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Vol. 7, No. 12
www.stuffofheroes.com
(626) 350-1500 Ext 102  

Extraordinary achievements demand extraordinary leaders.

IMPORTANT NOTICE

Recent Linked Articles by Dr. Cohen not  Published  in the Journal of Leadership Applications:

The Four Steps You Must Take to Create the Future from Human Resources IQ

How to Predict Your Personal Professional Future from Human Resources IQ

Peter Drucker’s Path to Creating an Engaged Worker from Human Resources IQ

The Seven Deadly Sins of Leadership from Human Resources IQ

Integrity is Not About Profit from Human Resources IQ

Tough Times from Leadership Excellence

 How to Create Your Organization’s Future

© 2009 William A. Cohen, PhD  

Adapted from the just-published book Drucker on Leadership

Creating an organization’s future is an awesome responsibility. I don’t remember anyone having ever mentioned this leadership task when I first learned leadership. Yes, they spoke of the leader’s responsibility for the accomplishment of the mission and and for the organization’s members. However the future of the organization was just assumed – “and it lived happily ever after.” This is probably true for all of us, no matter the  organization where we first saw leadership practiced. If we stopped to think about it, which we probably didn’t, we knew this was neither necessarily not automatically true.  In recent years we have seen many of today’s successful organizations stumble, fall, and fail although they looked invincible in the near past. We may assume that this tends to be a result of the tactical decision’s made by the organization’s leader, helped along perhaps because of economic conditions. In some cases this is true. However a look at both successful and failed organizations indicates that the seeds for the result we see today were sown years before by prior leaders long gone.

 Drucker’s insight that what the organization would become in the future was much dependent on today’s leader’s actions was revolutionary. It is little wonder that Drucker designated determining what an organization was to become as any leader’s prime task. How difficult is it to accomplish this prime task? Not too difficult if a leader has a methodology and does a few more things today. Drucker had a methodology in mind and some advice for leaders as well. The methodology he proposed was strategic planning, but not in the way that many organizations perform this task.

 What is Strategic Planning as Drucker Envisioned It?

Drucker did not look at strategic planning as did others. His definition was different from most. According to Drucker, strategic planning was “ . . . the continuous process of making present entrepreneurial (risk-taking) decisions systematically and with the greatest knowledge of their futurity; organizing systematically theefforts needed to carry out these decisions through organized systematic feedback.[1] The italics are Drucker’s. The important elements in Drucker’s definition are:

·        That it must be a continuous process

·        That these involved risk-taking decisions made in the present

·        That these decisions were made with the greatest knowledge available of their futurity

·        That the efforts taken to carry out these decisions had to be organized systematically

·        That feedback as these efforts were undertaken had to be similarly systematically organized

Not stated, but implied by this definition, is the fact that a leader is responsible for everything that happens or fails to happen in the organization he or she leads.  Therefore, strategic planning is the responsibility of the leader, not a separate strategic planning group. Professional strategic planners can develop plans and make recommendations to leaders, but it is the leader’s responsibility to give general direction, oversee the process, establish the strategy, direct the implementation, obtain and analyze feedback, and adjust the actions and movement toward the results desired.

 Of course this process does not substitute facts for judgment, or as Drucker put it, “substitute science for the manager.” What systematic strategic planning does is strengthen any manager’s judgment, leadership, and vision.[2] This means that the leader must involve himself as closely as possible in this process from start to finish.

 It is a mistake for a leader to establish a separate group to do this planning and then periodically to simply “sign off” on the results. The day to day problems of leading any organization will soon cause the leader to spend less and less time on the critical issue of the organization’s future. Moreover, there are benefits to be gained by the leader’s close involvement which are unattainable through any other means. Dwight D. Eisenhower, once responsible for the largest seaborne invasion in the history of the world, before or since, and later President of the United States said that based on his experience: “Plans are nothing, but planning is everything.”[3]

 Useful Functions of a Strategic Plan for the Leader

A plan is more than a combination of objectives, resources, and strategies. It is a road map which will guide you in leading your organization forward to the future you are creating. This it accomplishes in a number of ways:

 

  •      The plan shows the route from where you are now to the future you envision based first on the business you earlier defined. Like a road map, the plan describes the environment you assumed at the time the plan was  developed as well as the actions planned. As time moves on, this will all change, including at some point even the answer to the question: “What is my business?” The only thing certain about the future is that it will be different. However, having these environmental variables and your assumptions about it and your business documented will enable you to see “the big picture” on a ongoing basis and more easily spot and take advantage of opportunities while avoiding the threats.

 

  •      As you proceed, various issues will arise which could impact on your planned strategy and actions. It is virtually certain that almost nothing will go exactly as originally planned. Your plan will allow you to spot and redirect your activities toward alternate paths in order to reach the future you want. This will give you and your successors control and allow both to take the corrective actions needed to keep your organization on track to the future envisioned.

 

  •      Successful implementation of overall strategies requires integration of many actions, usually by many different individuals inside and outside of your organization. It is most important that everyone concerned understand where you are going and why and what everyone’s responsibilities are as well as how their tasks or actions fit into the overall strategy. In this way, the entire organization, and those supporting it can move toward this future together.

 

  •      Resources  to create your future are not unlimited. Resources are always limited. This is true whether you are an individual entrepreneur attempting to obtain money from a potential investor or you are working in a large corporation and seeking resources for your organization within a greater organization. Resources are needed to proceed with your efforts at implementing your decisions. The first questions to ask are what resources?  what will they be used for? and why are they necessary? When you master your plan for the future on paper, you’re already halfway there. Those who have the resources you need will be more likely to see the potential and it will be easier to obtain them.

 

  •     As the organization’s leader it is your responsibility  to  get the maximum results from what you have. A well-organized, well-integrated plan will make efficient use of the always limited resources available.

 Drucker’s Three Questions to Determine Your Plan’s Objective

Drucker wrote that a leader must start with three questions to begin planning to create an organization’s future. These three questions are: What is our business? What will it be? What should it be?[4] Although the questions need to be considered separately, they need to be integrated. This is because the present is connected with the future. We have short range plans for projects, products, and initiatives. These have an impact on what your business will be in the short term future, whether you like it or not. What should it be is a question of the more distant future. How far distant? That’s up to you. Ten years is not too far distant. I’ve seen organizations plan for the creation of a future twenty-five or even fifty years in the future. Regardless of the time horizon selected, the answers to the three questions must fit together. One doesn’t suddenly jump from the business we are in today without intermediate steps into the future of what our business should be.

Of course, the first step is know what business you are in. Now the task is to look at your present actions and operations and see where this is taking you. This will tell you where you are presently headed. Once you have done this, you can turn to your final and most important question: what should your business be in the future? What is the future you want to create? An important part in defining what your business should be is the precise objectives of your business of the future.

This is the most important element of the strategic plan because you can’t get “there” until you know where “there” is.

Moving Forward on the Strategic Plan

Now that you know where you are going, you need to know how you are going to get there. To do this, you need first to understand the situation. An analysis of the situation contains a vast amount of information. The situational analysis comes from taking a good hard look at everything that may impact the environment. But herein lies a problem. Your environment today is good only for your starting point. But this is certain to change. Drucker saw that most planners simply extrapolated the present into the future, assuming that everything would remain the same or that a trend would continue. Of course, this rarely happens. Along the way there can and will be wars, recessions, technological developments, and the sudden collapse of corporations. The only thing we know for certain is things will be different and the environments we operate in will be different.  Unfortunately forecasting for a future environment ten years down the road will be grossly in error, maybe as much as 70-100% . Did you predict the fall of Enron, the attacks on 9/11, or the development and impact of the computer and the Internet on business? Did you predict the onset of the economic crisis in 2008? Even predicting tomorrow’s weather, with all our technology and scientific analyses and modeling is difficult and far from 100% accurate. Drucker’s solution was in two parts which he called “sloughing off yesterday” and “what new and different things we have to do and when.”

The Impossibility of Accurate Forecasting

Drucker recognized the problems in trying to accurately predict the future. His solution was to begin with the objectives of the business. In each area of objectives he first asked: “What do we have to do now to attain our objectives tomorrow?”  He answered his own question by stating this was “the sloughing off of yesterday.”  He noted that most plans focus on the new: new resource commitments, products, markets, you name it. They never talked about dropping anything. This by the way, was one his criticisms of government’s attempt to meet social responsibilities. New projects were continually introduced while older failing and marginal projects were continued. So Drucker suggested that a leader look at the situation and ask: If we weren’t already committed to this, is this what we would do?” And if the answer is no: “How can we get out?” Only then did Drucker suggest that the leader proceed to ask the second question: “What new and different things do we have to do, and when?”[5]

This wasn’t a bad approach. In fact, it was this solution and these questions which Jack Welch, legendary CEO of General Electric said enabled his huge success at GE. Drucker had asked, “What businesses would GE be in if it weren’t already in them today?” Next, “And what are you going to do about it?” Welch said that if they weren’t number one or two in a market they would shed the business. According to Welch it was this simple strategy as part of his strategic plan which enabled him to increase GE’s net worth by billions of dollars.[6]

Drucker’s Secret which Violated His Own Rule

Drucker’s famous dictum: “You can’t predict the future, but you can create it,” downplays any attempt to forecast for the reasons stated previously. However, Drucker himself made predictions, and he was frequently right on the money. He left Germany within days of Hitler becoming to power in 1933, a significant fact when so many others held on for years in the vain hope that things would get better. Frequently these individuals waited until it was too late to escape. Forty years ago Peter predicted nearly every major change in business that has occurred since, including the impact of information technology and the concepts of the Internet and cyberspace. He coined the term “knowledge worker” and he predicted that these workers would predominant in the workplace of the future. He was the first to view management as a profession and not simply as an activity. He invented management by objectives and more. So while much cannot be forecast, some things can, and he also taught others how to do this.

His methods were not based on probabilities. In fact, Drucker said that this was the problem. Traditional planning as done in most corporations was forecasting based on probabilities, even though unique events have no probability.  In his opinion such forecasters asked the wrong question. They asked, “What is the likelihood of such and such happening?” Drucker said that the right question was “What has already happened that will create the future?”[7] In response to a question as to how he did this, he responded that he simply looked out of the window and noted what was going on.

He went further and suggested several questions that businesses need to ask as a result of the facts observed from looking out the window: what do these observed facts mean for our business?; what changes have occurred which have not yet had full impact?; what are the trends in economic and societal structure and what do they mean for our business? The answers to these questions showed a potential of opportunities for the future and help further to define what a company can be in the future as well as the strategies and actions that should be taken to get there.

Drucker’s General Directions Lead to New Ideas

Drucker’s concept of “nonforecasting” but understanding what effects can be derived from actions which have already occurred led me to adapt some additional means to further define the opportunities for what the corporation should be and look like in the future. These three concepts are baseline assumptions, Delphi Method, and what if questions.

Baseline Assumptions

With baseline assumptions, the idea is not to forecast, but to make assumptions based on the best information available. This becomes the baseline. Of course, you can use any methodology you choose to arrive at your baseline. As you proceed to implement your strategic plan and measure your progress, you also integrate and update your baseline assumptions so that the environment, trends, etc. while still imperfect, are more up to date and assist in adjusting your actions to keep on track for reaching your goals and creating your future.

Delphi Method

The Delphi Method is a structured process for collecting and distilling knowledge from a group of experts by means of a series of questionnaires with controlled opinion feedback after each question. The method was developed under direction of scientist Theodor von Karman who was asked by General “Hap” Arnold to prepare a forecast of future capabilities that would be of use to the Army Air Forces, which Arnold commanded during World War II. Other studies had determined that in fields that have not yet developed to the point of having scientific laws, expert opinion could be fairly accurate, if a sufficient number of experts participated. The problem was how to combine the opinions of a number of different experts with different opinions into a single useful estimate since there were many problems. Single experts suffer from strong biases while public discussions and interactions among experts are subject to individual persuasiveness, the relative power of recognized experts in the field, and reluctance to abandon opinions, once stated. In response, Delphi was developed. It proved fairly reliable..

 

In a typical scenario a question is put to a group made up of experts in the area where the forecast is needed. For example currently there is considerable controversy about when Iran will have developed the capability to produce nuclear weapons. Estimates range from a few months to ten years or more.  A group of experts in this field would be assembled. A facilitator would ask the question under study and each expert would supply a written answer along with written justification for his answer. The facilitator would read the justifications for each response without identifying the authors and usually without tying the reasons to a particular estimate. He would then display the extreme estimates to the assembled group of experts. The facilitator would then initiate another round following the same procedure. After each sequence, the tendency is for the estimate to move closer and closer to a single value. In the past, this single value has proved to be remarkably accurate when compared to the actual date of the event for which a prediction is desired.

 

What If Questions

 “What if” questions define potential problems, opportunities, and threats that might occur in the coming leg of your journey toward your eventual goals and have a direct bearing on them and the new actions based on the latest decisions you have taken. What if an industry you depend on collapses? What if you can’t get raw materials? What if there is a major war?  What if the demand suddenly quadruples? I don’t mean that you need to consider every possibility of every single change occurring — only those most relevant and those having the potential for the greatest impact on your business. For each of these occurrences, problem, opportunity, or threat, you need to decide what you are going to do in that the event occurs. However beyond the usefulness of what if questions in adjustments to planning, these questions can have an important influence on the strategic plans as you develop them. For example “what if questions” asked and acted upon years prior to the current recession may have resulted in entirely different plans for companies in the housing, financial, and other  industries with would have manifested themselves in much different results today.

 

Fine Tuning and Judging the Future You Have Selected

Drucker had some definite ideas to help you gauge whether or not you are on the right track with the ideas which define what your organization should be in the future. First he felt that the leader’s view of the future must be representative of what he called “the entrepreneurial view.” By this he meant a willingness to think in terms of contribution, customer satisfaction, and benefit to the market and the economy. He believed that the leader must have the courage to make the future happen and that this courage must not be wasted. The decisions taken to attain the future must meet  the test of practicality and what he called operational and economic validity. That is, these decisions must be actionable by the organization and be able to produce real economic results. Finally, Drucker stated that the leader must be personally committed to what he envisioned. He added one additional thought to the foregoing: whatever reaching the future entailed, it must be risky as the one idea about the future that was certain to fail was the riskless idea.[8]

 

Drucker Concepts on the Process of Creating an Organization’s Future:

  • The leader must be in charge of the strategic planning process.
  • The planning process must be continuous, systematic in organization and effort, involving risk and systematic feedback.
  • Accurate forecasting is impossible so work with eliminating the no longer useful and work what new things need to be done.
  • While you can’t do accurate forecasting, you can make useful predictions.

 

[1] Drucker, Peter F. Management: Tasks, Responsibilities, Practices (New York: Harper & Row Publishers, 1973, 1974) p.125.

[2] Ibid. p.129.

[3] Baker, John, “Business Plans are Nothing; Planning is Everything,” Country Business, no date listed, accessed at http://www.country-business.com/growyourbiz/legal_finance/article.aspx?id=6080 , December 26, 2008.

[4] Op. Cit Drucker, Peter F., pg. 122.

[5] Ibid. p.126

[6] Mulligan, Thomas F. and James Flanigan, “Prolific Father of Modern Management,” Los Angeles Times, Business Section, November 12, 2005, p. A-1, accessed athttp://articles.latimes.com/2005/nov/12/business/fi-drucker12 , December 26, 2008.

[7] Drucker, Peter F., Managing in the Time of Great Change (New York: Truman Talley Books, 1995). Pp.39-40

[8] Drucker, Peter F., On the Profession of Management ( Boston: Harvard Business Review Publishing, 1998) pp. 51-52.

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 


For more information, contact me directly by e-mail at wcohen@stuffofheroes.com or telephone (626) 794-5998. Yes we do give international seminars — The U.S. country code is 01.

 

THIS MONTH’S THOUGHT FOR LEADERS

You’ve got to be very careful if you don’t know where you are going, because you might not get there.

                                                       – Yogi Berra