Managing for Results
author: Peter Drucker
date completed: 2022-01-27
--Reinforce success (and opportunity), not failure. Don't assign your most skilled people to the hard problems, assign them to the ones that provide greatest opportunity for future. Eg don't assign best salesmen to the hardest to win deals, assign them to the deals that will drive tomorrow's success.
--"Concentration is the key to business results". Focus focus focus! If you have a B2B and B2C business, pick one and focus, don't serve mediocre products to both. Concentrate on the 20% that will produce 80% of results.
--Don't cut cost by implementing a "fair" across the board 5-10% cost. This may hamstring otherwise successful efforts. Focus on where the preponderance of costs are.
--Three tasks of the executive: 1) making effective the present business 2) finding business potential 3) making the future of the business.
--"Focusing resources on results is the best and most effective cost control...no matter how cheap or efficient an effort, it is waste, rather than cost, if it is devoid of results."
--"The one truly effective way to cut costs is to cut out an activity altogether. To try to cut back costs is rarely effective. There is little point to trying to do cheaply what should not be done at all."
--Before deciding where to cut costs, build a holistic view of the entire business - the cost stream - from supplier to customer. Then identify where significant costs are (highest percentage of dollar paid by customer) and where effective cost reduction can take place. Is it in materials? Distribution/warehousing costs? Rather than cutting cost to increase margins, can you manage cash flow better (faster)? Develop a view of the costs as a system before taking action.
--"Not-doing" or waste can be a high cost as well - eg planes or trucks coming back empty on return leg instead of full. To fix, processes and business models may need to be re-designed.
--The natural state of a business is entropy: gradual decline in performance and increase in waste/costs. Only a purposeful program can counteract it.
--Build on strength. Look for opportunities rather than problems, stress attainable results rather than dangers to be avoided. Control your destiny, don't let it control you.
--"First-class people must always be allocated to major opportunities, to the areas of greatest possible return for each unit of effort." Accept risk by assigning less resources to weaker opportunities.
--Be ruthless with prioritization: "never assign high-grade resources to anything but major opportunities...[do] not create resources for secondary opportunities...leave secondary opportunities to fend for themselves."
--Allocate resources by stack-ranking opportunities and resources, then use "forced-choice" method to allocate top resources to top opportunities.
--Beware industries with high break-even volume and price requirements. "The business that runs at a loss unless it runs at 98 percent capacity and at boom-levels of price is highly vulnerable."
--"Unless the few really first-rate resources are put full-time on the few outstanding opportunities, priorities have not really been set."