THE DIFFERENCE BETWEEN LEADING PEOPLE AND MANAGING A BUSINESS

Leaders must differentiate between leading people and managing production and transaction processes. These two disciplines require different sets of competencies. Leadership requires relationship skills, while management requires analytical and problem-solving skills. People often confuse the two sets of skills, sometimes with disastrous results. Both must be coordinated and aligned if the organization is to achieve its full potential. Over the past half-century or so, there's been a movement toward treating human resources as expendable commodities while concentrating on the tasks of the business. This imbalance in the dynamics of organizations has created soulless entities where people no longer feel valued, and employee, and thus customer, loyalty continues to decline. Why?

Two powerful forces, material output and ethereal energy, make up the heart and soul of every organization. The heart pumps life throughout the enterprise, delivering vital nutrients needed to get the job completed. The soul, however, gives the business its "life force," its unique imprint on the world, the source of its creativity and intelligence, defining the essence of its being. The Holistic Organization Model (see Figure 2) depicts the interrelationship between material output and ethereal energy in an organization.

Figure 2: Holistic Organization Model

The Holistic Organization Model offers a systematic approach for grasping the interconnected aspects of business strategies and serves as a mechanism for facilitating alignment across a company. The model integrates the two distinct realms-ethereal and material- that influence and reflect on each other. Ethereal energies, like the unseen influence of the moon on tides, powerfully drive organization performance. The material outputs result from shaped ethereal energies. Ethereal energies cascade with human motivation and potential, while material outputs entail transactions, products, and services. People watch closely for nonverbal behavioral clues establishing the boundaries of "right" and "wrong." Thus, any organization culture derives directly from the vision, values, and ethics demonstrated by its leaders. Culture defines what, how, when, and why we do what we do, thus becoming a backdrop to organization performance. The outcomes of a business's strategies and tactics are its products and services, its material outputs, tangible evidence of the organization's vision, values, and ethics.

Human energy is the most powerful energy in any organization. It is the vision, values, passion, and commitment of individuals that propel an organization to achieve great things. A leader's most important role is motivating, harnessing, and directing human energy to achieve the objectives of the organization. Leaders must be skilled in leading people by understanding their intrinsic motivators. Leaders must connect with people's core values to create the conditions and environment for people to achieve the objectives of the business. The result of this leadership is culture. For an organization to survive, it must produce something of value, something that is needed or wanted. The output of an organization ensures that the organization will have a purpose for its existence. Leaders manage material output. Specific steps designed to stabilize and control the production process ensure the desired outcomes.

Examples of Ethereal Energy

Ethereal energies are the unseen forces that drive organizations. These energies are based on, and reflect, the levels and quality of interaction between the people within the organization. Ethereal energies result directly from a leader's ability to create an organizational environment that supports and encourages human achievement. Ethereal energies are difficult to quantify. As with the wind, you know it's there when you feel it on your face, and you can see its impact, such as a flag waving or leaves blowing, but you can't actually see it. A good barometer for determining the quality of the ethereal energies in your organization is morale. Is the morale in your group high or low? Elements that contribute to the quality of ethereal energy include:

• Free and open communication

• People feeling valued

• People being listened to and leaders acting on their input

• People feeling like winners

• A dynamic organization

• A sense of team spirit and loyalty

Examples of Material Output

Material output directly reflects the ethereal energy within an organization. It also depends on the level of management skills demonstrated by leaders. These skills include strategic and tactical planning, process and project management, research, product and business development, sales and marketing, and other task-related management competencies. Well-managed organizations have such characteristics in common. These traits have become benchmarked both nationally in quality awards such as the Malcolm Baldrige National Quality Award (MBNQA) and internationally with ISO series certifications and others. Elements that contribute to the quality of material output include:

• A grounded, compelling strategic framework

• Aligned tactics and processes

• A defined process management system and scorecard

• Creative problem-solving technologies

• Uniform project management methodologies

Although the short-term effect of an imbalance between achieving tasks (management) and building relationships (leadership) may seem insignificant, the long-term impact on a business can be deadly. In the 1970s and '80s, factory workers for the "Big Three" American automobile manufacturers drove the cars they assembled. In fact, the first few employees that started arriving in employee parking lots in "foreign" cars were threatened, and their cars sometimes bashed … figuratively, or literally, or both. Today, go to any of those employee parking lots and you will see a rainbow of makes and models. Employees no longer feel bound to purchase a car from their own employer. While the type of car an employee drives may not appear to mean much, the messages sent to consumers everywhere are extraordinarily powerful. "Even we don't drive the cars we build … Why should you?" This disconnect is an example of the potent force of ethereal energy. The messages are communicated and reverberate throughout the nation and businesses slowly die.

The American auto industry is in a thirty-year decline. According to Michael Ellis in a August 1, 2003, Reuters report, "Auto Sales Hit 2003 High-Big Three Fall," General Motors, Ford Motor Company, and Chrysler of Daimler-Chrysler lost 15 percent of the total market share in 2003, while Mercedes, the German division of Daimler-Chrysler, gained 20.6 percent, BMW gained 10.1 percent, and Audi gained 7 percent. All three Japanese manufacturers posted strong increases. Do Americans really build inferior cars, or do people believe Americans build inferior cars? In a relatively short time, the American automobile industry has managed to squander a century of employee and customer goodwill to satisfy the demands of a short-term bottom line by ignoring, at best, the human element of its business.

In the information-rich, interconnected world of the twenty-first century, organizations can no longer risk alienating either employees or customers by failing to connect with human values. Instead, they must balance the need to accomplish tasks while connecting with people's values, emotions, and desires-their human energy. To make this connection, the first step is to have leaders who create an environment that is open and receptive to partnering with others. Creating a partnering culture requires focused leadership to establish trust and open communication, listen to others' needs, and act on those needs.

Leaders have always played a pivotal role in shaping the culture of an organization. In the Dual Age of Information and Connections, the behaviors of leaders have become vital for success, and counterproductive leadership behaviors can have a severe, sometimes catastrophic, impact on the viability of an enterprise. Consider what happened at Enron, WorldCom, ImClone, Arthur Andersen, and other companies betrayed by self-indulgent executives. Mull over the trading scandals in the mutual fund industry. Reflect on the number of people hurt by the greed of certain C-suite brigands, schemers, and narcissists. Leaders who decide to commit to creating a partnering culture within their enterprise must also pledge themselves to lead by example, to model the Six Partnering Attributes. Leaders must take the first step by practicing focused leadership. In Chapter 4, we discuss step 1 of the Powerhouse Partner Model, "Practice Focused Leadership," and offer concrete suggestions for achieving the four objectives of focused leadership: attaining personal mastery, inspiring vision, motivating action, and achieving results.