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The Drucker Difference

Outspoken About Outcomes for Nonprofits

In 1994, at a gathering of a dozen top social-sector leaders, Peter Drucker could clearly see potential for the nonprofit world to make huge strides in innovation, effectiveness, and impact. But a big question swirled in his head.

“Though impressed by the emerging movement this group epitomized, he wasn’t convinced that it would amount to wholesale change in the mindset and culture of the social sector,” recalls Mario Morino, a participant in the meeting. For Drucker and the other attendees, the key was to figure out how to turn “this emerging movement into a true force for change.”

More than 15 years later, Morino is still trying to do that. He offers some marvelous ideas in a new book, Leap of Reason: Managing to Outcomes in an Era of Scarcity, published by Venture Philanthropy Partners, at which Morino is chairman. It is the best thing on management I’ve read all summer. (It helped me sharpen some of what we’re trying to achieve at my own organization, the Drucker Institute.)

The book frames, in the starkest terms, the fundamental problem that most nonprofits face: “We don’t manage to outcomes,” Morino writes, “thus greatly diminishing our collective impact.”

He goes on to add that, despite the best of intentions, “the vast majority of nonprofits do not have the benefit of good information and tools to determine where they’re headed, chart a logical course, and course-correct when they’re off. They’re navigating with little more than intuition and anecdotes. Only a fortunate few have a reliable way to know whether they’re doing meaningful, measurable good for those they serve.”

Voluntary Post Mortems Are Rare

Of course, this serious pitfall isn’t limited to the social sector. In a new piece in Harvard Business Review, Stanford University’s Jeffrey Pfeffer writes that “the U.S. military regularly conducts after-action reviews; hospitals convene mortality and morbidity meetings. Yet such voluntary formal reviews of decisions and their outcomes are rare inside companies—even ones that have made costly blunders.”

Nonetheless, there’s little doubt that it’s among nonprofits—which can’t count on the commercial marketplace to serve as a cold-hearted corrective—where this shortcoming is especially pronounced. “For many organizations in the nonprofit sector, to be specific about results is still odious,” Drucker observed.

What Morino now wants is for the nation’s 1.5 million nonprofits to “take a sector-wide leap of reason” and truly commit themselves to ensuring they’re making a positive difference. It begins, he suggests, by focusing more on “why measure and what to measure—not just on how to measure.”

Drucker would have liked this approach. “Measurements, or at least criteria for judgment and appraisal, define what we mean by performance,” he wrote in a 1976 essay. “They largely dictate where the efforts should be spent. They determine whether policy priorities are serious or are merely administrative doubletalk. For this reason it … is not adequate, indeed it is misleading, to use measurements that focus on efficiency of operation, rather than on services the agency delivers to somebody outside.”

Some of the impetus for this orientation must come from philanthropic funders—a topic that I wrote about a few months ago. But really, it is the nonprofit itself that, in Morino’s words, “needs to drive the outcomes-assessment process and be the primary beneficiary of it.”

Needed: Commitment and Accountability

In particular, according to Morino, nonprofits must reach clarity on what change they’re trying to create, acquire specificity on how they will accomplish that change, determine what information they need to track how they’re doing, and then use this feedback to make continuous improvements. Technology can help. But more important, Morino stresses, is cultivating the right organizational culture and getting the right people in the right jobs to drive toward the right outcomes.

“The truth is that we’re not good at this type of change in our sector,” Morino writes in the kind of refreshingly tough-love passage you find throughout Leap of Reason. “We often sacrifice the quality of our programs and services in order to protect those who aren’t doing their jobs well.”

Notably, Morino is no slave to data. In fact, he cautions nonprofit executives not to “drink the metrics Kool-Aid” but rather to use their common sense in embracing outcomes thinking.

A strong undercurrent of urgency runs through the book. With “the dire fiscal reality for federal, state, and local governments,” Morino points out, nonprofits that rely on public money are in for some very lean times. Even those that don’t receive government dollars will be affected as demand for their services soars.

Morino acknowledges that he doesn’t have all the answers, though he proposes some possible ways to move beyond “the years of incremental gains” and piecemeal commitment to measuring outcomes that nonprofits have exhibited so far. Among the most intriguing: creating a service-sector analog to the International Organization for Standardization’s quality benchmarks for industry, developing models for outcomes-driven collaborations, and encouraging performance-based funding.

Mostly, he seeks to spark a sector-wide dialogue around this essential topic that, in turn, will spur action. “My fervent hope,” Morino writes, “is that ‘managing to outcomes’ could serve as the banner under which many of us with diverse skills, talents, and offerings could come together to meet Drucker’s challenge and convert a promising movement into a potent force.”

I can’t imagine a more fitting tribute to the man who invented management.

Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University.

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