Fast Track recording for Peter F. Drucker’s book, Managing in Turbulent Times. Bill Corsair introduces Peter F. Drucker and provides information on the book before introducing the narrator, who begins to summarize Drucker’s book. In turbulent times, the narrator notes, it is the fundamentals that must be managed well, and managed for tomorrow. What is required is that managers learn to distinguish between healthy growth in an organization, and simply “putting on fat.” The first question the narrator identifies is, what are the fundamentals that must be managed well if businesses are to survive in turbulent times? They are liquidity, productivity, and the costs of the future. However, before understanding these fundamentals, it must be understood that inflation distorts reality by distorting the benchmarks by which a business is managed. Managing for liquidity and financial strength is key, and in turbulent times, liquidity is more important than earnings. In turbulent times, it is crucial to identify the minimum liquidity needed to stay in business. Productivity, the second fundamental, entails making resources productive. Two goals must be set to achieve healthy productivity levels, the first being to double the company’s productivity of money or capital, and, second, to produce at least 50% more in the next 8-10 years without increasing the number of employees in an organization. A decrease in the productivity of one resource in a firm is more likely to result in a decrease of overall productivity, a situation not easily reversed. It is overall productivity, and not individual resources, that managers are being paid to promote. Finally, the costs of the future, or the costs of staying in business till tomorrow, are a necessary consideration, because without taking into account such costs, a business will fade and disappear. Until future costs are routinely determined, business is not facing economic reality, and as long as executive bonuses are tied to the usual reported profits, the deception will continue. All companies live and perform in two time periods--that of today, and that of tomorrow. This means that companies must be kept lean and muscular, capable of taking strain, but also capable of moving fast to benefit from any opportunity in times of turbulence. One way to concentrate resources is for an organization to develop two budgets--an operational budget and an opportunities budget. The ultimate goal should be corporate growth, and even a minimal amount of growth is necessary for corporate survival. Any growth that results in the overall increase of productivity in the short term is healthy growth, whereas growth that results only in more volume and does not, in a short period of time, produce higher overall productivity, is “fat.” Innovation and change must also be viewed as essential to a firm’s survival. It will be up to large companies to come through with innovations. The least profitable businesses over long periods are single product businesses with the wrong product. For managers, in large measure, doing a good job of preparing today’s business for the future, is what they will be judged on. The four areas of performance include performance in appropriating capital, spirit and development (judging results against original expectations), innovation, and the performance of management measured against business strategies. In turbulent times, the most important change taking place is the drastic changes in the size, age, education, and composition of the labor force. Labor shortages and labor surpluses will inevitably complicate the way business is done. For this reason, management as a field and as a practice will become, over the course of the future, more rather than less important. Moreover, the form that management will take will become quite different. First-line supervisors now face the most upsetting challenges, as they must now function as teachers; middle managers must learn to work with people over whom they have no direct control, and must learn to work transnationally. The greatest challenges face top management, which has to face the task of setting directions for the company, handling the turbulence in the environment, and the emergence of a greater world economy. Top management will inevitably come to embrace a larger amount of people, especially in larger organizations.
Drucker, Peter F. (Peter Ferdinand), 1909-2005 New York University Fast-track (Alpha Books (Firm)) Management Management by objectives Management by objectives - Programmed instruction Management science Organizational behavior Organizational change Organizational effectiveness Organizational Innovation Liquidity (Economics) Productivity Cost Cost accounting Uncertainty Budgets Executives - Salaries, etc Diversification in industry Diversity Labor force Labor mobility Labor movement Supervisors Middle managers Executive management Globalization Global economy and development Corsair, Bill Budgeting Corporate growth
Source
Original recording, February 1989; Drucker Archives; Box 68
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