Here is a good test of the clarity of your thinking so far: show the entire written document up to this point to someone who is not particularly familiar with the problem. Have this individual read your central problem, the relevant factors you have identified, the alternative courses of action with the advantages and disadvantages, and finally your discussion and analysis. Then ask what his or her conclusions are. If they are identical to yours, you have correctly worded your discussion and analysis. If the conclusions are different, you have made an error, either in the wording of the discussion and analysis or in the logic of your conclusions.
Conclusions and Recommendations
It is important to precisely list the conclusions arrived at as a result of your discussion and analysis. Do not add any explanations; they belong in the previous section. Also don’t list conclusions based on information extraneous to your analysis; your conclusions are based solely on your discussion and analysis. Another common error here is to restate relevant factors as conclusions.
Finally, we get to recommendations to your client. You explicitly state the results of your analysis and your recommendations about what your client should do to solve the central problem you have identified and defined. As with your conclusions, do not include extraneous information or explanations; all such explanations go in the discussion and analysis section. If you are presenting this orally, your client can always ask additional questions; if this is a written report, your client can always contact you for additional information. However, if you have done the analysis correctly, there will be no need to explain your recommendations; your reasons will be obvious from your discussion and analysis.
Many consultants first learning this methodology ask about the difference between conclusions and recommendations. With a recommendation, you put your reputation on the line. You make it clear and unequivocal what you want your client to do. You are accepting full responsibility for the recommendations you make. A conclusion is written in the passive tense: “Marketing research should be done.” Recommendations are written in the imperative: “Initiate marketing research.” If a conclusion on your list reads, “A new accountant should be hired,” the recommendation would be, “Hire a new accountant.”
Did Drucker do all this in his head? I doubt it. There are limits even to genius. Knowing him, he did not allow for chance. Except for the rarest of general consulting issues, he would have had things well worked out, with notes ready and fully prepared with his questions, even if he didn’t use fancy presentation slides.
The Right-brain Solution
The right-brain approach to problem solving still works by starting out with an assumption of ignorance. However, unlike the very structured procedure that is part of the left-brain approach, the right-brain method uses no fixed sequence of logical steps to arrive at a solution. It uses the subconscious mind, in which Drucker was a big believer and though not commonly known, used it frequently: “I first do my analysis homework and come to a conclusion. Then I put the answer aside and spend time with my feelings, intuition, pray about it, and leave it to my subconscious mind to come to a conclusion. If analysis and intuition both give the same answer, it is an easy decision. The problem is when one says yes and the other says no. Then courage comes into play.”4
One of the best examples of the use of subconscious in American business was by the famous inventor, Thomas Edison. It is important to recall that while Edison had no formal education past high school, he was the inventor of numerous “high-tech” devices, from the light bulb to practical motion pictures. His right-brain approach, according to those who worked with him, was to go into a dark room and sit there – sometimes for hours – until a solution to the problem presented itself.
Donald Trump can be described variously as an American politician and current presidential candidate, business magnate, investor, television personality, and author. However, he makes no bones about the subconscious. In one instance, his subconscious mind worked on a problem even after his conscious mind had come to what proved to be the wrong decision. “The papers were being drawn up, and then one morning I woke up and it didn’t feel right.” Listening to the conclusions of his subconscious mind, Trump changed his mind. He didn’t invest in a project that many experts, and his conscious mind, said was a sound investment. Several months later, the company about which Trump made his decision went bankrupt. The investors lost all their money.5
Another example of the use of this right-brain method was Einstein’s description as to how he formulated the Theory of Relativity – and he didn’t even need to go to sleep. He simply started daydreaming. One would think that anything as quantitatively complex or as mathematical as the development of this theory would require a good number of white-coated scientists working months at blackboards covered with hundreds of chalk-smeared formulas and equations, and advanced work in laboratories. Even if today’s technologies were available to Einstein, these scientists would have used up an awful lot of computer time to conceptualize this theory. Yet Einstein stated that he thought the whole thing up by himself by simply closing his eyes and imagining himself riding on a beam of light and what would transpire as to time on Earth during his speed-of-light-trip. Daydreaming may not be as useless as you may have thought.
After your conscious mind has collected and analysed all the relevant factors in a situation, your subconscious mind sometimes comes to a better decision than your conscious mind. Why is this so?
1. Nopressure. Your conscious mind may be under the pressures of time, a demanding client, or deadlines. Your subconscious mind doesn’t recognize these pressures.
2. Distractions. Your conscious mind may be distracted by friends, family, business problems, noise, or even a lack of sleep – not so for the subconscious mind.
3. Limited time. Most consultants don’t have the time to work on a single problem all day on a continual basis. But your subconscious mind has all night, and it will work effortlessly on a problem that needs solving.
4. False knowledge. For a variety of reasons, your conscious mind may be influenced by false assumptions or inaccurate facts. Your subconscious mind may know better.
Helping the Subconscious Solve Consulting Problems
If you want to use your subconscious mind to help you solve a problem, first learn all you can about the problem. As when you use the staff study method, that Drucker introduced in The Effective Executive, gather all the relevant factors and spend a great deal of time arriving at the central issue in the case. You can also mull over the alternatives, talk to other people and get their opinions, and do additional research. Do this until you feel slightly overloaded.
Before you go to sleep, set aside a half-hour to an hour to do nothing but think about the problem, analyse the data, and think about potential solutions.
Go to sleep in the normal way. Don’t try to force a solution to your problem. Although the solution is usually ready for you sometime the next morning, it could come in the middle of the night. If it does, be ready for it by having pencil and paper nearby, and quickly scribble down the solution and any other insights.
Sometimes answers come in indirect and strange ways. In 1846, when Elias Howe was struggling to invent the sewing machine, he was stumped. Howe had invented a machine that could push and extract a needle in and out of cloth. The problem was the thread. Since the thread went through an eye in the needle at the end opposite the point, the entire needle had to go through the material and back again in order to make a stitch. That was impossible. Howe was at an impasse. Then, for several nights in a row, Howe had identical dreams; Howe’s subconscious mind was trying to tell him something. In the dreams, Howe found himself on a South Pacific island, where natives armed with spears danced around him. But the spears were very strange. Each spearhead had a conspicuous hole. Only after several days did Howe realize the solution to his problem: to construct sewing needles with eyes for the thread near the point rather than at the opposite end.
If you
want outstanding solutions to your client’s problems, use both sides of your brain and your conscious and subconscious minds, but first and foremost, according to Drucker, it’s your ignorance with which you start that counts most.
1 Drucker, Peter F., The Effective Executive (New York: Harper and Row Publishers, 1954), pp.422-436.
2 Ibid.,421.
3 John H. Lienhard, Engines of Our Ingenuity. “No. 1525: Liberty Ships,” accessed at http://www.uh.edu/engines/epi1525.htm, 25 June 2015.
4 No author listed, “What Would Drucker be Reading?” Drucker Institute, 12 November 2013, accessed at http://www.druckerinstitute.com/2013/11/what-peter-drucker-would-be-reading-79/, 25 June 2015.
5 Donald J. Trump and Tony Schwartz, The Art of the Deal (New York: Warner Books, 1987), pp.27-28.
Chapter 10
Drucker Tells His Clients What to Do about Risk
Risk in management is unavoidable. Some of Drucker’s clients did not acknowledge this. They thought that risk could be avoided and just wanted Drucker to tell them how. However, according to Drucker, risk could not be avoided, and it could be desirable. In fact, the assumption of risk was a basic function of any successful enterprise. Here’s how Drucker reasoned. First, of necessity, in any organization economic activity consists of the commitment of present resources to an unknowable and uncertain future. Moreover, this is a commitment to expectations, assumptions, and predictions, almost everything, but not necessarily to facts. Yet future facts, while essential, cannot be known with certainty. That meant whatever decisions were made had risk 100 times out of 100.
If that were not bad enough, risks are not taken only by the one running everything at the top, but by everyone in the organization who contributes knowledge to the enterprise. That is, by every manager and every professional specialist at every level, as well as non-managers and non-specialists.
Even Attempting to Lower Risk Could Be the Wrong Move
Drucker saw that in attempting to decrease risk, managers and professionals of all types sometimes made assumptions that could lead to disaster. The most-used method of lowering risk is to assume either no change in the current situation or that the trend, whatever it is, will continue on into the future. The fallacy of either assumption can be seen almost every day, as many stock market investors make one of these two assumptions with eventually poor results. Drucker knew that change is inevitable and so advised his clients.
Years ago, I saw this in a weekly advertisement for an investment firm in the Los Angeles Times. Every Sunday they took out a full-page ad that showed for ten or more consecutive years they had provided investors a consistent return on investment. Then in bold, giant type, they wrote two words: “HO HUM!” The message being that theirs was a consistent, reasonably high return on their investors’ money, which would go on forever with no risk whatsoever. Not quite. Obviously when the bottom fell out of the market, beginning with the “Great Recession”, they no longer ran the ad.
One of Drucker’s Few Errors Was of this Type
Drucker made one of these erroneous assumptions himself and learned the hard way how dangerous such an assumption can be. As a young journalist for the Frankfurter General-Anzeiger in 1929, Drucker predicted a rosy future and a bull market in his newspaper column. He had to eat crow a few weeks later with an article that he wrote, but that his editor entitled “Panic on the New York Stock Exchange”. The panic he wrote about was the onset of the worldwide Great Depression, which lasted more than 10 years. Drucker at least admitted his error. That’s a lot better than some of our journalists today who, in print or on television, attempt to put a positive spin to make it appear that what occurred was exactly what they had predicted and known all along, even though it was not.
Drucker never made the same mistake again. But he knew that risks in business and life could not be avoided. He concluded that, “While it is futile to try to eliminate risk, and questionable to try to minimize it, it is essential that the risks taken be the right risks.”1
The Story of the Unlucky General Who Took the Wrong Risk
Shortly after I was commissioned a lieutenant in the Air Force, I heard the story of the unlucky general. This was in peacetime, so he had no worries about an enemy. This general was given command of a large number of bomber aircraft billeted in “Tornado Alley”, a part of the southwest United States. During tornado season, dangerous and destructive tornados build with sudden rapidity. The bomber aircraft were very large and most could not always be protected by hangars, sitting out during regular storms right on the runway, unprotected. Now that was good enough for rainstorms, thunderstorms, or even snowstorms. However, tornados could destroy these multimillion-dollar aircraft with great ease. Today, they would have been valued at multibillion dollars each.
One day the conditions were right for tornados and a storm warning was issued. Being prudent, this general ordered his crews to man their aircraft and ordered all his aircraft to fly out of the tornado-threatened area to other airfields far enough to avoid the tornados. But after the airplanes landed at their emergency bases, the storms dissipated, and no tornados struck. The fuel and man-hours wasted amounted to tens of thousands of dollars. However, the general was not criticized for his actions in moving his aircraft. At least, not this time.
A few weeks later, the same thing happened. Again the storms dissipated after the general moved the aircraft, and no tornados struck. And again, the fuel and man-hours wasted amounted to tens of thousands of dollars. This time his commander suggested that the general look into the possibility of improving his ability to predict whether tornados were really going to strike or not. The general did, but the state of art at the time would allow him to do no better. No one could predict whether tornados would form and strike the base with any certainty.
And sure enough, a few weeks later the tornado warning came again. This time the general decided that enough was enough and he didn’t move the aircraft. You guessed it. This time the tornados did form and several struck the base and destroyed or damaged several of these expensive aircraft. The general’s boss immediately relieved him of his command. In plain language, he fired him. “But I didn’t do anything wrong,” the fired general complained. “I know,” responded his boss, “but I don’t like unlucky generals.” In analysing the situation, this general had taken the wrong risks. Despite the expense of moving the aircraft, and his superior’s mild criticism regarding the decision of getting them to safety, he should have paid the price and moved them anyway. The weather may have been unpredictable, but millions of dollars in aircraft still should not have been risked.
Picking the Right Risk Is Crucial
General Walter Short commanded the US Army in Hawaii, including the Air Force, which in those days was part of the army. The Navy Commander was Admiral Husband Kimmel. Both Admiral Kimmel and General Short thought that the danger of sabotage was greater than that of an air attack and that the Navy, responsible for air surveillance, could provide adequate warning of an air attack, roughly thought beyond the capability of Japanese forces, which were thousands of miles away. Short therefore parked his aircraft close together, almost wingtip to wingtip, where they could be easily and more efficiently guarded. He was lowering the risk of sabotage, but greatly raising the risk of destruction if there were an attack by air.
Consequently, when 353 Japanese airplanes launched from six aircraft carriers attacked at 7:48a.m. on Sunday morning, 7 December 1941, it was a complete surprise. Of the eight US battleships in port, all were damaged and four were sunk, as were many other smaller ships. No less than 188 aircraft were destroyed and another 159 from a total of 390 aircraft were damaged, almost all on the ground, The US suffered immensely, with almost 4,000 killed and wounded. Both US commanders were accused of dereliction of duty and relieved of command. They were forced to retire and played no further part in the war. In their defence, some commented on their previous efficiency or even on the efficiency of the wrong actions they took. But it was for naugh
t. These leaders may have been very efficient in doing the wrong thing, but they were not effective in protecting their crews defending their charges, or saving the Hawaiian Islands when they came under attack.
Drucker learned to analyse the situation and to emphasize taking the right risks, because taking the wrong risk could be even more disastrous. Drucker’s investigations led to the discovery of a critical factor in the process: while deciding on the right risk, one had to institute controls in the actions involved in taking the risk. Otherwise, even though it might well be the right risk to take, there might be other considerations and more important risks. Risks that, in the end, may result in mismanaged actions, intended objectives not reached, and failed results, even though taking a risk of some sort was fully understood and accepted. This is important for any client to understand. Moreover, it is useful in persuading clients to take this approach.
Risk Controls and their Characteristics
Drucker found that all controls invariably have three basic characteristics that make risks difficult to manage:
1. Risk controls won’t be objective and they won’t be neutral.
2. While they need to focus on the real results, the “real” results aren’t always possible to control.
3. Risks are needed for both measurable and unmeasurable events, which cannot be measured or cannot be managed without difficulty.
Consulting Drucker Page 15