Reading Notes: Chapter 10 of "Understanding Management" by Peter Drucker: Reasons for Poor Performance of Service Organizations

1. Overview of Chapter Contents

There are usually three explanations for the poor performance of service organizations: lack of corporate management; lack of excellent talents; vague goals and difficult to measure results. All three are invalid and almost entirely pure subterfuge. The fundamental problem with service organizations is that they are funded for commitment rather than performance or results; in other words, funding comes from budgets rather than results.

2. Chapter Question Set

Question 1:Why is it misleading to attribute poor service organization performance to inefficiency?

Attributing poor service organization performance to inefficiencies can be misleading for several reasons:

1. The importance of effectiveness is ignored: efficiency is doing things correctly, effectiveness is doing the right things. If a company is committed to the wrong business, no matter how efficient it is, it will be difficult to survive, let alone succeed. For example, no matter how efficient horsewhip manufacturers are, they cannot survive in modern society. Efficiency itself therefore involves the investment of effort and resources in all areas of the business, while effectiveness is about doing the right things.
2. Ignoring the relationship between costs and benefits: If managers only focus on efficiency, they will ignore the relationship between costs and benefits. 80% to 90% of revenue may only come from 10% to 15% of products, orders, customers, markets, talents, etc., while the remaining 85% to 90% of resources, no matter how efficient, will only incur costs. If managers fail to realize this, it will lead to excessive costs, thereby affecting the economic performance of the enterprise.
3. Ignoring social support for enterprises: Enterprises are organs of society, and their survival and development cannot be separated from social support. If a company only focuses on its own economic performance and ignores its social impact, it will undermine society's support for the company, thereby damaging the company itself.
4. Ignoring the importance of ethical principles: The management authority of an enterprise needs to be based on ethical principles. If managers focus only on efficiency, they will ignore the importance of ethical principles. Only one ethical principle can serve as the basis for managerial authority: helping people develop their strengths, avoid their weaknesses, and pursue excellence. If a manager's management behavior violates ethical principles, he or she will lose the trust and support of employees, thereby affecting the company's performance.

Therefore, attributing poor performance of service organizations to inefficiency is misleading because it ignores effectiveness, the relationship between costs and benefits, social support for business, and the importance of ethical principles. To improve the performance of service organizations, it is necessary to comprehensively consider factors such as effectiveness, efficiency, cost, social impact and ethical principles.

Question 2:Many people believe that service organizations perform poorly because their employees are not as qualified and capable as corporate employees. Is this comment justified?

There is some truth to this comment, but it is not entirely correct. There may be many reasons for poor performance of service organizations, one of which is insufficient quality and competence of employees. However, this is not the only factor.

Service organizations often have to deal with many different challenges than businesses, such as:

1. Resource constraints: Service organizations often face tighter budget constraints than businesses, so they may need to use resources more efficiently to provide better services.
2. Diversified services: Service organizations usually need to provide multiple types of services, including consulting, education, medical care, etc. This requires employees to have a broad range of skills and knowledge, as well as good communication and interpersonal skills.
3. People management: Employees in service organizations often need to deal with different customers and need to maintain a high degree of patience and flexibility. This requires employees to have excellent interpersonal skills and self-management skills.
4. Customer Satisfaction: The success of a service organization is often highly dependent on customer satisfaction. Therefore, employees need to have good customer service skills and communication skills to meet customer needs and keep customers satisfied.

Therefore, although the quality and capabilities of employees are critical to the success of a service organization, there are other factors that influence service organization performance. In order to improve performance, service organizations need to pay attention not only to the quality and abilities of employees, but also to management methods, service quality, resource utilization and other aspects.

Question 3:For organizations that have set abstract goals, how can performance levels be improved?

For organizations with abstract goals, improving performance requires a multifaceted approach. Here are some suggestions:

1. Clear goals: Make sure every employee has a clear understanding of the organization's goals and can connect the organization's goals to their personal work goals. With clear goals, employees can better understand their responsibilities and expectations and become more motivated to complete tasks.
2. Make a plan: Make a detailed plan based on your goals, including specific steps, timelines, resource requirements, etc. By making a plan, you can ensure that every employee knows what tasks they need to complete and when they need to be completed, so that they can better control the progress of the work.
3. Training and Development: Provide employees with necessary training and development opportunities to enhance their skills and capabilities. Through training and development, employees can better adapt to the work environment and job requirements, thereby improving work efficiency and quality.
4. Incentives and rewards: Establish incentives and reward mechanisms to encourage employees to work hard to achieve goals. Through incentives and rewards, employees can feel that their work is recognized and rewarded, so they can be more motivated to work.
5. Feedback and evaluation: Regularly provide feedback and evaluation of employees' work so that problems can be discovered and corrective measures can be taken in a timely manner. Through feedback and evaluation, employees can understand their work performance and areas for improvement, so as to continuously improve their work level.
6. Create a positive working atmosphere: Create a positive, open and inclusive working atmosphere and encourage employees to actively participate in work discussions and decision-making. Through a positive work atmosphere, employees can feel respected and valued, and thus be more enthusiastic about their work.
7. Promote teamwork: Encourage teamwork and communication among employees to solve problems and complete tasks together. Through teamwork, employees are able to work better together, thereby increasing overall performance levels.
8. Pay attention to employees’ personal development: Pay attention to employees’ personal development and career planning, and provide employees with more development opportunities and challenges. By focusing on employees' personal development, employees can feel cared for and supported, allowing them to face work challenges with more confidence.
9. Establish an effective communication mechanism: Establish an effective communication mechanism to ensure smooth flow of information and avoid information errors and communication barriers at work. Through effective communication mechanisms, employees can better understand job requirements and task assignments, and thus complete tasks better.
10. Continuous improvement: Continuously seek opportunities and methods for improvement to improve work efficiency and quality. Through continuous improvement, employees can continuously improve their work methods and methods, thereby improving overall performance levels.

In short, improving performance levels requires starting from many aspects, including clarifying goals, formulating plans, training and development, motivation and rewards, feedback and evaluation, creating a positive working atmosphere, promoting teamwork, focusing on employee personal development, and establishing effective communication Mechanism etc. Through the comprehensive application of these measures, the performance level of the organization can be effectively improved.

Question 4:What are the basic differences in the way service organizations and enterprises obtain funds?

There are some fundamental differences in how service organizations and businesses obtain funding. Here are some possible differences:

1. Sources of Funding: Services and businesses can rely on different sources of funding. Service organizations, such as nonprofit organizations, charities, and government agencies, often rely on external funding in the form of donations, grants, and government grants. Businesses, on the other hand, rely mainly on internal funds in the form of profits, investor investments, loans and bonds.
2. Purpose of funds: Service organizations and businesses also have different priorities and constraints when using funds. Service agencies typically use funds to provide services, promote social welfare, and meet the needs of specific groups. Enterprises use funds for research and development, production, marketing, expansion and other activities aimed at improving efficiency and creating profits.
3. Money Management: Services and businesses have different money management strategies. Service organizations often focus on social benefit and long-term sustainability, and this is especially true of nonprofit organizations. This means that they may adopt some more robust and conservative investment strategies to maintain the safety and stability of their funds. In contrast, companies usually pursue higher returns on investment and faster capital accumulation, and therefore may adopt more risky investment strategies.
4. Capital flows and risks: The capital flows and risk profiles faced by service organizations and enterprises are also different. For service organizations, financial flows are generally stable because their sources of income are relatively fixed (such as government grants or donations). However, businesses may face greater liquidity and financial risks as they respond to market demands and competitive pressures.

In general, there are some basic differences in the way service organizations and businesses obtain funding. These differences mainly stem from their different missions, goals, resource constraints, and social responsibilities.

Question 5:Why are typical service organizations similar to monopolies?

Typical service organizations are similar to monopolies in that they seek to maximize profits and achieve this goal by controlling market share and price.

Service organizations often have some of the characteristics of monopolies. First, they often hold a dominant position in the market, which allows them to control prices and market share. Second, due to the lack of competitors, service organizations can set high prices and earn high profits. In addition, service organizations can also enhance their market competitiveness by improving service quality, increasing product differentiation, and reducing costs.

Similar to monopolies, service organizations also face supervision by regulatory agencies to prevent them from abusing their market position and harming consumer interests. For example, the government may impose price ceilings, service quality standards, and market competition regulations on service organizations.

However, while service organizations and monopolies are similar in some respects, there are also some differences between them. For example, service organizations usually provide non-necessities or luxuries, while monopolies usually provide necessities or basic services. In addition, employees in service organizations usually have higher levels of skills and knowledge, while employees in monopolies usually have only basic labor skills.

In summary, while a typical service organization is similar to a monopoly in some respects, there are also some differences between them. These differences arise primarily from differences in the types of products and services provided by service organizations and the skills and knowledge levels of their employees.

Question 6:Why does funding from budget allocations rather than outcomes change the meaning of performance?

Receiving funding from budget allocations rather than results changes the meaning of performance because budget allocations are often based on the size and needs of the organization rather than on the organization's actual results or performance. In this case, the organization may be more focused on obtaining budgetary allocations than on achieving high performance.

When funding comes primarily from budgetary appropriations, organizations may focus on meeting budget requirements rather than on achieving long-term goals or creating value for stakeholders. This approach can lead to irrational allocation of resources, such as allocating funds to projects or departments that do not produce benefits, while neglecting high-performing areas.

In contrast, if funding comes primarily from outcomes or performance, the organization will be more focused on achieving practical business goals, improving productivity and efficiency, and creating value for stakeholders. This performance-based financing approach will incentivize organizations to improve processes, increase quality, reduce costs, and seek innovative ways to improve performance.

In summary, taking funds from budgetary allocations dilutes the meaning of performance as it may lead organizations to ignore actual results and value creation. And results-based financing will incentivize organizations to improve performance and achieve long-term goals.

Question 7:Why is cost control hardly a plus for an organization that relies on a budget?

There may be several reasons why cost control is hardly a virtue for agencies that rely on budgets. Here are some possible reasons:

1. Limitations of Budgeting: A budget is a planning and forecasting tool that is usually prepared based on historical data and forecasts. However, historical data may not reflect current actual conditions, and forecasts may contain errors. In addition, the budget may not take into account unexpected events or unanticipated expenses.
2. The Complexity of Cost Control: Cost control is more than just making cuts when budgeting. It requires an in-depth understanding of the company's operational processes, supply chain management, human resources management and other aspects. Relying solely on budgets to control costs may not achieve comprehensive and effective cost control.
3. Impact of Organizational Culture: If there is a "pursue budget at all costs" culture in an organization, then cost controls may be overlooked. Employees may be more focused on meeting budget targets than on using resources efficiently.
4. Lack of strategic vision: Some organizations may be too focused on short-term cost control and neglect long-term strategic goals. Such an approach may cause the company to face greater cost pressure or lose its competitive advantage in the future.
5. Lack of effective monitoring and evaluation mechanisms: Cost control may become less important if the organization does not establish effective monitoring and evaluation mechanisms to ensure budget execution and cost control effectiveness.

In summary, for organizations that rely on budgets, cost control may not be considered an advantage for many reasons, including budget limitations, cost control complexity, the impact of organizational culture, lack of strategic vision, and lack of effective Monitoring and evaluation mechanisms, etc. Therefore, to achieve effective cost control, multiple factors need to be considered and comprehensive measures taken.

Question 8:Why do service organizations encounter special difficulties when defining their purpose and mission??

Service organizations encounter special difficulties in defining their purpose and mission, mainly because of the diversity of service objects and values ​​of service organizations. Take the carpet industry, for example, which was established in the early 1950s in the 1950s Until carpet manufacturers stop persuading and hard-selling and start thinking about who the consumer is. ”and“Who should be our consumers”After the problem, the carpet industry really reversed the above trend. This suggests that service organizations need to have a deep understanding of their customer segments and their needs and expectations in order to provide services that are consistent with customer values.

In addition, the purpose and mission of the service organization also need to take into account the common technical issues of the service. For continuous manufacturing companies, such as steel companies or aluminum smelting companies, the purpose and mission require more than just marketing definitions, because their products enter multiple markets, serve countless consumers, and must meet a variety of values. concepts to meet multiple value expectations. Therefore, service organizations need to comprehensively consider common issues of customer groups, service values, market trends, and technology when defining their purpose and mission.

Finally, service organizations also need to adapt their purpose and mission to changes in society. With the development of society and changes in consumer needs, service organizations need to constantly update their service content and methods to meet customer needs and expectations. Therefore, the purpose and mission of service organizations should be dynamic and need to be continuously adjusted and improved according to changes in society.

To sum up, service organizations will encounter special difficulties when defining their purpose and mission. They need to comprehensively consider the common issues of customer groups, service values, market trends and technology, and continuously adjust and improve according to changes in society.

Question 9:Why is it especially difficult for agencies that rely on budgets to ditch outdated businesses?

In organizations, especially those that rely on budgets, such as industrial and commercial enterprises, hospitals, universities, etc., it is difficult to abandon outdated business. The main reasons are as follows:

1. The economic performance of these institutions is the basic basis and goal of their existence. To achieve economic performance, they need to maintain a stable business and minimize the risks associated with change. As a result, organizations often choose to maintain an outdated business rather than risking change.
2. Managers and employees in organizations tend to be conservative about change. They may fear that change will threaten their career advancement and financial interests. In this case, they may be tempted to continue with their existing business model, even if it becomes obsolete.
3. Organizations usually face various contradictions and conflicts, such as efficiency and innovation, system and personalization, profit and social responsibility, etc. These contradictions and conflicts can cause organizations to struggle between change and stability, making it difficult to abandon outdated operations.

Therefore, to solve this problem, organizations need to take effective measures to promote change and innovation while balancing various contradictions and conflicts. This requires managers and employees of the organization to have high management skills and professional ethics to ensure that the change proceeds smoothly and the goals of the organization are achieved.

Question 10:“Getting”Getting “Getting it”Purchasing area is the same< a i=9>?

“earning”earning“The following are the main categories of acquisition:”Acquired

1. Source of income: "Earned" income usually comes from labor income such as wages, bonuses, commissions, etc., while "deserved" income includes non-earned income such as equity investment, real estate leasing, and patent licensing.
2. Certainty: Generally speaking, "earned" income is certain, that is, as long as you put in the effort, you can get the corresponding reward. "Deserved" income has a certain degree of uncertainty, because its realization depends on a variety of factors, such as market conditions, legal environment, etc.
3. Risk: The income "earned" is usually proportional to personal effort, and the risk is relatively low. The risk of "deserved" income is relatively high because it involves many factors, such as the investment may fail, the lease may be cancelled, etc.
4. Legality: “Earned” income is legal because it is earned through labor within the framework of the law. "Deserved" income may involve legal issues, such as the legality of equity investments and the compliance of real estate lease contracts.
5. Tax treatment: For “earned” income, personal income tax is usually required in accordance with the provisions of the Personal Income Tax Law. As for "due" income, if it is investment income, you may enjoy tax benefits, such as corporate income tax exemptions, etc.

In short,“earned”income and< /span>Income depends on income source, certainty, risk, There are clear differences in areas such as legality and tax treatment. In personal financial planning, you need to reasonably arrange the ratio of the two according to your own situation to achieve the goal of steady financial growth. ”Deserve“