Peter Drucker on Organizational Complexity For Chamber of Commerce Executives to Start Your 2014 Planning

Six Drucker Questions that Simplify a Complex Age

by Rick Wartzman  |   3:00 PM November 6, 2013

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In 1981, Peter Drucker delivered a lecture at New York University titled “Managing the Increasing Complexity of Large Organizations.” Drawing on lessons from the auto industry, banking and beyond, he offered provocative prescriptions for coping in a world in which “the real challenge is to decide what you are doing” in the face of tremendous “technological change or market change.”

But, as was his wont, Drucker didn’t just provide answers. Speaking slowly, through his thick Viennese accent, he asked questions: “How do we organize the new within the old?” “How do you organize your entrepreneurial within the managerial?” “How do you maintain the cohesion” at a multinational corporation with far-flung operations spanning myriad cultures?

This was no mere rhetorical device. As I’ve explored previously, Drucker was always asking pointed questions—and, in turn, prompting people to challenge their assumptions, reframe problems and consider different angles.

More than 30 years after Drucker’s talk at NYU, the level of complexity confronting us has only continued to increase—or at least it feels to most managers like it has increased, given the outdated models and processes that most businesses tend to use (as both Steve Denning and Roger Martinhave eloquently explained).

With that in mind, here are six questions—all of them straight out of Drucker’s writing—that I believe he would now pose to any manager trying to cope with, in his words, “the complexities of size, markets, products and technologies.” You should ask the first two from the standpoint of your overall organization. You should ask those who work for you the second two. And the final two you should ask yourself.

1. What does the customer value? This “may be the most important question,” Drucker advised. “Yet it is the one least often asked.” This insight is especially relevant in an age where customers have more power and choice than ever before. Unless there is a relentless quest to figure out what they want and need—and the only way to do this is “to go out to look, to ask, to listen,” Drucker said—it is easy to be left behind in relatively short order. Think BlackBerry, for example. “What is value to the customer,” Drucker wrote in his 1999 book Management Challenges for the 21st Century, “is always something quite different from what is value or quality to the supplier.”

2. What is our business, and what should it be? “Nothing may seem simpler or more obvious than to know what a company’s business is,” Drucker pointed out in his 1973 landmarkManagement: Tasks, Responsibilities, Practices. Yet “the right answer is usually anything but obvious.” This is particularly true in an era in which market structures can change with astonishing rapidity and new horizons are continuously opening because of technological advances. One of the reasons for Amazon’s great success, I would argue, is that it is constantly honing its answer to “What is our business?”—although doing so requires an extraordinary amount of discipline. Why? Asked seriously, “the question causes controversy, argument and disagreement,” Drucker noted. “It requires judgment and considerable courage. The answer rarely follows what ‘everybody knows.’ . . . It should never be made quickly; it can never be made painlessly.”

3. What is the task? No one ever would have asked this question to a 1950s blue-collar laborer. That’s because “in manual work,” Drucker observed, “the task is always given”: A car rolls down the assembly line, and someone bolts on the fender. But today, when knowledge work is predominant, tasks can be far more difficult to define. There is often no specific way for a knowledge worker to tackle an assignment. He or she typically has enormous discretion over what steps to take (and which ones not to take), and in what order to take them. Even outputs can be fuzzy when the “work product” is what lies between people’s ears, not what emerges from their hands. The key to improving knowledge-worker productivity, Drucker wrote, begins bottom-up, “with asking knowledge workers themselves: What is your task? What should it be? What should you be expected to contribute? And what hampers you in doing your task and should be eliminated?”

4. What are your ideas for us to try to do new things, develop new products, design new ways of reaching the market? More than ever, it’s imperative that all employees make innovation a priority, not just the R&D staff or the “new products” team. To be sure, not everyone has equal capacity for driving “change that creates a new dimension of performance,” as Drucker put it. “There are clearly people who are more talented innovators than the rest of us,” he acknowledged. But each person in the organization, from top to bottom, needs to adopt an innovative mindset. One way to foster this, Drucker counseled, is for senior executives to hold a session a few times a year with 25 to 30 more junior employees from across all functions. As Drucker scripted it, “the senior opens the session by saying: ‘I’m not here to make a speech or to tell you anything. I’m here to listen. I want to hear from you what your aspirations are, but above all, where you see opportunities for this company and where you see threats.’” Such gatherings, Drucker added, “are one of the most effective ways to instill entrepreneurial vision throughout the company.”

5. Who in this organization depends on me for what information? “Each person’s list will always include superiors and subordinates,” Drucker wrote in a 1988 Harvard Business Reviewessay called “The Coming of the New Organization.” “But the most important names on it will be those of colleagues, people with whom one’s primary relationship is coordination.” This notion rings even more true now, as traditional command-and-control structures slowly give way to more fluid and flexible arrangements at a growing number of enterprises. Asking this question—and making sure that the information you deliver to your peers comes in the right form and at the right time—is a central part of what Drucker termed taking “information responsibility.” After determining who depends on you for information, the follow-up question is also crucial: And on whom, in turn, do I depend?

6. What would happen if this were not done at all? There’s never been a more apt moment to ask this question, what with every manager these days struggling to preserve his or her most precious resource—time. In his 1967 classic The Effective Executive, Drucker recommended that everyone keep a detailed time log, tracking how minutes and hours are actually spent. Mark down events as they occur; don’t rely on your memory. After three or four weeks, analyze what you’ve recorded and ask what the result would be if a certain activity weren’t undertaken in the first place. “If the answer is nothing would happen,” Drucker wrote, “then obviously the conclusion is to stop doing it. It is amazing how many things busy people are doing that never will be missed.”

This post is part of a series of perspectives leading up to the fifth annual Global Drucker Forum in November 2013 in Vienna, Austria.