Consulting Drucker Page 9

  Drucker wrote a warning that marketers introducing new products or services should begin with the assumption that their products or services might find uses and markets never imagined when the product was designed and first introduced.

  Marketing as a Pervasive Theme throughout the Organization

  Some years ago, my wife and I visited Turkey. When we inquired about assistance in purchasing a sample of Turkey’s world-famous rugs, the hotel personnel recommended several manufacturing companies and advised us to purchase from one of them rather than from a street store or in the Grand Bazaar, where hundreds of vendors exhibited their wares of Turkish rugs. There was a big difference. The highest price for a rug on the street was about $2,000. The hotel staff told us that a top-quality rug would go for at least twice that. We knew that the hotel probably received a commission from the rug companies recommended, but still the hotel’s reputation was on the line and it seemed a much better source of purchase. In addition, the hotel said that the company would probably give us a tour of its factory. That had to be worth something. Accordingly, the hotel made a call, and a limousine came to take us to the rug factory for a tour. Marketing actually began with the manufacturer’s rep – in this case, the hotel. However, it continued in the limo.

  The driver spoke perfect English. He explained that we would be shown the entire process of rug manufacture, and in the case of the silk rugs, from the caterpillars on up. During the drive he explained that rug quality varied greatly and that this company wanted potential buyers to be educated so that they knew the difference between quality rugs and the cheap rugs frequently sold on the Turkish streets. He took us to a sub-plant where the process began. A junior manager stopped the process at every phase so that we understood what was being done and why. His English wasn’t perfect, but it was good enough that we understood everything he said and he could answer our questions. We progressed from station to station, from the raw material to weaving.

  Even as we moved from station to station and encountered someone who did not speak English, the supervisor explained each function and why different tasks were important and necessary for a superior product. The manager who acted as our guide also translated whenever required. We were told that some manufacturers skipped certain steps, which might save money but would cost the owner in the long run. A quality control engineer who was educated in the states explained how they controlled quality, how each item was inspected and why some were rejected. They all seemed happy to explain their contribution to the rug-making.

  From this facility, our limousine driver took us to another facility, where the rugs were stored. Again we were taken from station to station and the different types of rugs, weaves, and colouring were patiently explained. At the end of the tour, we were taken to a large showroom and introduced to the salesman. He showed us samples and asked about the size, material, design, and colouring of the kind of rug we wanted. He wrote down this information. The most expensive types were pure silk, the least expensive wool, and the blends in between. These were reasonably expensive rugs. We had intended to buy only one rug of moderate size and spend a maximum of $4,000. And though we usually don’t carry that much money around, we had investigated prices before we left the hotel and had this in cash. We were led to a comfortable couch and were served tea and light refreshments by friendly employees while the salesman chatted with us.

  After a few minutes, two workmen began to bring in rugs of the types we had requested. There were about a dozen. We liked two silk rugs, but could not decide between them. The asking price was about $6,500 each. My wife and I had considerable experience in buying products all over the world, but I knew we would have to negotiate. We thought we could probably get one rug for about $5,000. This was more than we intended to spend, but thought that probably it was the best we could do. We told the salesman which rugs we were interested in. He said something to the workmen and they carried the others rugs out.

  I smiled and opened with an offer of $4,000 for one of the rugs. He smiled back, but shook his head “no” and knocked off only $500 from $6,500, taking rug’s price down to $6000. We haggled some more, and after several additional cycles of pricing eventually got down to about $5,500. Then I had an idea. I told my wife my idea and asked her in Hebrew (she’s an Israeli) if we could afford it. She liked the idea and said that we could.

  I asked the salesman, “What if we bought both rugs? How much would he charge us?”

  He thought for a moment and said, “$10,000”.

  I said, “Look, we’ll give you $7,500 right now for both rugs.”

  “I can’t make a deal like that,” he responded. “Only the general manager has that authority, but if you are serious about buying both rugs, I’ll see if he’s available.”

  Minutes later a well-dressed, middle-aged man stepped into the room.

  “How will you pay for the rugs, Mr Cohen?” he asked.

  “$4,000 cash, $3,500 cheque or credit card,” I answered. We closed the deal, drank tea, and chatted. On the way back to the hotel, the driver asked if we had made a purchase and he resold the company’s reputation and quality.

  The lesson here is that marketing of one sort or another occurred from start to finish, beginning at the hotel. Did we get a good deal? Probably, but others have done better. After all, this was the Middle East. But consider this: we intended to spend $4,000 tops. We spent more than twice that. We were told by the hotel that prices would be much higher than on the street or in the Grand Bazaar, so we were prepared. However, we wouldn’t have even spent the $4,000 without being absolutely convinced of the quality and reputation of the manufacturer. We were on vacation and would consider occasionally spending more money than we would normally, but $4,000 was a lot of money, especially when the asking price on the street or in the Grand Bazaar was much less. Marketing was pervasive within every department of that organization and it paid off in a large sale that would not otherwise have been obtained.

  Did Drucker Take His Own Medicine?

  Drucker first had a background in writing and worked as a journalist. He developed his writing abilities further, first in German, and then in English. When we consider if Drucker used the methods of Drucker Marketing in his consulting practice, we have to first remember that Drucker originally came into consulting through his writing articles and books, a major consulting contract with General Motors, and another book and more articles. So he didn’t sell his services to build his practice. Clients came to him through his writing. And this is a perfect entry. I got into consulting the same way. It certainly fits the principle of Drucker Marketing, which asserts that marketing is primary over other business functions, including selling. Moreover, it almost automatically ensured that Drucker had a product that prospects desired and valued. If they didn’t, he would not have been published in either books or magazines. Moreover, every part of “the Drucker business” was involved in this marketing effort—from his books and articles in Harvard Business Review to tapes, videos, seminars, and workshops.

  But don’t misunderstand. I’m not saying that Drucker intentionally followed any marketing strategy in building his practice, but it worked out that way nevertheless. Moreover, intentionally or not, Drucker manoeuvred his practice into the “Hershey Syndrome”. He no longer even had to write to get clients. I’m sure he received offers into his nineties, although he had long since retired from an active consulting role. Like Hershey: “This was a brand that was an American staple, had been passed down for generations, and that people could remember enjoying as a kid.” Well, perhaps a little exaggeration in the last few words, but you get what I mean.

  I view Drucker’s consulting practice as confirmation of the marketing principles inherent in “Drucker Marketing”, a term that he never himself used to describe what he recommended in marketing anything.

  1 Emerson’s actual words were, apparently: “If a man has good corn or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles or churc
h organs, than anybody else, you will find a broad hard-beaten road to his house, though it be in the woods.” Even the misquote is misquoted today. Originally it was: “If a man can write a better book, preach a better sermon, or make a better mousetrap than his neighbor.” No author listed. “Build a Better Mousetrap, and the World Will Beat a Path to Your Door,” Wikipedia, accessed at http://en.wikipedia.org/wiki/Build_a_better_mousetrap,_and_the_world_will_beat_a_path_to_your_door, 26 April 2015.

  2 Cohen, William A., “The Grandfather of Marketing,” M&SB, November 2014, accessed at http://www.marketingandsalesbooks.com/en/contribution/114/the-grandfather-of-marketing?c=4, 24 November 24, 2015.

  3 John Luciew, “Hollywood Gets Hershey’s Marketing History Mostly Right In ‘Mad Men’ Finale,” accessed at http://www.pennlive.com/midstate/index.ssf/2013/06/hollywood_gets_hersheys_market.html, 7 May 2015.

  Chapter 6

  Drucker’s Ethical and Integrity Bedrock

  To Drucker, ethics and integrity were the bedrock of all business and personal practices. However, he recognized that there were differences in cultures and many challenges in operating from this bedrock. So he brought all his talents to bear and investigated all manner of ethics and integrity. He easily could have written a book solely on this one topic. He told clients from all organizations that they could make lots of mistakes and still get through in fine shape, so long as they obeyed the single injunction to maintain their integrity. He told clients that there was no such thing as “business ethics”, but that without integrity they would not succeed. The clients who obeyed his injunction to resolve the apparent conflict between ethics and integrity in their private and business lives tended to be more successful than those who paid lip service to Drucker’s recommendations. He is rightly credited with the comment that he repeated both in class and in his writings, which drew a line and distinguished between ethics and integrity from morality and the law. Whether hiring call girls to entertain customers was ethical or not was the wrong question. According to Drucker, this was not a question of ethics, but rather aesthetics. To wit, “Do I want to see a pimp when I look at myself in the mirror while shaving?”1

  Drucker’s “Lies” and the Licence to Shade Statements for Emphasis

  Doris Drucker died at the age of 103 in 2014. Before she died, I heard Doris say many times: “I was blessed with having a husband who, in addition to being clever, was a man of substance, with strong values and high ethics.”

  Through his stories and examples, Drucker taught his students, readers, audiences, and consulting clients what he had learned only after intensive study, analysis, and thinking. However, he was sometimes criticized for the examples he used to illustrate his conclusions. Stories that he told occasionally misstated facts in illustrating his concepts. This was true, and if challenged, he did not deny the charge. His response invariably was, “I’m not a historian; I’m trying to make a point.”

  I have heard Drucker attacked by those who disagreed with his conclusions or the management solutions he recommended. For example, they criticized Management by Objectives, a methodology Drucker promoted and claimed was a fairer and more accurate means of evaluating managers, as well as ensuring that executives were focused on the organization’s current goals and objectives. Moreover, his detractors even questioned if his very practical solutions were really based on scientific research. However, I have never heard of his being attacked for a lack of ethics or integrity. He might have been occasionally careless with the accuracy of his examples, but never with his integrity. He did not lie, cheat, or steal, nor did he tolerate those who did. He was one of the most ethical individuals I have ever met – whether in consulting, his business dealings, or his private life. I believe that his ethics played a major role in his consulting practice and should be modelled and followed as Drucker did himself. Not many people would turn down a major speaking contract worth thousands of dollars with an admonishment that there was nothing that the ancients didn’t know about leadership and that this wisdom was available in books written two thousand years ago.

  Drucker’s Ethics vs. Those Commonly Stated

  Yet Drucker’s ethics were not always the “ethics” that people readily label as such. He despised the term “business ethics” and said that there was no such thing. There was only ethics, period. If a consultant wishes to follow in Drucker’s ethical footsteps, and I certainly recommend this, it is important to understand his thinking and what was behind it. Only with this understanding can we proceed to apply Drucker’s thinking on ethics as a guide in our own practice and in dealing with clients.

  Ethical Decisions May Be More Complex Than You Think

  Ethical challenges are pervasive and significant. Clients pay for the consulting. Do they have a right to tell you to omit, deemphasize, or “spin” conclusions in your report and recommendations? Where does the difference between positive thinking about the future of a product, service, or business differ from the facts sufficiently enough to make the consultant’s statements a lie? Even legal requirements usually do not permit an advertiser to claim that it makes “the best hamburger on Earth”, though most realize that such a statement, impossible to prove, is at best a goal and not a demonstrable fact. But there are limits, ethical as well as legal. When does a “white lie” told to protect someone’s feelings become an unacceptable “bald-faced lie”? These questions just scratch the surface of those that a consultant frequently faces.

  What Are We Talking About?

  The concepts of integrity, ethics, morality, obedience to the law, and even honour are closely related, but they are not the same. Drucker spoke about the need for integrity. He raised issues regarding business ethics. It is important to distinguish among these and other connected concepts. I know that I’ve overly simplified these here, but it is necessary for an understanding of Drucker’s views. Ethics is a code of values. Integrity speaks to adherence to this code of values. Morality is the quality of this adherence. Drucker defined honour as demonstrable integrity and honesty, adding also that an honourable man stood by his principles.2

  Drucker’s writing contained evidence of considerable concern with these concepts. What makes them particularly difficult to understand is that the unique interpretation of each concept determines what is right and good, and what is not. Drucker was acutely aware of the 17th century physicist, mathematician, and philosopher Blaise Pascal’s pronouncement that “there are truths on this side of the Pyrenees, which are falsehoods on the other”.3 Drucker recognized that what one culture might find acceptable or even a requirement for ethical behaviour might be totally different for another and even considered unethical. An example he used in class was the custom for corporations in Japan to reward underpaid government officials after their retirement if the corporations had benefitted from the actions of these officials when they were in office. In the US, this was considered unethical and corrupt. In Japan this was both ethical and the right thing to do. He told the story in class which I have frequently repeated illustrating this problem and told in chapter one.

  Drucker explained why the actions of the Japanese CEO in that story would be considered an ethical duty and neither unethical nor unlawful in Japan. “In Japan,” Drucker told us, “government officials are paid very little. They could live on what they receive in retirement only with great difficulty. It is therefore expected that when they retire, companies that have benefited from their actions during their tenure will assist them, financially and otherwise. Since they could barely get by on their retirement pay, this is considered the only right and ethical thing to do.” Drucker concluded that the Japanese CEO acted correctly; since this was unethical and moreover illegal in the US, the American standards would be followed.

  Yet Drucker did not agree with so-called “situational ethics” and warned against them. In other words, one did not behave one way in private life and another way in business or professional life. He also believed social responsibility to be a part of an individual’s or or
ganization’s ethical behaviour. But here again he gave examples of corporations that, seeking to do good, had caused harm to customers, the organization, and to society. He cautioned that, under certain conditions, what would normally be considered a corporation’s social responsibility should not be undertaken and was probably considered unethical behaviour. Drucker’s positions on ethics and integrity might be argued, but they must be understood, for they form the basis of his ideas in dealing with clients and in the application of all his management concepts for consulting.

  The Distinction between What Is Legal and What Is Ethical

  Drucker made an important distinction: law may have very little to do with ethics or integrity. He made it clear that law and ethics are not the same and gave us two examples. Until the 1860s, slavery was legal in the United States. Moreover, in the Dred Scott Decision of the late 1850s, the Supreme Court ruled that no African-Americans, not even free African-Americans, could ever become citizens of the United States. According to the law, the Declaration of Independence did not apply to them, nor did the US Constitution offer them any protection. So, if you maintain that the law and ethics are the same, you would have to say that if anyone in any way attempted to subvert the law to award constitutional rights to African-Americans in those days, he would not only be in violation of the law but he would have been unethical. However, clearly it was the laws that were unethical, not the violators.