Drucker: "Innovation and Entrepreneurship in Public Service Organizations"

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September 2009

Innovation and an entrepreneurial approach are key concepts in organizational performance and sustainability. As stakeholder needs and the environment change, organizations need to keep up with the changes, and, when possible, get ahead of them. Peter Drucker notes in his classic management publication, Management: Tasks, Responsibilities, Practices (Harper and Row, 1974), and later in Innovation and Entrepreneurship (HarperBusiness, 1993), that this may be more difficult for not-for-profit, public service organizations than it is for conventional profit driven organizations, but that it is possible and necessary.

For-profit businesses see performance results in close to real-time, based on customer purchases. Those results determines income, profits, and future budgets. Businesses may be considered successful if they capture 25% of their market, even though that indicates 75% of the population prefers the products of other organizations.

Service organizations differ from profit organizations in three ways.

  • First, they focus on ‘doing good’ in areas such as education, health, and community service, and have less tangible products.
  • Second, their budgets may be based on what they do, not on longer term results. While their activities are apparent – students taught, patients treated, clients counseled – the impact of their activities, such as a healthier or better educated population, may be harder to measure. Also, their funds are often provided by some source other than the immediate consumer of their product or service.
  • Third, service organizations need to maintain the support of most, if not all, of their stakeholders or constituents.

The effectiveness of the public service organization may thus be measured by its increasing budget and increasing services or activities, or by its efficiency, providing more services at a lesser cost. With no clear measure of impact, it can be difficult to end or change programs without losing stakeholder support.

Drucker provides the following guidelines to public service organizations to be ready and able to innovate and adapt to changing needs.

  1. Have a clear definition of the mission or purpose of the organization.
  2. Develop goals and objectives to fulfill the purpose of the organization. Goals should be realistic and achievable. Each goal should also have a quantitative measure, and an indication of when it has been achieved or completed. There should be no goals that can never be completed (for example ‘ending world hunger’).
  3. Recognize that specific programs are a means to an end or goal. Programs should be temporary and it should be clear what goal or end each program is supporting.
  4. Identify measures of performance for goals, objectives, and programs.
  5. Set priorities to accomplish results and hold those responsible accountable.
  6. Build feedback from results into the system.
  7. Have a systematic audit of objectives and results. Be ready to identify nonproductive or obsolete activities and unsatisfactory results and have a means to stop or eliminate those activities. Be willing to reassess objectives if they are not met. Consider that the objective could be wrong, or not measured correctly, or not attainable. Be ready to stop trying to meet it and ready to end related activities and programs. If old programs cannot be eliminated, it will be difficult to start new programs.
  8. Build into the organization the search for and support of innovative and entrepreneurial opportunities, and new objectives and programs to replace those that are eliminated.

While innovation and entrepreneurship may be more of a challenge in institutions of higher education and other public service organizations, it can be done. If opportunities are not addressed internally, someone else will address them externally, and the organization will eventually become obsolete.