Leadership vs Management

A Business Excellence / Performance Management view

George A. Bohoris
Professor in Total Quality Management, MBA TQM Programme Director,
Department of Business Administration, Karaoli & Dimitriou 80, 185 34 Piraeus
[email protected]

Evanthia P. Vorria
Ph.D Candidate in Business Administration
Department of Business Administration, Karaoli & Dimitriou 80, 185 34 Piraeus
[email protected]

Keywords: Leadership, Business Excellence, Performance Management, Assessment Frameworks

Category: General Review

Introduction

Leadership and management are often considered practically overlapping concepts. But are they?
Is there a difference between the two concepts or leadership is a facet of management and
therefore cannot be separated? Virtually all organizations, including large corporations, academia,
leadership theorists, researchers and authors are concerned about the difference and believe it is
important.

This article aims to focus on the differences and similarities at all organization’s levels and to by
reviewing requests of the most known Business Excellence Frameworks.

Leadership versus Management

Leadership

There are many diverse definitions of leadership. Stogdill concluded that "there are almost as
many definitions of leadership as there are persons who have attempted to define the concept”.
While Peter Drucker sums up that: "The only definition of a leader is someone who has followers.
To gain followers requires influence but doesn't exclude the lack of integrity in achieving this”
(Yukl, 1989). Some theorists believe that leadership is no different from the social influence
processes occurring among all members of a group and others believe that leadership is everything
someone is doing in order to lead effective.

The classic question if leaders are made or born is still concerning many researchers. Is it a
charisma or something that can be taught? The answer to this question varies. Although it is
unexceptionable that leading isn’t easy, leaders should have some essential attributes such as
vision, integrity, trust, selflessness, commitment, creative ability, toughness, communication
ability, risk taking and visibility (Capowski, 1994).
Management

Some would define management as an art, while others would define it as a science. Whether
management is an art or a science isn't what is most important. Management is a process that is
used to accomplish organizational goals. that is, a process that is used to achieve what an
organization wants to achieve.

But do leaders and managers have the same role? Can organizations have only leaders or only
managers?

A well balanced organization should have a mix of leaders and managers to succeed, and in fact
what they really need is a few great leaders and many first-class managers (Kotterman, 2006)

Managers and Leaders: Are they different?

Managers are the people to whom this management task is assigned, and it is generally thought
that they achieve the desired goals through the key functions of planning and budgeting,
organizing and staffing, problem solving and controlling. Leaders on the other hand set a
direction, align people, motivate and inspire (Kotter, 2001).

Other researchers consider that a leader has soul, the passion and the creativity while a manager
has the mind, the rational and the persistence. A leader is flexible, innovative, inspiring,
courageous and independent and at the same time a manager is consulting, analytical, deliberate,
authoritative and stabilizing (Capowski, 1994).

The most important differences between leaders and managers concern the workplace and are
concluded in table I:

Process Management Leadership

Vision Establishment  Plans and budgets  Sets direction and develop
 Develops process steps and the vision
sets timelines  Develops strategic plans
 Displays impersonal attitude and achieve the vision
about the vision and goals  Displays very passionate
attitude about the vision
and goals
Human Development and  Organizes and staffs  Align organization
Networking  Maintains structure  Communicates the vision,
 Delegate responsibility mission and direction
 Delegates authority  Influences creation of
 Implements the vision coalitions, teams and
 Establishes policy and partnerships that
procedures to implement understand and accept the
vision vision
 Displays low emotion  Displays driven, high
 Limits employee choices emotion
 Increases choices
Vision Execution  Controls processes  Motivates and inspires
 Identifies problems  Energizes employees to
 Solves problems overcome barriers to
  Monitor results change
 Takes low risk approach to  Satisfies basic human
problem solving needs
 Takes high risk approach
to problem solving
Vision Outcome  Managers vision order and  Promotes useful and
predictability dramatic changes, such as
 Provides expected results new products or
consistently to leadership and approaches to improving
other stakeholders labor relations
Table I: Comparison of Management and Leadership Process Differences in the workplace
(Kotterman,2006).

Leadership and Management in TQM and Excellent Organizations

Total Quality Management is a philosophy based on a set of principles, as customer focus,

continuous improvement, everyone’s involvement and management by fact. TQM literature also
highlights management’s commitment and leadership as determining factor for the implementation
of this management philosophy and the basic precondition in order to succeed Business Excellence
(Gonzàlez, Guillèn, 2001).

A research project started in 1996 by Jim Collins and his research team shows that companies that
had shifted from good performance to great performance and sustained it follow a particular
module of leadership and management hierarchy, known as Level 5.

Level 5 Hierarchy means that in a organization managers and leaders exist with different forms,
roles and responsibilities: Level 1: Highly Capable Individuals - Makes productive contributions
through talent, knowledge, skills, and good work habits, Level 2: Contributing Team Member
-Contributes to the achievement of group objectives, works effectively with others in a group
setting, Level 3: Competent Manager - Organizes people and resources toward the effective and
efficient pursuit of predetermined objectives, Level 4: Effective Leader - Catalyzes commitment to
and vigorous pursuit of a clear and compelling vision; stimulates the group to high performance
standards, and Level 5: Level 5 Executive - Builds enduring greatness through a paradoxical
combination of personal humility plus professional will (Collins, 2001).

Business/ Performance Excellence and Leadership-Management

In the early 80’s when everyone was talking about quality and business excellence many
frameworks and performance models derived. Leadership was a basic concept in all these
frameworks with a direct or indirect impact.

In the Australian Quality Award Leadership Criteria examine the role of management in creating
values and developing an appropriate management system to make them a reality. Malcolm
Baldridge Award and European Foundation for Quality Management (EFQM) Business
Excellence Model have an extend report to leadership criterion (Edgeman, Rodgers, 1999). Later
on some new Performance Management systems arrive (Performance Pyramid, Performance
Prism, a.o.) where management involvement and leadership commitment are still a basic aspect
behind the deployment of all their requests, but not with a clear and obvious way, as the
frameworks mentioned before.
It can be argued as to whether "management" and "leadership" in these models are the equivalent.
This article aims to distinguish these two concepts by reviewing the relevant requests of some of
the wider known Business Excellence Frameworks.

 EFQM Excellence Model

The EFQM Excellence Model is framework based on 9 criteria. The first five are “Enablers” and
the last four are “Results”. The “Enabler” criteria cover what an organisation does. The “Results”
criteria cover what an organisation achieves. There are two approaches to explain the model. One
approach is based on the idea that the results are caused by the “Enablers” and the second enablers
are improved using feedback from “Results”. The Model is based on the premise that:

Excellent results with respect to Performance, Customers, People and Society are achieved
through Leadership driving Policy and Strategy, that is delivered through People, Partnerships
and Resources, and Processes. (www.efqm.org). The EFQM Model is presented in Figure 1.

The percentage given in each box in figure 1 identifies the proportion of each criterion in the
award assessment system of the European Quality Award. As it is shown leadership criterion has a
weight of 10%, which is the second highest weight for the Enablers. That means that Excellent
Organizations are highly dependant of good leadership.

Enablers Results

People
People
Results
9%
9%

Key
Policy & Customer
Leadership Processes Performance
Strategy Results
10% 14% Results
9% 20%
15%

Partnerships Society
& Resources Results
8% 6%
Innovation & Learning

Figure 1: The EFQM Excellence Model (www.efqm.org)

For EFQM, leadership relates to the behavior of the executive team and all other levels of
management in as much as how leaders develop mission and vision and values, are personally
involved, support continuous improvement, are involved with stakeholders, motivate and
recognize employees loyalty and efforts and identify and set direction for change (Wongrassamee,
Gardiner and Simmons, 2003).

Leadership criterion in EFQM Model refers mainly to Level 5 Hierarchy: Executives. But a more
severe study of the model indicates that also management in all levels plays an important role in
the criteria of enablers in EFQM Model.

People Management is the third criterion of EFQM Model and refers to how organizations
manage, develop and release the full potential of their people at an individual, team-based and
organizational level. With a weight of 9% this criterion proves that management in all levels, as an
individual, as a team member and as competent manager and effective leader, effects this aspect of
the framework, as well. Partnership and Resources the forth criterion indicates the above
conclusion, as all partnerships and resources need effective leaders and capable manager in order
to be administrated. Finally, processes is the criterion with the highest proportion in the
assessment system (14%). It refers to how organizations design, manage and improve the
processes intending to satisfy its stakeholders. TQM and Business Excellence philosophy
underlines the importance of everyone’s involvement in processes and procedures design, in order
to meet customers’ (internal and external) expectations. Therefore, it is really important to identify
leadership contribution in the journey for succeeding Business Excellence but first line managers’,
team managers’, and individuals’ offer must not be ignored or underestimated.

 Balanced Scorecard

In early 90’s David Norton and Robert Kaplan came up with a comprehensive framework named
Balanced Scorecard. Aim of this framework is to give managers and leaders a comprehensive view
of the business and allow them to focus on critical areas, as customer perspective, financial
perspective, Internal Business perspective and Innovation and Learning (Wongrassamee, Gardiner
and Simmons, 2003). The balance Scorecard is shown in Figure 2.

Financial Perspective
Goals Measures How do we look to
our stakeholders?

How do customers see us?

What must we excel at?

Customer Perspective Internal Business Perspective

Goals Measures Goals Measures

Innovation & Learning

Goals Measures

Can we continue to
improve and create value?

Figure 2: The Balanced Scorecard (Kaplan, Norton, 2005)

This framework does not have direct requests for leadership commitment and manager
involvement. But studying it in depth, different conclusions are emerging. Balanced Scorecard
demands that managers translate customer requests into specific measurements. Customers want
good time, quality, performance and service. To put this framework to work leaders should be
aware of these four requirements and determine relevant goals. Managers in all levels should also
focus on those critical internal business processes that enable them to satisfy customers. Leaders
on the other hand, have to identify their company’s core competencies and critical technologies
needed and give all the resources in order to succeed customer delight. But the targets for success
keep changing. Global market and strong competition command organizations to make continuous
improvements to their existing products/services and processes and have the ability to introduce
new products into the market. Leaders have the responsibility to identify the need for change and
set the directions, when managers should participate in this procedure and suggest solutions. At
last financial performance is regarding to leaders and managers. Leaders need to know how the
organization is going and develop the policy and strategy, while managers should know the results
of the operational actions and their areas for improvement (Kaplan and Norton 1993, 2005).

 Performance Pyramid or “SMART” System

The Strategic Measurement Analysis and Reporting Technique (SMART) system was proposed by
Cross and Lynch in 1992, as a result of dissatisfaction with traditional performance measures such
as productivity and financial variances. The objective was to devise a management control system
with performance indicators designed to define and sustain success (Ghalayini, Noble, 1996).

The Performance Pyramid includes four levels of objectives that address the organization’s
effectiveness and its internal efficiency. As it is shown in figure 3, there isn’t a direct request for
leadership and management involvement. Nevertheless, leaders develop vision (first level of the
system) and they translate stakeholders’ needs into individual business and unit objectives. The
second level of the pyramid indicates that managers set short-term targets when leaders determine
long term goals of growth and market position. Middle managers bridge the gap between top-level
measures and day-to-day operational measures, as customer satisfaction, flexibility and
productivity. Finally, first line managers measure on a daily basis indicators that effect
performance, as quality, delivery, cycle time and waste (Tangen, 2004).

Objectives The Measurements

vision

Business Unit
Market Financial
Measures Measures

Business
Operating Units
Customer Flexibility Productivity
Satisfaction
Department
and work
centres

Quality Delivery Process Time Cost

Operations

Figure 3: The Performance Pyramid (Neely, Bourne, Kennerley, 2000)

 Performance Prism

The Performance Prism (Figure 4) is a performance measurement framework that addresses the
key business issues to which a wide variety of organizations, will be able to relate. It asks critical
questions and encourages managers and leaders to think through the links between measures in a
way that other frameworks do not intuitively suggest (Neely, Adams and Crowe, 2001).
 Stakeholders Satisfaction  Corporate
 Business Unit
Strategies  Brands/Products/Services
 Operating

 People
 Practices
Capabilities
 Technology
 Infrastracture

 Develop Products & Services

 Generate Demand
Processes  Fulfill Demand
 Plan & Manage Enterprise
Stakeholders Contribution

Figure 4: The Performance Prism (Neely, Adams and Crowe, 2001)

This framework suggests that stakeholders’ wants and needs must be considered first. Then leaders
can formulate the strategies, identify capabilities and plan processes (Tangen, 2004). When on the
other hand managers of all levels participate in the procedures and follow instructions.

Conclusion

Based on the above it is obvious that there is an underlying strong request for leadership, even in
the areas where the request is either verbally or actually of a managerial nature. Managers of all
levels play an important role in the development of a self assessment project through the known
Business Excellence/ Performance Evaluation Models and have a high impact on the
organizations’ journey to Excellence. Further research on how organizations comprehend this
strong request of leadership involvement and commitment and how do excellent organizations
manage to sustain the competitive advantage is important to be held out. Nevertheless, it cannot be
debatable that the contribution of leadership and management on the organizations’ success is high
and it is clearly shown by reviewing the wider known Business Excellence / Performance
Management/Assessment Frameworks and Models.

References

Capowski, G., (1994), “Anatomy of a leader: where are the leader of tomorrow?”, Management
Review, Vol. 83 Issue 3, p.10-18
Collins, J., (2001), “Level 5 Leadership, The Triumph of humility and fierce resolve”, Harvard
Business Review, Vol. 79 Issue 1, p.66-76
Edgeman R.L., Rodgers T., (1999), “ Leadership ESCAPE FROM Organizational Nihilism:
Leadership Core Values for Business Excellence”, International Journal of Applied Quality
Management, Vol. 2 No 1, p. 117-125
Ghalayini A.M., Noble J. S., (1996), “The changing basis of performance measurement”,
International Journal of Operations & Production Management, Vol. 16 No. 8 1996, p. 63-
80.
González T.F., Guillén M., (2002), “Leadership ethical dimension: a requirement in TQM
implementation”, The TQM Magazine , vol. 14 Issue 3, pp. 150 – 164.
Kaplan R.S., Norton D. P., (1993), “Putting the Balanced Scorecard to Work”, Harvard Business
Review, Vol. 71 Issue 5, p. 134-147
Kaplan R.S., Norton D. P., (2005), “The Balanced Scorecard: Measures that drive performance”,
Harvard Business Review, Vol. 83 Issue 7/8, p. 172-180
Kotter, J. P., (2001), “What leaders really do?“, Harvard Business Review, Vol. 79 Issue 11, p.85-
96
Kotterman, J., (2006), “Leadership vs Management: What’s the difference?”, Journal for Quality
& Participation, Vol. 29 Issue 2, p.13-17
Neely A., Adams C. and Crowe P., (2001), "The Performance Prism in Practice”, Measuring
Business Excellence, Vol. 5 No 2, p. 6-12
Neely A., Adams C., (2000), “The Performance Prism to boost M&A Success”, Measuring
Business Excellence, Vol. 4 No 3, p. 19-23
Neely A., Mills J., Platts K., Richards H., Gregory M., Bourne M., Kennerley M., (2000),
“Performance measurement system design; developing and testing a process-based
approach”, International Journal of Operations & Production Management, Vol. 20 No. 10,
p. 63-80.
Tangen S., (2004), “Performance measurement: from philosophy to practice”, International
Journal of Productivity and Performance Management, Vol. 53 No. 8, 2004 p. 726-737
Wongrasamee S., Gardiner P.D., Simmons J.E.L., (2003), “Performance Measurement tools: the
Balanced Scorecard and EFQM Excellence Model”, Measuring Business Excellence, Vol. 7
No 1, p. 14-29
Yukl, G., (1989), “Managerial Leadership: a review of theory and research”, Journal of
Management, Vol. 15 Issue 2, p.251-290
www.efqm.org