T E A C H I N G N O T E S

Prepared and Compiled by

Joseph A.Maciariellowith assistance from Richard Romo and Matthew Shin

HarperCollinsPublisherswww.HarperAcademic.com

TABLE OF CONTENTSPART ONE MANAGEMENT’S NEW REALITIES . . . . . . . . . . . . . . . . . . .4Case Number 1 Yuhan-Kimberly’s New Paradigm: Respect for Human Dignity . . . . . . . .4

PART TWO BUSINESS PERFORMANCE . . . . . . . . . . . . . . . . . . .5Case 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 . . . . . . . .7Case 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 . . .15Case 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 20Case Number 24 Corporate Image to Brand Image: Yuhan-Kimberly . . . . . . . . . . . . . . . .20

Case Number 25 The Peerless Starch Company of Blair, Indiana . . . . . . . . . . . . . . . . . . . .222

PART SIX THE MANAGER’S WORK AND JOBS . . . . . . . . . . . .23Case Number 26 Alfred Sloan’s Management Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Case Number 27 Performance Development System at Lincoln . . . . . . . . . . . . . . . . . . . . .23Electric 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 . . . . . . . . . . . . . . . . . . . . . . .28Case 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 . . . . . . . .30Case 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 . . . . . . . . . . . . . . . .32Case 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 . . . . . . . . . .34Case 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 1Yuhan-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 difficultto develop such a culture. So, let’s look further into how Y-K accomplished its spirit ofperformance. It is based first and foremost on its principle ‘respect for the human.’ Theimplementation of Y-K’s principle led to hiring managers who have integrity and thisintegrity 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 theperformance 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 qualityin 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 intheir work. Developing people always involves self-development. Self-development is assisted placing highperformance 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 outputsthat are larger than the sum of the individual efforts. This cannot be accomplished by mere mechanicalmeans. To get out more than is being put in is possible only in the moral sphere and this requires respectfor human dignity.

The spirit of performance requires integrity, high performance standards, focusing on opportunity, andexpressing organizational values in people decision. For these requirements to lead to the spirit of theperformance, management must demonstrate integrity: the only quality that they must bring with them andcannot 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.

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PART TWO: BUSINESS PERFORMANCE

CASE NUMBER 2What is OUR Business?

“All right.” said a thoroughly exasperated Callahan, “you have told me what our business is NOT -but how doesone go about deciding what it is or should be? You all agree that the market opportunities are good in bothareas. 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 isour 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 op-posed to Restaurants, on grounds of the need to provide service, atmosphere, and cooks and while catering toguests, 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 kindof 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 3What 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 destroyingeconomic wealth and is incapable of self-renewal. So, the president of the conglomerate is right to require thebakery to earn a sum sufficient to cover and exceed its cost of capital. The president of the bakery is wrong inasserting 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 meetcorporate 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 togrowth expectations. Given The Theory of Business “as is” the bakery is not going to be a growth business nomatter what is done with it—not in a developed country in which bread consumption goes down with risingincomes and standards of living. The bakery is unlikely to grow at 10 percent per year, as the president of theconglomerate expects.

However, the bakery could re-define its Theory of Business and look at the new realities of the baking businesstoday. To achieve the president’s expectation and meet growth potential the bakery will need to innovate withnew delivery channels, new “whole earth” recipes and expand its product line. Combining these ideas with ad-vanced information technology and Internet sales, this bakery can turn into the juggernaut that the corporatepresident 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 itmeets profit and growth objectives. Current operations must be operated at minimum costs and maximum cashgeneration. This will require that the bakery stream line production, reengineer business processes and work onthe 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 andProfit Requirements. These objectives are paramount for establishing new directions and new measurementsfor performance.

The new Theory of the Business should aim at creating new customers by aligning its business with the needsof 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 noncustomers? What should our business be? This bakery will begin a process of change that will eventually lead tonew services, new customers and improved financial metrics. The Bakery may need to start a delivery usingbakery trucks powered by hybrid, smart vehicles making deliveries at the right time in the evening and servicingworking professional that don’t have time for shopping but need healthy organic baked goods like such asScones, 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 customere-commerce, opportunities that will enhance delivery and expand production and growth by enhancing deliveryof 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 togrow. The speed with which the environment around us is changing necessitates that the bakery alter its theoryof the business.

Executives need to keep ideas flowing and understand that there are internal and external variables that must bemeasured. Internally, among the most important variables are the theory of the business, personal skills, mana-gerial skills, and productivity of resources. Externally, executives must innovate, by understanding environmentaltrends, by creating a niche that is socially responsible and a spirit of performance that motivates employees.

CASE NUMBER 4Success in the Small Multinational

Bluntschili meant what he said. All he did was to think through the strengths of the company, concentrate onthem and get paid for them. He changed the business away from the exclusive design, manufacture and serviceof gears for cog rails on a global basis to the design, manufacture and service of specialized precision gears for allkinds of transportation vehicles.

It changed its manufacturing from all equipment it sells and services to manufacturing only a few specializedparts 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 5Health 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?

Thenmanagement 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 businesswith 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 6The 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 museumdirectors? 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 whomshould it report?

No one knows where the museum fits in the organization and to whom it reports.Why is it in the graduatefaculty? Should it be there?

Organization decisions should follow the basic mission decisions—but without them no museum director canhope to accomplish much.

Third, this is also a case of a failed promotion decision. A dialogue should have taken place with the previousdirector before he took the job. The previous director should be asked: “You realize that you are no longerrunning a community museum. You are running a university museum.”What do you have to do to be successfulin 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 acommunity museum. And it was not appropriate for this university museum.

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CASE NUMBER 7Rural 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 theDrucker Management System. A major purpose of the Drucker Management System is to develop and validatean organization’s “theory of the business,” which Drucker defines as an organization’s “assumptions ...about whata company gets paid for” (Drucker 2008, p.85).1 We will take a closer look at the theory of the business portionof the Drucker Management System in Figure 1, in order to analyze the decision making process used whenRDI 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 lookbeyond the walls of the organization to the external environment. The environment is not limited to where theenterprise is currently operating, but also includes other ‘environments,’ such as those where non-customers arebeing served and where future customers are likely to be served. The executives of RDI had clearly segmentedits business environment: “the world’s poorest people – those 3.4 billion, chiefly rural, people who live on lessthan two dollars a day.”

Executives must also understand the core-competencies required by an organization’s mission. In order tounderstand core-competencies, executives must ask, what are we really good at? The executives of RDI evidentlyunderstood 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 thebusiness.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 therequirements 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 largestpopulation of poor in the world, and there was a strong link between poverty and landlessness. These facts fitthe business environment that RDI has a passion for. However, there was a major problem: the lack of politicalwill to reform. Although, it is a major problem, RDI has core-competencies in policy advocacy, and reformdesign. The problem should not discourage RDI, but challenge them to solve the problem through their existingcore-competencies.

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

CASE NUMBER 8The Future of Mt. Hillyer College

DeanHolman 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 successfuland 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 requiredto realize the ideal?

That is the way the reformers of American Higher Education, such as Robert Hutchins, President of theUniversity 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?

6Disciplines 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 studentsMilitary 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 thanwasting limited resources.

CASE NUMBER 9The Water Museum

The museum’s mission statement is clear and meets the requirements outlined in Management Revised. Themission statement avoided grand sweeping generalities..It was precise and it was a call to action, “To promoteamong the general public an awareness and appreciation of water related issues–past, present, and future–andto provide leadership in research leading to more efficient water usage.” The only addition that may improve thismission statement would be to include a sentence on conservation and preservation of water resourcesand on social responsibility. Otherwise this mission statement seems to meet the requirements for a goodmission 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 utilitycompany, a natural monopoly, a type-one service organization. These type-one service institutions are run bya different charter and have different responses to constituents. The type-one service non-profit organization isnot directly answerable to its constituents, but they do answer to regulatory agencies that govern them. Whilethe type-two service organization is performing a task that serves a societal function they have a need to be veryresponsive to their constituents. The motivation and urgency is different between these two types of non-profitservice organizations. This eventually leads to a problem in performance and in meeting objectives. The boardhas two members from the utility company and that affects the urgency of the decisions. The museum requires astrong 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. Theomission was corporations and their impact on water conservation. It is the private sector’s profit that providesfunds for non-profit service organizations. A major source of funding was not included in their target audiencesand this was a mistake. As a result they do not have enough money to complete the museum project after twoyears of development.

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In essence, the management of the Water Museum requires strict performance monitoring focused on themeasurements and the achievement of objectives. It appears that the board was formed as a passive unit thatmay or may not raise money. The board must be stronger and business objectives should be defined. And theperformance 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 onperformance. The utility board members are of great concern because of the different style of business that theyare representing (a type-one service organization as compared to the museum type-two variety non-profitservice organization). However, the museum needs board support. The CEO should create an executivecommittee and add utility board members to that committee and replace them on the museum board. Thiswould accomplish two objectives. First, it will please the utility company by eliciting their input. Two, and atthe same time, it will place stronger entrepreneurial members on the museum board that would align themselvesbetter 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 emphasizeinnovation in water conservation. The museum should create alliances with arboretums with educationprograms for drought resistant plants and take the message of conservation out to the public. The museumshould promote programs in water conservation and reusable water systems. The museum should havea program of hydroponics that includes the history of these programs and how to use them in one’s own backyard 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’sresponsibility 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 wereineffective in monitoring the work of the CEO.The CEO and board should carefully delineate the dutiesof the CEO and the duties of the board and should work together to make the museum a success.

CASE NUMBER 10Should the Water Utility Operate a Museum?

The water utility should stay within its core competencies and not try to operate the museum.The WaterMuseum 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 ofcharter then the museum.These two kinds of organizations traditionally have different constituencies. Thetype-one service non-profit organization is not directly answerable to its primary constituents but to theregulatory agency that governs it. In contrast to the type-one service organization, type-two service organiza-tions are organized to perform a task that makes society a better place. Their performance metrics tend to be fo-cused 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 themuseum.Managing different kinds of organizations may lead to performance problems. The museum requiresa strong board that is performance oriented and task-based executives to move the museum forward. Thesetwo types of institutions are organized differently and must be sensitive to different constituents. The route tosuccess in the type-two organizations (i.e., the museum) is different then the route of a utility company that

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is a natural monopoly.

Certainly we all have heard the grumblings and the horror stories of poor customer relations from regulatednatural monopolies. Service organizations like water and electric utilities have often compiled dismal records oncustomer satisfaction and innovation. But, these very same type-one non-profit organizations have developedclever methods for communicating and answering to their regulatory agencies.

Type-two institutions need innovation and must constantly connect to their constituents. Type-two organiza-tions rely on enthusiasm and volunteer work to succeed. These organizations must be outward thinking andresponsible 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 bestructured in such a way that if the museum accepts the money it will need to reconfigure its board. To helpthe utility company in its involvement with the museum, a museum governance committee should beestablished. This committee should include some members of the utility board. Furthermore, the museumshould be independent of the utility company so that it can become innovative and establish programsthat enhance water conservation.

These two types of institutions do not mix very well. The Water Utility Company does not have the samepurpose as the museum. Having people on the governance committee will give the utility company a presenceat the museum. Having an independent board will give the museum freedom to innovate and to establishprograms that will eventually expand donations and support from the community at large.

CASE NUMBER 11Meeting 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 senseof belonging and result in changed lives both for those served and for those serving. That these institutions existat 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 thatthese resources be used effectively. It is incumbent upon us who contribute to these institutions to emphasizeat least minimum standards of performance and results.We must insist on strong mission oriented boards thathave 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 theformulation of its objectives while adhering steadfastly to the basic mission. Finally, one of the major needsin 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 sector12

organizations the main job of the CEO, the board, paid staff, and volunteers is to make sure that the mission isthe central call to action. Principles of professional management are required to convert good intentionsto results.

In reviewing several non-profit service organizations, one of the biggest contributions that can be made to thissector is the practice of entrepreneurial management. Public Service institutions must build into their policiesand 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 externaltrends 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 goodexamples of board development, mission focus and how to manage volunteers. These exemplary social sector or-ganizations provide good examples for other organizations to follow.

A look at the American Red Cross Web Site provides encouragement. It appears that this organization hastaken great pains to define itself while avoiding sweeping mission statements. The American Red Cross has veryspecific goals within each programmatic area. The Red Cross developed their internet site to communicate withdonors, constituents, corporations and volunteers. It appears they have set clear goals and aspiration for theirvolunteers.

The goals of the Red Cross appear realistic. These goals seek to optimize, not maximize and overreach. Theinternet site is setup for volunteers to communicate and participate with the organization. The site also allowscommunication by voice, videos and Wikis.

The Red Cross is using its site to communicate to members and non members in the hope they will expandtheir horizons and improve their life by becoming a volunteer or donor. Their site takes donations, entertainsand communicates.

After comparing various social sector internet sites it appears that a number of organizations lack strong missionstatements, objectives and goals, communication capabilities, and accountability. The Red Cross Web Site isstellar. 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 cancommunicate to end users. Effective usage of alarms and alerts also should be extended. Publishing news feedsand videos and membership photos are all tools that should be part of the arsenal used to communicate toconstituents. 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 utilizemodern information technology to advance their mission.We all have much to gain by improving theeffectiveness of these social sector institutions.

CASE NUMBER 12The Dilemma of Aliesha State College: Competence versus Need

Both the speech therapy clinic and the demonstration high school activities fragment the resources of thecollege without contributing to its performance. Therefore, both should be phased out (and within a fewyears both were). But, if one must be kept it is the one that performs—the demonstration high school, becauseit performs.

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Need alone, as in the case of the speech therapy clinic, is not enough if there is no competence—no chance ofsatisfying the need—no performance and results.

To keep on doing what one knows cannot produce results can only aggravate matters. It would lull the commu-nity into a false belief that it is doing something for children with speech problems, whereas it actually onlyharms them—by discouraging and disappointing them even more.

CASE NUMBER 13What Are “Results” in the Hospitals?

Armstrong rightly sees that there are many customers—physicians who decide whether the hospital’s beds arefilled; 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 toany of these constituents unless he is willing to face up to the risk taking decision of “what is the missionof the hospital?”

Objectives and goals, and measurements, in respect to any of these constituents follow from this risk takingdecision.

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 commu-nity 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 theemergency room door until he or she is in an examination room with an attending nurse or doctor there shouldbe 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 amajor 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 14Cost 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 therebycreates 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 hereand abroad) have not been notably successful.

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Some success has been reached by setting up units of the hospital as if they were on a profit centers, or at leastto 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 Foundationis strictly nonprofit but the Medical Group is for-profit. Bonuses are awarded to physicians based upongroup performance.

But in respect to the trustees, the case probably argues that the shift in health-care finance, as a result of whichthe great bulk of hospital costs are now underwritten rather than contributed by charity, implies a drastic shift inthe 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 buildthe 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, thewrong kind will soon be imposed on its community hospitals by legislative fiat.

PART FOUR: PRODUCTIVE WORK AND ACHIEVING WORKER

CASE NUMBER 15Work Simplification and the Marketing Executive

Peter Drucker always said “start with results.” This letter serves as an ironic example of optimizing runningamuck. Clearly, optimizing the symphony orchestra by thinning out its members and making the music simplerwill eventfully lead to inferior performances. The suggestion that efficiency and cost would be enhanced bydismissing 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 emphasizesthe need to consider the end result for the audience (i.e., customer) before attempting to design theperformance. The suggestion by this industrial engineer is ironic and funny, but it is often the folly of many cor-porate managers and CEO’s.

The people performing in this symphony orchestra are clearly assets. People in the orchestra own their assetswhich are their talents and these musicians are very mobile. All musicians need the spirit of creativity andinnovation that makes each member great and that makes the whole significantly greater that the sum of theindividual efforts.

The symphony orchestra is an accumulation of human assets that are used to create great performances that theorchestra leader and audiences will enjoy and evaluate. The assets of this orchestra company are the members ofthe symphony—that’s it. Thus innovation and creativity and artistic freedom are major parts of the outcome thatthey are seeking to produce. To assume that slashing certain redundancies, replacing highly skilled musicianswith lesser skilled people and replacing notes to create efficiencies is funny and ironic. This letter is a highlyeffective 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 costin creating better looking financial statements. This is done without fully considering the end result—the longterm impact on people, quality and productivity.

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The outcome of any production or service operation should dictate efficiency, and managers need to be con-cerned with the mix of inputs that create the optimum product or service. The concern for efficiency shouldnever over shadow the quest to produce a quality product. The members of the symphony orchestra along withthe conductor are inputs that provide the skill, knowledge and understanding needed to create the best qualityperformance, which is the sole objective of an orchestra. The efficiency is determined by the quality of musicdesired. Eliminating redundancies and changing the music to simpler forms does not enhance the output of thesymphony orchestra.

But here again, how many managers in corporations of today have tried the same efficiency process? Theyignore the quality of the product produced and the subtle nuisances of corporate networking. Understanding theproduct or service that is being produced is the first step in fine tuning the inputs, something that this industrialengineer 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 laborenvironments, such as manufacturing. However the work force has changed over the past 50 years from physicaland 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 fita single formula. Albeit, there is some elements of “Scientific Management” that apply to knowledge work butmuch has to be changed and recalibrated for the new millennium and its new work force. This letter treats thedynamics of managing the knowledge worker by focusing on the inputs and he misses the point of the qualityof the output.

As silly as this letter is, it reflects a very important reality of the market place today which is 1. the productivityof the knowledge worker should be measured in terms of the quantity of the quality of the output produced and2. one always begins with the desired output in determining the required inputs for producing a productor service.

CASE NUMBER 16The Army Service Forces

Fredrick Taylor pioneered the field of scientific management through his efficiency studies. Taylor analyzedmotion, tasks to control the direction of quantity, quality and the acceptable range of exceptions to come up withappropriate and most efficient ways of proceeding in doing a job. Taylor also realized task-oriented operationsrequire simplification. The need is to organize steps into a sequential work flow in order to complete productionwith the most efficient inputs. Taylor realized that task analysis and critical pathways determine the best workflow and the most efficient mix of inputs for producing a well-defined output. Taylor’s scientific engineeringlater turned into industrial engineering in the US, Japan, and the United Kingdom, and was referred to asrationalization in Germany.

Aldridge’s Army Service Forces used a command and control style of management. Manual tasks werecombined under perfect conditions for using scientific management and re-engineering processes fortransforming this service into a lean, efficient juggernaut. This successfully supplied resources efficiently andquickly to fight World War II. Simplifying tasks by reengineering processes was the exact technique requiredin this situation.

Whether these tasks become monotonous and dehumanizing depends on management and its motivationalstructures. The management team must determine a set of principles that will help humanize the monotonoustasks that lay ahead for the worker. The Army’s singular task was to win the war. As a result, the potential

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de-humanizing aspect of this work may not have been a problem when considering the higher goals. Thesemonotonous tasks would certainly be de-humanizing if management were autocratic. However, these techniquesmixed with practices of the human relations school of management make it more humane. In fact, strong laborunions help to mitigate these kinds of complaints and help management to decide on the right course of actionwhen 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 artisticfreedom is needed to produce the best performance, this kind of management and simplification apparentlyworked very well this situation. Managing knowledge workers is very different then managing manual laborwhere 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 selfregulated. The members of the orchestra must define their tasks, quality, and results. They are accountable forthe over all sound of the orchestra. Often in these kinds of organization a manager needs to understand that themembers in the orchestra are self driven and experts in their given fields. Managers need to share leadershipwith people within the group to capitalize on knowledge possessed by subject matter experts. This leadershipparadigm is called the “shared leadership model” and just one more tool to use when managing knowledgeworkers.

These knowledge teams should not be managed with a top-down style. Rather, these knowledge teams shouldbe self-managed groups. They perform better when left alone and held accountable for both the quantity andquality of performance.

Aldridge’s use of Scientific Management to trim and make the Army Service Forces more efficient wasa brilliant example of the right technique for the right situation at the right time. The command and controlstructure of management in the army and the pre-determined nature of the output, lent themselves to ScientificManagement. The education and understanding of all tasks was a great additional piece of Aldridge’s plan thatseemed 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 uniqueand needs a plan of analyses. It’s always a matter of doing what is necessary both to make the work productiveand the worker achieving.

CASE NUMBER 17How 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 knowledgeworker, and Susan hasn’t given much thought to that yet. But, she is taking the right starting point—themanager’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 assumeaccountability for results.

It is up to Susan to integrate the work of knowledge workers and make sure their definition of results is correctfor the bank.

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CASE NUMBER 18Can 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 highvisibility, things that are operational.

Examples might be:

ask each affiliate’s management group what the company and European headquarters staff do that helps themanagement 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 thenext 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 notime for “studies.”

Those familiar with MBO will notice how these recommendations follow from the MBO Philosophyof Management.

CASE NUMBER 19How 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 theirlife—e.g., a middle-aged women. Undertake job-enlargement that gives stock-room employees responsibilityfor 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 companyfor able people for whom there are no promotional opportunities. Law, Accounting and Consulting firms dothis routinely.

Then the company must give management an alternative way to recruit junior management for this proposal tosucceed. 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 changeits practices until it found that it could no longer attract “high-quality people” to its stock-room jobs and had in-stead 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-roomjobs despite their total lack of success.

CASE NUMBER 20The New Training Director in the Hospital

The expert’s advice may make very high demands on a new training director—even though it is probablywise advice.

A new policy that STRONGLY deviates from what people expect is probably best tried out on a small scale,

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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 headsare 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 anddefined standards of patient care and of medical care—that is clarity from her own bosses, the hospitaladministrator, 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 hospitalhasn’t defined what the proper objectives, standards, and practices should be. The frustration may be thehospital’s fault more than any one else’s.

CASE NUMBER 21Are 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 thesupervisor, 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 maintainthe 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 tocome to students’ social affairs? Still it is possible to minimize the necessary division—by common dinningfacilities, by common plant activities.

The case furnishes a powerful argument for creating plant-community activities in which nonmanagers andnonsupervisors have meaningful roles—for example in vacation scheduling, in safety, in the suggestion plan,in benefits and their administration, and so on.

CASE NUMBER 22Midwest Metals and the Labor Union

The union attitude—and the corresponding management attitude—reflect in part the fact that it is the functionof the union to be an opposition. The attitudes also reflect the divorce of the worker from the benefits, and theirmanagement 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 in-come 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 planningand administration of employee benefits. Unions may oppose this quite as much as management, because itwould make them (unions) responsible for results.

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CASE NUMBER 23Safety at Kajak Airbase

The two officers represent different approaches to motivating people. The chief of operations relies oncarrot and stick, the Chief Safety Inspector on continuous learning. Both approaches are needed, only togetherare they likely to achieve lasting results.

There are three complimentary approaches to safety. Each can do only so much and if driven beyond theoptimum 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 thatbeyond a certain point that approach lulls people into false security, for dangerous work cannot be made trulysafe.

There is secondly the training in safe behavior—safe driver training, for example. And both officers inthe case are focusing on it—rightly because it is the most effective way to prevent accidents. But it needsstrong 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 af-termath—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 isnever going to be a totally safety—conscious and careful workforce, and accidents cannot be eliminated nor theworld made risk-free.

So there is always need to prepare for accidents and to organize for minimizing their impact.

PART FIVE: SOCIAL IMPACTSAND SOCIAL RESPONSIBILITIES

CASE NUMBER 24Corporate Image to Brand Image: Yuhan-Kimberly

Diapers, female sanitary napkins, box tissues, bathroom tissues, medical gloves, sterilization wrap, surgical facialprotection, etc. are some of the major products manufactured and marketed by Y-K. Y-K is in the business offulfilling 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 hadsaid about the limits on corporate social responsibility (CSR): The manager is a servant. His master is theinstitution he manages, and his first responsibility must therefore be to it. His first task is to make theinstitution, whether business, hospital, school, or university, perform the function and make the contributionfor 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 cleancorporate image for this personal hygiene and health care products company. So, let’s look further into how Y-Kaccomplished its primary mission through its CSR activities by analyzing its mission, strategy, and CSR.

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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 tocommunicate to the members of the organization where the business is going, provide the rationale as to why itis going down a given path, and help executives align activities of its members to fulfill the mission. Formulatingthe mission of an organization requires executives to look beyond the walls of the organization to the externalenvironment. 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 theorganization when formulating the organization’s mission. In understanding core-competencies, executives mustask, 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 ourbusiness? Who is our customer? What does the customer consider value?

[Figure 1]3

Y-K’sMission

By answering the questions above, we may get close to what Y-K’s mission must have been at the time ofimplementing “Keep Korea Green,” the forest restoration CSR activity.We will exclusively look into thefeminine care product business of Y-K since the case illustrates the relationship between the “Keep KoreaGreen” 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 themonth 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 (30-35years 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 andof purchasing sanitary napkins. Any venue that leads to overcoming such anxiety would produce greatvalue 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 femalemenstruation. To achieve long term contacts with its indirect customers, Y-K had to show a commitmentthat company would continuously manufacture pulp based female sanitary napkins instead of convertingto synthetic-fiber napkins.

Forest restoration with a phrase “Keep Korea Green”, along with printing the “Keep Korea Green” logo on theback of each product led to creating the “clean image” enabling young female to overcome the guilt of purchas-ing sanitary napkins. “Keep Korea Green” activity involves a large investment in tree planting. From the pulpsupplier’s point of view, such a large investment could be seen as a gesture from Y-K announcing its long termcommitment to the use pulp (from trees) instead of synthetic materials. Due to such commitment, Y-K and itsraw 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 goodintentions. 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 fa-vorable long-term-contacts, and a differentiation strategy involved in its “clean image.”

CASE NUMBER 25The Peerless Starch Company of Blair, Indiana

The Peerless Board clearly chose to let things drift rather than “interfere” and force the resignation of anincompetent 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 helay-off according to seniority? This would give him the labor force least likely to succeed and one with SocialSecurity and other pension benefits. Or should he lay-off by selection? And how does one select and what im-pact on morale would that have—with all the opportunities for favoritism and for setting colleague against col-league? And is any plant likely to survive such a pruning?

THE SOCIAL SHOCK OF ATURNAROUND OFTHIS 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 townis a threat to the town and to itself. It cannot do the economically necessary things without endangering thecommunity, and vice versa.

There is also the lesson that top management of a multi-plant or multi-division business does damage if it alsomanages one plant or one business—a lesson that multinationals have learned the hard way. It will impair effec-tive management of the plant or division where it makes its headquarters, and subordinate the other parts of thebusiness 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 itcannot 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 26Alfred Sloan’s Management Style

The point of the case lies in the last sentence. Lincoln and Roosevelt both ran their office very much the waySloan did, by keeping official relations and private friendships apart. The best documented case is the way inwhich Roosevelt stopped having social relations with Henry Morgenthau, a life-long and close friend, as soon asMorgenthau took over as Secretary of the Treasury.

Both Lincoln and Roosevelt had “kitchen cabinets” like Sloan’s—but Lincoln and Sloan did not allow theiroutside friends to have any influence on their decisions—in contrast to Roosevelt, who did. Roosevelt didsomething else different: he organized systematic outside communication and thus prevented the isolationthat threatens the chief executive. This was one of the main roles Eleanor Roosevelt played.The case illus-trates the dilemma at the top.

Many styles are effective but an executive with a number of personal friendships on the job may not be asobjective 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 withreality. 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 ElectricThe Professional Development System (PDS) has clear parallels to Peter Drucker’s classic “Management byObjectives with Self-control” Philosophy. It is not a perfect example of MBO principles in action, but the man-agement tool is an effective way to make and keep knowledge workers productive. This, coupled with makingwork 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 strategyof the business (in this case, the department’s business plan but such a system could also be established fora social sector organization based upon mission & desired results), and precise requirements for meeting andmeasuring 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 employeesthemselves 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 dependenton not only the scheme, but also how it is implemented. The goals must be clearly congruent with the theory ofthe business, and the mission must be kept in mind. How results are reviewed is also important: a discussion ofthe overall firm goals must be intertwined in the conversation the boss and the employee have during theevaluation. Reviewing steps performed, and how well, is, of course, necessary. But a step is not effective unlessthe “big picture” is in view, and intentionally discussing that target brings it to the forefront. Overall, this isan excellent foundation for establishing alignment.

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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 benumerical and absolute: sales, market share, number of new products developed, number of branchesopened, or number of classes offered. Alternatively, it may be less concrete but nevertheless tactical:increase in employeeand/or customer satisfaction, change in brand recognition, confidence in the product or service, and otherintangibles 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 cancause 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 passedinspection, 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 thereis a goal such as “complete strategic marketing plan within six months of new product patent.” This impliesan acceptable range of time, not a stopwatch. First to market can be lucrative, but shortcuts that mightcause 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 vi-sion, and setting objectives not only for corporate goals but also for personal competencies, serves several pur-poses.

First, becoming good at something is an end unto itself, and is often minimized by corporations hoping to getthe most out of their employees in the short run. This happens, for example, when a disorganized departmentworks so much overtime that there is no time for training, reflection, or personal development. The future ofthe company is compromised under these circumstances. The department may meet its daily deadlines, and beefficient this fiscal quarter, but is ineffective over the long haul. Employees that are trained, cross-trained, andencouraged to learn new skills and topics on their own are less bored, more motivated and therefore moreproductive. 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 willhelp the company move forward. In executive management programs, for example, they will network with otheremployees who bring good ideas to class. Strategies such as Management by Objectives can be conscientiouslyapplied to the entity that pays for their courses.

Lastly, competence is contagious.When one member of a group becomes more capable, others want to learnand improve, too. The whole becomes stronger when each member raises his or her sights. The value and thecompetitive edge earned will prove profitable. By having its knowledge workers improve their competencies, it isforcing them to ask what they need to learn to keep abreast of their knowledge area. By sharing learning withinand without their departments, they are asking what their associates need to know about their knowledge area,

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and how it contributes to the work of others. By utilizing PDS, Lincoln Electric is helping itself by helping eachemployee and each department.

Providing a two-way communication tool is imperative in setting objectives. Feeling ownership of a plan makesone more likely to follow it.When we agree with something, and understand its purpose, we move forwardwithout 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 theyneed to do. Having capable, self-motivated knowledge workers on one’s side is invaluable. Micromanaging onlystifles 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 thathuman nature is good (Theory Y), and that people will work hard and reach for results (seek self control). Thefixed, locked-in nature of the performance evaluation would otherwise cause one to “play the numbers game” ofreceiving high ratings, instead of trying to do the most good for the organization. The system infers fairness anda sense of what is mutually beneficial. It assumes honesty in self-assessment of performance. It assumes thatitems on the agenda of performance coaching/mentoring as well as in the interim review will be acknowledgedand observed. It assumes, in general, that both parties will choose to raise their sights to focus on the highestlong-term contribution to the department’s goals and to the company’s overall objectives. In summary, it as-sumes good management up and down the ranks.

The effort required to initiate, implement and integrate the Professional Development System is absolutelyworthwhile. Management today must be intentional about setting, reaching, and measuring performance onmeaningful 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 LincolnElectric and for other organizations.

CASE NUMBER 28Internal 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 needsof the organization. This technique focuses manager’s attention on the objectives and results. It does so whileconserving energy—everyone knows what is expected of them.

At TI and in many organizations the question has become, how do I manage knowledge workers? TheCatchball process has captured the essence of the management process by aligning the overall external needsof 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 theorganization. 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 througha communication process that relates the goals and objectives of the company to worker performance. In doingso, management steps out of the way of its workers; employees are empowered by having control of their owndestiny. This contributes to workers feeling free and also responsible. It stimulates innovation and boosts the

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spirit of performance of the organization. A workforce is created that is concerned with the job, with objectivesand 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 empowermentof the individual in the organization. He ends by harmonizing individual goals with the strategic direction of theorganization. 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 resolutionon many levels. And in this way provides for the very demanding communications required in the “systemsorganization.” The inter-organizational management team enhanced communications by not allowing anydissention or argument to remain unresolved, thus promoting the central ideas of harmony amongst teammembers from different organizations. They fostered a highly effective inter-organizational team by deliberatelyorganizing team building exercises. They tried to establish trust and communications that would lead to bothvertical and horizontal integration. In essence, they were practicing Management by Objectives both verticallyand horizontally.

However good Catchball is–as time goes on–there may be a convergence of ideas that may reduce independentthinking. Tolerance of new ideas is important for innovation. The management team of TI, and of The JointWeapons Systems Program, must guard against the tendency towards “group think” and thereby squash thebenefits of diversity in the organization. This can be very detrimental considering the needs of knowledgeworkers for autonomy and for independent thinking. Pushing on everyone for convergence and agreement maydecrease 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 29Can You Manage Your Boss?

What Larry Frankenmuth told Sartorius is, of course, that it is the subordinate’s job to manage the boss—andthat doing it takes work.

He also told Sartorius how to manage this particular boss. He made it clear that Webster was a listener and nota reader, and therefore inundating him with memoranda and reports before making an oral presentation to himwas quite useless. He told Sartorius that Webster—like any boss—hated “surprises” and considered it the subor-dinate’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 obvi-ously 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 itnever occurred to him that Webster’s “anecdotes” were meant to tell something; and it never occurred to himthat a man who could make his way to a senior position despite his lack of formal education might havestrengths and qualities—and surely a capacity to learn—that deserved respect rather than contempt.

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CASE NUMBER 30Ross Abernathy and the Frontier National Bank

Staffing a totally disorganized company is difficult and risky. The inside, crony, outside approaches requireschoosing 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 incompetent outsiders to replace key people who have not performed, he will do equally great (or greater) damageto the morale of those customers and especially of those of his younger people who expected changes and newleadership.

And then he surely must fail—for he will have lost the support of the people inside and outside on whom hedepends 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 troopscompetent 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 wellbring in imitators, and ‘carbon copies’ are weak.

The choice probably lies between alternative one—the inside approach—and alternative number three—theoutside approach—and number three may be the lesser evil.

CASE NUMBER 31The Failed Promotion

The promotion was made in violation of all the rules needed to prevent, or at least to minimize, the tremendouswaste of a failed promotion and the risk attendant on all people decisions. The rules laid down by the chairmanare 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, becausea 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 suspectedwas 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 likelyto be damaged. Does one have the right to expose a younger man to damage in order to maintain the autonomyof 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 minimizewaste. Think through the demands of a new job and make sure the appointee understands these demands. Donot 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 32Lyndon Johnson’s Decision

Lyndon Johnson (LBJ) violated two basic decision-making rules. First, he did not evoke dissent. George Ball’sdemurrer was quickly shoved aside, with Ball himself soon eased out of Washington. Thus Johnson had noalternatives 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 ofGeorge Ball and don’t persist in a policy that failed to produce results.

CASE NUMBER 33The New Export Manager

Both sides violated the rules of communications: The Company did so by not challenging Andrews to tellmanagement 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 estimateof 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 addressany of their concerns.

Instead, Andrews depended upon those in the Company reading his mind and seeing through closed doors.

CASE NUMBER 34The 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. Effectivecommunication is facilitated by trust. You build trust by telling the truth, using effective methods ofcommunication, and following through on promises.

But the Board tried to communicate “down”—from the Board to the black community. Even with good upwardcommunications, 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 thatshe would therefore automatically be a candidate for the open principal position. The Board did not test thisassumption. An hour with one of the black board members would probably have brought out the existence ofa serious problem with Mrs.Wicks.

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

CASE NUMBER 35The Structure of a Business Decision

The first offer (National China) gives Nakamura immediate profits but does not establish Nakamura’s brandname in the U.S. This offer thus contains a risk of losing the U.S market again if National China switchessuppliers after 3 years.

The second offer (SSW) means no profit for some time but also no capital investment (assuming excesscapacity) 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 whichdecision accomplishes the desired result? That is the management must establish the boundary conditions forthe decision. If Nakamura wants to be a big company and foresees a steady growth in the home market butis already at full capacity and if expanding capacity to an optimum size requires a quantum jump beyond whatthe 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 36The 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 theCEO 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 itaccessible—but for the CEO to say “get me a control panel” makes no more sense than for a man to say “get mea 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 badidea to start roughing out—in far less time than three months—a proposal as to the kind of information theCEO 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 37Research Strategy and Business Objectives

Able Company defines its business as exploiting the rhythm of scientific discovery. It gambles on the scientificrevolutions (its research strategy) in which an established scientific assumption is being challenged and mayeventually be overturned. This gives so long a lead time between scientific discovery and general acceptancethat the successful pioneer can establish an unchallenged leadership position. Able is indeed “using science andtechnology 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 practionerwith 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 intospecialties—hence the company’s insistence on not keeping drugs for specialized applications or specializedareas of medical practice.

Charlie Company looks for small but strategic spots (i.e., a market niche strategy) in which a significantimprovement establishes a leadership position that is likely to go unchallenged; there isn’t enough business therefor a second supplier and not much point in trying to compete with something that is “just as good” or evena little better.”

Some examples of this kind of situation are sealing compounds for canned products that have a risk of botulismif there is any leakage, or welding rods (a whole ship may sink if one weld is faulty). Such market niches arebest found where the cost of the product is insignificant in the cost of the whole—i.e., a few drops of a sealingcompound—and yet the loss due to malfunction is almost catastrophic.

CASE NUMBER 38Who 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 intomoney, 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 39Andy 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 interviewand 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 notworking 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 40The Chardack-Greatbatch: Implantable Pacemaker

Students should be encouraged to read about the history of Cardiac Pacemaking to understand the role pastinnovations played on the success of the Chardack-Greatbatch Pacemaker. Timing must be right, and enoughinformation must be known in advance if the missing pieces are to be supplied by an innovator pursuinga strategy of innovation using new knowledge. The role of “good fortune” also seems relevant to innovationsbased 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 articlemay 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 knowl-edge. We build upon the shoulders of giants (see the quote from Isaac Newton on page xi of Management CasesRevised).

Part of the genius of the Chardack-Greatbatch Pacemaker was the immediate recognition by Greatbatch thatproven results from medical device research and development require large scale manufacturing capacity in orderto convert the results to customer value. Greatbatch did not have this manufacturing capacity and had to quicklyfind a company that did.

“Unlike those who did not fully recognize their accomplishments or did not recognize that research anddevelopment are different from device manufacture, Greatbatch, Chardack, and Gage patented theirdevice 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

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PART NINE: MANAGERIAL ORGANIZATION

CASE NUMBER 41The Invincible Life Assurance Company

What Invincible lacks is a Top Management and the Spirit of Performance. Mulholland, for all his appearancesof kindness, was a tyrant whose benevolence masked a lust for power and he left an empty shell rather thana flourishing company.

Wintress’ first job is to think through his own role and relationships as the new chief executive officer; he cannotdo anything until he has done that. And he has virtually no time, fort his first moves will establish the way he isperceived by the people at Invincible.

Wintress should not continue Mulholland’s pattern. But, it is not clear that is any one thing that would beright—he has to make risk-taking decisions, and make them fast. His first moves will establish the way he isperceived by the people at Invincible.

CASE NUMBER 42The Failed Acquisition

Chrysler was purchased in 1998 by Cerberus Capital, a large US Private Equity firm. Daimler paid $37 billionfor Chrysler in 1998 and sold 80 percent of its equity in 2007 for approximately zero, while as of the sales agree-ment it continues to hold 20 percent equity in Chrysler. Although Daimler took a $37 billion total loss on theacquisition price, it avoided billions of dollars of future Chrysler losses. In retrospect, the timing of its purchasewas 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 forChrysler. Global excess automobile capacity, uncompetitive cost structure of Chrysler, poor product mix, and ris-ing fuel prices simply overcame whatever strengths Daimler could contribute to Chrysler, such as world-classengineering 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, havebeen hurt by high gasoline prices over the past year and a half; they depend much more on sales of light truckmodels, such as SUVs, pickups and minivans, than on the more fuel-efficient car models, where Japaneseautomakers dominate U.S. sales.”

CASE NUMBER 43Banco Mercantil: Organization Structure

Both plans are simulated decentralization—probably the only kind of decentralization possible in a commercialbank. 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 togeography. Banks have found that they need both. The head of the London Office of Citibank or Bank ofAmerica 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, partsof a world-wide corporate banking business. Banco Mercantil is moving towards such a (rather messy) matrixorganization.

Putting a matrix in is a last resort—it rarely works well. It requires an enormous amount of self-discipline andfar more mutual trust than exists in most organizations. And even where it is appropriate such as in BancoMercantil it usually takes a few years or so before it functions. But, sometimes it is the only appropriateorganizational solution.

What the case does not bring up, although it is strongly implied, is that neither plan thinks through adequatelythe role and organization of top management—the president does not see such a function at all, or the role andorganization of innovation.

CASE NUMBER 44The Universal Electronics Company

Manzoni objects on three grounds:

1. The major expansion is projected for Europe, while the organization subordinates Europe to theslow-growing or stagnant U.S., thus violating the link between strategy and business needs (i.e., theorganization structure).

2. Neither of the two men on top in Europe would have enough to do. Also, it proposes putting the seniorand important man (Manzoni) under someone with far less stature and experience who can only becomea messenger boy for Manzoni.

3. It fails to separate the company’s top management from the domestic U.S. business.With three U.S. divi-sions, top management would surely spend three quarters of its time on U.S. business even though all threeU.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), eachheaded by a “President” and with a top management acting as a Board for each of the regions; or organizationby 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 45Research 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 sitdown with them frequently in their place of business. He has to make sure that the people in all five labs knowwhat is going on in every lab—largely by him telling them but also by making sure that they meet often, witha 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 betweentwo stools.

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CASE NUMBER 46The Aftermath of Tyranny

Many of the company vice-presidents will fault Bullock. Few will see that Bullock may not have had muchchoice. 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 ismoved out—made chairman of the executive committee or otherwise kicked upstairs. Any other successorwould 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 wellintentioned 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 squabbleamongst themselves.

CASE NUMBER 47What is the Contribution of Bigness?

In respect to the first question, DeWitt is more nearly right than Augener. A top management structure that fitsa collection of small businesses has to be quite different than one that fits a confederation of big ones, each ofwhich can support all the management it needs.

Augener is more right than DeWitt on the second questions: the conglomerate which manages businesses in allkinds of industries, technologies, and markets has never been particularly successful although it becomes fash-ionable periodically.

A business needs a core of unity—either in the market or in the technology. It needs to be able to create unityout of diversity.

PART TEN: NEW DEMANDS

CASE NUMBER 48The Function of the Chief Executive

Both candidates—Strong and Wetherall have ample experience in the main areas of the company. But, Stronghas always been an adviser, a staff person—final decisions have been made by Neyland.Wetherall, on the otherhand, has always been in operating work—where she has had to take command responsibility.What she lacks isexperience in making policy and in planning.

Which is the indispensable one of the two experiences? If the Board of Directors had to make the decisionalong 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 hasproven his capacity to do so. But, we do not know how to get the indecisive man to make decisions.

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Alternative Approaches

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

CASE NUMBER 49Drucker’s Ideas for School Reform

When I (Maciariello) ask my international students about education in their country (including students fromBrazil, China, Columbia, India, Japan, Korea, Russia, Malaysia, Taiwan, Thailand, Turkey, Indonesia, and Singa-pore) only those from Singapore believe their nation has adequate primary and secondary schools. The othersfeel students in their countries are not well prepared for knowledge work and for the knowledge society. Some ofproblems in the United States are also encountered in other parts of the world. So, how can education be bothrevitalized 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 aschool for the minorities in the slums. For the first time in its history, the United States faces the threat of aclass structure in education in which all but the very poor remain outside of the public school system–at leastin 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. COMPETITIONCOMINGFROMOUTSIDETHEPUBLIC SCHOOLSYSTEM

1.Rising Private School Enrollment9

Private school enrollment in the U.S. in grades K-12 now accounts for over 25 percent of all studentenrollments. This shift away from public to private schools is occurring despite very high after-tax costof 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 areapproximately 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 between1999 and 2003.Why the Increase?31 %—Reasons having to do with the environment of public schools, such as safety, drugsand negative peer pressure

35

30 %—Religious and Moral Values26% 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’sUnions and from Public Schools. Over the 10-year period, 1995-2005, 4,000 charter schools wereopened. 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 createdby 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 MagnetSchools 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 ofgoals.” 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 socialamelioration; 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 sug-gested by the discussion of “Entrepreneurship in the Service Institution” in Chapter 16. Four entrepre-neurial policies are outlined in the chapter that provide a foundation for redirection of public schools. Thefirst of these is a clear definition of its mission. Public schools now have a diffuse mission. Schools differbut 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 lifetimerequires “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. Usetechnology to speed-up the quantity and the quality of education in subjects that are amenable tothe use of technology such as mathematics and languages. Use the internet to bring the world into theclassroom. 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 differby geographical location, school population and funding sources.

CASE NUMBER 50What 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 whohad a deep desire to release the latent talent in human beings. For example, you can see this described on pagesxiii-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 belowto illustrate the life processes required to move from success to significance. The diagram is used byhis permission.

The diagram represents a program of L3—Leaders building Life for Legacy.10 The 4th L is the influence oflegacy on human beings. The diagram is pretty easy to follow. Answering the question, “What do I want to beremembered for?” involves an existential dimension—it is looking beyond ourselves to the contributions we seekto make in the lives of others (the 4th L). It requires a knowledge of one’s strengths that can be determined byconsulting any one of a number of books that will help you determine your strengths, such as Now DiscoverYour Strengths by Marcus Buckingham and Donald O. Clifton (New York: Simon Shuster, 2001). It alsorequires knowledge of your values or passions. Once these are matched together one then must find out wherehe or she belongs.

We free ourselves for maximum ability to create a legacy when we feel financially independent—a state whichoccurs when we are content with the means we have. As we accumulate excess, we gain freedom, and we thenhave 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 forachieving your legacy. This plan should change as our lives progress. One thing for certain, however, ourlives are finite and we should follow Drucker’s admonition to begin thinking through the question on page 511of Management Revised: “What Do I Want to Be Remembered For?

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1 2 Drucker, Peter F., & Maciariello, Joseph A. (2008). Management: Red Ed. New York: Collins Business3 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 Korea6 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 billionsin 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.

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