Tuesday, August 30, 2011

Inside Drucker's Brain

Inside Drucker's Brain
by Jeffrey Krammes


Peter Drucker is said to have created modern management science. This is a heavy statement given many academics before him were working on management. His achievement was his ability to built on the theories of others like Adam Smith, Frederick Taylor and he turned management studies into a coherent science. This book, unlikely other biographies, does not give a detailed account of Drucker's life. The materials in the book are the record of an interview with Drucker when he was over 90. It is a recapitulation of the theories and thoughts of Drucker and is an useful overview and reference.

Managers know very well the concepts put forward by Drucker. Management by objectives, vision and mission, partnership and leadership are all in the present management text books in use. While it is a good revision of these management topics, there are a few more points in the book which have caught my mind.

The first is a brief account of the evolution of corporations. Companies started small and were managed by royalties, aristocrats, and rich families. Before the 20th centuries, there were usually only two layers in a company: the top management of family members and then a large group of skilled and unskilled labour. Middle management was non-existent. At the beginning of the 20th century, Du Pont grew so big that some middle managers were required. Numbers were limited because the demand was small and the supply of talents was short.

The coming of age of the middle management exploded after the second world war when the economy took up pace. In particular, the cause could be attributed to the GI Bill of Rights passed in 1944. The US Government would pay for college and offer business loans to all returning servicemen. An enormous number of people who would never have thought of going to college went to college. By the time the bill ended in 1956, 7.8 million World War II veterans had attained college education. This enormous amount of knowledge workers created the scene of ample supply of talents which fueled the rapid deployment of middle management in all corporations.

The other point is the interest of Drucker on non-profit organizations. This is a problematic area where management is generally poor. Drucker worked extensively with many non-profit organizations like hospitals, churches, etc. I think this is a warning to their administrators, especially the volunteers. He pointed out many did not realize that the competitive environment of non-profit organizations was more severe than the competition for goods. Non-profit organizations usually have impractical and non-actionable mission statement. They are not measured by profit as a good indicator, and thus they do not have a bottom line. The wrong perception is that as long as they can get charitable donation then business can go on. Many do not have good strategy and continue to engage resources to areas where there is no good results.

Drucker had a vision on information technology. He foresaw a fourth information revolution where the use of IT would shift from the use of technology to the provision of information. This is particular true for managers whose main concern is not only the use of IT on production and service delivery, but actionable information, especially of the outside, to facilitate strategy formulation. Mangers will request from the IT department and the finance department not just piles of statistical reports, but answers and reasons on strategic questions. The fourth information revolution will not be the advancement of technology, but a change of concept on the use of information.

Thursday, August 11, 2011

The HKEx incident reminder

Horror, horror.  HKEx's computer system was hacked.  You may think that such security incidents occur everyday and they may not necessarily affect us.  But this particular case has some far-reaching consequences.  First, trading of some stocks was suspended leading to unspecified loss to some.  Second, the possibility of an infrastructure computer system being hacked is a reminder of our fragile world.  Some analysts said that HKEx was to be blamed for first, unnecessarily suspending trading, and second, being unable to put the security of the systems in order.  But that is besides the point.  Management decisions are frequently wrong, and computer systems cannot be 100% protected.

We now extremely rely on the computer systems and the Internet in particular in our daily life.  I try to count how much I rely on them and find a lot.  I no longer buy newspapers but read news online and on TV.  I have very little cash in the pocket because goods and services are mostly paid by credit cards and the Octopus.  I do not have bank statements which are now in digital form to be downloaded.  I do not have bills because all are paperless and are paid by direct bank transfer.  The best use of cash is to pay taxi fare, but I heard Octopus readers are now installed in some taxis.  I discussed with some friends who have computer-phobia and they said they bought newspapers, held bank books and received bank statements, got their bills by post and sent their cheques also by post.  I told them that they still could not escape the demise of computer failure because all these providers are using computers.  When the systems fail, there will be no newspaper, statements or bills, or for that matter, no service at all.

We can only survive in a city with infrastructure working properly.  A short disruption of the MTR would create chaos, similarly for electricity and water and many trivial but essential services.  The Internet is another vulnerability.  Any disruption, like the earthquake in Taiwan a few years back, will stop the world built on the Internet.  Even a slow down is a very serious matter.  But I am not as pessimistic as many people with paranoid.  I think the very large systems are organic and they normally have the power of healing themselves.  Of course we could not rule out the black swan which might completely wipe out human beings on earth.  But we could only prepare ourselves for incidents which could be prevented or salvaged.

For us, the Internet can only be left on its own, and computer hardware can be replaced.  But our data are invaluable.  If lost, all that left are those we could barely remember.  So my first concern is to preserve the personal data I collected over the years.  In the past, I stored them on floppy disks, which deteriorated in just a few years.  Then I put them on the so-called everlasting CD.  It turns out although the data bits may be everlasting, the disks are not.  They could be scratched, stained and then unreadable.  Then come the memory cards which are convenient.  But they can still be destroyed by static electricity.  The more reliable media are the hard disks.  They can still fail but at least they are more robust.  I back up all my data in two separate hard disks.  In addition, I also store the most essential data in two more smaller hard disks.  The up-to-date trend of storage is in the cloud because security and encryption have improved.  So I also store the most essential data in the cloud, and in two separate locations.   Now comes the problem.  How can I keep all six backup copies up-to-date?  The truth is that I cannot.  Some are just backed up monthly and so they are actually always some weeks out of date.  Luckily one cloud service is automatic and it backs up my data once every night.  However, my experience is still scary.  Last month when I urgently needed to recover the essential data, the cloud server was out-of-service and I had to wait for 24 hours to get it done.

We live in a world of uncertainty.  Praying may only give you consolation.  Just accept it as a way of life.

Disruption of HKExnews Website Services    HKEx News Release   10/08/2011

Hong Kong Exchanges and Clearing Limited (HKEx) announced today (Wednesday) that HKExnews website services are being interrupted due to technical problems. Contingency measures have been invoked until further notice to provide for the continued dissemination of issuers’ regulatory news.  HKEx’s other systems are not affected and trading in its securities and derivatives markets continues to operate normally.  HKEx is now investigating the problem and the HKExnews website services will resume as soon as the technical problem is resolved.

As a result of the website service disruption, issuer documents submitted to HKEx for publication on the HKExnews website (www.hkexnews.hk) and the Growth Enterprise Market website (www.hkgem.com) may not be published on the HKExnews website. 

HKEx has adopted a half day (i.e. one trading session) suspension policy for issuers which announce price sensitive information during the lunch publication window today.  This trading suspension policy aims to give all investors sufficient time to understand the contingency arrangements and locate issuers’ announcements on their websites.   Trading in an issuer’s shares will also be suspended if price sensitive information announcements are not timely posted on an issuer’s website and/or the headlines and document titles are not timely posted on the Bulletin Board.