Understanding the difference between management and leadership

Understanding the Difference between Management and Leadership

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Both management and leadership are necessary ingredients for organizational success at any business—small or large. After all, McShane and Von Glinow (2010) aptly note that “managing improves organizational efficiency, whereas transformational leadership steers companies onto a better course of action” (p. 363).

However, significant and fundamental differences exist between management and leadership; between being a manager and being a leader. Peter Drucker once famously stated, “Management is doing things right; leadership is doing the right things.” The goal of every small business owner should be to evolve beyond being a manager and to become a transformational leader. Which one are you?

Management and Leadership: There Is a Difference

The terms management and leadership are not synonymous.

Management—also known as transactional leadership—is focused on the functions of planning, organizing and controlling human capital and other resources to effectively and efficiently achieve organizational goals. Managers apply management principles, guide employees, and clarify employee roles and task requirements.

Leadership—also known as transformational leadership—is focused on change and the ability to influence others to embrace that change. Leadership inspires followers to achieve organizational goals and ensures that followers are aware of the issues involved. Leaders are charismatic, visionary, strong communicators, and possess both a high degree of emotional intelligence and a high learning curve.

Satterlee (2013) notes:

“Management is about coping with complexity, while leadership is about coping with change. Managers overcome complexity by designing formal plans and organizational structures; leaders overcome change by developing future visions, and encouraging followers to overcome the hurdles of change.”

In A Force for Change: How Leadership Differs from Management, John Kotter (1990) provides further clarity regarding the difference between management and leadership:

“[G]ood leaders produce important, positive change by providing vision, aligning people’s efforts with the organization’s direction, and keeping people focused on the mission and vision by motivating and inspiring them. Good leadership, like good management, helps an organization to succeed.”

Managers vs. Leaders

McShane and Von Glinow (2010) argue that “transformational leaders are change agents who energize and direct employees to a new vision and corresponding behavior.” On the other hand, managers “help employees become more proficient and satisfied in the current situation.”

In Managing People is like Herding Cats, Warren Bennis (2000) provides the following juxtaposition regarding managers and leaders:

The Manager The Leader
administers innovates
is a copy is an original
maintains develops
focuses on systems & structure focuses on people
relies on control inspires trust
has a short-range view has a long-range perspective
asks how and when asks what and how
has eye on the bottom line has eye on the horizon
imitates originates
accepts the status quo challenges it
is the classic good soldier is his or her own person
does things right does the right thing

Leadership and Organizational Change

Management and LeadershipIn the world of business—and especially small business—change is not just inevitable; rather, it is constant, necessary and potentially advantageous. A business cannot meet the needs of a consumer-driven market and achieve exceptional performance without a relentless pursuit of growth and development—in other words, fostering a culture predicated on beneficial change.

As noted about, leadership is all about coping with such change. Most people do not like change and they possess a normal resistance to it. What makes a leader effective (i.e., successful) is (1) having the vision to identify and define positive change and (2) being able to motivate and inspire followers to overcome their normal resistance to that change and, thereby, achieve greatness.

This ability is both an art and a science. Lewin (1951) proposed a three-step process for dealing with organizational change: unfreezing, change, and refreezing. Kotter (1996) further defines this process, asserting that there are eight steps an effective leader must understand and complete in order to successfully implement organizational change:

  • Unfreezing Phase (Lewin)
    • Establish a Sense of Urgency (Kotter)
    • Create a Guiding Coalition (Kotter>
    • Develop a Vision & Strategy (Kotter)
    • Communicate the Vision for Change (Kotter)
  • Change Phase (Lewin)
    • Empower Broad-Based Action (Kotter)
    • Generate Short-Term Wins (Kotter)
    • Consolidate Gains & Produce More Change (Kotter)
  • Refreezing Phase (Lewin)
    • Anchor Change in the Organization’s Culture

Understanding the Difference between Management and Leadership

Are You a Leader or a Manager?

In the early stages of a small business, the owner typically has to function as both a manager and a leader. However, as the company grows and operational managers are brought on board, an owner needs to transition towards being a leader and letting his or her managers manage. It is a difficult evolution for many—but one that must be embraced for the long-run good of the business.

Satterlee (2012) notes that transformational leadership:

“proves to be the more dynamic approach to leadership with a focus on individuals within the organization. This [leadership] attempts to go beyond the corporate goal of productivity to focus on the health of the organization, as well as the individual. Transformational leadership believes that by improving employees’ quality of life, the organization will benefit in the long run. By focusing on the individual, each employee feels valued and knows that his or her contributions to the company matter, which causes them to work more efficiently for the company.”

So, which are you? As a small business owner, are you a transactional manager… or a transformational leader?


Bennis, W. (2000). Managing people is like herding cats. NY: The Free Press.
Kotter, J. P. (1990). A force for change: How leadership differs from management. NY: The Free Press.
Kotter, J. P. (1996). Leading change. Boston: Harvard Business School Press.
Lewin, K. (1951). Field theory in social science. NY: Harper and Row.
McShane, S. L., & Von Glinow, M. A. (2010). Organizational behavior (6th ed.). New York, NY: McGraw-Hill Irwin.
Satterlee, A. (2013). Organizational management and leadership: A Christian perspective (2nd ed.). Raleigh, NC: Synergistics International Inc.

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Doug is a proud follower of Christ, dad of 4 awesome kids, and the founder of High-Octane Small Business Consulting, which provides results-oriented solutions to boost small business performance. He has over 15 years of proven management, marketing, leadership, communications, and accounting experience--spanning the private, nonprofit and public sectors.

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