How can business leaders worldwide manage their way to prosperity? David Woods reports from the 6th annual Peter Drucker Forum
In November 2014, a group of the world’s leading business, management and leadership practitioners and thinkers gathered in Vienna for the 6th annual Peter Drucker Forum 2014. Over two days, delegates debated the “great transformation” needed to transition our struggling economies into sustained, ethical and dynamic growth.
As media partner, Dialogue has published an extended write up of the entire forum, which will be available at www.dialoguereview.com from April 2015, but the following pages contain the personal highlights of the conference for some of the leaders who were there.
Rita Gunther McGRath, associate professor of management at Columbia Business School
I’d like to summarize my contribution to this forum with one word: agenda.
I would like to recommend to you to start with your agenda. I mean that incredibly literally. Here’s the exercise: take the last three or four meetings where you’ve got together to discuss important stuff. Write an agenda, print it out and highlight on that agenda all the places where you actually talked about the thing you thought was important enough to have a meeting about.
I had a meeting when we were hoping to talk about innovation, but it was number 18 on the agenda, right next to “material data sheet update”. What does that tell you? It tells you it’s quite literally not at the top of the agenda. Innovation should be number one, two or three on every agenda. Then move on. If you want a new way of working, start there.
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If you do this highlighter exercise on your own life and your own calendar, I think you’ll be shocked by how little time you’re spending on the things that are important to you. Start there because your people will want to know “do you mean what you say?” They will figure out what’s important to senior people in their organization. Allocate your time in proportion to what’s important.
Nilofer Merchant, lecturer at Stanford university and professor at Santa Clara university
Five frogs are sitting on a log – one decides to jump. How many are left on the log? Five – deciding to jump is not the same as jumping.
We can sit at a conference like this and hear so many ideas and it would be easy to go back to work and do nothing. One moment of this conference really touched me. It was when Clay Christensen said capital should be invested in people. I have never heard that before. We don’t understand how these metrics work. Only 5% of any workforce knows the strategy of their firm.
If we were going to build a new building we would have scaffolding for how to do this – we don’t understand metrics of investing in people and talent. If we had that, we would have a management and leadership argument to go forward.
It’s stupid to talk about engagement but not capture information about potential and capacity. We are not measuring how a person’s full potential can come to bear. When it comes to the economy I think we are remodelling a house and trying to do as little as possible. I think it’s time we built a whole new house.
Fredmund Malik, founder, owner and chairman, Malik Management institute, St Gallen
I am an Austrian entrepreneur of a medium-sized organization of 5,000 people. The EU stands out for its complexity and unmanageability. If you look at this enormous complexity, it’s not that bad but we have to change it. We have 26 legal languages in this strange construction. Think of translation costs alone. The probability of making mistakes in translation makes it almost impossible to communicate. It will have to change. I think we need a new science: complexity science. Mid-sized businesses are the back- bone of European economies; 90% of organizations in Europe do not care about stock exchanges but are self financed on equity. We call them SMEs but this is a misnomer because size is not what is important. I call them entrepreneurially-managed enterprises. They are managed for the long term – for generations. They’re running their organizations differently. They don’t need sustainability because it is already part of their organizations.
What is the minimum we need to earn to stay in business? We need to redefine capitalism. Capitalism is not the business of making profit, but staying in business. Capitalism comes not from banks and stock exchanges, but from satisfied customers; giving as many people as possible meaning in their lives.
Roger Martin, academic director, Martin Property Institute, Rotman School of Management
I am motivated to think about the nature of the old and what happens when we try to make people into “non-peoply kinds of people”. I would say people are social creatures who get enormous meaning from their social structures; they’re deeply emotional and much of their emotion is subconscious. They’re optimistic; they’re spiritual; they need to tell stories about themselves and their challenges, such as limited self-control.
Out of this natural state, society has grown some good things that help us with self-control – legal and social structures, for example, help us co-ordinate things. Pharmaceuticals help us control nature. To say that we should somehow keep people in their “natural state” is not right. There are good infringements on the natural state that make for a better society.
However, in many ways things that make us less human are deeply problematic for the economy. Management has brought structure to organizations, making us think that the need is financial compensation and this doesn’t help people be people. This is unnatural and there are better incentives in more abstract goals. There are anti-social structures such as cultures where employees are disposable.
We can’t go to one end or the other – we can’t leave people in their natural state or drive them to an artificial state. We need to prepare people to be the best they can be and nurture a culture of honesty.
Martin Wolf, Chief Economics Commentator, The Financial Times
There’s a wonderful atmosphere when people are thrilled and enthralled by questions that, quite literally, I never think about. I’ve learned more in this conference than anyone here. Over the next year or two I will work out what it means.
I have some thoughts that occur to me and they are a little provocative. A clear feature of a lot of what I’ve heard here is that “the future is always better than the past and today”. My response is “not necessarily”. I don’t think the new dynamic corporation that removes people after three years is best. I think about little issues such as the fact that we have all this technology, but the developed countries’ productivity growth is the slowest it’s been since the Second World War. We have radical increases in inequality characterized by income and ‘gentrifitocracies’. In all the discussions about motivation I haven’t heard what managers pay themselves.
We are living through a prolonged slump and US performance is the worst it has been since the 1930s. There is no sign this is going to change. These are systemic failures that cannot be solved by individual firms or their managers and they can only be solved by changing systems and we can only change systems by changing ideas. I didn’t hear enough of that in this conference.
If you look at rates of economic growth in developed countries, unemployment and stability, it’s quite easy to argue that the ‘1950s and 1960s were better than today. Even when great ideas are out there for change, people haven’t internalized them.
Dov Seidman, founder and CEO of LRN
In each pause we hear the call.Over the past two days [at this conference] we have paused. Only humans have a pause button and when we pause we can imagine our future, we can reconnect with what matters, we can re-connect to our values and I cannot think of a more important time than now, to learn to pause and inspire others to pause, think and become more conscious.
In the pause, we looked back. I think keeping Drucker’s enduring principles in mind, but bringing them forward in an innovative and enduring way, is an important call in this community. I’m not interested in Capitalism 2.0 or 3.0. I’m interested in going back to Capitalism 1.0: Adam Smith and The Wealth of Nations. Smith never even used the word “capitalism’” but talked about a system of liberties.
I’m not interested in reforming, resetting or rebooting, which I hear after every boom, bust and crisis. Reform is more about keeping things the way they are with some changes. When you pause, you can rethink and we need to have the courage to rethink our definitions of leadership, margins and management. How do we see the world? Let’s rethink society because Peter Drucker said you can’t have a healthy business in a sick society. I think if we’re honest, transformation is difficult and scary – but the only way to deal with difficult things is to ask difficult questions.
There is one last thing I want to offer that all humans can do. Only humans can handle journeys. Life goes up and down – health, friendships, relationships; hang in there and be resilient. Business, as it stands, is not a journey. We have got into the habit of trying to control the future through analytics, and business has a tendency to focus on the linear. I think there is a lack of honesty.
Journeys can be relentless; they have resilience; you can pivot to where you’re going and experiment. I would urge leaders to frame the picture as a journey.
The most important journey is the inner journey – who we are; what we stand for. I choose optimism over pessimism.
Marc Merrill, president and co- founder of Riot Games
I would like to quote Peter Drucker, where he says: “We now accept as a fact that learning is a lifelong process of keeping abreast of change and the most pressing task is teaching people how to learn.” We have to learn how to learn and acknowledge things we don’t know.
This is an experience outside of the other conferences I attend and I have enjoyed hearing everyone’s perspectives. It’s important for us, as a society, to engage in these types of discussion.
I thought it might be useful to talk a little bit about how my company is structured. Our philosophy is like a triangle, with leadership at the top and structure underneath it. Culture is extremely important; it should be the rubber band or membrane that wraps around an organization. Culture is the most important element because a weak culture will mean the organization will drift apart over time if people don’t understand the value of what they are doing. A strong culture helps people understand and is a self- correcting mechanism. One thing we focus on is really nailing culture.
Herminia Ibarra, professor of leadership and learning and professor of organizational behaviour at INSEAD
I love the idea of culture as a rubber band. It connects very nicely to another “takeaway”: freedom from, and freedom to.
When it comes to business transformation, we have to ask what we want to scale. Do we want some tweaks on basic assumptions? Do we want to remodel the house or build a new house? That debate is still not clear. I thought it was different to hear the contrast of views in terms of how much is really possible within the system that exists.
Is management the victim of external forces? Is the firm no longer interesting?
Organizations have become the middle manager on a societal scale. Organizations are necessary; they are desirable. But how can you make them more apt?
I think it is system perspective, which requires a new and different set of ideas. I think some of the ideas we have about leadership are ripe for rethinking. But how can we start moving these ideas from ecosystems to systems that can architect and build that bridge for us?
Tamara Erickson, executive fellow at London Business School and founder and CEO of Tammy Erickson Associates
We’ve all come here with some very different hats on, from big organizations and small, to wrestle with the interesting word “transformation”. But we are not gelling on the question, “Is transformation something we all need to do?” I’m here to tell you that it is. One of the oldest maxims that I hold, is that form needs to follow function. The function that organizations had 100 years ago was that they were trying to turn cottage industries into those that could develop scale. I would argue that the kind of organizations we built were brilliant and perfectly well designed to perform those functions. You would come up with the same things.
But hierarchy and specialization is not the primary function of organizations today. Whether you want to call it “collaboration” or “leveraging intelligence”, that is the primary function of the organizations that will be iconic in the century we live in.
We have a challenge regarding career paths; metrics and so on. I would love to measure whether or not every role in every company was filled by a person qualified to do that job. That’s what I would like to know before I invested.
If we look at the kinds of organizational change, we see that we need different performance management structures and different metrics, but most importantly, we need different leaders. We need leaders who can create a context for adults. I would like to suggest a call to action that you think about these things.
You need to think about a role around building collaborative capacity and ensure that the right people know each other. Get people to talk. Think about being a provocateur. Think about a sense of ‘glue’. If you have a great culture, it absolutely serves as the filter you need to weed out the stuff that won’t work for your organization.
You have to ask great questions. As leaders we need to think of ourselves as teachers to help our organizations learn some of these transformative skills.
Gary Hamel, management expert, consultant, MIX co- founder and professor at London Business School
In all my writing and all my speaking, I very rarely talk about leadership. But maybe I should. Leadership has never mattered as much as it does now, but around the world, leaders seem so inadequate when it comes to the challenges they are facing. Somehow they come up short. I don’t think the problem is with leaders but the role has become too complex for individuals. How can ordinary people lead extraordinary organizations? Very few of us have the instincts of Steve Jobs or Desmond Tutu. Great leaders are rare.
Transformation has little to do with leadership development, but has more to do with creating opportunities for natural leaders. What do you think about when someone says “leadership”? If you only think about the top team, you will under exploit a lot of leadership capacity in your organization.
There will always be hierarchies. Your leadership is a reciprocal of your followership on the web and I think this is how it should be in every organization. When people are incompetent, they should be voted off. This is working at scale in some amazing organizations.
People are losing faith because they are losing share of voice. Power should move up, not down. People who have power are good at getting more of it. The financial crisis was caused because of a system of the elite, by the elite, for the elite.
How can you have trust in a system where your share of voice is going down?
If you approach a task with a contrarian spirit, with humility and compassion, you can do amazing things that will shock and surprise you and you will leave the world a better place. That’s my hope for this conference.
Clayton Christensen, professor of business administration at Harvard Business School
A number of years ago, I co-authored a book about improving our schools. My co-author attended and spoke at a conference on the topic. Jeb Bush was there – at the time he was governor of Florida. He took my co-author aside and asked him about his PowerPoint slide on child-centric learning, which helps teachers teach better, because they teach children in the way that is most applicable to them. Jeb Bush asked if he could use the slide from the presentation. My co-author asked if he could have three slides in return.
Jeb Bush was a good friend of the governors of West Virginia and North Carolina and these governors were giving keynotes and they wanted to borrow slides as well. Eventually they decided to standardize their language and their slides. They ended up speaking the same language over and over again.
That’s how I feel now. My goodness, we have great ideas! I’m not sure I can replicate what everybody has said at this conference because there were so many great ideas. But let’s take the best of our ideas, our language, our ways of communicating and expand the breadth of ideas. Then we can standardize.
If we focus and clarify we will have impact.
In Jewish tradition, at main meals it is customary to set a place for Elijah to remind people to think about what he stood for. As leaders, if we come together, we should set a place at the table for Peter Drucker. He has given us great ideas and great language. He gave so much that we can use to focus on what we are trying to do.
I am so optimistic because I just don’t think the best products, processes and services have been developed yet. We have an opportunity to focus our capabilities. I think that when you see someone underperforming, or screwing up on occasion it’s because they don’t want to succeed but most of the time it’s because they don’t know how to lead. We have a lot of people here trying to figure it out. We have a great message and we need to focus the message to help these people.