Shifting Roles of Management in Society

Management Cutting Across Sectors

Overview

With the blurring of boundaries between organizations of different sectors, the realm of b-schools is no longer restricted to “business,” therefore, management cuts across sectors.

At the same time many private sector businesses have begun to pursue social and environmental aims, many nonprofits and governmental organizations have begun to apply business principles to achieve their missions and mandates. New forms of organizations, such as Benefit Corporations, are emerging in the seams, and new partnerships are forming across sectors. The boundaries separating public sector, civil society, and private business have begun to blur.

Important differences remain, pointing to special leadership and management challenges for organizations depending on the sector. In public and nonprofit organizations, executives might be chosen for political or other reasons as much as potential performance and rules and regulations guiding decisions might severely limit flexibility. Nonetheless, effective leadership and management is viewed as increasingly important across organizational types, suggesting that the public and third-sector organizations can learn from experience in business. In their research comparing management practices, Bloom and Van Reenen conclude that “government-owned firms are typically managed extremely badly” while multinational corporations are among the best managed.

Private sector business also can learn from other sectors. Peter Drucker was a pioneer in considering organizations and management across the business, government, and nonprofit sectors of society. He also coined the term “knowledge worker” and wrote in 1989 that “in the most crucial area—the motivation and productivity of knowledge workers—[nonprofits] are truly pioneers, working out the policies and practices that business will have to learn tomorrow”. He also foresaw the convergence of management and leadership, as he believed that with knowledge workers the task is to lead, rather than to manage, people.

Sector boundaries are also blurring when it comes to new business creation. According to Greg Dees,

    Many regular entrepreneurs improve the state of the world without ever meaning to, as a byproduct of building a successful business. But, as Mr Dees saw it, intention matters. Not all entrepreneurs are social entrepreneurs. Rather, social entrepreneurs are "one species in the genus entrepreneur." What differentiates them is their social mission. Whereas many regular entrepreneurs are motivated by the prospect of a financially lucrative exit, for social entrepreneurs the “social mission is explicit and central."

Dees argued that “the new name is important in that it implies a blurring of sector boundaries. In addition to innovative not-for-profit ventures, social entrepreneurship can include social purpose business ventures, such as for-profit community development banks, and hybrid organizations mixing not-for-profit and for-profit elements, such as homeless shelters that start businesses to train and employ their residents. The new language helps to broaden the playing field. Social entrepreneurs look for the most effective methods of serving their social missions.”

Related Resources

Lost, Dysfunctional, or Evolving? A View of Business Schools from Silicon Valley, Singh et al.
"With the increased complexity of the legal system, strains on environmental resources, expanded global ties through immigration, and increasing science and technology content of products and services, one can predict that those jobs will increase in numbers which require deep knowledge of local context."

Benefit Corp Information Center
B Lab is a nonprofit organization dedicated to using the power of business to solve social and environmental problems.

Why Do Management Practices Differ across Firms and Countries?
An article within the Journal of Economic Perspectives in which the authors present evidence on a possible explanation for persistent differences in productivity at the firm and the national level, namely, that such differences largely reflect variations in management practices.

What Business Can Learn from Nonprofits
Peter Drucker, in an 1989 issue of the Harvard Business Review, writes that the best nonprofits devote a great deal of thought to defining their organization’s mission and avoid sweeping statements full of good intentions and focus, instead, on objectives that have clear-cut implications for the work their members perform—staff and volunteers both.

Social Capitalist
This article in The Economist offers a glimpse of Gregory Dee's work with respect to social entrepreneurship.


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