Consulting Drucker Read online

  Drucker’s decision to depart for England at once is significant in analysing both his preparation for becoming a consultant and his ability to analyse situations, come to conclusions, and act without hesitation. Most, if not the majority of ethnic Jews in Germany – whether converts to Christianity or not – did not depart Nazi Germany on such short notice. Drucker left before any anti-Semitic laws could be put into place and even before Hindenburg, Germany’s president, died and Hitler assumed the leading role. He left at the best possible time. In short order, would-be Jewish emigrants faced far more than the challenges of a new language, a new job, and leaving their homelands for the unknown. It became increasingly difficult to leave, and finally it became impossible. Drucker looked at the situation realistically, saw the likely consequences – and using a technique he developed and that I’ll explain later because it’s very useful for a consultant – he made the difficult decision and left immediately to get as far away from Hitler as he could, just as rapidly as possible. He took no chances, recognizing that since Hitler was a fellow Austrian, Austria was not even a possibility.

  Drucker’s Activities in England and His First Book

  Drucker could not have had an easy time of it in England as a foreigner, especially a Germanic foreigner during the Great Depression. His dreams of becoming a professor at the University of Cologne, in fact of becoming a professor anywhere, were gone, at least temporarily. His English must have been imperfect. He could not practise law. He got a job with an insurance company, but in what capacity we don’t know. Later he said that he became senior economist at a private bank. We can speculate that, in either case, both these jobs were significantly below what his doctorate endorsed and what the abilities that he ultimately demonstrated would have commanded in Germany or Austria. But he was not yet Peter Drucker, the world famous management theorist, much less the social ecologist scientist that he ultimately claimed as his profession. He was a 24-year-old alien who had almost no work experience and spoke with a heavy Viennese accent. The heavy accent, by the way, he was never able to completely shake.

  However, Drucker had been a journalist, and he knew that if he could write well enough to be published in German, he could eventually learn English well enough to be published in English. Why not? Others had. That’s the kind of question you might ask yourself from time to time. He knew that “if he could take it, he could make it”. Moreover, he took stock of what else he had. Not only did he have a good education, but he had seen fascism first-hand. He spent the next four years putting all this together and laboriously learning the fine points of English writing as he wrote his first book on the origins of totalitarianism and analysing the totalitarian state, with additional insights from his first-hand experiences. As he saw war approaching in 1937 because of Hitler’s actions, he again made a decision to get as far away from the approaching storm as he could. He and Doris Schmitz, who also had previously moved to England to escape Hitler, packed up and immigrated to the United States. He had first met Doris at the University of Frankfurt, she too being the daughter of non-practising Jews, and they had married in England despite Doris’ mother depreciating her intended, the future “father of modern management,” as “that happy-go-lucky Austrian, Peter Drucker.”

  Drucker’s book was published almost two years later on the eve of war, as both English and Americans sought answers as to whether some accommodation might be made with Hitler and a war averted. Some, including Winston Churchill, read Drucker’s book and were happy to recommend it. It was sheer serendipity that Churchill became prime minister not long afterward, but I’d bet money that Churchill didn’t just buy a book at the airport. Someone, probably the publisher, or Drucker himself, sent Churchill the manuscript, which he was happy to endorse. At the time, only a little over 20 years after the end of World War I, many were tired of war and “wanted peace in our time.” Hitler promised that his annexing and destruction of the country of Czechoslovakia was his last territorial demand in Europe. Many who were highly educated convinced themselves that all Hitler wanted was justice for Germans and disagreed strongly with Churchill, who was sounding the alarm that England needed to hop to and prepare for war. Drucker had no such blinders on and wrote accordingly. So Churchill welcomed Drucker and his book with open arms.

  However, the publishing of this bestseller did not assure a university teaching position at a prestigious school in the US, where Drucker lived when the book was published. The best that Drucker could do at that time was to teach undergraduate courses at two girls schools: first a part-time position teaching economics at Sarah Lawrence College in New York, and then a full-time position teaching at Bennington in Vermont, where he taught undergraduate philosophy. Drucker continued to develop and use his writing abilities in English, even writing for popular US magazines on a variety of topics to supplement what must have been a meagre income as a junior professor at what was then far below a top-tiered graduate school.

  The Influence of World War II and Marvin Bower

  You read about Drucker’s mobilization as a management consultant in chapter one. Marvin Bower and Drucker occupied nearby cubicles when both were drafted for service by the US government in World War II. They became friends. Today, Marvin Bower is known as the “father of modern management consulting” and you can’t miss Bower’s influence in Drucker’s consulting.

  Bower eventually became a director at McKinsey & Company. As noted earlier, the famous consulting company of McKinsey & Company was founded by University of Chicago accounting professor James O. McKinsey. (To acknowledge any possible bias, the University of Chicago is my own MBA alma mater.) Marvin Bower became director of McKinsey after World War II, in 1950. He had begun creating McKinsey’s driving principles and making them part of McKinsey’s culture earlier, long before the war. These included putting clients’ interests above McKinsey revenues, not discussing clients’ affairs, always telling the truth to clients regardless of the consequences, and only performing consulting work that was truly necessary, regardless of the demands of a client.

  Under Bower’s tenure, McKinsey sales grew rapidly, and it expanded its offices both in the US and overseas. However, sales declined after Bower’s retirement some years later, but it is telling that the culture he founded lives on more than 50 years later. The company not only recovered from its temporary decline, but eventually forged a reputation as the most prestigious of all consulting firms. Today, McKinsey & Company has more than 20,000 consultants and more than 120 offices worldwide.4, 5

  The close office locations of Bower and Drucker allowed their relationship to deepen to a friendship. This was easy to understand; their professional backgrounds were somewhat similar, as both were lawyers by education. However, having first signed on with McKinsey in 1933, Bower had been a consultant for some years before he “joined the army”, whereas Drucker, on the other hand, didn’t even know what a management consultant was when he started his wartime consulting work. Moreover, Bower had not graduated from just any law school, but from the most prestigious law school in the country, the Harvard Law School, and after that, the most prestigious business school in the country, the Harvard Business School. Finally, he was six years older than Drucker. It is very likely that he was the dominant one in the relationship and that Drucker was heavily influenced by Bower’s ideas about consulting, and there’s some confirmation of this.

  Years later in his career, Drucker described how he was approached by a large organization about giving a speech on the latest developments in leadership. At the time, Drucker was commanding $20,000 for a one-hour presentation. However, he considered the latest developments in leadership – servant leadership – to be totally superfluous, and a speech on the so-called “latest developments” unnecessary and a waste of time. Following Bower’s concepts, he rejected the assignment with the admonition: “There is nothing new about leadership that was not already known by the ancients two thousand years ago” and advised his surprised potential clients to read a p
articular ancient text by Xenophon. This was certainly in line with Bower’s principles that he inculcated at McKinsey and no doubt passed on to Peter.

  Marvin Bower had also created a sensation in 1963, an era in which other consultants were making a fortune by going public and selling their shares back to corporations at huge multiples of earnings on retirement. Bower did something unheard of that no one else had done previously: he sold his shares back to McK-insey at book value, foregoing millions of dollars in the process. According to one writer, “in doing what he did, he demonstrated precisely the kind of allegiance to the cause he expected of anyone wishing to be successful at McKinsey. He sent the message that working for McKinsey was like joining a special order of men willing to put the higher cause of the firm ahead of self-interest.”6

  When Drucker became internationally famous and was highly successful and wealthy, he still maintained his residence in a modest home on a modest block in Claremont, California. He did not wear expensive suits, nor did he drive a fancy car. Like Bower, he seemed to be sending a message that though he might be world-famous as a scientist and social ecologist, he was in a special order of men (and women) willing to put the interests of his students, his profession, his clients, and society well ahead of self-interest. Though he may have charged $20,000 an hour for a keynote speech, the money was taken as a donation and given to a foundation he had founded.

  As final evidence of Bower’s influence, Drucker was 94 years old and still at the height of his fame less than two years before his death. He knew best-selling management authors from around the world: Tom Peters, Jim Collins, Charles Handy, Phil Kotler, Rosabeth Moss Kanter, Theodore Leavitt, and the list goes on and on. His close friend and best-selling author, Warren Bennis, was a professor at the University of Southern California only a few miles away from Drucker’s home in Claremont.

  These authors had all written numerous books, frequently multiple bestsellers and were all world-famous. Any one of them might have jumped at the chance and been eager to take the time to spend with Drucker to write his biography. And as his advanced age began to affect his writing, Drucker worked with a collaborator and second author for several of his books, a fellow professor at Claremont Graduate School where he taught, Joe Maciariello.

  But despite many available and willing authors, Drucker choose a new and relatively unknown author to write his biography: Elizabeth Haas Edersheim, who had written a single book, a biography entitled McKinsey’s Marvin Bower. Drucker initiated the contact and Edersheim visited Drucker periodically to do research on the book. However, she did not drive just a couple blocks or even a few miles, but rather flew from New York for these working interviews, which lasted about 16 months. The effort resulted in The Definitive Drucker (McGraw-Hill, 2007), published after Drucker’s death. It was not a biography, but about how Drucker saw the past development and the future of management at the end of his long career.

  The origin of all this is traceable to the time when Drucker served as a military management consultant with Bower during World War II. Clearly, at least some of Drucker’s ideas about the practice of consulting came through the influence of Bower.

  Drucker’s Big Break

  Meanwhile, Drucker wrote another book, The Future of Industrial Man, which was published in the US in 1942. This and other writings brought him to the attention of Donaldson Brown, a senior executive at one of the best-known companies in America, General Motors (GM). According to one story, Brown became interested in Drucker due to their common interest in authority. Apparently through Brown’s influence, Drucker was hired for what some have called “a two-year audit” of GM in 1943. His work resulted in his book, Concept of the Corporation, which was published in 1946 and was immensely popular. It easily became a business bestseller. In many other cases, when academics write a bestselling book, offers for speaking, more book contracts, and of course consulting come rolling in. The temptation is great, and writing and speaking sufficiently rewarding, that it is not unusual for the former university professor to give up teaching and research to devote himself full time to these associated activities. As Drucker wrote, even Albert Einstein, perhaps the greatest theoretical physicist, gave it all up to become, in Drucker’s words, a “professional famous person”. Drucker, however, did not do this. Instead, he used his new fame to secure a position as professor of management at New York University, but continued his writing, speaking, and of course, consulting.

  The book, Concept of the Corporation, was not intended as a tell-all of everything that was wrong about big business or GM. On the contrary, Drucker considered GM practices to be worthy of emulation by others. He did, however, publish ideas for even greater improvement at GM, for practices already considered far out, such as decentralization. This got him in trouble with legendary GM CEO Alfred P. Sloan, who, as explained in chapter two, was said to be so upset about Drucker’s recommendations that he retaliated by ignoring the book and acting as if it did not exist. Was Sloan overly sensitive or Drucker overly aggressive? Who knows? What we do know is that Drucker might have followed the advice of his mentor, Marvin Bower, and not written the book at all or at least not commented on the activities of a client. Maybe Drucker got off easy on this one.

  1 No author listed, “What is the Origin of the Word ‘Serendipity’?” Oxford Dictionaries, accessed at http://blog.oxforddictionaries.com/2012/03/what-is-the-origin-of-serendipity, 20 March 2015.

  2 Peter F. Drucker, Adventures of a Bystander, (New York: HarperCollins, 1978, 1979, 1991), p. 84.

  3 No author listed, “Alfred von Henikstein,” Wikipedia, accessed at https://en.wikipedia.org/wiki/Alfred_von_Henikstein, 23 November 2015.

  4 No author listed, “History of Our Firm,” McKinsey & Company, accessed at http://www.mckinsey.com/about_us/who_we_are/history_of_our_firm, 19 March 2015.

  5 No author listed, “McKinsey & Company,” Wikipedia, accessed at http://en.wikipedia.org/wiki/McKinsey_%26_Company, 28 November 2017.

  6 No author listed, “Marvin Bower,” Wikipedia, accessed at http://en.wikipedia.org/wiki/Marvin_Bower, 19 March 2015.

  Chapter 4

  How Drucker Established a Top-rated Consulting Practice

  I don’t think there is a question in anyone’s mind that Drucker built a highly unusual yet top-rated consulting practice. His consulting services were in demand, and he received requests almost every week without advertising. He frequently rejected potential business, either because he felt his services weren’t really necessary, the job could be better done by someone else, or he was just too busy to undertake it. I don’t think that he ever was in a situation where it was financially necessary to accept work or that he felt it necessary to agree to an engagement from a sales point of view. The value in understanding Drucker’s achievements in the building of his consulting practice is not just of general interest. Understanding this can enable almost anyone to adapt his ideas in other consulting practices, to make use of a consultant’s services, or to adapt Drucker’s advice in running organizations and accomplishing tasks. To understand how Drucker was able to achieve high value and results for his clients, we need to first examine both how and why consultants become consultants in the first place.

  Why Do Consultants Become Consultants?

  American Civil War General William Tecumseh Sherman succeeding Ulysses Grant as commander of the western theatre during the American Civil War once said: “I have heard of men peculiarly endowed with the traits necessary to be a general, but I have never met one.” This is equally true of management consultants and their reasons for entering the profession. A few years back, the dean of a major business school reported that a survey showed the preponderance of its students wanted to be management consultants.

  There is admittedly a certain glamour in being a consultant. Moreover, considered as a business, independent consulting has to be one of the more attractive ways of earning a living. It offers certain advantages not available in any other profession. Consider working hours.
You probably have a time of the day when you work best. Most people do. Some people work better early in the morning, others late in the evening, and there are probably a lucky few who work equally well throughout a 24-hour period. Drucker, too, worked according to when he was the most productive and could establish the best results for his clients.

  Zeroing in on Preferences

  Knowing Drucker and how he paid special attention to individual preferences and advantages in knowledge work performance, I’m sure that he would suggest that consultants should identify their optimally most productive period to work.

  Other preferences were equally important, he maintained. He advised all managers to identify their bosses’ preferred method of receiving information. He followed his own advice whenever possible in working with his clients. Some preferred to get his recommendations in writing, he noted, while others preferred to receive information verbally. He also said that it was extremely important for new employees to discover which it was. He recommended that one investigate and discover this as soon as possible when employed by a new boss because the results achieved in effective work was heavily dependent on this single factor alone. Of course, this applies to a newly-employed consultant, as well. Unfortunately, the boss or the client could rarely provide this information; more often than not, they wouldn’t even know if they were asked. This could only be ascertained by observation and experience.

  My observations and experience in dealing with Drucker as his student was that he preferred communications in writing, although he could easily and did communicate face-to-face verbally and sometimes even on his own initiative with equal effectiveness. So he may have been one of the lucky few that could do both.