Managing and Leading - Principles of Management

It has become fashionable to draw a sharp distinction between leaders and managers. The influential business author Warren Bennis, for example, has stated that leaders are concerned with “doing the right things,” whereas managers are concerned with “doing things right.” He sees leaders as focusing on vision, mission, and goals, whereas managers focus on efficiency and effectiveness.

He depicts managers as preservers of the status quo; leaders see themselves as promoters of change and challengers of the status quo. Bennis argues that American organizations are “overmanaged and underled.” Harvard’s John Kotter makes a similar point. Management, according to Kotter, is about coping with complexity. Leadership, by contrast, is about coping with change. In the view of Bennis and Kotter, important as they are to the efficient functioning of organizations, managers are somehow lesser mortals than leaders.

Both Bennis and Kotter are writing for effect; but their comparisons between managers and leaders are misleading. The reason is simple: All managers are also leaders they must perform the leadership function effectively to excel at the other management functions—strategizing, planning, organizing, controlling, and developing employees.

This is true not just of the CEO of a corporation but also of lower-level managers, who must lead their divisions, functions, units, and teams effectively to achieve their goals. Management and leadership are not two different tasks that require different skills; they are the same thing.

To be effective, whatever their position in the organization hierarchy, managers must lead. Where Bennis and Kotter may be right is in asserting that too many managers have not grasped the basic truth that leading is a critical component of their job.

How important is good leadership to the performance of an organization? One stream of research looks at the impact of CEO succession on firm performance and argues that if leadership is important, a change in CEOs should explain some of the subsequent variance in enterprise profitability (with good leaders boosting performance and bad leaders depressing performance).

A widely quoted classic study found that CEO succession explained about 15.2 percent of a company’s profit margin variance after one year and 31.7 percent of the variance after three years. Another more recent study suggested that on average, the impact of CEO succession explained roughly 15 percent of the subsequent variance in company performance, after controlling for general economic conditions, industry factors, and unique company attributes.

This was about the same impact on performance as the industry in which an enterprise competed. These are not trivial findings; they suggest that leadership changes at the top of an organization can have a substantial impact on the subsequent performance of an enterprise.

Moreover, numerous case studies suggest that these averaged figures disguise the significant impact that good or bad leaders can have on an organization in specific situations. There is little doubt that Gordon Bethune had a major impact on the performance of Continental Airlines. After having cycled through 10 CEOs in as many years, Continental was desperate for strong leadership.

In contrast, bad leaders have often destroyed significant economic value at the enterprises unlucky enough to have them. Al Dunlap, for example, who was known as “Chainsaw Al” for his tough approach to cost cutting, is blamed for rapidly driving small appliance maker Sunbeam into bankruptcy due to poor leadership during his two-year tenure as CEO of that company. 10 In short, leaders matter.

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