The Essential Drucker

By Peter Drucker (2000)

Just as the essence of medicine is not the urinalysis, important though it is, the essence of management is not techniques and procedures. The essence of management is to make knowledge productive. Management, in other words, is a social function. And in its practice, management is truly a ‘liberal art.’

My Notes


To make people capable to joint performance through common goals, common values, the right structure, and the training and development they need to perform and to respond to change.

Neither the quantity of output nor the ‘bottom line’ is by itself an adequate measure of the performance of management and enterprise. Market standing, innovation, productivity, development of people, quality, financial results—all are crucial to an organisation’s performance and to its survival

Objectives are like a flight plan which can get changed by weather:

Objectives are not fare; they are directions. They are not commands; they are commitments. They do not determine the future; they are means to mobilise the resources and energies of the business for the making of the future.

Hospitals as an example of complex procedures and decisions and teams, with little overhead:

In a hospital for instance… nurses, dietitians, physical therapists, medical and X-ray technicians, pharmacologists, pathologists, and a host of other health-service professionals have to work on and with the same patient, with a minimum of conscious command or control by anyone.

Alfred P Sloan Jr on embracing the inspectors:

I shall not tell you what to study, what to write, or what conclusions to come to. This is your task. My only instruction to you is to put down what you think is right as you see it. Don’t worry about our reaction. Don’t worry about whether we like this or dislike that. And don’t you, above all, concern yourself with the compromises that might be needed to make your recommendations acceptable. There is not one executive in this company who does not know how to make every single compromise without any help from you. But he can’t make the right compromise unless you first tell him what ‘right’ is.

If, in other words, communication fits in with the aspirations, the values, the purposes of the recipient, it is powerful. If it goes against his aspirations, his values, his motivations, it is likely not to he received at all or, at best, to be resisted.

Knowledge Workers

These knowledge workers demand responsibility—above all, for thinking through and setting their own performance goals. They expect to be consulted and to participate in making decisions that affect their work and the work of the organisation as a whole. And they expect opportunities for advancement, that is, a chance to take on more demanding assignments and more responsibility as their performance warrants.

The motivation of the knowledge worker depends in his being effective, on being able to achieve. If effectiveness is lacking in his work, his commitment to work and to contribution will soon wither, and he will become a time-server going through the motions from nine to five.

The great majority of people tend to focus downward. They are occupied with efforts rather than with results. They worry over what the organisation and their superiors ‘owe’ them and should do for them. And they are conscious above all if the authority they ‘should have.’ As a result, they render themselves ineffectual.

Knowledge workers are not subordinates; they are ‘associates.’ For, once beyond the apprentice stage, knowledge workers must know more about their job than their boss does—or else they are no good at all. In fact, that they know more about their job than anybody else in the organisation is part of the definition of knowledge workers.

There is always the danger that the true workman, the true professional, will believe that he is accomplishing something when in effect he is just polishing stones or collecting footnotes. Workmanship must be encouraged in the business enterprise. But it must always be related to the needs of the whole.

The only principle that can do this is management by objectives and self-control. It makes the commonweal the aim of every manager. It substitutes for control from outside the stricter, more exacting and more effective control from the inside. It motivates the manager to action not because somebody tells him to do something or talks him into doing it, but because the objective needs of his task demand it. He acts not because somebody wants him to but because he himself decides that he has to - he acts, in other words, as a free man.

A well-managed organisation is a ‘dull’ organisation.


Every enterprise is a learning and teaching institution.

The single most important thing to remember about any enterprise is that results exist only on the outside. The result of a business is a satisfied customer. The result of a hospital is a healed patient… Inside an enterprise, there are only costs.

There is only one valid definition of business purpose: to create a customer.

The aim of marketing is to make selling superfluous.

Every organisation needs performance in three major areas: direct results, building of values and their reaffirmation, and building and developing people for tomorrow.

New Ventures

Not to innovate is the single largest reason for the decline of existing organisations. Not to know how to manage is the single largest reason for the failure of new ventures.

Do not make innovation an objective for people charged with running, exploiting, optimising what already exists.

When a new venture does succeed, more often than not it is in a market other than the one it was originally intended to serve, with products or services not quite those with which it had set out, bought in large part by customers it did not even think of when it started, and used for a host of purposes besides the ones for which the products were first designed.

The new venture needs to build in systematic practices to remind itself that a ‘product’ or a ‘service’ is defined by the customer, not by the producer. It needs to work continually on challenging itself in respect to the utility and value that its products or services contribute to customers.


‘Quality’ in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for.


Working on the right things is what makes knowledge work effective. This is not capable of being measured by any of the yardsticks for manual work.

Knowledge workers cannot be supervised closely or in detail. They can only be helped. But they must direct themselves, and they must do so toward performance and contribution, that is, toward effectiveness.

Most books on decision-making tell the reader: first find the facts. But executives who make effective decisions know that one does not start with facts. One starts with opinions.