Managing the Non-Profit Organization

Peter F. Drucker

• Publisher: HarperCollins e-books
• Year: 2010
• ISBN:
  9780062034755
• Topic: Business
• Subtopic: Nonprofit Organizations & Charities
• Index: Business

The groundbreaking and premier work on nonprofit organizations.

The nonprofit sector is growing rapidly, creating a major need for expert advice on how to manage these organizations effectively. Management legend Peter Drucker provides excellent examples and explanations of mission, leadership, resources, marketing, goals, and much more. Interviews with nine experts also address key issues in this booming sector.

PART ONE
The Mission Comes First

and your role as a leader

1. The Commitment

2. Leadership Is a Foul-Weather Job

3. Setting New Goals—Interview with Frances Hesselbein

4. What the Leader Owes—Interview with Max De Pree

5. Summary: The Action Implications

1
The Commitment

The non-profit organization exists to bring about a change in individuals and in society. The first thing to talk about is what missions work and what missions don’t work, and how to define the mission. For the ultimate test is not the beauty of the mission statement. The ultimate test is right action.

The most common question asked me by non-profit executives is: What are the qualities of a leader? The question seems to assume that leadership is something you can learn in a charm school. But it also assumes that leadership by itself is enough, that it’s an end. And that’s misleadership. The leader who basically focuses on himself or herself is going to mislead. The three most charismatic leaders in this century inflicted more suffering on the human race than almost any trio in history: Hitler, Stalin, and Mao. What matters is not the leader’s charisma. What matters is the leader’s mission. Therefore, the first job of the leader is to think through and define the mission of the institution.

SETTING CONCRETE ACTION GOALS

Here is a simple and mundane example—the mission statement of a hospital emergency room: “It’s our mission to give assurance to the afflicted.” That’s simple and clear and direct. Or take the mission of the Girl Scouts of the U.S.A.: to help girls grow into proud, self-confident, and self-respecting young women. There is an Episcopal church on the East Coast which defines its mission as making Jesus the head of this church and its chief executive officer. Or the mission of the Salvation Army, which is to make citizens out of the rejected. Arnold of Rugby, the greatest English educator of the nineteenth century, who created the English public school, defined its mission as making gentlemen out of savages.

My favorite mission definition, however, is not that of a non-profit institution, but of a business. It’s a definition that changed Sears from a near-bankrupt, struggling mail-order house at the beginning of the century into the world’s leading retailer within less than ten years: It’s our mission to be the informed and responsible buyer—first for the American farmer, and later for the American family altogether.

Almost every hospital I know says, “Our mission is health care.” And that’s the wrong definition. The hospital does not take care of health; the hospital takes care of illness. You and I take care of health by not smoking, not drinking too much, going to bed early, watching our weight, and so on. The hospital comes in when health care breaks down. An even more serious failing of this mission is that nobody can tell you what action or behavior follows from saying: “Our mission is health care.”

A mission statement has to be operational, otherwise it’s just good intentions. A mission statement has to focus on what the institution really tries to do and then do it so that everybody in the organization can say, This is my contribution to the goal.

Many years ago, I sat down with the administrators of a major hospital to think through the mission statement of the emergency room. It took us a long time to come up with the very simple, and (most people thought) too obvious statement that the emergency room was there to give assurance to the afflicted. To do that well, you have to know what really goes on. And, much to the surprise of the physicians and nurses, it turned out that in a good emergency room, the function is to tell eight out of ten people there is nothing wrong that a good night’s sleep won’t take care of. You’ve been shaken up. Or the baby has the flu. All right, it’s got convulsions, but there is nothing seriously wrong with the child. The doctors and nurses give assurance.

We worked it out, but it sounded awfully obvious. Yet translating that mission statement into action meant that everybody who comes in is now seen by a qualified person in less than a minute. That is the mission; that is the goal. The rest is implementation. Some people are immediately rushed to intensive care, others get a lot of tests, and yet others are told: “Go back home, go to sleep, take an aspirin, and don’t worry. If these things persist, see a physician tomorrow.” But the first objective is to see everybody, almost immediately—because that is the only way to give assurance.

The task of the non-profit manager is to try to convert the organization’s mission statement into specifics. The mission may be forever—or at least as long as we can foresee. As long as the human race is around, we’ll be miserable sinners. As long as the human race is around, there will be sick people. And, as long as the human race is around, there will be alcoholics and drug addicts and the unfortunate. For hundreds of years we’ve had schools of one kind or another trying to get a little knowledge into seven-year-old boys and girls who would rather be out playing.

But the goal can be short-lived, or it might change drastically because a mission is accomplished. A hundred years ago, one of the great inventions of the late nineteenth century was the tuberculosis sanatorium. That mission has been accomplished, at least in developed countries. We know how to treat TB with antibiotics. And so managers of Non-profits also have to build in review, revision, and organized abandonment. The mission is forever and may be divinely ordained; the goals are temporary.

One of our most common mistakes is to make the mission statement into a kind of hero sandwich of good intentions. It has to be simple and clear. As you add new tasks, you deemphasize and get rid of old ones. You can only do so many things. Look at what we are trying to do in our colleges. The mission statement is confused—we are trying to do fifty different things. It won’t work, and that’s why the fundamentalist colleges attract so many young people. Their mission is very narrow. You and I may quarrel with it and say it’s too narrow, but it’s clear. It enables the students to understand. And it also enables the faculty to know. And it enables that administration to say, We aren’t going to teach accounting.

As you add on, you have to abandon. But you also have to think through which are the few things we can accomplish that will do the most for us, and which are the things that contribute either marginally or are no longer of great significance. A hundred years ago, about the greatest contribution the hospital could make was in obstetrics, though it took a long time before the population accepted that, because childbirth at home in the growing city was perceived to be, well, dangerous, what with infection and untrained people. Well, now I would say that not every hospital should do obstetrics, and a great many don’t. Partly because it’s become so much safer, so much more predictable. But also because if anything does go wrong, it’s so much more critical, so you need a concentration of resources. In a suburban community there just might not be enough volume to do a really good job. So perhaps you don’t abandon obstetrics, but you phase it out slowly. On the other hand, fifty or sixty years ago, before the psychotropic drugs, no hospital could do much for mental diseases. Today, almost a majority of people who are mentally sick or endangered can be taken care of in the community hospital, with short-term stays for depression and so on. You can make a major contribution there.

So you constantly look at the state-of-the-art. You look at the opportunities in the community. The hospital isn’t going to sell shoes and it’s not going into education on a big scale. It’s going to take care of the sick. But the specific objective may change. Things that were of primary importance may become secondary or even totally irrelevant. You must watch this constantly, or else very soon you will become a museum piece.

THE THREE “MUSTS” OF A SUCCESSFUL MISSION

Look at strength and performance. Do better what you already do well—if it’s the right thing to do. The belief that every institution can do everything is just not true. When you violate the values of an institution, you are likely to do a poor job. In the 1960s, all of us in academia rushed into the urban problem. We were totally incompetent: our values don’t fit what are political issues; academicians don’t understand power. At the same time, hospitals rushed into what they called health education. Here are the people who come in, such as the diabetic, and before they go home maybe we can teach them how to handle their diet and their stress and so on so that they don’t come back. It hasn’t worked. That’s not what hospitals are good at. Hospitals are not good at prevention; hospitals are good at taking care of damage that’s already been done.

Look outside at the opportunities, the needs. Where can we, with the limited resources we have—and I don’t just mean people and money, but also competence—really make a difference, really set a new standard? One sets the standard by doing something and doing it well. You create a new dimension of performance.

The next thing to look at is what we really believe in. A mission is not, in that sense, impersonal. I have never seen anything being done well unless people were committed.

All of us know the story of the Edsel automobile. Everybody thinks the Edsel failed because Ford didn’t do its homework. In fact, it was the best-engineered, the best-researched, the best-everything car. There was only one thing wrong with it: nobody in the Ford Motor Company believed in it. It was contrived. It was designed on the basis of research and not on the basis of commitment. And so when it got into a little trouble, nobody supported the child. I’m not saying it could have been a success. But without that personal commitment, it certainly never could be.

And so one asks first, what are the opportunities, the needs? Then, do they fit us? Are we likely to do a decent job? Are we competent? Do they match our strengths? Do we really believe in this? This is not just true of products, it’s true of services.

So, you need three things: opportunities; competence; and commitment. Every mission statement, believe me, has to reflect all three or it will fall down on what is its ultimate goal, its ultimate purpose and final test. It will not mobilize the human resources of the organization for getting the right things done.

2
Leadership Is a Foul-Weather Job

The most successful leader of this century was Winston Churchill. But for twelve years, from 1928 until Dunkirk in 1940, he was totally on the sidelines, almost discredited—because there was no need for a Churchill. Things were routine or, at any rate, looked routine. When the catastrophe came, thank goodness, he was available. Fortunately or unfortunately, the one predictable thing in any organization is the crisis. That always comes. That’s when you do depend on the leader.

The most important task of an organization’s leader is to anticipate crisis. Perhaps not to avert it, but to anticipate it. To wait until the crisis hits is already abdication. One has to make the organization capable of anticipating the storm, weathering it, and in fact, being ahead of it. That is called innovation, constant renewal. You cannot prevent a major catastrophe, but you can build an organization that is battle-ready, that has high morale, and also has been through a crisis, knows how to behave, trusts itself, and where people trust one another. In military training, the first rule is to instill soldiers with trust in their officers, because without trust they won’t fight.

THE PROBLEMS OF SUCCESS

Problems of success have ruined more organizations than has failure, partly because if things go wrong, everybody knows they have to go to work. Success creates its own euphoria. You outrun your resources. And you retire on the job, which may be the most difficult thing to fight. I’m now in California instead of New York University, where I was for twenty years, in part because the Graduate Business School at NYU decided to cut back rather than grow with the growing student demand. That’s why I left. When I started to build a management school at Claremont, I made sure that we did not overextend ourselves. I was very careful to ensure that we kept the faculty first rate but small, and that we used adjuncts, part-time people, then built a strong administration. And then we could run with success. If the market grows, you have to grow with it, or you become marginal.

I am arguing these days with our pastor, who wants to keep our church small. This is in a community where we have a lot of young people, students, and a lot of people in retirement homes who want to come to church. My very nice and able pastor likes to keep it small so that he knows everybody. I said to him, “Look, Father Michael, it won’t work.” Five years after he had come in, the church began to shrink. The lesson for the leaders of non-profits is that one has to grow with success. But one also has to make sure that one doesn’t become unable to adjust. Sooner or later, growth slows down and the institution plateaus. Then it has to be able to maintain its momentum, its flexibility, its vitality, and its vision. Otherwise, it becomes frozen.

HARD CHOICES

Non-profit organizations have no “bottom line.” They are prone to consider everything they do to be righteous and moral and to serve a cause, so they are not willing to say, if it doesn’t produce results then maybe we should direct our resources elsewhere. non-profit organizations need the discipline of organized abandonment perhaps even more than a business does. They need to face up to critical choices.

Some of these choices are very difficult. I have a friend, a Catholic priest, who is Vicar General of a large diocese. The bishop called him in to deal with the shortage of priests. Which services should they keep and which should they abandon? There is the terrible dilemma of Catholic schools in a big metropolitan archdiocese where 97 percent of the kids are not Catholics and aren’t going to be Catholics; they’re fleeing the misery of the public schools. I’ve been arguing with the diocese for years. Some of the priests say, “Our first task is to save souls; it’s not to educate people. Let’s put our few priests and nuns on our first priority.” And I say, “Look, it says in the Bible, ‘But the greatest of these is Charity,’ and that’s what you are doing. You cannot possibly leave those kids in the lurch. That’s a value choice, and it’s critical that it’s faced up to and not pushed under the rug, as we like to do.”

Once you acknowledge that, you can then innovate—provided you organize yourself to look for innovation. Non-profit institutions need innovation as much as businesses or governments. And we know how to do it.

The starting point is to recognize that change is not a threat. It’s an opportunity. We know where to look for changes.¹ Here are a few examples:

Unexpected Success in Your Own Organization

Some institutions of higher education, for instance, have learned that continuing education of already highly educated adults is not a luxury, or something to bring in additional money, or good public relations. It is becoming the central thrust of our knowledge society. So, they have organized themselves and their faculties to attract the doctors, engineers, and executives who want and need to go back to school.

Population Changes

About twelve years ago, the Girl Scouts of the U.S.A. realized that demographic shifts in the United States, with the fast growth of minorities, were creating a new frontier for the organization— new needs and the opportunity to change. They now have a 15 percent enrollment of minority kids, which explains why they kept growing even though the total number of girls of scouting age fell quite s...