As the President asked for individual responsibility during a national crisis, Drucker said corporate leaders must serve the common good
When Peter Drucker was asked toward the end of his long life to list his greatest contributions, he pointed to his pioneering insight that management had extended beyond the realm of business to become "the governing organ of all institutions of modern society." He also noted, without embellishment nor false modesty, that "I established the study of management as a discipline in its own right."
And then he added this: "I focused this discipline on people and power; on values, structure and constitution; and above all on responsibilities." For extra emphasis, he typed the last part of the sentence in capital letters.
I thought about Drucker's list this week, as President Barack Obama summoned the R-word in an inaugural address that was by turns soaring and sober. "What is required of us now," he declared, "is a new era of responsibility."
But what are these "duties to ourselves, our nation, and the world" that Obama has asked us to "seize gladly"? What, really, can we be expected to do at a time when as the president himself put it, "our economy is badly weakened…. Homes have been lost, jobs shed, businesses shuttered." How can each of us, in our own way, help provide for the common good?
Part of the answer lies in Obama's call for service and volunteering—a force that Drucker also viewed as "a powerful countercurrent" to the "decay and dissolution of family and community and …loss of values" in America.
But for Drucker, there was something even more fundamental to the notion of responsibility. It begins with the recognition that over the last 150 years we've become a society of big organizations. And when these organizations aren't effectively managed and ethically led, society as a whole stands to suffer.
Who could doubt that these days? What's good for General Motors (GM) may be good for the country, but the corollary is surely true: When things go bad at GM (or Citigroup or Fannie Mae), it's lousy for us all.
"Economic performance is the first responsibility of a business," Drucker wrote. "Indeed, a business that does not show a profit at least equal to its cost of capital is irresponsible; it wastes society's resources. Economic performance is the base without which a business cannot discharge any other responsibilities, cannot be a good employer, a good citizen, a good neighbor. But economic performance is not the only responsibility of a business…. Every organization must assume full responsibility for its impact on employees, the environment, customers, and whomever and whatever it touches. This is its social responsibility."
What's more, it can't do this after the fact. "It is the job of the organization," Drucker explained, "to look ahead and to think through which of its impacts are likely to become social problems. And then it is the duty of the organization to try to prevent these undesirable side results."
What's Socially Responsible?
And yet organizations must do more than simply keep the negative from happening; to be truly responsible, they must leave a mark on the positive side of society's ledger sheet.
The best way to accomplish this, Drucker advised, is for the organization to convert "into opportunities for its own performance the satisfaction of social needs and wants." This approach, Drucker noted in the late 1960s, another time of intense anxiety for the nation, "may be particularly important in a period of discontinuity."
If there is a danger in satisfying social needs, Drucker recognized, it occurs when organizations fall prey to the temptation to overreach—to try to take on tasks for which they're not properly equipped. "Organizations…do not act 'socially responsible' when they concern themselves with 'social problems' outside of their own sphere of competence and action," he said. "They act 'socially responsible' when they satisfy society's needs through concentration on their own specific job. They act most responsibly when they convert public need into their own achievement."
So what does this come down to for you and me?
Although Drucker wrote about "social responsibility" in the context of the organization, he was quick to remind that "the organization itself, like every collective, is a legal fiction. It is individuals in the organization who make the decisions and take the actions which are then ascribed to the institution, whether it be the 'United States,' the 'General Electric Company,' or 'Misericordia Hospital.'"
It is up to us, then, to be mindful of our impact, no matter what kind of work we're engaged in, to do no harm, and to actively look for ways to solve social ills whenever it makes sound business sense to do so.
Finally, it's up to us to perform. Otherwise, the organizations in Drucker's "society of organizations" will never be healthy and stable.
This holds true for both managers and other workers, especially the knowledge workers whose ranks continue to swell. "The well-being of our entire society," said Drucker, "depends increasingly on the ability of these large numbers of knowledge workers to be effective."
Being responsible not only means doing the right things. It means doing the right things well.