Albert Einstein wrote: “Information is not knowledge…the only source of knowledge is experience.”
I believe that Einstein’s statement bears on the distinction between a manager and a leader. Leaders are created by adding wisdom and trust to experience. More often than not, successful companies have leaders at the top of their organization.
The Risk of Failure
The risk of failure for any company with someone who lacks leadership capability at its head is extremely high.
Let’s first review the distinction between a leader and manager through their respective definitions.
Leader/Leadership: A person who guides or directs a group: An act or instance of leading; guidance; direction.
Manager/Managing: The act or manner of managing; handling, direction, or control: The person or persons controlling and directing the affairs of a business or institution.
Management is an absolute necessity to a successful business, but a manager’s toolbox consists of facts and figures that are defensible with spreadsheets, PowerPoint’s, and formulas. They do not look beyond them. A Leader utilizes these as tools among the many in his toolbox.
Leadership is an intangible intuition, based on a reciprocal earning of trust and respect between the leader and the company and its employees. A leader sets the culture, direction and philosophy of a company.
“The philosophy of the leader is the philosophy of the organization”--Ayn Rand.
Duke University, Fuqua School of Business, Professor of Leadership, E. Allan Lind; uses the following illustration to portray the difference:
Showing a picture of a horse and a train, he points to the train and says; “That’s management; you check the boxes, gauges, timetables, do the math, and push the go button”. Then he points to the horse and says: “That’s Leadership; you have to know and trust where you want to go and then by earning the horse’s trust, convince it to take you there”.
Steve Jobs is now considered a genius. But he wasn’t always. In 1985, faced with disappointing sales of the Macintosh and a reputation for being a temperamental, erratic manager, he was thrown out of his own company. Ironically, in 1996, Jobs was asked back to Apple to save it…only after he had earned the wisdom to become a leader.
Growing up in Michigan during the ‘70s & ‘80s I had a front row seat to the spectacle of the automotive industry managing itself to almost complete destruction.
Chrysler was literally saved the first time by Lee Iacocca in the early 80s. Iacocca was famous for his leadership and asked once about his success, he replied, “I hire people brighter than me and I get out of their way”. Chrysler would fall back into disarray after Iacocca left in ’92, subsequently filing for bankruptcy a second time in 2009, only to be rescued by the leadership of Sergio Marchionne.
I would suggest Ford’s demise started ironically, when Henry Ford II fired Lee Iacocca in 1978. It was reignited when William Clay Ford Jr. was named CEO in 2001. In 2006, Ford was wise enough to realize he needed help and named Alan Mulally as President and CEO. Mulally took the groundwork Ford had established and ran with it. Ford is noted for saying: "Alan was the right choice [to be CEO], and it gets more right every day". It must have been extremely gratifying for Ford, Mulally and the entire Ford team to be validated by famously telling Congress in 2009; thanks, but we really don’t need your money.
Once considered one of the largest, most successful & admired companies in the world, General Motors heroically managed its way into bankruptcy in 2009…only to be rescued by the leadership of Edward Whitacre, Jr.
Leadership and Investors
Leaders are critical for investors and executives of growth companies to keep in mind. Leaders are people who trust who they are and what they want—and earn the trust and respect of others to gain their cooperation and support. To be sure, managers are also important: good decisions require collecting and analyzing information before making a decision and acting. But successful companies need effective leaders, who both trust and respect their rank and file. Leaders are essential to propelling a company and its people forward.
Contact Dave at dale.fedewa@newportboardgroup.com
