When we take people merely as they are, we make them worse; when we treat them as if they were what they should be, we improve them as far as they can be improved.
 
[Wenn wir die Menschen nur nehmen, wie sie sind, so machen wir sie schlechter; wenn wir sie behandeln, als wären sie, was sie sein sollten, so bringen wir sie dahin, wohin sie zu bringen sind.]

Johann Wolfgang von Goethe (1749-1832) German poet, statesman, scientist

Wilhelm Meister’s Apprenticeship, Book 8, ch. 4 (1796) [tr. Carlyle (1824)]
    (Source)

Theresa, quoting Wilhelm in a letter to him.

(Source (German)). Alternate translation:

If all we do is take people as they are, we shall make them worse; if we treat them as if they were what they ought to be, we shall lead them to that place where they are to be led.
[tr. Waidson (1972)]

The following very similar passage is often cited to Haim Ginott, Teacher and Child: A Book for Parents and Teachers (1972), but does not appear in that work:

If we treat people as they are, we make them worse. If we treat people as they ought to be, we help them become what they are capable of becoming.