THE JOURNAL OF LEADERSHIP APPLICATIONS
Vol. 8, No. 2
(626) 350-1500 Ext 102
© 2010 William A. Cohen, PhD
“Extraordinary achievements demand extraordinary leaders.“
Recent Linked Articles by Dr. Cohen not Published in the Journal of Leadership Applications:
The Four Steps You Must Take to Create the Future published in Human Resources IQ, Customer Management IQ, and Six Sigma Management IQ
Drucker’s Fundamental Business Decision from Human Resources IQ
The Importance of Controls in Implementation
© 2010 William A. Cohen, PhD
Adapted from Drucker on Leadership (Jossey – Bass, 2009)
Peter Drucker was a man of action. He wrote that the best plan is only a plan, mere good intentions unless it degenerates into work. His propensity for action and the application of knowledge over the theoretical and the academic cost him favor with some fellow academics. However this same focus is what led to his acclamation by practitioners, and his acknowledgement even by these academic detractors as “The Father of Modern Management.”
Without action nothing is achieved and nothing will get done. Your planning is worthless and it will be impossible to create your future or to live up this very basic responsibility of the leader. However there is even more. How many very talented leaders have you known who excelled in almost every department? That is, every department except one. They lacked “follow through.” Now this doesn’t necessarily mean that they failed to initiate the action required by their plans. It is just that this is all they did. They turned the switch on, and let it run. Unfortunately that was it. Their plans ran in the direction they were initially pointed with no updating or oversight if they ran at all. They made no attempt to insure the actions initiated were carried out. They made no attempt to discover whether everything was working out as intended or that the organization’s future was being shaped as they had envisioned and whether these actions should be changed or fine-tuned. In failing the critical task of follow through they wasted the time, effort, and resources of all the work that was invested previously.
Implementing your plan means initiating and putting your plans into action. As with any project, your plan needs to be managed. Management requires a breakdown of tasks, assignments as to who is doing what, time schedules, resource allocations, performance expectations, means of measurement of results, periodic and ad hoc reviews, and feedback. In short, as leader you are responsible for and must implement the plan. To do this, a leader needs controls. Drucker wrote that controls have three major characteristics.
1. controls can be neither objective nor are they neutral
2. controls need to focus on results
3. controls must consider both measurable and nonmeasurable events.
Controls Can Be Neither Objective nor Neutral
No matter how scientific we try to be, when we control something we induce error in measurement. Since we need to measure the effect of strategy, this characteristic is of some importance because the very act of establishing the control creates focus and can influence results. The most famous (or infamous) example of the errors that can be induced through controls was a study done at the Hawthorne Works in Cicero, Illinois beginning about 1924. An experiment was set up to measure productivity improvement with better illumination of the work area. Not surprisingly, it was found that by increasing the wattage of the electrical light bulbs under which the workers performed their duties, productivity increased. All well and good. However, the productivity continued to improve even though the wattage was increased only very slightly. Suspicious, the investigators decreased, rather than increased, the wattage of the light bulbs. Surprise, surprise, productivity still increased! This became known as the Hawthorne Effect. The very fact of the attention paid the workers during the experiments caused a short term increase in productivity. The Hawthorne Effect, first named in 1955 has been observed many times in different settings and environments. Unfortunately it is still controversial, as it has not always been replicated. Still, there is enough evidence to support Drucker’s assertion as a cautionary note. For example, in 1978 the Department of Neuroaugmentive Surgery at the Sister Kenny Institute in Minneapolis initiated a series of studies during which young adult patients with cerebral palsy were given an experimental treatment to help control their motor dysfunction. All patients reported significant improvement and all were very satisfied with the treatment. Objective testing did not, however, confirm these patient-perceived results. In fact, there was no improvement at all in either motor skills or function. The conclusion was that the felt improvement was due to the attention paid to these patients by the doctors, nurses, and technicians. The basic question then is what exactly is it that should be measured and controlled?
Controls Must Focus on Results
Drucker said that the major difference between a manager and a leader is that the manager focuses on doing things right, while the leader focuses on doing the right things. This is not a simple play on words. Of course you would like a leader who is both efficient (doing things right) and effective (doing the right things). But if it is a choice between the two, and this determines focus, than the leader must focus on the latter, getting the right job done, whether this job is performed more or less efficiently.
This was the great weakness of the Total Quality Management movement which had many good attributes to recommend it. These included ownership, continuous improvement, empowerment, and of course seeking high quality in all aspects. However, TQM specifically focused on process rather than results. The theory was that if you had the most efficient process in place then the best result would just naturally follow. Unfortunately, as demonstrated by many organizations that adopted TQM, this was not necessarily true. The Florida Power and Light Company, winner of Japan’s Deming Prize for quality management abandoned TQM due to worker complaints within a year, while The Wallace Company, a Houston oil supplier won the prestigious Malcolm Baldrige National Quality Award and promptly went bankrupt. All this says that the control system that you put in place as a leader must focus on your goals and what your business should be, not gaining efficiencies along the way.
Controls Needed for Both Measurable and Nonmeasurable Events
Drucker noted that controls were needed for both measurable and nonmeasurable events. His concern was that obviously measurable events would gradually overshadow nonmeasurable results which were frequently more important. However, in the context of a strategic plan, most if not all events are measurable or can be made so. Drucker’s example of a critical nonmeasurable event was the need for an organization to attract and hold able employees. However, while the need to attract and hold able employees may not be measurable, measurements designed to calculate how an organization is doing in meeting this need can be developed. These might be measured employee satisfaction, employee turnover rates, time to acquire new hires and so forth.
Control Requires Metrics
Today we call the measurements necessary for control “metrics.” Choosing the correct metrics and the decisions made about them are incredibly important in using them to control the organization for any goal whether strategic or day-to-day. Choice of the wrong metrics, or their collection organized or analyzed incorrectly can lead to a multitude of problems for the organization while failing in their purpose of rendering control.
A large Air Force command established a management control system and performance measurements were developed for important aspects of the organization’s primary mission and support functions. One of the support functions at most U.S. military installations consisted then and now of social club-like organizations. These could be very simple, or for the larger permanent bases, quite elaborate. All were for the benefit of members and their families and guests and were supported by the membership, not the government. Membership was voluntary although there was some pressure to participate. The result was that almost all joined and paid a modest monthly membership fee. The clubs offered one or more restaurants, a swimming pool, services like check cashing, and usually pool and ping pong tables and also a place where everything from parties to bingo, bridge clubs, and weddings could also be held. Since club membership fees were intentionally kept very low, like many civilian restaurants, a disproportionate amount of income came from the bars. In fact, they tended to generate profitability for the entire club. These clubs were not set up to be profit centers, but to serve its members. Usually profits generated were turned back to the club, and the elected club board made the decision as to how to spend this money locally.
In this particular Air Force command, it was decided at the higher command level that the basic metric for the clubs would be profits. One club’s profits would be compared with another. The metric was not however just overall club profit, but profit in each part of the club. For example, the swimming pool never charged fees. The costs for maintenance of the pools, life guards, etc. were all covered by surplus funds from the bar. The restaurant provided exceptionally good service and high quality food at low prices. These too were enabled due to the profitability of the club bar. The new management control system created immediate problems. The swimming pools had to charge fees for use. Use declined. The restaurants could no longer offer the same quality of food or service. As a result they were no longer competitive with many nearby civilian restaurants. In desperation and in trying to become profitable, some clubs turned to highly questionable cost-cutting practices. One club ceased purchase of catsup and mustard bottles. Instead, the small government-issue tubes of catsup and mustard, when unused, were salvaged from flight lunch boxes after a flight. Club members deserted the club restaurants and soon membership declined. Only when metrics based on service as well as profits did the clubs return to their previous state. Because of the importance of the metrics, Drucker created seven specifications to be adopted in the establishment of “metrics” or controls.
Drucker’s Seven Control Specifications
Drucker listed seven specifications for an effective control. First, a control must be economical. The economy issue has to do with the cost both to managers and the leader. When Frank Carlucci was Secretary of Defense I heard him speak on some of his early experiences in this high level cabinet position. He oversaw several million employees in and out of uniform and billions of dollars in defense expenditures. In order to be able to properly control such a vast empire and fulfill his responsibilities he required a great deal of information from all of the many defense organizations under his supervision. His staff put a list of volumes of information they thought that he would need from each major defense organization. Carlucci forwarded these lists and asked that this information be collected, analyzed and presented to him during a personal visit which he intended to make every six months to every major organization. Six months later he made his first visit and was presented with an immense document. Although the information from this one organization was too voluminous to go over in detail, he knew it was all there. He was immensely pleased and told the organization’s head that this was exactly what he wanted. The only problem was that he learned that in order to obtain all the information required by him every six months, the organization would have to spend most of its time and a huge amount of its resources on this one task and would not be focused on performing its mission. He had his staff review the requirements with this stark fact in mind and found he could get by on a tiny percentage of the information originally requested and still have everything he needed for effective control and oversight..
Drucker found that many organizations were measuring things which were unimportant to the leader’s intended outcome. These controls were meaningless when they should have been meaningful. If a control is not meaningful, you are not only wasting time and effort in gathering data and analyzing the measurement, but you will be sending the wrong signals to subordinate leaders as your organization proceeds with the plan. Those you lead will be wasting time, energy, and resources working on the wrong objectives and not what your business is or should be. The control must be meaningful to your ultimate objective for your strategic plan.
Drucker felt that the most important specification was that the control be appropriate to what was being measured. He found that many controls in use tended to supply numbers without a description which would define what the numbers meant. As an example he noted that a measurement of sales performance was frequently reported in total dollars, which by itself was an inappropriate figure because an identical volume of sales could mean substantial profit, zero profit, or a substantial lost depending on the product mix sold.
Drucker listed congruency as another important control specification. In this regard he encouraged leaders to think through whether their measurements were congruent with the events being measured. He warned leaders of the tyranny of numbers and cautioned that frequently an exact numerical figure which sounded precise could be so inaccurate as to be meaningless and even dangerous because of its implied certainty and because it misled readers as to the real nature of the perception of the event. Instead he stated that terms such as “larger” and “smaller,” and “earlier” and “later” were quantitative terms which were often more accurate than numbers. An example might be a case where deliveries were described as being on the average only 1.2 days late, when in fact almost half of the deliveries were late by almost a week and early by almost the same amount.
The time factor is an important specification in several ways. The tendency Drucker reported is to assume frequent measurements and feedback. However, frequency of feedback is not always required, nor is early reporting. As Secretary Carlucci discovered, there is always a cost of measurements and control, and a frequency requirement increases that cost and could be counterproductive. On the other hand, increased frequency may be needed in certain situations. So, the key is to make the control timely. Not too frequent, not too infrequent, and not too early, nor too late, but in both cases timely according to the particular event being measured and the need for feedback immediacy.
“Everything that can go wrong, will go wrong” is an old saying and as shown by the NASA official in the last chapter who estimated that if every part of a rocket worked 99.9% of the time, the overall reliability of the rocket would be only 50%, it is in our interest to keep controls as simple as possible. Complicated controls and rules confuse. They make measurement more difficult, costly, and induce a greater chance of error. So the objective is not to make controls as complicated as possible, but as simple.
Drucker’s last specification for a control was that it be “operational.” By this, he meant that the results should be actionable, not merely of interest or “academic” but that it be such that action could be taken by the responsible individual based on the results noted.
Based on the feedback from the controls, the leader may adjust strategy, adjust goals and objectives, or even reinvent everything as the ship of state is guided continually toward what the organization should become. If the environment changes so rapidly, even the purpose of the entire organization may need to be adjusted rapidly, even immediately to survive. Drucker recognized the even reorganization was “major surgery.” Still, that’s what the slide rule, vinyl record, and railroad companies should have done. In order to maintain control, the leader must reconvene strategic planning review periodically, probably annually, as well as maintain readiness for an ad hoc review given any major opportunity or threat or change of a “certainty” in the equation. This can at any time involve anything from fine tuning to almost reinventing the organization from the top down and bottom up.
The Ultimate Control
Drucker recognized that the ultimate control was the fact that people act according to the metrics as if they would be rewarded or punished, because they know that they invariably will be. One of the dysfunctions of the controls established for the military clubs was the fact that the profit metrics established focused subordinate leaders not on service, which was the intent of the club system, but on profits. A system of control which is not in conformity with the organization’s progress based on what it is and what it should be will create conflict and push the organization out of control.
Drucker’s Concepts of Taking Action on Your Future:
- No matter how good the plan, there is no progress toward a desired future without action
- Action requires control
- Control is only possible through metrics
- There are seven specifications which all metrics must meet
- Both period and ad hoc reviews are required
- The ultimate control is the fact that the metrics will be seen as the measurement for reward and punishment — and this perception exists because it is correct
 Drucker, Peter F., Management: Tasks, Responsibilities, Practices (New York: Harper & Row, Publishers, 1973) p. 128.
 Ibid. p. 496
 No author listed, “The Hawthorne Effect,” The Burton Report, Accessed at http://www.burtonreport.com/InfHealthCare/Info&UseHawthorne.html , December 30, 2008.
 Op. Cit. Drucker, Peter F., Management: Tasks, Responsibilities, Practices, p. 496.
 Jay Mathews and Peter Katel, “The Cost of Quality,” Newsweek (September 7, 1992) p. 48.
 Op. Cit. Drucker, Peter F., Management: Tasks, Responsibilities, Practices,p.497.
 Op. Cit. Drucker, Peter F., Management: Tasks, Responsibilities, Practices,pp.498-504
 Op. Cit. Drucker, Peter F., Management: Tasks, Responsibilities, Practices,pp.504-505
THIS IS WHAT THEY’RE SAYING ABOUT THE BOOK
Bill Cohen’s Drucker on Leadership is the best collection of Peter Drucker’s unique insights, deep wisdom, and practical advice I have ever read. Cohen channels Drucker as only a three decades-long colleague and student can. You will find the lessons highly accessible, immensely enjoyable, and wonderfully fresh. – Jim Kouzes, Award-winning co-author of the bestselling, The Leadership Challenge
Cohen has written with clarity and authority about the major challenges facing leaders today. And Cohen, like Drucker, emphasizes responsibility and integrity in leadership, qualities so desperately needed today. I strongly recommend this book to you. – Joseph A. Maciariello, Horton Professor of Management, Peter F. Drucker and Masatoshi Ito Graduate School of Management and Co-Author of The Daily Drucker by Peter F. Drucker and Management by Peter F. Drucker
Cohen’s unique relationship with Peter Drucker, as student and friend, allows him to extract valuable leadership lessons from Drucker’s writings and teachings on management. Bill Cohen’s “labor of love” provides the essential lessons for leaders straight from the Father of Modern Management. – Ronald E. Riggio, Henry R. Kravis Professor of Leadership and Organizational Psychology, and director of the Kravis Leadership Institute at Claremont McKenna College
For those who aspire to lead – and we need a new generation of Drucker— like leaders in organizations in every country around the world — Bill Cohen distills the essential leadership lessons from the world’s greatest management thinker. – Ira A. Jackson, Dean and Professor of Management, Peter F. Drucker and Masatoshi Ito Graduate School of Management
Through a blend of anecdote and analysis, Bill Cohen has given us great insight into Peter Drucker’s thinking on leadership—an aspect of Drucker’s work that many have misconstrued or overlooked altogether. This is a new prism through which to view Drucker and, as such, a valuable contribution to the field. – Rick Wartzman, Executive Director, The Drucker Institute
What Cohen learned as Peter Drucker’s student, and their personal relationship afterwards, changed Bill’s life. Reading Drucker on Leadership will change the way you look at and apply leadership forever. – Bruce Rosenstein, author of Living in More Than One World: How Peter Drucker’s Wisdom Can Inspire and Transform Your Life
I read Dr. Cohen’s books in Chinese, and with the help of a translator, reviewed a draft of Drucker on Leadership in English. Peter F. Drucker helped me found the Peter F. Drucker Academy in China. It was a pleasure to see his concepts and what he instructed me brought together in one place and explained so that they could be applied by any executive. This is a valuable and useful book. – Minglo Shao, Chairman and CEO of the Bright China Group, Founder of the Peter F. Drucker Academy
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THIS MONTH’S THOUGHT FOR LEADERS
Once you start measuring something, you can easily end up in a situation where the measurement itself starts influencing the things you want to measure. – Peter Drucker