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What management guru Peter Drucker might have to say about executive scorecards at Citigroup

Citigroup CEO Michael Corbat wants to track the performance of the third-largest bank in the US and its individual executives using a scorecard system, according to Wall Street Journal reporting.

The weighted scorecards system will assess Citigroup’s top executives based on five categories: capital, clients, costs, culture and controls. Exactly how this is going to work is expected to be revealed later today. But the Journal says that Corbat’s idea is one in line with the thinking of the late management guru Peter Drucker. (The newspaper notes that New York City Mayor Michael Bloomberg shares this philosophy, though leaves unclear whether Corbat had Drucker specifically in mind with his scorecards. We reached out to Citi for comment, and will update when we hear back.)

The basic idea behind the cards is that for Corbat to best manage a humongous organization like Citigroup, he needs to set specific measurable objectives and then track execution against them. What sounds like a pretty straightforward concept was once a groundbreaking insight pioneered in the 1950s by Drucker.

In his 1954 manifesto, The Practice of Management, Drucker outlined the principle that the Citi scorecards appear to be rooted in. In the book, Drucker introduced the phrase “management by objectives,” which describes a manager sitting down with individual workers and setting goals and deadlines which workers are held accountable for. It’s for formalizing such modern theories about how to run a business that Businessweek’s John Byrne has described Drucker as being as fundamental to management as Keynes was to economics.

Whatever the inspiration, are Corbat’s scorecards actually in keeping with Drucker’s approach? Performance measurement and individual goals do appear consistent with Drucker’s management advice.

But in The Practice of Management, Drucker used a metaphor involving a stonecutter to provide an important caveat to his recommendation:

“A favorite story at management meetings is that of the three stonecutters who were asked what they were doing. The first replied: ‘I am making a living.’ The second kept on hammering while he said: ‘I am doing the best job of stonecutting in the entire county.’ The third one looked up with a visionary gleam in his eyes and said: ‘I am building a cathedral.’”

Drucker’s point was that the ideal manager is the worker building the cathedral, because he’s the one who can see the big picture. It highlights the challenge facing Corbat to identify the right end goals to measure employee performance against, and transmit them while using scorecards to measure more incremental progress.

That, as Drucker might agree, is one of the core jobs of the CEO.

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