“Nonbusiness institutions flock in increasing numbers 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, nonbusiness 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, noneconomic institutions, such as a university or a hospital, will also need very different management from that of a business. . . . Noneconomic institutions need a yardstick that does for them what profitability does for the business.”
– Peter F. Drucker
Nonbusiness institutions are right to study the practices of business management because most of these practices can be used to their benefit. But as Peter Drucker notes, here are some major qualifications when it comes to the management of these social-sector institutions.
First, there is a tendency among some social-sector organizations to believe that good intentions are enough. After all, they are the purveyors of virtue! But that is never true because resources are limited. A clear sense of mission is necessary to avoid this temptation. Once a crisp mission statement has been prepared, it is imperative to translate the mission statement into specific goals. And performance against these goals must be measureable.
Because social-sector institutions don’t have a bottom line in the same sense as a private corporation, one must be careful how goals are set and measurements or qualitative assessments are taken. Why? Because participants are motivated—and often pick up on the organization’s sense of values—in these performance measures. Participants want to perform well against these measures, so they become the focus of organizational efforts.
Finally, social sector institutions need money—badly. The best way to attain fundraising objectives is to produce results and then let the relevant donors know about it. This helps explain why Americans have had a torrid love affair with certain social-sector organizations. They produce results!
Within these parameters, public service organizations can and must take advantage of what we have learned since perhaps the 1800s about the effective management of business organizations. And on the performance of these nonbusiness organizations, the welfare of American society rests.
– Joe Maciariello