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Linnaeus University Kalmar


Reasons and effects of the tension between the society and organization


Inheritance of social responsibility in the society of organizations and its limitations

Submitted to

Dr .Joachim Timlon

Submitted By

Muhammad Tayyeb Riaz

Linnaeus School of Business & Economics

Muhammad Tayyeb Riaz | / 1

This Assignment is based on the work of Management Guru Peter F Drucker. The assignment is
about functioning society and has two parts. The first part discusses the reasons and effects of the
tension between the society and organization. The second part is about the inheritance of social
responsibility in the society of organizations and its limitations, i.e. how far outside the own
company/organization should it stretch.
Part I (Tension between society and organization ......)

Drucker thinks that it is natural for the societies to continuously pass through process of
transformation sometimes this transformation becomes very sharp like western society
rearranges itself in the matter of decades, its world view, its basic values, its social and political
structures, its arts, its key institutions is completely changed. The world which exists Fifty years
before is completely different from the world which exists now. And the people born into that
world cannot even imagine the world in which their grandparents lived and into which their own
parents were born (Drucker 1992).

Drucker rejects the idea of regional history or civilization rather he suggests that there is now
world history and world civilization and according to him this transformation began with the
emergence of first non western country Japan as a great economic power.

He further explains that in this transformed form of society knowledge is the primary resource
for individuals and for the economy overall. The traditional economist's factors of production
land, labor, and capital become secondary. They can be obtained and obtained easily, provided
there is specialized knowledge. The specialized knowledge by itself produces nothing. It can
become productive only when it is integrated into a task. And that is why the knowledge society
is also a society of organizations (Drucker 1992).

According to Drucker the basic reason of tension between organization and society is due to the
conflicting needs of both organization and society. Society, community, and family are all
conserving institutions. They try to maintain stability and to prevent, or at least to slow, change
for the Common Good (Drucker 2003).

The organization's function is to put knowledge to work -- on tools, products, and processes; on
the design of work; on knowledge itself. The purpose and function of every organization,
business and non business is the integration of specialized knowledge into a task. It is the nature

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of knowledge that it changes fast and that today's certainties always become tomorrow's

Societies need to stabilize but organization’s need to destabilize. It must be organized for
innovation and innovation, as the great Austro-American economist Joseph Schumpeter said, is
"creative destruction." (Drucker 2003).

Skills change slowly and infrequently. In the society of organizations, however, it is safe to
assume that anyone with any knowledge will have to acquire new knowledge every four or five
years or become obsolete.

The conflicting situations identified by the literature written by the Drucker are the conflict --
between the autonomy the organization needs in order to perform and the claims of the
community, between the values of the organization and those of the community, between the
decisions facing the organization and the interests of the community -- is inherent in the society
of organizations.(Drucker 1992)

The two basic reasons of tensions between organizations and societies can be identified from the
work of Drucker. These two reasons are interrelated to each other. The first reason is the purpose
for which both made for and the second is the style of working of both in order to achieve their
targets. Societies are form for the common good, welfare and the protection of the people. They
try to remain the things as they are moving so the people will remain familiar with the things and
don’t have to bear the hardships of adopting new changes. Unlike "community," "society," or
"family," organizations are purposefully designed and always specialized. Community and
society are defined by the bonds that hold their members together, whether they be language,
culture, history, or locality. An organization is defined by its task. The symphony orchestra does
not attempt to cure the sick; it plays music. The hospital takes care of the sick but does not
attempt to play Beethoven (Drucker 1992).. The organizations weather they are business or non
business are formed to turn knowledge into something workable. Knowledge is constantly
changing as new knowledge is generating with every moment of life. The organization is based
on change and the society is based on preservation so this is the basic reason of tension between

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Part II (Social responsibility; inheritance & limitations ......)

As the world is becoming more global and global with the emergence of new non western
economies the similarities between organizations are increasing day by day like to perform its
task the organization has to be organized and managed the same way as others of its type. For
example in spite of the difference between Japanese and American management style the
Japanese company functions very much like a large American company; and both function very
much like a large German or British company. Hospitals will provide same kind of services, no
matter where the hospital is located (Drucker 1992). Due to this reason the societies are turning
into more and more societies of organizations so the role of government is reducing day by day
to the role of norm setter and organizations have to do the rest. (Drucker 2005).

Drucker used the words of American economist Milton Friedman to explain the relation of
economic performance and social responsibility. It is futile to argue, that a business has only one
responsibility: economic performance. Economic performance is the first responsibility of a
business. Indeed, a business that does not show a profit at least equal to its cost of capital is
irresponsible; it wastes society's resources. Economic performance is the base without which a
business cannot discharge any other responsibilities, cannot be a good employee, a good citizen,
a good neighbor. But economic performance is not the only responsibility of a business any more
than educational performance is the only responsibility of a school or health care the only
responsibility of a hospital (Drucker 1992).

The issue of social responsibility is also gaining more importance for organizations in the society
of organizations due to the reducing role of the governments (Drucker 2005).

Organizations in its nature have conflict with the society but even then it has to survive in and
with the society (Drucker 2003). If an organization's culture and the values of its community
clash, the organization must prevail -- or else it will not make its social contribution. And it will
lose its social power. The power of the organization can be restrained by political power. It can
be made subject to due process and to review by the courts. But it must be exercised by
individual organizations rather than by political authorities. This is why post-capitalist society
talks so much about social responsibilities of the organization (Drucker 1992).
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The modern organization has and must have social power -- and a good deal of it. It needs power
to make decisions about people: whom to hire, whom to fire, whom to promote. It needs power
to establish the rules and disciplines required to produce results: for example, the assignment of
jobs and tasks and the establishment of working hours. It needs power to decide which factories
to build where and which factories to close. It needs power to set prices, and so on (Drucker

Non businesses have the greatest social power -- far more, in fact, than business enterprises.
Few organizations in history were ever granted the power the university has today. Refusing to
admit a student or to grant a student the diploma is tantamount to debarring that person from
careers and opportunities. Similarly, the power of the American hospital to deny a physician
admitting privileges is the power to exclude that physician from the practice of medicine. The
labor union's power over admission to apprenticeship or its control of access to employment in a
"closed shop," where only union members can be hired, gives the union tremendous social power
(Drucker 1992).

Unless power is balanced by responsibility, it becomes tyranny. Furthermore, without

responsibility power always degenerates into nonperformance, and organizations must perform.
So the demand for socially responsible organizations will not go away but rather widen.

Each organization has a value system that is determined by its task. In every hospital in the
world, health care is considered the ultimate good. In every school in the world, learning is
considered the ultimate good. In every business in the world, production and distribution of
goods or services is considered the ultimate good. For the organization to perform to a high
standard, its members must believe that what it is doing is, in the last analysis, the one
contribution to community and society on which all others depend (Drucker 1992). If any
organization’s culture and the values of its community clash, the organization must prevail
(Drucker 2005). But this prevarication should not be as much that it can create harm for
organization or society.

As discussed above Organizations have natural conflict for each other if organizations do not full
fill its responsibilities it may result in the increasing hatred from society towards organization. It
is the reason for which every organization must assume full responsibility for its impact on
employees, the environment, customers, and whomever and whatever it touches. This will

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become more important in future as society has started increasingly look to major organizations,
for profit and nonprofit alike, to tackle major social ills.


Class Lectures: Dr. Joachim Timlon Assistant Professor Linneaus University conducted at
Linneaus School of Business and Economics for the course of Marketing Strategies for
International Growth.

Peter F Drucker (2003) A Functioning Society Selections from Sixty-Five years of Writing
Community Society and Policy Published By : Rutgers – The state university, 35 Berrue Circle,
Piscataway, New Jersey 08854-8042.

Peter F Drucker (1992) The New Society Of Organizations


Last Interview of Management Guru Peter Drucker By Tom Ashbrook for On point at Tuesday,
August 2, 2005 at 10 :00 AM EDT) http://www.onpointradio.org/2005/08/management-guru-

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