The Daily Drucker: 366 Days of Insight and Motivation for Getting the Right Things Done

by Peter F. Drucker

You have to do it. It’s not fun, but you enjoy it because even after forty years you still feel the fingers improving.

It is the task of management to make the institutions of the society of organizations, beginning with the business enterprise, perform for the society and economy, for the community, and for the individual, alike. This requires, first, that managers know their discipline. It requires that they know management. The first task of the manager is indeed to manage the institution for the mission for which it has been designed.

the tasks of making the work productive and the worker achieving, and of providing for the quality of life for society and individual. But a leadership group also has to have legitimacy. It has to be accepted by the community as “right.” They need to ground their authority in a moral commitment, which at the same time, expresses the purpose and character of organizations. There is only one such principle of morality. It is the purpose of organization, and, therefore, the grounds of management authority, to make human strength productive.

economic expansion and increase are not aims in themselves.

Capitalism as a social order and as a creed is the expression of the belief in economic progress as leading toward the freedom and equality of the individual in the free and equal society.

the best—opportunity for successful change is to exploit one’s own successes and to build on them. Problems cannot be ignored. And serious problems have to be taken care of. But to be change leaders, enterprises have to focus on opportunities. They have to starve problems and feed opportunities.

Whatever an enterprise does internally and externally needs to be improved systematically and continuously:

If performance is to be improved, we need to define clearly what “performance” means.

Systematic innovation means monitoring seven sources for innovative opportunity. The first four sources lie within the enterprise, whether business or public-service institution, or within an industry or service sector. The unexpected—the unexpected success, the unexpected failure, the unexpected outside event; the incongruity—between reality as it actually is and reality as it is assumed to be or as it “ought to be”; innovation based on process need; changes in industry structure or market structure that catch everyone unawares. The second set of sources for innovative opportunity involves changes outside the enterprise or industry: demographics (population changes); changes in perception, mood, and meaning; new knowledge, both scientific and nonscientific.

The introduction of innovation creates excitement and attracts a host of competitors, meaning that innovators have to be right the first time.

government agencies, labor unions, churches, universities and schools, hospitals, community and charitable organizations, professional and trade associations, and the like need to be entrepreneurial and innovative fully as much as any business does.

every service institution likes to get bigger. In the absence of a profit test, size is the one criterion of success for a service institution, and growth a goal in itself. And then, of course, there is always so much more that needs to be done. But stopping what has “always been done” and doing something new are equally anathema to service institutions, or at least excruciatingly painful to them. Most innovations in public-service institutions are imposed on them either by outsiders or by catastrophe.

Why is the worship of high profit margin likely to damage—if not destroy—the business? It not only holds an umbrella over the competitor; it also makes competing practically risk-free and virtually guarantees that the competitor will take over the market.

buying customers doesn’t work.

How to define the market is the second lesson—the lesson of what was both a marketing success and a major marketing fiasco: the conquest of the American market by the fax machine. The Japanese did not ask, “What is the market for this machine?” Instead they asked, “What is the market for what it does?” And they immediately saw, when looking at the growth of courier services such as Federal Express, that the market for the fax machine had already been established. The next lesson is that marketing starts with all customers in the market rather than with our customers. The final lesson is that of the success of the new “pastoral” churches by exploiting demographic changes as a marketing opportunity.

marketing is still rhetoric rather than reality in far too many businesses.

what consumerism demands of business is that it actually market. It demands that business start out with the needs, the realities, the values of the customer.

There will always, one can assume, be a need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits her and sells itself. Ideally, marketing should result in a customer who is ready to buy.

the only sound way to price is to start out with what the market is willing to pay and design to that price specification.

make sure that costs do not go up as fast as revenues; and, conversely, that they fall at least as fast as revenues if there is a recession and revenues go down.

Management needs to think through the minimum of growth that its company requires. What is the minimum of growth without which the company would actually lose strength, vigor, and ability to perform,

A company needs a viable market standing.

if the market expands, whether domestically or worldwide, a company has to grow with the marke...

A business needs to distinguish between the wrong kind of growth and the...

Any growth that, within a short period of time, results in an overall increase in the total productivities of the enterpr...

does not, within a fairly short period of time, produce higher overall ...

any increase in volume that leads to reduced productivities should be eliminated

Innovative efforts, especially those aimed at developing new businesses, products, or services, should normally report directly to the “executive in charge of innovation.” They should never report to line managers charged with responsibility for ongoing operations.

Every surprise is something to be taken seriously. The entire reporting system kind of encourages the neglect of opportunities and surprises, but also it’s fairly easy to change.

Every manager, down to the first-line supervisor, sits down every month and writes a letter with one subject: the unexpected. Not what went right or what went wrong, but the unexpected. And then they have a meeting and look at these things with the question: Does this tell us something?

You have to focus on success, especially unexpected success, and run with it.

The great majority of executives tend to focus downward. They are occupied with efforts rather than with results. They worry over what the organization and their superiors “owe” them and should do for them. And they are conscious above all of the authority they “should have.” As a result, they render themselves ineffectual. The effective executive focuses on contribution. He looks up from his work and outward toward goals. He asks: “What can I contribute that will significantly affect the performance and the results of the institution I serve?” His stress is on responsibility. The focus on contribution is the key to effectiveness: in a person’s own work—its content, its level, its standards, and its impacts; in his relations with others—his superiors, his associates, his subordinates; in his use of the tools of the executive such as meetings or reports. The focus on contribution turns the executive’s attention away from his own specialty, his own narrow skills, his own department, and toward the performance of the whole. It turns his attention to the outside, the only place where there are results.

What has he [or she] done well? What, therefore, is he likely to be able to do well? What does he have to learn or to acquire to be able to get the full benefit from his strength? If I had a son or daughter, would I be willing to have him or her work under this person? If yes, why? If no, why?

The only relevant and meaningful question is whether the profit motive is the socially most efficient one of the available directions in which the drive for power can be channeled. But we can say that of the channels available and known to us, the profit motive has a very high, if not the highest, social efficiency. All the other known forms in which the lust for power can be expressed offer satisfaction by giving the ambitious man direct power and domination over his fellow men. The profit motive alone gives fulfillment through power over things.

Management—no matter who “owns” and no matter whether the institution is a business, a government agency, or a hospital—has to have considerable power and authority—power and authority grounded in the needs of the enterprise and based on competence. And power, as the drafters of the American Constitution knew, needs to be limited by countervailing power.

But to become again a dynamic, effective, legitimate organ, the labor union will have to transform itself drastically.

When it comes to the performance of the primary task of an institution—whether economic goods and services in the case of the business, health care in that of a hospital, or scholarship and higher education in that of the university—the rule is to optimize. There, managers have to base their decisions on what is right rather than on what is acceptable. But in dealing with the constituencies outside and beyond this narrow definition of the primary task, managers have to think politically—in terms of the minimum needed to placate and appease and keep quiet constituent groups that otherwise might use their power of veto.

The nonprofit institution is not merely delivering a service. It wants the end user to be not a user but a doer. It uses a service to bring about a change in human beings. It attempts to become a part of the recipient rather than merely a supplier.

But the marketing you do in the nonprofit sector is quite different from selling. It’s more a matter of looking at your service from the recipient’s point of view.

The nonprofit institution has to raise money from donors. It raises money, or at least a large portion of it—from people who want to participate in the cause but who are not beneficiaries. A nonprofit institution that becomes a prisoner of money-raising is in serious trouble and in a serious identity crisis. The purpose of a strategy for raising money is precisely to enable the nonprofit institution to carry out its mission without subordinating that mission to fund-raising. This is why nonprofit people have now changed the term they use from “fund raising” to “fund development.” Fund development is creating a constituency that supports the organization because it deserves it.

The board not only helps think through the institution’s mission, it is the guardian of that mission and makes sure the organization lives up to its basic mission.

The board has the responsibility of making sure the nonprofit has competent management—and the right management.

The board’s role is to appraise the performance of the organization. The board is also the premier fund-raising o...

Large organizations cannot be versatile. A large organization is effective through its mass rather than through its agility. Mass enables the organization to put to work a great many more kinds of knowledge and skill than could possibly be combined in any one person or small group. But mass is also a limitation. An organization, no matter what it would like to do, can only do a small number of tasks at any one time. This is not something that better organization or “effective communications” can cure. The law of organization is concentration. Yet modern organization must be capable of change. Indeed it must be capable of initiating change, that is innovation. It must be able to move scarce and expensive resources of knowledge from areas of low productivity and nonresults to opportunities for achievement and contribution. This, however, requires the ability to stop doing what wastes resources.