Information For Wealth
Creation - Drucker
• “Enterprises are paid to create wealth not control
costs”
• The Effective Executive
• Wealth creation requires four types of
information:
–
–
–
–
Foundation Information
Productivity Information
Competence Information
Resource Allocation Information
Information For Wealth
Creation - Drucker
• Foundation Information:
– Cash Flow, liquidity projections, inventory levels,
account receivables
– When normal, don’t tell us much
– When abnormal they represent a problem that needs
fixing
Information For Wealth
Creation - Drucker
• Productivity Information:
– Deals with productivity of key resources
– Need data on total factor productivity eg
Benchmarking and Economic Value Added Analysis
(EVA)
Information For Wealth
Creation - Drucker
• Competence Information:
– Core competencies of a company
– Must keep track of orgs. and competitors’
performance – helps identify competencies. Drucker
on Competition
– Core competencies are different for each company,
but every org. should be competent in Innovation
CORE
Information For Wealth
Creation - Drucker
• Resource Allocation Information:
– Allocation of Scarce Resources: Capital and People
– Advice from Drucker: Make your back room someone
else's front room.
– Capital appropriations process: ROI, DPV, Cash Flow,
Payback – use all 4
– Need to ask what will happen if project
fails/succeeds and the repercussions
Information For Wealth
Creation - Drucker
• Resource Allocation Information:
– Performing people one of the scarcest resources
– Yesterday's Worker
– Human resources need to be allocated as
purposefully and thoughtfully as Capital
Information For Wealth
Creation - Drucker
• Where the Results are:
– The 4 kinds of information tell us about the current
business. They inform and direct tactics
– Decision Making is not desirable, it's just inevitable!
– Strategy needs info. about the environment
– “Inside the organisation there are only cost centres.
The only profit centre is a customer whose check hasn’t
bounced”
Information Executives Need for
Their Work - Drucker
• To produce the info they need, executives
have to ask:
– What info do I owe others?
– What info do I need from others?
– Drucker on Bosses
Information
Information Executives Need for
Their Work - Drucker
• They have to:
– Organise their information Drucker on Effective
Executive
– Have no surprises
– Go outside the org. for information
• Decisions and actions which affect pricing
• Decisions and actions which affect volume
• Decisions and actions which affect overhead
orstructural cost
• Decision and actions which affect product or
service cost
• Decisions and actions which affect asset
turnover (Ward Fredericks)