Great managers may be charismatic or dull, generous or tightfisted, visionary or numbers oriented. But every effective executive follows eight simple practices.

What Makes an Effective Executive

by Peter F. Drucker

An effective executive does not need to be a • They ran productive meetings. leader in the sense that the term is now most • They thought and said “we” rather than “I.” commonly used. Harry Truman did not have The first two practices gave them the knowl- one ounce of charisma, for example, yet he edge they needed. The next four helped them was among the most effective chief executives convert this knowledge into effective action. in U.S. history. Similarly, some of the best busi- The last two ensured that the whole organiza- ness and nonprofit CEOs I’ve worked with tion felt responsible and accountable. over a 65-year consulting career were not ste- reotypical leaders. They were all over the map Get the Knowledge You Need in terms of their personalities, attitudes, val- The first practice is to ask what needs to be ues, strengths, and weaknesses. They ranged done. Note that the question is not “What do I from extroverted to nearly reclusive, from want to do?” Asking what has to be done, and easygoing to controlling, from generous to taking the question seriously, is crucial for man- parsimonious. agerial success. Failure to ask this question will What made them all effective is that they render even the ablest executive ineffectual. followed the same eight practices: When Truman became president in 1945, he • They asked, “What needs to be done?” knew exactly what he wanted to do: complete • They asked, “What is right for the enter- the economic and social reforms of Roosevelt’s prise?” New Deal, which had been deferred by World • They developed action plans. War II. As soon as he asked what needed to be • They took responsibility for decisions. done, though, Truman realized that foreign af- • They took responsibility for communicating. fairs had absolute priority. He organized his • They were focused on opportunities rather working day so that it began with tutorials on than problems. foreign policy by the secretaries of state and OPYRIGHT © 2004 HARVARD PUBLISHING . ALL RIGHTS RESERVED. BUSINESS SCHOOLOPYRIGHT © 2004 HARVARD PUBLISHING CORPORATION. C

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What Makes an Effective Executive

defense. As a result, he became the most effec- if it’s right for the owners, the stock price, the tive president in foreign affairs the United employees, or the executives. Of course they States has ever known. He contained Commu- know that shareholders, employees, and execu- nism in both Europe and Asia and, with the tives are important constituencies who have to Marshall Plan, triggered 50 years of worldwide support a decision, or at least acquiesce in it, if economic growth. the choice is to be effective. They know that Similarly, Jack Welch realized that what the share price is important not only for the needed to be done at when he shareholders but also for the enterprise, since took over as chief executive was not the over- the price/earnings ratio sets the cost of capital. seas expansion he wanted to launch. It was get- But they also know that a decision that isn’t ting rid of GE businesses that, no matter how right for the enterprise will ultimately not be profitable, could not be number one or num- right for any of the stakeholders. ber two in their industries. This second practice is especially important The answer to the question “What needs to for executives at family owned or family run be done?” almost always contains more than businesses—the majority of businesses in every one urgent task. But effective executives do country—particularly when they’re making not splinter themselves. They concentrate on decisions about people. In the successful fam- one task if at all possible. If they are among ily company, a relative is promoted only if he those people—a sizable minority—who work or she is measurably superior to all nonrela- best with a change of pace in their working tives on the same level. At DuPont, for in- day, they pick two tasks. I have never encoun- stance, all top managers (except the controller tered an executive who remains effective and lawyer) were family members in the early while tackling more than two tasks at a time. years when the firm was run as a family busi- Hence, after asking what needs to be done, ness. All male descendants of the founders the effective executive sets priorities and were entitled to entry-level jobs at the com- sticks to them. For a CEO, the priority task pany. Beyond the entrance level, a family might be redefining the company’s mission. member got a promotion only if a panel com- For a unit head, it might be redefining the posed primarily of nonfamily managers judged unit’s relationship with headquarters. Other the person to be superior in ability and perfor- tasks, no matter how important or appealing, mance to all other employees at the same are postponed. However, after completing level. The same rule was observed for a cen- the original top-priority task, the executive re- tury in the highly successful British family sets priorities rather than moving on to num- business J. Lyons & Company (now part of a ber two from the original list. He asks, “What major conglomerate) when it dominated the must be done now?” This generally results in British food-service and hotel industries. new and different priorities. Asking “What is right for the enterprise?” To refer again to America’s best-known does not guarantee that the right decision will CEO: Every five years, according to his autobi- be made. Even the most brilliant executive is ography, Jack Welch asked himself, “What human and thus prone to mistakes and preju- needs to be done now?” And every time, he dices. But failure to ask the question virtually came up with a new and different priority. guarantees the wrong decision. But Welch also thought through another issue before deciding where to concentrate his Write an Action Plan efforts for the next five years. He asked himself Executives are doers; they execute. Knowledge which of the two or three tasks at the top of is useless to executives until it has been trans- the list he himself was best suited to under- lated into deeds. But before springing into ac- Peter F. Drucker is the Marie Rankin take. Then he concentrated on that task; the tion, the executive needs to plan his course. Clarke Professor of Social Science and others he delegated. Effective executives try to He needs to think about desired results, prob- at the Peter F. Drucker focus on jobs they’ll do especially well. They able restraints, future revisions, check-in and Masatoshi Ito Graduate School of know that enterprises perform if top manage- points, and implications for how he’ll spend Management at Claremont Graduate ment performs—and don’t if it doesn’t. his time. University in Claremont, California. He Effective executives’ second practice—fully First, the executive defines desired results by has written nearly two dozen articles as important as the first—is to ask, “Is this the asking: “What contributions should the enter- for HBR. right thing for the enterprise?” They do not ask prise expect from me over the next 18 months harvard business review • june 2004 page 2

What Makes an Effective Executive

to two years? What results will I commit to? sion has not been made until people know: With what deadlines?” Then he considers the • the name of the person accountable for restraints on action: “Is this course of action carrying it out; ethical? Is it acceptable within the organiza- • the deadline; tion? Is it legal? Is it compatible with the mis- • the names of the people who will be af- sion, values, and policies of the organization?” fected by the decision and therefore have to Affirmative answers don’t guarantee that the know about, understand, and approve it—or at action will be effective. But violating these re- least not be strongly opposed to it—and straints is certain to make it both wrong and • the names of the people who have to be ineffectual. informed of the decision, even if they are not The action plan is a statement of intentions directly affected by it. rather than a commitment. It must not be- An extraordinary number of organizational come a straitjacket. It should be revised often, decisions run into trouble because these bases because every success creates new opportuni- aren’t covered. One of my clients, 30 years ago, ties. So does every failure. The same is true for lost its position in the fast-growing changes in the business environment, in the Japanese market because the company, after market, and especially in people within the en- deciding to enter into a joint venture with a terprise—all these changes demand that the new Japanese partner, never made clear who plan be revised. A written plan should antici- was to inform the purchasing agents that the pate the need for flexibility. partner defined its specifications in meters and In addition, the action plan needs to create kilograms rather than feet and pounds—and a system for checking the results against the nobody ever did relay that information. expectations. Effective executives usually build It’s just as important to review decisions pe- Asking what has to be two such checks into their action plans. The riodically—at a time that’s been agreed on in first check comes halfway through the plan’s advance—as it is to make them carefully in the done, and taking the time period; for example, at nine months. The first place. That way, a poor decision can be question seriously, is second occurs at the end, before the next ac- corrected before it does real damage. These re- tion plan is drawn up. views can cover anything from the results to crucial for managerial Finally, the action plan has to become the the assumptions underlying the decision. basis for the executive’s . Such a review is especially important for the success. Time is an executive’s scarcest and most pre- most crucial and most difficult of all decisions, cious resource. And organizations—whether the ones about hiring or promoting people. government agencies, businesses, or nonprof- Studies of decisions about people show that its—are inherently time wasters. The action only one-third of such choices turn out to be plan will prove useless unless it’s allowed to de- truly successful. One-third are likely to be termine how the executive spends his or her draws—neither successes nor outright failures. time. And one-third are failures, pure and simple. Ef- Napoleon allegedly said that no successful fective executives know this and check up (six battle ever followed its plan. Yet Napoleon also to nine months later) on the results of their planned every one of his battles, far more me- people decisions. If they find that a decision ticulously than any earlier general had done. has not had the desired results, they don’t con- Without an action plan, the executive becomes clude that the person has not performed. They a prisoner of events. And without check-ins to conclude, instead, that they themselves made a reexamine the plan as events unfold, the exec- mistake. In a well-managed enterprise, it is un- utive has no way of knowing which events re- derstood that people who fail in a new job, es- ally matter and which are only noise. pecially after a promotion, may not be the ones to blame. Act Executives also owe it to the organization When they translate plans into action, execu- and to their fellow workers not to tolerate non- tives need to pay particular attention to deci- performing individuals in important jobs. It sion making, communication, opportunities may not be the employees’ fault that they are (as opposed to problems), and meetings. I’ll underperforming, but even so, they have to be consider these one at a time. removed. People who have failed in a new job Take responsibility for decisions. A deci- should be given the choice to go back to a job

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at their former level and salary. This option is from subordinate to boss is usually what gets rarely exercised; such people, as a rule, leave the most attention. But executives need to pay voluntarily, at least when their employers are equal attention to peers’ and superiors’ infor- U.S. firms. But the very existence of the option mation needs. can have a powerful effect, encouraging peo- We all know, thanks to Chester Barnard’s ple to leave safe, comfortable jobs and take 1938 classic The Functions of the Executive, that risky new assignments. The organization’s per- organizations are held together by information formance depends on employees’ willingness rather than by ownership or command. Still, to take such chances. far too many executives behave as if informa- A systematic decision review can be a pow- tion and its flow were the job of the informa- erful tool for self-development, too. Checking tion specialist—for example, the accountant. the results of a decision against its expectations As a result, they get an enormous amount of shows executives what their strengths are, data they do not need and cannot use, but little where they need to improve, and where they of the information they do need. The best way lack knowledge or information. It shows them around this problem is for each executive to their biases. Very often it shows them that identify the information he needs, ask for it, their decisions didn’t produce results because and keep pushing until he gets it. they didn’t put the right people on the job. Al- Focus on opportunities. Good executives locating the best people to the right positions focus on opportunities rather than problems. is a crucial, tough job that many executives Problems have to be taken care of, of course; slight, in part because the best people are al- they must not be swept under the rug. But ready too busy. Systematic decision review also problem solving, however necessary, does not shows executives their own weaknesses, partic- produce results. It prevents damage. Exploit- Executives owe it to the ularly the areas in which they are simply in- ing opportunities produces results. competent. In these areas, smart executives Above all, effective executives treat change organization and their don’t make decisions or take actions. They del- as an opportunity rather than a threat. They fellow workers not to egate. Everyone has such areas; there’s no such systematically look at changes, inside and out- thing as a universal executive genius. side the corporation, and ask, “How can we ex- tolerate nonperforming Most discussions of decision making assume ploit this change as an opportunity for our en- that only senior executives make decisions or terprise?” Specifically, executives scan these people in important jobs. that only senior executives’ decisions matter. seven situations for opportunities: This is a dangerous mistake. Decisions are • an unexpected success or failure in their made at every level of the organization, begin- own enterprise, in a competing enterprise, or in ning with individual professional contributors the industry; and frontline supervisors. These apparently •a gap between what is and what could be low-level decisions are extremely important in in a market, process, product, or service (for ex- a knowledge-based organization. Knowledge ample, in the nineteenth century, the paper in- workers are supposed to know more about dustry concentrated on the 10% of each tree their areas of specialization—for example, tax that became wood pulp and totally neglected accounting—than anybody else, so their deci- the possibilities in the remaining 90%, which sions are likely to have an impact throughout became waste); the company. Making good decisions is a cru- • in a process, product, or ser- cial skill at every level. It needs to be taught ex- vice, whether inside or outside the enterprise or plicitly to everyone in organizations that are its industry; based on knowledge. • changes in industry structure and market Take responsibility for communicating. structure; Effective executives make sure that both their • demographics; action plans and their information needs are • changes in mind-set, values, perception, understood. Specifically, this means that they mood, or meaning; and share their plans with and ask for comments •new knowledge or a new technology. from all their colleagues—superiors, subordi- Effective executives also make sure that nates, and peers. At the same time, they let problems do not overwhelm opportunities. In each person know what information they’ll most companies, the first page of the monthly need to get the job done. The information flow management report lists key problems. It’s far

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What Makes an Effective Executive

wiser to list opportunities on the first page and bull sessions. leave problems for the second page. Unless The key to running an effective meeting is there is a true catastrophe, problems are not to decide in advance what kind of meeting it discussed in management meetings until op- will be. Different kinds of meetings require dif- portunities have been analyzed and properly ferent forms of preparation and different re- dealt with. sults: Staffing is another important aspect of A meeting to prepare a statement, an an- being opportunity focused. Effective execu- nouncement, or a press release. For this to be tives put their best people on opportunities productive, one member has to prepare a draft rather than on problems. One way to staff for beforehand. At the meeting’s end, a preap- opportunities is to ask each member of the pointed member has to take responsibility for management group to prepare two lists every disseminating the final text. six months—a list of opportunities for the en- A meeting to make an announcement—for ex- tire enterprise and a list of the best-performing ample, an organizational change. This meeting people throughout the enterprise. These are should be confined to the announcement and discussed, then melded into two master lists, a discussion about it. and the best people are matched with the best A meeting in which one member reports. opportunities. In Japan, by the way, this Nothing but the report should be discussed. matchup is considered a major HR task in a big A meeting in which several or all members re- corporation or government department; that port. Either there should be no discussion at all practice is one of the key strengths of Japanese or the discussion should be limited to ques- business. tions for clarification. Alternatively, for each Make meetings productive. The most visi- report there could be a short discussion in In areas where they are ble, powerful, and, arguably, effective non- which all participants may ask questions. If governmental executive in the America of this is the format, the reports should be dis- simply incompetent, World War II and the years thereafter was not tributed to all participants well before the smart executives don’t a businessman. It was Francis Cardinal Spell- meeting. At this kind of meeting, each report man, the head of the Roman Catholic Archdi- should be limited to a preset time—for exam- make decisions or take ocese of New York and adviser to several U.S. ple, 15 minutes. presidents. When Spellman took over, the di- A meeting to inform the convening executive. actions. They delegate. ocese was bankrupt and totally demoralized. The executive should listen and ask questions. Everyone has such areas. His successor inherited the leadership posi- He or she should sum up but not make a pre- tion in the American Catholic church. Spell- sentation. man often said that during his waking hours A meeting whose only function is to allow the he was alone only twice each day, for 25 min- participants to be in the executive’s presence. utes each time: when he said Mass in his pri- Cardinal Spellman’s breakfast and dinner vate chapel after getting up in the morning meetings were of that kind. There is no way to and when he said his evening prayers before make these meetings productive. They are the going to bed. Otherwise he was always with penalties of rank. Senior executives are effec- people in a meeting, starting at breakfast tive to the extent to which they can prevent with one Catholic organization and ending at such meetings from encroaching on their dinner with another. workdays. Spellman, for instance, was effec- Top executives aren’t quite as imprisoned as tive in large part because he confined such the archbishop of a major Catholic diocese. meetings to breakfast and dinner and kept the But every study of the executive workday has rest of his working day free of them. found that even junior executives and profes- Making a meeting productive takes a good sionals are with other people—that is, in a deal of self-discipline. It requires that execu- meeting of some sort—more than half of every tives determine what kind of meeting is appro- business day. The only exceptions are a few se- priate and then stick to that format. It’s also nior researchers. Even a conversation with necessary to terminate the meeting as soon as only one other person is a meeting. Hence, if its specific purpose has been accomplished. they are to be effective, executives must make Good executives don’t raise another matter for meetings productive. They must make sure discussion. They sum up and adjourn. that meetings are work sessions rather than Good follow-up is just as important as the

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meeting itself. The great master of follow-up Think and Say “We” was Alfred Sloan, the most effective business The final practice is this: Don’t think or say “I.” executive I have ever known. Sloan, who Think and say “we.” Effective executives know headed from the 1920s until that they have ultimate responsibility, which the 1950s, spent most of his six working days a can be neither shared nor delegated. But they week in meetings—three days a week in for- have authority only because they have the mal committee meetings with a set member- trust of the organization. This means that they ship, the other three days in ad hoc meetings think of the needs and the opportunities of with individual GM executives or with a small the organization before they think of their group of executives. At the beginning of a for- own needs and opportunities. This one may mal meeting, Sloan announced the meeting’s sound simple; it isn’t, but it needs to be strictly purpose. He then listened. He never took notes observed. and he rarely spoke except to clarify a confus- We’ve just reviewed eight practices of effec- ing point. At the end he summed up, thanked tive executives. I’m going to throw in one final, the participants, and left. Then he immedi- bonus practice. This one’s so important that I’ll ately wrote a short memo addressed to one at- elevate it to the level of a rule: Listen first, speak tendee of the meeting. In that note, he summa- last. rized the discussion and its conclusions and Effective executives differ widely in their spelled out any work assignment decided upon personalities, strengths, weaknesses, values, in the meeting (including a decision to hold and beliefs. All they have in common is that another meeting on the subject or to study an they get the right things done. Some are born issue). He specified the deadline and the execu- effective. But the demand is much too great to tive who was to be accountable for the assign- be satisfied by extraordinary talent. Effective- ment. He sent a copy of the memo to everyone ness is a discipline. And, like every discipline, who’d been present at the meeting. It was effectiveness can be learned and must be through these memos—each a small master- earned. piece—that Sloan made himself into an out- standingly effective executive. Reprint R0406C Effective executives know that any given Harvard Business Review OnPoint 6980 meeting is either productive or a total waste of To order, see the next page time. or call 800-988-0886 or 617-783-7500 or go to www.hbr.org

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