Learning from Peter Drucker and the Girl Scouts by Colleen Leahey @FortuneMagazine November 9, 2011, 10:11 AM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons Frances Hesselbein has headed Peter Drucker’s Leader to Leader Institute for 21 years. Before that, she turned around the Girl Scouts of the USA. Now she shares her lessons in leadership. FORTUNE — Frances Hesselbein received a call to head Girl Scout Troop 17 in Johnstown, Pa., in her early twenties. Married, with an 8-year-old boy, she felt unequipped to manage a gaggle of 10-year-old girls. But she led the troop for eight years and eventually moved to the state level in York, Pa. There she implemented management guru Peter Drucker’s philosophies — which she had stumbled upon while browsing Johnstown’s Cambria Free Library. Her success caught the attention of the national Girl Scouts organization, and Hesselbein became its CEO. In her 13 years with the group, she led a turnaround and worked directly with Drucker, who recruited her to run his Leader to Leader Institute (then called the Peter F. Drucker Foundation for Nonprofit Management) in 1990. Hesselbein, 96, yes, 96 years old, has outlived her mentor but remains CEO of the institute, which will be renamed the Frances Hesselbein Leadership Institute in early 2012. The author of an autobiography published in February, My Life in Leadership, she shares her lessons with Colleen Leahey.If a door opens, walk through itIn 1976 I was invited to interview for the CEO position of the Girl Scouts of the USA. In 64 years there had never been a CEO from a local council — they were always from the outside — so I was very sure it was not serious. The search committee asked, “If you were in this position, what would you do?” I described the total transformation of the largest organization for girls and women in the world. I might have been more discreet if I had thought they were really serious. A few days later they called and asked me to take the job. Because I had described the transformation and the changes before they ever offered me the job, there was no pushback.Have a clear missionAt the beginning, I revisited the Girl Scouts’ mission, remembering Peter Drucker’s five questions [What is our mission? Who is our customer? What does the customer value? What are our results? What is our plan?]. We distilled it so that it was short, powerful, compelling: “To help each girl reach her own highest potential.” We did solid research on what the Girl Scout leaders really want and need. And we did a serious study in 1989, “The Beliefs and Moral Values of American Children.” It looked at what they actually value, rather than telling them what they should value. Because we included everyone, it became theirs, not ours. And it was an exuberant, exuberant time. Change became the climate.Be inclusiveI never had any question about the direction we were going in at the Girl Scouts. We shared our mission and research with all levels of leaders from the very beginning — a concept I created using cups and saucers, called circular management. Everyone was on a team; there were no superiors or subordinates. There was respect for all people. The group helped create and test the idea — and it was theirs. We had richly diverse boards and staff, and reached out to all racial and ethnic groups. We were one great movement. There was marvelous cohesion. We more than tripled racial and ethnic representation. It was the most beautiful experience.Accept only the bestI always had this philosophy that only the best is good enough for those who serve girls. We had a team of Harvard Business School professors, like Regina Herzlinger and Jim Heskett, who developed corporate management seminars, and John W. Gardner, one of the greatest leaders ever, trained our board. It was about the small things too, like our dowdy polyester uniforms. In 1978 I asked Halston, the No. 1 American designer, to design contemporary uniforms for 650,000 women, most of whom would never own a Halston. And he said, “I’ll do it.” Six years later, times changed, and Bill Blass was the greatest designer in our country. So I went to him with my story, and he, too, agreed. Both designs were beautiful and functional. We manufactured them ourselves, so they were minimally priced. That did a great deal for staff morale.Be on timeI had read everything Peter Drucker ever wrote. In 1970, on my first day as CEO of the Talus Rock, Pa., Girl Scout council, I showed up with six copies of Drucker’s The Effective Executive under my arm — one for each staff member. In 1981, as CEO, I went to the University Club in New York City to hear Peter speak, knowing I would never get to talk to him in that mob. Growing up in Johnstown, Pa., 5:30 means 5:30. I was alone with two bartenders, and I turned around and there was a man standing behind me. And he said, “I am Peter Drucker.” And I was just stunned — I forgot my manners. Instead of saying, “How do you do?” I said, “Do you realize how important you are to the Girl Scouts? If you go to any one of our 335 Girl Scout councils around this country, you will see all of your books — you will see your philosophy alive.” And he said, “Tell me, does it work?” I said, “It works so wonderfully that I’ve been trying to get up enough courage to come to Claremont, Calif., and sit down with you for an hour.” He said, “Why should both of us travel?” He gave me a date when he would be in New York. After that, he generously gave his time as an adviser and dear friend to the Girl Scouts. He adopted us.See yourself “life-size”When Drucker came to speak at our board meeting, I brought the entire national board and 100 national staff members. He told them, “You do not see yourselves life-size. You do not appreciate the significance of the work you do, for we live in a society that pretends to care about its children, and it does not. And for a little while you give a little girl a chance to be a girl in a society that forces her to grow up all too soon.” What we all realized at that moment was that the work we did in the social sector was as important as business or government; we were not simply junior members of a society.Look to the futureWhen I left the Girl Scouts in 1990, it was the largest organization for girls and women in the world. Six weeks later I found myself CEO [of the Drucker Foundation], with no money, no staff, and just a powerful vision. Peter encouraged us to focus on the type of change that will determine whether or not we are, all of us, a part of the future.This article is from the November 7, 2011 issue of Fortune.