Show Notes

Article critiqued in this episode:

Harvard Business Review – What We Can Learn from Japanese Management
By Peter F. Drucker (March 1971)

From this episode:

I have studied both kinds of theory. The difference for me is that Drucker’s method still lacks the inner perspective of an awareness of the worldview he is unconsciously deploying in his research. In the research world there is very little development, if any. There is the interpretation of knowledge and recommendations one makes from that.

In this episode:

This episode uses an old Harvard Business Review article by Peter Drucker, the Father (Godfather?) of Modern Management as “grist for our Second Opinion mill”. We rethink Drucker and created a more systemic look at management and decisions-making.

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Zac: Welcome back to Business Second Opinion Podcast. We’re always excited to bring you another episode.

Business Second Opinion Podcast digs deep to explore questions about business and business practice. In the process of examining them, we give you a second opinion, usually a contrarian opinion, but one that is well tested and proven to give the outcomes you really want without the side effects. And by the way, if you want to learn more about how to work more closely with us, stay tuned at the end of the show.

I am Zac Swartout, and always with me is Carol Sanford, our inhouse positive contrarian. Who responds to big and hard questions with a radically different take. 

Hey Carol

Carol: Hi Zac

We got a request for a Second Opinion listener, Alex Hutton,  a manager at Providence Health Care in Vancouver, British Columbia. It is on an article about Japanese Management lessons.  It was written in 1971 by the acclaimed Father of Modern Management, Peter Drucker. Maybe you will give us a bit of background on it

Zac: Yes, so this article, from our old standby Harvard Business Review, is titled “What We Can Learn from Japanese Management”  and we are only going to tackle the first section which is all about decision making. It was published as you said, in March of 1971. What Drucker attempts to shed light on is how the process of Japanese decision making, which seemed at the time so slow and plodding to Western eyes, actually was about a consensus-based system of deeper exploration of the question being posed before a decision even gets considered.

Carol: Drucker points immediately to the fact that Americans would not adopt the Japanese methods. This is mostly a research article reporting on what he sees between two approaches. Zac, what stands out to you in Drucker’s offerings? Give folks who did not have time to read it yet what is his point and the implications of it.

Zac: The whole point of what Drucker is trying to say here is that the Japanese management style at the time in 1971 seemed frustrating to Western business eyes. But actually he was trying to reveal that there was much to learn and instead they could be great teachers of making effective decisions. For example, Drucker points to the speed of the Western negotiation process versus Japanese. He talked about how during the negotiations for a licensing agreement, for example, the Japanese company will send delegation after delegation for a conversation and extensive note taking. During this phase, it can often lead to Western business leaders becoming frustrated with the length of the process. At this stage however, the Japanese business is actually gathering consensus from the “appropriate people” before the negotiations terms are finalized and the decision is made. By contrast, once the decision is made for a Japanese business, they are already in what Drucker calls the “action phase” and are ready to make it operational. Meanwhile, Western leaders are often left trying to gain consensus with the “appropriate people” after the terms have been set by management. This leaves the Japanese business leaders frustrated with the Western business leader’s slowness in operationalizing their decisions.

Carol: We might shorthand it as having a long assessing and quick deciding and implementing approach vs. short assessing and long deciding and implementing approach? Why does he see Americans not able to do the Japanese way or at least understand it? What do you think of his opinion?

Zac: From what I read, Drucker sees much of the Western style of management, or specifically American, being about executives making lots of small, quick decisions and longer implementation periods of having to “sell” those ideas to their workers. While at the time he saw many Western companies trying to approach a more Japanese style of deeper consideration, this process was ultimately siloed into task forces, long-range planning committees, and strategic groups that then brought back that information for management to decide. The issue as he saw it was the Japanese process “pre-sold” critical decisions through a longer process of up-front shared consideration through “consensus” versus Western managers having difficulty selling their decisions after the fact.

Carol: I noticed a couple of things about the piece

His tool gave us Management by Objects, Distributed Work and Knowledge Workers. His theories extend from Fredrick Taylor of machine theory with knowledge workers managing the rest of the workers. He was a proponent of direct work on behavior and lifelong acquisition of knowledge. At the exact same time starting in 1964, our early teams in P&G were working with a theory of management that departed from this. Drucker was working in academia, therefore studying and interpreting publishing about practices while we were working in industry as educators but with a different epistemology of learning. Not by research and publishing but by simultaneous learning and doing. And focused on developing people in inner processing and reflection rather than outer programs and behaviors

Zac: I have studied both kinds of theory. The difference for me is that Drucker’s method still lacks the inner perspective of an awareness of the worldview he is unconsciously deploying in his research. In the research world there is very little development, if any. There is the interpretation of knowledge and recommendations one makes from that. He is focused primarily on behavior change and how Western leaders can enact that. As opposed to our way of approaching business which is about the development of will, being, and function for the ongoing contribution towards the entities and systems within which we are intertwined. In Drucker’s case, he is still trying to recommend different methods for managers to externally determine worker behavior – which, as we’ve talked about at length here, gets us into all the same societal ruts we continually find ourselves in. As opposed to our worldview which sees each individual as unique and on a path towards greater and greater orders of contribution to the ongoing evolution of systems. 

Carol: We shared something with Drucker, which is the belief that thinking is the source of our successes and shortfalls. What is interesting is that Drucker never presented the idea that thinking and being had structure and could be developed. And that inner working of our being state could be developed in people. He tended to work more on the surface idea that thinking was changed by knowledge. More knowledge, better thinking. And was lifelong therefore.

Zac: But he mostly offered executives advice on how to structure work to get the most out of people. And gave managers the idea that they were the leaders of people and their job was to take care of them. It was a benevolent hierarchy and for ‘good’. I don’t remember any idea that he developed that discussed how all people can lead. You instead manage them as resources while taking care of them.

Carol: He was coming into his own, just as John Watson’s ideas were spreading. He was a behaviorist, using that for good. Did you see that in this article? Less about manipulating them, but still Any clues in the article? And what does that lead to in how organizations work?

Zac: Yea so I touched on this a little before but he talks a lot, through his Western eyes, about having to “sell” an idea. So the Japanese process “pre-sold” a change to their relevant management teams, while the Western process has to “sell” a decision after it’s made. In both of these cases, Drucker sees them as externally determining behavior, which he is recommending. This is still rooted in a Behaviorist, hierarchical mindset.  I think the modern instantiation of this we see today as OD practitioners now go the other way with trying to build consensus based processes by trying to get “all the voices in the room.” Unfortunately the decisions are still made hastily at the executive level, leading to low levels of adoption, too many fragmented initiatives, and burnout.

Carol: He frequently said that all institutions, including those in the private sector, have a responsibility to the whole of society. “The fact is,” Drucker wrote in his 1973 Management: Tasks, Responsibilities, Practices, “that in modern society there is no other leadership group but managers. If the managers of our major institutions, and especially of business, do not take responsibility for the common good, no one else can or will.”[25]  

Zac: I think he says it all right there really. If no other workers have leadership potential, how can they be considered as anything more than automatons?  What’s funny about this article is that Drucker offered the idea that “Culture eats strategy for lunch,” several years later than this article, but does not speak to culture here. He describes it all in behavioral terms, as in, how they ‘do’ decision making. Culture is not spoken to as a way of being but as a method for behavior change.

Carol: A contemporary of Drucker’s, Edward Hall looked at culture through a lens of three layers, he called the iceberg theory. One layer above water and two below. There are external and internal factors and things learned consciously and unconsciously forming culture. The external is often learned implicitly which Drucker reports on as behavior. This is what Drucker describes in his article. Hall would say what is missing is the part of the iceberg below water. 

Zac: You are referring to Beliefs that shape our behavior in Hall’s terms which are all implicitly learned. So if Halls is right, it seems the beliefs that differentiate these two cultures are – in the case of the Japanese business leaders – that the process for going about understanding the nature of the question is more important. While the Western style believes that arriving at a swift and decisive answer is most important.

Carol: And below that on the iceberg is thinking and values. Which Drucker does not speak to here, except that thinking is the source of problems. Critical thinking skills had yet to become a hot topic. Much less systems thinking and systems thinking based on how Living Systems thinking.

Zac: What seems important in Decision Making for Drucker is the ways in which it can be engineered. Anything else around that or where it’s sourced from is either disregarded or irrelevant.

Carol: My take on this report of how companies in the two cultures works, is that it can be understood more completely if there are three nested ways of examining different cultures and also better ways to cross over the two cultures. Envision Three rings; the outer ring, most influential one is Culture in terms of rituals, taboos, status and totems we have spoken about before. The next, slightly smaller ring in influence is Corporate Direction for each business he studied.

Zac: Right so you’re saying, the body of the whole has a shared understanding or where they are headed, or not. This shared understanding determines the way of behaving culturally. When there is not shared understanding then you end up having to sell decisions and ideas to people, like Drucker is saying.

Carol: And below that is shared framework for thinking and shared language for understanding meaning. In our school we work indirectly, what is under water in Hall’s model, not directly, behaviorally on what to do, e.g.  we don’t offer best practices, procedures. Models (which have answers on what everyone is to do). We develop framework thinking so that all in a group can follow the thinking process but develop their own answers. Foster better self-expression and innovation.  They have little trouble staying on the same process, aligning together, in the assessing, examining, exploring because the framework they explore through is explicit most often. After years together, it will become implicit eventually because they can read one another’s thinking pattern, allowing for the speed the Westerners crave, but the depth Asian cultures seek, simultaneously.

Zac: I think sharing an example might help people here. Do you have one for decision making to try to help tie all this together? We have a series of tetrads, which are four term frameworks, that organizational members or teams use to gain depth of understanding, build alignment as they go, and be whole and complete on their work. How about we approach it from that lens?

Carol: I like that idea. So, we have Seventh Generation negotiating with SC Johnson on merging or partnering. SC Johnson was wanting to acquire them but did not make that clear. For 7th Generation, they were using a tetrad that was like a diamond on its side, where the goal on the right was unclear and had to be discerned. They had to dig deeply into the corporate direction, to be a trusted voice for consumers on the working of sustainability in creating and using products . They realized in the conversation that they wanted to include the industry in that and they needed to start influencing other manufacturers. This led away from partnering on making a few products and co-branding for marketing to industry considerations. S. C Johnson was listening all the time for how to get them to sell themselves. Noticing they were not aligned by using the framework, on what decisions they were working on was core. All 7th Generation team members noticed this and was part of why they knew it was an industry concern they needed to take on, not a partnering question

Zac: And on the left side was the Ground of the decision. We call that “where is the highest potential place to start and launch the work for which the decision is needed”. I remember you saying that in dialogue with 7th Generation, they realized that for them it was about raising stewardship among other companies for educating people; and not about competing to sell more products. The conversation showed that competing was at cross purposes. Instead they ended up shifting the goal on 7th Generation’s part to proposing a shared campaign with Whole Foods to have all manufacturers educate consumers.

Carol: The top of the diamond had the Idea of overarching direction, for this decision, which was changing more consumers to deep green buyers, but also to get the attention of all household products manufacturers as working for the good of society as an industry and away from individual competing efforts. The leaders of the trip felt the pressure on them to sell 7th Generation which was not in alignment with the overall direction that was arising in the conversation. 7th Generation members had the shared framework and sharing languge about what words meant and could organize on the fly and evolve. Much like the Japanese. As they worked, the shifted understanding about what was the important question, purpose or decision and could never lose focus because the framework was shared and implicitly in mind

Zac: I know 7th Generation then reached out to Whole Foods and did a series of in-store demonstrations that included six non-toxic brands actually working together. That was the instrument on our framework. That was a shift since they went in thinking it was actually a partner contract. They had to manage the not so subtle overtures to sell themselves, while shifting the levels they were engaging because they were shifting in real time what their goal was based on their own corporate direction. That Whole Foods set of events put the intention of the industry as a whole on notice. They were able to bring thousands more buyers into the deeper green world because they trusted the industry more. All the while, they were meeting 7th Generation’s Corporate Direction-which they called “getting trustworthiness into buying decisions”.

Carol: So we add to Drucker’s ideas here how to have the best of both worldviews and draw from each culture. And to use Hall’s ideas, to make the decision process and unconscious beliefs conscious. It turns out that a combination of the processes is more effective to being better managers and caring about society.

Zac: But Carol the story doesn’t end there. What happened when S. C. Johnson attempted to bid to buy 7th Generation?

Carol: It was clear to 7th Generation leaders on the trip and in debrief that the culture at SC Johnson was not one they wanted to join. Their framework thinking allowed them to see the differences which to them were less whole or complete and too under the table. But it did lead to them thinking better about an exit strategy if it ever seemed right. And the conversations with other suitors followed the same framework, but made explicit so both parties could determine what the higher order goal might be for consumers to benefit and society. So when the time came, they had a great aligning process with Unilever, even with a series of bumps and spills with 7th Generation’s board, and Jeffrey Hollender was placed on the Unilever board to keep such clear processes explicit going forward. 

Zac: So summarizing a redo of Drucker’s work, using some later ideas, the influencers in decision making start explicitly with culture and consider how the decision-making and decisions are creating or reinforcing culture. All the while, the teams need to hold in mind, all members involved, and the Corporate Direction of the business. Finally, they need to use a shared framework and language to ensure the teams involved are thinking in the same way, not the same thoughts, but with guides they are using as a light for all the dark corners. It allows the decision-making to be fluid and evolve the possibilities as the conversation shifts and reorder,  while still staying on course toward understanding how it will play out in execution.

Carol: The best of both worlds. Thanks Alex for the article, and for joining our Change Agent Community for the Americas. Look forward to meeting you.


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Zac: This has been Business Second Opinion

Business Second Opinion Podcast digs deep to answer questions about business and business practice,  you may not know you need to ask. But we believe you should be asking for the benefit of your understanding and your businesses ethics and practice. In the process of answering them, we give you a second opinion, usually a contrarian opinion, but that is well tested and proven to give the outcomes you really want without the side effects. 

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