June Visionary Ventures: Leadership— More than Managing
Many entrepreneurs in our valley, and in general, are new to starting and running a business.
Typically, first-time entrepreneurs come up with what they believe is a great idea. If they are smart, organized and lucky, their idea may morph from concept into reality. Et voila, a new venture is born, and with it, a founder or founders who must run the business.
This applies to potential growth businesses that can scale beyond the Tetons region as well as small local businesses dependent on people spending their money here.
As their business grows, so typically does the eventual need for employees. What might have started out as a venture run by a solo entrepreneur often grows into one that turns to outside contractors and vendors and part-time staff. If all goes well and growth continues, in all likelihood the founder will end up with full-time employees, part-time employees and outside vendors for specific aspects of the venture, such as marketing or manufacturing.
Throughout this process two distinct facets of running an organization become more critical as the venture grows: management and leadership.
Yes. Though often conflated together, leadership and management are two distinctly different concepts requiring completely different skill sets. For the entrepreneur, understanding the difference between the two can be the determining factor in the ultimate success or failure of their venture.
Peter Drucker is revered by many as the father of modern management. He defined management as “the art of getting things done through and with people in formally organized groups.” More than just “art,” management involves process. Specifically, utilizing processes through planning, organizing, decision-making, implementing and accountability to achieve organizational goals efficiently and effectively (yeah, sounds pretty wonky). Effective management of staff and outside vendors is critical to the success of any business or organization.
Inspiring and motivating
However, managing is not the same as leading. Leadership entails, well, leading others. This entails defining a mission and vision and inspiring and motivating others to fully believe in and work toward a common purpose. Leadership means not just convincing people to hop onboard the boat for the ride, but inspiring everyone to actively pull their oars in the same direction to make sure the boat arrives where it was meant to go, perhaps even faster and earlier than originally planned.
In many organizations, leadership is highly undervalued and misunderstood. Most businesses tend to lean on quantitative metrics (sales growth, profitability and gross margin, among others) to measure success. These metrics are easy to measure and, yes, important to understand. Yet it is the qualitative aspects of a business — common culture, motivation, maximizing efforts for a common purpose — that often determine the ultimate success or failure of a venture.
Clear guidance
As organizations grow, so do the views and opinions of staff. Good leaders recognize that it is highly unlikely that everyone in their organization will agree with any given leadership decision. That’s why it is essential that true leaders set clear roles, goals, responsibilities and expectations, delineate processes and clearly guide their teams on how decisions are to be made.
Leaders must meaningfully engage with all parties in a process, and then clearly communicate not only the final decision but also the reasons behind the final decision to all participating and affected parties. And, yes, leaders must make tough decisions.
Entrepreneurs and business owners can delegate management (i.e., operations, sales marketing, finance, accounting and other business processes) to others within the organization. The same is most certainly not true of leadership.
Perhaps a real-life story will help underline the difference between management and leadership. Several years ago, a co-founder and I were running an internet firm here in the valley. We had started from scratch, and the business had grown rapidly through acquisitions to where it had nearly 100 employees. The company competed in a rapidly evolving industry that required constant infusions of capital to keep up with technological change and consumer demand.
Tough decisions
Over time, it became clear that our organization did not have the resources to continue to compete against bigger and better-capitalized competitors. While we had a management structure that allowed the company to operate as efficiently as possible, it became clear to me and my partner that no change in process or increase in efficiency would stem the bleeding of our customers to larger companies offering state-of-the-art services.
We knew that we were facing a founder’s worst nightmares: the possibility of laying off staff. It was time for leadership to kick into a higher gear. We gathered everyone together and explained the situation, ran through market and industry conditions and where the company stood from a competitive perspective. We solicited alternative ideas and worked our way through them.
Only after considering all alternatives did we actually arrive at the final decision, albeit a gut wrenching one: Layoffs were required.
Understanding the reasons
To this day, it is still one of the hardest business decisions I ever made. However, not long after we explained our decision to our team, one of our managers approached me unsolicited in the hall outside his office.
“Gary, I know how hard this must have been,” he said. “But think of it this way: Your decision actually saved all of the jobs for those of us still here.
“And I understand why you needed to do what you did. For that I’m truly appreciative.”
For success, management matters. But, leadership is essential.