The mistake most people make when they move into the second half is to rely on good intentions
According to Peter, good intentions (“I want to do something significant”) is only a starting point.
The goal is results and performance that fulfills a clearly stated mission—something that needs doing—something that creates value for a customer (something that is important to them as human beings—not the typical marketing BS).
Peter told me over and over, “All results are on the outside.
On the inside is only cost and effort.”
… Another phrase I heard over and over in virtually every conversation with Peter has shaped my thinking: From good intentions to results and performance.”
Peter contended that most nonprofit organizations, almost all big foundations, and a good deal of government spending are invested in “good intentions.”
Outspoken About Outcomes for Nonprofits
Leap of Reason: Managing to Outcomes in an Era of Scarcity
How to guarantee non-performance
What results should you expect? — a user’s guide to MBO
In his typically brusque style, he once told me, “Tell your rich friends money has no results
If money were what made the difference, Egypt would be Japan.”
Peter wasn’t speaking against money.
He was simply saying that money alone won’t get results.
It might even impede results.
From Chapter 12 of Management, Revised Edition
Amazon Links: Management Rev Ed and Management Cases, Revised Edition
Business enterprise is only one of the institutions of modern society, and business managers are by no means our only managers.
Service institutions are equally institutions and, therefore, equally in need of management.
Some of the most familiar of these institutions are government agencies, the armed services, schools, colleges, universities, research laboratories, hospitals and other health-care institutions, unions, professional practices such as the large law firm, and professional, industry, and trade associations.
They all have people who are paid for doing the management job, even though they may be called administrators, commanders, directors, or executives, rather than managers.
The Multi-Institutional Society
Public-service institutions are supported by the economic surplus produced by economic activity.
They are social overhead.
The growth of the public service institution in the twentieth and twenty-first centuries is the best testimonial to the success of business in discharging its economic task—producing economic surplus.
Yet, unlike the early nineteenth-century university, the service institutions are not a luxury or an ornament.
They are essentials of a modern society.
They have to perform if society and business are to function.
These service institutions are the main expense of a modern society.
Approximately half of the gross national product of the United States (and of most of the other developed countries) is spent on public-service institutions.
Every citizen in the developed, industrialized, urbanized societies depends for survival on the performance of the public-service institutions.
These institutions also embody the values of developed societies.
Education, health care, knowledge, and mobility—not just more food, clothing, and shelter—are the fruits of our society's increased economic capacities and productivity.
Yet the evidence for performance in the service institutions is not impressive, let alone overwhelming.
Colleges, hospitals, and universities have grown larger than an earlier generation would have dreamed possible.
Their budgets have grown even faster.
Yet everywhere they are in crisis.
A generation or two ago their performance was taken for granted.
Today they are attacked on all sides for lack of performance.
Services that the nineteenth century managed successfully with little apparent effort—the postal service, for instance, or the railroads—are today deep in the red and require enormous subsidies.
National and local government agencies are constantly being reorganized for efficiency.
Yet in every country citizens complain loudly of growing bureaucracy in government.
What they mean is that the government agency is being run more for the convenience of its employees than for contribution and performance.
This is mismanagement.
Are Service Institutions Managed?
The service institutions themselves have become "management conscious."
Increasingly they turn to business to learn management.
In all service institutions, manager development, management by objectives, and many other concepts and tools of business management are now common.
This is a healthy sign, but it does not mean that the service institutions understand the problems of managing themselves.
It only means that they begin to realize that at present they are not being managed.
But Are They Manageable?
There is another and very different response to the performance crisis of the service institutions.
A growing number of critics have come to the conclusion that service institutions are inherently unmanageable and incapable of performance.
Some go so far as to suggest that they should, therefore, be dissolved.
But there is not the slightest evidence that today's society is willing to do without the contributions the service institutions provide.
The people who most vocally attack the shortcomings of the hospitals want more and better health care.
Those who criticize public schools want better, not less, education.
The voters bitterest about government bureaucracy vote for more government programs.
We have no choice but to learn to manage the public-service institutions for performance.
And they can be managed for performance.
Managing Public-Service Institutions For Performance
Different classes of service institutions need different structures.
But all of them need first to impose on themselves discipline of the kind imposed by leaders of the institutions in the examples in the previous chapters.
This work involves
They need to define "what our business is and what it should be."
See "The Theory of the Business" in chapter 8 of Management, Revised Edition and The Five Most Important Questions You Will Ever Ask About Your Organization (converts intentions into action)
They need to bring alternative definitions into the open and consider them carefully.
They should perhaps even work out some balance between the different and conflicting definitions of mission (as did the presidents of the emerging American universities—see later in this chapter).
They must derive clear objectives and goals from their definition of function and mission.
They then must set priorities that enable them to select targets, to set standards of accomplishment and performance—that is, to define the minimum acceptable results, to set deadlines, to go to work on results, and to make someone accountable for results.
They must define measurements of performance—customer-satisfaction measurements for the performance of Medicare services, or the number of households supplied with electric power (a quantity much easier to measure).
They must use these measurements to feed back on their efforts.
That is, they must build self-control by results into their system.
Finally, they need an organized review of objectives and results, to weed out those objectives that no longer serve a purpose or have proven unattainable.
They need to identify unsatisfactory performance and activities that are outdated or unproductive, or both.
And they need a mechanism for dropping such activities rather than wasting money and human energies where the results are poor.
The last requirement may be the most important one.
Without a market test, the service institution lacks the built-in discipline that forces a business eventually to abandon yesterday—or else go bankrupt.
Assessing and abandoning low-performance activities in service institutions, outside and inside business, would be the most painful but also the most beneficial improvement.
As the examples have shown, no success is "forever."
Yet it is even more difficult to abandon yesterday's success than it is to reappraise a failure.
A once-successful project gains an air of success that outlasts the project's real usefulness and disguises its failings.
In a service institution particularly, yesterday's success becomes "policy," "virtue," "conviction," if not holy writ.
The institution must impose on itself the discipline of thinking through its mission, its objectives, and its priorities, and of building in feedback control from results and performance on policies, priorities, and action.
Otherwise, it will gradually become less and less effective.
We are in such a welfare mess today in the United States largely because the welfare program of the 1930s was such a success.
We could not abandon it and, instead, misapplied it to the radically different problem of the inner-city poor.
To make service institutions perform, it should by now be clear, does not require great leaders.
It requires a system.
The essentials of this system are not too different from the essentials of performance in a business enterprise, but the application will be quite different.
The service institutions are not businesses; performance means something quite different in them.
The applications of the essentials differ greatly for different service institutions.
As our later examples will show, there are at least three different kinds of service institutions—institutions that are not paid for performance and results, but for efforts and programs.
How to guarantee non-performance
Management by Objectives — a user’s guide
The question, What do customers value?—what satisfies their needs, wants, and aspirations—is so complicated that it can only be answered by customers themselves.
And the first rule is that there are no irrational customers.
Almost without exception, customers behave rationally in terms of their own realities and their own situation. (Their logic bubble — see below)
Leadership should not even try to guess at the answers but should always go to the customers in a systematic quest for those answers.
I practice this.
Each year I personally telephone a random sample of fifty or sixty students who graduated ten years earlier.
I ask, “Looking back, what did we contribute in this school?
What is still important to you?
What should we do better?
What should we stop doing?”
And believe me, the knowledge I have gained has had a profound influence.
What does the customer value? may be the most important question.
Yet it is the one least often asked.
Nonprofit leaders tend to answer it for themselves.
“It’s the quality of our programs.
It’s the way we improve the community.”
People are so convinced they are doing the right things and so committed to their cause that they come to see the institution as an end in itself.
But that’s a bureaucracy.
Instead of asking, “Does it deliver value to our customers?” they ask, “Does it fit our rules?”
And that not only inhibits performance but also destroys vision and dedication.
— Peter Drucker,
The Five Most Important Questions …
I (Edward de Bono) created the term ‘logic bubble’ in a previous book.
When someone does something you do not like or with which you do not agree, it is easy to label that person as stupid, ignorant or malevolent.
But that person may be acting ‘logically’ within his or her ‘logic bubble’.
That bubble is made up of the perceptions, values, needs and experience of that person.
If you make a real effort to see inside that bubble and to see where that person is ‘coming from’, you usually see the logic of that person’s position.
In the school programme for teaching thinking (CoRT (Cognitive Research Trust) programme) there are tools which broaden perception so the thinker sees a wider picture and acts accordingly.
One of these tools is OPV, which encourages the thinker to ‘see the Other Person’s Point of View’.
We have numerous examples where a serious fight came to a sudden end when the combatants (who had learned the methods) decided to do an OPV on each other, a very similar process to understanding the ‘logic bubble’ of the other party.
— Edward de Bono
Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (P.S.)
Most people think of Peter Drucker as the "father of modern management," which he was (though he was never very comfortable with that description).
And while it's true that most of the very successful corporations owe a lot of their success to him, Peter increasingly turned his attention to the social sector—nonprofit organizations whose role is to look after the social needs of a culture.
Peter felt strongly that while government has a critical role to play as policy maker, standard setter, and paymaster, it should not attempt to run social services because it has proven to be almost totally incompetent in that area.
He also believed it was not a primary role of business to provide for the social needs of citizens.
Instead, nonprofit agencies—of which more than fifty percent are churches and faith—based organizations—have the greatest potential for doing the greatest good.
But as Peter would often say, "Don't mistake potential for performance," and devoted a great deal of his time helping the social sector, including churches, becoming more effective by becoming better managers.
I know that some have criticized larger churches for becoming more "businesslike" by adopting modern management principles, but Peter was adamant that the function of management is to make the church more churchlike, not make it more businesslike.
He saw such huge potential within churches to care for the social needs of the nation, especially within the ranks of Baby Boomers who will be looking for more meaningful options to retirement.