Managing Things and Leading People: David T. Morgenthaler

Most people identify leadership with an individual and a strong personality, but leadership is more than that. It is a function — an activity that every group of two or more experiences — and is highly situational and often shared.

The CEO leads the organization, not every task. If there is no effective method of delegation, an organization will choke on its growth. Equally, if lower levels of management make major commitments or decisions without appropriate review, chaos will ensue.

Any appraisal of leadership should therefore start with the organization and the situation, not the individual. What needs to get done? What are the problems and opportunities? What are the resources? The CEO's job is to ensure that the organization has the leadership it needs for every situation — not to supply all of it personally.

As a venture capitalist, I have seen thousands of business plans and been directly or indirectly involved with hundreds of management teams. In my experience, company success depends on two key leadership functions: managing things and leading people.

Managing Things

The first facet involves “things”: What the organization intends to do, how it needs to get it done, and what resources are needed. You could also label this “managership.” The activities involved are fairly straightforward.

1. Find and adopt a vision. It doesn't have to originate with the CEO, but he or she has to buy into it.
2. Spell out a mission with a clear set of objectives.
3. Prepare a strategic plan to attain the objectives, and prepare tactical plans where necessary.
4. Plan for the required organization and the needed resources.
5. Measure performance against plan.
6. Assess and replan.

Often, many of these activities can be carried out by competent staff. However, the leader must see that these things happen and must ensure quality. Most of all, he or she must wholeheartedly approve of the decisions made at each step. If a leader views the final plan as something separate from him or herself, disaster is likely to follow.

Leading People

The second function of leadership deals with who is going to execute the plans and how they will be led. Here I use the label of “leadership” or “people on people.” The leader must:

1. Have a clear vision and mission. If you cannot answer clearly what you are trying to do and what ought to work, you are not ready to start.
2. See that the right people are selected, and ensure they buy into the vision, mission and plan.
3. Stimulate extraordinary effort and results out of ordinary people. Involve everyone. A leader is most effective by setting a clear personal example.
4. Obtain the necessary resources. In newer companies, this is often a major personal task for the CEO.
5. Appraise performance accurately, and give people what they need on a timely basis — whether they need guidance, encouragement, or a strong kick in the rear. Replace those who cannot or will not perform to standards. Be fair but firm.
6. Communicate with your people. Do not let dissatisfaction and misunderstandings build up.
7. Reward fairly and keep all promises. Remember once mentioned is half promised.

Putting It All Together

You can arrange these two leadership functions — managing things and leading people — on a matrix (see illustration).

Strong Manager, Weak Leader. This person prepares excellent plans, but nothing gets done. At one company, managers wrote business plan after business plan and made projection after projection. When the company missed a plan, the CEO just developed another one. Nothing was implemented on time or to budget. People felt no responsibility and little got accomplished.

Weak Manager, Strong Leader. This leader is likely to take his organization right over a cliff as he runs out of resources, breaks laws, or attempts the clearly impossible. One of the strongest leaders I ever knew was good on everything except sticking to the law. Unfortunately, people would follow him blindly. The company was performing very well, but had set targets too high. The leader gave people the sense that he didn't care how they met the targets. They bent the accounting rules, and he ignored that. Eventually, the management team was censured and fired, and the company lost major market value.

Weak Manager, Weak Leader. This is the ineffective CEO who neither plans well nor accomplishes important goals. He does not usually last long, or the company will stagnate or fail.

Strong Manager, Strong Leader. This is the CEO who does most things right. She sees that the necessary things are scheduled and happen on time, on budget, and to acceptable quality standards. She sees that the right people are in place, are stimulated to exceptional performance, and are handled promptly as needed if they underperform.

Good leadership cannot do everything. Some technologies will not work. Some medicines will not heal. Markets change or dry up in wholly unexpected ways. But when we as venture capitalists analyze our disappointing investments and failures, more than half the time the technology, markets, or competitors are not to blame. The fault lies in planning or execution — managing things — or in the lack of inspiration or guidance — leading people. And that's a failure of leadership.