Leadership versus Management


As an enterprise grows there should be a change from a leadership focus
to a management focus. In other words, dependent on the size, complexity and
diversity of the organisation, the dominant leadership profile needs to change.
The enterprise leader stops being the management and manages through
delegation. At inception the entrepreneurial venture is led by the visionary
who in most cases embodies strong leadership competences. However leaders
thrive on change and conquering new ground. They are forward looking and are
spurred by the thrill of the hunt more than the maintenance of what has been
acquired. The entrepreneurial bankers grew their organisations to levels where
there was a need for strong managerial competences, which most of them lacked. At
this stage it was observed that systems were inadequate and cases of serious
fraud were unearthed within some of the banks.

Nigel Chanakira observed, with the wisdom of hindsight, that the move
into commercial banking for Kingdom was premature as there were no managerial
competences to handle it. This situation was rife in the banking sector as most
of the banks converted from merchant banks into commercial banks with
inadequate management competences. Commercial banking is complex and risky as
compared to merchant banking which requires a small staff complement and fewer
people having access to cash transactions.

Some banks, e.g. NMB and Kingdom, worked hard at creating and acquiring management systems. NMB had a deputy managing director who had been an auditing partner with a chartered accounting firm and was good at systems. He effectively acted as the Chief Operating Officer. Because of this, even when the bank had an aggressive run on deposits and an assault from predators after the forced exit
of the founding directors, it remained stable because of strong managerial
systems. It survived where many others could not stand. Kingdom benefited from
a decision to acquire managerial skills through a management agreement with a
Holland-based bank which provided seasoned bankers to complement its skills
base. These helped create systems for the bank. Unfortunately this agreement
seemed to have lapsed by the time it entered into the commercial banking project
when it needed it most. The shortage of foreign currency in the country could explain
why Kingdom did not renew the contract or find a replacement, as the service fees
would have to be paid out in foreign currency.

Other entrepreneurial bankers were hesitant to delegate management
functions as this would have meant the risk of entrusting their hard earned
investments into the hands of others who might make mistakes with them. For
many entrepreneurs, delegation is not easy as it implies that they have to:

  • · manage and coach people instead of
    just making the decisions. This is particularly hard as leaders pride
    themselves on their decisiveness.
  • · Stand by and watch people make
    mistakes with their money.

The governor of the Reserve Bank correctly diagnosed the need to
separate the leadership from the managerial role. However what is disputed is
whether this was the right time in the life span of these businesses to move
them into the hands of professional managers and whether it necessarily implied
an expulsion of entrepreneurial bankers from their own investments.

This raises an issue of conflicts in leadership theory on the role of
managers and leaders. In my view, managers are concerned with the stewardship
of resources whether material, financial or human. Consequently they tend to
exhibit a more conservative approach.

This in no way makes them subservient to leaders in importance. They
play a critical role of maintaining and conserving what would have been gained
through the entrepreneurial activities of leaders. They build the capacity to
contain and grow what leaders acquire and exercise innovation and originality
in their sphere of influence. Managers thus are creators of structure and
systems that enable consistent performance while reducing chaos and risks in
the work place.

Leadership experts, Kotter and Buckingham both contend that strong
leadership and strong management are needed in large organisations. Kotter argues
that strong management alone discourages risk taking and enthusiasm while
strong leadership alone disrupts an orderly planning system and undermines the
management hierarchy.

It is my view that with start- ups there is more leadership first and as
they grow into complex organisations, one needs to have strong management
coming on board to bring order and create systems. A failure to appreciate this
has adversely affected the Zimbabwean banking industry. Since 1998, when the
financial services were deregulated, there has been explosive growth of
financial institutions with new banks being born as entrepreneurial bankers
exploited the opportunities. However as these new banks grew, the
entrepreneurial founders continued to create innovative products and assume
risks without strong managers to create order and structure to the increasingly
complex organisations. This led to a major crisis that resulted in some of
these banks collapsing.

This is a case of entrepreneurial organisations which were “over-led and
undermanaged”, contrary to the situation in developed countries wherein
companies are mostly over- managed and under- led.

The decision for the delegation to professional managers is dictated by
the entrepreneurial life cycle stage of the businesses. In the growth stage one
still requires a strong leadership role. However in the maturity phase there is
urgent need for strong managerial competences.

In retrospect, although the RBZ’s view that banks needed strong
managerial competences was correct, the decision to force strong
entrepreneurial leaders out of management was unfortunate. The industry had not
reached maturity stage at that time. It was in a strong growth mode within a
high risk and highly competitive environment which necessitated strong
leadership roles. The sector needed both strong leadership and strong
managerial roles within banking organisations. Strong managers and strong
leaders are not mutually exclusive. It can be argued that the positions of both
the bankers and the central bank were faulty because they were largely based on
an either/or perspective. Strong entrepreneurial leadership would have
benefited from strong managerial competences at this critical stage in the
growth of the financial services. We needed banks which were both well led and
well managed.

Extracts from Entreprenurship On Trial by Dr T. A. Makoni

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