Peter Drucker's mantras for success

# Efficiency is doing better what is already being done.

# The productivity of work is not the responsibility of the worker but of the manager.

# Follow effective action with quiet reflection. From the quiet reflection will come even more effective action.

# No institution can possibly survive if it needs geniuses or supermen to manage it. It must be organised in such a way as to be able to get along under a leadership composed of average human beings.

# The most important thing in communication is to hear what isn't being said.

# Rank does not confer privilege or give power. It imposes responsibility.

# Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes.

# All one has to do is to learn to say 'no' if an activity contributes nothing.

# What is the first duty -- and the continuing responsibility -- of the business manager? To strive for the best possible economic results from the resources currently employed or available.

# People do not know that you cannot successfully innovate in an existing organisation unless you systematically abandon. As long as you eliminate, you'll eat again. But if you stop eliminating, you don't last long.

# Leaders shouldn't attach moral significance to their ideas: Do that, and you can't compromise.

# The only things that evolve by themselves in an organisation are disorder, friction, and malperformance.

# One cannot buy, rent or hire more time. The supply of time is totally inelastic. No matter how high the demand, the supply will not go up. There is no price for it. Time is totally perishable and cannot be stored. Yesterday's time is gone forever, and will never come back. Time is always in short supply. There is no substitute for time. Everything requires time. All work takes place in, and uses up time. Yet most people take for granted this unique, irreplaceable and necessary resource.

# The really important things are said over cocktails and are never done.

# Doing the right thing is more important than doing the thing right.

# Concentration is the key to economic results. No other principles of effectiveness is violated as constantly today as the basic principle of concentration.

# Long range planning does not deal with future decisions, but with the future of present decisions.

# Leadership is not magnetic personality -- that can just as well be a glib tongue. It is not 'making friends and influencing people' -- that is flattery. Leadership is lifting a person's vision to high sights, the raising of a person's performance to a higher standard, the building of a personality beyond its normal limitations.

# What gets measured, gets managed.

# No decision has been made unless carrying it out in specific steps has become someone's work assignment and responsibility.

# Whenever you see a successful business, someone once made a courageous decision.

# Meetings are a symptom of bad organisation. The fewer meetings the better.

# The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.

# Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you've got.

# Objectives are not fate; they are direction. 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.

# Any organisation develops people: It has no choice. It either helps them grow or stunts them.

# Don't take on things you don't believe in and that you yourself are not good at. Learn to say no.

# If you can't establish clear career priorities by yourself, use friends and business acquaintances as a sounding board. They will want to help. Ask them to help you determine your 'first things' and 'second things.' Or seek an outside coach or advisor to help you focus. Because if you don't know what your 'first things' are, you simply can't do them FIRST.

# Teaching is the only major occupation of man for which we have not yet developed tools that make an average person capable of competence and performance. In teaching we rely on the naturals', the ones who somehow know how to teach.

# Don't travel too much. Organise your travel. It is important that you see people and that you are seen by people maybe once or twice a year. Otherwise, don't travel. Make them come to see you.

# The leaders who work most effectively, it seems to me, never say 'I'. And that's not because they have trained themselves not to say 'I'. They don't think 'I'. They think 'we'; they think 'team'. They understand their job to be to make the team function. They accept responsibility and don't sidestep it, but 'we' gets the credit... This is what creates trust, what enables you to get the task done.

# Too many leaders try to do a little bit of 25 things and get nothing done. They are very popular because they always say yes. But they get nothing done.

# Efficiency is doing things right; effectiveness is doing the right things.

# The purpose of business is to create and keep a customer.

# Again, let's start out discussing what not to do. Don't try to be somebody else. By now you have your style. This is how you get things done.

# Leaders communicate in the sense that people around them know what they are trying to do. They are purpose driven -- yes, mission driven. They know how to establish a mission.

# I tell all my clients that it is absolutely imperative that they spend a few weeks each year outside their own business and actively working in the marketplace, or in a university lab in the case of technical people. The best way is for the chief executive officer to take the place of a salesman twice a year for two weeks.

# Few top executives can even imagine the hatred, contempt and fury that has been created -- not primarily among blue-collar workers who never had an exalted opinion of the 'bosses' -- but among their middle management and professional people.

# When you are the chief executive, you're the prisoner of your organisation. The moment you're in the office, everybody comes to you and wants something, and it is useless to lock the door. They'll break in. So, you have to get outside the office. But still, that isn't travelling. That's being at home or having a secret office elsewhere. When you're alone, in your secret office, ask the question, 'What needs to be done?' Develop your priorities and don't have more than two. I don't know anybody who can do three things at the same time and do them well. Do one task at a time or two tasks at a time. That's it. OK, two works better for most. Most people need the change of pace. But, when you are finished with two jobs or reach the point where it's futile, make the list again. Don't go back to priority three. At that point, it's obsolete.

# We suffer from over-choice: 67 varieties of toothpaste, 487 styles of shoes, 186 brands of cell phones with 137 telephone companies. We demand more variety than we could possibly need or want; and as a result, we get lost in options, opportunities, and choices. There are 87 varieties of lawyers, and 75 specialties inside medicine. The world of work can be a confusing landscape.

# That people even in well paid jobs choose ever earlier retirement is a severe indictment of our organisations -- not just business, but government service, the universities. These people don't find their jobs interesting.

# A critical question for leaders is: 'When do you stop pouring resources into things that have achieved their purpose?'

# Morale in an organisation does not mean that 'people get along together'; the test is performance not conformance.

# An employer has no business with a man's personality. Employment is a specific contract calling for a specific performance... Any attempt to go beyond that is usurpation. It is immoral as well as an illegal intrusion of privacy. It is abuse of power. An employee owes no 'loyalty,' he owes no 'love' and no 'attitudes' -- he owes performance and nothing else.

# Ideas are somewhat like babies -- they are born small, immature, and shapeless. They are promise rather than fulfillment. In the innovative company, executives do not say, 'This is a damn-fool idea.' Instead they ask, 'What would be needed to make this embryonic, half-baked, foolish idea into something that makes sense, that is an opportunity for us?'

# Innovation is the specific instrument of entrepreneurship... the act that endows resources with a new capacity to create wealth.

# Once a year ask the boss, 'What do I or my people do that helps you to do your job?' and 'What do I or my people do that hampers you?'

# Great leaders find out whether they picked the truly important things to do. I've seen a great many people who are exceedingly good at execution, but exceedingly poor at picking the important things. They are magnificent at getting the unimportant things done. They have an impressive record of achievement on trivial matters.

# How does one display integrity? 'By asking, especially when taking on office: What is the foremost need of the institution and therefore my first task and duty?'

# Ask yourself: What major change in the economy, market or knowledge would enable our company to conduct business the way we really would like to do it, the way we would really obtain economic results?

# Ask yourself: What would happen if this were not done at all?

# So much of what we call management consists in making it difficult for people to work.

# The subordinate's job is not to reform or re-educate the boss, not to make him conform to what the business schools or the management book say bosses should be like. It is to enable a particular boss to perform as a unique individual.

# Effective leaders check their performance. They write down, �What do I hope to achieve if I take on this assignment?' They put away their goals for six months and then come back and check their performance against goals. This way, they find out what they do well and what they do poorly.

# The individual is the central, rarest, most precious capital resource of our society.

# The most efficient way to produce anything is to bring together under one management as many as possible of the activities needed to turn out the product.

# The computer is a moron.

# Successful leaders make sure that they succeed! They are not afraid of strength in others.

# The CEO needs to ask of his associates, 'What are you focusing on?' Ask your associates, 'You put this on top of your priority list -- why?' The reason may be the right one, but it may also be that this associate of yours is a salesman who persuades you that his priorities are correct when they are not.

# Free enterprise cannot be justified as being good for business. It can be justified only as being good for society.

# Executives owe it to the organisation and to their fellow workers not to tolerate nonperforming individuals in important jobs.

# A manager is responsible for the application and performance of knowledge.

# Accept the fact that we have to treat almost anybody as a volunteer.

# Business, that's easily defined -- it's other people's money.

# Few companies that installed computers to reduce the employment of clerks have realised their expectations... They now need more and more expensive clerks even though they call them 'operators' or 'programmers.'

# What's absolutely unforgivable is the financial benefit top management people get for laying off people. There is no excuse for it. No justification. This is morally and socially unforgivable, and we will pay a heavy price for it.

# Management is doing things right; leadership is doing the right things.

# A man should never be appointed into a managerial position if his vision focuses on people's weaknesses rather than on their strengths.

# Start with what is right rather than what is acceptable.

# Performing organisations enjoy what they're doing.

What is subprime crisis? How it caused financial mayhem?

The current upheaval in the global financial markets has caused more mayhem in a fortnight than the world has seen in its entire economic history.

Although there are many reasons responsible for bringing the world to the doorstep of financial doom, the main cause of this financial disaster is said to be the �sub-prime loan.'

So what is this sub-prime loan? And why has it caused global panic? If it is related to the American housing sector, why should it affect Indian and other markets?

A sub-prime loan

Sub-prime mortgage loans (or housing loans or junk loans) are very risky. But since profits are high where the risk is high, a lot of lenders get into this business to try and make a quick buck.

Sub-prime loans are dicey as they are given to people with unstable incomes or low creditworthiness. These individuals are not financially sound enough to be given a loan when judged under the strict standards that should normally be followed by a bank or lending institution.

However, there's more to it. Let us simplify this issue to understand better how sub-prime loans work and how they brought the world down to its knees.


It all begins with an American wanting to live the famed American dream.

So he seeks a housing loan to give shape to his dream home. But there is a slight problem. He doesn't have good credit rating. This means that he is unable to clear all the stringent conditions that a bank imposes on an individual before it sanctions a loan.

Since his credit is not good enough, no bank will give him a home loan as there is a fear that the chances of a default by him are high. Banks don't like customers who default on their payments.

But lo!, before the American dream can fade away, there enters a second American -- usually a robust financial institution -- who has good credit rating and is willing to take on some amount of risk.

Given his good credit rating, the bank is willing to give the second American a loan. The bank gives the loan at a certain rate of interest.

The second American then divides this loan into a lot of small portions and gives them out as home loans to lots of other Americans -- like the first American -- who do not have a great credit rating and to whom the bank would not have given a home loan in the first place.

The second American gives out these loans at a rate of interest that is much higher rate than the rate at which he borrowed money from the bank. This higher rate is referred to as the sub-prime rate and this home loan market is referred to as the sub-prime home loan market.


Also by giving out a home loan to lots of individuals, the second American is trying to hedge his bets. He feels that even if a few of his borrowers default, his overall position would not be affected much, and he will end up making a neat profit.

Now if this home loan market is sub-prime, what is prime? The prime home loan market refers to individuals who have good credit ratings and to whom the banks lend directly.

Now let's get back to the sub-prime market. The institution giving out loans in the sub-prime market does not stop here. It does not wait for the principal and the interest on the sub-prime home loans to be repaid, so that it can repay its loan to the bank (the prime lender), which has given it the loan.


So what does the institution do?

It goes ahead and 'securitises' these loans. Securitisation means converting these home loans into financial securities, which promise to pay a certain rate of interest. These financial securities are then sold to big institutional investors.

Many investment banks (or institutions like the 'second American' in our story) sold complicated securities that were backed by debt which was very risky.

And how are these investors repaid? The interest and the principal that is repaid by the sub-prime borrowers through equated monthly installments (EMIs) is passed onto these institutional investors.


The institution giving out the sub-prime loans takes the money that it gets by selling the financial securities and passes it on to the bank he had taken the loan from, thereby repaying the loan. And everybody lives happily ever after. Or so it would have seemed.

The sub-prime home loans were given out as floating rate home loans. A floating rate home loan as the name suggests is not fixed. As interest rates go up, the interest rate on floating rate home loans also go up. As interest rates to be paid on floating rate home loans go up, the EMIs that need to be paid to service these loans go up as well.


With US interest rising, the EMIs too increased. Higher EMIs hit the sub-prime borrowers hard. A lot of them in the first place had unstable incomes and poor credit rating.

They, thus, defaulted. Once more and more sub-prime borrowers started defaulting, payments to the institutional investors who had bought the financial securities stopped, leading to huge losses.

The problem primarily began with the United States keeping its interest rates very low for a very long time, thus encouraging Americans to go in for housing loans, or mortgages. Lower interest rates led to buyers wanting to take on bigger loans, and thus bigger and better homes.


But life was fine. With the American economy doing well at that time and housing prices soaring on the back of huge demand for real estate and bigger and better homes, financial institutions saw a mouthwatering opportunity in the mortgage market.

In their zeal to make a quick buck, these institutions relaxed the strict regulatory procedures before extending housing loans to people with unstable jobs and weak credit standing.

Few controls were put in place to handle the situation in case the housing 'bubble' burst. And when the US economy began to slow down, the house of cards began to fall.

The crisis began with the bursting of the United States housing bubble.


A slowing US economy, high interest rates, unrealistic real estate prices, high inflation and rising oil tags together led to a fall in stock markets, growth stagnation, job losses, lack of consumer spending, a virtual halt to new jobs, and foreclosures and defaults.

Sub-prime homeowners began to default as they could no longer afford to pay their EMIs. A deluge of such defaults inundated these institutions and banks, wiping out their net worth. Their mortgage-backed securities were almost worthless as real estate prices crashed.

The moment it was found out that these institutions had failed to manage the risk, panic spread. Investors realised that they could hardly put any value on the securities that these institutions were selling. This caused many a Wall Street pillar to crumble.


As defaults kept rising, these institutions could not service their loans that they had taken from banks. So they turned to other financial firms to help them out, but after a while these firms too stopped extending credit realizing that the collateral backing this credit would soon lose value in the falling real estate market.

Now burdened with tons of debt and no money to pay it back, the back of these financial entities broke, leading to the current meltdown.



The problem worsened because institutions giving out sub-prime home loans could easily securitise it. Once an institution securitises a loan, it does not remain on the books of the institution.

Hence that institution does not take the risk of the loan going bad. The risk is passed onto the investors who buy the financial securities issued for securitising the home loan.

Another advantage of securitisation, which has now become a disadvantage, is that money keeps coming in.

Once an institution securitises the first lot of home loans and repays the bank it has borrowed from, it can borrow again to give out loans. The bank having been repaid and made its money does not have any inhibitions in lending out money again.


Given the fact that institutions giving out the loan did not take the risk, their incentive was in just giving out the loan. Whether the individual taking the home loan had the capacity to repay the loan or not, wasn't their problem.

Thus proper due diligence to give out the home loan was not done and loans were extended to individuals who are more likely to default.

Other than this, greater the amount of loan that the institution gave out, greater was the amount it could securitise and, hence, greater the amount of money it could earn.

After borrowers started defaulting, it came to light that institutions giving out loans in the sub-prime market had been inflating the incomes of borrowers, so that they could give out greater amount of home loans.

By giving out greater amounts of home loan, they were able to securitise more, issue more financial securities and earn more money. Quite a vicious cycle, eh?



And so the story continued, till the day borrowers stop repaying. Investors who bought the financial securities could be serviced.

Well, that still does not explain, why stock markets in India, fell? Here's why. . .

Institutional investors who had invested in securitised paper from the sub-prime home loan market in the US, saw their investments turning into losses. Most big investors have a certain fixed proportion of their total investments invested in various parts of the world. So...


Once investments in the US turned bad, more money had to be invested in the US, to maintain that fixed proportion.

In order to invest more money in the US, money had to come in from somewhere. To make up their losses in the sub-prime market in the United States, they went out to sell their investments in emerging markets like India where their investments have been doing well.

So these big institutional investors, to make good of their losses in the sub-prime market, began to sell their investments in India and other markets around the world. Since the amount of selling in the market is much higher than the amount of buying, the Sensex began to tumble.

The flight of capital from the Indian markets also led to a fall in the value of the rupee against the US dollar.


Any other reason, apart from sub-prime crisis?

Of course! Sub-prime crisis alone could not have caused such mayhem, although it is to blame for the beginning of the end.

This crisis is spreading from sub-prime to prime mortgages, home equity loans, to commercial real estate, to unsecured consumer credit (credit cards, student loans, auto loans), to leveraged loans that financed reckless debt-laden leveraged buy outs, to municipal bonds, to industrial and commercial loans, to corporate bonds, to the derivative markets whose risk are indeterminate, etc.

It has been a total systemic failure that has its roots in the US real estate and the sub-prime loan market.

Note: Some analysts say that the worst might not be over. . .

WHY EMPLOYEES LEAVE ORGANISATIONS ? - By Azim Premji

Every company faces the problem of people leaving the company for better pay or profile.

Early this year, Mark, a senior software designer, got an offer from a prestigious international firm to work in its India operations developing specialized software. He was thrilled by the offer.

He had heard a lot about the CEO. The salary was great. The company had all the right systems in place employee-friendly human resources (HR) policies, a spanking new office,and the very best technology,even a canteen that served superb food.

Twice Mark was sent abroad for training. "My learning curve is the sharpest it's ever been," he said soon after he joined.

Last week, less than eight months after he joined, Mark walked out of the job.

Why did this talented employee leave ?

Arun quit for the same reason that drives many good people away.

The answer lies in one of the largest studies undertaken by the Gallup Organization. The study surveyed over a million employees and 80,000 managers and was published in a book called "First Break All The Rules". It came up with this surprising finding:

If you're losing good people, look to their immediate boss ..Immediate boss is the reason people stay and thrive in an organization. And he 's the reason why people leave. When people leave they take knowledge,experience and contacts with them, straight to the competition.

"People leave managers not companies," write the authors Marcus Buckingham and Curt Coffman.

Mostly manager drives people away?

HR experts say that of all the abuses, employees find humiliation the most intolerable. The first time, an employee may not leave,but a thought has been planted. The second time, that thought gets strengthened. The third time, he looks for another job.

When people cannot retort openly in anger, they do so by passive aggression. By digging their heels in and slowing down. By doing only what they are told to do and no more. By omitting to give the boss crucial information. Dev says: "If you work for a jerk, you basically want to get him into trouble. You don 't have your heart and soul in the job."

Different managers can stress out employees in different ways - by being too controlling, too suspicious,too pushy, too critical, but they forget that workers are not fixed assets, they are free agents. When this goes on too long, an employee will quit - often over a trivial issue.

Talented men leave. Dead wood doesn't.