Posted on : 2023-03-31 06:28:41
Article : Good evening, Friday management TASK 235- Peter Drucker was the first to understand that the basis of success in any business rested on only two basic functions. It does mean that any business or organisation regardless of products or service.
Recently I caught up little time to refresh recalling my PG Business program study times, leafing through favourite all-time great management gurus’ management thoughts and articles. In particular with the great interest in Peter Drucker’s marketing management theories, I have secured one useful article which I wish to share in this TASK and SOLUTION article. It would be more interesting and get connected if you read it as business article imagining it as a task to understand and find a solution.
Peter Drucker was the first to understand that the basis of success in any business rested on only two basic functions. It does mean that any business or organisation regardless of products or service. Every business or human endeavour has a purpose. Unfortunately, individuals engaged in the business or who are responsible for its operation frequently misidentify this purpose. Drucker used the example of a for-profit business. Executives may think that its purpose is to create a profit which is inadequate. Profit was only a means to an end. Drucker reasoned that the ultimate purpose of any business was to create a customer.
Many focus on profit as the business’s ultimate objective because it is an easy measurement. However, this focus can actually impede success. This is why even in a recession some businesses increase their quality, level of service or advanced products and stand head and shoulders above their competitors who try to cut corners in order to stay profitable. Customers look around with certainty at a correctly focused business and know that such a business is not only going to survive and continue to be profitable, it’s going to emerge from the recession in a highly successful fashion. The future of other businesses which have cut services, quality or development in order to "stay profitable" is much less certain.
Drucker recognized that profit was needed for business survival and growth. In fact, he speculated about replacing the word "profit" with the word "responsibility." He agreed that profit was not the whole responsibility of a business, but it was the first. This was true because it was needed to cover the cost of capital, innovation, and future risks. But he also concluded that the business’s ultimate purpose was not profit. Rather its purpose was to create a highly satisfied consumer or user of whatever the product or service. Drucker saw that those businesses prospering maintain this focus on purpose and had the advantage.
The word "business" is actually one synonym for a "responsibility," which is probably why Drucker contemplated using this word. "Profit" also means "return." In other words, you invest money in something and you get a return on that investment. If you are in HR, money has been invested in your responsibility for which you expect to receive a return or profit. How is that profit measured? Rarely by money. Rather it is measured by the effectiveness or efficiency of your output. Let’s say you are responsible for recruiting. Your recruitment of qualified engineers, salesmen, or whatever specialty is needed for the appropriate department is the resulting return on investment. This return is actually evaluated by your "customer" which internally is the department you service by your recruitment.
Success means satisfied users of what you supply, and that is the ultimate purpose of your "business." This is true of any internal business or responsibility from sales to production. Identifying and focusing on the real purpose of your business is necessary for success because: (1) Regardless of the area of the company in which you work, you are involved in "a business. (2)Your output must result in a profit, or return on the investment made. (3) This profit is evaluated by your customer, the organization which your organization supports.
This implies that both correct purpose and "profit" is needed at many levels within an organization and for many different departments in order to create satisfied users of the "product" of that department. Having briefly discussed on business and its aspects in SOLUTION part we will discuss on those TWO essential functions in our Good morning Monday 3rd April 2023.
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