We’ve all read articles or heard speakers pontificate on the differences between leadership and management. I reject the concept. Leadership is management and management is leadership. To cast management as a second tier role downplays its importance in a successful organization.
My preference is to view leadership as both an art and a science. The science is the definable and systematic part of leadership. It is the tangible side of the equation and the foundation of operational excellence. Operational excellence demands proficiency in three disciplines, financial, production and profit.
Financial Discipline is managing the organization’s limited resources. It defines parameters and manages risk. Are we managing to value, cash flow or current income? While all three are interrelated, top performing organizations ultimately prioritize value.
Financial Discipline also defines the circumstances under which we are willing to incur debt? Debt is binding and habit-forming. Its mismanagement hinders strategy and reduces market flexibility. While I’ve occasionally met people who thought they should have borrowed more money for growth opportunities, I’ve never met anyone who, when times were tough, wished they had more debt..
Production Discipline is managing gross profit. It includes everything in the process of building our product or providing our service. There have been many modernizations here and if we aren’t proficient, we’ll find ourselves at an unnecessary disadvantage. In the end, business is competition and we’re playing to win. We cannot win if our production timing or costs are out of line.
The third discipline, Profit Discipline, would seem the easiest, but, for some reason, it’s where we make some big mistakes. It includes selling, technology and general administration. I’ve seen too many cases where great strides in financial or production discipline were wasted by over staffing, over managing, and over spending in the back room. Too much control negates progress.
The science of leadership is foundational and a minimal level of competence is required for organizational success. If it’s not our proficiency, it’s critical that we add and empower members of the leadership team for whom it is.
Classifying some roles as management separate from leadership is misguided. Top performing organizations know that leadership is a team game. Teams respect the value that each member brings to the table. They don’t harp on differences.