Page 255 - The Drucker Lectures

236 [ The Drucker Lectures

And so if you want to have an understanding of what man-
agement is and what management does, you have to start with
results on the outside. In many cases, it’s not easy to define re-
sults. I’ve been working with some excellent Midwestern col-
leges. But what are their results? Is it how many people get into
Harvard Law School? That’s probably a minus. Or tell me what
the bottom line is for a hospital or for the Girl Scouts or for a
church. You’d be surprised how difficult it is.
We know that the bottom line for a business is net income.
But what about market standing? That is not so easy to define,
and it is changing very rapidly.
From the point of view of the shareholder, the only thing of
interest is financial results, whether it is dividends or the stock
price. From the point of view of the enterprise, the question is:
How do we get capital the most cheaply and how do we use it
the most effectively? But you’d be surprised, whenever you raise
this question how management differs.
Let me give you a recent example. There are two department
store chains that are very similar. Both came to me indepen-
dently and at different times about what they should expect from
their salespeople. One of those chains defined the results of the
salespeople by the size of the sales ticket—whether the item sold
on one ticket was for $6.15 or for $615. The other sees the re-
sults of its salespeople as attracting and holding customers.
They judge their salespeople on whether Mrs. Smith comes
in and asks for Betty. Does Betty build a customer base? And let
me say that when you look at it from the point of view of ultimate
income to the store, the two are indistinguishable. You can’t say
one is a better way. But they are totally different. They lead to
hiring different salespeople, to training different salespeople,
and to paying them differently. And the saleswoman who does
well in chain A is unlikely to do well in chain B, and vice versa.
So results are not that obvious.