The Practice of Management

The Practice of Management
by Peter F. Drucker
 
Preamble

Like all of Drucker’s books, there is a lot of deep insight here, and some common themes reiterated. Especially the sections on the spirit of an organization, management by objectives are good.

This one is a bit dated, being published in 1955 first. Apparently “automation” was all the rage at the time, as Drucker oracles on how it will influence the work environment throughout (calling it “the new technology”). Drucker also differentiates between managing managers, professional employees and “workers”, writing at a time of industrial production on the assembly line, with few “knowledge” or “professional” workers, and a lot of unskilled labor. He talks at length about the managerial role of foremen etc. Other books of his have aged better in this regard. As ideally the worker should be able to look at the business with managerial viewpoint to do the right thing, and Drucker prescribes largely the same focus areas for both groups, I will combine them here.

Management is about managing the business, and the enterprise.

The Business

The purpose of a business is to create a customer through marketing and innovation.

Thus, managing a business is entrepreneurial, it cannot be bureaucratic or administrative. It cannot be passive or adaptive. It must take decisions on actions to create future results.

Marketing

The customer determines what a business is. What the customer thinks he is buying, what he considers value is decisive. It determines what a business needs to be and to produce to prosper. Marketing is figuring out what this is, and providing it. Not just selling what the business happens to make.

What is our business, and what should it be?

Ask yourself: Who is the customer? The actual and potential customer? Where is he, how does he buy, how can he be reached? And most crucial: what does he buy? What does he consider value? What are his unsatisfied needs? What does he look for, when he buys the product? (For some luxury goods, the high price itself is value). Never try to guess, ask or even better, observe!

How will trends, economic developments, innovation, technology, fashion and taste change? How will they affect what the customer wants and needs, and what wants and needs do exist that are not met by services and products offered today? Therefore: What should our business be? Are we in the right business, or should we change? To what? This may be many kinds of change, like change to a service model? Instead of selling new customers, keep and expand old ones?

Services should always be measured by regular, unbiased and systematic questioning of the customer. This may take the form of an annual customer survey.

A business that supplies less than a certain share of the market becomes a marginal supplier.

Innovation

Innovation can be in lower price, better product, new convenience or creation of a new want. It goes through all parts of a business, design, production, marketing, management. Successful companies are in danger of living of past successes instead of continuing to innovate.

In Innovating for productivity gains, scheduling of work flow is the greatest time saver. Mass production is based on uniform parts or modules, which can be assembled into a great variety of products. The burden of diversity is shifted from manufacturing to assembly.

Profit

Enterprise must operate with adequate profit, it is its social responsibility as well as its first duty towards itself and its workers. It is the first duty of the business to survive, that is, to avoid loss and liquidation. Sufficient profit is the only source to cover the risks of economic activity. Profit is the final result of successful business activity.

Profit is not the purpose of business, nor the reason for its behavior and decisions: it is how results are measured.

Management must maintain its wealth producing resources intact by making profit to offset the risk of economic activity. It must increase these resources and with them the wealth of society. A shareholder always can sell his stock, but society is stuck with the enterprise, and has to take the impoverishment if the enterprise does not succeed with innovation and growth, does not succeed in generating adequate profit.

Profit is the yardstick to warn you from pouring money and energy into bolstering the weak, ailing and declining, instead of strengthening the strong and growing among your ventures. It also should block the dangerous and most deceptive alibi for following the line of least resistance: that an otherwise unprofitable venture pays for itself by “absorbing overhead”.

You measure profit as return on invested capital over borrowing cost. (Other, simpler methods may also be applicable, like as percentage of sales; depends on your goals).

If a management cannot over a reasonable period of time create profit, it should abdicate. If the business will not be able to create profit for too long, eventually it will fail.

Where will capital come from? How much will you need? What is the capital market rate for financing? What will your ROI be (see EVA)? Plan capital supply and calculate expected profit over capital cost over the life of the investment. This also overcomes artificial annual budgeting.

You need a rational capital-allocation policy. Otherwise you will always arbitrarily grant or withhold capital and centralize the management of cash. It must be based on a reasonable and reliable assessment of the ratio between returns and risks. (How?) How much should go into productivity improvements? How much into new designs? “Any fool can stay in budget, but it’s hard to draft a budget worth staying within.”

No company can be good at everything. Focus on your strengths. Outsource what others can do 
better.

Society

The enterprise must consider the impact of every business policy and action on society.

Responsibility implies authority. You can only be held responsible for that which you had the power to decide. There can be no responsibility without authority. As it would be intolerable for management to have authority over colleges, culture, the arts, free press, society cannot ask it to take responsibility for them. Management and enterprise can only assume responsibility for that on which it legitimately can claim authority, and indeed owes society to take responsibility there.

What is good for the country must be good for business, not the other way round. Hostility to capitalism is moral and ethical. It is attacked not because it does not work, but, because it is cynical. A society based on the assertion that private vices like greed will turn into public good cannot endure. In a lasting, moral society, the public good must always rest on private virtue. 
The enterprise
The needs of the customer have to be turned into action in the enterprise. The manager has to bring out whatever strength is there in his resources — especially people — and neutralize whatever there is in weakness.

Balancing contradicting needs is the hallmark of good management. One core challenge is balancing the short and long term needs. If the enterprise is not profitable in the present, there will be no enterprise in the future. Depreciation replacement, maintenance, capital replacement, research, product development, design, training and education, promotion and advertising, service — you can save on all these in the short term to make numbers look good, but will hurt the long term prospects of the business. You can increase them all short term, and may see results only in the long term. Modest but steady over time beats frantic back and forth. It also gives job stability to people.

Whatever he does should be sound in expediency as well as in basic long range objective and principle. He has to harmonize immediate and long term needs. Where he cannot harmonize them, he must carefully balance sacrifices. (Look at the detail to understand the big picture).

The basic operations in the work of the manager are setting objectives, organizing and planning work and jobs, developing and motivating people, and measuring . The contribution of the manager is uniquely to provide vision and ability to perform. It is vision and moral responsibility that in the last analysis define the manager.

1. He sets objectives, derived from the needs of the business in general and derived from this in each area. He communicates them to the people whose performance is needed to obtain them. This requires reconciling business outcomes and the principles one believes in, immediate need and future need, desirable ends and available means. It therefore requires analytical and synthesizing ability.

Spend more time on listening than talking. Do not talk to your men about your own problems, but make them talk about theirs. They spend a great deal of time on a half-yearly manager letter, up to a whole day for each of their reports. They think about their boss’ problems, the enterprises, and what they can do to help.

2. He organizes. He analyzes activities, decisions and relations needed. He classifies the work and divides it into manageable activities, and those into jobs. He groups these activities and jobs into an organizational structure (see Sloane). This again requires analytical ability.

3. He develops and motivates people. He does so through giving them responsibility, incentives, fair promotion policy. He selects people for the management of units and jobs. He helps them in developing themselves .

This requires integrity, justice, care, and respect. He needs to put the common good of the company before his own advantage. Integrity of character is something that cannot be learned, and is central. (I think he learned this from Sloane, too).

4. He measures. He establishes meaningful yardsticks that capture performance for the overall enterprise as well as for the key areas of business performance, and actionable performance of the individual. He makes these measurements available for self-control to each man, rather than for control. Without measuring, there can be no rational decision making. This again requires analytical ability.

Planning

Work will become easier and more effective and productive, when we plan before we do. Managers who know the use of time well succeed by planning. They spend a lot of time thinking through areas in which objectives should be set, and a great deal more on thinking through systematically what to do with recurrent problems. If they have a recurrent crisis, they spent time to find out what causes it to avoid repetition.

This does not mean the planner and doer should be different people. There is better planning if the man to carry out the work is involved in the planning. What is a good strategy to plan?

At its core is the study and analysis of work into simplest elements, and then improving the workers performance on each of these elements. This idea of being able to improve work by first breaking it down into its constituent elements, laying them out in a logical order, and work to improve them was a liberating, pioneering insight.

How well people are managed determines if goals will be reached. A great plan fails in flawed execution. (Welch — simple plans and powerful execution are more nimble and beat big planning).

No management by drives. It is a sign of lack of planning and of confusion.

Maxims

Give people maximum authority, and full responsibility for results.
You get what you reward, not, what you preach.
You can only lead by example.

Management by objectives

Each job should have clearly spelled out objectives. How is it to help other units, and what it can expect from them? Teamwork must be considered right from the start. The objectives should cover all areas of the business affected, even if the contribution is small, so people understand the overall needs and the need to balance. They should include both tangible business objectives, performance and development. Good objectives give people clear information what is expected from them.

The manager should develop the objectives for his unit himself. Higher management should review, approve or disapprove. Each manager should participate in setting objectives for the higher unit of which he is a part. The goals should be measurable. The measure must not be rigidly quantitative or exact, but clear, simple and rational, and should direct attentions and efforts where they need to go. The measurements should go to the manager himself, not to his superior. (Goodhearts Law: “when a measure becomes a target, it ceases to be a good measure”; SMART goals, e.g. specific, measurable, agreed, realistic, time-bound)

In a “manager’s letter” written once or twice a year each manager should define the objectives of his superior’s job and of his own; the performance standards which he believes are applied to him; the things he must do to attain these goals, the major obstacles; the things that his superior and the company do to help or hamper him. Are there conflicting demands made, or work asked for that is then not used? Grievances and suggestions what can be done to fix them. Finally, what he proposes to do during the next year to reach his goals.

Understanding can never be attained just by communicating down, by telling. It only can be by asking, and listening.

Procedures only can work where judgment is no longer required. The test of a good procedure is that it quickly identifies situations that do not fit the pattern but require special handling and judgment. Reports are often abused as an instrument for control from above. Reports and procedures should be kept to a minimum, and used only if they save time and labor. At least once every few years all reports should be stopped, and only the ones re-established, which managers still requested after living without them for a month or two. They should focus on the key performance areas. To “control” everything is to control nothing.

The ability to go around obstacles rather than charge them head-on is a major requirement for managing by objectives. (See also Richard Branson)
Make real budgets, and let people run with them. Do not run your division managers jobs, and do not appraise them on how much they allow you to do so. It is ineffectual and de-motivating. “Projectitis” is a common disease resulting from attempts of management to control professional work which they do not understand.

Leadership – the Spirit of the Organization

A man lacking in integrity destroys people, spirit and performance. The spirit of an organization is created from the top. If it decays, it is so because the top rots. (This is called values nowadays).

The purpose of an organization is to “make common men do uncommon things” (Lord Beveridge). The test of good spirit is performance, not conformance. It’s the abilities, not the disabilities that count. Only high performance can build spirit.

It is the willingness of people to give of themselves over and above the needs of the job that distinguishes the great organization.

A manager who sets his goals low, and consistently fails to perform must be removed from his job. Decisions on a person demand the greatest consideration for the individual. If possible give them another job fitting his strengths — you should be able to find one with effort and imagination.

What is needed for proper spirit is morality: emphasis on strength, integrity, high standards of justice and conduct. Again here, you get what you reward, not, what you preach. And you can only lead by example. It must be practice, not sermon.

People may forgive ignorance, bad manners, insecurity but they will not forgive lack of integrity.

1. No condoning of mediocre or poor performance.
2. Each job must be a rewarding job in itself.
3. A rational and just promotion system.
4. Clarity: who makes salary, job scope, promotion and demotion and dismissal decisions?
5. Integrity : no lies, keep your word, treat people with respect.

Do not promote a man to management: Who focuses on people’s weaknesses; Who is more interested in the question “Who is right?” than “What is right?”; Who considers intelligence more important than integrity; Who is afraid of strong subordinates; Who does not set high standards for his own work, for it breeds contempt for the work and managements competence.

You cannot buy loyalty; you can only earn it.
Leadership cannot be taught or learned.

Decisions

Whatever a manager does, he does through making decisions.

The important decisions, the ones that really matter are strategic. They are about finding out what the situation is, or changing it: on business objectives, organizational, affecting productivity, or about major capital-expenditure decisions. For these, the hard part is not problem solving, it is asking the right question. Few things are as dangerous as the right answer to the wrong question.

A decision should always be made at the lowest possible level, as close to the action as possible. It also should be made at the level where all that it impacts are considered. The first tells how far down it should be made, the second, how far down it can.

Once the decision has been made, it is essential that it be carried out. Nothing is as useless as the right answer that quietly disappears into the filing cabinet, or that is quietly sabotaged by the people supposed to carry it out. Decision-making has five phases:

1. Defining the problem

What courses of action are unacceptable and can be discarded, because of fundamental values, economic, moral, structural, cultural issues that cannot be touched? (quick-screen)
What is the critical factor that has to change before anything else can be done?
What will happen in time, if nothing is changed?
What could have been done or avoided, when the problem first appeared, that would have altered the present situation?
It the problem lack of or contradiction of objectives or organizational structure? Is it changes in the environment?

2. Analyzing the problem (finding the root cause of the problem)

Understand who must make the decision, who must be consulted and who informed:

i. What is the futurity of the decision — for how long into the future does it commit the company? How fast can it be reversed?
ii. What is the impact on other areas and functions — how much of the business does it affect?
iii. Does it affect fundamental values? What political, ethical, social questions have to be considered on that level?
iv. Is it a unique decision or is it recurrent? Does it only appear to be unique? The recurrent decision requires the establishment of a general rule, that is, a decision in principle. The rule needs maybe to be decided on a high level, but its application can then be done at a lower level. (This is like laws).

You will never have all the facts. Decisions must be made on incomplete knowledge. It usually is either impossible or too costly to get complete information.

3. Developing alternative solutions

We tend to see one solution and consider it the right if not the only one. Look for at least two or three alternative solutions. Do not just do the first thing that comes to mind. Alternative solutions are the only means to bring underlying assumptions out, and test if they are right. They are to only tool to force us to use our imaginations.

People who have to carry out the decision should always be involved in the work of developing the alternatives. All the typical creativity tools can be used here.

No action is a decision as valid as all other ones. Spell out the consequences that follow from a decision for no action.

4. Deciding upon the best solution

i. The decision should accomplish the desired end with minimum effort and disturbance. Don’t pick an Elephant gun to kill sparrows. What will give the most result for the least effort and disturbance? Often a 80% solution that is easily done is preferable to a vastly more resource-hungry 100% solution. (I combined here risk and effort.)
ii. Timing. Is urgent action needed, or long, continuous effort?
iii. Ability to implement. No decision can be better than the people who have to carry it out. It is well possible that the solution requires skill from people they do not possess today. Then the right course is to hire or train people to obtain this knowledge. The wrong decision may never be adopted because people and the competence to do what is right are lacking. If a solution requires more of people than they can give, they must learn to give more or be replaced by people who can. (How do you afford this? Often you are restricted by economical reasons to not do that?)

5. Converting the decision into effective action

Time spent on “selling” the solution is a waste. If the first steps were done right, it will sell itself by improving things. Also, what is right is determined by the nature of the problem. If people like it or not is quite irrelevant. They must be led to accept it, if they first like it or not.
To do so, remember the first law of rhetoric: present it to them in the language they speak and understand.

Organizational Structure

Whatever strength individuals have must become the source of strength for the whole group — that is the first principle of organization. If there is a lack of a clear organization, people spent their time trying to figure out what they should do, instead of doing it. A good structure is not the end, but it is a necessary foundation; without it, most other managerial efforts will come to naught.

To create a working organizational structure, look at the activities that need to be carried out, and the relations between different groups that are affected by them, sideways and upwards. In a small enterprise, they should be able to be done in a few hours and a few sheets of paper. (Then consider the people you have and their strength.)

The largest possible number of managers should have business responsibility, and be measured by business results, not by professional criteria. They should not be administrators or bureaucrats. The structure should encourage new products and businesses, and discourage old, unprofitable products and businesses to continue.

It should have the least possible number of management levels. Take heed of the Catholic Church, which has only one level, the bishop, between the Pope and the lowly priest.

Managerial control can only handle six to eight subordinates. Managerial responsibility, counseling, can be many more. A manager should always have more people than he can control, so he will not have the time to try and take over their jobs. Teams should normally not exceed five or six members, and they work best with three to four. (Communication channels grow n*(n-1)/2 with people involved). Only individuals can manage, teams are better to disperse policy.

Many levels are a sign of bad organization, as is overhead, such as co-ordinators, assistants, liaisons; as are lots of coordinating meetings, committees; as is going through the “proper channels” instead of directly to the man who has the information. The latter is not just a symptom, it is a cause of misorganization.

Overhead includes management and innovation work, but also waste like mismanagement and bad organization (the “co-ordinator” is a sure sign of it).

The structure should enable the training and testing of tomorrows managers buy giving them actual management responsibility in an autonomous position, where they at least can see the whole business.

Functional organization

Proper functional organization is by stage of process. Functional organization should always aim to give as complete products as possible, so that the objectives of the functional manager are connected to business results. Ideally every functional manager should report to the general manager of a unit or product business. An enterprise is too big for functional organization, if it requires more than two levels of functional managers.
Every functional manager tries to increase the importance and influence of his function, often even to the detriment of the overall business. It is human nature.

Small business has functional organization. The main problem of the small business is that it typically cannot support the management it needs. Top management should set aside at least one week each year for a review conference, out of office, to get away from day-to-day, and think about the bigger picture. It should be attended by every senior member of management. It should focus on the needs of the company years ahead, and on setting objectives for all key areas. It should appraise results in these areas achieved it the past year, and assign responsibility for them to individual members of the group.

Federal decentralization is more powerful than functional decentralization, but it works only for larger enterprises. (Skipping the part about non-small and large businesses.) Central management must be able to override local ambitions. (E.g. by setting products or price ranges). Someone who has shown extraordinary good performance should be considered a candidate for promotion out of his original unit.

Growth

The requirement for successful growth is the ability of management to drastically change its basic attitudes and behavior (probably because fast growth changes the nature of the business, and what was good for a startup, does not work in a more mature organization?)

The problem of size cannot be met by trying to keep in communication with managers or employees as far down as possible. That is neither required nor desirable. The larger the business, the more will top management be concerned with setting objectives, and the less with the steps to their attainment. The personal touch is no substitute for performance.

The normal reason for growth is success and the normal reason for success is able management. That problems of growth are problems of success is why they are so difficult.

CEO and the board

The CEO thinks trough the business of the company, develops overall objectives, makes the decisions to reach them, and communicates them to his management, educates it to see the business as a whole, helps them to develop their own objectives from those of the business, reviews them and measures performance and results against them. He ensures that there is a bench of managers being developed, makes basic decisions on organizing the company, arbitrates in case of conflict, and asks his managers the right questions. He only takes personal command in an emergency. He negotiates, plans capital expenditure, and suggests dividend to the board. He prepares the agenda for the board meeting.

Do not waste your time running functions, when you should be leading the organization. Entertaining customers or supporting sales, correcting technical plans, checking expenditures of others is not your job. You not only fail to do your work, you prevent others from doing theirs. (What about management by walking around, i.e. staying in touch with people on all levels to develop a feeling what is going on?)

If the top man gets a salary several times as large as number two, three or four, you can be pretty sure that the firm is badly managed. (Drucker then goes on that the job is too large for one man, and must be done by a team, with one maybe first among equals. The idea has taken hold in other C-level positions).

The board is not a governing organ, although it legally represents the owners and holds all power. It acts only in crisis, and then only to remove executives that failed and to appoint new ones. Otherwise its role is review, appraisal, appeal. It must be detached from operations and see the company as a whole. Working executives may not dominate it.

Motivating workers

The two most important areas in the management of workers are the organization of work, and the placement and development of the people who do the work. And this can only be done by the line managers. It must build on underlying strength and focus on the positive. Experience shows that what a man is good at is also what he wants to do. Organizing for work means putting the man on the job he will do best.

It is not the business of the enterprise to create worker happiness, but to make and sell shoes. (Or, databases). Still, to perform the task of the management is to reach the worker’s motivation and to enlist his participation, to mobilize his desire to work. How?

Motivation must have its center in the work.

The work itself must be meaningful. The enterprise must demand active assumption of responsibility for results by the worker. It can nourish this by careful placement, high standards of performance, providing the information the worker needs to control himself, and by participation that gives the worker managerial vision.

The worker demands justice through equal opportunity for advancement; that his work be meaningful and serious. High standards of performance and a high degree of competence in the way the work is organized and managed, and visible signs of managements concern for good work (see employees complaining about bad quality in other sites, and management’s apparent disinterest in this fact. But what is quality? It is not what we build in, it is what our users get out.)

Plan and schedule work ahead of time. Keep things spotless (tools, machines, code). Insist on the best tools and replace them when they wear out. That’s all that is needed. No fancy HR gimmicks.

Human resources or personnel administration departments are always going to be constrained to administrative and incidental chores, lest they usurp managerial positions that are focusing on business outcomes. They tend to put the stress on inter-personal relations, missing the point. The good professional employee has little respect for the administrator.

Developing people

Development is always self-development. The best people educate themselves. Responsibility rests with the individual, his efforts, his abilities. But you must think about each person’s strengths to give them opportunity. For this the best is a systematic way of appraising performance. How to offer challenges and opportunities for the individual development of each worker to the fullest of his ability?

The decisions to hire, to appoint and to promote are the most crucial decisions you can make. Job requirements and organizational structure will change as they always have. Development must not just replace yesterday, but focus on the needs of tomorrow. What skills will be needed? What knowledge? Thus placement must be a continuous and systematic effort and is one of the most important tasks in the management of worker and work. It must be reviewed continually. It must give workers the opportunity to rise from the bottom according to their ability.

Management must demand also that the worker be willing to accept change. For this, change must appear as an improvement. It must not be so fast as to make people feel lost. It must be rational.

You need a formal performance appraisal process, best with feedback from peers. The reason for promotion must always be performance, not “potential”. Identify strength, the greatest mistake is to try and build on weakness (see Hornblower). Only when the strengths are known, does it make sense to ask: what weaknesses must be overcome to make the progress the strengths would support? Give people a way to appeal against wrong decisions at a higher level. Promotion should not be entirely from within. That should be the norm, but exclusivity leads to inbreeding.

If developing people is the most important thing for success, then if follows that you only can be the best and develop yourself by learning to make others successful. No one can develop himself unless he works at the development of others.

It is not necessary that everybody be promoted but it is necessary that everybody knows there are opportunities for the man who performs well. There will always be more people wanting to get recognized through promotion than opportunities for promotion, and some will be driven into opposition of management by this in order to exercise their leadership.

Because placement decisions are so important, they should be reviewed by a manager’s supervisor; but they should be the managers to make, otherwise he lacks real authority and consequently responsibility.

The long-term survival of any enterprise depends on being able to hire the ablest, most dedicated young people. For this, the promise of a living is not enough. The enterprise must be able to give such man a vision and a sense of mission, to satisfy their desire to meaningful contribution to society (well, at least for idealists. There are some who just want to get rich).

The power of a company to attract good man is proportional to its name for excellence.
High standards of performance 
The enterprise must demand more than a fair day’s work. It must build esprit de corps. The work must encourage and demand the growth of the individual that performs it. The job must always challenge the worker. The nature of man demands that performance of the best, not of the worst be the goal for all. It is the peculiarity of man that he yields best to high demands. The capacity to produce depends largely on the level of demands made (see Edgar).

Management must set and enforce on itself high standards for its own performance of those functions that determine the workers ability to perform. Few things constitute such conclusive proof of management’s incompetence as when people idle. The first test on its competence is its ability to keep people working with minimal disruption.

Information, Measurement and managerial vision

No sale, no job.

People need to know what is expected of them (see Management by objectives above). Let people measure their own work. They will be finding more ingenious ways by themselves to improve, especially if there is competition.

Managerial vision means that the vision of the individual must be directed towards the overall goals of the business, their will and efforts be bent towards reaching these goals. The worker will assume responsibility and act for the good of the whole only if he has managerial vision, that is, if he sees the enterprise as if he were a manager responsible for its success.

There are powerful forces of misdirection in the specialization of work, the hierarchical structure and in differences in vision and values. Especially dangerous is the employee who aims to do the best possible professional job in his area, and disregards the overall goals and needs of the enterprise for it. Professional work must have highest standards lest it be dishonest and corrupts. But performance must be measured to overall goals, not just the own professional criteria. Otherwise the professional work becomes a centrifugal force to pull the enterprise apart.

Any job whose objectives can be set in the main focusing directly on business objectives is a managerial one. Any job whose objectives cannot be so derived is not; it is a professional one. The worker must know how his work relates to the overall enterprise. This is challenging as conventional data (P&L, Balance, etc) mean nothing to him.

Internally the company is not a market economy. It is directed. So while the effort of management is increasing the total product, the effort of the worker is receiving a larger share, whatever the total product may be. Outside the enterprise, considerations are economic. Inside they are based on power balance and power relationships. The enterprise needs flexibility of the wage burden, the worker needs steady and predictable income. To the enterprise profit is a necessity for survival. To the worker, it is someone else’s income.

Organizations are not the extension of individuals. They create their own political sphere, with relationships involving real and health problems of power, and conflicts which are not conflicts of personality, but objective conflicts of vision and interest.

Security of continuing employment is the one really important security for the worker. Next to it, all others pale. Their job is their stake in the enterprise. Thus, the real job is to convince workers that there is an ever-present danger of loss, that profit therefore is necessary to build their own future job and livelihood, that profits will make it more secure and enjoyable.

Job rotation is not useful, when the goal is understanding business as a whole, experience at one or two narrow specialties does not help. A good course on marketing or a good book teaches this much better.

How not to motivate

Money is important as a hygiene factor — its absence damages. But satisfaction with money is not a sufficient positive motivation.

Fear corrupts him who uses it and him who fears. Fear is not a good tool to motivate people who can escape. Absence of fear is not motivation by itself either. There is no worse sin than turning a man’s capacity to perform into a threat for himself and others.

The tendency of many enterprises to assume paternal authority over their people and demand of them a special allegiance is socially irresponsible usurpation, indefensible on the grounds alike of public benefit and the company’s self interest. The company is not, and must never claim to be home, family, religion, life or fate for the individual. It must never interfere in his private life or citizenship.

A man who is deeply dissatisfied may quit or become bitter and move into opposition to the company and management.