Peter, Where Art Thou?

The purpose of a company is to create a customer

The first book I bought for my first graduate school class decades ago was “Management: Tasks, Responsibilities, Practices” by Peter Drucker. He wrote it in 1973, and it’s 800 pages of pure genius.

I’m not sure I needed to buy another business book. Seriously.

I was reminded of this when I read “The 250 Most Effectively Managed U.S. Companies — and How They Got That Way” in the Wall Street Journal a few years ago. Fueled by Peter Drucker’s teaching, it ranks companies on five metrics: Customer Satisfaction, Employee Engagement and Development, Innovation, Social Responsibility, and Financial Strength.

It seems the good folks at the Drucker Institute were concerned about short-term thinking in the business community, and this is the output of their thoughtful pondering.

These are the top 10 companies in the first ranking in 2017:

  1. Amazon
  2. Apple
  3. Alphabet (At this point, you should consider renaming your company starting with an “A.”)
  4. Johnson & Johnson
  5. IBM
  6. Procter & Gamble
  7. Microsoft
  8. 3M
  9. Cisco
  10. Nvidia

A damn good list. Yes, the methodology only considers large public companies because of access to public information, but for leaders in any size company who are challenged by daily firefighting, working on the urgent rather than the important, I suggest measuring the five buckets mentioned above to sharpen your focus.

I’ve worked with and spoken to hundreds of CEOs in my consulting career, and — not to poke a stick in their eyes — not one has effectively measured more than two of the above criteria. As you might guess, financial results are the only consistent metric.

I’ve recently spoken to groups of executives about what I believe to be the three most imperative questions a CEO must ask: What is our strategy? How do I create an aligned and committed team? Who do I need to be as a leader? Everyone agrees commitment is imperative, but I’ve only met a couple of CEOs who measure it.

Leadership is about driving change, and management is about taming complexity. At the intersection of those two might be the question, “What’s our focus, and how do we measure it?”

We can’t forget that Drucker also said that the purpose of a company is to create a customer. Once you’ve found a need to satisfy, measuring the five key metrics above would be a grand way to stay on track!

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  • Richard Regan

    7:10 am December 12, 2017

    It is interesting that Drucker leaves out diversity and inclusion as one of his metrics. Maybe his omission is reflective of that fact that many of the companies on the Drucker Institute list are predominately white male companies with very few women or people of color. This debunks the business case argument for inclusion.

    • Todd Ordal

      9:07 am December 12, 2017

      Richard, Peter Drucker would be 106 were he still alive today. The metrics were chosen by the institute based upon his writings, which, given the timeframe, were no doubt lacking in the language of inclusion using today’s lens. I’m not sure what source you are using for asserting that the companies on the list include very few women or people of color, but suspect that they are reflective of the general business population. Apple, for instance, has a gay CEO and 4 women on their board of directors. This is not to say that discrimination doesn’t exist but this list doesn’t debunk the rational for inclusion.

  • Kristin Thielking

    11:03 am December 12, 2017

    I completely agree that these 5 metrics are key to effectively managed companies. What continues to baffle me, is the number of organizations willing to leave Employee Engagement & Development to happenstance, but are laser-focused on customer satisfaction and financial results. You can’t have one without the other. And, I would argue, Employee Engagement is actually central to, and drives, all other business results.

    • Todd Ordal

      1:54 pm December 12, 2017

      Thanks, Kristin. It can certainly be “managed” but CEO must believe in it and have the wherewithal (e.g. emotional intelligence) to drive it.