School administrators can get a better idea of what their purpose is by examining, first, what schools achieve; second, how schools function; and, third, why they function. A school's production function (what it achieves) involves many specific functions, but they all are a product of the relationship between school inputs and outputs. Inputs include social and cultural background, teacher variables, and school-level influences; outputs comprise student behavior. The second issue (how schools function) requires looking at schools as social organizations, using such concepts as structural functionalism and social exchange theory. Social exchange theory, especially, is useful for input-output analysis of schools and for administrators' efforts to improve school effectiveness, since the theory stresses the types of social-contract obligations--be they implicit or explicit, collective or individual--involved in a social organization. Finally, looking at schools in an ideological or philosophical framework helps connect the first two issues and answer the question of why schools (and administrators) function. Ideological assumptions are needed to provide both the goals of educational administration and a conception of what administrators and schools "ought" to be doing regarding the social contract, freedom, order, and education for what is good. (Author/RW)