Management by leadership

Management has always been hard to define. Gurus and managers both differ about whether the activity is art or science or craft or discipline – or if it is inspirational or mathematical. The source of this uncertainty is the fact that management is a many-sided task which changes its spots and its pressure points in response to inner and outer stimuli but never arrives at ultimate truths.

But of course, this doesn’t stop people from attempting the impossible. A current example is the widespread enthusiasm for leadership. But how do you define leadership? And how can you be sure whose is better or best?

The same questions apply equally to ‘management’. Getting the answers has been tried time and again.

The great Peter Drucker's definition is the most reliable I know of, because it deals with processes, not platitudes. The expert manager, he wrote, knows what to do, knows how to do it, and – most important of all – does it. That last task is where the difficulty mostly arises.

To suppose that superior financial performance equates with better management and/or leadership is weak. However, if the financials aren't included in your weightings, what other objective measures are there?

Writing an article on ‘The Four Principles of Enduring Success’ for the Harvard Business Review, Innsbruck academic Christian Stadler worked on the basis that comparing the great companies with the second-best tells you more about corporate goodness than comparison with poor performers. Once again, financials are relied upon to define success. From 1953 to 2006, the Nine Greats gave much better returns to shareholders than nine runners-up: $4,077 on a single 1953 dollar versus $713. After careful analysis, Stadler arrived at his four principles:

• Exploit prior to exploring. Then more money will be made from existing businesses than from all-new ventures.

• Diversify your business portfolio, and diversify wisely – and keep your suppliers and customers broadly based.

• Remember your errors. Constantly review past failures to ensure they are not repeated.

• Be conservative about change. Great companies very rarely make radical changes. Also take great care in their planning and implementation.

The notable aspect of this list is that it differs so much from the programme that today’s true leaders are encouraged to follow.

My own advice would be to exploit the old as the basis for breaking completely new ground; not just for diversification, but to build in concentric circles round the core business; to analyse your success as thoroughly as your failures; and to throw conservatism to the wind, changing as much and as often as opportunities and circumstances require.

For more on management and leadership, see http://www.thinkingmanagers.com/business-management/leadership.php

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