Social Responsibility and Its Conflict with Business as Foreseen by Peter Drucker

Scanned Book Cover of "Management Challenges for the 21st Century" by Drucker
Scanned Book Cover of "Management Challenges for the 21st Century" by Drucker | Source

Introduction

Peter Drucker’s book “Managing in a Time of Great Change” was prescient, and many of the lessons in that book are expounded upon in "Management Challenges for the 21st Century". He foresaw the conflict between liberal groups and business as the liberals tried to co-opt private businesses indirectly through public pressure and directly through legislation to use them to do their work. Today we see socialism and fascism creeping in as people see businesses as mere groups that should follow current social trends, cash-cows to fund projects that taxpayers and donors aren't or simply a way to force people to act in certain ways to work for the businesses these groups influence.

Let's look at what he wrote a generation ago and how it is still relevant today.

Why Businesses Aren't More Popular

Peter Drucker wrote, “Non-business organizations have more social power than businesses.”

This is true for several reasons. First, businesses focus on their business objectives because their business will fail immediately if they ignore their profit motive and lose to the market long term if they try to focus on multiple objectives instead of their mission, be it “make the highest quality canoes in our state” or “deliver low cost IT security solutions to small businesses”.

Another reason why businesses don't have more social power than non-business organizations is due to all the safeguards we have had against corruption and bribery that allowed business leaders to have undue influence. People rail against the Koch Brothers for their donations, but few complain about how much money public sector unions give or the millions of people they rally for each election.

Another reason businesses don't have more social power is that their marketing efforts are focused on brand management and advertising of their products. Any social promotion they do is directly linked to their desire to make money from it, not just generate goodwill that doesn't help the bottom line.

Companies must have the right to have a corporate culture separate from the community's.
Companies must have the right to have a corporate culture separate from the community's. | Source

In the Community But Not Of It

Peter Drucker said, “Businesses must be in the community but not of the community.” This statement refers to how businesses draw workers from the community and sell to the local community. However, the business shouldn’t chase the latest local fads or invest in every little local charity that asks for money. Nor should they be pushed to take a side in every local, state or national issue. Employees and owners alike are free to donate to political causes and charities, but that is not the business’ job. Its purpose is its chosen mission – the products it creates or the services it delivers.

Businesses certainly tap into the local community as workers and, ideally, as customers. However, it can't be too local or it loses out on its opportunity to be more successful.

Corporate Culture Must Transcend the Popular

Peter Drucker's book "Managing in a Time of Great Change" says, “In its culture, therefore, the organization must always transcend the community.” The business has assumptions about its environment, including labor costs and market demographics, and what they get paid to do. Businesses have assumptions about their mission that define what they consider success, whether it is sales figures, profit margins or quality metrics. Businesses have assumptions about core competencies that define what they need to do best to remain ahead of their competitors.

A company culture focused on quality may be in contrast to a laid back and lackadaisical community ethic. Company culture that is focused on delivering products with a low cost on a tight margin cannot afford to raise wages to the higher levels those in a middle class community may want their children or less skilled neighbors to receive. But the local community doesn’t see how this results in businesses replacing labor with machinery, outsourcing services or reducing its benefits to pay the higher wages.

Company cultures can include international processes local ones don't, though it can trickle down from the business.
Company cultures can include international processes local ones don't, though it can trickle down from the business. | Source

Corporate Culture Versus Popular Culture

“A conflict between the organization’s autonomy and claims of the community is inherent in the society of organizations.” Too many communities think that the businesses must reflect their values and follow their whims, forgetting that businesses are private entities subject to public demand but are not a democracy. If you want a company that follows your ideals, start your own, but don't demand that businesses try to follow your precepts, be it promotion of your particular social causes or altering its work practices to suit your preferences.

When a business is pushed to follow various social fads and trends, it makes changes that are not those in alignment with what must change – revising its mission, product line, definition of success and operating procedures to stay ahead in the market. Thus changing with the social trends of today hurt its ability to be successful long term in business.

Why Companies Must Have Autonomy To Succeed

Peter Drucker wrote, “The issue of social responsibility is inherent in the society of organizations … it must have the social power to make decisions on people … who to hire, fire, promote, to establish rules and discipline, the assignment of jobs and tasks.”

Too many social groups look at the money flowing through the business as a community resource. They try to push obligations onto businesses. One example is the government and social movements trying to force businesses taking care of employees with benefits to move beyond health insurance and sick days into pushing people into healthier lifestyles via a carrot and stick. Another example is pushing businesses to offer training from literacy courses to English classes to remedial academics, training that should have taken place in the public schools.

We see another form of this with the social justice warrior movement trying to force businesses to put their ethical principles into the corporate code of ethics, such as mandatory diversity training for employees and requiring someone to be a social justice advocate to be considered for a promotion. Businesses lose out when radical groups demand that businesses donate to far left wing causes or else face a social media storm painting them as sexist, racist, bigoted, etc. Their war cry is, "Give us money or we'll name call so no one else will do business with you!" Too many organizations give them the money, hoping to avoid the negative publicity.

Unfortunately, Shakespeare realized, "Once you pay the Danegeld, you never get rid of the Dane." And when you bribe someone to avoid a manufactured firestorm of criticism, you've guaranteed they will try the tactic on others before coming back to you. And now the bribery of social "justice" groups becomes a standard business expense, draining productive organizations to fuel professional shakedown artists.

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1 comment

DDE profile image

DDE 9 months ago from Dubrovnik, Croatia

Great ideas and certainly a useful hub. I Tweeted!

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