3Peter F. Drucker – The Father of Modern Management Central to his philosophy is the view that PEOPLE are an organization’s MOST VALUABLE resourceand a manager’s job is to PREPARE and FREE people to perform.(1909 – 2005)3
4The Social Sector“It is not business, it is not government, it is the social sector that may yet save society.”- Peter Drucker4
5Why Ask the Five Questions? Appraise performance, anticipate change, and set direction.Create a learning organization that values and fosters leadership development.Manage limited resourcesStrengthen strategic planningEncourage constructive dissentValidate assumptions against actual customer values, andLearn to say “no”
6Who Can Use the Five Questions? The Five Questions can be used by all sectors, during any organizational phase: strategic planning, start-up, growth, etc.Social SectorPrivate sectorPublic Sector
7The Self Assessment Tool is used to: Deepen understanding of the mission.Conduct organization-wide strategic planning.Purposely, listen to the customer.Define results.Clarify organizational goals.Plan to achieve results.7
8Planning Process 8 PLANS INCLUDE: MISSIONWhy you do what you do; the organization’s reason for being, its purpose. Says what, in the end, you would like to be remembered for.VISIONThe vision statement envisions a future when the organization’s goals have been achieved.A vision of desired results provides the framework for “measuring the right things.”Knowing where we want to go tomorrow frames what we must do today.A vision:Outlines what the organization wants to be.It concentrates on the future.It is a source of inspiration.It provides clear decision-making criteria.GOALSA set of three to five aims that set the organization’s fundamental, long-range direction.Goals make it clear where an organization will concentrate resources for results.Goals flow from mission, set the organization’s direction, build on strength, address opportunity, and outline an organization’s desired future Participant Workbook, p. 53.OBJECTIVESSpecific and measurable levels of achievement that move an organization towards its goals.ACTION STEPSDetailed plans and activities directed toward meeting an organization’s objectives.Establish accountability for objectives – who will do what by when.Drucker states:Action steps are developed by the people who will carry them out – everyone with a role has the opportunity to provide input.The above helps: it seems slow, but when the plan is completed everyone understands it; more people will embrace change, are committed, ready to act.BUDGETThe commitment of resources necessary to implement plans—the financial expression of a particular plan of work.8
9The Five Questions: What is our mission? Who is our customer? What does the customer value?What are our results?What is our plan?As an overview – the 5 Questions are?We will focus on two today: Who is our customer? And What does the customer value?You have to become accustomed to Drucker’s terminology and accept his definitions to get the most out of the process.
10WHAT IS OUR MISSION? The FIVE Questions 10 We will briefly discuss mission so that you can understand the link between mission and the customer. I recently worked with the board of an association, the Airport Minority Advisory Council….MISSIONWhy you do what you do; the organization’s reason for being, its purpose. Says what, in the end, you would like to be remembered for.Why is mission important?THE MISSION KEEPS LEADERS FOCUSED ON PROGRAMS AND ACTIVITIES THAT LEAD TO RESULTS . . .which are measured in the form of the changed life of the customer.WHAT IS OUR MISSION?10
11Mission DefinedMission: Why we do what we do; the organization’s reason for being, its purpose. Says what, in the end, you want to be remembered for.
12Drucker on Mission“The effective mission statement is short and sharply focused. It should fit on a T-shirt. The mission says why you do what you do, not the means by which you do it.”- Peter Drucker, p. 14So if we use my example from AMAC, the organization went from a two paragraph description of its activities to a single sentence:12
13Leader to Leader Institute Mission StatementLeader to Leader Institute“Should fit on a t-shirt”To Strengthen theLeadership of theSocial Sector
14To promote the full participation of minority-owned, women-owned, Some require an XXL….To promote the full participationof minority-owned, women-owned,and disadvantagedbusiness enterprises(DBEs)in airport contractsand employmentopportunities.
15Your Mission Defines Your Purpose Why the organization exists.What the organization would like to be remembered for.Not prescriptive; not ‘How.’
16Inspires Powerful. Compelling. Motivating. Red Cross: To help the most vulnerable.
172. WHO IS OUR CUSTOMER? The FIVE Questions Discussion: Q: Why is the customer at the heart of Drucker’s Five Questions?Points might include:Who must be satisfied for the organization to achieve results?Results are measured outside the organization in the form of how the organization changes the life of the customer.But, who the customer is changes, as well as what the customer values.Q: In what ways are customers changing in today’s economic environment?Globalization is affecting who the customer is. Can anyone relate examples?Might refer to Author’s work “Customers at the bottom of the Pyramid.”Big change in banking industry, consumer credit, home loans, etc.Organizations must anticipate how the customer is changing in order to impact the customers life.Drucker says, “Change outside is an opportunity” for organizations to:Reach new performance standards.Achieve excellence.Innovate. Managing the Nonprofit Organization. P. 672. WHO IS OUR CUSTOMER?17
18The customer is the heart of the matter for Drucker. The Customer Is KeyThe customer is the heart of the matter for Drucker.
19Drucker on Customer“Who must be satisfied for the organization to achieve results?”“When you answer this question, you define your customer as one who values your service who wants what you offer, who feels it’s important to them.”Peter Drucker
20Customer DefinedCustomer: The one who must be satisfied for the organization to achieve results.Primary Customer: is the person whose life is changed through the organization’s work.Supporting Customers: individuals and groups who, in addition to the primary customer, must be satisfied for the organization to achieve results.So if I go back to my trade association model, the customer is the minority, woman or disadvantaged business owner. They are the primary customers. The airports and prime contractors that provide opportunity and support the organization through dues and sponsorships is a supporting customer. At the AMAC board meeting where this self assessment was conducted, the corporations were pleased to view themselves as “enablers”.
21Customers Change“Customers are never static. They will become more diverse. Their needs, wants, and aspirations will evolve.”- Peter DruckerYou might not catch innovations if you are not paying attention to this. External factors change everything. The economy? New diseases – pandemics, epidemics. The impact of societal and political change on individuals…21
22Customers Change (Cont’d) “There may be entirely new customers you must satisfy to achieve results—individuals who really need the service, want the service, but not in the way in which it is available today.”- Peter DruckerYou might not catch innovations if you are not paying attention to this.22
23There is no budget large enough to be all things to all people… According to marketing guru Seth Godin…Marketers rarely think about choosing customers... like a sailor on shore leave, we're not so picky. Huge mistake.Your customers define what you make, how you make it, where you sell it, what you charge, who you hire and even how you fund your organization. If your customer base changes over time but you fail to make changes in the rest of your organization, stress and failure will follow.
24Choose your customers wisely When you find great customers, they will eagerly co-create with you. They will engage and invent and spread the word.It takes vision and guts to turn someone down and focus on a different segment, on people who might be more difficult to sell at first, but will lead you where you want to go over time.Seth Godin
253. WHAT DOES THE CUSTOMER VALUE? The FIVE QuestionsOnce an organization has identified its customers, it is critical for it to understand what the customers value. Why?A DIRECT RELATIONSHIP EXISTS BETWEEN WHAT THE CUSTOMER VALUES AND RESULTS.Results must measure the impact the organization has on the life of the customer.Drucker said “You cannot arrive at the right definition of results without significant input from your customers.” Monograph, p. 3.Failure to recognize this point damages the organization leading to misallocation of resources and unsatisfied customers.Inside what the customer values lies the organization’s opportunities to profoundly impact lives.3. WHAT DOES THE CUSTOMER VALUE?25
26Drucker on Customer Value “You cannot arrive at the right definition of results without significant input from your customers.”- Peter DruckerStory about Virginia Tech International Business Program. What does the customer value?
27Value Defined Value: that which satisfies a customer’s: Needs (physical and psychological well-being).Wants (where, when, and how service is provided).Aspirations (desired long-term results).In the case of the students at Virginia Tech, their long term aspirations are to find meaningful work associated with their field of study. The assumption made by those of us on the committee, even before Tom Friedman wrote The World is Flat, was that the globalization of the business world would require changes to the curriculum and a concentration in global business. There was great resistance from the faculty. ….We went to the “customer” of our graduating business students, businesses in the State of Virginia and asked them what they valued in our graduates and what changes they would like to see.
28Kouzes on Value“Clearly customers value an organization that seeks their feedback and that is capable of solving their problems and meeting their needs.. . .”- James KouzesLeadership should go directly to the customer and ask them what is of value based on their perspective.28
29Kouzes onValue“But I would also venture to guess that customers value a leader and a team who have the ability to listen and the courage to challenge the ‘business-as-usual- environment.’”- James KouzesLeadership should go directly to the customer and ask them what is of value based on their perspective.29
30What Does Our Customer Value? So how do you find out what the customer values?Ask.
31Opportunities Mission CompetenceCommitmentWhat does the customer value? may be the most important question. Yet it is the one least often asked. People are so convinced they are doing the right things and so committed to their cause that they come to see the institution as an end in itself. But that’s a bureaucracy. Instead of asking, ‘Does it deliver value to our customers?’ they ask, ‘Does it fit our rules?’ And that not only inhibits performance but also destroys vision and dedication.”- Peter DruckerOnce you
32Methods for Understanding What Customers Value Collect/analyze customer information.Gather customer feedback (program evaluations).Conduct customer research:Pre-post program questionnaires.One-on-one interviews.On-line surveys.Focus groupsVirginia Tech survey of Virginia businesses:
33Has Your Customer Changed? How?Richer or poorerDownsized – upsizedOlderYoungerEducation levelAccess to Services -localNew Customers?GlobalRemote Access to Services
34What People WantThe same thing everyone else is having, but different.A menu where the prices aren't all the same.More attention than the person sitting next to them.A slightly lower price than anyone else.A new model, just moments before anyone else, but only if everyone else is really going to like it.A seat at a sold out movie.Access to the best customer service person in the shop, preferably the owner.Being treated better, but not too much better.Being noticed, but not too noticed.Being right.
35A Closing Word from Peter Drucker “We have to have discipline rooted in our mission. We have to manage our limited resources of people and money for maximum effectiveness. And we have to think through very clearly what results are for our organization .”- Peter Drucker
36Susan Phillips Bari Contact me: email@example.com (M)(O)Follow me on