APR 06 2011

Peter Drucker on Management and, in Particular, Nonprofit Management


In The End of Economic Man: The Origins of Totalitarianism (1939), Peter F. Drucker argued that capitalism can generate economic development, but he believed that capitalism was bad as a underlying social system due to its “failure to establish equality by economic freedom.”  Drucker believed this is why the Germans and Russians chose socialism (although this was an ideology that Drucker thought was both totalitarian and of little value) in the early 20th century.
Drucker, instead, saw early 20th century American corporations as a source for a potential alternative. Corporations such as General Motors had become excellent at wealth creation.  Drucker believed that such firms could also help provide a sense of community to their managers and employees.  He wanted these firms to develop health and pension plans, to involve employees in corporate governance, and to build factories closer to where people lived.  He believed that profits should not be the only goal of economic life, but rather an indicator of how businesses were doing in motivating their workers to produce goods and services.  (Drucker perhaps failed to realize the full implications of the fact that corporations would chase lower production costs to other jurisdictions (and sets of values influenced by their current, less fully developed economic conditions) as the costs of creating the “sense of community” at home accrued.)  This book set the stage for Drucker’s outlook on businesses (and nonprofits) for the remainder of his life.
In 1990, Drucker wrote a guidebook for and about nonprofits, Managing the Non-Profit Organization: Principles and Practices (Collins, 1992).  Drucker was interested in nonprofit groups because he thought they played a key role in giving a purpose to modern societies, a task he felt that, despite their economic successes, businesses increasingly avoided.  Drucker meant this book as advice for leaders in the “social sector.”  He saw nonprofits as an American innovation that built communities while providing valuable services and fostering innovation and as leaders in knowledge-driven economic activity.  However, he also thought that nonprofits had plenty of room for improvement, and his book emphasized working on development of the mission and governance of nonprofits.  His hope to improve the performance of nonprofits, and his recognition that without nonprofits their great contribution to social equality would disappear, spurred his efforts in this area.
Drucker’s book is well organized and emphasizes the nonprofit mission and governance. He divides the book into the following chapters:
  •          Mission comes first and the role of a leader
  •          From mission to performance: effective strategies for marketing, innovation, and development
  •          Managing for performance
  •          People and relationships: staff, board volunteers, and community
  •         Developing yourself: as a person, executive, or leader
Drucker felt that donors needed to feel more like participants and to learn how to offer volunteers a greater sense of “community and common purpose.”  According to Drucker, management is about goals, not processes, habits, and rules.
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