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)