Essential Drucker: What the nonprofits are teaching business (Summary of Chapter 4)

Transcription

1 University of Salzburg - Institute of Computer Science VP Projektmanagement o.univ.-prof. Dr. Wolfgang Pree Essential Drucker: What the nonprofits are teaching business (Summary of Chapter 4) Michael Huber (mhuber@cosy.sbg.ac.at) April 18,

2 The summary of the chapter four is based on the book: Drucker, Peter F., Essential Drucker - The pre-eminent management thinker of our time, Harvard Business School, (2001), ISBN Contents 1 Introduction 3 2 A Commitment to Management 3 3 Effective Use of the Board 4 4 To Offer Meaningful Achievement 4 5 Training, training, training 5 6 A Warning to Business 5 2

3 1 Introduction In America, especially in the U.S. there are many nonprofit organizations. The most famous ones are: Red Cross, pastoral churches, Girl- Boy Scouts, Nature Conservancy,... These organizations are becoming America s management leaders because of their strategy and effectiveness of their boards. These organizations are practicing, what most American businesses only preach. In the motivation they are giving to their volunteers and in the productivity of knowledge workers they produce, they are practicing what businesses will have to learn. Statistically the nonprofit sector is America s largest employer. Over 80 million people work as a volunteer. They work in average nearly five hours each week in one or more nonprofit organizations. This is equal to 10 million full-time jobs and if this where paid volunteers they would earn $150 billion. Examples of volunteer work would be: collecting in the neighborhood for the Community Chest, driving old people to the doctor,... But more and more volunteers are becoming unpaid staff, because of the managerial tasks in their organizations. Also, not all nonprofit organizations have been doing well. Examples are many community hospitals, traditional churches, etc. The fact that churches are loosing members is well founded, because this sector hasn t expanded in the last one or two decades. But generally the nonprofit sector has grown tremendously in the last two decades. An example Peter Drucker mentioned is the Salvation Army. This organization has been able to rehabilitate 80 % of the people who where arrested. In that case the positive amount of rehabilitations is based on a strict work program. 2 A Commitment to Management Twenty years ago management was a dirty word for those people in nonprofit organization because took pride in being free of the taint of commercialism in comparison to the business. Now most of all nonprofit organizations have learned that without being perfectly managed they lack the discipline of the bottom line. So they even need more management 3

4 than the business needs. They realized that good intentions are no substitute for organization and leadership, for accountability, performance, and results. All these facts require management and management first begins with the organization s mission. Also a very important fact is that this mission should specify strategies, that are needed to reach the goals the organization assigned. The nonprofit organizations did it that way that they avoided sweeping statements full of good intentions. For example the Salvation army s goal is to turn society s rejects, criminals, etc. into citizens. It is also very important to start with the environment, the community, the customers. It is less important to start with the inside of every organization or with financial returns. That way you come to a well defined mission that is an important fact for measuring the success of an organization. The nonprofit organizations have also learned to define clearly what changes outside the organization and to focus on the new facts. Peter Drucker also mentioned an example of a health-care organizations that s motto of which was, If it s in the patient s interest, we have to promote it; it s then our job to make it pay. This is not so different from the marketing strategy of successful Japanese companies. But it is also very difficult to compare the thinking and operation of Western business companies with the Japanese ones. Finally Peter Drucker says, that clearly defined missions foster innovative ideas and help others understand why they need to be implemented. 3 Effective Use of the Board A second reason why the business can learn from the nonprofit sector is that most nonprofit have a functioning board whose performance is reviewed and controlled annually by a board committee. Further the board s performance is also reviewed against present performance objectives. In U.S. law, the board of directors is still considered the managing organ of the corporation. A negative point in the last decades was that the board was the last to realize that things were going wrong. If you want to find a truly effective board, it will be better to look in the nonprofit sector than in the public corporations. To make such a board effective Peter Drucker said, that It is not useful to talk about its function but to organize its work. More and more nonprofit are doing just that. One thing he has never seen in companies is, that there are no work plans for the board and any kind of review of the board s performance. 4 To Offer Meaningful Achievement Nonprofits say, We don t pay volunteers so we cannot make demands upon them. Nowadays they say, Volunteers must get greater satisfaction from their accomplishments and make a greater contribution precisely because they do not get a pay check. The steady transformation of the volunteer from well-meaning amateur to trained, professional, unpaid 4

5 member is the most significant development in the nonprofit sector. This transformations are, in part, a response to need. And with the fact that money is always in short supply, the nonprofit cannot add professional paid staff to teach all volunteers. So the educated people should teach the volunteers themselves. But especially these people that are knowledge worker in their job in which they earn their living, want to stay as knowledge worker in their contribution to society. So the problem for the nonprofit organizations is to attract and hold them. So they have to put their competence and knowledge to work. So finally Peter Drucker said, They have to offer meaningful achievements. 5 Training, training, training Many nonprofit systematically recruit people. The senior staff interviews the newcomers to tell them their strengths. These volunteers, if they were selected were placed accordingly. These volunteers may also be assigned both a mentor and a supervisor with whom they work out their performance goals. These advisers are two different people, as a rule and both ordinary volunteers themselves. For example the Girl Scouts in the U.S. which employs volunteers and only paid staff for 3.5 million girl members. They work in a step-by-step organization in which they start on the first step, for example selling cookies door-to-door. Each of these steps has specific performance standards and goals. Peter Drucker asked and answered the following questions: What do these unpaid staff people themselves demand? What makes them stay? They can leave the organization at any time. Their first and most important demand is that the nonprofit have a clear mission, one that drives everything the organization does. Recognize their expertise and use old veterans to train newcomers. Give the knowledge-workers responsibility. Let them set their own performance goals. Give them the expectation of opportunities for advancements, to take more demanding assignments. These are also points and facts why many nonprofit organizations have developed career ladders for their volunteers. 6 A Warning to Business The move from nonprofit volunteers to non-paid professional may be the most important development in Americas society today. One sentence Peter Drucker said in this chapter, is that, 5

6 What the nonprofit contributes to the volunteers is as important as what the volunteer contributes to the nonprofit. Also important is managing the knowledge worker for productivity. This requires: a clear mission, careful placement and continual learning and teaching, management by objectives, self-control, high demands but corresponding responsibility and accountability for performance and results. This facts are also a clear warning to Americas business in the understood transformation of volunteer work. When Peter Drucker asked the volunteers: Why they do this? Far too many give the same answer: In my paying job there isn t much challenge, not enough opportunity for achievement, not enough responsibility; and there is no mission, there is only expediency. 6