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How to Make People Decisions

This chapter was acquired from Peter Drucker on the Profession of Management. A similar topic can be found in Management, Revised Edition, Managing the Non-Profit Organization, The Daily Drucker, and The Effective Executive in Action and The Effective Executive

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Executives spend more time on managing people and making people decisions than on anything else—and they should.

No other decisions are so long lasting in their consequences or so difficult to unmake.

And yet, by and large, executives make poor promotion and staffing decisions.

By all accounts, their batting average is no better than 0.333 at most one-third of such decisions turn out right; one-third are minimally effective; and one-third are outright failures.


In no other area of management would we put up with such miserable performance.

Indeed, we need not and should not.

Managers making people decisions will never be perfect, of course, but they should come pretty close to batting 1,000—especially since in no other area of management do we know as much.


Some executives’ people decisions have, however, approached perfection.

At the time of Pearl Harbor, every single general officer in the U.S. Army was overage.

Although none of the younger men had been tested in combat or in a significant troop command, the United States came out of World War II with the largest corps of competent general officers any army has ever had.

George C. Marshall, the army’s chief of staff, had personally chosen each man.

Not all were great successes, but practically none were outright failures.


In the 40 or so years during which he ran General Motors, Alfred P. Sloan, Jr. picked every GM executive—down to the manufacturing managers, controllers, engineering managers, and master mechanics at even the smallest accessory division.

By today’s standards, Sloan’s vision and values may seem narrow.

They were.

He was concerned only with performance in and for GM.

Nonetheless, his long-term performance in placing people in the right jobs was flawless.

Calendarize all of this?


The Basic Principles

There is no such thing as an infallible judge of people, at least not on this side of the Pearly Gates.

There are, however, a few executives who take their people decisions seriously and work at them.


Marshall and Sloan were about as different as two human beings can be, but they followed, and quite consciously, much the same principles in making people decisions:

bb If I put a person into a job and he or she does not perform, I have made a mistake.

I have no business blaming that person, no business invoking the “Peter Principle,” no business complaining.

I have made a mistake.

bb “The soldier has a right to competent command” was already an old maxim at the time of Julius Caesar.

It is the duty of managers to make sure that the responsible people in their organizations perform.

bb Of all the decisions an executive makes, none are as important as the decisions about people because they determine the performance capacity of the organization.

Therefore, I'd better make these decisions well.

bb The one “don't": do not give new people new major assignments, for doing so only compounds the risks.

Give this sort of assignment to someone whose behavior and habits you know and who has earned trust and credibility within your organization.

Put a high level newcomer first into an established position where the expectations are known and help is available.

Some of the worst staffing failures I have seen involved brilliant Europeans hired by U.S. companies—one based in Pittsburgh; the other, Chicago—to head up new European ventures.

Dr. Hans Schmidt and M. Jean Perrin (only the names are fictitious) were hailed as geniuses when they came in.

A year later they were both out, totally defeated.


No one in Pittsburgh had understood that Schmidt’s training and temperament would make him sit on a new assignment for the first six or nine months, thinking, studying, planning, getting ready for decisive action.

Schmidt, in turn, had never even imagined that Pittsburgh expected instant action and immediate results.

No one in Chicago had known that Perrin, while a solid and doggedly purposeful man, was excitable and mercurial, flailing his arms, making speeches about trivia, and sending up one trial balloon after another.

Although both men subsequently became highly successful CEOs of major European corporations, both executives were failures in companies that did not know and understand them.


Two other U.S. companies successfully established businesses for the first time in Europe during the same period (the late 1960s and early 1970s).

To initiate their projects, each sent to Europe a U.S. executive who had never before worked or lived there but whom people in the head offices knew thoroughly and understood well.

In turn the two managers were thoroughly familiar with their companies.

At the same time, each organization hired half a dozen young Europeans and placed them in upper-middle executive jobs in the United States.

Within a few years, both companies had a solid European business and a trained, seasoned, and trusted corps of executives to run it.


As Winston Churchill’s ancestor, the great Duke of Marlborough, observed some three centuries ago, “The basic trouble in coalition warfare is that one has to entrust victory if not one’s life, to a fellow commander whom one knows by reputation rather than by performance.”


In the corporation as in the military, without personal knowledge built up over a period of time there can be neither trust nor effective communication.


The Decision Steps

Just as there are only a few basic principles, there are only a few important steps to follow in making effective promotion and staffing decisions:

Think through the assignment

Job descriptions may last a long time.

In one large manufacturing company, for example, the job description for the position of division general manager has hardly changed since the company began to decentralize 30 years ago.

Indeed, the job description for bishops in the Roman Catholic church has not changed at all since canon law was first codified in the thirteenth century.

But assignments change all the time, and unpredictably.


Once in the early 1940s, I told Alfred Sloan that he seemed to spend an inordinate amount of time pondering the assignment of a fairly low-level job—general sales manager of a small accessory division—before choosing among three equally qualified candidates.

“Look at the assignment the last few times we had to fill the same job,” Sloan answered.

To my surprise, I found that the terms of the assignment were quite different on each occasion.


When putting a man in as division commander during World War II, George Marshall always looked first at the nature of the assignment for the next eighteen months or two years.

To raise a division and train it is one assignment.

To lead it in combat is quite another.

To take command of a division that has been badly mauled and restore its morale and fighting strength is another still.


When the task is to select a new regional sales manager, the responsible executive must first know what the heart of the assignment is: to recruit and train new salespeople because, say, the present sales force is nearing retirement age?

Or is it to open up new markets because the company’s products, though doing well with old-line industries in the region, have not been able to penetrate new and growing markets?

Or, since the bulk of sales still comes from products that are 25 years old, is it to establish a market presence for the company’s new products?

Each of these is a different assignment and requires a different kind of person.

Look at a number of potentially qualified people

The controlling word here is “number.”

Formal qualifications are a minimum for consideration; their absence disqualifies the candidate automatically.

Equally important, the person and the assignment need to fit each other.

To make an effective decision, an executive should look at three to five qualified candidates.

Think hard about how to look at these candidates

If an executive has studied the assignment, he or she understands what a new person would need to do with high priority and concentrated effort.

The central question is not “What can this or that candidate do or not do?”

It is, rather, “What are the strengths each possesses and are these the right strengths for the assignment?”

Weaknesses are limitations, which may, of course, rule a candidate out.

For instance, a person may be excellently qualified for the technical aspects of a job; but if the assignment requires above all the ability to build a team and this ability is lacking, then the fit is not right.


But effective executives do not start out by looking at weaknesses.

You cannot build performance on weaknesses.

You can build only on strengths.

Both Marshall and Sloan were highly demanding men, but both knew that what matters is the ability to do the assignment.

If that exists, the company can always supply the rest.

If it does not exist, the rest is useless.


If, for instance, a division needed an officer for a training assignment, Marshall looked for people who could turn recruits into soldiers.

Every man that was good at this task usually had serious weaknesses in other areas.

One was not particularly effective as a tactical commander and was positively hopeless when it came to strategy.

Another had foot-in-mouth disease and got into trouble with the press.

A third was vain, arrogant, egotistical, and fought constantly with his commanding officer.

Never mind, could he train recruits?

If the answer was yes—and especially if the answer was “he’s the best”—he got the job.


In picking the members of their cabinets, Franklin Roosevelt and Harry Truman said, in effect: “Never mind personal weaknesses.

Tell me first what each of them can do
:’ It may not be coincidence that these two presidents had the strongest cabinets in twentieth century U.S. history.

Discuss each of the candidates with several people who have worked with them

One executive’s judgment alone is worthless.

Because all of us have first impressions, prejudices, likes, and dislikes, we need to listen to what other people think.

When the military picks general officers or the Catholic church picks bishops, this kind of extensive discussion is a formal step in their selection process.

Competent executives do it informally.

Hermann Abs, the former head of Deutsche Bank, picked more successful chief executives in recent times than anyone else.

He personally chose most of the top-level managers who pulled off the postwar German “economic miracle,” and he checked out each of them first with three or four of the person’s former bosses or colleagues.

Make sure the appointee understands the job

After the appointee has been in a new job for three or four months, he or she should be focusing on the demands of that job rather than on the requirements of preceding assignments.

It is the executive’s responsibility to call that person in and say, “You have now been regional sales manager—or whatever—for three months.

What do you have to do to be a success in your new job?

Think it through and come back in a week or ten days and show me in writing.

But I can tell you one thing right away: the things you did to get the promotion are almost certainly the wrong things to do now.”


If you do not follow this step, don't blame the candidate for poor performance.

Blame yourself.

You have failed in your duty as a manager.


The largest single source of failed promotions—and I know of no greater waste in U.S. management—is the failure to think through, and help others think through, what a new job requires.

All too typical is the brilliant former student of mine who telephoned me a few months ago, almost in tears.

“I got my first big chance a year ago,” he said.

“My company made me engineering manager.

Now they tell me that I'm through.

And yet I've done a better job than ever before.

I have actually designed three successful new products for which we'll get patents.


It is only human to say to ourselves, “I must have done something right or I would not have gotten the big new job.

Therefore, I had better do more of what I did to get the promotion now that I have it:’ It is not intuitively obvious to most people that a new and different job requires new and different behavior.

Almost 50 years ago, a boss of mine challenged me four months after he had advanced me to a far more responsible position.

Until he called me in, I had continued to do what I had done before.

To his credit, he understood that it was his responsibility to make me see that a new job means different behavior, a different focus, and different relationships.

The High-Risk Decisions

Even if executives follow all these steps, some of their people decisions will still fail.

These are, for the most part, the high-risk decisions that nevertheless have to be taken.


There is, for example, high risk in picking managers in professional organizations—for a research lab, say, or an engineering or corporate legal department.

Professionals do not readily accept as their boss someone whose credentials in the field they do not respect.

In choosing a manager of engineering, the choices are therefore limited to the top-flight engineers in the department.

Yet there is no correlation (unless it be a negative one) between performance as a bench engineer and performance as a manager.

Much the same is true when a high-performing operating manager gets a promotion to a staff job in headquarters or a staff expert moves into a line position.

Temperamentally, operating people are frequently unsuited to the tensions, frustrations, and relationships of staff work, and vice versa.

The first-rate regional sales manager may well become totally ineffective if promoted into market research, sales forecasting, or pricing.


We do not know how to test or predict whether a person’s temperament will suit a new environment.

We can find this out only by experience
.

If a move from one kind of work to another does not pan out, the executive who made the decision has to remove the misfit, and fast.

But that executive also has to say, “I made a mistake, and it is my job to correct it:’ To keep misfits in a job they cannot do is not being kind; it is being cruel.

But there is also no reason to let the person go.

A company can always use a good bench engineer, a good analyst, a good sales manager.

The proper course of action—and it works most times—is to offer the misfit a return to the old job or an equivalent.


People decisions may also fail because a job has become what New England ship captains 150 years ago called a “widow maker:” When a clipper ship, no matter how well designed and constructed, began to have fatal “accidents,” the owners did not redesign or rebuild the ship.

They broke it up as fast as possible.


Widow makers—that is, jobs that regularly defeat even good people—appear most often when a company grows or changes fast.

For instance, in the 1960s and early 1970s, the job of “international vice president” in U.S. banks became a widow maker.

It had always been an easy job to fill.

In fact, it had long been considered a job in which banks could safely put “also rans” and could expect them to perform well.

Then, suddenly, the job began to defeat one new incumbent after another.

What had happened, as hindsight now tells us, is that international activity quickly and without warning became an integral part of the daily business of major banks and their corporate customers.

What had been until then an easy job became, literally, a “non job” that nobody could do.


Whenever a job defeats two people in a row, who in their earlier assignments had performed well, a company has a widow maker on its hands.

When this happens, a responsible executive should not ask the headhunter for a universal genius.

Instead abolish the job.

Any job that ordinarily competent people cannot perform is a job that cannot be staffed.

Unless changed, it will predictably defeat the third incumbent the way it defeated the first two.

Making the right people decisions is the ultimate means of controlling an organization well.

Such decisions reveal how competent management is, what its values are, and whether it takes its job seriously.

No matter how hard managers try to keep their decisions a secret—and some still try hard—people decisions cannot be hidden.

They are eminently visible.


Executives often cannot judge whether a strategic move is a wise one.

Nor are they necessarily interested.

“I don't know why we are buying this business in Australia, but it won't interfere with what we are doing here in Fort Worth” is a common reaction.

But when the same executives read that “Joe Smith has been made controller in the XYZ division,” they usually know Joe much better than top management does.

These executives should be able to say, “Joe deserves the promotion; he is an excellent choice—just the person that division needs to get the controls appropriate for its rapid growth.”


If, however, Joe got promoted because he is a politician, everybody will know it.

They will all say to themselves, “Okay, that is the way to get ahead in this company:’ They will despise their management for forcing them to become politicians but will either quit or become politicians themselves in the end.

As we have known for a long time, people in organizations tend to behave as they see others being rewarded.

And when the rewards go to nonperformance, to flattery, or to mere cleverness, the organization will soon decline into nonperformance, flattery, or cleverness.


Executives who do not make the effort to get their people decisions right do more than risk poor performance.


They risk losing their organization’s respect
.

 

“The greatest danger in times of turbulence is not turbulence; it is to act with yesterday’s logic”. — Peter Drucker


The shift from manual workers who do as they are being told — either by the task or by the boss — to knowledge workers who have to manage themselves ↓ profoundly challenges social structure

Managing Oneself is a REVOLUTION in human affairs.” … “It also requires an almost 180-degree change in the knowledge workers’ thoughts and actions from what most of us—even of the younger generation—still take for granted as the way to think and the way to act.” …

… “Managing Oneself is based on the very opposite realities: Workers are likely to outlive organizations (and therefore, employers can’t be depended on for designing your life), and the knowledge worker has mobility.” ← in a context

 

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