A Class with Drucker

The Lost Lessons of the World’s Greatest Management Teacher

Author: William A. Cohen
Pub Date: 2007
Your Price: $24.95
ISBN: 0814409199
Format: Hardcover

• Overview
• Author Bio
• Drucker Bio
• Peter Said, Bill Said
• Press Release
• Sample Chapter
• Table of Contents
• Request an Evaluation Copy, INSTRUCTOR ONLY!

A Class with Drucker

Chapter 3
What Everybody Knows Is Frequently Wrong

My first class with Peter Drucker met in the fall of 1975. I didn't know what to expect. Drucker was a world-famous celebrity. I was a young man with limited business experience. Needless to say, I was more than a little intimidated with the thought of dealing with this prominent professor face-to-face.

I was actually taking two courses with Peter that first term. The other class had yet to meet. It was to meet Wednesday night in the faculty club, and Peter and the dean, Paul Albrecht, were teamed as instructors. It was open only to the ten students in the new doctoral program for practicing executives.

However, this was Monday night, and the class was entitled "Module 300: The Management Process." This particular course, and even the course numbering system then used, no longer exists. Peter taught it by himself. There were no other professors, and no graduate students assisting him. The class was open to both master's students and the ten doctoral students and was taught over a seven-week period. In the Claremont system, there were three semesters a year with two seven-week modules in every semester. This allowed students to take a variety of courses.

In later years, Drucker classes met in Albrecht Auditorium, and other ultramodern complexes built long after my own graduation. However, since the larger and more modern facilities didn't exist then, Module 300 met in probably the largest room available on campus in Harper Hall. It held fifty or sixty of the old-style seats for students with a table top that folded over your lap to allow notetaking.

I arrived early. About half of the class was already there. I didn't know anyone. We were all working professionals, and there were no orientation programs for new graduate students in those days. However, I discovered that many of these students weren't new to Claremont, and had taken classes with Drucker previously.

"What's he like?" I asked. "Oh, Peter's fine, you'll like him" seemed to be the most common reply. I noticed that just about everyone called him "Peter" not "Drucker" or "Professor Drucker." I discovered that this was his preferred form of address. He seemed to dislike any form of honorific or deferential treatment. I don't want to describe him as modest, but rather I would say that he considered himself beyond any special behavior and thought that this sort of thing was a waste of time. This does not mean to imply that he was timid in any way or encouraged disrespect. I never saw anyone ever treat Peter with disrespect, and he absolutely was not bashful about correcting any student.

After several minutes Peter strode confidently into the classroom. He was in good humor and engaged several students in conversation who apparently had been his students previously. He was of medium height, wore glasses, and was balding. He was energetic and appeared to be in excellent health. He had a copy of a thick book under one arm. As the time for the class to begin approached, he removed his jacket and held a copy of Management: Tasks, Responsibilities, and Practices aloft with one hand. "This is your textbook," he said with a heavy Viennese accent. "Anyone wanting me to autograph it, please line up over here to the right side of the classroom near the window."

There was a scrambling as maybe fifteen or sixteen students formed a line to get the coveted autograph. I did not. I didn't know what to make of this action at the time. Somehow it rubbed me the wrong way. I guess I thought it egotistical. The rest of the students continued their conversations while the autographing took place for another ten minutes or so. Then Peter went to the front of the classroom and began to lecture without reference to notes or his book.


The Story of the Two Vice Presidents

Peter began with a story about a company he had observed. As the president of the company grew older, he knew that he should begin thinking about succession. Fortunately, he had two vice presidents, both equally outstanding, and of the right age, and each with a record of outstanding prior accomplishments with this firm. He increased the responsibility of both subordinate executives and gave them each the new title of executive vice president. He called them in together and announced that he intended to retire in five years and that one of them would be named to succeed him as president.

Both men thanked the president for the opportunity. The president had confidence that he had picked the right candidates. Although both were ambitious, he knew that both would put the company before themselves in whatever they undertook. He knew that either would make an excellent replacement.

Over the five years of their apprenticeship a differing pattern began to emerge from each of the prospective presidents-to-be. Although both men did well in every task given them and were equally successful in accomplishing their assignments, the process each followed was quite different. One would be given a task by the president. He would request the information needed and would ask when the job was to be accomplished. He would go off, gather his subordinates together, and would invariably present the president with a completed job well done days, weeks, or months later. Unless he needed some specific information or permission to do something a little out of the usual process, he would do this without ever bothering the old president.

The other executive vice president took an entirely different approach. Given a project by the president, he too would organize his subordinates to complete it successfully. However, there was a big difference. The first candidate worked independently and didn't bother the president with the details of what he was doing unless specific help was needed. However, the second candidate met periodically with the president to discuss the project and frequently requested additional meetings, continually seeking the president's advice.

"Now," asked Drucker, "When the president retired, which candidate did he pick to succeed him, the executive who was always successful without bothering him or taking his time, or the one who continually seemed to seek his help and approval?"

Many hands shot up, including my own. Drucker called on several students. Each stated his opinion that the president picked the executive who was able to succeed on his own without having to report back until the job was done unless there was a specific problem. This was my opinion too. Our thinking was that the new president would need to operate on his own and would not have the old president's counsel to fall back on.

Peter asked for a show of hands as to how many agreed that the president selected the executive who demonstrated that he was able to operate independently and without the president's ongoing approval. A large majority agreed with the students Peter had previously called on. Only a few thought that the second executive who constantly bothered the former president had been the one selected.

Peter stated the results: "Most of you are wrong. The former president selected the candidate who continually consulted with him." The class was in an uproar. This went against everything we knew about management and leadership. Everyone knew that the candidate who demonstrated that he could make decisions on his own should and would be selected.


Drucker's Lesson: Question Your Assumptions

"What everybody 'knows' is frequently wrong," Peter responded. "We are dealing with human beings. Most top managers want to feel that their policies and legacies will be continued. The constant contact and interaction with the second manager gave the president that confidence.

"Both executives were outstanding, but while the president felt that he knew and understood the executive who maintained contact, he was less certain about the other executive and he was less invested in his success. After picking candidates based on accomplishment, he went with his gut instinct, a perfectly correct way in which to make such an important decision after considering all the facts. Unless the president's preferred style was to let those who reported to him operate independently, the first executive should have tried to adapt his preferred method to what his boss preferred, even though 'everyone knows' that continual consultation with a higher manager is less desirable."

Drucker was right, and I should have known better. I was in the process of losing the confidence of my then boss by behaving exactly like the executive who operated independently. That in itself is an important lesson, but the idea that what everyone knows is frequently wrong proved even more important to me, and I think many other of Drucker's students. Over the next few years, I heard Peter say this quite a few times.

Maybe through repetition I finally began to think more deeply about what the words really meant. This seemingly simple and self-contradicting statement is amazingly true and immensely valuable, and not only in business. What Drucker wanted to emphasize was that we must always question our assumptions no matter from where they originate. This is especially true regarding anything that a majority of people "know" or assume without questioning. This "knowledge" should always be suspect and needs to be examined much more closely. In a surprisingly high percentage of cases, the information "known to be true" will turn out to be false or inaccurate, if not generally, then in a specific instance. This can lead to extremely poor, even disastrous management decisions.


Things Once "Known to Be True" Are Now Known to Be False

Of course there are many old "truisms" once thought by everyone to be true which we laugh at today. "The world is flat." "The earth is the center of the universe." The ancient Greeks knew that everything was made up of only four elements: earth, air, fire, and water. Of course, in modern times we learned that they were mistaken. When I took chemistry in high school, I learned that a Periodic Table of Elements had been formulated by a fellow named Mendeleev and that it had been established that there were exactly 93 elements, no more, no less. We got an "A" if we could name them all. Today, there are 102 elements-or so "everybody knows."


Questions Raised by 100 Percent Agreement

Interestingly, Drucker's lesson goes back over the millennia. In ancient Israel, the highest court was called the Sanhedrin. It corresponded roughly to the U.S. Supreme Court today, although it had a lot more power. The Sanhedrin tried the most important cases, and it had the power to exact capital punishment. In this high court, there were no prosecuting or defense attorneys and no appeals. The Sanhedrin court consisted only of judges. Some historians say 71 judges, others 23. The actual number is unimportant to some factual points.

The judges could examine the defendant, the accusers, and any witnesses either side brought before it. To exonerate a defendant required a majority of one, while to find him guilty required a majority of two. But perhaps the most interesting aspect of this ancient Jewish legal body was that if all judges found the accused guilty of a capital crime, he or she was allowed to go free! This was because the ancient Hebrews were convinced that there is a defense to be argued for every individual accused, regardless of the gravity of the crime and the persuasiveness of the evidence. If not a single judge thought that the defendant's case had merit, then it was clear that no matter how heinous the crime, something was wrong in the situation and it was likely that the accused was innocent. In other words, when every judge "knew" something to be "true," it probably wasn't.

In modern times, the impact of mass agreement on an issue has been addressed and confirmed in psychological research. In one experiment, subjects were asked to rate the attractiveness of individuals depicted in selections of photographs. However, there was only one real subject and the results were rigged. Unknown to the subject, the other participants were part of the scientist's team of experimenters. These participants were to agree about the most attractive individual depicted in any particular set of photographs at random. It was found that the subject could usually be influenced to agree with any photograph that the group selected, regardless of merit. This experiment demonstrates the influence of social proof, while it confirms one reason why Drucker's theory that what everyone knows is frequently wrong is correct. Accepting what everybody knows without any examination will often result in faulty decisions.


The Tylenol Case

Is Drucker's wisdom valid or important in business? Back in 1982 someone laced a popular over-the-counter drug with cyanide. A few who bought the poisoned product died. This led to an almost instantaneous nationwide panic. One hospital received 700 queries from people suspecting they had been poisoned with the tainted product. People in cities across the country were admitted to hospitals on suspicion of cyanide poisoning. The Food and Drug Administration (FDA) investigated 270 incidents of suspected product tampering. While some of the product had been tampered with as some sort of a sick joke, in most cases this was pure hysteria with no basis at all in fact. This panic in itself demonstrates part of Peter's thesis, but there is more that is critical to business decision-makers.

At that time, the product, Tylenol, was almost thirty years old. Over the years, it had built up a well-deserved trust with consumers. Nevertheless, sales of the product plummeted overnight and Johnson & Johnson, the product's maker, launched a recall and stopped all sales. The company advised consumers not to buy or use the product until further notice.

Virtually everyone predicted the demise of the product. One well-known advertising guru was quoted in The New York Times: "I don't think they can ever sell another product under that name. . . . There may be an advertising person who thinks he can solve this [crisis] and if they find him, I want to hire him, because then I want him to turn our water cooler into a wine cooler."¹

Tylenol once dominated the market. Everyone knew that those days were gone for good. An article in The Wall Street Journal commented sadly that the product was dead and could not be resurrected; any other notion was an executive's pipedream. A survey of "the-man-in-the-street" found almost no one that would buy the product regardless of what the company did to guarantee its safety or promote its sale.

Despite what everyone knew, Johnson & Johnson retained the product Tylenol and its now famous brand name, which had become infamous through no fault of the product or its maker. Johnson & Johnson launched one of the most effective public relations campaigns for a product in commercial history. As a result, sales began a steady climb only a few months after the poisonings, returning Tylenol to its previous position as the number one analgesic controlling 35 percent of a two-billion-dollar market.

Where would Johnson & Johnson have been today had this established brand, built through thirty years of advertising, performance, and reliability, been allowed to disappear? How much would it have cost Johnson & Johnson to attempt to introduce and build an entirely new brand to replace Tylenol? Could this have even been accomplished? We'll never know. Nor do we know whether Peter Drucker was called in to consult with Johnson & Johnson.

What we do know is that Johnson & Johnson did the right thing when this tragedy struck and then took the right actions to reintroduce the Tylenol product successfully. These actions today are studied in business schools as an almost perfect example of a successful public relations strategy and execution in the face of a crisis. However the basis of this was that Johnson & Johnson executives, knowingly or not, decided, "What everyone knows is frequently wrong." They went against what all the experts and even the consumers "knew" and went on to resurrect Tylenol to be even more successful than it was previously.


Analyzing Assumptions

How can this Drucker wisdom be applied in business? There is no question that applying this lesson requires critical analysis, because while "what everyone knows is frequently wrong" may be true, sometimes "what everyone knows" is actually true. So the problem is in how to know when common knowledge is true and when it is not. The first thing we need to understand is that what everyone knows, or so-called common knowledge, is simply an assumption.

An assumption is any belief, idea, hunch, or thought that you, a group of people, or any internal or external experts have about a subject. These assumptions are crucial because we use our assumptions to guide our actions and decision-making. This is sometimes complicated by the fact that frequently these assumptions are implicit and unstated. Decision making can be disastrous if we accept assumptions as fact without analysis. In the previous example, Tylenol would have been dropped as a product and Johnson & Johnson would have lost millions of dollars in revenue, plus it would have had to spend further millions of dollars to develop and market a replacement product.

So how can you analyze an assumption? The following steps will help:

Look at the Source's Reliability. The first step in analyzing an assumption is to look at the source's reliability. Reliability refers to consistency in measurement over time. Many years ago, I was involved in the selection of one of two designs for a new aircraft from two different companies. The companies were The Boeing Aircraft Company and McDonnell Douglas Aircraft Company. (Those who know this industry also know that the former company eventually acquired the latter, but this has nothing to do with our story.) Both companies proposed modifying one of their standard airline designs which was already in production and in use. Periodically we would meet with each aircraft company's design team individually to assess progress on each company's proposals, acceptance of which would be worth hundreds of millions of dollars to the winning contractor.

On one occasion we discussed ways in which we might lower the cost of each aircraft. The McDonnell Douglas manager stated, "You can save $10 million for each aircraft produced if you will allow us to deviate on the size of the escape hatch by two inches. That would be the standard size of the hatch on our DC-9 airliners. They successfully passed all FAA tests with no problems." I promised to look into his request, since it could save a lot of money.

Find the Ultimate Source. In this case, the initial source was the engineer who had put this requirement into the package listing design specifications that we had sent to the two aircraft manufacturers. However, frequently, you need to conduct a process I call "peeling the onion," because the initial source isn't the end of the story. What we are looking for usually lies inside one, maybe more layers that we need to peel away to get to the center-the ultimate source.

As soon as I could, I contacted the engineer responsible for the aircraft specification that McDonnell-Douglas wanted waived. "We can't do it," he told me. "This requirement comes directly from our aircraft design handbook with specifications that we must use for all new transport type aircraft." This means that the source had a sub-source. The sub-source was the design handbook. Not only did it produce a predictable and repeatable result, but "everybody knew" that these dimensions were the correct ones for the escape hatch and that we were required to use them.

Suppose Johnson & Johnson had investigated the sources for those who said that the demise of Tylenol was irreversible. These sources were the advertising and business experts who wrote for the business journals. They were usually right on the money in their judgments regarding advertising and how poor publicity could ruin a product's reputation. They were reliable sources based on past history.

Is the Source Valid? Both reliability and validity are concepts that come from testing. The validity of a test tells us how well the test measures what it is supposed to measure. It is a judgment based on evidence about the appropriateness of inferences drawn from test scores. But we're not looking at test scores here, we're looking at assumptions. So where did this particular specification in the aircraft design handbook come from? Knowing that source could help me decide whether this particular specification was valid for the aircraft we now wanted to build.

So, I peeled the onion again. I knew that every specification in the aircraft design handbook was referenced as to where it came from and what it was based on. I asked the engineer to do the necessary research to find out what tests this particular design specification was based on. Surprise, surprise, this specification was based on an aircraft test done with propeller-driven aircraft almost thirty years earlier. That aircraft traveled at about 120 miles per hour. The aircraft we were working on traveled at about 500 miles per hour.

Obviously, in this instance, the design specification was not valid. We turned it over to one of our aeronautical designers. He advised us to forget what everyone knew (the design handbook) and that the two inches would make no difference at the air speeds we were anticipating for an emergency bailout. We took his advice.

In the same way, the Johnson & Johnson decision makers probably evaluated the sources advising them to drop Tylenol and find something else. They probably asked what the success rate was for a product that was reintroduced in this way and under similar circumstance. That would have been peeling the onion. They probably discovered that there wasn't much of a data base to go on because no one had even attempted something like this before. They had taken the high road all the way, and felt that despite what everybody knew, it was worthwhile trying. The results, as they say, are history.

Drucker's wisdom reminds me of Roger Bannister's stunning achievement. Bannister, an Australian medical doctor, broke a record in running once thought to be impossible. This was the famous "four-minute mile." No one had ever run a mile in four minutes. The world record of 4:01.4, had been set in 1945 by Sweden's Gunder Haegg. The experts knew that it could not be done, and some said it was dangerous for an athlete to even attempt. Today, the fastest mile record is 3 minutes, 43.13 seconds. Some high school runners even break the 4-minute mile. However, the fact is that when Bannister achieved this on May 6th of 1954, many, if not most, knew that it was an impossible dream. He was knighted for his achievement.

I was in high school at the time and I remember a radio interview with an doctor of kinesiology shortly before Bannister broke the record. He stated that the human body just wasn't built to run this fast and that it couldn't be done. He predicted that Bannister would never succeed. Bannister knew better. What most "knew" was wrong, and Bannister understood this.

Drucker Lesson Summary

What everyone knows is frequently wrong. It is wrong because people make one or more erroneous assumptions and then everybody else buys in. To use this wisdom effectively, a decision maker needs to look at the source and determine its reliability and validity. Usually this involves "peeling the onion" to get to the very core source.

© 2008 William A. Cohen.
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