from accounting to marketing and general management. Teams of four students, and one course done solo, by an individual student provide consulting for small businesses, non-profit organizations, large corporations, and the government. These consulting engagements are all done without charge.

  We also began consulting remotely using electronic visual and audio contact. We did this first in Canada, Israel and Mexico. When CIAM held its second graduation, Dr Francisco Suarez flew 1,500 miles, from Monterrey, Mexico, to speak in El Monte, near Los Angeles. At the time, Dr Suarez was director of sustainability at FEMSA. FEMSA is one of the largest corporations in Mexico, the largest beverage company in Latin America, and the largest Coca-Cola bottling companies in the world. One of FEMSA’s television advertisements for Dos Equis beer features “the Most Interesting Man in the World” nodding solemnly at the end and saying, “I don’t always drink beer, but when I do, I drink Dos Equis. Stay thirsty, my friends.” If you’ve seen that ad, that’s FEMSA.