Effective Decisions – Key learnings from Peter F. Drucker

Peter F Drucker (1909-2005) was once regarded by President Bush as ‘the world’s foremost pioneer of management theory’ in the spring of 2002.  Over his life, he had spent more than sixty years inventing the management concept, studying and contributing to the philosophical and practical foundations of the modern business corporation. Intrinsically, he described his desires as not coming from business interests, but from the long-term goals of building up a ‘functioning society’. To turn that into reality, there exists a need for effective and responsible institutions run by effective executives (The Drucker Institute n.d.).

The above intention has become the main theme for the first 39 books written by Peter Drucker, one of which is titled The Effective Executive. In his 1967 book, it rested on two premises:

• The executive’s job is to be effective; and

• Effectiveness can be learned.

The author defined the Executive as anyone who works as a knowledge worker in a modern entity and is responsible for the capacity of the organization to perform and obtain results. At a core, what sets apart a knowledge worker from a manual worker is the ability to produce knowledge, ideas and information. Therefore, it is a must for an executive to be effective.

Following through the remains of the book, Peter Drucker highlights that effectiveness can be learned and practised with one’s self-discipline rather than merely treated as a subject. One of the most fascinating chapters is about making effective decisions as a key component to becoming an effective executive. This article is an outline of steps that an executive goes about making effective decisions:

Step 1 –  Start with opinions

Effective executives do not start with facts first because they know it is an impossible task unless they have a criterion of relevance.  Otherwise, they inevitably all start with opinions, nothing but untested hypotheses. It is especially crucial for those who have worked long enough in major areas to give out opinions when things occur, if one fails to do so, he would either have an unobservant eye or a sluggish mind.

Step 2 – Create experiments to test the validity of opinions

Alongside the opinions given, executives now face a list of hypotheses, which need to be tested against reality. To become effective, he would insist the people who voice their opinions take responsibility for thinking through what factual findings can be expected and should be looked for.

Step 3 – Finding appropriate measurement that is relevant to the decision

If traditional measurement is used, there might not be a need for a decision to make as traditional measurement reflects yesterday’s decision, so it is no longer relevant. And the best way to find a more appropriate measurement is to look for feedback before any decision is made. Also, Peter Drucker quoted an example of overusing misleading ‘average’ statistical data such as the average percentage of absenteeism in the whole workforce or the average number of car accidents per passenger mile to direct personnel management decisions, because they are meaningless and will not produce the desired result. Instead, the book indicates that there should be more than one appropriate measurement so that effective executives can choose the most appropriate one based on risk-taking judgment.

Step 4 – Creating dissension rather than a consensus form of thinking

An important decision cannot be well made if it is not based on the clash of conflicting views, the constructive discussion between different points of view and the choice between different judgments. Here is why:

• It is, first, considered the safeguard for the decision maker from becoming the prisoner of the organisation by ensuring that the decision is supported with sufficient critical scrutiny and diverse perspectives.

• Second, disagreement itself can provide alternatives to a decision. Deciding without a throughout thought of alternatives is a risky game. There is always a high possibility that whether the decision will be proven wrong or the circumstances will make it wrong. Hence, the alternatives here serve as a backup plan.

• Above all, dissension is necessary to stimulate the imagination of the decision maker and that of his associates, a new and different way of perceiving and understanding a matter which leads to creative solutions.

Step 5 – The alternative of doing nothing

The author resembles every decision as like surgery, meaning it is an intervention into a system and therefore carries the risk of shock. Therefore, the effective executive is expected to compare the effort and risk of action to the risk of inaction. If the answer to the question is that the condition will take care of itself or is unlikely to make any difference anyhow, then doing nothing is still a good option.

Step 6 – Avoid the coward’s way

When confronted with the demand for another study, an effective executive will carefully examine his thoughts and the needs for it. He should know for sure that he does not want to waste the time of good people to cover up his own indecision.

Step 7 – The inner voice

In summary, effective executives are not adequate for making a great many decisions. They concentrate on making a few important decisions that require the highest level of conceptual understanding. They will ensure there are sufficient contrasting opinions and disagreements to prevent the likely confirmation bias. He will not be overly impressed by his speed in decision-making. More vitally, they want the decision made to be sound rather than clever by fully understanding what the decision is all about, what the impacts are and what the underlying realities are which it has to satisfy.

References

Drucker, P.F. (1967). The Effective Executive: The Definitive Guide to Getting the Right Things Done. New York, NY: HarperBusiness.

The Drucker Institute n.d., About Peter Drucker, The Drucker Institute, viewed 27/02/2024, <https://drucker.institute/perspective/about-peter-drucker/>.