The traditional theorem of the maximization of profit has to be discarded.
To manage a business is to balance a variety of needs and goals. To emphasize only profit, misdirects managers to the point where they may endanger the survival of the business. To obtain profit today, they tend to undermine the future. They may push the most easily saleable product lines and slight those that are the market of tomorrow. They tend to shortchange research, promotion, and other postponable investments. Above all, they shy away from any capital expenditure that may increase the investment capital base against which profits are measured; and the result is dangerous obsolescing of equipment. In other words, they are directed into the worst practices of management.
Objectives are needed in every area where performance and results directly and vitally affect the survival and prosperity of the business. There are eight areas in which performance and objectives have to be set; market standing, innovation, productivity, physical and financial resources, profitability, manager performance and development, worker performance and attitude, and public responsibility. Different key areas require different emphasis in different businesses—and different emphasis at different stages of the development of each business. But the areas are the same, whatever the business, whatever the economic conditions, whatever the business’s size or stage of growth.
ACTION POINT: In addition to setting profit objectives, set objectives for your business in the following areas: market standing, innovation, productivity, physical and financial resources, profitability, manager performance and development, worker performance, and public responsibility.
The Practice of Management
* Source: The Daily Drucker by Peter F. Drucker