Quantification for most of the phenomena in a social ecology is misleading or at best useless.
The most important reason why I am not a quantifier is that in social affairs, events that matter cannot be quantified. For example, Henry Ford‘s ignorance in 1900 or 1903 of the prevailing economic wisdom that the way to maximize profit was to be a monopolist—that is, to keep production low and prices high—led him to assume that the way to make money was to keep prices low and production high. This, the invention of “mass production,” totally changed industrial economics. It would have been impossible, however, to quantify the impact even as late as 1918 or 1920, years after Ford’s success had made him the richest industrialist in the United States, and probably in the world. He had revolutionized industrial production, the automobile industry, and the economy in general, and had, above all, completely changed our perception of industry.
The unique event that changes the universe is an event “at the margin.” By the time it becomes statistically significant, it is no longer “future”; it is, indeed, no longer even “present.” It is already “past.”
The only things that evolve by themselves in an organization are disorder, friction, malperformance.
The pioneers of management a century ago were right: organizational structure is needed. The modern enterprise needs organization. But the pioneers were wrong in their assumption that there is—or should be—one right organization. Instead of searching for the right organization, management needs to learn to look for, to develop, to test, the organization that fits the task.
There are some “principles” of organization. One is that organization has to be transparent. People have to know and have to understand the organization structure they are supposed to work in. Someone in the organization must have the authority to make the final decision in a given area. It also is a sound principle that authority be commensurate with responsibility. It is a sound principle that any one person in an organization should have only one “master.” These principles are not too different from the ones that inform an architect’s work. They do not tell him what kind of building to build. They tell him what the restraints are. And this is pretty much what the various principles of organization structure do.
Managing managers requires special efforts not only to establish common direction, but to eliminate misdirection.
Setting objectives is so important that some of the most effective managers I know have each of their subordinates write a “manger’s letter” twice a year. In this letter to his superior, each manager
first defines the objectives of his superior’s job and of his own job as he sees them. He then sets down the performance standards that he believes are being applied to him.
Next, he lists the things he must do to attain these goals—and the things within his own unit he considers the major obstacles. He lists the things his superior and the company do that help him and the things that hamper him.
Finally, he outlines what he proposes to do during the next year to reach his goals. If his superior accepts this statement, the “manager’s letter” becomes the charter under which the manager operates.
Mutual understanding can never be attained by “communications down,” can never be created by talking. It can result only from “communications up.” It requires both the superior’s willingness to listen and a tool especially designed to make lower managers heard.
If objectives are only good intentions, they are worthless. They must degenerate into work. And work is always specific, always has—or should have—clear, unambiguous, measurable results, a deadline, and a specific assignment of accountability. But objectives that become a straitjacket do harm. Objectives are always based on expectations. And expectations are, at best, informed guesses. The world does not stand still.
The proper way to use objectives is the way an airline uses schedules and flight plans. The schedule provides for the 9 AM flight from Los Angeles to get to Boston by 5 PM. But if there is a blizzard in Boston that day, the plane will land in Pittsburgh instead and wait out the storm. The flight plan provides for flying at thirty thousand feet and for flying over Denver and Chicago. But if the pilot encounters turbulence or strong headwinds, he will ask flight control for permission to go up another five thousand feet and to take the Minneapolis—Montreal route. Yet no flight is ever operated without a schedule and flight plan. Any change is immediately fed back to produce a new schedule and flight plan. Objectives are not fate; they are direction. They are not commands; they are commitments. They do not determine the future; they are a means to mobilize the resources and energies of the business for the making of the future.
The greatest advantage of management by objectives is perhaps that it makes it possible for a manager to control his own performance. Self-control means stronger motivation: a desire to do the best rather than just enough to get by. It means higher performance goals and broader vision. Even if management by objectives were not necessary to give the enterprise the unity of direction and effort of a management team, it would be necessary to make possible management by self-control.
“Control” means the ability to direct oneself and one’s work. It can also mean domination of one person by another. Objectives are the basis of “control” in the first sense; but they must never become the basis of “control” in the second, for this would defeat their purpose. Indeed, one of the major contributions of management by objectives is that it enables us to substitute management by self-control for management by domination. It should be clearly understood what behavior and methods the company bars as unethical, unprofessional, or unsound. But within these limits every manager must be free to decide what he or she has to do.
Managers can improve their performance by improving their performance of these constituent activities.
There are five basic operations in the work of the manager.
Managers, in the first place, set objectives. They determine what the objectives should be. They determine what the goals in each area of objectives should be. They decide what has to be done to reach these objectives. They make the objectives effective by communicating them to the people whose performance is needed to attain them.
Second, managers organize. They analyze the activities, decisions, and relations needed. They classify the work. They divide it into manageable activities and further divide the activities into manageable jobs. They group these units and jobs into an organization structure. They select people for the management of these units and for the jobs to be done.
Next, managers motivate and communicate. They make a team out of the people who are responsible for various jobs.
The fourth basic element in the work of the manager is measurement. The manager establishes yardsticks—and few factors are as important to the performance of the organization and of every person in it.
Finally, managers develop people, including themselves.
In looking for a husband for your daughter, says an old proverb, don’t ask: “Who’ll make the best husband for her?” Ask instead: “For which kind of a man would she make a good wife?”
Divestment is a “marketing” rather than a “selling” problem. The question is not: “What do we want to sell and for how much?” It is: “For whom is this venture ‘value’ and under what conditions?” The salient point is finding the potential buyer for whom what is misfit to the seller is a perfect fit, the buyer to whom the venture to be sold offers the best opportunity or solves the worst problem. This is then also the buyer who will pay the most.
A major printing company decided that a mass-circulation magazine it owned was at best a partial fit and should be sold. The magazine had been bought originally to hold it printing contract. They asked, “What is value to a magazine publishing company?” “If it is a growing magazine company,” they answered, “its greatest need is cash. For a growing magazine requires heavy cash investments in building circulation for several years. “How can we supply this need of the potential buyer to our own advantage?” was the next question. And the answer was. “By giving him ninety days rather than the customary thirty days to pay his print and paper bill to our printing plants.” The printing company then rapidly found a publishing group that filled their requirements.
“To abandon what? and “To abandon how? have to be practiced systematically. Otherwise they will always be “postponed,” for they are never “popular” policies.
In one fairly big company offering outsourcing services in most developed countries, the first Monday of every month is set aside for an abandonment meeting at every management level from top management to the supervisors in each area. Each of these sessions examines one part of the business—one of the services one Monday, one of the regions in which the company does business a month later, the way this or that service is organized the Monday morning of the third month, and so on. Within the year, the company this way examines itself completely, including its personnel policies, for instance. In the course of a year, three to four major decisions are likely to be made on the “what” of the company’s services and perhaps twice as many decisions to change the “how.” But also each year, three to five ideas for new things to do come out of these sessions. These decisions to change anything—whether to abandon something, whether to abandon the way something is being done, or whether to do something new—are reported each month to all members of management. And twice a year all management levels report on what has actually happened as a result of their sessions, what action has been taken and with what results.
