Management: The Central Social Function
Non economic institutions need a yardstick that does for them what profitability does for business.
Non business institutions flock in increasing number to business management to learn from it how to manage themselves. The hospital, the armed service, the Catholic diocese, the civil service – all want to go to school for business management.
This does not mean that business management can be transferred to other, non business institutions. On the contrary, the first thing these institutions have to learn from business management is that management begins with the setting of objectives and that, therefore, non economic institutions, such as a university or a hospital, will also need very different management from that of a business. But these institutions are right in seeing, is simply the first of the species and the one we have studied the most intensively. Non economic institutions need a yardstick that does for them what profitability does for the business. “Profitability,” in other words, rather than being the “exemption” and distinct from “human” or “social” needs, emerges, in the pluralist society of organizations, as the prototype of the measurement needed every institution in order to be managed and manageable.
The Function of Management Is to Produce Results
Above all management is responsible for producing results.
Management has to give direction to the institution it manages. It has to think through the institution’s mission, has to set its objectives, and has to organize resources for the results the institution has to contribute. Management is, indeed, J.B. Say’s “entrepreneur” and responsible for directing vision and resources toward greatest results and contributions.
In performing these essential functions, management everywhere faces the same problems. It has to organize work for productivity; it has to lead the worker toward productivity and achievement. It is responsible for the social impact of its enterprise. Above all, it is responsible for producing the results – whether economic performance,, student learning, or patient care – for the sake of which each institution exists.
All organizations need a discipline that makes them face up to reality.
All organizations need to know that virtually no program or activity will perform effectively for a long time without modification and redesign. Eventually every activity becomes obsolete. Among organizations that ignore this fact, the worst offender if government. Indeed, the inability to stop doing anything is the central disease of government and a major reason why government today is sick. Hospitals and universities are only a little better than government in getting rid of yesterday.
Businessmen are just as sentimental about yesterday as bureaucrats. They are just as likely to respond to the failure of a product or program by doubling the efforts invested in it. But they are, fortunately, unable to indulge freely in their predilections. They stand under an objective discipline, the discipline of the market. They have an objective outside measurement, profitability. And so they are forced to slough off the unsuccessful and unproductive sooner or later. In other organizations – government, hospitals, the military, and so on – economics is only a restraint.
All organizations must be capable of change. We need concepts and measurements that give to other kinds of organizations what the market test and profitability yardstick give to business. Those tests and yardsticks will be quite different.
There is nothing as difficult and as expensive, but also nothing as futile, as trying to keep a corpse from stinking.
Effective executives know that they have to get many things done effectively. Therefore, they concentrate. And the first rule for the concentration of executive effort is to slough off the past that has ceased to be productive. The first-class resources, especially those scarce resources of human strength, are immediately pulled out and put to work on the opportunities of tomorrow. If leaders are unable to slough off yesterday, to abandon yesterday, they simply will not be able to create tomorrow.
Without systematic and purposeful abandonment, an organization will be overtaken by events. It will squander its best resources on things it should never have been doing or should no longer do. As a result, it will lack the resources, especially capable people, needed to exploit the opportunities that arise. Far too few businesses are willing to slough of yesterday, and as a result, far too few have resources available for tomorrow.