Administration and Entrepreneurship: Balancing Present and Future

Definition

Every manager has a dual responsibility: administration (managing and improving what already exists) and entrepreneurship (creating and building what does not yet exist). Administration asks, "How do we optimize the yield from our current resources?" Entrepreneurship asks, "How do we make tomorrow's business?" Success requires doing both simultaneously, for ignoring either—pursuing today's profits at the cost of tomorrow's viability, or investing in tomorrow while current operations collapse—destroys capital and the organization itself.

In the Book

Drucker establishes the tension: "The manager always has to administer. He has to manage and improve what already exists and is already known. But he also has to be an entrepreneur. He has to redirect resources from areas of low or diminishing results to areas of high or increasing results. He has to slough off yesterday and to render obsolete what already exists and is already known. He has to create tomorrow."

On administration, the task is not mere efficiency but effectiveness: "Even the healthiest business, the business with the greatest effectiveness, can well die of poor efficiency. But even the most efficient business cannot survive, let alone succeed, if it is doing the wrong things, that is, if it lacks effectiveness."

On entrepreneurship: "Making the business of tomorrow starts out with the conviction that the business of tomorrow will be and must be different. But it also starts out of necessity—with the business of today. Making the business of tomorrow cannot be a flash of genius. It requires systematic analysis and hard, rigorous work today—and that means by people in today's business and operating within it."

The danger is that success in administration breeds blindness to need for change. "Success cannot, one might say, be continued forever...the perpetuation of a business is a central entrepreneurial task—and ability to do so may well be the most trenchant and definitive test of a management." A manager who produces "startling economic results" while leaving "nothing but a sinking hulk" behind has failed because immediate profits were achieved "by paying out capital."

Drucker also introduces the time dimension: "Management always has to consider both the present and the future; both the short run and the long run. A management problem is not solved if immediate profits are purchased by endangering the long-range health, perhaps even the survival, of the company." This is especially difficult because the payoff periods for different investments vary dramatically. A new plant may take 10-12 years to pay for itself; a management group even longer to build and pay for itself.

Why It Matters

This framework explains a common failure pattern: a manager or company succeeds brilliantly at current business, then declines suddenly when the market shifts. The success in administration—getting better at what exists—creates pressure and confidence that crowds out entrepreneurial work. Resources that should fund R&D get consumed by optimizing operations. Talented people get locked into running existing businesses rather than creating new ones. The concept applies to any institution with long time horizons: universities that become excellent at teaching current curricula but stop innovating; nonprofits that perfect their current model but cannot adapt to changing needs; governments that optimize current services without investing in future capacity. The dual requirement is not balanced—entrepreneurship is harder, riskier, and shows results slower—so it requires intentional structure, separate funding, and protection from short-term performance pressure.