Leadership Beyond the Walls

Which respon­si­bil­i­ties do orga­ni­za­tions bear for soci­ety? Is it enough for them to ful­fill their respec­tive pur­pose to the best of their abil­i­ty or do they also have respon­si­bil­i­ty beyond that? Who takes care of the whole if every­one only takes care of their own? In view of the press­ing social chal­lenges of our time, above all the threat of the glob­al cli­mate cri­sis, these ques­tions con­cern us all more than ever. They are by no means new, how­ev­er, but have already been answered in detail and unequiv­o­cal­ly by Peter Druck­er: Lead­er­ship does not end at the walls of the orga­ni­za­tion, but also assumes respon­si­bil­i­ty for the community.

The Purpose of the Organization and Its Responsibilities

Even if it some­times feels like that when you look at the busi­ness news, the pur­pose of com­pa­nies is not to make prof­it or even max­i­mize prof­it. Peter Druck­er used this beau­ti­ful anal­o­gy: Prof­it is impor­tant for the sur­vival of the orga­ni­za­tion in the same way that oxy­gen is impor­tant for human beings. How­ev­er, a ful­filled life is not just about breath­ing for the sake of breath­ing. And in the same way, the pur­pose of the orga­ni­za­tion is not prof­it for the sake of profit.

Prof­it for a com­pa­ny is like oxy­gen for a per­son. If you don’t have enough of it, you’re out of the game. But if you think your life is about breath­ing, you’re real­ly miss­ing something.

Peter F. Drucker

But what is the pur­pose of an enter­prise? Peter Druck­er is quite clear on that point, too. This pur­pose always lies out­side and there­fore in soci­ety, and it essen­tial­ly con­sists of hav­ing and keep­ing cus­tomers. The cus­tomer ulti­mate­ly decides whether the com­pa­ny ful­fills its purpose.

To know what a busi­ness is, we have to start with its pur­pose. Its pur­pose must lie out­side of the busi­ness itself. In fact, it must lie in soci­ety, since busi­ness enter­prise is an organ of soci­ety. There is only one valid def­i­n­i­tion of busi­ness pur­pose: to cre­ate a customer.

Peter F. Druck­er, Man­age­ment Rev Ed

How­ev­er, the con­clu­sion that the cus­tomer jus­ti­fies any means is too short-sight­ed. Com­pa­nies can­not steal from respon­si­bil­i­ty that eas­i­ly. Not every­thing that serves the cus­tomer is per­mit­ted and jus­ti­fi­able. This par­tic­u­lar­ly is the case for the treat­ment of their employ­ees. That’s why Ama­zon has had to face accu­sa­tions of exploita­tion over and over again in recent years, Apple has been and con­tin­ues to be accused of irreg­u­lar­i­ties at Fox­conn and the tex­tile indus­try still has a huge prob­lem with its sweat­shops.

Nei­ther can the respon­si­bil­i­ty for pos­si­ble neg­a­tive effects of the prod­ucts, espe­cial­ly on soci­ety and the envi­ron­ment, be com­plete­ly passed on to the cus­tomer (by say­ing the it was his choice!). This is why par­tic­u­lar­ly harm­ful prod­ucts, although there are cus­tomers, are com­plete­ly banned, such as drugs, or only avail­able under more or less strict con­di­tions, such as alco­hol, tobac­co, weapons (at least in most civ­i­lized coun­tries) and much more. Oth­er prod­ucts must be labelled clear­ly and uni­form­ly to sup­port the customer’s deci­sion, for exam­ple with the EU ener­gy label (and par­tic­u­lar­ly inef­fi­cient prod­ucts such as light bulbs will then be banned altogether).

Soci­ety or the econ­o­my can put any busi­ness out of exis­tence overnight. The enter­prise exists on suf­fer­ance and exists only as long as soci­ety and the econ­o­my believe that it does a job, and a nec­es­sary, use­ful, and pro­duc­tive one.

Peter F. Druck­er, Man­age­ment Rev Ed

In addi­tion to share­hold­ers, employ­ees and cus­tomers, there is also soci­ety as a whole in which an orga­ni­za­tion pro­duces and sells their prod­ucts and in which these prod­ucts are used and dis­card­ed. Orga­ni­za­tions also have a respon­si­bil­i­ty towards this soci­ety, because they exist only because soci­ety tol­er­ates them. And the heat­ed debate about SUVs in Ger­many (which is per­haps only so heat­ed here, because the car in Ger­many is a holy cow for many peo­ple) shows impres­sive­ly how quick­ly the pub­lic mood can change these days.

Primum non nocere

In chap­ter 21 of his book Man­age­ment Rev Ed (Ama­zon Affil­i­ate-Link) Peter Druck­er com­pares the dis­tri­b­u­tion of pow­er of our time with the plu­ral­ism of the Mid­dle Ages, which neglect­ed the over­ar­ch­ing com­mu­ni­ty due to the strong focus on par­tic­u­lar inter­ests of dif­fer­ent inde­pen­dent rulers (bish­ops, lords, uni­ver­si­ties, etc.). Every­one cared for his or her own, but no one cared for the com­mu­ni­ty beyond that. Accord­ing to Druck­er, this lack led to the emer­gence of the mod­ern state over the course of 500 years, where these indi­vid­ual par­ties became orga­nized and arranged into a large whole.

The indi­vid­ual man­ag­er, even the chief exec­u­tive of a giant cor­po­ra­tion, has become anony­mous, unas­sum­ing — just anoth­er employ­ee. But togeth­er the man­agers of our insti­tu­tions — busi­ness­es, uni­ver­si­ties, schools, hos­pi­tals, and gov­ern­ment agen­cies — are the lead­er­ship groups in the mod­ern soci­ety of orga­ni­za­tions. As such, they need an ethics, a com­mit­ment, and a code. The right one is the code devel­oped more than 2,000 years ago for the first pro­fes­sion­al lead­er­ship group, physi­cians: “Above all, not know­ing­ly to do harm.”

Peter F. Druck­er, Man­age­ment Rev Ed

With the rise of large indus­tri­al com­pa­nies around 1860, the new plu­ral­ism orig­i­nat­ed. The com­pa­nies increas­ing­ly gained (more inde­pen­dent, because not cen­tral­ly, but by the mar­kets reg­u­lat­ed) pow­er and state orga­ni­za­tions were increas­ing­ly pri­va­tized, so that today there is again a more or less unco­or­di­nat­ed coex­is­tence of author­i­ties as in the Mid­dle Ages. Togeth­er, the lead­ers of these dif­fer­ent orga­ni­za­tions man­age mod­ern soci­ety, whether they are aware of it or not. Fol­low­ing the ancient max­im of physi­cians, they should at least not know­ing­ly do harm to the com­mu­ni­ty: Pri­mum non nocere.

This plu­ral­ism is gen­er­al­ly required and use­ful, because only through this spe­cial­iza­tion and focus per­for­mance and progress can be achieved — indus­tri­al­iza­tion has also shown this. How­ev­er, this focus needs a coun­ter­weight in com­mit­ment and respon­si­bil­i­ty for soci­ety as a whole. Peter Druck­er there­fore goes one step fur­ther and demands that lead­er­ship always goes beyond the walls of the respec­tive orga­ni­za­tion: in form of mon­ey, for exam­ple, by com­pa­nies not evad­ing their tax bur­den or even vol­un­tar­i­ly sup­port­ing projects, in form of per­son­nel, by employ­ees hav­ing the oppor­tu­ni­ty to get involved in the com­mu­ni­ty (this requires fair pay­ment and flex­i­ble work­ing mod­els as well), and in the form of over­ar­ch­ing coop­er­a­tion on chal­lenges that can only be mas­tered togeth­er. And here we are again with the chal­lenges of the impend­ing cli­mate crisis.

Yes, each insti­tu­tion is autonomous and has to do its own work, the way each instru­ment in an orches­tra plays only its own part. But there is also the score, the com­mu­ni­ty. And only if each indi­vid­ual instru­ment con­tributes to the score is there music. Oth­er­wise there is only noise.

Peter F. Druck­er, Man­age­ment Rev Ed