The management methodologies that helped successfully develop enterprises throughout the 20th century are no longer sufficient. Driving results in a world of ever-increasing change requires a new kind of leadership.
Management is about coping with complexity. Its practices and procedures are largely responses to one of the most significant developments of the twentieth century: the emergence of large organizations.
Without good management, complex enterprises tend to become chaotic in ways that threaten their very existence. Good management brings a degree of order and consistency to key dimensions like the quality and profitability of products.
Leadership, by contrast, is about coping with change. Part of the reason it has become so important in recent years is that the business world has become more competitive and more volatile.
Faster technological change, greater international competition, the deregulation of markets, overcapacity in capital-intensive industries, an unstable oil cartel, raiders with junk bonds, and the changing demographics of the work-force are among the many factors that have contributed to this shift.
The net result is that doing what was done yesterday, or doing it 5% better, is no longer a formula for success. Major changes are more and more necessary to survive and compete effectively in this new environment. More change always demands more leadership.
What happens when organizations have different amounts of management and leadership?
When organizations have high competencies in management and leadership, they’re able to meet challenges today as well as tomorrow. However, most organizations are usually lacking one or the other. When management exists without leadership, the company is often unable to change. And when leadership exists without management, the company is only as strong as its charismatic leader. Most of the time, organizations are overstaffed with managers, but lack enough leadership to help them deal with constant change.
How do organizations change over time?
When they are formed, organizations are often long on leadership and short on management. The savviest organizations gradually add management capabilities over time while still preserving that spark of leadership that led them to rapid growth in the first place. But inevitably, over time, the most passionate leaders move on to something else, while layers of management build up in their place. Organizations gradually transition to a complacent mentality, where management reigns supreme and leadership is in short supply.