6 THE PRACTICE OF MANAGEMENT establish team work and harmonize the goals 0f the individual ⅵ山 the C01 第一 0 Ⅱ weal. The only principle that can d0 this is management by objectives and self-control. lt makes the common weal the aim Of every man ・ ager. lt substitutes for control from outside the more exact ・ ing and more effective control from the inside. lt motivates the manager tO action not because somebody tells him tO dO something or talks him into doing it, but because the objective needs 0f 5 task demand it. He acts not because somebody wants him tO but because he himself decides that he has to-—he acts, in 0ther words, as a free 1 an. The word "philosophy" is tossed around with happy abandon these days in management circles. I have even seen a signed by a vice-president, on the "philosophy 0f handling purchase requisitions" ()s far as I could figure out philosophy" here meant that purchase requisitions had tO be in triplicate). But management by objectives and self-control may legltimately be a " philos ・ ophy" 0f management. Ⅱ rests on a concept 0f the J0b 0f manage- ment. lt rests on an analysis Of the specific needs Of the management group and the obstacles it faces. lt rests on a concept Of human action, human behavior and human motivation. Finally, it applies tO every manager, whatever his level and function, and tO any business enterpnse whether large or small. It insures performance by converting 0bJective needs int0 personal goals. And this is gen ・ uine freedom, freedom under the law.

C H A ? T R MOTIVATING TO PEAK PERFORMANCE 2 3 302 question: "DO you think the company is a good place to work in?" is satisfactory. Ⅱ 70 per cent of the employees answer yes" to the We also have れ 0 standards to measure what degree of satisfaction discontent from dissatisfaction that is the desire to do a better ] ob. filment from satisfaction that is just apathy, dissatisfaction that is responsibility. Yet we have no way of telling satisfaction that is ful ・ and the most real expression pride in job and work, and 飜 most valuable attitude any company can possess in its employees, wants tO dO bigger and better things. And this dissatisfaction is the a better jOb, wants tO improve his own work and that of his group, ( on 記 n 肥 d. But he may also be dissatisfied because he wants to do t0 "get by. " A man may be dissatisfied because he is genuinely dis ・ filment in れ . He may also be satisfied because the job permits him A man may be satisfied with his job because he really n ful ・ 5ti11 not be suffcient motivation to fu1611 the needs 0 { the enterprise. concept. Even if れ meant something, "employee satisfaction" would dustry is "employee satisfaction. " But this is an almost meaningless worker? The answer that is usually given today in American in- WHAT motivation is needed t0 obtain peak performance from the ities. participation—The C. & 0. example—The plant-community activ ・ the worker informed—The managerial vision—The need for aged by 0bjectives?—The performance of management-—Keeping worker—High standards of performance—Can workers be man ・ —The enterprise's need is for responsibility—The responsible What motivation is needed——"Employee satisfaction" will れ 0 【 dO

THE SMALL, THE LARGE, THE GROWING BUSINESS 2 い the priorities in a man's ] Ob. A decision analysis would have forced the president in the seemingly decentralized company tO realize that he had t00 many basic long-range problems to worry about to spend all his time in the division general manager's 0 伍 ce. At the least, れ would have forced him tO choose between the tWO things ・ A relations analysis would have forced him to realize that "keeping in touch with the employees" was Ⅱ 0 longer his job. The two might also have made it possible for the division general managers tO get across tO the president that he was actually running their jOb (at least they might have found some Board member willing and able to break 山 to the president). These analyses of the kind of structure the enterprise needs also show operating managers what they are supposed t0 be doing. They make clear to them what decisions they should take. They curb their tendency to pass the buck upstairs. " And they protect them against the boss's wrath if they really make the decision they are supposed t0 be making. Finally, they lead t0 the establishment clear perfonnance standards without which the problem 0f the incompetent old-timer cannot be tackled. Growth (provided it is not the mere addition of fat) is the result 0 [ success. A company grows because it is doing a good j0b. lts products meet with inaeasing demand. lt can only service its cus• tomers by becoming bigger; a company making tin cans, for in ・ stance, has no ChOice but tO become a national distributor for the simple reason that its customers demand delivery 0 [ tin cans for crops that ow ⅲ Oregon as well as for those that 部 ow in New York State. A company may grow because it has mastered a particular technology. lt may ow , as most 0f the chemical companies did, because research produced new products for which a market had tO be found. lt is true that some big companies are the result Of financial manipulation and Of merger rather than Of successful management. But, in an 】 y in WhiCh monopolies are out ・ lawed, the normal reason for business growth iS success. 、 he normal cause Of business growth is able and competent management. That the problems of growth are problems success is the reason why they are so diffcult. Problems 0f success are always the hardest—if only because the human mind tends t0 believe that

4 THE PRACTICE OF MANAGEMENT M 市 io とアどお 0 The hierarchical structure of management aggravates the danger. What the "boss" does and says, his most casual remarks, his habits, even hiS mannensms, tend [ 0 appear tO hiS subordinates as ( al ・ culated, planned and meaningful. "AII you ever hear around the place is human-relations talk; but when the boss calls you on the carpet it is always because the burden figure is t00 high; and when it comes to promoting a guy, the plums always go to those wh0 d0 the best job filling out accounting ・ department forms. '' ThiS iS one Of the most C01 mon tunes, sung with infinite variations on every level Of management. lt leads to poor performance even in cutting the burden figure. lt alSO expresses IOSS Of confidence in, and absence Of respect for, the company and its management. Yet the manager WhO so misdirects his subordinates does not intend tO dO SO. He genuinely considers human relations to be the most important task 0f his plant managers. But he talks about the burden figure because he feels that he has to establish himself with his men as a practical man," or because he thinks that he shOWS familiarity with their problems by talking their "shop. " He stresses the accounting-department forms only because they annoy him as much as they dO his men or he may Just not want tO have any more trouble with the comptroller than he can help. But tO his subordinates these reasons are hidden; a11 they see and hear is the question about the burden figure, the emphasis on forms. The solution t0 this problem requires a structure of management which focuses both the manager's and his boss's eyes on what the J0b—rather than the boss—demands. To stress behavior and atti ・ tudes—as does a good deal Of current management literature—can ・ not solve the problem. lt is likely instead to aggravate it by making managers self-conscious in their relationships. lndeed, everyone familiar with business tOday has seen situations in which a manager's attempt tO avoid misdirection through changing his behavior has converted a fairly satisfactory relationship into a nightmare of Ⅱ・ barrassment and misunderstanding. The manager himself has be- come SO self-conscious as tO lose all easy relationship with his men. And the men in turn react with: "So help us, the old man has

20 THE PRACHCE OF MANAGEMENT mation requires that what is significant be pre-established, and that it be used a pre-set and self-activaung governor Of the process. The mechanics of control can be extremely simple. ln the claims Offce Of a life-insurance company, policies that require special handling—because the documents are not all there, because data are missing, because the beneficiary is not clearly established, because the title is clouded, etc. —are simply put aside and handed over t0 a separate clerk for special, individual handling. This anyone can 厄社 n t0 do ⅲ a few days ()r a machine could be designed to do (t). lt makes po sible the rapid, smoo 山 and continuous processing of the 98 per cent or 0f all policies that are routine—even though there are literally thou- sands Of variations in the mode Of payment, the distribution among bene- ficiaries and SO on. Simple rejection iS adequate C0n501 tO maintain the process. Control may also require complicated machinery. lt can be ex- ercised as "feed-back," in which the result of the process is fed back intO an earlier stage tO maintain the process and tO adjust it if necessary. The simplest example is the ・・ safety valve" on a steam engine which is lifted up by steam pressure in the boiler until it opens up a ho 厄 through which the excess steam escapes, thus lowering the pressure enough for the safety valve tO sink back to its former place and to close the opening again ・ lt is this principle on which glandular body functions operate. And it is feed-back that is used by the electronic C0n50 ー system Of an anti- aircraft 部 1 n. The mechanics of control are, however, quite secondary to the technology Of Automation. What is essential is that there always be a ( 0n501 built intO the process which maintains it either by eliminating what the process cannot handle, or by adjusting the process SO as tO make it produce the planned result. Only 可 t these concepts have been thought through can ma ・ chines and gadgets be fruitfully applied. After this conceptual rethinking, however, mechanization of those operations that are repetitive in character becomes both pos ・ sible and economical. A machine can be used to feed material into another machine, to change the material's position in the machine

THE IBM STORY 2 would have cushioned the depression unpact on IBM even without the New Deal. The fact remains, however, that many of IBM's competitors suffered heavily during the depression despite New DeaI and favor ・ able long-term な e れ d. There is something to be said for the argu- ment used by one IBM executive: "lt is not correct tO say that we managed tO maintain employment during the depression because we grew. We grew because we had committed ourselves tO the 1 期 ai ・ tenance Of employment. This forced us tO find new users and new uses for our existing products. lt forced us tO find unsatisfied wants in the market and to develop new products t0 satisfy them. lt forced us to develop foreign markets and t0 push export sales. I am convinced that we would not today be one 0f the world's leading producers and exporters Of Ofre machinery but for our commit- ment tO maintain employment during the depression years. lndeed,' he added, "I sometimes wonder whether we wouldn't be well advised tO commit ourselves tO i れ 2 れ g employment constandy.

THE SMALL, THE LARGE, THE GROWING BUSINESS 249 still small and when bOth their competence and their VISion was adequate to the job. As the company grew, the job grew. Ⅱ was lifted up if by geological pressure. But the man did not grow with the job. There is the bookkeeper who became comptroller of a large company because the accounting department grew under him and pushed him up. There is the plant superintendent who finds m ・ self in charge Of twenty plants because he was the senior foreman when the company started. These men Often dO not know how tO manage. lndeed, they 0ften d0 not even realize that these things are れ ow required of them. They still behave as if their job were t0 keep the cash ledger or t0 supervise four production foremen. As a result, they stifle, frustrate and crush the men under them. And because managements—with commendable senument—do not like to hurt these old-timers by promoting ople around them, they become a bottleneck depriving the entire company Of management talent. Growth always requires new and different competence in tOP management. lt requires that top management realize that its own function iS no longer tO know what goes on in the plant or in the regional sales Offces. lt is important indeed for top manage ・ ment t0 learn that the problem 0f size cannot be met by trying tO keep in communication with managers and employees as far down possible—that this is neither required nor even desirable. As the business gets larger, the job of top management acquires a different time dimension; the larger the business the further ahead in the future top management operates. lt requires a different ratiO between objective-setting and dOing; the larger the business, the more will top management concern itself with setting objectives, the less will it be concerned with the steps tO their attainment. lt requires different relations inside management. The emphasis in communication shifts: the larger the enterprise the less will top management be concerned With communications down, the 1 ore it will have tO work on establishing communications upwards, from lower management tO itself. Growth demands 0f management the understanding and applica ・ む on Of principles, rigorous emphasis on organization structure,

MAKING DECISI ONS 359 The manager will never be able to get all the facts he should have. Most decisions have to be based 0 incomplete knowledge-— either because the information iS not available or because it would cost t00 much in time and money tO get it. TO make a sound decision, it is not necessary tO have all the facts; but it iS necessary tO know what information is lacking in order to judge how much a risk the decision involves, as well as the degree Of precision and rigidity that the proposed course Of action can afford. For there iS nothing more treacherous—or, alas, more common—than the at ・ tempt tO make precise decisions on the basis Of coarse and incom ・ plete information. When information iS unobtainable, guesses have tO be made. And only subsequent events can shOW whether these guesses were justified or not. TO the decision ・ making manager ap- plies the 01d saying of d0 は 0 : "The best diagnostician is not the man whO makes the largest number Of correct diagnoses, but the man whO can spot early, and correct right away, his own mistaken diagnosis. " TO d0 this, however, the manager must know where lack Of information has forced him tO guess. He must define the unknown. D どび elo 巨れ g / ″記 2 So ons lt should be an invariable rule tO develop several alternative SOlu ・ tions for every problem. Otherwise there is the danger 0f falling into the trap of the false "either-or. " Most people would protest were one tO say tO them: "All things in the world are either green or red. " But most of us every day accept statements—and act on them-— that are Ⅱ 0 whit less preposterous. Nothing iS more C01 れ mon than the confusion between a true contradiction—green and non-green, for instance——which embraces all possibilities, and a contrast— green and red, for instance—which lists only tWO out Of numerous possibilities. The danger is heightened by the common human tendency tO focus on the extremes. All color possibilities are indeed expressed in "black or white," but they are not contained in it. Yet, when we say "black or white," we tend tO believe that we have stated the full range simply because we have stated its extremes. The 01d plant of a small plumbing equipment manufacturer had be ・ come obsolete and threatened the company with the total 1055 0f market position in a highly competitive and price ・ consclous industry. Manage ・

392 THE PRACrICE OF MANAGEMENT the threat Of tyranny. But these answers have not been suffcient tO quiet the critics 0f capitalism. lndeed they have usually appeared quite irrelevant t0 the critiCS' as well as t0 the people at large. For the hostility t0 capitalism and capitalists is moral and ethical. Capitalism iS being attacked Ot because it iS or misgov ・ erned but because れ is cynical. And indeed a society based on the assertion that private vices become public benefits cannot endure, れ 0 matter わ OW impeccable its 10 部 c , no matter hOW great its benefits. Fifty years ago de Mandeville's principle was as fully accepted here as れ still is in Europe. But today it has become possible if not commonplace in 山 is country t0 assert the opposite principle that the business enterprise must be SO managed as tO make the public go become the private good 0f the enterprise. ln this lies the real meaning 0 [ the "American Revolution" of the twentieth cen ・ tury. That more and more Of our managements claim it tO be their responsibility tO realize this new principle in their daily actions iS our best hope for the future Of our ( 0 社 nt ' and society, and perhaps for the future of Westem society altogether. TO make certain that thiS assertion does not remain lip service but becomes hard fact is the most important, the ultimate responsi ・ bility Of management: tO itself, tO the enterprise, to our heritage, tO our society and tO our way Of life.

360 THE PRACTICE OF MANAGEMENT ment rightly concluded that had t0 move out 0f the plant• But because れ did not force itself t0 develop alternate solutions れ decided that れ had to build a new plant. And this decision bankrupted the company ・ Actually nothing followed from the finding that the 01d plant had become obsolete but the decision t0 stop manufacturing there. There were plenty 飜・ ternative courses Of action: tO sub-contract production, for instance, or tO become a distributor for another manufacturer not yet represented in the territory. Either one would have been preferable, would indeed have been welcomed by a management that recognized the dangers involved in building a new plant. Yet, management did not think of these alternates until it was t00 la 記 . Another example is that Of a big railroad which, in the postwar years, experienced a sharp increase in traffc volume. lt was clear that facilities had to be expanded. The bottleneck seemed to be the company's biggest classification yard. Situated halfway between the main terminal points the yard handled a11 freight trains, breaking them up and rearranging them. And the jam in the yard had become so bad that trains were some- times backed up for miles outside either end and had to wait twenty-four hours before they could even get in. The obvious remedy was to enlarge the yard. And this was accordingly done at a ( 05t running into many mil ・ lions. But the company has never been able to use the enlarged facilities. or the two subsidiary yards that lie between the main yard and the two terminals, れ 0 れ h and south respectively, simply could not handle such additional loads as would be imposed on them were the new facilities put t0 e. lndeed it speedily became clear that the real problem all along had been the limited capacity of the subsidiary yards. The original main yard would have been able to handle a good deal more trafr if only the subsidiary yards had been larger and faster. And the enlargement 0 [ these two yards would have cost less than a fifth of the sum that was wastefully invested in enlarging the main yard. These cases reveal how limited most of us are our imagination. We tend [ 0 see one pattern and to consider it the right if not the only pattern. Because the company has always manufactured its own goods, it must keep on manufacturing. Because profit has always been considered the margin between sales pnce and manufactunng COSts, the only way to raise profitability is cutting production C05 . We do not even think of subcontracting the manufacturing JOb or 0f changing the product mix. Alternative solutions are the only means 0f bringing our basic assumptions up tO the conscious level, forcing ourselves t0 examine