The Temptation to Do Good
Public-service institutions are out to maximize rather than to optimize.
The most important obstacle to innovation is that public-service institutions exist, after all, to “do good.”
This means that they tend to see their mission as a moral absolute rather than as economic and subject to a cost/benefit calculus.
Economics always seeks a different allocation of the same resources to obtain a higher yield.
In the public-service institution, there is no such thing as a higher yield.
If one is “doing good,” then there is no “better.”
Indeed, failure to attain objectives in the quest for a “good” only means that efforts need to be redoubled.
“Our mission will not be completed,” asserts the head of the Crusade Against Hunger, “as long as there is one child on the earth going to bed hungry.”
If he were to say, “Our mission will be completed if the largest possible number of children that can be reached through existing distribution channels get enough to eat not to be stunted,” he would be booted out of office.
But if the goal is maximization, it can never be attained.
Indeed, the closer one comes toward attaining one’s objective, the more efforts are called for.
For, once optimization has been reached, additional costs go up exponentially while additional results fall off exponentially.
The closer a public-service institution comes to attaining its objectives, therefore, the more frustrated it will be and the harder it will work on what it is already doing. — The Daily Drucker
Every social problem is an opportunity
“Men of high effectiveness are conspicuous by their absence in executive jobs.
High intelligence is common enough among executives.
Imagination is far from rare.
The level of knowledge tends to be high.
But there seems to be little correlation between a man’s effectiveness and his intelligence, his imagination, or his knowledge.
Brilliant men are often strikingly ineffectual; they fail to realize that the brilliant insight is not by itself achievement.
They never have learned that insights become effectiveness only through hard systematic work.
Conversely, in every organization there are some highly effective plodders.
While others rush around in the frenzy and busyness which very bright people so often confuse with ‘creativity,’ the plodder puts one foot in front of the other and gets there first, like the tortoise in the old fable.”
“Follow effective action with quiet reflection.
From the quiet reflection will come even more effective action.” — Peter Drucker
“The last twenty years have been very unsettling.
Executives really don’t understand the world they live in” — PFD Forbes
Creating Tomorrow’s Society Of Citizens
Your commitment to self-assessment is a commitment to developing yourself and your organization as a leader.
You will expand your vision by listening to your customers, by encouraging constructive dissent, by looking at the sweeping transformation taking place in society.
You have vital judgments ahead: whether to change the mission, whether to abandon programs that have outlived their usefulness and concentrate resources elsewhere, how to match opportunities with your competence and commitment, how you will build community and change lives.
Self-assessment is the first action requirement of leadership: the constant re-sharpening, constant refocusing, never being really satisfied.
And the time to do this is when you are successful.
If you wait until things start to go down, then it’s very difficult.
We are creating tomorrow’s society of citizens through the social sector, through your nonprofit organization.
And in that society, everybody is a leader, everybody is responsible, everybody acts.
Therefore, mission and leadership are not just things to read about, to listen to; they are things to do something about.
Self-assessment can and should convert good intentions and knowledge into effective action — not next year but tomorrow morning.
Refining the Mission Statement
Every three to five years you should look at the mission again to decide whether it needs to be refocused
▪ because the demographics of your customers have changed,
▪ because you should abandon something that produces no results or needs resources beyond the organization’s competencies, or
▪ because the objective has been accomplished.
You must think through priorities.
That’s easy to say, but to act on it is very hard because doing so always involves
▪ abandoning things that may look attractive, or
▪ giving up programs that people both inside and outside the organization are strongly encouraging you to keep.
But if you don’t concentrate your institution’s resources, you are not going to get results.
This may be the ultimate test of leadership: the ability to think through the priority decision and to make it stick
The importance of financial measurements and financial results
Similarly, I have always emphasized in my writing, in my teaching, and in my consulting the importance of financial measurements and financial results.
Indeed, most businesses do not earn enough.
What they consider profits are, in effect, true costs.
One of my central theses for almost forty years has been that one cannot even speak of a profit unless one has earned the true cost of capital.
And, in most cases, the cost of capital is far higher than what businesses, especially American businesses, tend to consider as “record profits.”
I have also always maintained—often to the scandal of liberal readers—that the first social responsibility of a business is to produce an adequate surplus.
Without a surplus, it steals from the commonwealth and deprives society and the economy of the capital needed to provide jobs for tomorrow.
Further, for more years than I care to remember, I have maintained that there is no virtue in being nonprofit and that, indeed, any activity that could produce a profit and does not do so is antisocial.
Professional schools are my favorite example.
There was a time when such activities were so marginal that their being subsidized by society could be justified.
Today, they constitute such a large sector that they have to contribute to the capital formation of an economy in which capital to finance tomorrow’s jobs may well be the central economic requirement, and even a survival need.
… “But now the traditional axiom that an enterprise should aim for maximum integration has become almost entirely invalidated.
One reason is that the knowledge needed for any activity has become highly specialized.
It is therefore increasingly expensive, and also increasingly difficult, to maintain enough critical mass for every major task within an enterprise.
And because knowledge rapidly deteriorates unless it is used constantly, maintaining within an organization an activity that is used only intermittently guarantees incompetence” — Peter Drucker