Devoted to Managers and those that seek to improve their management skills

"The [true] decision-maker is outside rather than inside the business."

This is of course referring to the customers we serve - whether a consumer or business customer.

In the current business and economic climate we're in, I think Drucker's words are important to heed, because at times like these it's even more tempting for business leaders to look within their business rather than without. That can end up creating a self-fulfilling prophecy of lost business and sales because we can lose the focus on the reason we're in business: the customers we serve.

The reason this happens is because when things get slow, the initial reaction is to think in terms of cutting costs and running lean.

There's nothing wrong with that, but it can lead to allowing ourselves to be put in a box we're not aware we're in, and end up being part of the problem, rather than a solution.

One thing I like about Herb Kelleher when he ran Southwest Airlines (LUV), is he knew how to manage human resources in the sense of hiring, so he wouldn't have internal problems when slower times arrived, which they always do.

So when extra business was attained by the company, he allowed his existing people to handle it, without hiring new people that may only be around because of a temporary increase in business. As a result, when business declined in a cyclical way, he didn't have to overly obsess with what to do as far as cost cuts, because he managed the number of his employees in a way that basically kept the company running a peak performance without the need to lay others off.

What that means is he stayed focused on what was out there, rather than what was inside the company.

In these times, we need to continually focus on those that make us successful as a business: those outside it. To do that, we need to simply understand that the decisions that make us a success are truly made by those outside the business, and not those inside.

If we forget that, it may not be long before we may be looking at all the wrong things to keep things going forward successfully.

To me, how this can be avoided is to run our business in a way that it can successfully navigate fast and slow times. Most of that is related to managing our hiring practices, and giving our people the opportunity to serve in those times, rather than hiring those we know we'll probably eventually have to lay off.

When considering the costs of training and the psychological impact on our people, this makes much more sense than scrambling and letting good people go we have a lot invested in.

This is why we always hear about the layoffs when slow times come. Management has hired far to many people in response to temporary business windfalls that come their way. When business or outward economic climate slows down, those people are the first casualities of the slowing situation.

So what it comes down to are two things: Should we even take the business, and can our existing people handle it if it's a temporary surge that will last over a relatively short time.

Or if we take the business, will the process of hiring new people to handle it result in long term profits for the company and employment for the people.

The costs of taking on new business could make the deal not worth it if the surety of long term possibilities don't exist.

Other Peter Drucker Resources:

Peter Drucker

Quotes from Peter Drucker

Leader to Leader

Peter Drucker Archives

Peter Drucker On Leadership

The Man Who Invented Management

Beyond the Information Revolution

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