6
The Public and Social Sectors
Getting from Giving
’Tis the season for giving. Yet, as Peter Drucker knew so well, the rewards from such actions flow two ways—not just to those in need, but to those who get a lift from making a difference in an all-too-troubled world.
That is why on Christmas Day I went over to a church not far from my house to help dish up dinner for the hungry and homeless. Dozens of volunteers from my synagogue and elsewhere passed out about 1,000 plates of food. Many others, of course, will participate in similar activities today—and every day. Volunteering across the nation is at a 30-year high, according to the Corporation for National and Community Service, with 27 percent of adults donating their time and talent to a wide range of nonprofits. That’s up 15 percent from 1974 and more than 20 percent from 1989.
What Makes Volunteers Tick
None of this would have surprised Drucker. Although best known for advising top executives from major corporations, the father of modern management counseled numerous social-sector organizations such as the Girl Scouts, forcing them to wrestle with the same fundamental questions that every enterprise—profit or nonprofit—should confront: What is our mission? Who is our customer? What does the customer value? What are our results? What is our plan?
Drucker, like all of us, saw the importance of lending a hand in what he termed “a rapidly changing and turbulent America”—one where, economists estimate, as much as a third of the population doesn’t earn enough to cover basic necessities. But as Drucker approached the end of his life, he became convinced that this jump in volunteer participation wasn’t being driven by the exigencies of the disadvantaged. “The main reason for this upsurge,” he wrote in a workbook for nonprofit managers, published in 1999, “is the search for community, for commitment, and for contribution.
“Again and again when I talk to volunteers, I ask, ‘Why are you willing to give all this time when you are already working hard?’ Again and again I get the same answer, ‘Because here I know what I am doing. Here I contribute. Here I am part of a community.’”
Drucker once had high hopes that people would find such fulfillment and a sense of belonging at their factories and offices. But this ideal, Drucker explained in his 1993 book, Post-Capitalist Society, “never took root.” So while most volunteers are, as he observed, “well-educated, affluent, busy,” and “enjoy their jobs,” they are also yearning for a different sort of outlet that confers “civic pride.”
Doing Well While Doing Good
With astonishing swiftness, however, this picture of two distinct arenas—one in which people go to their day jobs and try to do well, the other in which they leave work and try to do good—is getting fuzzy. More and more, as America Online founder and philanthropist Steve Case has pointed out, “the lines that divide the business, government, and charitable sectors are blurring.”
On the one side, a mounting number of companies are paying attention to the so-called double bottom line: their effect on society as well as to their financial returns. Case’s own Revolution Health is a good example. It’s a for-profit business that seeks to make money in part by selling Internet advertising. But Revolution Health partners with nonprofits, broadening their visibility and helping them sign up new members and supporters, and the company has a social purpose: to assist people in leading healthier lives by building a “consumer-centric” market for medical and wellness information.
Is much of the talk about the double bottom line (or the triple bottom line, if you also consider environmental impact) pure public-relations hooey? You bet. But does much of it reflect a movement toward a genuinely new approach to business? Absolutely.
Creative Capitalism
“We can make market forces work better for the poor,” Microsoft Chairman Bill Gates told a group of Harvard graduates, “if we can develop a more creative capitalism”—one in which it’s possible to “make a profit, or at least make a living, serving people who are suffering from the worst inequities.”
On the other side, the ranks of nonprofits are exploding. There are now about 1.5 million such organizations in the U.S., up from 1 million or so a decade before, the Urban Institute’s National Center for Charitable Statistics reports. With growth has come opportunity—and not just for volunteers. An analysis this year by the Johns Hopkins Center for Civil Society Studies found that between 2002 and 2004, the paid nonprofit workforce grew by more than 5 percent, while overall employment declined slightly during the same period.
Nonprofits Attract Top Talent
In all, charities employed 9.4 million paid workers, more than those in the utility, wholesale trade, or construction industries. What’s more, as the sector expands, it is attracting the best and the brightest. By all accounts, MBAs are increasingly eager to apply their acumen in finance, strategy, and marketing not to get rich, but to change the world.
Tom Tierney, the chairman of Bridgespan Group, a nonprofit that provides consulting services to foundations and other nonprofits, noted at a conference recently that his firm saw 110 applications for every entry-level spot it had open this year. Tierney, who used to be the chief executive of the corporate consultancy Bain & Co., stressed that these weren’t second-rate candidates. “That talent pool is every bit as good—and I might argue better—than any talent pool Bain & Co. has even seen,” Tierney said. “And Bain pays a lot more.”
Why would anybody seek out a slimmer paycheck? It’s for the very same reason Drucker identified: a deep desire to engage in “the civic responsibility that is the mark of citizenship.” Only now, the trend is transcending volunteering and moving to the place that Drucker had always wished it would thrive: the realm of nine to five.
December 27, 2007
What Obama Shouldn’t Do
President-elect Barack Obama has made plenty of promises about what he’s going to do: provide tax relief to the middle class, rebuild our crumbling infrastructure, invest in renewable energy, ensure that all children receive a first-rate education, and make health care accessible and affordable for every American—all while taming the nation’s monstrous deficit.
But as Peter Drucker made clear, Obama’s success may well hinge on what he chooses not to do.
It is absolutely crucial, Drucker wrote in a 1993 piece in which he dispensed a little management advice for the Oval Office, that any new President “not stubbornly do what he wants to do, even if it was the focus of his campaign.”
He noted that Harry Truman came into the Presidency convinced, “as were most Americans,” that he should begin tackling a string of domestic problems, what with the end of World War II at hand. “What made him an effective President,” said Drucker, “was his accepting within a few weeks that international affairs, especially the containment of Stalin’s worldwide aggression, had to be given priority whether he liked it or not (and he didn’t).
“There seems to be a law of American politics,” Drucker continued, “that the world always changes between Election Day and Inauguration Day. To refuse to accept this—as Jimmy Carter tried to do—is not to be ‘principled.’ It is to deny reality and condemn oneself to being ineffectual.”
Of course, in Obama’s case, the upending of the world has already happened. Strengthening the economy, and especially bringing some relief to battered homeowners, has to be his No. 1 aim. Should Obama splinter his efforts and concentrate on much more at the outset than fixing the financial system, he is likely, as Drucker put it, to “achieve nothing.”
No “Sure Thing”
Another what-not-to-do rule for the President-elect: “Don’t ever bet on a sure thing,” Drucker wrote. “It always misfires.” Drucker recalled that no President has enjoyed more of a popular mandate than did Franklin Roosevelt heading into his second term. Indeed, he had “every reason to believe that his plan to ‘pack’ the Supreme Court and thereby remove the last obstacle to . . . New Deal reforms” would be a slam dunk. His move, however, immediately backfired—“so much so,” Drucker pointed out, “that he never regained control of Congress.”
Obama’s gracious victory speech, in which he reached across the aisle and expressed “a measure of humility and determination to heal the divides that have held back our progress,” was a good and important first step. As he moves along in the months ahead, he must continue to take that same tack in both words and deeds.
What else shouldn’t Obama do? “An effective President,” Drucker wrote, “has to say no to the temptation to micromanage.” The most promising paradigm, he suggested, might be FDR’s cabinet, where “nine of 10 members (all but the Secretary of State) were what we would now call technocrats—competent specialists in one area.” “I make the decision,” Drucker quoted Roosevelt as saying, “and then turn the job over to a cabinet member and leave him or her alone.”
By contrast, Drucker asserted, trying to have a single White House chief-of-staff spearhead an administration’s biggest programs “has never worked” very well. Neither, he said, does the Clintonesque model of bringing into the room “dozens and dozens of deputy secretaries, under-secretaries, assistant secretaries, special assistants, and so on.” That merely turns the highest levels of government “into a perpetual mass meeting.”
Of all the things for the President not to do, though, Drucker left little doubt: He must never assume that government can—or should even try to—solve every ill.
Government Ineffectiveness
“There is mounting evidence that government is big rather than strong; that it is fat and flabby rather than powerful; that it costs a great deal but does not achieve much,” Drucker wrote 40 years ago in The Age of Discontinuity. Three decades later, in an article in The Atlantic, Drucker’s frank assessment hadn’t changed much: “Government everywhere—in the United States, the United Kingdom, Germany, the former Soviet Union—has proved unable to run community and society.”
Drucker didn’t just lash out, however. He also offered up his share of prescriptions. Among them: building “the habit of continuous improvement” into all federal departments and introducing “benchmarking,” in which the performance of various agencies would be compared annually, “with the best becoming the standard to be met by all the following year.”
But, as Drucker saw it, the thing that government needs to do, most of all, is to stop doing. “The purpose of government is to make fundamental decisions and to make them effectively,” Drucker declared. “The purpose of government is to focus the political energies of society. It is to dramatize issues. It is to present fundamental choices. The purpose of government, in other words, is to govern.
“This, as we have learned in other institutions, is incompatible with ‘doing.’ Any attempt to combine government with ‘doing’ on a large scale paralyzes the decision-making capacity. Any attempt to have decision-making organs actually ‘do’ also means very poor ‘doing.’ They are . . . not equipped for it.”
Obama, for his part, seems to have embraced this philosophy. It makes no sense to push for “an era of no government,” he told The New York Times Magazine last summer. “What we need to bring about is the end of the era of unresponsive and inefficient government and short-term thinking in government, so that government is laying the groundwork, the framework, the foundation for the market to operate effectively and for every single individual to be able to be connected with that market and to succeed in that market.”
In the end, the surest route to “Yes We Can” will be for the President sometimes to say, “No, I’m afraid I can’t.”
November 7, 2008
Solving the Health-Care Conundrum
President Barack Obama began this week to push hard on health-care reform. Whether any legislation gets passed will depend, of course, on how well he navigates the treacherous politics of Washington in the months ahead. But whether the medical system actually improves will hinge on something else altogether: how effectively it is managed in the years ahead.
This is something that Peter Drucker understood very well. “Drucker championed the twin principles of management by objective and management by measurement—two driving forces behind the modern quality revolution in health care,” the University of Toronto’s Neil Seeman and Adalsteinn Brown declared a few years ago in the journal Health Quarterly.
But the revolution has yet to make it past the barricades, at least in the U.S. To begin with, quality is not what it should be. A government report issued earlier this month found that 40 percent of recommended care is not received by patients. Meanwhile, infections that people acquire during the course of their stay in a health-care facility, such as a nursing home or a hospital, stand among the nation’s top 10 causes of death. It’s little wonder that Health & Human Services Secretary Kathleen Sebelius has said, “The status quo is unsustainable.”
At the same time, costs are out of control. The U.S. spends far more per person on medical care than any other country. In 2007, we plunked down $2.2 trillion on medical expenditures, and government analysts predict the figure will climb by more than 6 percent annually through the next decade. That would boost the share of the gross domestic product going toward health care from 17.6 percent this year to 20.3 percent in 2018. All the while, some 45 million Americans remain without medical coverage.
A Complex Web
That the system is in such rotten shape is not totally surprising. The world of medicine has gotten more and more complicated over time. Drucker, for one, identified the hospital as “the most complex human organization ever devised,” with its web of doctors and nurses and technicians. Insurance companies aren’t inclined to simplify matters, either, having discovered that opacity and obfuscation can help bring in enormous profits.
So how do we make things better?
The White House believes there are several keys, including beefing up prevention and wellness programs so people don’t get so sick in the first place. They’re also hoping to spur the revamping of financial incentives for health providers so they’re rewarded—rather than penalized—for delivering excellent care.
But much of the Administration’s efforts are centered on something straight from the Drucker playbook: measuring results. Peter Orszag, the director of the Office of Management & Budget, is fond of citing a body of research from Dartmouth that shows how health-care spending varies widely between regions of the country, often with little correlation to outcomes.
By zeroing in on these discrepancies, as well as methodically determining which drugs and treatments work best, it should be possible to save oodles of money while enhancing quality. At least that’s the theory.
What Drucker knew, however, is that measuring anything is far from a straightforward proposition. For starters, he wrote, “what we measure and how we measure determine what will be considered relevant and, thereby, determine not just what we see, but what we—and others—do.” Beyond that, the more we measure, the more we risk flooding the system with data. What’s needed, instead, is genuine information: what Drucker defined as “data endowed with relevance and purpose.”
“A View of the Whole”
This is especially difficult to do, he added, in an organization filled with specialists—and no area has more specialists than medicine. “Each specialty,” Drucker noted, “has its own knowledge, its own training, its own language.”
A big challenge that management faces in such a situation, Drucker explained, is creating “a common vision, a view of the whole.” Only when that’s established can individuals begin asking the questions that Drucker deemed a matter of professional responsibility: “Who in this organization depends on me for what information? And on whom, in turn, do I depend?”
“Each person’s list will always include superiors and subordinates,” Drucker wrote in a 1988 piece in Harvard Business Review. “But the most important names on it will be those of colleagues, people with whom one’s primary relationship is coordination.
“The relationship of the internist, the surgeon, and the anesthesiologist is one example,” he continued. “But the relationship of a biochemist, a pharmacologist, the medical director in charge of clinical testing, and a marketing specialist in a pharmaceutical company is no different.”
What is absent today is precisely the common vision and sense of coordination that Drucker called for. As Seeman and Brown pointed out, “health-care leaders have embraced measurement.” That’s not the problem. What “often goes missing,” however, is Drucker’s exhortation that “all collected data should be tied to a strategy that serves the patient.”
In the end, Obama’s team must remember that measuring is only half the battle. They must also make sure that the findings are diligently managed, just as Dr. Drucker ordered.
May 15, 2009
Boredom, Not Rigor, Dampens Volunteers’ Spirits
Michelle Obama strode across the podium in San Francisco this week and, staring out at thousands of nonprofit leaders and volunteers assembled in front of her, took note of an unmistakable trend sweeping the country: These days, it’s hip to help.
“You’ve done everything in your power,” the First Lady declared at the start of the 2009 National Conference on Service & Volunteering, “to make giving back cool again.”
Somewhere, Peter Drucker is smiling.
When I last wrote about the surge in volunteerism in America, a year and a half ago, I noted Drucker’s influence in the field both as an adviser to numerous social-sector organizations and as an observer of people’s hunger to find something in their lives that brings them fulfillment. “What the U.S. nonprofits do for their volunteers may well be just as important as what they do for the recipients of their services,” Drucker wrote in his 1993 book, Post-Capitalist Society. “Citizenship in and through the social sector . . . restores the civic pride that is the mark of community.”
Today, propelled by this way of thinking, volunteering is fast becoming a full-blown cultural phenomenon. Surveys suggest that Millennials—those born between 1980 and 2000—are more civic-minded than any generation since the 1930s. The nation’s 77 million baby boomers are also getting into the act, as more and more folks in their 40s, 50s, and 60s look to take up a so-called encore career that’s centered on volunteering and public service.
A Wave of Doing Good
Meanwhile, technology is enabling people, in a click, to find a multitude of avenues to get involved and do their part in tackling some of society’s most pressing problems. Among those leading the wave is All for Good, a new Web site hosted by Google.
Nothing, though, has given the National Service Movement more of a lift than the words and deeds of the Obamas. From the President’s signing in April of the $5.7 billion Serve America Act to his launching this month of United We Serve—an initiative designed to have all Americans make volunteering a part of their daily lives this summer—he has delivered on his campaign promise to make community service a centerpiece of his Administration.
Yet despite all of the momentum and the palpable excitement in San Francisco, nonprofits need to be careful or they’ll wind up squandering the remarkable opportunity before them.
Earlier this year, the Stanford Social Innovation Review published a piece that noted how poorly most nonprofits manage their volunteers. As a result, more than a third of the 60 million-plus Americans who donate their time and talents one year don’t do so the next—not only at the organization where they’d signed up, but at any nonprofit at all. Some call this “the leaky bucket of volunteerism.”
There are a host of reasons for this pullback, according to the analysis, including nonprofits inadequately recognizing the contributions of their volunteers and a lack of training among volunteers and their managers.
But Robert Grimm, director of research and policy development at the Corporation for National and Community Service and one of the authors of the article, believes there’s a more fundamental issue to grapple with: It isn’t so much that volunteers have nightmarish experiences at nonprofits, he says; it’s that they have “bland” ones.
Matching Needs and Skills
Nonprofits, says Grimm, must “find out what people’s passions are”—and do a better job of meeting those interests. They also need to take far greater advantage of the skills that volunteers bring. There’s no reason for an attorney, say, to paint a fence when the organization he wants to assist could put him to work on an urgent legal matter. Why have a retired marketing executive stuff envelopes when she could be helping to devise the nonprofit’s new media campaign?
The ability of nonprofits to match needs and skills effectively becomes all the more critical as an increasing number of corporations, including consulting firms such as Deloitte and PricewaterhouseCoopers, donate millions of dollars worth of pro bono services to nonprofits.
The necessity of keeping workers engaged and bestowing upon them a feeling of pride is hardly exclusive to the social sector. Drucker taught that all managers must offer their employees a way to make a meaningful contribution. For it is this, even more than money, that motivates people.
“Personal satisfaction of the worker without productive work is failure,” Drucker wrote in his 1973 classic, Management: Tasks, Responsibilities, Practices. “But so is productive work that destroys the worker’s achievement” and his or her sense of having made a real difference. “Neither is, in effect, tenable for very long.”
When it comes to volunteers, the instinct among some managers is not to demand too much from them for fear that they’ll walk away if they’re overworked. But, in fact, Drucker believed that volunteers are hoping to be pushed hard—as long as it’s into something that can supply a big emotional payoff at the end.
“Volunteers have to get more satisfaction from their work than paid employees, precisely because they don’t get a paycheck,” Drucker wrote. “They need, above all, challenges.”
Nonprofits must quickly begin to provide them. Or the nation’s burgeoning ranks of volunteers will no longer feel cool. They’ll simply grow cold.
June 26, 2009
Health-Care Reform: The Right Kind of Compromise
This week’s brouhaha over whether the White House is ready to give up on a public insurance plan as part of health-care reform provides a fascinating window into the give-and-take of capital politics. But it’s also a window into what Peter Drucker called “the elements of decision making.”
In that sense, the dustup in D.C. is instructive for any leader charged with implementing a difficult decision. Invariably, he or she will be forced at some point to take a step that many people instinctively resist: compromise.
“The leader sets the goals, sets the priorities, and sets and maintains the standards,” Drucker wrote in his 1992 book, Managing for the Future. Yet he also “makes compromises, of course; indeed, effective leaders are painfully aware that they are not in control of the universe.
“But before accepting a compromise,” Drucker added, “the effective leader has thought through . . . whether the compromises he makes with the constraints of reality—which may involve political, economic, financial, or people problems—are compatible with his mission and goals or lead away from them.”
It was many months ago, back on the campaign trail, that President Barack Obama made the fundamental decision to move full steam ahead in trying to overhaul the nation’s health-care system. In doing so, he seemed to follow to a tee Drucker’s counsel regarding one of the most crucial questions that any executive should ask: “Is a decision really necessary?”
After all, as Drucker pointed out, “one alternative is always the alternative of doing nothing.” And this is precisely the course that should be taken “if the condition, while annoying, is of no importance and unlikely to make much difference.”
In this case, however, inaction was not a possibility—not with healthcare costs soaring and not with 45 million-plus Americans uninsured and as many as 15,000 more losing their coverage every day, by some estimates.
But now has come what the President himself recently described as “the hard part.” This is the inevitable stage, Drucker observed, when “it becomes suddenly quite obvious that the decision is not going to be pleasant, is not going to be popular, is not going to be easy.”
Making it all the tougher for Obama is that lies are being spread about his beliefs: that he favors “socialism,” government “death panels” for the elderly, and other nonsense. Maddening though this may be, the President needs to be extremely careful in the way that he and his surrogates push back, lest they stifle legitimate debate over the details of reform.
Conflict Can Produce Good Solutions
That would be a disaster because, as Drucker knew, the best outcomes emerge from sharply conflicting points of view. For starters, he explained, dissent “safeguards the decision maker against becoming the prisoner of the organization” he or she is in. In addition, it can present other ideas to fall back on should something later go wrong with the initial effort.
“Above all,” Drucker wrote in Management: Tasks, Responsibilities, Practices, “disagreement is needed to stimulate the imagination” and come up with truly “creative solutions” that require “a new and different way of perceiving and understanding.”
In the end, the key is to avoid what Drucker termed “the trap of ‘being right.’” Rather than beginning “with the assumption, ‘I am right and he is wrong,’” Drucker wrote, a great leader “starts out with the commitment to find out why people disagree” and is then prepared to yield where it makes sense to do so.
Earlier this week, as members of the Administration took to the Sunday morning talk shows, this is exactly what appeared to be happening. They suggested that they were not completely wedded to a “public option”—that is, setting up a government-run medical insurance plan that would compete with private insurers. Such flexibility is wise. All along, opponents have painted this proposal as a federal “takeover” of health care, and it’s this kind of rhetoric that most threatens to derail reform.
At the same time—and even more important—Obama’s advisers stressed that their openness to other approaches doesn’t in any way mean that the President is forsaking certain essential aims: heightening competition (which should help curb costs) and offering choice. These, though, can conceivably be met through other avenues, including the establishment of health-care cooperatives.
How all of this will shake out is far from clear. Some of the Administration’s closest allies are insisting on keeping the public option. More broadly, voters remain deeply skeptical of what the President and congressional Democrats are trying to achieve.
But know this: If we do ultimately get real reform, it will be because the Administration has forged what Drucker characterized as the right kind of compromise—one best expressed, he said, in the old proverb “Half a loaf is better than no bread.”
On the other hand, if too much is bargained away—if the President, in desperation, gives up not only the public option but its underlying goals as well, he will have made a very different kind of compromise, expressed in the story of the Judgment of Solomon: “Half a baby is worse than no baby at all.” As Drucker noted, half a baby “is not half of a living and growing child. It is a corpse in two pieces.”
And one, we can be sure, whose parents couldn’t afford any insurance to begin with.
August 21, 2009
Big Solutions Should Start Small
Even if Harry and Louise hadn’t killed off President Clinton’s health-care reform initiative in the planning stages, Peter Drucker believed it would have been doomed in practice by two other culprits: enormity and complexity.
“You have to start small,” Drucker remarked during a 1996 interview, as he zeroed in on “the problem” with ClintonCare. “The big cure-alls never work.”
It is this very insight that likely would have made Drucker a fan of the historic health-care legislation that Congress is in the final stages of passing. And it is an insight that managers far beyond the medical world should take note of, as it applies to practically every kind of organization.
The notion that the health-care package now on Capitol Hill is, in fact, based on a “start small” paradigm has gained currency in recent weeks, thanks to the publication in The New Yorker of a compelling article by Atul Gawande, a Boston surgeon and former Clinton adviser. Despite all the critics who have warned of a “big government” takeover of medicine, Gawande points out that nearly half the 2,000-plus pages in the Senate health-care bill are devoted to relatively small-gauge pilot programs that would “test various ways to curb costs and increase quality.”
Avoiding Grandiosity
“There is a pilot program to increase payments for doctors who deliver high-quality care at lower cost, while reducing payments for those who deliver low-quality care at higher cost,” Gawande writes. “There’s a program that would pay bonuses to hospitals that improve patient results after heart failure, pneumonia, and surgery. There’s a program that would impose financial penalties on institutions with high rates of infections transmitted by health-care workers. Still another would test a system of penalties and rewards scaled to the quality of home health and rehabilitation care. Other experiments try moving medicine away from fee-for-service payment altogether.”
It seems counterintuitive, in some respects, to take on a gargantuan task by trying a little of this and a little of that. But Drucker taught that this is the only way for a potential game-changer to get off the ground. “Grandiose ideas for things that will ‘revolutionize an industry’ are unlikely to work,” Drucker asserted. At another point, while discussing the development of education policy, he put it like this: “We need innovation; therefore, we need experimentation.”
Bill Pollard, the chairman emeritus of ServiceMaster, a pest-control, lawn care, and housecleaning company, says that one of the most valuable lessons he ever learned from Drucker was that “the potential for the new always requires testing and piloting.”
“Worth Doing Poorly”
“For a new idea to be successful, it must get off the drawing board and beyond a market analysis or focus study group,” explains Pollard, a Drucker consulting client and close friend. “It’s important to get started—to start servicing a few customers to learn from the practical application of an idea. Ideas can be studied and analyzed until they are suffocated. If a thing is worth doing, it is worth doing poorly to begin with . . . to learn from experience.”
Of course, truly learning from experience takes real effort. Drucker stressed that every new endeavor must have built into it from the beginning carefully considered tools for flagging when an undertaking has gone off course and isn’t likely to pan out.
At the same time, Drucker made clear that such assessments must not become too sharply focused on what’s broken. “The first aim,” Drucker wrote, “is to find out what we are doing well, for one can always go ahead and do more of the same, even if we usually do not have the slightest idea why we are doing well in a given area.”
In his piece, Gawande makes the case for advancement through trial and error by tracing how a series of U.S. Agriculture Department pilot programs revolutionized farming in the early twentieth century. “What seemed like a hodgepodge eventually cohered into a whole,” Gawande reports. “The government never took over agriculture, but the government didn’t leave it alone, either. It shaped a feedback loop of experiment and learning and encouragement for farmers across the country.” The result: Food prices tumbled while productivity and quality soared.
Pilot Testing the New Deal
Drucker, for his part, drew similarly on history. He concluded that the parts of President Franklin D. Roosevelt’s agenda that fared the worst—including, for instance, the National Recovery Administration—started out as overly ambitious conceits that spanned the country. By contrast, Drucker said, “it is no coincidence that practically all successful New Deal programs had been pilot tested as small-scale experiments in states and cities over the preceding 20 years—in Wisconsin, New York City, or elsewhere in New York State, or by one of the Chicago reform administrations.”
Drucker certainly understood the limits of the federal government and would have insisted that the actual implementation of these pilot programs and any follow-ons be left, wherever possible, to local agencies, nonprofits, and businesses. As the saying goes, Uncle Sam has to steer more and row less.
Yet interestingly, Drucker also discerned the seeds of what Gawande just wrote about, commenting in that 1996 interview: “The outline of a new American health-care system is slowly emerging out of literally hundreds of local experiments.”
If health-care reform becomes law and more of these pilot projects reach full flower, maybe we’ll hear a different—and more uplifting—watchword coming out of Washington: It’s too small to fail.
January 8, 2010
Facing the Wreckage Head-On
Detroit has declined immeasurably since Peter Drucker described it, more than a half-century ago, as “the industrial city per se.” But even by today’s diminished expectations, the past few weeks have been especially tough.
Former Mayor Kwame Kilpatrick, already in prison for probation violations, was arraigned in federal court on 19 counts of felony fraud and tax charges. The president of the local school board resigned and was hit with criminal charges after he allegedly fondled himself during a meeting with a colleague. And newly released Census figures show that Detroit continues to lose residents.
Yet despite all the setbacks, the Motor City may well have begun the very earliest stages of a turnaround. This is largely due to a trait that current Detroit Mayor Dave Bing displays and that every manager, especially during this uncertain age, should emulate: the resolve to look at the worst problems square in the face.
“A time of turbulence is a dangerous time,” Drucker wrote, “but its greatest danger is a temptation to deny reality.”
Prevalence of Denial
Indeed, many fall straight into this trap, often unconsciously. The inability to deal with unpleasant circumstances “is what Sigmund Freud described as the combination of ‘knowing with not knowing.’ It is, in George Orwell’s blunt formulation, ‘protective stupidity,’” Harvard Business School’s Richard Tedlow explains in his book Denial.
“From the young child who insists that his parents haven’t separated even though his father has moved out, to the alcoholic who swears he is just a social drinker, to the president who declares ‘mission accomplished’ when it isn’t,” Tedlow adds, “denial permeates every facet of life. Business is no exception. In fact, denial may be the biggest and potentially most ruinous problem that businesses face, from startups to mature, powerful corporations.”
The 66-year-old Bing, who enjoyed a Hall of Fame basketball career and success as the owner of several manufacturing companies before moving into politics, is anything but in denial. His leadership style first caught my eye when I read a profile of him earlier this year in Sports Illustrated. Bing, writer Michael Rosenberg said, “seems almost to take pleasure in telling people what they don’t want to hear.”
Smaller and Leaner
A month or so later, he made headlines for doing just that. Rather than trying to juice Detroit’s Census count, so as to puff up the city’s pride and maximize federal funding—a tactic used by many municipalities—the mayor spoke openly about the need to embrace a city that is much smaller and leaner.
“Transformational issues have to be talked about,” Bing told me, citing the steady hemorrhaging of high-paying blue-collar work that Detroit has witnessed for many years. “It’s hard for people to grapple with the fact that those jobs are gone and they’re not coming back. We have to prepare ourselves for something very different.”
This, of course, is the real trick: not only to have the courage to contend with the most daunting challenges but also to possess the vision and skill to then turn the situation into something positive. As Drucker asserted, “A time of turbulence is also one of great opportunity for those who can understand, accept, and exploit the new realities.”
In Detroit’s case, this means slimming things down before building them back up. Bing, who inherited a $300 million-plus deficit when he came into office in May 2009, reached agreement with the city council last month on a $3 billion budget that includes more than $100 million in cuts.
Dwindling Tax Base
Getting pinched like that is always painful. But with a tax base supported by only about 900,000 people—not even half of what Detroit had at its height—there’s simply “a whole litany of things we can’t afford to do anymore,” says Bing, as he rattles off reductions in “street paving . . . grass cutting, snow removal,” and other services. “Nobody likes to hear that. But if we fight it, we’re going to keep spiraling down.” In a similar vein, the mayor has targeted 3,000 blighted homes for demolition this year.
Yet Bing also believes that amid all the rubble a little light can shine: The scaling back will allow the city to focus on revitalizing a select number of core neighborhoods. The mayor notes that a number of new construction projects are now under way, and he also sees a chance to develop Detroit’s international riverfront.
In the end, though, Bing recognizes that ideas, not edifices, are what must save the city. Detroit, he points out, has a rich tradition of engineering excellence and entrepreneurship. The question is: How can the city rekindle that spirit and translate it into jobs?
Repairing the Schools
“How do we identify the next Berry Gordy?” Bing asks, referring to the founder of Motown Records. “How do we identify the next Henry Ford?”
The process must begin, he suggests, by accepting “that we have a broken, failing school system.” Some are urging mayoral control of the city’s schools in the hope of improving accountability, but it isn’t entirely clear that Bing is eager to play that role. In any event, such plans are presently stalled.
Detroit has a long way to go before it is healthy again. And Bing isn’t immune to criticism. The Detroit Free Press, for instance, has rapped him for “mincing words about what the city’s educational future should look like.”
Still, all in all, Bing appears to be slowly making progress by confronting many of Detroit’s harshest realities head-on while not overpromising what he can deliver. If the city rises as a result, the man who collected more than 3,400 caroms during his time in the NBA will have claimed his biggest rebound by far.