By choosing a direction to realize the vision of a company, the leader passes the baton to the manager who implements the direction identified by the leader
“You feel the absolute need to move. And above all to move in a specific direction. A double need: to move and to know in what direction.”
D. H. Lawrence
“Unfortunately, it is difficult to move in the right direction when you have burned the bridge you have to cross…”
In this article we illustrate the distinction between leadership and strategic management, which are often assimilated with each other, generating confusion within the decision-making process of the firm. The leader chooses a vision and the direction that is necessary to achieve that vision. The strategic manager implements the direction identified by the leader, by choosing objectives, evaluating the required resources, and preparing a plan. The point of contact between the two disciplines is, therefore, the direction. A leadership is effective when the chosen vision and direction are implementable and when the strategic manager implements that direction in accord with the vision.
In some well-established business practices, the concept of leadership tends to be assimilated with the concept of strategic management to the point of creating confusion between these two disciplines. Leadership and strategic management perform two fundamentally different functions. It is therefore useful to clarify these, also through some examples.
- Leadership is both a research area and a pragmatic skill that implies the ability of an individual to lead or guide other individuals, teams or entire organization. Based on a vision, the leader chooses a direction for his company to pursue and, if effective, involves a team or the entire organization to pursue the direction he chooses in a cohesive fashion;
- strategic management consists of planning and implementing the direction identified by the leader. To this purpose, the manager identifies objectives, considers and evaluates the resources of the organization (both, internal and external), and develops policies as well as appropriate planning to achieve the identified objectives and efficiently and effectively allocate the available resources.
The two definitions trace a clear difference between the two disciplines and a clear boundary in the lines of thought and action adopted by leaders and managers. However, confusion between these figures and their respective roles are not rare. It often happens that companies looking for a leader hire a strategic manager or vice versa, with potentially disastrous consequences for the company.
Let’s try to shed light on the distinction between leadership and strategic managers. Let’s try, in other words, to draw a line between the two disciplines and between the two roles to illustrate how the two should come together without any risk of confusion.
The leader, as said, plays a guiding role. In order to make this possible, the leader must choose a direction to pursue, which the strategic manager must follow. In order to identify a direction, in turn, the leader must have developed a vision that inspires, motivates and makes sense for the chosen direction. Once the leader chose to pursue a direction, the manager is supposed to bring together the vision, the sense and the motivation of the leader in order to implement the chosen direction in an effective way. To this purpose, the manager will identify the objectives of the organization based on the resources available or acquirable and will develop a plan to achieve the identified objectives.
The organization that draws a clear distinction between the two disciplines must ensure that the leadership and strategic management functions are appropriately balanced so that there is no excess weight on either side.
Reality offers many examples in which the leadership and the strategic management functions are unbalanced, sometimes because the differences between the two are not appropriately taken into consideration, sometimes because the priority assigned to one of the two confines the other discipline to an ancillary role.
Let’s consider an example: suppose a company has high debt exposure that induces its management to deploy strategies to reduce the amount of debt. If the debt reduction goal were to become an absolute priority, the company might lose sight of the vision promoted by the leader and make the company short-sighted: the objective of reducing costs would be achieved, the capital structure would be rebalanced but the side effect would be to fail to follow the direction identified by the leader, betrayed the vision initially identified, and compromise the company’s ability to thrive in the long term. Similarly, it is possible that the leadership function becomes a priority to the point of neglecting the implementation of the vision and of the direction. In this case too, the lack of an adequate balance between the two functions undermines the effectiveness of corporate choices.
I want to share with you an anecdote which a friend of mine who in the 80s was a top executive of an industrial group of global relevance shared with me. At that time, the company’s leadership was supposed to assess whether to broaden its investment portfolios to include China. To this purpose, the strategic manager of the company had carried out in-depth analyzes aimed at assessing the attractiveness of the Chinese market, its prospects for expansion, and the growth expectations of the Chinese economy. The presentation provided compelling indications that the Chinese market would have become a key market for the growth of the group and suggested that the development of an investment plan in China could be of great interest to the company. The CEO of the company silently listened to the entire presentation and, in conclusion, congratulated the strategic manager and his team for the work done. Before leaving the boardroom, however, he raised the following question: “Do you know of a Western company, of our size, that has successfully launched an investment plan in China?” No one was able to answer. The expansion plan in China was therefore abandoned. The CEO reckoned that the uncertainty regarding its viability was too high.
In this anecdote, the leader, who had identified a new direction of potential interest for the company, drew on his strategic management skills to carry out a first high level check on the viability of the direction he had identified and concluded that, as attractive as it was, the viability of the investment plan was too high to proceed.
In conclusion, the passing of the baton from the leader, who is supposed to choose a direction, and the strategic manager, who is supposed to implement that direction, requires a multidisciplinary approach. In other words, the leader must be a “small strategic manager” and the strategic manager must be a “small leader.” A compelling vision and an interesting direction that turn out to be unviable make the leadership ineffective.