What is the Difference Between Leadership and Management in Small Business?

Leadership and management are both essential elements of business success. Leadership is closely aligned with the role of a CEO and Management to the role of the President. Even though there is a difference between leadership and management, most people use them interchangeably which is incorrect.

Recently, I was trying to explain the evolution of a business to a client and introduced the idea of business function segmentation. In the discussion, the role of “management” came up. Since up to that point I referred to “leadership” during the early stages of a company, my client stopped me and asked me how I differentiated leadership from management. Here is how I define the differences between leader and managers.

What is Leadership?

In the early stages of a business, leadership by the founder is essential to the success of the business. Strong leaders are followed because of their personality, behaviors, and beliefs. Leaders have an attraction energy. Leaders create a kind of personal gravity that pulls people into their orbit, which is required at various stages of a business and very much so in its early stages.

Some of the key attributes of leaders are their ability to see and articulate the future. Good leaders care about others and inspire and challenge others to take action. To be an effective leader, you have to be viewed as honest and have the utmost in integrity.

The role of a Chief Executive Office or CEO requires a great deal of leadership. A CEO looks at the future and defines a vision of the business. The CEO also deals with relationships outside the company, such as with investors and flagship customers. Therefore, CEOs must be great leaders to share their company’s vision and attract investors and customers with their gravity.

What is Management?

As the business grows, a division of responsibility occurs. To head up these divisions the business needs to add managers. Managers carry out three primary functions of a business division: planning, organization, and controlling. Managers are followed because their direct reports are obligated to do so based on their title. Managers have a push energy. Managers create boundaries for subordinates since managers are held accountable for their own actions as well as those of direct reports.

Some of the key attributes of managers are their ability to execute. Good managers need to be able to review the available resources at their disposal and direct others. Managers need to anticipate any challenges and clear any potential roadblocks. A manager establishes rules processes, standards, and procedures.

The role of a President relies more heavily on management than on leadership. A President and their subordinate managers use historical performance to define what needs to be executed by their direct reports. The President and their managers also deal with relationships inside the company. Therefore, the President and their subordinate managers must be great at execution, assessing available resources and directing others.

Here are a few key attributes that I believe differentiate leaders and leadership from managers and management.

Leadership	Management
Focus Outside of the Business	Focus Inside of the Business
Has Vision	Has Objectives & Goals
Fosters Ideas	Assign Duties
Define the Business (Strategy)	Drive the Defined Business (Execution)
Balance Investments	Maximize Output
Plan	Implement
Doing The Right Things	Doing Things Right
Timeline = Future	Timeline = Present/Past
Long Term View	Short Term Focus
Create Value	Count Value
Have Followers	Have Subordinates
Motivate Others	Control Others
Create Change	Maintain Status Quo
Take Risk	Control Risk
Create Relationships	Build Systems
Sells	Tells
Sets Expectations	Meets Expectations
Eyes the Horizon	Eyes the Bottom Line
Sets the Direction	Plans the Details
Encourages People	Instructs People
Sees Opportunities	Sees Problems
Motivates	Approves
Breaks Rules	Establishes Rules
Inspires Trust	Relies on Control