Drucker Management Lessons For the Obama Administration

Economists...anti-tax tea protesters nationwide...CEOs from major organizations...and management experts have hoisted the warning signals.

And the Obama administration had better read them carefully.

Because the spending decisions made today could make or break our economy tomorrow. Trillions of dollars are being earmarked for rescue plans, social programs, education, health care reform, alternative energy sources and the like.

For many years the United States enjoyed unlimited credit abroad. But that confidence is gone now. And it won't come back until the U.S. budget is balanced.

Every major economist has recently said in one form or another: "Eliminate chronic budget deficits and with them dependency on borrowing from other nations—that well has gone dry!"

Today's decisions will give us tomorrow's results. If the new administration follows the guidelines so thoughtfully crafted by Peter F. Drucker, the probability of actually reducing the growing budget deficit will significantly increase.

Things We Wish the Obama Administration Would Learn

Most things get done in small doses. For decades many studied the prescriptions of Peter F. Drucker, W. Edwards Deming, Joseph Juran, Ted Levitt, Warren Buffett and dozens of others with respect to making change happen.

Those who spent time learning and doing have discovered to get better one step at a time is a far better way to improve than shooting constantly for the moon.

Major leaps into success rarely ever happen. Success depends upon focusing on the right things and making a lot of systematic, uncelebrated improvements every day.

Is the administration listening to the sage advice being offered by The Wall Street Journal, Business Week, The Economist, Fortune magazine and the like? We do not know.

What we do know is that blaming this or that president for the ineffectiveness of government is pointless.

It is the fault neither of the Democrats nor the Republicans. Government, said Drucker, has outgrown the structure, the policies and the rules designed for it and still in use.

The Drucker Prescription for Achieving Results

No one can guarantee the performance of the stimulus package and the proposed Blueprint for America budget. But we know how to ensure non-performance with absolute certainty.

Peter F. Drucker identified in many of his articles published over a span of 60 years the seven common sins of public administration. According to Drucker, if just two of the sins are committed, non-performance will inevitably follow.

To commit all seven will cause irreparable damage to our economy and society. It should be mentioned that many of these sins overlap, that is, they are intertwined with each other. Two different sins may be, in reality, the same sin viewed from a different perspective.

Hopefully, the new administration will soon learn to think with the principles and practices developed by Drucker. It will help them to rethink how to reinvent government.

Peter F. Drucker's Seven Government Management Sins

Sin #1: Mistake Good Intentions For Clear Objectives And Goals

The first thing to do to make sure the program will not have results, Drucker reminded us, is to have a lofty objective. The purpose of an objective is to make possible the organization of work for its attainment.

Translated, this means that objectives must be operational: capable of being converted into specific work assignments, deadlines for performance and measurable.

Take, for instance, Drucker's classic church example:

"'Saving souls,’ as the definition of the objectives of a church's mission is totally intangible. At least, the bookkeeping is not of this world. But church attendance is measurable. And so is the goal of bringing at least two-thirds of the young people of the congregation into the church and its activities."

Another classic Drucker example:

"'The development of the whole personality' as the objective of a school is, indeed, intangible. But 'teaching a child to read by the time he has finished third grade' is by no means intangible and can be measured easily and with considerable precision."

Still another Drucker example:

"Similarly, ‘health-care’ is intangible. But the goals of the maternity ward that state that the number of ‘surprises’ in delivery must not be more then two or three out of every 100 deliveries; the number of postpartum infections of mothers must not exceed one-half of 1 percent of all deliveries; and that every eight out of 10 premature babies live after the seventh month of conception must survive in good health, are tangible and fairly easy to measure."

Drucker's Point?

Sentiments expressed as objectives are a recipe for failure. Other examples include, "to aid the disadvantaged," or "maintenance of law and order" or "improvement of our educational system."

Such type sentiments, said Drucker, belong in the preamble. They explain why a specific program or agency is being initiated rather than what the program or agency is meant to accomplish.

To use such statements, Drucker observed, as "objectives" thus makes sure that no effective work will be done. For productive work is always specific, always focused, always related to carrying out clearly defined expected results.

"Measurements," said Drucker, "define what is meant by performance. To think through the appropriate measurement is in itself a policy decision and therefore highly risky."

Why risky? Because now everybody knows the results expected.

Therefore, the results can be appraised or at least judged. There is no room for administrative doubletalk once performance measurements are defined.

Needed: A Rigorous Management Process

If the new president really intends to make government more effective, he should require clear and measurable goals for every government agency and for each program and project within each agency.

What are needed are not just statements of broad policies—these are simply good intentions—but measurable targets with specific timetables and clear assignments of accountability.

The budget, of course, tell us how much money an agency intends to spend and where. But rarely tells what specific results are expected.

In other words, Drucker observed, "Budgets are spending plans that make vague promises, but they omit mention of the specific social and economic changes that should result from government action."

To have a chance for performance, Drucker emphasized, "Each and every program needs clear targets, the attainment of which can be measured, appraised, or at least judged."

Sin #2: Fail To Distinguish Between Output and Outcome Measurements

The second deadly sin of the public administrator is to confuse efficiency measurements (output) with outcome measurements.

To repeat, measurements define what we mean by performance. In their wonderful book Reinventing Government (Plume,1993), David Osborne and Ted Gaebler credit their inspiration to the trail blazing work of Peter F. Drucker.

They provide an illuminating illustration of one of the central problems of government agencies, indeed of all organizations, when it comes to measuring what matters.

The authors note that there is a tendency to direct efforts and vision toward the inside, that is, toward efficiencies, rather than the purposes on the outside for which every public-service institution exists.

Here follows their illustration about the vast difference between measuring process and measuring results:

"When public organizations set out to measure performance, their managers usually draw up lists that measure how well they carry out some administrative process; how many people they serve; how fast they serve them; what percentage of requests are filled within a set period of time.

"In essence, they measure their volume of output. But outputs do not generate outcomes.

"A vocational school might pump out more and more graduates of a welding program, for instance. But if those graduates cannot find jobs as welders, what good is the program? It may be generating impressive outputs without generating any positive outcomes."

The Obama administration would be well advised to work through specific measurements required for evaluating program outcomes and policy outcomes. Indeed, the integration of Six Sigma initiatives would be highly useful in this endeavor.

Sin #3: Fail To Set Priorities And/Or Concentration Objectives...And Try to Do a Little Bit of Everything at the Expense of Accomplishing Major Results

The third strategy guaranteed to produce non-performance is to try to do several things at once. Warren Buffett, an early Obama supporter, has repeatedly said that the president is taking his eye off the ball.

Buffett believes that the economy is priority number one, priority number two and priority number three. To try to do as many things as the current administration is trying to do will render them ineffectual, says Andy Grove, former head of Intel.

Corporate America is also upset with the new administration because it appears they are refusing to establish priorities and stick with them. Splintering of efforts always guarantees non-results.

Drucker hammered home, time and again, the importance of concentrating on a priority. He emphasized that results require staff efforts be concentrated on the few activities capable of producing significant results.

An Example...And Its Lessons

Drucker frequently cited the impressive example of the Tennessee Valley Authority (TVA) in the ‘30s. Said Drucker:

"The bill establishing the TVA only passed Congress despite tremendous opposition because its backers promised a dozen different, if not incompatible benefits to a dozen different and mutually antagonistic constituencies: cheap power, cheap fertilizer, flood control, irrigation, navigation, committed development and whatnot.

"TVA's first administrator, Arthur Morgan, a great engineer, then attempted to live up to these promises and to satisfy every one of his constituencies. The only result was an uncontrollably growing bureaucracy, uncontrollably growing expenditures, and a total lack of any performance.

"Indeed, the TVA in its early years resembles nothing as much as one of those 'messes,' which we now attack in the Washington. Then President Roosevelt removed Morgan and put in a totally unknown young but Wisconsin utilities lawyer, David Lilienthal, who immediately—against all advice from all the 'pros'—announced his priority: power production.

"And within a year, the TVA produced results—and Lowenthal, by the way,—met no opposition, but was universally acclaimed as a savior."

In more general terms, many feel that the administration must make priority decisions with respect to what must be accomplished. After they succeed, then other programs can be initiated and efforts expended on accomplishing clearly defined goals.

Sin #4: Forget "First Comes the Belly and then Morality."

The fourth deadly sin of public administrators involves the failure to distinguish between moral and economic causes. This sin is closely related to the sin of splintering resources.

The discipline of thinking through what results will be demanded, Drucker observed, protects a government institution from squandering resources because of confusion between moral and economic causes.

A moral cause is an absolute good. Preaching against evil doings, while well-meaning, rarely has ever had a significant impact. The lack of results only proves how deeply entrenched perceived evil is.

When results are not forthcoming, public administrators feel efforts must be increased. This is the essence of a moral cause, noted Drucker.

In an economic cause, Drucker said, one must ask: "Is this the best application of our scarce resources? There is so much work to be done. Let's put our resources where the results are."

To believe whatever we do is a moral cause, and should be pursued whether there are results or not, is a perennial temptation for government. And a temptation that must be avoided.

There are, Drucker reminded us, "always so many more moral causes to be served then we have resources for that government has a responsibility to allocate scarce resources for results rather than to squander the money being righteous."

Without doubt, even the most convinced moralist would likely admit that the bulk of government efforts today belong in the category of economics, in which results are a proper measurement of an activity and the proper concern of management.

Sin #5: Forget Everything New Needs First To Be Tested on a Small-Scale, That Is, It Needs To Be Piloted

The fifth deadly sin Drucker identified is: Don't experiment, be dogmatic. He called this one of the most common errors in government administration. Said Drucker, tongue-in-cheek: "Whatever you do, do it on a grand scale at the first try. Otherwise, God forbid, you might learn how to do it differently. "

In technical and product innovation, Drucker observed, we sometimes skip the pilot-plant stage. This usually causes great problems. But at least a model is built that can simulate what's likely to happen under varying conditions.

It appears that the Obama administration is going from idea into full-scale operation. Drucker emphasized and reemphasized the need for the pilot stage.

When you omit the pilot stage and go from concept to the full-scale, even tiny and easily correctable flaws will be overlooked. And these flaws can ultimately destroy well intentioned projects.

Many "theories" of the administration are speculative and totally untried. But even if they have a chance of success, "successful application always demands adaptation, cutting, fitting, trying, balancing."

To reiterate: In industry we learned long ago that we are going to be in trouble if we jump the pilot stage. The new administration must learn that this is just as true for government projects and programs.

Sin #6: Fail To Set Up a Mechanism for Organized Feedback from Actual Results...And Thereby Fail to Continuously Revise Objectives, Roles, Priorities and Allocation of Resources

"Make sure that you will not learn from experience" is the next prescription for non-performance in government, the next one of its deadly sins. This sin is closely associated with the sin of not, first, piloting.

One of Drucker's rich insights involved the statement:

"One can only learn by feedback. And we know that feedback from results always improves performance capacity and effectiveness.

"Without feedback from results, weaknesses, limitations and blind spots increasingly dominate. Without learning from results from feedback, any organization, like any individual, must inevitably deteriorate in its capacity to perform."

The only way you can get better and better is through self correction. This is true in sports, management of all institutions and life. Learn what you are doing wrong, and make continual corrections.

But—and this is a big but—feedback from results must be an organized activity. Collecting, tracking, analyzing, and using feedback data productively requires first-rate management.

The Need for Establishing Clear Targets and Auditing Results

So the first step toward better government performance is to establish clear targets, targets that would specify the expected measurable results and the time necessary to achieve them.

These results must be continually tracked to determine the deviation between actual and predicted results. When deviations occur, corrective actions can be taken. Specifically, the goals can be lowered or the strategies for accomplishing the goals changed.

It appears the new administration is spending a great deal of time on capital appropriation decisions. But amazingly, if history is our guide, they will pay little attention to what happens after the capital investment has been approved.

It's hard work to think through the specific results needed to judge if a spending program is successful. But this is the exercise the administration must undertake to appraise results achieved...and to change the strategies for accomplishing the target results if they are below expectations.

Thinking through what is meant by results is never an easy task. Arguments will occur. When everybody's thinking alike, nobody's thinking.

Setting concrete action goals defines what is meant by performance. Once we define performance, we can track performance.

Sin #7: Resist Abandoning What Doesn't Work, and Spend Resources on Defending Yesterday's Decisions

The last of the public administrator's deadly sins, according to Drucker, is the most important: the inability to abandon, that is, to slough off the unproductive and the obsolete.

Drucker felt that many activities and programs of the government become pointless because the need to which they address themselves no longer exists or is no longer urgent.

They may become pointless because the old need appears in such a new guise as to make obsolete the present design, shape, concerns and policies.

Drucker provides an amusing illustration when he discussed the great environmental problem of 1910—the horrendous pollution by the horse.

"The horse, with its stench, and its liquid and solid wastes, threatened to bury the cities of that time.

"If we had been as environmentally conscious then as we are now, we would have saddled ourselves with agencies, which only 10 years later would have become totally pointless, and yet, predictably, the government would have probably redoubled their efforts since they would have totally lost sight of their objectives."

Drucker repeatedly said every organization must be able to get rid of yesterday's tasks and free its energies and resources for new and more productive tasks.

If an organization wants to be able to work on opportunities, it must be able to abandon the unproductive and slough off the obsolete.

To Drucker the worst offender of the principle of abandonment is government. Indeed, the inability to stop doing anything, Drucker observed, is the central degenerative disease of government and a major reason why government today is sick.

Organized Abandonment

Drucker noted that the most important prerequisite for organizational effectiveness is organized abandonment. Political philosophy maintains that the tasks of government are perennial and can never be abandoned.

According to Drucker, this may have made sense when government confined itself to such basic functions as defense, administration of justice, and domestic order. Those days are long past, of course, yet this is still the way we run government.

Political philosophy has also always maintained that results and performance are not a proper yardstick by which to measure governmental programs. Those measurements belonged to economics, which assumes that efforts are being made for the sake of results.

But when governmental efforts produce disappointing performance and results it is always agreed more effort is needed to succeed. And this usually ends up to be an exercise in futility.

The first government policy—and a foundation for all the others—should be to decide what to abandon. It is not possible to create tomorrow unless one first sloughs of yesterday.

Drucker's Critical Abandonment Decision Questions

What is our objective? Is it still the right objective? Is it still worth doing? If we were not already doing this, would we go into it would now?

This questioning, Drucker observed, has been done often enough, in all kinds of organizations—businesses, hospitals, churches and even local governments—that we know it works.

Drucker gave, as an example, the welfare program:

"The welfare program was designed in the late 1930s...it worked beautifully. But the needs it then tackled were different from those that it is supposed to serve today: the needs of unwed mothers and fatherless children, of people without education, skills or work experience.

"Whether it actually does harm is hotly debated. But few claim that it works or that it even alleviates the social ills it is supposed to cure."

Drucker maintained that many governmental programs cannot be reformed. To reform something that malfunctions without knowing why it does not work only makes things worse. The best thing to do with such programs is to abolish them.

Putting all programs and activities regularly on trial for their lives and getting rid of those that cannot prove their productivity is the quickest way any government can produce enough savings to significantly reduce our mounting deficit.

In Conclusion

Nothing is more important to leaders then ideas. Ideas that make them effective. Ideas that change their way of thinking.

Learning is nothing more than thinking with other people's ideas. The ideas and concepts of Peter F. Drucker can transform our society.

Hopefully, the new administration will routinely stretch every Drucker idea (among others) in all possible directions. New ideas come from old ones. The trick is to associate, adapt, magnify, substitute and rearrange.