Drucker to Leaders: Above All, Do No Harm
Drucker summarized what he expected from the leader with one of Hippocrates’s concepts: primum non nocere. This means "above all, do no harm."
Hippocrates was a Greek physician born in 460 BC. As Peter Drucker is known as "The Father of Modern Management," Hippocrates is known as the "The Father of Medicine." In the ancient western world Hippocrates was regarded as the greatest physician of his day. As Drucker looked at a business, Hippocrates looked at a patient and based his diagnoses on his observations. This was a breakthrough at the time. Hippocrates rejected the common views of his age that considered illness to be caused by evil spirits or the disfavor of the gods.
Hippocrates shared other commonalities with Drucker’s methods. Hippocrates believed that the body must be looked at as a whole, and not just individual parts analyzed, diagnosed and treated separately. He observed disease symptoms and consequently was the first to accurately describe and catalog indications of various illnesses. He developed the Oath of Medical Ethics, now known as the Hippocratic Oath, for physicians to follow as their ethical and moral code.
The Hippocratic Oath and Primum Non Nocere
The statement "above all do no harm" is not mentioned in The Hippocratic Oath, but a close approximation to the phrase can be found in Of the Epidemics, also written by Hippocrates. Hippocrates was cautioning that the physician must consider the possible harm that any intervention might cause. Drucker expands this to mean that the leader must consider the possible harm that any act might cause the mission, the organization, its members, or society and he considers this to be the ultimate guide for the leader in ethical conduct in business. Although a simple reading of Drucker’s advice may give the impression that following it is easy, this is not so. Not infrequently, the well-intentioned acts of leaders can do precisely what Hippocrates and Drucker cautioned against. And the harm done can be much greater than the good originally sought. So while seemingly a simple rule to follow, like other simple rules, it is not always easy to implement.
Ensuring Primum Non Nocere
There are several ways that leaders can, with the best of intentions, cause harm to the organizations or others and thus fall into this ethical trap. Most start with the intention to make some situation better. In many cases, the focus of the leader or leaders is so much on the one good intention that the system as a whole is ignored. Drucker taught that good intentions were of themselves not socially responsible. It is common, and serious, for organizations to take actions with the intent of improving a condition, frequently a social condition, only to result in tremendous and unintended negative impacts—all due to ignoring this basic injunction of doing no harm.
Pollution from motor vehicles has received a lot of attention over the last 30 years. Despite this, you will probably see some quiet modification of the strict policies in coming years despite the outcry in some quarters for even more strict controls. To eliminate, or at least reduce pollution, individual states and the U.S. government have passed laws limiting the automobile emissions allowed on American roadways. Even the Sierra Club, perhaps the most vocal environmental advocate in the United States, admits that today’s American automobiles emit 90 percent less pollution than those cars manufactured in the 1960’s. Yet today, we have more pollution in American air from automobiles than ever before, though U.S, standards are higher than those of most foreign countries.
The Sierra Club states that the reason for these results is that technological improvements to reduce emissions have mostly been offset by the increases in number of cars on the road, the number of inefficient light trucks and sport utility vehicles in use, and the number of miles driven each day. This is true. However, this explanation ignores another important element in the system. The use of pollution emission reduction devices on automobiles has a negative impact on fuel economy. So even if a car drives the same number of miles, it burns additional fuel in order to do so. Therefore, for a given number of miles, more fuel must be produced.
This requires more oil to be refined into gasoline for this car to drive the same number of miles. Oil refining is a far greater potential source of pollution than automobiles. With more refining accomplished to drive the same number of miles, more pollution will result, unless refining pollution is also reduced. It’s all part of the body or system.
The Great Housing Depression
The roots of our mortgage problems and our current financial crisis go back to the mid-1990’s and the very good and noble intention of making ownership of homes open to all Americans. To enable this, laws were passed and the government, in the name of this good intention, which encouraged the mortgage industry to lower lending standards. As a part of this effort, The U.S. Department of Housing and Urban Development (HUD) formulated policies which fueled the trends toward issuing increasingly risky loans and directed Government Sponsored Enterprises that at least 42 percent of the mortgages they purchased should have been issued to borrowers whose household income was below the median in their area.
Meanwhile, the economy and housing prices continued to expand. Laws were further loosened which permitted and even encouraged borrowers to borrow for not so much as what they could afford, but how much they could borrow. These practices also encouraged investors to borrow and whenever and wherever possible to purchase in order to make money in a market that appeared to be a certainty for profits. In nine years, sub prime loans rose by 1000 percent. Greed was not discouraged. It was encouraged.
It was always assumed that a bank cares about whether the loans it makes are repaid, and that therefore it would carefully screen the potential borrowers. In the 1970s and 1980s and previously, this was in fact the case. The bank that originated a mortgage usually held it long term and derived income from interest and from repayment of the principal. So banks would allow only those mortgages that were likely to be repaid, otherwise they lost money. However, once the focus was changed to loaning to those less likely to be able to repay the loan, various financial innovations were permitted to not only enable, but encourage banks, to make these loans. For example with sub prime mortgages, the mortgage could be broken into component parts so that the principal could be separated from the interest, and then the components packaged into securities by common characteristics such as maturity or perceived risk that could be sold separately in financial markets.
These various plans caused a number of results which should have been foreseen as potentially harmful, but were not. High yields in a time of low interest rates were very attractive to Wall Street and these mortgage-backed securities developed quickly into a large market. Nothing wrong with that except that many banks and specialized mortgage companies no longer held the mortgages they originated. The main source of revenue for the bank was the origination fee, not the repayment of mortgage principal or interest as had been true in the past. As a result, they were no longer concerned about repayment, but rather to make as many of these loans possible under the much more lenient lending laws.
So these very good intentions created a toxic mix of incentives which sooner or later would lead to real harm when "the bubble burst." And if one interjects human greed which unfortunately, but frequently, clouds judgment when "everybody’s doing it," a major disaster was inevitable. On one side borrowers were encouraged to borrow and to purchase far more than they could afford. It seemed that they would forever make money on these deals as housing prices rose higher and higher. The lenders were encouraged to approve as many mortgages as possible since the market was so heated that they would be able to sell the mortgages in these packages before any repayment problems arose, even those of clearly risky borrowers. Increasingly less regulated and easy financial controls made it easy for borrowers, lenders and financial investment institutions to profit—at least on paper—until everything came crashing down when the bubble burst. But remember, this all started with a very good intention: to enable more Americans to own their own homes.
Applying Drucker’s Thoughts on Primum Non Nocere
1. Good intentions don’t count for anything
2. Beware of unintentional results and analyze bad things that could happen. Like, the BP disaster in the Gulf, they probably will.
3. Look before you leap, especially with new concepts and untested ideas.
Adapted from Drucker on Leadership (Jossey-Bass, 2010)