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TEACHING NOTES

Prepared and Compiled by

Joseph A. Maciariello with assistance from Richard Romo and Matthew Shin

HarperCollinsPublishers www.HarperAcademic.com

TABLE OF CONTENTS PART ONE

MANAGEMENT’S NEW REALITIES . . . . . . . . . . . . . . . . . . .4

Case Number 1

Yuhan-Kimberly’s New Paradigm: Respect for Human Dignity . . . . . . . .4

PART TWO

BUSINESS PERFORMANCE . . . . . . . . . . . . . . . . . . .5

Case Number 2

What Is OUR Business? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Case Number 3

What Is a Growth Company? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Case Number 4

Success in the Small Multinational . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Case Number 5

Health Care as a Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

PART THREE

PERFORMANCE IN SERVICE INSTITUTION . . . . . . . .7

Case Number 6

The University Art Museum: Defining Purpose and Mission . . . . . . . . .7

Case Number 7

Rural Development Institute: Should It Tackle the Problem of the Landless Poor in India? . . . . . . . . . .8

Case Number 8

The Future of Mt. Hillyer College . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Case Number 9

The Water Museum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Case Number 10

Should the Water Utility Operate A Museum? . . . . . . . . . . . . . . . . . . . .11

Case Number 11

Meeting the Growing Needs of The Social Sector . . . . . . . . . . . . . . . . .12

Case Number 12

The Dilemma of Aliesha State College: Competence versus Need . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Case Number 13

What Are Results in the Hospital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Case Number 14

Cost Control in the Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

PART FOUR

PRODUCTIVE WORK AND ACHIEVING WORKER . . .15

Case Number 15

Work Simplification and the Marketing Executive . . . . . . . . . . . . . . . . .15

Case Number 16

The Army Service Forces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Case Number 17

How Does One Analyze and Organize Knowledge Work? . . . . . . . . . . .17

Case Number 18

Can One Learn to Manage Subordinates? . . . . . . . . . . . . . . . . . . . . . . .18

Case Number 19

How to Staff the Dead-End Job? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Case Number 20

The Training Director in the Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Case Number 21

Are You One of Us or One of Them? . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Case Number 22

Midwest Metals and the Labor Union . . . . . . . . . . . . . . . . . . . . . . . . . .19

Case Number 23

Safety at Kajak Airbase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

PART FIVE

SOCIAL IMPACTS AND SOCIAL RESPONSIBILITIES 20

Case Number 24

Corporate Image to Brand Image: Yuhan-Kimberly . . . . . . . . . . . . . . . .20

Case Number 25

The Peerless Starch Company of Blair, Indiana . . . . . . . . . . . . . . . . . . . .22 2

PART SIX

THE MANAGER’S WORK AND JOBS . . . . . . . . . . . .23

Case Number 26

Alfred Sloan’s Management Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Case Number 27

Performance Development System at Lincoln . . . . . . . . . . . . . . . . . . . . .23 Electric for Service and Knowledge Workers

Case Number 28

Internal and External Goal Alignment at Texas Instruments . . . . . . . . .25

Case Number 29

Can You Manage Your Boss? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

Case Number 30

Ross Abernathy and the Frontier National Bank . . . . . . . . . . . . . . . . . . .27

Case Number 31

The Failed Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

PART SEVEN

MANAGERIAL SKILLS . . . . . . . . . . . . . . . . . . . . . . .28

Case Number 32

Lyndon Johnson’s Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Case Number 33

The New Export Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Case Number 34

The Insane Junior High Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Case Number 35

The Structure of a Business Decision . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Case Number 36

The Corporate Control Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

PART EIGHT

INNOVATION AND ENTREPRENEURSHIP . . . . . . . .30

Case Number 37

Research Strategy and Business Objectives . . . . . . . . . . . . . . . . . . . . . . .30

Case Number 38

Who Is the Brightest Hamster In The Laboratory? . . . . . . . . . . . . . . . .30

Case Number 39

Andy Grove of Intel: Entrepreneur Turned Executive . . . . . . . . . . . . . .31

Case Number 40

The Chardack-Greatbatch Implantable Pacemaker . . . . . . . . . . . . . . . .31

PART NINE

MANAGERIAL ORGANIZATION . . . . . . . . . . . . . . . .32

Case Number 41

The Invincible Life Insurance Company . . . . . . . . . . . . . . . . . . . . . . . . .32

Case Number 42

The Failed Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Case Number 43

Banco Mercantil: Organization Structure . . . . . . . . . . . . . . . . . . . . . . . .32

Case Number 44

The Universal Electronics Company . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

Case Number 45

Research Coordination in the Pharmaceutical Industry . . . . . . . . . . . . .33

Case Number 46

The Aftermath of Tyranny . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Case Number 47

What Is the Contribution of Bigness? . . . . . . . . . . . . . . . . . . . . . . . . . . .34

PART TEN

NEW DEMANDS ON THE INDIVIDUAL . . . . . . . . . .34

Case Number 48

The Function of the Chief Executive . . . . . . . . . . . . . . . . . . . . . . . . . . .34

Case Number 49

Drucker’s Ideas for School Reform? . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

Case Number 50

What Do You Want to Be Remembered For? . . . . . . . . . . . . . . . . . . . . .37

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PART ONE: MANAGEMENT’S NEW REALITIES CASE NUMBER 1 Yuhan-Kimberly’s New Paradigm: Respect for Human Dignity The success of the Y-K’s rotation system requires the spirit of the performance. It is difficult to develop such a culture. So, let’s look further into how Y-K accomplished its spirit of performance. It is based first and foremost on its principle ‘respect for the human.’ The implementation of Y-K’s principle led to hiring managers who have integrity and this integrity in turn results in both human development and the spirit of performance. Human development leads to the spirit of the performance and the spirit of the performance leads to human development in a reinforcing manner. There is a feedback, or mutually reinforcing, relationship between the two variables as shown below.

Integrity of Character “Working” with human being always means developing him or her. Developing people requires a basic quality in the manager that cannot be created simply by improving skills or by emphasizing the importance of the task. It requires integrity of character. It requires an understanding of and interest in what people are becoming in their work. Developing people always involves self-development. Self-development is assisted placing high performance standards on people, according to their strengths. The Spirit of Performance “Spirit of performance” in a human organization means that the energy of the organization leads to outputs that are larger than the sum of the individual efforts. This cannot be accomplished by mere mechanical means. To get out more than is being put in is possible only in the moral sphere and this requires respect for human dignity. The spirit of performance requires integrity, high performance standards, focusing on opportunity, and expressing organizational values in people decision. For these requirements to lead to the spirit of the performance, management must demonstrate integrity: the only quality that they must bring with them and cannot be expected to be acquired later on. With a successful implementation of the spirit of the performance, individuals in the organization will develop – both as persons and as knowledge resources. 4

PART TWO: BUSINESS PERFORMANCE CASE NUMBER 2 What is OUR Business? “All right.” said a thoroughly exasperated Callahan, “you have told me what our business is NOT -but how does one go about deciding what it is or should be? You all agree that the market opportunities are good in both areas. So what we need to think through is what it is we are? What is it that we can do? What do we believe in?” How should one go about thinking through these questions? In other words, we have to think through what is our business? What are our core competencies? And what is our mission? But, how should we go about this task? Both those opposed to Outdoor Wear, on grounds the needs for style, promotion, and sex appeal, and those opposed to Restaurants, on grounds of the need to provide service, atmosphere, and cooks and while catering to guests, have made the mistake of focusing only on weaknesses, what Callahan is not good at, have never done, and the competencies they would have to learn. Neither side has asked: What are we good at? What are our strengths? What can we put to work? In what kind of business are these strengths likely to be productive? Are we primarily buyers for customers? That would have a major bearing for entering the fashion business. Or, are we primarily people who know how to organize and systematize? THE LATTER IS OUR STRENGTH. AND, that is what a chain restaurant requires.

CASE NUMBER 3 What is a Growth Company? Each of the men is both right and wrong. Any business needs to earn its cost of capital—or it is destroying economic wealth and is incapable of self-renewal. So, the president of the conglomerate is right to require the bakery to earn a sum sufficient to cover and exceed its cost of capital. The president of the bakery is wrong in asserting that the bakery cannot earn its cost of capital. As is the bakery should at least earn its cost of capital, but by changing its “Theory of Business” and through innovation this bakery could have the potential to meet corporate expectations of financial performance and growth. On the other hand, the president of the bakery is right and the president of the conglomerate wrong as to growth expectations. Given The Theory of Business “as is” the bakery is not going to be a growth business no matter what is done with it—not in a developed country in which bread consumption goes down with rising incomes and standards of living. The bakery is unlikely to grow at 10 percent per year, as the president of the conglomerate expects. However, the bakery could re-define its Theory of Business and look at the new realities of the baking business today. To achieve the president’s expectation and meet growth potential the bakery will need to innovate with new delivery channels, new “whole earth” recipes and expand its product line. Combining these ideas with advanced information technology and Internet sales, this bakery can turn into the juggernaut that the corporate president expects.

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The staff people of the conglomerate can help the president of the bakery to turn the business around so that it meets profit and growth objectives. Current operations must be operated at minimum costs and maximum cash generation. This will require that the bakery stream line production, reengineer business processes and work on the spirit of performance with incentives and education on a new baking process. To achieve business goals set by the president; objectives should be established in eight key areas: Marketing, Innovation, Human Resources, Financial Resources, Physical Resources, Productivity, Social Responsibility and Profit Requirements. These objectives are paramount for establishing new directions and new measurements for performance. The new Theory of the Business should aim at creating new customers by aligning its business with the needs of noncustomers, taking full advantage of the opportunity created by the two-person working household. Technology and Internet presence should allow the bakery’s executives to explore new channels of distribution, marketing opportunities and branding. By aligning today’s business with today’s realities and by asking the right questions such as: Who are the non customers? What should our business be? This bakery will begin a process of change that will eventually lead to new services, new customers and improved financial metrics. The Bakery may need to start a delivery using bakery trucks powered by hybrid, smart vehicles making deliveries at the right time in the evening and servicing working professional that don’t have time for shopping but need healthy organic baked goods like such as Scones, rolls, English biscuits using minimal amounts of brown sugar and whole wheat breads. The Bakery can innovate by using technology and by developing on line services such as business to customer e-commerce, opportunities that will enhance delivery and expand production and growth by enhancing delivery of orders and by creating an e-mail order business using information technology. Innovation is the key to business. The innovation cycle – in this case – requires investment in order for profits to grow. The speed with which the environment around us is changing necessitates that the bakery alter its theory of the business. Executives need to keep ideas flowing and understand that there are internal and external variables that must be measured. Internally, among the most important variables are the theory of the business, personal skills, managerial skills, and productivity of resources. Externally, executives must innovate, by understanding environmental trends, by creating a niche that is socially responsible and a spirit of performance that motivates employees.

CASE NUMBER 4 Success in the Small Multinational Bluntschili meant what he said. All he did was to think through the strengths of the company, concentrate on them and get paid for them. He changed the business away from the exclusive design, manufacture and service of gears for cog rails on a global basis to the design, manufacture and service of specialized precision gears for all kinds of transportation vehicles. It changed its manufacturing from all equipment it sells and services to manufacturing only a few specialized parts for each of the pieces of equipment it sells, and out-sources the standard parts. It continues to provide global service for the gears it designs and sells but now charges for the service.

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CASE NUMBER 5 Health Care as a Business Three basic questions for each alternative: Does it fit OUR strengths and avoid OUR weaknesses? Is it the best way to tackle the health care and hospital job? Does it fit the way health-care and hospital people operate or are likely to be willing to operate? Then management should ask: What does each approach commit us to? What should we expect as results for each approach? What constitutes performance for each approach? For example, under the first approach, the design of hardware for hospitals, clearly only a very sizeable business with a leadership position in a number of major health-care technologies could possibly succeed, and indeed, would even be viable.

PART THREE: PERFORMANCE IN SERVICE INSTITUTIONS CASE NUMBER 6 The University Art Museum: Defining Purpose and Mission This case should be looked at in three ways: First, what mission & purpose does the university strive to fulfill? We cannot focus solely on the art museum. Then we can consider the mission & purpose of the Art Museum in light of the mission of the university. What should be the relation of the Art Museum to the surrounding community? What is the correct balance between teaching, research and preparation of future scholars and museum directors? This in turn is very dependent upon the mission of the university. Second, this is a case in organization. Where does the museum fit in the university and to whom should it report? No one knows where the museum fits in the organization and to whom it reports. Why is it in the graduate faculty? Should it be there? Organization decisions should follow the basic mission decisions—but without them no museum director can hope to accomplish much. Third, this is also a case of a failed promotion decision. A dialogue should have taken place with the previous director before he took the job. The previous director should be asked: “You realize that you are no longer running a community museum. You are running a university museum.” What do you have to do to be successful in running a university (versus a community) museum? No one did this, so he continued, without thinking, to behave in the way that had been successful in running a community museum. And it was not appropriate for this university museum. 7

CASE NUMBER 7 Rural Development Institute: Should It Tackle the Problem of the Landless poor in India? To assess the likelihood of success, we will examine the validity of RDI’s theory of the business through the Drucker Management System. A major purpose of the Drucker Management System is to develop and validate an organization’s “theory of the business,” which Drucker defines as an organization’s “assumptions ...about what a company gets paid for” (Drucker 2008, p.85).1 We will take a closer look at the theory of the business portion of the Drucker Management System in Figure 1, in order to analyze the decision making process used when RDI passed up the opportunities in the former Soviet Union and when RDI considered the India project.

[Figure 1] The Theory of the Business formulation (Maciariello, 2009)2

First, formulating the mission, the theory of the business, of an organization requires executives to look beyond the walls of the organization to the external environment. The environment is not limited to where the enterprise is currently operating, but also includes other ‘environments,’ such as those where non-customers are being served and where future customers are likely to be served. The executives of RDI had clearly segmented its business environment: “the world’s poorest people – those 3.4 billion, chiefly rural, people who live on less than two dollars a day.” Executives must also understand the core-competencies required by an organization’s mission. In order to understand core-competencies, executives must ask, what are we really good at? The executives of RDI evidently understood their strengths in research, reform design, policy advocacy, and implementation. The opportunity in the Soviet Union noticeably violates the environmental dimensions of RDI’s theory of the business. What RDI considered as their business environment was the rural poor not the urban poor. Therefore, passing up the opportunity in the Soviet Union reflected good judgment that is in line with the requirements in the Drucker Management System. In order to fully consider the lessons from this case, let’s look at the example of India. India had the largest population of poor in the world, and there was a strong link between poverty and landlessness. These facts fit the business environment that RDI has a passion for. However, there was a major problem: the lack of political will to reform. Although, it is a major problem, RDI has core-competencies in policy advocacy, and reform design. The problem should not discourage RDI, but challenge them to solve the problem through their existing core-competencies. 8

The international context presents both greater challenges and opportunities in the India case. These challenges and opportunities should be considered as “Management’s New Realities” which influence the organization’s environment as seen in Figure 1. If management’s new realities alter its environment and if the organization cannot adjust its competencies to these new realities, it creates a challenge for the organization to develop a new theory of the business. This was not the case for RDI.

CASE NUMBER 8 The Future of Mt. Hillyer College Dean Holman was concerned that nobody had asked such important questions such as: What is its excellence going to be tomorrow? Does Hillyer have to stand for something in higher education? Should it be excellence in teaching? Should it be leadership in new areas of learning and knowledge? Should it be close integration with the world of work? Dean Holman asks these questions at the right time—when the institution is successful and has attained his objectives. It is possible to come to grips with the questions by asking who the “publics” are for higher education: students, faculties, parents, donors, and society at large What do each of these “publics” expect and consider “excellence” or “leadership”? Still another approach would be to answer the question: What is the ideal for Mt. Hillyer? What is required to realize the ideal? That is the way the reformers of American Higher Education, such as Robert Hutchins, President of the University of Chicago in the 1930s, tried to approach the problem. Another possibility is to work on the specifics—such as the quality of teaching, or on new courses (for example by replacing the standard course on Western Civilization by a new one on World Civilization). All of these are feasible approaches, but how does one go about each one of them? 6 Disciplines should be applied: 1. Define “What is our Business and what shall it be?” 2. Derive “Clear Objectives & Goals from its definition of its function & mission” Examples: American Universities in late 1800 (Example: Harvard University and John Hopkins University) and American Community Hospitals 3. Set up “Priorities based on Clear Mission and Objectives” 9

Resources are limited, so some questions must be asked: What targets to select? What deadline to set? Who will be responsible to achieve these Results? What standard of performance to set? Examples: Police Department in large Cities and the Tennessee Valley Authority 4. Define “Measurement of Performance” Example: Schools in NY South Bronx and the Bell Telephone System 5. Need “Feedback to its System” Example: Feedback from faculty and students Military Officers give orders and then check results 6. Continuously audit previously defined objectives and results Now remember, no success is “forever.” One must assess and abandon low-performance activities rather than wasting limited resources.

CASE NUMBER 9 The Water Museum The museum’s mission statement is clear and meets the requirements outlined in Management Revised. The mission statement avoided grand sweeping generalities..It was precise and it was a call to action, “To promote among the general public an awareness and appreciation of water related issues–past, present, and future–and to provide leadership in research leading to more efficient water usage.” The only addition that may improve this mission statement would be to include a sentence on conservation and preservation of water resources and on social responsibility. Otherwise this mission statement seems to meet the requirements for a good mission statement. However, the museum did not define measurements and controls and did not review objectives and results. The Water Museum is a type-two non profit organization. Interesting enough it is being formed from a utility company, a natural monopoly, a type-one service organization. These type-one service institutions are run by a different charter and have different responses to constituents. The type-one service non-profit organization is not directly answerable to its constituents, but they do answer to regulatory agencies that govern them. While the type-two service organization is performing a task that serves a societal function they have a need to be very responsive to their constituents. The motivation and urgency is different between these two types of non-profit service organizations. This eventually leads to a problem in performance and in meeting objectives. The board has two members from the utility company and that affects the urgency of the decisions. The museum requires a strong board that is oriented towards its unique objectives and is task based. The mission statement is clean but the target audience is everyone except one very important constituent. The omission was corporations and their impact on water conservation. It is the private sector’s profit that provides funds for non-profit service organizations. A major source of funding was not included in their target audiences and this was a mistake. As a result they do not have enough money to complete the museum project after two years of development. 10

In essence, the management of the Water Museum requires strict performance monitoring focused on the measurements and the achievement of objectives. It appears that the board was formed as a passive unit that may or may not raise money. The board must be stronger and business objectives should be defined. And the performance of the board itself should be reviewed every year. Each board member’s performance should be analyzed and they should be asked to leave or stay depending on performance. The utility board members are of great concern because of the different style of business that they are representing (a type-one service organization as compared to the museum type-two variety non-profit service organization). However, the museum needs board support. The CEO should create an executive committee and add utility board members to that committee and replace them on the museum board. This would accomplish two objectives. First, it will please the utility company by eliciting their input. Two, and at the same time, it will place stronger entrepreneurial members on the museum board that would align themselves better to the needs of the museum and its market. Board members should focus on helping to define the mission and the organization’s “Theory of Business.” Corporations should be included in the target audience and corporations should be urged to emphasize innovation in water conservation. The museum should create alliances with arboretums with education programs for drought resistant plants and take the message of conservation out to the public. The museum should promote programs in water conservation and reusable water systems. The museum should have a program of hydroponics that includes the history of these programs and how to use them in one’s own back yard to conserve water and save money and grow food, thus promoting urban farming. The job of a Board member is to discover new projects that enhance and promote the “theory of the business.” A board member is responsible for the goals and aspiration and the direction of the museum. A board member’s responsibility also includes monitoring the external variables for their potential impact on the organization. Board members are responsible for monitoring the work of the CEO. In this case, board members were ineffective in monitoring the work of the CEO. The CEO and board should carefully delineate the duties of the CEO and the duties of the board and should work together to make the museum a success.

CASE NUMBER 10 Should the Water Utility Operate a Museum? The water utility should stay within its core competencies and not try to operate the museum. The Water Museum is a type-two non-profit organization. Interesting enough it is being formed from a utility company, a natural monopoly, a type-one service organization. These utility organizations operate by a different sort of charter then the museum. These two kinds of organizations traditionally have different constituencies. The type-one service non-profit organization is not directly answerable to its primary constituents but to the regulatory agency that governs it. In contrast to the type-one service organization, type-two service organizations are organized to perform a task that makes society a better place. Their performance metrics tend to be focused on their constituents who are customers, donors and the public. The motivation and urgency is different between these two types of non-profit service organizations. More than likely, this different style of business will be reflected in board policies and requirements of the museum. Managing different kinds of organizations may lead to performance problems. The museum requires a strong board that is performance oriented and task-based executives to move the museum forward. These two types of institutions are organized differently and must be sensitive to different constituents. The route to success in the type-two organizations (i.e., the museum) is different then the route of a utility company that 11

is a natural monopoly. Certainly we all have heard the grumblings and the horror stories of poor customer relations from regulated natural monopolies. Service organizations like water and electric utilities have often compiled dismal records on customer satisfaction and innovation. But, these very same type-one non-profit organizations have developed clever methods for communicating and answering to their regulatory agencies. Type-two institutions need innovation and must constantly connect to their constituents. Type-two organizations rely on enthusiasm and volunteer work to succeed. These organizations must be outward thinking and responsible for social needs such as water conservation, physical ecology, and protecting endangered species. Water utilities, however, are measured by different standards, often those established by regulatory bodies. As a result the utility should choose option two and provide a grant for the museum. The grant should be structured in such a way that if the museum accepts the money it will need to reconfigure its board. To help the utility company in its involvement with the museum, a museum governance committee should be established. This committee should include some members of the utility board. Furthermore, the museum should be independent of the utility company so that it can become innovative and establish programs that enhance water conservation. These two types of institutions do not mix very well. The Water Utility Company does not have the same purpose as the museum. Having people on the governance committee will give the utility company a presence at the museum. Having an independent board will give the museum freedom to innovate and to establish programs that will eventually expand donations and support from the community at large.

CASE NUMBER 11 Meeting the Growing Needs of the Social Sector The social sector is critical to our nation’s well being. These organizations reflect our values, help foster a sense of belonging and result in changed lives both for those served and for those serving. That these institutions exist at all is a reflection of our collective civility. These organizations attend to many of social needs of society. These organizations are funded from corporate donations and from individual donors. It is paramount that these resources be used effectively. It is incumbent upon us who contribute to these institutions to emphasize at least minimum standards of performance and results. We must insist on strong mission oriented boards that have clear objectives for which they can be held accountable. The CEO of a social sector organization should offer a fair amount of flexibility to constituents in the formulation of its objectives while adhering steadfastly to the basic mission. Finally, one of the major needs in social sector organizations is innovation through entrepreneurial leadership. An assessment of the general needs of these organizations seems to cluster around several requirements: 1. A concise mission statement that calls staff and volunteers to action 2. Clear objectives and goals 3. Measurable standards of performance 4. Feedback to assess progress towards achieving results 5. Decisions to pursue opportunities and plans to abandon programs that are no longer effective. The more an organization pursues a pressing need of society the more success it is likely to have. In social sector 12

organizations the main job of the CEO, the board, paid staff, and volunteers is to make sure that the mission is the central call to action. Principles of professional management are required to convert good intentions to results. In reviewing several non-profit service organizations, one of the biggest contributions that can be made to this sector is the practice of entrepreneurial management. Public Service institutions must build into their policies and practices the continuous search for innovative ideas. These organizations must look outward to social, technical, economic and demographic shifts for opportunities to adapt their mission. The focus on external trends and the communication of this information to all constituents will facilitate the process of change. Many social service institutions are still not managed professionally, although a number of them offer good examples of board development, mission focus and how to manage volunteers. These exemplary social sector organizations provide good examples for other organizations to follow. A look at the American Red Cross Web Site provides encouragement. It appears that this organization has taken great pains to define itself while avoiding sweeping mission statements. The American Red Cross has very specific goals within each programmatic area. The Red Cross developed their internet site to communicate with donors, constituents, corporations and volunteers. It appears they have set clear goals and aspiration for their volunteers. The goals of the Red Cross appear realistic. These goals seek to optimize, not maximize and overreach. The internet site is setup for volunteers to communicate and participate with the organization. The site also allows communication by voice, videos and Wikis. The Red Cross is using its site to communicate to members and non members in the hope they will expand their horizons and improve their life by becoming a volunteer or donor. Their site takes donations, entertains and communicates. After comparing various social sector internet sites it appears that a number of organizations lack strong mission statements, objectives and goals, communication capabilities, and accountability. The Red Cross Web Site is stellar. But it too has areas worth developing such as social networking capability. Much work should be done to improve other sites. They should update their technology by using Wikis, blogs, social networking capability and publishing features with up-to-date content so that an organization can communicate to end users. Effective usage of alarms and alerts also should be extended. Publishing news feeds and videos and membership photos are all tools that should be part of the arsenal used to communicate to constituents. Sites should be something that members want to ‘live on’ and interact with. Accolades and other kinds of recognition should be lavished on those organizations who effectively utilize modern information technology to advance their mission. We all have much to gain by improving the effectiveness of these social sector institutions.

CASE NUMBER 12 The Dilemma of Aliesha State College: Competence versus Need Both the speech therapy clinic and the demonstration high school activities fragment the resources of the college without contributing to its performance. Therefore, both should be phased out (and within a few years both were). But, if one must be kept it is the one that performs—the demonstration high school, because it performs. 13

Need alone, as in the case of the speech therapy clinic, is not enough if there is no competence—no chance of satisfying the need—no performance and results. To keep on doing what one knows cannot produce results can only aggravate matters. It would lull the community into a false belief that it is doing something for children with speech problems, whereas it actually only harms them—by discouraging and disappointing them even more.

CASE NUMBER 13 What Are “Results” in the Hospitals? Armstrong rightly sees that there are many customers—physicians who decide whether the hospital’s beds are filled; patients and their families; people who are paying the rapidly rising bills; and the community. The hospital acts as an intermediary to help all four hospitals parties (doctors, patients, staff, and insurance/ government) work together so that that the bottom line, a patient being cured, can be achieved. What Armstrong does not see is that he cannot really hope to develop objectives and goals in respect to any of these constituents unless he is willing to face up to the risk taking decision of “what is the mission of the hospital?” Objectives and goals, and measurements, in respect to any of these constituents follow from this risk taking decision. Is it a facility for the physician? Or a substitute for the physician? Is it a community health center? Is it a social agency? If the physician is the customer, objectives for the number, percentage, and quality of physicians in the community who patronize the hospital (rather than its local competitors) are easily developed. If the patient is the primary customer, patient care objectives such as “from the time a patient comes in the emergency room door until he or she is in an examination room with an attending nurse or doctor there should be a maximum time span of no more than twenty minutes” are fairly simple to work out, though they take time, hard work, and a lot of trial and error. (This is an actual performance objective and measure of results for a major hospital chain.) But, without a decision on what the main mission of this particular hospital should, could, and will be no policy, no objectives, and no measurements are going to work.

CASE NUMBER 14 Cost Control in the Hospital Dr. Bernauer’s explanation is probably pretty close to the mark. The profit-making hospital tends to perform better, because it stands under the test of results and thereby creates rationality within its members even though it carries an additional tax burden. Attempts to reach the same end in the nonprofit community hospital (or in government-owned hospitals here and abroad) have not been notably successful. 14

Some success has been reached by setting up units of the hospital as if they were on a profit centers, or at least to give the doctors and administrators a direct stake in results through a bonus. The Kaiser Permanente Medical Group, for example, operates this way. The Kaiser Permanente Foundation is strictly nonprofit but the Medical Group is for-profit. Bonuses are awarded to physicians based upon group performance. But in respect to the trustees, the case probably argues that the shift in health-care finance, as a result of which the great bulk of hospital costs are now underwritten rather than contributed by charity, implies a drastic shift in the role of trustees. The original function of trustees was to raise money. If the attempt to change attitudes doesn’t work, Glen River probably has no choice but to go ahead and build the wrong kind of room; it must have the facilities to take care of community needs. But the administrators should start working to get the right kind of regulations passed into law. Otherwise, the wrong kind will soon be imposed on its community hospitals by legislative fiat.

PART FOUR: PRODUCTIVE WORK AND ACHIEVING WORKER CASE NUMBER 15 Work Simplification and the Marketing Executive Peter Drucker always said “start with results.” This letter serves as an ironic example of optimizing running amuck. Clearly, optimizing the symphony orchestra by thinning out its members and making the music simpler will eventfully lead to inferior performances. The suggestion that efficiency and cost would be enhanced by dismissing highly trained musicians eliminates many important inputs to creating an enjoyable performance. Efficiency by formula without considering the ultimate results is a ludicrous endeavor. This letter emphasizes the need to consider the end result for the audience (i.e., customer) before attempting to design the performance. The suggestion by this industrial engineer is ironic and funny, but it is often the folly of many corporate managers and CEO’s. The people performing in this symphony orchestra are clearly assets. People in the orchestra own their assets which are their talents and these musicians are very mobile. All musicians need the spirit of creativity and innovation that makes each member great and that makes the whole significantly greater that the sum of the individual efforts. The symphony orchestra is an accumulation of human assets that are used to create great performances that the orchestra leader and audiences will enjoy and evaluate. The assets of this orchestra company are the members of the symphony—that’s it. Thus innovation and creativity and artistic freedom are major parts of the outcome that they are seeking to produce. To assume that slashing certain redundancies, replacing highly skilled musicians with lesser skilled people and replacing notes to create efficiencies is funny and ironic. This letter is a highly effective metaphor to much that happens in organizations of today. In our own institutions people are eliminated, production lines are gutted and quality is sacrificed to reduce cost in creating better looking financial statements. This is done without fully considering the end result—the long term impact on people, quality and productivity. 15

The outcome of any production or service operation should dictate efficiency, and managers need to be concerned with the mix of inputs that create the optimum product or service. The concern for efficiency should never over shadow the quest to produce a quality product. The members of the symphony orchestra along with the conductor are inputs that provide the skill, knowledge and understanding needed to create the best quality performance, which is the sole objective of an orchestra. The efficiency is determined by the quality of music desired. Eliminating redundancies and changing the music to simpler forms does not enhance the output of the symphony orchestra. But here again, how many managers in corporations of today have tried the same efficiency process? They ignore the quality of the product produced and the subtle nuisances of corporate networking. Understanding the product or service that is being produced is the first step in fine tuning the inputs, something that this industrial engineer and this letter ignore. This is all too often ignored in our other institutions as well. Fredrick Taylor pioneered Scientific Management by studying redundancy, motion and order in physical labor environments, such as manufacturing. However the work force has changed over the past 50 years from physical and manufacturing labor to the knowledge worker. The measurement of this kind of work has changed with it. Today managing work and the knowledge worker has changed into a fluent customized process that does not fit a single formula. Albeit, there is some elements of “Scientific Management” that apply to knowledge work but much has to be changed and recalibrated for the new millennium and its new work force. This letter treats the dynamics of managing the knowledge worker by focusing on the inputs and he misses the point of the quality of the output. As silly as this letter is, it reflects a very important reality of the market place today which is 1. the productivity of the knowledge worker should be measured in terms of the quantity of the quality of the output produced and 2. one always begins with the desired output in determining the required inputs for producing a product or service.

CASE NUMBER 16 The Army Service Forces Fredrick Taylor pioneered the field of scientific management through his efficiency studies. Taylor analyzed motion, tasks to control the direction of quantity, quality and the acceptable range of exceptions to come up with appropriate and most efficient ways of proceeding in doing a job. Taylor also realized task-oriented operations require simplification. The need is to organize steps into a sequential work flow in order to complete production with the most efficient inputs. Taylor realized that task analysis and critical pathways determine the best work flow and the most efficient mix of inputs for producing a well-defined output. Taylor’s scientific engineering later turned into industrial engineering in the US, Japan, and the United Kingdom, and was referred to as rationalization in Germany. Aldridge’s Army Service Forces used a command and control style of management. Manual tasks were combined under perfect conditions for using scientific management and re-engineering processes for transforming this service into a lean, efficient juggernaut. This successfully supplied resources efficiently and quickly to fight World War II. Simplifying tasks by reengineering processes was the exact technique required in this situation. Whether these tasks become monotonous and dehumanizing depends on management and its motivational structures. The management team must determine a set of principles that will help humanize the monotonous tasks that lay ahead for the worker. The Army’s singular task was to win the war. As a result, the potential 16

de-humanizing aspect of this work may not have been a problem when considering the higher goals. These monotonous tasks would certainly be de-humanizing if management were autocratic. However, these techniques mixed with practices of the human relations school of management make it more humane. In fact, strong labor unions help to mitigate these kinds of complaints and help management to decide on the right course of action when it comes to preserving both the dignity and responsibility of workers. In contrast to the Symphony orchestra in Case Number 15 where creativity, knowledge and autonomous artistic freedom is needed to produce the best performance, this kind of management and simplification apparently worked very well this situation. Managing knowledge workers is very different then managing manual labor where operations are often made up of repetitive tasks that lend themselves to time-and-motion studies. The members of the orchestra in case 15 are the means of production and need to be self motivated and self regulated. The members of the orchestra must define their tasks, quality, and results. They are accountable for the over all sound of the orchestra. Often in these kinds of organization a manager needs to understand that the members in the orchestra are self driven and experts in their given fields. Managers need to share leadership with people within the group to capitalize on knowledge possessed by subject matter experts. This leadership paradigm is called the “shared leadership model” and just one more tool to use when managing knowledge workers. These knowledge teams should not be managed with a top-down style. Rather, these knowledge teams should be self-managed groups. They perform better when left alone and held accountable for both the quantity and quality of performance. Aldridge’s use of Scientific Management to trim and make the Army Service Forces more efficient was a brilliant example of the right technique for the right situation at the right time. The command and control structure of management in the army and the pre-determined nature of the output, lent themselves to Scientific Management. The education and understanding of all tasks was a great additional piece of Aldridge’s plan that seemed to work for this kind of re-engineering, while providing the humanization of tasks being performed. It is important to note that these techniques would not work in every situation and that each situation is unique and needs a plan of analyses. It’s always a matter of doing what is necessary both to make the work productive and the worker achieving.

CASE NUMBER 17 How Does One Analyze and Organize Knowledge Work? Susan is right but she is likely to encounter resistance from her associates in Huston as she tries to bring change. Susan needs to think through how she can win them over. “Scientific management” is indeed needed for knowledge work, but it has to be accepted by the knowledge worker, and Susan hasn’t given much thought to that yet. But, she is taking the right starting point—the manager’s job. As to identifying the pieces, POIM does that for the work of the manager. For the work of the loan officer in the bank—or for any other knowledge worker—one does what Taylor did: one looks at it, but unlike Taylor, one then asks the people to define their work themselves and assume accountability for results. It is up to Susan to integrate the work of knowledge workers and make sure their definition of results is correct for the bank. 17

CASE NUMBER 18 Can One LEARN to Manage Subordinates? There will and should be a good many different answers to the question. The case expressly calls for things to do—things that have immediate effect or at least immediate high visibility, things that are operational. Examples might be: ask each affiliate’s management group what the company and European headquarters staff do that helps the management group do their job and what the staffs do that hampers them; after McAvoy has thought through the contribution and results he, himself, should be held accountable for the next few years, he might ask each affiliate’s management group to do the same. The point is to emphasize the need to establish a visible and meaningful direction at the outset; McAvoy has no time for “studies.” Those familiar with MBO will notice how these recommendations follow from the MBO Philosophy of Management.

CASE NUMBER 19 How to Staff the Dead-End Job? What needs to be done is probably to combine two of the proposals. Hire people for whom the stock room job is a challenge and who don’t want to make work the center of their life—e.g., a middle-aged women. Undertake job-enlargement that gives stock-room employees responsibility for merchandise display, inventory keeping, and inventory control. As a final point, it is a good idea for any institution to take responsibility for finding jobs outside the company for able people for whom there are no promotional opportunities. Law, Accounting and Consulting firms do this routinely. Then the company must give management an alternative way to recruit junior management for this proposal to succeed. An example would be a genuine management trainee program, started in each area of the business. But, the only cure for management blindness & obstinacy is failure. In this case the company did not change its practices until it found that it could no longer attract “high-quality people” to its stock-room jobs and had instead to staff stock-room jobs with part-timers and people past normal retirement age. Until this happened, the company tried to stay with its old policies of hiring college graduates for stock-room jobs despite their total lack of success.

CASE NUMBER 20 The New Training Director in the Hospital The expert’s advice may make very high demands on a new training director—even though it is probably wise advice. A new policy that STRONGLY deviates from what people expect is probably best tried out on a small scale, 18

that is, a pilot study using the new training policy with the few who believe in it and want it to work. It might be better to work out the new approach in one or two departments where the department heads are sympathetic. The consultant’s advice may be good, but it is not realistic in that it suggests accomplishing everything at once. Perhaps her first priority for the new training director is a clear statement of objectives for the hospital and defined standards of patient care and of medical care—that is clarity from her own bosses, the hospital administrator, and the medical director, as to what “performance” and “results” mean. The case states that the training director is expected to create skills, attitudes, and behavior, but the hospital hasn’t defined what the proper objectives, standards, and practices should be. The frustration may be the hospital’s fault more than any one else’s.

CASE NUMBER 21 Are You One of “Us” or One of “Them”? This case deals with the role and function of the supervisor. Is he or she the “non-commissioned” officer of industry? Or is the supervisor’s job the first rung on the management ladder? Or can the supervisor be both? Is the supervisor, as Frederick W. Taylor wanted, a “resource” to the people in the department? Their “assistant”? Or should the supervisor be the boss? The second dimension of this case is concerned with social structure or social relations. Is it possible to maintain the authority and objectivity of the supervisor if socially the supervisor is “one of the boys” or “one of the girls”? How many of you call their parents by their first names, for instance? How many of you prefer instructors to come to students’ social affairs? Still it is possible to minimize the necessary division—by common dinning facilities, by common plant activities. The case furnishes a powerful argument for creating plant-community activities in which nonmanagers and nonsupervisors have meaningful roles—for example in vacation scheduling, in safety, in the suggestion plan, in benefits and their administration, and so on.

CASE NUMBER 22 Midwest Metals and the Labor Union The union attitude—and the corresponding management attitude—reflect in part the fact that it is the function of the union to be an opposition. The attitudes also reflect the divorce of the worker from the benefits, and their management and the resulting failure to perceive them as “benefits.” Instead they are seen as “costs” to the employer and therefore as something to hurt the boss rather than as income to the employee, the main function, of which is to produce the most benefit, both in quality and quantity, for the amount spent. The only remedy known so far is active worker participation (and indeed largely worker control) in the planning and administration of employee benefits. Unions may oppose this quite as much as management, because it would make them (unions) responsible for results.

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CASE NUMBER 23 Safety at Kajak Airbase The two officers represent different approaches to motivating people. The chief of operations relies on carrot and stick, the Chief Safety Inspector on continuous learning. Both approaches are needed, only together are they likely to achieve lasting results. There are three complimentary approaches to safety. Each can do only so much and if driven beyond the optimum point actually may lead to less safety and to more accidents. There is first the approach of making equipment and operations safe—that is OSHA’s approach. We know that beyond a certain point that approach lulls people into false security, for dangerous work cannot be made truly safe. There is secondly the training in safe behavior—safe driver training, for example. And both officers in the case are focusing on it—rightly because it is the most effective way to prevent accidents. But it needs strong incentives and deterrents and continuous learning to prevent carelessness. There is finally the necessary work on lessening the severity of accidents and of preparing for them and their aftermath—the seat belts in the automobile or the first aid department are examples. The Air Force has always stressed all three, but the two officers are right in focusing on the middle one. There is never going to be a totally safety—conscious and careful workforce, and accidents cannot be eliminated nor the world made risk-free. So there is always need to prepare for accidents and to organize for minimizing their impact.

PART FIVE: SOCIAL IMPACTS AND SOCIAL RESPONSIBILITIES CASE NUMBER 24 Corporate Image to Brand Image: Yuhan-Kimberly Diapers, female sanitary napkins, box tissues, bathroom tissues, medical gloves, sterilization wrap, surgical facial protection, etc. are some of the major products manufactured and marketed by Y-K. Y-K is in the business of fulfilling the hygiene and health needs of the public by providing personal hygiene and health care products. Evidently forest restoration is not directly related to Y-K’s business. This then contradicts what Drucker had said about the limits on corporate social responsibility (CSR): The manager is a servant. His master is the institution he manages, and his first responsibility must therefore be to it. His first task is to make the institution, whether business, hospital, school, or university, perform the function and make the contribution for the sake of which it exists. Certainly, an organization’s action to address social problems must not interfere with its primary mission. However, as seen in this case, ‘forest restoration’ led to achieving Y-K’s primary mission by establishing the clean corporate image for this personal hygiene and health care products company. So, let’s look further into how Y-K accomplished its primary mission through its CSR activities by analyzing its mission, strategy, and CSR. 20

First, mission needs to be clearly defined. As seen in Figure 1, mission, the theory of the business (i.e., environmental analysis, core competencies and mission), sets direction for the organization. It should be used to communicate to the members of the organization where the business is going, provide the rationale as to why it is going down a given path, and help executives align activities of its members to fulfill the mission. Formulating the mission of an organization requires executives to look beyond the walls of the organization to the external environment. Emerging trends, changes and problems should be considered management’s new realities, influencing the environment of an enterprise. Executives must also understand the core-competencies of the organization when formulating the organization’s mission. In understanding core-competencies, executives must ask, what are we really good at? With an answer to this question, and with an analysis of environmental forces, an organization can formulate its mission, a mission that answers the key Drucker questions: What is our business? Who is our customer? What does the customer consider value?

[Figure 1]3

Y-K’s Mission By answering the questions above, we may get close to what Y-K’s mission must have been at the time of implementing “Keep Korea Green,” the forest restoration CSR activity. We will exclusively look into the feminine care product business of Y-K since the case illustrates the relationship between the “Keep Korea Green” activity and the female sanitary napkin business. What is our business? The business of Y-K (feminine care) is to provide easy and comfortable life style for female at throughout the month through hygienic and user-friendly solution for female menstruation. Who is our customer? Direct customers: Young females (9-16 years old) who start their first menstruation to newly-weds (30-35 years old) who convert to tampons4. Indirect customers: Raw materials (pulp) suppliers What does customer consider value? Direct customers: There is innate anxiety among young females in South Korea of menstruation and of purchasing sanitary napkins. Any venue that leads to overcoming such anxiety would produce great value to customers, especially young females who have recently started menstruation. Indirect customers: Long term contracts CSR (“Keep Korea Green”) Formulation By answering the mission questions, Y-K identified what its customers consider value. For its direct customers, 21

along with the tangible technological superiority of the product (absorbency, anti-leakage, comfort, etc.), Y-K had to create an image that could overcome the taboo and unsanitary shadow associated with female menstruation. To achieve long term contacts with its indirect customers, Y-K had to show a commitment that company would continuously manufacture pulp based female sanitary napkins instead of converting to synthetic-fiber napkins. Forest restoration with a phrase “Keep Korea Green”, along with printing the “Keep Korea Green” logo on the back of each product led to creating the “clean image” enabling young female to overcome the guilt of purchasing sanitary napkins. “Keep Korea Green” activity involves a large investment in tree planting. From the pulp supplier’s point of view, such a large investment could be seen as a gesture from Y-K announcing its long term commitment to the use pulp (from trees) instead of synthetic materials. Due to such commitment, Y-K and its raw materials suppliers were able to both achieve favorable long-term-contracts. Strategy Formulation CSR objectives should be included in the strategy of a business, rather than become merely statements of good intentions. From the CSR formulation, we can already foresee how CSR would be incorporated into its strategy. From CSR, Y-K was able to build two strategies into its corporate strategy: a low cost strategy, consisting of favorable long-term-contacts, and a differentiation strategy involved in its “clean image.”

CASE NUMBER 25 The Peerless Starch Company of Blair, Indiana The Peerless Board clearly chose to let things drift rather than “interfere” and force the resignation of an incompetent top management. As to the case itself, clearly Blair is beyond help. One way to think this through would be to ask: how Ludwig might reduce the force to 2,600 people? Should he lay-off according to seniority? This would give him the labor force least likely to succeed and one with Social Security and other pension benefits. Or should he lay-off by selection? And how does one select and what impact on morale would that have—with all the opportunities for favoritism and for setting colleague against colleague? And is any plant likely to survive such a pruning? THE SOCIAL SHOCK OF A TURNAROUND OF THIS DIMENSION IS SIMPLY TOO GREAT. What are the lessons? Paternalism is a hidden lust for power. A company that is too big and dominates a town is a threat to the town and to itself. It cannot do the economically necessary things without endangering the community, and vice versa. There is also the lesson that top management of a multi-plant or multi-division business does damage if it also manages one plant or one business—a lesson that multinationals have learned the hard way. It will impair effective management of the plant or division where it makes its headquarters, and subordinate the other parts of the business to the part that it manages directly. There is above all the lesson that the first social responsibility of a business is economic performance and that it cannot discharge any other responsibility unless it is first a performing business.

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PART SIX: THE MANAGER’S WORK AND JOBS CASE NUMBER 26 Alfred Sloan’s Management Style The point of the case lies in the last sentence. Lincoln and Roosevelt both ran their office very much the way Sloan did, by keeping official relations and private friendships apart. The best documented case is the way in which Roosevelt stopped having social relations with Henry Morgenthau, a life-long and close friend, as soon as Morgenthau took over as Secretary of the Treasury. Both Lincoln and Roosevelt had “kitchen cabinets” like Sloan’s—but Lincoln and Sloan did not allow their outside friends to have any influence on their decisions—in contrast to Roosevelt, who did. Roosevelt did something else different: he organized systematic outside communication and thus prevented the isolation that threatens the chief executive. This was one of the main roles Eleanor Roosevelt played. The case illustrates the dilemma at the top. Many styles are effective but an executive with a number of personal friendships on the job may not be as objective in decision making as is necessary. There is a dilemma, especially at the top: if you don’t have friends you may become isolated and lose touch with reality. If you do have friends and confidants on the job, you may not be as objective as to have to be.

CASE NUMBER 27 The Performance Development System at Lincoln Electric The Professional Development System (PDS) has clear parallels to Peter Drucker’s classic “Management by Objectives with Self-control” Philosophy. It is not a perfect example of MBO principles in action, but the management tool is an effective way to make and keep knowledge workers productive. This, coupled with making work productive, is one of the top tasks of management. Getting the most out of Lincoln’s most precious assets, its people, is paramount. PDS’ strengths include an established practice for setting objectives that are linked to the fundamental strategy of the business (in this case, the department’s business plan but such a system could also be established for a social sector organization based upon mission & desired results), and precise requirements for meeting and measuring the objectives. They are operational, specific, and based on clear expectations. They are the basis for work assignments, and include important intangibles such as coaching and mentoring. Another strength of PDS is that self-control is built into the design. Both managers and the employees themselves are involved in setting goals and measuring whether, and how well, the agreed-upon targets are met. The degree to which the system creates alignment between the objectives and individual employees is dependent on not only the scheme, but also how it is implemented. The goals must be clearly congruent with the theory of the business, and the mission must be kept in mind. How results are reviewed is also important: a discussion of the overall firm goals must be intertwined in the conversation the boss and the employee have during the evaluation. Reviewing steps performed, and how well, is, of course, necessary. But a step is not effective unless the “big picture” is in view, and intentionally discussing that target brings it to the forefront. Overall, this is an excellent foundation for establishing alignment. 23

This alignment is carried out by these characteristics of Lincoln’s “controls”: Specific—there should be clear, precise steps and action items. • Measurable—some goals are more tangible than others, but all are measurable. The metric may be numerical and absolute: sales, market share, number of new products developed, number of branches opened, or number of classes offered. Alternatively, it may be less concrete but nevertheless tactical: increase in employee and/or customer satisfaction, change in brand recognition, confidence in the product or service, and other intangibles requiring comparison of before-and-after surveys or compilation of comment cards. • Attainable—just as setting the bar too low can cause boredom and laziness, setting the bar too high can cause an otherwise excellent employee to give up. “Just beyond reach” is just about right. • Relevant – if your goal is to produce the best quality radios, then count the percentage which passed inspection, not how many radios traversed the assembly line. • Time-based – this does not refer to how quickly one can reach one’s objectives; rather, it means that there is a goal such as “complete strategic marketing plan within six months of new product patent.” This implies an acceptable range of time, not a stopwatch. First to market can be lucrative, but shortcuts that might cause sloppiness and thereby jeopardize quality are inadvisable. Many companies set goals for only their own needs: Increase revenues, Reduce expenses, Expand the market. Financial or capital budgets are common, and variances are routinely noted and explained. Expanding this vision, and setting objectives not only for corporate goals but also for personal competencies, serves several purposes. First, becoming good at something is an end unto itself, and is often minimized by corporations hoping to get the most out of their employees in the short run. This happens, for example, when a disorganized department works so much overtime that there is no time for training, reflection, or personal development. The future of the company is compromised under these circumstances. The department may meet its daily deadlines, and be efficient this fiscal quarter, but is ineffective over the long haul. Employees that are trained, cross-trained, and encouraged to learn new skills and topics on their own are less bored, more motivated and therefore more productive. They feel more vital, smart and useful, and happy employees simply perform better. Another reason for encouraging improved and additional competencies is that employees learn things that will help the company move forward. In executive management programs, for example, they will network with other employees who bring good ideas to class. Strategies such as Management by Objectives can be conscientiously applied to the entity that pays for their courses. Lastly, competence is contagious. When one member of a group becomes more capable, others want to learn and improve, too. The whole becomes stronger when each member raises his or her sights. The value and the competitive edge earned will prove profitable. By having its knowledge workers improve their competencies, it is forcing them to ask what they need to learn to keep abreast of their knowledge area. By sharing learning within and without their departments, they are asking what their associates need to know about their knowledge area, 24

and how it contributes to the work of others. By utilizing PDS, Lincoln Electric is helping itself by helping each employee and each department. Providing a two-way communication tool is imperative in setting objectives. Feeling ownership of a plan makes one more likely to follow it. When we agree with something, and understand its purpose, we move forward without resistance. This is akin to a management letter, describing one’s own job, how it relates to the whole, and how to fulfill its requirements. The manager’s position in the organization is enhanced when he or she can trust employees to do what they need to do. Having capable, self-motivated knowledge workers on one’s side is invaluable. Micromanaging only stifles creativity and drive. When employees think they are valued and trusted, everyone wins. Enabling employees to blossom and grow works better in an environment like Lincoln’s. PDS implies that human nature is good (Theory Y ), and that people will work hard and reach for results (seek self control). The fixed, locked-in nature of the performance evaluation would otherwise cause one to “play the numbers game” of receiving high ratings, instead of trying to do the most good for the organization. The system infers fairness and a sense of what is mutually beneficial. It assumes honesty in self-assessment of performance. It assumes that items on the agenda of performance coaching/mentoring as well as in the interim review will be acknowledged and observed. It assumes, in general, that both parties will choose to raise their sights to focus on the highest long-term contribution to the department’s goals and to the company’s overall objectives. In summary, it assumes good management up and down the ranks. The effort required to initiate, implement and integrate the Professional Development System is absolutely worthwhile. Management today must be intentional about setting, reaching, and measuring performance on meaningful goals. Otherwise, employees can work very hard chasing their tails, efficient but largely ineffective. The Professional Development System is remarkably similar to Management by Objectives with self-control. It holds the essence of the philosophy in high esteem, and should be a valuable management tool for Lincoln Electric and for other organizations.

CASE NUMBER 28 Internal and External Goal Alignment at Texas Instruments External vigilance is the price that must be paid to be competitive in the changing world of today’s business.5 This is especially true of knowledge-centered organizations like Texas Instruments (TI). The “Catchball” process is the means used at TI to organize and align management and workers with the needs of the organization. This technique focuses manager’s attention on the objectives and results. It does so while conserving energy—everyone knows what is expected of them. At TI and in many organizations the question has become, how do I manage knowledge workers? The Catchball process has captured the essence of the management process by aligning the overall external needs of the organization to the internal processes by focusing these internal processes on objectives and on results. This makes crystal clear everyone’s expected results and integrates all activities into the overall mission of the organization. Catchball thus helps to create an integrated system of management. At TI, Catchball allows the engineer, factory worker and the sales force to define their own objectives through a communication process that relates the goals and objectives of the company to worker performance. In doing so, management steps out of the way of its workers; employees are empowered by having control of their own destiny. This contributes to workers feeling free and also responsible. It stimulates innovation and boosts the 25

spirit of performance of the organization. A workforce is created that is concerned with the job, with objectives and with results. This promotes professionalism and enhances overall organizational performance. Gary Siegel of DePaul University clearly states many of the dimensions of Management by Objectives. He describes communication in terms of throwing the “Communication Ball” up and down the ladder of “management-to-subordinate-to- manager,” one level to the other and back. He writes about empowerment of the individual in the organization. He ends by harmonizing individual goals with the strategic direction of the organization. Siegel’s simple paragraph pretty much defines what Management by Objectives is all about. The leadership team of the Joint Standoff Weapons Program fostered participation and conflict resolution on many levels. And in this way provides for the very demanding communications required in the “systems organization.” The inter-organizational management team enhanced communications by not allowing any dissention or argument to remain unresolved, thus promoting the central ideas of harmony amongst team members from different organizations. They fostered a highly effective inter-organizational team by deliberately organizing team building exercises. They tried to establish trust and communications that would lead to both vertical and horizontal integration. In essence, they were practicing Management by Objectives both vertically and horizontally. However good Catchball is–as time goes on–there may be a convergence of ideas that may reduce independent thinking. Tolerance of new ideas is important for innovation. The management team of TI, and of The Joint Weapons Systems Program, must guard against the tendency towards “group think” and thereby squash the benefits of diversity in the organization. This can be very detrimental considering the needs of knowledge workers for autonomy and for independent thinking. Pushing on everyone for convergence and agreement may decrease variances. But it may also increase the risk of failure if external factors change. Tolerating “new think” and variations of behavior allow for the flexibility to change when external factors require change.

CASE NUMBER 29 Can You Manage Your Boss? What Larry Frankenmuth told Sartorius is, of course, that it is the subordinate’s job to manage the boss—and that doing it takes work. He also told Sartorius how to manage this particular boss. He made it clear that Webster was a listener and not a reader, and therefore inundating him with memoranda and reports before making an oral presentation to him was quite useless. He told Sartorius that Webster—like any boss—hated “surprises” and considered it the subordinate’s duty (rightly) to appraise the boss ahead of time of the possibility of new developments. And Frankenmuth also revealed clearly that his own worst mistake had been intellectual arrogance. He obviously under-rated the boss, or else he would have not been so surprised when Webster picked the youngest, boldest, and least conventional of the plant managers to succeed him. Frankenmuth had felt so superior that it never occurred to him that Webster’s “anecdotes” were meant to tell something; and it never occurred to him that a man who could make his way to a senior position despite his lack of formal education might have strengths and qualities—and surely a capacity to learn—that deserved respect rather than contempt.

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CASE NUMBER 30 Ross Abernathy and the Frontier National Bank Staffing a totally disorganized company is difficult and risky. The inside, crony, outside approaches requires choosing which group to upset. But, one must act and do so quickly. If he staffs with outsiders, a good many people inside the bank will be disturbed. But if he doesn’t bring in competent outsiders to replace key people who have not performed, he will do equally great (or greater) damage to the morale of those customers and especially of those of his younger people who expected changes and new leadership. And then he surely must fail—for he will have lost the support of the people inside and outside on whom he depends to turn the bank around. Perhaps his final rule might be the old one, “The first duty of the field commander is to give the troops competent command”—but it is a risky rule in this situation. An additional point: the second alternative, that of bringing in Abernathy men is the riskiest, for that may well bring in imitators, and ‘carbon copies’ are weak. The choice probably lies between alternative one—the inside approach—and alternative number three—the outside approach—and number three may be the lesser evil.

CASE NUMBER 31 The Failed Promotion The promotion was made in violation of all the rules needed to prevent, or at least to minimize, the tremendous waste of a failed promotion and the risk attendant on all people decisions. The rules laid down by the chairman are the correct ones. It is a person’s job to think through the demands of a new job and not to wait until the boss asks them, because a great many superiors don’t know that they should do so. Were the Chairman and his predecessor right in letting McQuinn stumble into what they knew—or suspected was a serious blunder? A senior man allowed a very valuable junior man’s career to be put into jeopardy. There is a good deal to be said for intervening in such a case; it is in fact not McQuinn but Novack who is likely to be damaged. Does one have the right to expose a younger man to damage in order to maintain the autonomy of the older one, or to teach the older one a much-needed lesson? In summary, in people decisions, there is tremendous waste in a failed promotion. Follow the rules to minimize waste. Think through the demands of a new job and make sure the appointee understands these demands. Do not expose able people to the damage of a promotion that is wrong, as Novack’s was so exposed.

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PART SEVEN: MANAGERIAL SKILLS CASE NUMBER 32 Lyndon Johnson’s Decision Lyndon Johnson (LBJ) violated two basic decision-making rules. First, he did not evoke dissent. George Ball’s demurrer was quickly shoved aside, with Ball himself soon eased out of Washington. Thus Johnson had no alternatives to fall back on when the first decision failed. Second, he violated a rule in that he persisted in a course of action that did not yield expected results. In summary, be sure to evoke dissent in a decision and don’t dismiss it out of hand as did LBJ with the dissent of George Ball and don’t persist in a policy that failed to produce results.

CASE NUMBER 33 The New Export Manager Both sides violated the rules of communications: The Company did so by not challenging Andrews to tell management what he planned to do, and by what time frame. Frank simply told the President he would work out a plan, believing that “everyone must see what I am doing” and he was never challenged to provide more information. It was Frank’s job to: 1. Come to his new associates with a clear proposal of what he wanted to do, with an estimate of how long it would take, and what he expected to come up with in that time period. 2. Draw on their experience with their products, their markets and their customers. 3. Make sure they would hear from him regularly about his progress and make sure he would address any of their concerns. Instead, Andrews depended upon those in the Company reading his mind and seeing through closed doors.

CASE NUMBER 34 The Insane Junior High School Principal The Board committed both errors of decision making and errors of communications. Do not try to communicate down; try to engage in constructive upward communication. Effective communication is facilitated by trust. You build trust by telling the truth, using effective methods of communication, and following through on promises. But the Board tried to communicate “down”—from the Board to the black community. Even with good upward communications, there would have been a problem. And all white Board members knew of Mrs. Wicks as she had been before she became sick, and assumed that she would therefore automatically be a candidate for the open principal position. The Board did not test this assumption. An hour with one of the black board members would probably have brought out the existence of a serious problem with Mrs. Wicks. 28

The black community was not eager to uncover the problem of which everyone in the black community was only too well aware. But at least a session with a few community leaders would have made the Board aware that the community did not trust the Board, and especially did not trust it to pick a black other than the totally unfit Mrs. Wicks.

CASE NUMBER 35 The Structure of a Business Decision The first offer (National China) gives Nakamura immediate profits but does not establish Nakamura’s brand name in the U.S. This offer thus contains a risk of losing the U.S market again if National China switches suppliers after 3 years. The second offer (SSW) means no profit for some time but also no capital investment (assuming excess capacity) and no risk. The second establishes Nakamura’s brand name in the U.S. if the venture succeeds. The management of Nakamura must answer the question: what must the decision accomplish and which decision accomplishes the desired result? That is the management must establish the boundary conditions for the decision. If Nakamura wants to be a big company and foresees a steady growth in the home market but is already at full capacity and if expanding capacity to an optimum size requires a quantum jump beyond what the Japanese market can absorb for several years, then Nakamura is better off with National China’s Offer. It enables Nakamura to bridge, without any risk, the few years Nakamura needs, and to get the capital it needs. It is National China that takes the risk of being without a supplier at the end of three years. If Nakamura has plant capacity but neither marketing experience nor capital to go directly into the U.S. market, then SSW’s offer is the right one. One final question Nakamura needs to ask is: do we really want to expand and become a big company? The case teaches under what assumptions (i.e., boundary conditions) each decision would make sense.

CASE NUMBER 36 The Corporate Control Panel Tschundi’s starting point is the question? What does top management really need to know? The only way to find out is to ask people in top management, beginning with the new CEO. For the CEO to believe that Christine, the information specialist, should answer this question is a misunderstanding. Information is the tool of the executive, and he or she should think through and specify what he needs. The information specialist then has the task of getting the information, putting it into right form and making it accessible—but for the CEO to say “get me a control panel” makes no more sense than for a man to say “get me a tool” without specifying whether he needs one to build a house or to finish a piece of ceramics. But, the CEOs starting point is reasonable—and it can be accomplished. For Christine, it might not be a bad idea to start roughing out—in far less time than three months—a proposal as to the kind of information the CEO might want and then go to him and ask, “Is this what you have in mind”? He will answer: “Hell, no”–but that is likely to trigger his thinking.

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PART EIGHT: INNOVATION AND ENTREPRENEURSHIP CASE NUMBER 37 Research Strategy and Business Objectives Able Company defines its business as exploiting the rhythm of scientific discovery. It gambles on the scientific revolutions (its research strategy) in which an established scientific assumption is being challenged and may eventually be overturned. This gives so long a lead time between scientific discovery and general acceptance that the successful pioneer can establish an unchallenged leadership position. Able is indeed “using science and technology to build a business.” The risk, of course, is that of picking the wrong scientific revolution—that is, the one that does not produce a revolution but fizzles out. Baker is market-oriented and customer oriented. It sees its business as supplying the medical practioner with what to he or she is value. In this sense Baker’s strategy is to provide service or value to the customer. Its research strategy is an effective application of the “marketing approach.” The risk is becoming splintered into specialties—hence the company’s insistence on not keeping drugs for specialized applications or specialized areas of medical practice. Charlie Company looks for small but strategic spots (i.e., a market niche strategy) in which a significant improvement establishes a leadership position that is likely to go unchallenged; there isn’t enough business there for a second supplier and not much point in trying to compete with something that is “just as good” or even a little better.” Some examples of this kind of situation are sealing compounds for canned products that have a risk of botulism if there is any leakage, or welding rods (a whole ship may sink if one weld is faulty). Such market niches are best found where the cost of the product is insignificant in the cost of the whole—i.e., a few drops of a sealing compound—and yet the loss due to malfunction is almost catastrophic.

CASE NUMBER 38 Who is the Brightest Hamster in the Laboratory? The place to begin is to ask: where do we expect to come out one year, three years, and five years hence? What do we intend to contribute to Wickstrom Chemical by way of: Product Innovation? Product Improvement? Product Renewal? On the basis of our experience, what does this entail of us by way of work and effort—and over what time span? In other words, the place for Hirschland to begin is with the management of research. Translating this into money, and adjusting it to available sums (“cutting the pattern to fit the cloth”), comes at the end of the process, not the beginning. Hirschland still sees Budgeting as a financial tool rather than as a management tool.

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CASE NUMBER 39 Andy Grove of Intel: Entrepreneur Turned Executive Andy Grove was one of the three founders of Intel Corporation along with Robert Noyce and Gordon Moore. Grove served as Intel’s CEO from 1987 to 1998 and as Chairman of the Board from 1997 to 2005. This case illustrates a number of extraordinary attributes of Andy Grove as entrepreneur-turned-executive. He transitioned from a scientist to an inventor to a successful leader of a big business. In a time span of 17 years Intel evolved from a start-up, high-tech venture to a large corporation. The interview and the case reveal Dr. Grove’s evolution from his role at Intel at its inception to his transition to Intel’s CEO. Among the many lessons to be learned from Grove’s personal account are: The importance of being willing to do what needs to be done and not necessarily what one likes to do. The over-riding need to be market-driven and market-focused. Essential to this is to abandon what is not working rather than to try to prove the entire universe wrong and oneself right. The busy executive must systematically review what he or she is doing and listen to people express their needs. Perhaps the most important of all is the lesson that one must put the enterprise before oneself.

CASE NUMBER 40 The Chardack-Greatbatch: Implantable Pacemaker Students should be encouraged to read about the history of Cardiac Pacemaking to understand the role past innovations played on the success of the Chardack-Greatbatch Pacemaker. Timing must be right, and enough information must be known in advance if the missing pieces are to be supplied by an innovator pursuing a strategy of innovation using new knowledge. The role of “good fortune” also seems relevant to innovations based on new knowledge. I (Maciariello) suggest students consult “A brief history of cardiac pacing,” by G. D. Nelson, Metronic Inc., published in the Texas Heart Institute Journal, volume 20(1), pages 12-18. This article may be accessed at http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=325046.6 This article contains all the information students need to address most of the questions on page 190. The history of Pacemaking is also indicative of the history of so many other inventions based upon new knowledge. We build upon the shoulders of giants (see the quote from Isaac Newton on page xi of Management Cases Revised). Part of the genius of the Chardack-Greatbatch Pacemaker was the immediate recognition by Greatbatch that proven results from medical device research and development require large scale manufacturing capacity in order to convert the results to customer value. Greatbatch did not have this manufacturing capacity and had to quickly find a company that did. “Unlike those who did not fully recognize their accomplishments or did not recognize that research and development are different from device manufacture, Greatbatch, Chardack, and Gage patented their device and undertook an agreement for manufacture with the then ten-year old firm Medtronic, Inc. of Minneapolis. That agreement effectively began the modern medical device industry.”7 31

PART NINE: MANAGERIAL ORGANIZATION CASE NUMBER 41 The Invincible Life Assurance Company What Invincible lacks is a Top Management and the Spirit of Performance. Mulholland, for all his appearances of kindness, was a tyrant whose benevolence masked a lust for power and he left an empty shell rather than a flourishing company. Wintress’ first job is to think through his own role and relationships as the new chief executive officer; he cannot do anything until he has done that. And he has virtually no time, fort his first moves will establish the way he is perceived by the people at Invincible. Wintress should not continue Mulholland’s pattern. But, it is not clear that is any one thing that would be right—he has to make risk-taking decisions, and make them fast. His first moves will establish the way he is perceived by the people at Invincible.

CASE NUMBER 42 The Failed Acquisition Chrysler was purchased in 1998 by Cerberus Capital, a large US Private Equity firm. Daimler paid $37 billion for Chrysler in 1998 and sold 80 percent of its equity in 2007 for approximately zero, while as of the sales agreement it continues to hold 20 percent equity in Chrysler. Although Daimler took a $37 billion total loss on the acquisition price, it avoided billions of dollars of future Chrysler losses. In retrospect, the timing of its purchase was awful but the timing of its sale was fortuitous. What went wrong with the acquisition? Simply stated, Daimler was unable to execute according to its plans for Chrysler. Global excess automobile capacity, uncompetitive cost structure of Chrysler, poor product mix, and rising fuel prices simply overcame whatever strengths Daimler could contribute to Chrysler, such as world-class engineering and world-wide distribution. Chris Isidore, Senior Writer for CNNMoney.com provides an analysis of the causes of the failed acquisition:8 “The U.S.-based automakers such as Chrysler, which includes the Chrysler, Dodge and Jeep brands, have been hurt by high gasoline prices over the past year and a half; they depend much more on sales of light truck models, such as SUVs, pickups and minivans, than on the more fuel-efficient car models, where Japanese automakers dominate U.S. sales.”

CASE NUMBER 43 Banco Mercantil: Organization Structure Both plans are simulated decentralization—probably the only kind of decentralization possible in a commercial bank. But the President puts the emphasis on decentralization by “business” such as commercial banking, corporate banking, international banking, and so on. The regions put the emphasis of the business on the geographical units, with the services subordinated to geography. Banks have found that they need both. The head of the London Office of Citibank or Bank of America is not just a landlord and office manager but the head of a business. Yet the heads of the respective 32

major services operating out of London—corporate banking, etc.—are also, and often primarily, parts of a world-wide corporate banking business. Banco Mercantil is moving towards such a (rather messy) matrix organization. Putting a matrix in is a last resort—it rarely works well. It requires an enormous amount of self-discipline and far more mutual trust than exists in most organizations. And even where it is appropriate such as in Banco Mercantil it usually takes a few years or so before it functions. But, sometimes it is the only appropriate organizational solution. What the case does not bring up, although it is strongly implied, is that neither plan thinks through adequately the role and organization of top management—the president does not see such a function at all, or the role and organization of innovation.

CASE NUMBER 44 The Universal Electronics Company Manzoni objects on three grounds: 1. The major expansion is projected for Europe, while the organization subordinates Europe to the slow-growing or stagnant U.S., thus violating the link between strategy and business needs (i.e., the organization structure). 2. Neither of the two men on top in Europe would have enough to do. Also, it proposes putting the senior and important man (Manzoni) under someone with far less stature and experience who can only become a messenger boy for Manzoni. 3. It fails to separate the company’s top management from the domestic U.S. business. With three U.S. divisions, top management would surely spend three quarters of its time on U.S. business even though all three U.S. divisions together account only for half of the company’s business and for much less of its growth. What is needed is either a structure with two main regions (or perhaps with Latin America as Number 3), each headed by a “President” and with a top management acting as a Board for each of the regions; or organization by main product lines, with the country being the administrative rather than the business unit. But the proposed structure can only stunt the company’s growth in the areas of its greatest opportunity.

CASE NUMBER 45 Research Coordination in the Pharmaceutical Industry The only organizational pattern that can work is the systems-approach. Here are the implications: VanDelden has to be a member of the top group of every one of his five labs and sit down with them frequently in their place of business. He has to make sure that the people in all five labs know what is going on in every lab—largely by him telling them but also by making sure that they meet often, with a clear agenda and yet as colleagues rather than as rivals. It is better in such a situation to risk duplication than to lose important results because the work falls between two stools.

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CASE NUMBER 46 The Aftermath of Tyranny Many of the company vice-presidents will fault Bullock. Few will see that Bullock may not have had much choice. He had responsibility without having the authority, and that is the classical prescription for autocracy. No sane person will take the job unless that problem is remedied—that is until the non-functioning president is moved out—made chairman of the executive committee or otherwise kicked upstairs. Any other successor would have to act just the way Bullock did. The suggestion that Greenback take over, or that a committee of VPs take over, are to be dismissed as well intentioned but not serious. The company needs a head. The president having abdicated years ago is most unlikely to be able to take over. Greenback is much too young and much too untried. The V-Ps, having been used to strong leadership and without experience in making decisions, will only squabble amongst themselves.

CASE NUMBER 47 What is the Contribution of Bigness? In respect to the first question, DeWitt is more nearly right than Augener. A top management structure that fits a collection of small businesses has to be quite different than one that fits a confederation of big ones, each of which can support all the management it needs. Augener is more right than DeWitt on the second questions: the conglomerate which manages businesses in all kinds of industries, technologies, and markets has never been particularly successful although it becomes fashionable periodically. A business needs a core of unity—either in the market or in the technology. It needs to be able to create unity out of diversity.

PART TEN: NEW DEMANDS CASE NUMBER 48 The Function of the Chief Executive Both candidates—Strong and Wetherall have ample experience in the main areas of the company. But, Strong has always been an adviser, a staff person—final decisions have been made by Neyland. Wetherall, on the other hand, has always been in operating work—where she has had to take command responsibility. What she lacks is experience in making policy and in planning. Which is the indispensable one of the two experiences? If the Board of Directors had to make the decision along these lines, there is not the slightest doubt that they would chose the person with command experience. We know how to give planning and policy advice to someone who knows how to make decisions and who has proven his capacity to do so. But, we do not know how to get the indecisive man to make decisions. 34

Alternative Approaches Stress the qualifications needed at the top. The alternative approach is to ask: what are the main problems facing the company the next few years or likely to face it? This approach is taken by a number of companies, but the results are very indifferent or non conclusive. Why? Because the future is not that predictable.

CASE NUMBER 49 Drucker’s Ideas for School Reform When I (Maciariello) ask my international students about education in their country (including students from Brazil, China, Columbia, India, Japan, Korea, Russia, Malaysia, Taiwan, Thailand, Turkey, Indonesia, and Singapore) only those from Singapore believe their nation has adequate primary and secondary schools. The others feel students in their countries are not well prepared for knowledge work and for the knowledge society. Some of problems in the United States are also encountered in other parts of the world. So, how can education be both revitalized and transformed? The Unites States has experienced: A flight away from public schools as predicted on p. 178 of Management Revised “Unless it [The Public School] takes the lead in innovation it is unlikely to survive this century, except as a school for the minorities in the slums. For the first time in its history, the United States faces the threat of a class structure in education in which all but the very poor remain outside of the public school system–at least in the cities and suburbs where most of the population lives.” Management Revised, p. 178 Public Schools in the U.S. are loosing their monopoly as providers of schooling. A. COMPETITION COMING FROM OUTSIDE THE PUBLIC SCHOOL SYSTEM 1. Rising Private School Enrollment9 Private school enrollment in the U.S. in grades K-12 now accounts for over 25 percent of all student enrollments. This shift away from public to private schools is occurring despite very high after-tax cost of tuition, especially in non-sectarian schools. PK-12 Enrollment (2009)

6,049,000 (11% of all US students)

# of Schools (2007-08)

33,740 (25% of all US schools)

Most students who are enrolled in private schools are enrollment in Catholic and in other Christian schools. Tuition charges in non-sectarian schools are approximately $15,000. Tuition charges in Christian schools are approximately 50 to 75 percent of charges in non-sectarian schools. 2. Home Schooling A 29 percent increase in home schooling from 850,000 to 1,096,000 students, occurred between 1999 and 2003. Why the Increase? 31 %—Reasons having to do with the environment of public schools, such as safety, drugs and negative peer pressure 35

30 %—Religious and Moral Values 26% Academic Dissatisfaction B. Changes Coming from Inside the Public School System 1. Charter Schools—40 states now (2008) permit charter schools—despite opposition from Teacher’s Unions and from Public Schools. Over the 10-year period, 1995-2005, 4,000 charter schools were opened. In 2006, 381 new charter schools were opened, an 11 percent increase over 2005. Why? Lack of product quality in public schools Ability to create small schools with freedom to innovate without union restrictions. The ability to focus on narrowly defined goals (or missions) These three alternatives to public schools—private schools, home schooling and charter schools— do not fall under the heading of “New Knowledge” innovation. They are simply alternatives created by necessity. C. Competition to Public Schools from charter schools Charter schools create a need for innovation in public schools. Every district reports effects of charter schools on public schools Creative Imitation—public schools try to maintain market share—for example, by creating Magnet Schools where each school is allowed to focus on strengths. D. Redefining the Mission of the Public School “The public-service institution needs a clear definition of its mission and it needs a realistic statement of goals.” From Entrepreneurship in the Public-Service Institution, Chapter 16, Management Revised, pp. 175-176. “What we have to do now is reassert the original purpose of the school. It is not social reform or social amelioration; it has to be individual learning.” The Accountable School Chapter 14, Management Revised, p. 154. Besides emulating charter schools, another possible avenue to explore to improve public schools is suggested by the discussion of “Entrepreneurship in the Service Institution” in Chapter 16. Four entrepreneurial policies are outlined in the chapter that provide a foundation for redirection of public schools. The first of these is a clear definition of its mission. Public schools now have a diffuse mission. Schools differ but many public schools now provide: 1. Multi-lingual training 2. Extensive remediation 3. A remedy for ethnic imbalances using busing 4. An array of counseling services E. The greatest Need of the Knowledge Society is to: Teach students how to learn for themselves over a lifetime! Teaching students how to learn over a lifetime requires “process-based” knowledge and this requires innovation. 36

F. Apply New Knowledge to Education Take advantage of the expansion of the knowledge of the brain and how learning occurs. Use technology to speed-up the quantity and the quality of education in subjects that are amenable to the use of technology such as mathematics and languages. Use the internet to bring the world into the classroom. Use time thus created to focus on developing the individual strengths of students. Conclusions: Schools are very complex. We should not impose one ideal on all schools. They differ by geographical location, school population and funding sources.

CASE NUMBER 50 What Do You Want to Be Remembered For? Peter Drucker’s legacy is in his writings. But, he is also remembered by those who knew him as a person who had a deep desire to release the latent talent in human beings. For example, you can see this described on pages xiii-xiv of Management Revised, in the life and works of Jim Collins. A colleague of mine, Derek Bell, President and Founder of Mosaic Trust, LLC, created the diagram below to illustrate the life processes required to move from success to significance. The diagram is used by his permission. The diagram represents a program of L3—Leaders building Life for Legacy.10 The 4th L is the influence of legacy on human beings. The diagram is pretty easy to follow. Answering the question, “What do I want to be remembered for?” involves an existential dimension—it is looking beyond ourselves to the contributions we seek to make in the lives of others (the 4th L). It requires a knowledge of one’s strengths that can be determined by consulting any one of a number of books that will help you determine your strengths, such as Now Discover Your Strengths by Marcus Buckingham and Donald O. Clifton (New York: Simon Shuster, 2001). It also requires knowledge of your values or passions. Once these are matched together one then must find out where he or she belongs. We free ourselves for maximum ability to create a legacy when we feel financially independent—a state which occurs when we are content with the means we have. As we accumulate excess, we gain freedom, and we then have the potential capacity to create a plan for our legacy. Creating a plan may require the help of an executive coach or mentor. The idea is to create a life-plan for achieving your legacy. This plan should change as our lives progress. One thing for certain, however, our lives are finite and we should follow Drucker’s admonition to begin thinking through the question on page 511 of Management Revised: “What Do I Want to Be Remembered For?

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Drucker, Peter F., & Maciariello, Joseph A. (2008). Management: Red Ed. New York: Collins Business Maciariello, Joseph A. (2009). Marketing and Innovation in the Drucker Management System.35-43. 4 Maciariello, Joseph A. (2009). Marketing and innovation in the Drucker Management System.35-43. 5 Tampons are shunned among unmarried female in South Korea 6 See Andrew S. Grove, Only the Paranoid Survive: How to Exploit the Crisis Points that Challenge Every Company, New York: Broadway Business, 1999. 7 Accessed on March 27, 2009. 8 Seymour Furman, M.D., “Foreword,” in Wilson Greatbatch, The Making of the Pacemaker: Celebrating a Life-Saving Invention, Amherst: New York, Prometheus Books, p. 18. 9 Chris Isidore, “Daimler pays to dump Chrysler: German automaker will end up actually paying $650 million to unload Chrysler to end its exposure to billions in ongoing losses, health care costs May 14 2007. Accessed, March 26, 2009. 10 Council for American Private Education, http://www.capenet.org/facts.html, accessed March 26, 2009. 3

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