The Five Most Important Questions According to Drucker

My favorite business writer, the late Peter Drucker, once wrote a slim but important book called The Five Most Important Questions You Will Ever Ask About Your Organization. The questions are clear and simple and seem intended for executives (especially those in non-profits) wishing to conduct a self-assessment about their organization. According to Drucker, this “self-assessment process is a method for assessing what you are doing, why you are doing it, and what you must do to improve an organization’s performance.” The five questions are the following: What is our mission? Who is our customer? What does the customer value? What are our results? What is our plan? Within each of these questions, Drucker offered more detail and more specific probes.

Although these questions were intended to apply to organizations, I believe it has value in applying them at the individual or personal level. This idea is not entirely original; Marshall Goldsmith, another great management guru, wrote that he once asked Peter Drucker about applying his five questions at a personal level. So let’s give it a try in the context of someone thinking about going into business for himself/herself or doing a start-up with some kind of promising product or service that he/she has come up.

1.     What is your mission? Here’s what Drucker wrote about effective mission statements. First, they reflect an “exacting match” of the organization’s opportunities, competence, and commitment. At an individual level, to me this sounds like you find the sweet spot where there is a convergence between what the environment or customers need, your capabilities, and what you value. This is similar to Goldsmith’s point that what you value means two things: what makes you happy and what you consider to be meaningful (Goldsmith, 2015). Second, effective mission statements say why an organization does what it does (not how to do it). Ray Dalio, the successful founder of the hedge fund Bridgewater Associates, wrote something similar in his treatise (Dalio, 2011) when he made a distinction about the difference between values and principles:

“Your values are what you consider important, literally what you ‘value.’ Principles are what allow you to live a life consistent with those values. Principles connect your values to your actions; they are beacons to rule your actions, and help you successfully deal with the laws of reality. It is to your principles that you turn when you face hard choices.” (p. 7)

And third, effective mission statements are short and sharply focused; they should fit on a T-shirt. When thinking about your business at the individual level, ask yourself: do you or does your potential business have a mission statement? What do you want to be remembered for? What do you want your business to be remembered for?

2.     Who is your customer? In other words, who must be satisfied for the business or organization to achieve its results? Drucker asks organizations to think about who their primary and secondary customers are. Management theory suggests that the organization has different stakeholders; the distinction that Drucker makes between primary and secondary customers is simpler. So who are your primary customers – those individuals or groups who will use and benefit from your business’s products and services? In other words, who is your product or service intended for? And who are your supporting customers – the other stakeholders, such as employees, funders or investors - that you need to identify and be aware of? Recently, I was having a discussion with an acquaintance who had patented a medical device that he hoped to commercialize, and was asking my advice on potential investors. Although his device would eventually be used by individual customers, it was not clear to me that he had thought through carefully who his primary and secondary customers were, and how they might impact the success of his venture. By applying this framework, he was able to target a specific customer segment and identify potential investors to pursue.

3.     What does the customer value? Drucker points out that organizations need to understand what their primary and supporting customers value. This does not necessarily mean doing intensive market research; Steve Jobs was well-known for pointing out that he never did any market research. Yet he was very much in tune with what he believed customers wanted, and Apple continues to be successful. I think the important lesson here for individuals is to listen, listen, listen. Customers may not exactly know what they want, but when we try to truly understand our customers, which involves deep listening, among other things, then we will be able to provide them with what they value – whether they knew it at the time or not. Drucker also states that organizations need to accept what customers value as “objective fact.” At an individual level, many organizations use 360-degree feedback tools to help managers identify their strengths and development needs. As an executive coach, I often supplement this tool with interviews of my clients’ key “customers” – their boss, co-workers, direct reports, and perhaps their customers, such as suppliers and sometimes even friends and family members. These data provide great insights to a person on what their customers (such as their manager and even their peers) value, and can be of tremendous value to those who listen and accept them. Are you clear on what your potential customers will value about your product or service? How will you find out?

4.     What are your results? The key insight for me here is Drucker’s discussion of assessing, based on results, what must be strengthened and what must be abandoned. Determining whether an organization is assessing the right results is an important issue. When I was an intern at General Motors a few decades ago, I remember being in meetings with senior management in which they regularly discussed their objective of reaching a market share of 50%. At that time, GM was the most successful of the Big Three (Ford and Chrysler being the other two major U.S. car companies at that time), and it has been argued that this obsession with market share caused GM to lose sight of focusing on profitability and the creeping Japanese challenge. This question also reminds us that effort, while laudable, is not enough at an organizational or personal level, unless you are clear on what the right results should be and what the right measures of success are.

It is a little bit disappointing that Drucker does not raise the issue of the importance of “how” results are achieved. Since his time, there have been numerous discussions of this issue; Seidman’s book How goes into detail on the importance of this. As he has written, “… leaders now recognize that sustainable behavior is an offensive strategy that you need to deploy over an entire field … (and) behavior has become a powerful source of excellence and competitive advantage.” Many large companies, such as GE, Ford and Siemens, have competency models in which employees are evaluated not just on their results but also on their behaviors, or how they achieved those results. As individuals, we need to pay attention not only to whether we have achieved our goals, but also to whether we have done so with integrity, consistent with our values and principles.

5.     What is our plan? For Drucker, “planning defines the particular place you want to be and how you intend to get there.” Planning consists of having goals, no more than five for an institution, in Drucker’s opinion. I agree; in the research on successful strategy execution, one common theme that emerges is that companies that have been successful in executing their strategies successfully have focused on a few selected priorities rather than a laundry list of initiatives they try to tackle. The CEO (and his or her team) is responsible for the development of objectives, action steps, and the appropriate allocation of resources. The five elements of an effective plan are: abandonment (if it’s not working, are you prepared to change or even abandon it?), concentration (are you putting your best efforts into what’s working well and in fact raising the bar?), innovation (what’s around the bend – is this what our customers might value and where we can add value?), risk taking (will you take the risk, while balancing the short term with the long term), and analysis (do your due diligence). For Drucker, creating action steps – the execution of the plan – is very much a part of this aspect of planning.

In summary, here’s how these questions can apply to someone at an individual level. By stating a mission, you are in essence trying to answer the question of what you want to be remembered for. By defining the customer and what they value, you will be answering the question of what problem it is your product or service will be solving and for whom. By specifying your results, you will be able to clarify what success will look like for you (e.g., is it an IPO, is it building a brand?). And by creating your plan, you will be able to define your short- and long-term goals and be able to monitor your results (e.g., how will you scale, have you identified the elements in your value chain?).    

Dalio, R. (2011). Principles. Unpublished manuscript.

Drucker, P. (2015). The Five Most Important Questions: Enduring Wisdom for Today’s Leaders. Hoboken, NJ: Wiley.

Goldsmith, M. (2015). Triggers: Creating Behavior That Lasts – Becoming the Person You Want to Be. New York: Crown Business.

Seidman, D. (2007) How: Why HOW We Do Anything Means Everything. New York: Wiley.

Networked and Mentored

Frank, a management consultant with his own independent business, believes in networking especially as a source of potential clients. His week is filled typically with lunches with potential and former clients, and evening meetings with various business groups, e.g., other consultants, business networking events, etc. Fortunately, Frank is very extroverted and he loves schmoozing and meeting new people. He claims to have gotten some new business out of these networking opportunities but I suspect that he would go to these events regardless.

Harriet works for a global consumer products company that had piloted a mentoring program for high-potentials in the company. She was selected to participate in the program, and after an internal matching process, was assigned a formal mentor – a senior executive from another division who had also been selected to participate but as a mentor. They met twice a month; while Harriet found their meetings helpful, she did not feel that she was getting much out of these meetings. After a year, the pilot program was disbanded, and Harriet’s meetings with the senior executive stopped.

Two important pieces of advice for workers of all ages today are to network and to have a mentor. In fact, Reid Hoffman, the founder of LinkedIn and the author of The Start-Up of You, advocates that hiring managers should give preference to candidates who are connected because workers today need to have “network intelligence.” Both networking and having a mentor are important to one’s career, but is one more important than the other, and what do these mean in practice? And what is the evidence other than anecdotal that these actually work?

For networking, I will use the definition proposed by Gibson et al. (2014): networking is a form of goal-oriented behavior, both inside and outside of an organization, focused on creating, cultivating, and utilizing interpersonal relationships. (p. 150) Reid Hoffman emphasizes the relationship-building aspects more so than the traditional notion of networking – a way to meet as many people as possible in order to see what they can do for you. There is evidence from research that networking works, but the types of networks and the measures of success vary significantly across studies. I like the concept of reputation capital, which Meister and Willyerd (2010) define as the “sum total of your personal brand, your expertise, and the breadth, depth, and quality of your social networks.” (p. 214) They predict that companies will increasingly hire and promote individuals based in large part on their reputation capital.

The traditional concept of mentoring is that of a one-on-one relationship between a more experienced organizational member and a less experienced employee. There is plenty of research suggesting that mentoring has many benefits to the mentee (or protégé) and to the organization. In one study of U.S. Army officers, Payne and Huffman (2005) showed that officers who had mentors tended to show greater “affective commitment” (i.e., emotional attachment) and “continuance commitment” (i.e., awareness of costs and benefits) to the organization than those who did not. Mentoring was also negatively associated with turnover. DeLong et al. (2008) have argued persuasively that professional service firms in particular would benefit greatly from mentoring their young professionals. Unfortunately, competitive pressures have eroded the traditional practice of mentoring in many firms. As a result, retaining talent has become a key issue. Allen et al. (2004) did a meta-analysis of hundreds of studies of mentoring and found that mentoring does have a positive impact, but the impact (especially on objective career outcomes such as compensation and promotions) was relatively small compared to the impact on such psychosocial outcomes like job and career satisfaction. It is important to note that other studies have shown that mentoring is especially beneficial among traditionally discriminated-against groups, such as African-Americans, Hispanics and Asian American men and women.
For women in particular, however, the Catalyst organization found that their mentors tended to play more of an advisory role, while male employees’ mentors tended to play more of a sponsorship and advocacy role for them.

Perhaps because of this, research and practice on mentoring over the past several years has advocated both formal and informal mentoring, as well as the use of peer and multiple mentors.
As Kram (1985) has indicated, mentoring has a dual purpose: helping you to enhance your career (e.g., through exposure and visibility, coaching) and helping you to enhance your professional effectiveness (e.g., counseling, friendship). She refers to these as the career function and the psychosocial function. An ideal mentoring relationship is when both are present. According to the research, the most important variable to predicting the outcomes of mentoring is the quality of the mentoring relationship.

Both networking and mentoring have benefited from recent technologies, with the increase in the use of social media such as LinkedIn, Twitter, and Facebook. For example, a recent trend in mentoring is that of online or e-mentoring. I have not had direct experience with these sites, but the idea is that you can find an anonymous mentor on-line and get advice from anywhere from six months to a year. Some NGOs like the Global Action Networks have mechanisms to match mentors and mentees globally and provide support for e-mentoring.

Networking and mentoring can be especially challenging for the global manager. Carraher et al. (2008) have pointed to the challenges expatriate managers have in being mentored. In my experience, I have seen expatriate managers struggle to find mentors in their host country for various reasons. First, host country executives may not be fully aware of the concept of mentoring and what its benefits are, both to them and to the expatriate manager. Second, they may also be somewhat resentful of the expatriate manager, or at least view them with suspicion, and therefore establishing a trusting relationship becomes quite difficult. Third, expatriate managers themselves may not believe that they would benefit from mentoring, especially if they adopt an ethnocentric attitude.

Another challenge especially for the practice of mentoring is that European and Asian mentoring practices may vary significantly from American practices. In many Asian cultures, for example, mentoring takes place, but it is heavily influenced by Confucian values, so that the mentorship tends to be more familial but also hierarchical. Goto (1999) has found that “Culturally, Asian mentor-like relationships differ from their Western counterparts in that they are much more formally hierarchical and they blur the distinction between family and social ties.” (p. 53) In Sweden, mentoring follows a process called “Handleduing” which is very similar to coaching and self-directed learning.

A third challenge is the perception of cost-benefit ratios. Research has shown that those who have not engaged in mentoring tend to overestimate the costs of this relationship and underestimate the benefits (which can be intangible as well as tangible).

For those interested in building your network and having mentors, here are a few recommendations. (Also note that Reid Hoffman has some excellent advice in his chapter on “It Takes a Network” from the book I referenced earlier). First, take small steps and start with your current connections. For those of you who are not as extroverted as Frank and who are loathe to simply schmooze and introduce yourselves to total strangers, consider your current contacts from LinkedIn. Re-establish relationships you may have with some colleagues you have not been in touch with. Perhaps there are some colleagues who have risen to senior positions who might be good potential mentors. Send them a short message updating them on your professional doings; you will most likely hear back from only some of them, but you can then follow up with those who replied. Second, take the initiative and get out of your comfort zone. If you are a global manager, take the time to learn more about the cultures of the colleagues with whom you are interacting. This is especially the case when a mentor you might consider approaching is of a different race, gender, or nationality than you. In fact, the potential mentor himself (or herself) may feel a bit of discomfort. You may need to be sensitive to this and seek to find common ground especially with these individuals. Sarah was a Human Resources manager who worked for an organization and had met Vic, VP of Finance, casually at the cafeteria. She knew that the best time to catch Vic was after six when he was in his office wrapping up his work for the day. She decided to stop in one day to ask him a work-related question. She ended up spending a half hour with him, and this started an informal mentoring relationship which lasted for over two years, until she left the company for a promotion elsewhere. Remember that quality is better than quantity. Make sure that those who end up as your mentors are willing to take a more active role in your development.

Third, be clear on your own goals and time frame, and break these down into bite-size pieces. What do you hope to achieve with your networking? And what are some specific goals you can set for yourself at your next networking opportunity? For example, tell yourself that in your next networking meet-up, you will meet at least two individuals you have not known before and get their business cards or contact information. Fourth, remember that networking and having a mentor is a two-way street. Determine what you have to offer and consider how you can help.

Fifth, be open to chance encounters and mentoring moments and take advantage of them. A few years ago, I scheduled a meeting with a client in Boston. We were going to meet in the office of a Harvard Business School professor with whom I was partnering. The client called to say he was running late. The professor, who I will call Sam, and I had an extra hour on our hands. Since he had a fairly light day, I decided to take advantage of the time and spent the next hour engaging in an amazing conversation with Sam. Sam was in turn gracious and tremendously helpful, and to this day, consider this one-hour session one of the most memorable highlights of my professional career.

Allen, T. et al. (2004). Career Benefits Associated with Mentoring for Protégés: A Meta-Analysis. Journal of Applied Psychology, 89 (1): 127-236.

Carraher, S. et al. (2008). Mentoring Across Global Boundaries: An Empirical Examination of Home- and Host-Country Mentors on Expatriate Career Outcomes. Journal of International Business Studies, 39: 131-1326.

DeLong, T., Gabarro, J. and Lees, R. (2008). Why Mentoring Matters in a Hypercompetitive World. Harvard Business Review, January.

Gibson, C. et al. (2014). Understanding the Role of Networking in Organizations. Career Development International, 19 (2), 146-161.

Goto, S. (1999). Asian Americans and Developmental Relationships. In A. Murrell et al. (Eds.), Mentoring Dilemmas: Developmental Relationships Within Multicultural Organizations. Mahwah, NJ: Lawrence Erlbaum.

Kram, K. (1985). Mentoring at Work: Developmental Relationships in Organizational Life. Glenview: IL: Scott, Foresman and Company.

Hoffman, R. and Casnocha, B. (2012). The Start-Up of You. New York: Crown Business.

Marcus, B. (2014). Advice from Top Women Leaders about Finding a Mentor. http://www.forbes.com/sites/bonniemarcus/2014/01/06/advice-from-women-leaders-about-finding-a-mentor/#7f9d3143fc37

Meister, J. and Willyerd, K. (2010). The 2020 Workplace: How Innovative Companies Attract, Develop, and Keep Tomorrow’s Employees Today. New York: Harper Collins.

Payne, S. and Huffman, A. (2005). A Longitudinal Examination of the Influence of Mentoring on Organizational Commitment and Turnover. Academy of Management Journal, 48 (1): 158-169.

Principles of Persuasion for Global Managers

 Professor Robert Cialdini’s groundbreaking research and his six principles of persuasion have been very influential with social scientists, marketers, and policy-makers, and have been applied in different contexts, from fund-raising to consumer and marketing research. Many of you are no doubt familiar with these principles of persuasion, which I summarize here:

1.     Liking: people like those who like them, so find out what things you might have in common with others and give them positive recognition or praise.

2.     Reciprocity: people “give and take” and they tend to respond in kind. If you behave in a collaborative way, they will tend to do the same.

3.     Social proof: people tend to rely on cues for how others think, feel and act, especially with people who are like them. Therefore, they can be more easily persuaded if they are made aware of others’ opinions or behavior, especially if these are people they like and/or respect.

4.     Consistency: people want to be consistent, so have them make public commitments about what they will do and they will want to align their behaviors with these statements.

5.     Authority: people tend to defer to experts or those in positions of authority.

6.     Scarcity: people tend to value things more if they are rare or not easily available. Therefore, creating situations where people feel they will miss out if they do not act can be effective in influencing them.

The research and the applications of these six principles have been impressive, and the evidence for their effectiveness has been strong. However, I have not seen many applications of his work in the organizational setting, although recently, Cialdini (2013) did publish an article with examples of how managers can use these principles. Furthermore, some have questioned whether these principles apply cross-culturally. Recent research has not been definitive on this. For example, Schouten (2008) showed that the authority principle (or source expertise, as she calls this) seems to be an effective compliance strategy across the Dutch, Turkish, and Moroccan groups she studied. On the other hand, a study by Cialdini and his colleagues (Petrova et al, 2007) showed that consistency-based compliance tactics were more effective with U.S. students than Asian students (including Chinese, Japanese and Taiwanese). The authors hypothesized that this technique would work better with people from individualistic cultures like the U.S. than with collectivistic cultures. Other research has shown mixed results. Cialdini has argued that these principles do apply across cultures, although their weights can vary.

In addition, since these principles were first proposed over 15 years ago, are these principles as relevant today? For example, there has been an erosion in the respect that people sometimes confer on authority; with information being so readily available, people do not seem to hold as much faith in expertise as they used to. Witness the rise of so-called fake news, where people are more willing to believe information that conforms with their views, regardless of the source. In the organizational setting, workers expect to have a greater voice in decision-making than in the past. We have also seen the emergence of more complex organizational forms such as matrix organizations, where people might have two or more bosses, and/or where lines of authority have become more ambiguous and more complex.

In my experience, I believe these six principles are still worth considering for managers in the workplace today, with some adjustments; here are four suggestions for how they can best be applied. First, even before considering applying these principles, make sure that you build trust with those you wish to influence. Developing trust is very important in business and personal relationships, and perhaps even more so when building relationships across cultures. Once you have established trust with your global colleagues, you will be able to build a more fruitful working relationship and influence them more effectively. However, the way you build trust may vary by culture. The evidence suggests that in individualistic cultures, trust is built primarily on competence, while in collectivistic cultures, trust is built through relationships. In fact, in many parts of the world, building relationships takes precedence over immediately working on the task requirements.

Like empathy, researchers have identified two types of trust: affective- and cognitive-based trust. The former is about building the emotional bond between persons, while the latter is more concerned with gains and losses, and where competence and reliability are important qualifications for trust to occur. In some cultures, cognitive-based trust is necessary before affective-based trust develops, while in other cultures, affective-based trust may have to be established before cognitive-based trust is built. For example, Kwan and Hong (2014) state: “In Chinese organizations, it is possible that affective-based trust serves as the foundation for cognitive-based trust development; that is, trusting someone’s abilities follows when guanxi (affective-based trust) has been developed.” (p. 102) Western leaders who are working with colleagues and business partners from collectivistic cultures would do well to spend time building and nurturing relationships, and/or establishing connections with their colleagues’ in-group. As a general rule, I advise my clients to remember the three Cs of trust-building: find commonality or connections, show competence, and establish credibility.

Second, and this is related to the first, ask yourself whether your goal is compliance or commitment. Cialdini’s six principles were formulated to get people to comply, with the assumption that the relationship would be a one-off or short-term. However, managers in organizations want more than mere compliance, and want to make sure that those they are influencing are committed and engaged. If so, then building trust becomes even more important since such trust is more likely to lead to commitment. Consider the recommendations for building trust that Zak proposes in a recent issue of Harvard Business Review (Zak, 2017). He claims that “… employees in high-trust organizations are more productive, have more energy at work, collaborate better with their colleagues, and stay with their employers longer than people working at low-trust companies.” Among his recommendations are the following: recognize excellence, induce challenge stress, share information broadly, intentionally build relationships. Note that these align very well with Cialdini’s principles of liking, consistency, and scarcity, suggesting that these three principles should be applied first when building trust.

Third, you may need to reframe some of these principles when applying them in the workplace. Here are three examples. One, the take-away for applying the principle of liking is to build empathy. That is, apply this principle by showing empathy to your employees, especially in trying to understand their point of view (what is called cognitive empathy or perspective-taking). Two, the take-away for managers applying the principle of reciprocity is to be a role model for employees, to do as you say you will do (rather than simply to engage in give-and-take). That is, rather than thinking of this principle in terms of a transactional quid pro quo, apply it by making sure that you are modeling the right behaviors for your employees; this can have a powerful influence on their own behavior. Three, the take-away for applying the principle of scarcity is to build a sense of urgency. Explain to your team why it is important to act now, and what the costs might be for not acting.

 

Fourth, Cialdini has noted that these principles are most effectively applied in combination. I agree. In addition, I would argue that they should also be prioritized depending on the situation. This requires that those of us working across borders get a good understanding of the cultural values and preferences of different cultures, as well as build our own skill set so we can apply these principles appropriately depending on the situation and the culture. For example, the principle of authority will work more effectively in cultures that are higher in “power distance” than those that are lower in power distance. Having a Master’s or a Ph.D. or having an important title carries more weight in some cultures more so than in others – and even in some organizations more so than in others.

Cialdini, R. (2013). The Uses (and Abuses) of Influence. Harvard Business Review, 132, 76-81.

Petrova, P., Cialdini, R. and Sills, S. (2006). Consistency-based Compliance Across Cultures. Journal of Experimental Social Psychology, 43, 104-111.

Schouten, B. (2008). Compliance Behavior and the Role of Ethnic Background, Source Expertise, Self-Construals and Values. International Journal of Intercultural Relations, 32, 55-523.

Zak, P. (2017). The Neuroscience of Trust. Harvard Business Review. January-February, 84-90.