Have you heard the word "leadership" lately—say, in the last 10 minutes? How about "management"? Remember that word? Let me suggest that you should, because what we've been calling a financial crisis is actually one of management. Corporate America has had too much of fancy leadership disconnected from plain old management.
How did this happen? It became fashionable some years ago to separate "leaders" from "managers"—you know, distinguishing those who "do the right things" from those who "do things right." It sounds good. But think about how this separation works in practice. U.S. businesses now have too many leaders who are detached from the messy process of managing. So they don't know what's going on.
We're overled and undermanaged. As someone who teaches, writes, and advises about management, I hear stories about this every day: about CEOs who don't manage so much as deem—pronouncing performance targets, for instance, that are supposed to be met by whoever is doing the real managing. ABOVE THE FRAYIf you want to appreciate the effect of this, put yourself in the shoes of one of those real managers—someone, say, in a blue-chip financial institution that has since gained notoriety in Washington. You're told you'd better meet the targets, or out you go. Then along come those subprime mortgage securities. What to do? "If the leader can't be bothered managing, why should I care?" you figure. "The pundits and the press, not to mention the board and the bonuses it bestows, have made it abundantly clear that the CEO is the company. I don't count. Besides, with so many of my colleagues gone in downsizings, I have less and less time to think. So buy these debt securities I shall. That will at least look good on the next quarterly report."
Or another scenario: You're a manager with serious, informed doubts about a strategy, but the leadership is too removed from the fray to hear you.
The truth is, many of the most successful strategies are not conceived in isolation at the "top." They grow throughout the organization via a kind of distributed leadership. Moreover, studies show that vital information is typically transmitted to a CEO informally—orally, often, rather than in formal reports. Leaders removed from managing aren't going to get these messages.
Unfortunately, detached leaders tend to be more concerned with impressing outsiders than managing within. A case in point: downsizing—decreeing the firing of thousands while ignoring the effect on morale. A robust company is not a collection of leftover "human resources." It's a community of engaged human beings.
Until this past year, when things collapsed, most downsizing took place at profitable companies that didn't happen to meet Wall Street's expectations. How could legions of employees suddenly be "redundant," as if they weren't needed in the first place? Where is the judgment—the wisdom to balance the financial community's demands with the company's long-term needs? And what was left after such leaders departed with their bonuses? All too often, out the door with fired employees went the heart and soul of a business.
American enterprise, so admired around the globe, was not built by currently fashionable "heroic" leadership but with leaders tangibly engaged in managing—and without today's bonuses, I might add. In fact, the most striking example of engaged leadership now comes from the political realm. Most impressive about President Barack Obama's energetically led campaign was how capably he managed it. (Remember all those photos of Obama on his BlackBerry? (RIMM))
America has much rebuilding to do, beyond bailing out its largest, sickest companies. Many businesses will have to be restored as communities, which to my mind means from the middle out, not the top down. Being an engaged leader means you must be reflective while staying in the fray—the hectic, fragmented, never-ending world of managing. The reward: access to the ideas flowing around you. As Stanford University emeritus professor James G. March put it: "Leadership involves plumbing as well as poetry." Instead of distinguishing leaders from managers, we should encourage all managers to be leaders. And we should define "leadership" as management practiced well.
Jack and Suzy Welch are off this week.