Personal bonds in business

In the second of our series on management and leadership, Larry Reynolds argues it’s all about people and relationships

The success of your organisation depends on the quality of leadership – at all levels. Good leadership is critical to the success of any enterprise. Leadership really matters. Leadership is exciting. Leadership is cool.

Management, on the other hand, is not so relevant in a fast changing world. Maybe you need a bit of it in the mix, but overall it’s far less important than leadership. Or so we’ve been told.

Unfortunately for all those of you busy designing leadership development programmes for middle and first line managers, it’s not true. Both leadership and management are important – but for most people in most organisations most of the time, management matters more. Or so I hope to convince you in this short article.

First though, what’s the difference between management and leadership? It’s common to make three key distinctions.

Leaders focus on the long-term. They are thinking about where the business will be in three, five or even ten years’ time. Leaders have a vision – a vivid picture of where the business will be at some time in the future. Managers, by contrast, focus on the short-term. What results must I deliver this quarter, this week, today?

Leaders challenge the status quo. They want to scrap existing methods and processes because they are no longer relevant. Managers, on the other hand, spend much of their time following processes and getting others to do the same. Peter Drucker captured this distinction in his famous phrase: “Management is doing things right, leadership is doing the right things”.

Leaders win hearts and minds. They engage, motivate and inspire. Managers, it is said, gain compliance by virtue of their formal authority. I follow a leader because I want to; I follow a manager because she’s my boss and I’ll get into trouble if I don’t.

Let’s examine these three distinctions in turn, through the lens of what matters most, for most people, in most organisations, most of the time.

Short-term or long-term? If I’m a customer of your organisation, I want short-term results. I don’t care if your long-term vision is to be the best hospital in the world, or the world’s favourite train company: I just wanted to get the right treatment today and to get a reasonably priced seat on a punctual train. This means that the front line staff in your organisation need to focus on meeting the very short-term goal of keeping customers like me happy. Managers exist to help their staff to do this.

Managers who spend most of their time meeting other managers to talk about strategy and all that long-term stuff tend not to be very effective. Managers who rely on an annual performance appraisal meeting to get the best from their staff tend not to be very effective. The best managers tend to focus on some very short-term management tasks. Who do I need to give feedback to today? Who do I need to talk to about a task that needs completing this week? How do I motivate my team to do the dull stuff that customers really value? How can I balance hitting today’s targets while developing the skills and confidence of my staff? These crucial management tasks are short-term, not long-term challenges.

Of course you can’t afford to ignore the long-term perspective altogether. Everyone in the organisation needs their short-term actions to be informed by a longer term goal and you do need a few people in your organisation to be thinking a lot about the long-term; it’s just that for most people, most of the time, it’s more important to be able to focus on and deliver short-term results.

But what about vision? Don’t leaders need a vision to be successful? In 1994, Jerry Porras and Jim Collins wrote an enormously influential book called Built to Last. It was subtitled Successful Habits of Visionary Companies. Its central thesis was that companies with a vision – a ‘big hairy audacious goal’ – tended to be more successful than those that just muddled along. The evidence for this claim was a detailed analysis of visionary companies and how enduringly successful they were in comparison to non-visionary companies.

It all seemed pretty convincing back in 1994. Indeed, some of you reading this may even have facilitated vision workshops for teams, departments and companies. Sadly though, this vision stuff doesn’t work. The visionary companies cited in Built to Last included Ford, Hewlett-Packard, IBM, Motorola and Nordstrom. They are all now facing considerable challenges if not actually struggling to survive. Some of the world’s most successful companies today – Apple, Amazon, Google, Netflix – don’t have a vision in the ‘built to last’ sense of a big hairy audacious goal. They’re just good at giving customers what they want and being opportunistic.

What about challenging the status quo? Is it more important to follow existing methods and processes or to challenge them? Think for a moment about the methods and processes in your organisation. What’s the biggest source of customer dissatisfaction – people failing to follow processes or people following them too closely? Unless your organisation is very unusual, most customer problems are caused by people failing to follow processes, not by following them too rigidly.

This isn’t to say that all your processes are perfect. There should be a few people in your organisation who are able to overhaul those processes that are no longer fit for purpose and everyone in your organisation needs to know that it’s occasionally OK to ignore a process for a good reason. But most of the time, your customers would get a better deal if your people followed processes properly and it’s the manager’s job to make sure that they do.

Of course there’s more to challenging the status quo than challenging methods and processes. Challenging assumptions about what customers want through innovation is an extremely powerful route to business success. [pullqoute]Apple, Amazon, Google and Netflix aren’t just good at customer fulfilment, they all have a business model built on genuine innovation – challenging the status quo in other words[/pullquote]. But only a handful of people at these companies are genuine innovators because only a handful needs to be. I’m not saying that the leadership skill of challenging the status quo is irrelevant, I’m saying that it’s relevant to only a small number of people who have jobs where that matters. For most people in management roles, it’s not such a big deal. And even if it was, the nature of organisational hierarchies means that they wouldn’t be able to do anything about this even if they wanted to.

It’s quite fashionable to criticise formal hierarchies in business and elsewhere. Historically, hierarchies have been used to perpetrate some very nasty deeds indeed. But [pullquote]hierarchies themselves are not inherently good or evil – they are just one of many structures for getting things done[/pullquote]. A few organisations have tried different approaches. W L Gore seems to do quite well without a formal organisational structure and the phenomenally successful Zappos (an online shoe retailer, now part of Amazon) has just began an interesting experiment with holocracy – a way of organising a company around autonomous units dependent on larger units. Think of a human cell’s relationship to the whole body. But until these rare experiments have been shown to work, most workplaces will be organised as conventional hierarchies because that’s what seems to produce the best results.

The third distinction I made between leadership and management was concerned with how to influence people to do things. It’s often said that leaders win hearts and minds while managers demand compliance by virtue of their formal authority. Anyone can be a leader but you can only be a manager if you have the formal authority that goes with the job title.

Of course it’s better to win hearts and minds – to influence and persuade people rather than have to throw your weight around. It’s better because commitment tends to be stronger and longer lasting if they’ve chosen to do something, rather than been told to do it by some authority figure. It’s also more effective in the 21st century when people’s respect for authority is generally quite low.

It may appear that in this case, I’m arguing in favour of leadership not management. If leaders really did influence and persuade and managers really did rely solely on their formal authority, this would be true. But it isn’t. In reality, in most organisations, it’s the managers who are doing the influencing and engaging, and the leaders who have to rely on their formal authority. This is because you can only really engage, influence and inspire people if they trust you. And you can only really build trust if you have that day-to-day, face-to-face contact with the people you are managing. The conventional distinction between managers and leaders is the wrong way round. In practice it’s the managers who engage and influence and the leaders – generally the people at the top of the hierarchy – who have to use their formal authority to get things done.

Which is more common in your organisation – people who say that they quite like and trust their immediate manager but they don’t really trust the CEO, or people who don’t trust their immediate manager but find the CEO highly trustworthy and inspirational? In my experience, an overwhelming majority of people prefer their immediate manager to their CEO.

It’s sometimes said that a leader should do more than engage and influence – a leader should also inspire. Would your organisation do better with a more inspirational, more charismatic leader?

This was the question addressed by Henry Tosi and his colleagues at Florida University. Their study compared the perceived charisma of Fortune 500 CEOs with their company’s performance over a 10-year period. Did a more charismatic CEO lead to better performance as measured by share price? The answer was no. The charisma of the CEO had no measurable influence on company performance. Companies with uncharismatic CEOs were just as likely to do well as those with charismatic CEOs. Interestingly though, Tosi did find a strong correlation between perceived charisma and the size of the CEOs pay packet, so maybe it’s a good idea to be charismatic after all.

One of the CEOs in Tosi’s study was called Ken Lay and he scored particularly highly on the charisma scale.

I have in front of me a book called The Future of Leadership, edited by respected leadership expert Warren Bennis. Ken Lay’s company is described as: “One of the fastest growing, most entrepreneurial corporations in the world… Management transformed the company by consciously creating the opportunities for many leaders at all levels of the organisation to take risks, create new businesses and share in the fruits of success.”

The name of this company? Enron. Just a few months after The Future of Leadership was published, Enron went bust. If ever there was a case study in how too much leadership and too little management can wreck a company,
it is Enron.

There is broader lesson to learn from Enron and similar corporate failures since then. So much of what we do in business is based on fashion,
not evidence.

When Jack Welch was at the helm of US based multinational GE, he instituted a system of performance appraisal that went something like this. Managers rank their staff in order from best to worst. The top 20 per cent get a big salary increase, the middle 70 per cent get paid a bit extra and the bottom 10 per cent get fired (at least in theory – thankfully employment legislation in many of the countries in which GE operates prevents this from always happening in practice). Many large corporates who admired Jack Welch introduced similar systems and some endure to this day. What’s the evidence that this approach to performance management leads to superior performance? None – and quite a few studies have been made. The bosses of the big corporates introduced this crazy system because they wanted to be like Welch.

And that’s why many in the L&D world continue to value leadership above management, because it’s fashionable to do. We want leaders who are more like Steve Jobs, Jeff Bezos, Nelson Mandela, Margaret Thatcher or whoever the latest leadership role model happens to be. I think it’s time to stop doing this and instead to focus on what really makes a difference.

Organisations are complex and unpredictable, but for a lot of organisations, the key to success is keeping customers happy. And the key to that is having good systems which people follow consistently, day in day out. And people want to do that not because they are inspired by some charismatic boss on the conference podium or the live video link but because they like and trust their immediate boss and want to do a good job for her.

The success of your organisation doesn’t depend on leadership, it depends on good people and good relationships. And that’s exactly what good management provides.


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