Posted: Mon 15th Jul 2013
Should theÂ managing director of a growing business be a 'manager' or a 'leader'?Â asks Bob (left).Â The answer to this question is far from straightforward. Many would argue that managing directors should strive to be both but this is often not the reality, as business owners get dragged down by the pressures of the day-to-day running of the business. Consequently, they end up doing too much management and too little leadership.
There are substantial differences between leaders and managers: Leaders
Ask strategic questions
Generate answers to those questions (involve others / make choices)
Initiate organisational changes to realise the strategy
Work through relationships and inspiring others
Solve operational problems
Generate detailed plans to achieve operational stability (staffing / budgeting)
Maintain systems and control mechanisms
Work through hierarchies and formal authority
The differences between leaders and managers are fundamental: managers make sure that everything is controlled properly; leaders create the vision, the enthusiasm and the passion. The best leaders are those who inspire and create followers.
One of the biggest challenges facing growth businesses is how to mature from a small owner-managed business, where the owner is at the hub of everything, into a medium-sized business run by a board and a team led by a leader rather than managed by a manager. The very characteristics that allow a start-up business to thrive can be detrimental when the business starts to achieve scale. Â An entrepreneur starting a business is usually a very driven and determined individual. You need drive to get a business off the ground and you need to be incredibly focused. Many entrepreneurs ignore rational, risk-based arguments as they pursue something they believe in, which means that ultimately the business thrives because of that sheer drive. Business owners therefore tend not to be easily swayed, and as the people funding the business they are often very tight with financial control - which is fine when the business is small. However as a business grows, at some stage the business leader must begin to delegate, even some financial matters.
Likewise, small businesses leaders usually make all the decisions. But as a business grows to be 20-100 people strong, depending upon the type of business it is, then this responsibility must also be shared to create space for the leader to 'lead' rather than 'do'. And as the business grows it is important that the leader's vision does not get drowned by their desire to control all aspects of the business. One fundamental area that is key to business success is communication. For small businesses, communication is not a problem - the boss just says what they want done!Â In a larger business it can't work like that.Â The leader can't communicate directly with everyone individually; there must be communication processes in place. So at some stage internal newsletters, management meetings, department meeting and workshops become necessary, often to the great frustration of the entrepreneurial business owner who just wants to get on with doing 'real work', not realising that for a medium-sized business and larger, the real work for the leader is largely communication! Entrepreneurs that started a business and grew it through its early stages themselves often see such management meetings and internal communication processes as unnecessary overheads - everyone should just know what they need to do.Â And the lack of such co-ordinating activity is what causes many businesses to plateau and stay small.Â By contrast, the leader that successfully grows a business of scale understands that management processes, communication and leadership are critical to successful growth. Every small business of course has big dreams but business leaders with a desire to grow must ensure that as they grow, they adapt their style of leadership to suits the stage of growth. Bob Bradley is executive chairman of MD2MD, which provides leadership development peer groups for managing directors of small and medium-sized businesses and other business leaders across the country.
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