Drucker on Non-Profit Management

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Preface

“[Non-profit] institutions are central to American society and its most distinguishing feature” (p. xiii).

“[Non-profits] do something very different from either business or government….[A non-profit’s] product is neither a pair of shoes or an effective regulation.  Its product is a changed human being.  The non-profit institutions are human change agents.  Their ‘product’ is a cured patient, a child that learns, a young man or young woman grown into a self-respecting adult; a changed human life altogether” (p. xiv).

“[Non-profit ] institutions themselves know they need management all the more because they do not have a conventional ‘bottom line.’  They know they need to learn management as their tool lest they be overwhelmed by it.  They know they need management so that they can concentrate on their mission” (pp. xiv, xv).

The distinct characteristics and needs of non-profits (p. xv):

  • keeping accountable to their unique mission and measuring results
  • developing and implementing strategies to market their services and obtain funding
  • introducing innovation and change to volunteers
  • engaging the board and keeping it from meddling
  • attracting, training, and managing volunteers for performance (results)
  • addressing individual burnout

Two distinct challenges (p. xvii):

  • Converting donors into contributors — into people who experience self-realization and look at themselves in the mirror and see someone “who as a citizen takes responsibility”
  • Giving a sense of community and common purpose

The Mission Comes First

The Commitment

“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” (p. 3).

“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” (p. 4).

Three Things

“[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?…So you need three things: opportunities, competence, commitment (p. 8).

Leadership is a Foul-Weather Job

“The most important task of an organization’s leader is to anticipate crisis….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….for without trust they won’t fight” (p. 9).

“The starting point is to recognize that change is not a threat.  It’s an opportunity” (p. 11).

What To Look For In A Leader

“If I were on a selection committee to choose a leader…what would I look for?

  • First, I would look at what the individuals have done, what their strengths are.
  • Second, I would look at the institution and ask: What is the one immediate key challenge?
  • Then I would look for–call it character or integrity” (p. 16).

Basic Leader Competencies

“Most organizations need somebody who can lead regardless of the weather.  What matters is that he or she works on the basic competences.

  • As the first basic competence, I would put the willingness, ability, and self-discipline to listen.
  • The second essential competence is the willingness to communicate, to make yourself understood.
  • The next important competence is not to alibi yourself [humbleness]
  • The last basic competence is to understand how unimportant you are compared to the task….The worst thing you can say about a leader is on the day he or she left, the organization collapsed” (p. 20).

Balancing

  • “One of the key tasks of the leader is to balance up the long range and the short range, the big picture and the pesky little details….
  • Another, which I think is even harder to handle, is the balance between concentrating resources on the goal and enough diversification….
  • The even more critical balance, and the toughest to handle, is between being too cautious and to rash.
  • Finally, there is timing….You know the people who always expect results too soon and pull up the radishes to see whether they’ve set root, and the ones who never pull up the radishes because they’re sure they’re never ripe enough….
  • Then there is the balance between opportunity and risk….Is it reversible?…Is it a risk we can afford?” (pp. 24, 25).

From Mission to Performance

Converting Good Intentions Into Results

“[You] need four things.

  • You need a plan.
  • You need marketing.
  • You need people.
  • And you need money” (p. 53).

Rules

  • “Don’t put your scarce resources where you aren’t going to have results.  This may be the first rule for effective marketing” (p. 55).
  • “And then, the second rule, know your customers” (p. 55).

Strategies

  • “So, the design of the right marketing strategy for the non-profit institution’s service is the first basic strategy: the non-profit institution needs market knowledge.
  • It needs a marketing plan with specific objectives and goals.
  • And it needs what I call marketing responsibility, which is to take one’s customers seriously.  Not saying, We know what’s good for them.  But, What are their values?  How do I reach them?” (p. 56).
  • “The non-profit institution also needs a fund development strategy….Fund-raising is going around with a begging bowl, asking for money because the need is so great.  Fund development is creating a constituency which supports the organization because it deserves it.  It means developing what I call a membership that participates through giving” (p. 56).

“The first constituency in fund development is your own board” (p. 56).

Winning Strategies

“In non-profit management, the mission and the plan–if that is all there is–are the good intentions.  Strategies are the bulldozers.  They convert what you want to do into accomplishment” (p. 59).

“One prays for miracles but works for results, St. Augustine said” (p. 59).

  • “First, the goal must be clearly defined.
  • Then that goal must be converted into specific results, specific targets, each focused on a specific audience, a specific market area….
  • Next, you will need a marketing plan and marketing efforts for each target group….
  • Next comes communication–lots of it–and training….
  • Then you need logistics….What resources are required?…
  • Finally, you ask: “When do we have to see results?” (pp. 63, 64).

Successful Innovation

  • “The first requirement for successful innovation is to look at a change as a potential opportunity instead of a threat….
  • The second question is, Who in our organization should really work on this?…
  • Then think through the proper marketing strategy….Look into the possibility of developing a niche” (pp. 68, 69).

Defining the Market

“The most important tasks in marketing have to do with studying the market, segmenting it, targeting the groups you want to service, positioning yourself in the market, and creating a service that meets needs out there.  Advertising and selling are afterthoughts” (p. 74).

“The answer marketing gives is that you must formulate an offer to put out to the group from which you want a response.  The process of getting that answer, I call exchange thinking.  What must I give in order to get?  How can I add value to the other party in such a way that I add value to what I want?  Reciprocity and exchange underlie marketing thinking” (p. 76).

Building the Donor Constituency

“It’s just more efficient to organize with a notion that you are going to have a long-term relationship with your donors, that you’re going to help them increase their support of the organization” (p. 86).

“First of all, what you want to do is acquaint donors with what you are as an organization, what you are trying to get accomplished, so they can identify with your goals” (p. 86).

“Development means bringing the donors along, raising their sights in terms of how they can support you, giving them ownership in the outcome of your organization” (p. 87).

“So you market research tries to identify two things, to use technical terms:  both market segmentation and market value propositions” (p. 93).

  • “You have told us, first of the central importance of the clear mission, and the importance of knowing your market, not just in generalities, but in fine detail.
  • And then of enabling those volunteers of yours to do a decent job by giving them the tools that make it almost certain that they can succeed.
  • And finally, what I heard you say loud and clear is that you don’t appeal to the heart alone, and you don’t appeal to the head alone.  You have to have a very rational case, but you also must appeal to our sense of responsibility for our brethren” (pp. 96, 97).

Managing for Performance

What is the Bottom Line When There Is No “Bottom Line”?

“Performance means concentrating available resources where the results are.  It does not mean making promises you can’t live up to” (p. 108).

  • “Performance in the non-profit institution must be planned.  And this starts out with the mission.  Non-profits fail to perform unless they start out with their mission.  For the mission defines what results are in this particular non-profit institution.
  • And then one asks: Who are our constituencies, and what are the results for each of them?” (p. 108).

Goals

  • “The first–but also the toughest–task of the non-profit executive is to get all of these constituencies to agree on what the long-term goals of the institution are….What I learned was that unless you integrate the vision of all constituencies into the long-range goal, you will soon lose support, lose credibility, and lose respect” (p. 110).
  • “[Non-profits] have to distinguish between moral causes and economic causes.  A moral cause is an absolute good….In an economic cause, one asks: Is this the best application of our scarce resources?” (pp. 111-112).

Don’t’s and Do’s–The Basic Rules

  • “In every move, in every policy, the non-profit institution needs to start out by asking, Will this advance our capacity to carry out our mission?” (p. 114).
  • “Dissent…is essential for effective decision-making.  Feuding and bickering are not.  In fact, they must not be tolerated.  They destroy the spirit of an organization” (p. 114).
  • “Don’t tolerate discourtesy” (p. 115).
  • “In the information-based institution, people must take responsibility for informing their bosses and their colleagues, and, above all, for educating them” (p. 116).
  • “Organizations are built on trust.  Trust means that you know what to expect of people.  Trust is mutual understanding.  Not mutual love, not even mutual respect.  Predictability” (p. 116).
  • “Everyone believes in delegation.  But it needs clear rules to become productive.  It requires that the delegated task be clearly defined, that there are mutually understood goals and mutually-agreed upon deadlines, both for progress reports and for the accomplishment of the task.  Above all, it requires clear understanding of what the person who delegates and the person who takes on the assignment expect and are committing themselves to.  Delegation further requires that delegators follow up (p. 117).
  • “An appraisal should always start out with what the person has done well.  Never start out with the negative:  You’ll get to it soon enough” (p. 120).

The Effective Decision

  • “The most important part of an effective decision is to ask: What is the decision really about?  Very rarely is the decision about what it seems to be about.  That’s usually a symptom” (p. 121).
  • “The next question in decision making is opportunity versus risk.  One starts out with the opportunity, not with the risk:  If this works, what will it do for us?  Then look at the risks.  And there are three kinds of risks:
    • There is the risk we can afford to take…
    • There is the irreversible decision, when failure may do serious harm.
    • Finally, there is the decision where the risk is great but one cannot afford not to take it” (p. 123).

“You do not prevent disagreement, but you do resolve conflict” (p. 127).

“Businesses usually define performance too narrowly–as the financial bottom line….In a non-profit organization, there is no bottom line.  But there is also a temptation to downplay results….That is not enough” (p. 139).

“One sometimes has to remind them of the Parable of the Talents in the New Testament:  Our job is to invest the resources we have–people and money–where the returns are manifold” (p. 140).

People and Relationships

People Decisions

“Those who have a batting average of almost 1.000 in [people] decisions start out with a very simple premise:  that they are not judges of people.  They start out with a commitment to a diagnostic process” (p. 145).

Stage 1: “The right questions are:

  • How have these people done in their last three assignments?  Have they come through?
  • Then…look at people’s strengths.  What have they shown they can do in their last three assignments?
  • Once you come to the conclusion [that you have the right person], go…to two or three people with whom she has worked” (p. 146).

Stage 2: “The second stage comes ninety days later, when you call the newly appointed person in and say….Think through what you have to do to be successful, and come back and tell me” (p. 146).

  • “First, one doesn’t try to build on people’s weaknesses….But if you want people to perform in an organization, you have to use their strengths….
  • A second don’t is to take a narrow and short-sighted view of the development of people.  One has to learn specific skills for a specific job.  But development is more than than: it has to be for a career and for a life” (p. 147).
  • “The old rule is, if they try, work with them.  If they don’t try, you’re better off if they work for the competition” (p. 150).
  • “Effective non-profit organizations also have to ask themselves all the time: Do our volunteers grow?  Do they acquire a bigger view of their mission and greater skill?” (pp. 150, 151).

Stage 3: “The more successful an organization becomes, the more it needs to build teams.  In fact, non-profit organizations most often fumble and lose their way despite great ability at the top and a dedicated staff because they fail to build teams” (p. 152).

“Once the right match is made, there are two keys to a person’s effectiveness in an organization.

  • One is that the person understands clearly what he or she is going to do and doesn’t ride off in all directions.
  • The other is that each person takes the responsibility for thinking through what he or she needs to do the job.
  • That done, the person goes to all the others on whom he depends–the superior, the associates, the subordinates–and says, “This is what you are doing that helps me.  This is what you are doing that hampers me.  And what do I to that helps you?  What do I do that hampers you?” (p. 153).

“Are we, in other words, building for tomorrow in our people decisions, or are we settling for the convenient and the easy today?” (p. 155).

The Key Relationships

“To be effective, a non-profit needs a strong board, but a board that does the board’s work.

  • 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 commitment.
  • The board has the job of making sure the non-profit has competent management–and the right management.
  • The board’s role is to appraise the performance of the organization.
  • And in a crisis, the board members may have to be firefighters.
  • The board is also the premier fund-raising organ of a non-profit organization–one important role it does not have in the the for-profit business” (p. 157).

“Wherever I’ve seen a non-profit institution with a strong board that gives the right kind of leadership, it represented very hard work on the part of the chief executive officer–not merely to bring the right people onto the board but to meld them into a team and point them in the right direction.  In my experience, the chief executive officer is the conscience of the board” (p. 158).

From Volunteers to Unpaid Staff

“[Quality] control is maintained because of the common vision” (p. 164).

“Emphasis in managing people should always be on performance.  But, especially for a non-profit it must also be compassionate….People work in non-profits because they believe in the cause.  They owe performance, and the executive owes them compassion.  People given a second chance usually come through.  If people try, give them a second chance.  If people try again and they still do not perform, they may be in the wrong spot” (p. 183).

“A person is never gong to have a sense of his own, her own, dignity unless they are able to fulfill the expectation of completing the tasks and discharging the responsibilities that they take on” (p. 168).

[There] is no greater achievement than to help a few people get the right things done.  That’s perhaps the only satisfactory definition of being a leader” (p. 169).

The Effective Board

“I think a CEO has two primary areas of service.

  • I have to care for the vice-presidents, whom I supervise, and who have no other boss than me.
  • And I have to care for the trustees, who have no other direct and immediate or ongoing contact with the institution besides me and what my office staff does” (p. 174).

“We tell bad news at 110 percent and good news at 90 percent in order to compensate for our tendency to cheat, almost unconsciously, because we want to tell the board all the good news and we want to minimize the bad news” (p. 175).

Developing Yourself

You Are Responsible

“The first priority for the non-profit executive’s own development is to strive for excellence.  That brings satisfaction and self-respect” (p. 189).

“You cannot allow the lack of resources, of money, of people, and of time (always the scarcest) to overwhelm you and become an excuse for shoddy work….Paying serious attention to self-development–your own and that of everyone in the organization–is not a luxury for non-profit executives…Volunteers, particularly, who don’t get a great deal out of working for the organization aren’t going to be around very long” (p. 189).

“You want constructive discontent” (p. 190).

“And each of these volunteers sits down twice a year and write a letter to himself or herself (a copy to the [CEO]) answer the questions: ‘What have I learned?  What difference to my own life has my work…been making?” (p. 190).

“Leadership is not characterized by stars on your shoulder; an executive leads by example.  And the greatest example is precisely the dedication to the mission of the organization as a means of making yourself bigger–respecting yourself more” (p. 193).

What Do You Want To Be Remembered For?

“To develop yourself, you have to be doing the right work in the right organization.  The basic question is: “Where do I belong as a person?”  (p. 195).

  • “The first step toward effectiveness is to decide what are the right things to do.  Efficiency, which is doing things right, is irrelevant until you work on the right things.  Decide your priorities, where to concentrate.  Work with your own strengths….You identify strengths with performance.  There is some correlation between what you and I like to do and what we do well” (p. 198).
  • “I’m always asking that question:  What do you want to be remembered for?  It is a question that induces you to renew yourself, because it pushes you to see yourself as a different person–the person you can become” (p. 202).

“Developing yourself begins by serving, but striving toward an idea outside of yourself–not by leading.  Leaders are not born, nor are they made–they are self-made.  To do this, a person needs focus.  Michael Kami, our leading authority on business strategy today, draws a square on the board and asks:  ‘Tell me what to put in there.  Jesus?  Or money?  I can help you develop a strategy for either one, but you have to decide which is the master” (p. 222).

Know Yourself

One of my fondest memories from high school was leaving a dance and walking a mile to retrieve my car.  The snowflakes were falling gently and I felt warmed by them as I walked.  In my solitude their peaceful descent felt comforting, like God was touching me and telling me to be who he created me to be.  But who was that?  Many years later I read this article and it reminded me of that memory.  The article helps me better understand who I am. Hopefully it will do the same for you.

From “Managing Oneself” by Peter Drucker* in HBR Leadership Fundamentals.

“Now most of us, even those of us with modest endowments, will have to learn to manage ourselves.  We will have to learn to develop ourselves.  We will have to place ourselves where we can make the greatest contribution” (p. 7).

“We need to know our strengths in order to know where to belong” (p. 8).

The only way to discover your strengths is through feedback analysis.  Whenever you make a key decision or take a key action, write down what you expect will happen.  Nine or twelve months later, compare the actual results with your expectations” (p. 8).

“Several implications for action follow from feedback analysis.

  • First and foremost, concentrate on your strengths.  Put yourself where your strengths can produce results.
  • Second, work on improving your strengths….
  • Third, discover where your intellectual arrogance is causing disabling ignorance and overcome it” (p. 8).

“It is equally essential to remedy your bad habits — the things you do or fail to do that inhibit your effectiveness and performance” (p. 8).

“Manners are the lubricating oil of an organization.  It is a law of nature that two moving bodies in contact with each other create friction” (p. 8).

How Do You Get Things Done?

“Comparing your expectations with your results also indicates what not to do….In those areas a person…should not take on work, jobs, and assignments.  One should waste as little effort as possible on improving areas of low competence.  It takes far more energy and work to improve from incompetence to mediocrity than it takes to improve from first-rate performance to excellence….Energy, resources, and time should go instead to making a competent person into a star performer” (pp. 8, 9).

“Amazingly few people know how they get things done….For knowledge workers, How do I perform? may be an even more important question than What are my strengths?….A few common personality traits usually determine how a person performs” (p. 9).
  • “The first thing to know is whether you are a reader or a listener” (p. 9).
  • “The second thing to know about how one performs is to know how one learns” (p. 9).
    • “[Writers] do not, as a rule, learn by listening or reading.  They learn by writing” (p. 9).
    •  “Some people learn by doing.
    • Others learn by hearing themselves talk” (p. 10).
    • “Am I reader or a listener?  and How do I learn? are the first questions to ask.  But they are by no means the only ones.
  • To manage yourself effectively, you also have to ask,
    • Do I work well with people, or am I a loner?
    • And if you work well with people, you then must ask, In what relationship?” (p. 10).
    • “Another crucial question is, Do I produce results as a decision maker or as an adviser?” (p. 10).
    • “Other important questions to ask include, Do I perform well under stress, or do I need a highly structured and predictable environment?
    • Do I work best in a big organization or a small one?  Few people work well in all kinds of environments” (p. 10).

“The conclusion bears repeating: Do not try to change yourself — you are unlikely to succeed.  But work hard to improve the way you perform” (p. 10).

“To be able to manage yourself, you finally have to ask, What are my values?….To work in an organization whose value system is unacceptable or incompatible with one’s own condemns a person both to frustration and nonperformance” (pp. 10, 11).

Successful careers are not planned They develop when people are prepared for opportunities because they know their strengths, their method of work, and their values” (p. 12).

“Knowledge workers in particular have to ask a question that has not been asked before: What should my contribution be?  To answer it, they must address three distinct elements:

  • What does the situation require?
  • Given my strengths, my way of performing, and my values, how can I make the greatest contribution to what needs to be done?
  • And finally, What results have to be achieved to make a difference?” (p. 12).

“Managing yourself requires taking responsibility for relationships.  This has two parts.

  • The first is to accept the fact that other people are as much individuals as you yourself are.  They perversely insist on behaving like human beings.  This means that they too have their strengths; they too have their ways of getting things done; they too have their values.  To be effective, therefore, you have to know the strengths, the performance modes, and the values of your coworkers….
  • The second of relationship responsibility is taking responsibility for communication” (p. 13).