Leadership vs. Management in Organizational Effectiveness

Introduction

Organizations that want to be profitable and prospective must have well-working management mechanisms. Without them, any company will eventually dive into chaos and inconsistency. The context of the modern global economy demonstrates such commonalities in every industrial sector, especially after the COVID-19 crisis. One of the key debates in the professional and academic community is connected with comparing leadership and management from the perspective of company functioning. The aim of this study is to conduct a literature review and analysis that will prove the position on the interconnectedness of management and leadership. The initial objective is to get acquitted with the modern scholarship on leadership and management and then make conclusions about the similarities and differences. Although the empirical research will not be done in this study, the ultimate text may greatly fit the research article. Firstly, the first segment will introduce leadership scholarship. Secondly, the academic literature on management effectiveness will be placed in antagonism to the last part. Thirdly, the critical comparison of these two categories with empirical evidence will be given. The cumulative and individual impact on performance and the determinants by which it is possible to determine the company’s success will be listed.

What is an Organizational Effectiveness?

Some think that appropriate management skills play an integral role in organizational effectiveness. Others disagree, claiming that the true leaders of a team of professionals may be the critical driver for innovations and reforms. In this paper, great attention will be given to the discussion of these debates. The final conclusions about the applicability of management and leadership in different contexts will be made by systemizing the academic literature. Modern trends in management and leadership studies are concerned with the combinational approach, which values the situational properties of a specific example.

What is Leadership?

Definition

From the beginning, it is crucial to delineate the meaning of the term leadership. In practice, leadership skills can be found in almost everyone: soldiers, ship captains, teachers, and coaches. In the field of management, one should clearly identify the consensus way of defining leadership. For example, one of the most popular ones indicates that leadership is “the ability of an individual to influence, motivate, and enable others to contribute toward the effectiveness and success of the organization” (Yukl and Gardner, 2020, p. 23). The peculiarity of this definition is that it emphasizes the activity of a particular individual, not a group of people. It also highlights the focus of the discussion, that is, the motivation in organizations, not in an army, a school class, and other places.

Besides the classical way of defining leadership, other theories also can be useful for this study. Antonakis and Day (2018) emphasize that “leadership is a formal or informal contextually rooted and goal-influencing process that occurs between a leader and a follower, groups, of followers, or institutions” (p. 5). Such an approach to considering leadership is rooted in the conviction that contextuality influences a leader’s attributes. Lastly, some scholars admit the huge value of changing the existing status quo through leadership skills. For example, one of the definitions claims that leadership “is the ability to step outside the culture to start evolutionary change processes that are more adaptive” (Yukl and Gardner, 2020, p. 23). From here, it is evident that scholars see the role of the change enabler as the most crucial factor.

Theoretical Explanations

Competing theories in the field describe how organizational effectiveness can be organized. One of the major rules that can explain the evolution of theories is that the most obvious and logical explanations are the most outdated and rejected. For example, the trait approach values the personal characteristics of genius leaders, like tireless energy and sharp intuition (Yukl and Gardner, 2020, p. 35). In an ordinary sense, not many will disagree that such personal traits play an integral role in being a leader. However, such a focus on personal attributes omits the real deeds of leaders in the workplace and also excludes people whose appearance is not highly charismatic and vivid.

The more modern theoretical approaches concentrate on contextual aspects, such as the type of organization and the characteristics of followers. To some extent, one can trace the postmodernist turn here expressed in the desire to move from universal reasons to more contextualized ones. In general, such a perspective is prevalent in the literature and is called the situational approach (Yukl and Gardner, 2020, p. 38). The main trend in research is the comparative analysis of leaders in different situations to identify traits that are important in specific contexts.

In addition, one other approach influenced by the modern trends in social sciences is the power-influence approach. The understanding of power here is mostly Foucauldian because it perceives power not as an institutionalized rule but as the capacity to influence others’ actions. Researchers conduct questionnaires in collectives to measure leaders’ power to convince subordinates to do or say something (Yukl and Gardner, 2020, p. 38). Such studies help identify the most powerful and influential leaders and then research their personal traits that led to success.

What is Management?

Management studies incorporate an even higher number of subdisciplines, theories, and approaches than leadership scholarship. In the majority of universities, there is usually a specific bachelor’s program principally designed for the study of management skills. However, for an unprofessional person, it is unclear where to put the line between leadership and management. This segment of the coursework is devoted to the conceptual introduction of management. This introduction will try to explain the basics of management, keeping in mind that the paper’s goal is to explain the difference between two discussed concepts.

Definition

While leadership debates have a long history that takes its roots from Aristotle, management is a quite modern field, the roots of which can be traced to the beginning of the 20th century. It was initially created to eliminate the widespread chaos and anarchy in early modern enterprises (Northhouse, 2016, p. 20). The major function of management is “planning, organizing, staffing, and controlling” (Northhouse, 2016, p. 13). In fact, all definitions of management in business are formulated around these key characteristics.

From here, the difference between the definitions of leadership becomes obvious. It requires only a comparison of verbs that describe both phenomena. While leaders initiate, influence, delegate or drive the change, managers perform more bureaucratic roles. Tracing back the origins of such differentiation, one may recall the famous Max Weber’s distinction between ‘administrative’ and ‘political’ officials (Swedberg, 2018). In principle, this distinction still exists in business organizations today: the political function is played by the leader. At the same time, the manager leads the process without the mandate of a dominant role in the team.

How does Leadership Affect Organizational Effectiveness?

There is a perception that management focuses on getting people to do things right while leadership focuses on getting people to do the right things. This division is narrow enough to cover the entire multi-criteria range of these concepts. Both phenomena are essential in the context of organizational effectiveness, as has been theoretically proven in the previous chapters. For a more detailed comparison, it is necessary to turn to the more differentiated leadership and management traits to assess the impact on the company’s success in practice.

There are situations when competent management or talented leadership are sufficient conditions for achieving goals, but these cases are rare. Leadership without management creates a distinct detached style that can harm the company’s ethics and reputation, while management without leadership leads to a lack of inspiration and engagement (Swanwick, 2019, p. 2). The most recent research in this area highlights this trend. Leadership is most often analyzed in terms of employee engagement and creativity in the workplace, and this correlation is proven to be highly statistically significant (Mahmood, Uddin, and Fan, 2019, p. 755; Milhem, Muda, and Ahmed, 2019, p. 35). In turn, engagement contributes to satisfaction, which is a determinant of individual and group performance, including discretionary performance (Garg, Dar, and Mishra, 2018, p. 60). Critical literature reviews are aimed at a broader assessment of studies and show almost unanimous agreement on the correlations mentioned (Sharafizad, Redmond, and Morris, 2020, p. 46). Therefore, it can be argued that leadership is aimed at regulating group interpersonal relations, which determine the company’s efficiency.

Since there is direct research evidence between employee satisfaction and engagement and performance, leadership must address certain aspects that improve these indicators. Firstly, this includes factors for achieving goals and growth prospects for the company and individual employees. Research shows that the full ins and outs of an organization controlled by management are not always available to ordinary employees, while the leader must communicate the mission, vision, and goals of the company with words and actions (Meraku, 2017, p. 336). In fact, this phenomenon provides long-term plans to employees, interacting with them at the level of views and principles, where the main mechanisms of motivation are laid down (Paais and Pattiruhu, 2020, p. 582). Motivation, in turn, is one of the main drivers of job satisfaction, as confirmed by Herzberg’s two-factor model (Paais and Pattiruhu, 2020, p. 586). Clear perspectives form explicit targets for the disclosure of this factor.

Secondly, these aspects of leadership contribute to a better and more effective organization in the face of uncertainty. First, leadership helps avoid delay through conscious turbulence, even in crises (Watts, Steele, and Den Hartog, 2020, p. 140). However, recent events have shown that some situations cannot be avoided, especially when it comes to global problems. In this case, employee trust becomes vital in maintaining efficiency, even after adjusting for inevitable losses (Ahern and Loh, 2020). At the same time, faith is itself synthesized by the ethical skills of the leader: in other words, research has evidence that exemplary leadership is the cause of high trust within the team (Javed et al., 2018, p. 400). In addition, this indicator significantly increased criticality in the face-to-face virtual interaction that has become relevant for many companies during the pandemic (Furumo, 2018; Ahern and Loh, 2020). Accordingly, leadership improves organizational performance indirectly through motivation and trust.

The state of turbulence and uncertainty always carries certain risks. A good leader always knows how to manage them, although, in part, these responsibilities are closer to management. Leveling risks and mitigating consequences can be described as the most common cases in management’s methodology of the employee’s actions. Leadership with more free decision-making methods is much more helpful for extraordinary situations. However, studies show the opposite picture: leaders do not complicate their behavior in unusual cases, provided that formal management authority does not intervene (van der Hoek, Beerkens, and Groeneveld, 2021, p. 394). A legitimate explanation for this behavior involves offering the most straightforward solutions to complex employee management problems (van der Hoek, Beerkens, and Groeneveld, 2021, p. 399). In other words, leadership in uncertain situations tends to order the organization, work with risks, and mitigate the consequences.

Finally, leaders contribute to creating an organizational culture that integrates informal work under challenging situations, motivation perspectives, and trust foundations. Having a sound value system that correlates with the company’s operations creates an enabling environment for innovation and engagement, which are determinants of organizational performance (Zheng et al., 2019, p. 892). In addition, the messages coming from the leadership that forms the mission and vision, as a rule, significantly affect the specification of the corporate social responsibility of the company. The presence of such activity not only plays a role in the organization’s reputation but also improves its operational performance in the market (Kim and Thapa, 2018, p. 447). In turn, CSR gives potential applicants a better idea of ​​the company’s philosophy, which comes from leadership. Management in this situation regulates the financial and organizational side of the implementation of this responsibility, while the ideological basis remains entirely with the administration.

Therefore, leadership outlines the long-term values ​​of the company while allowing for spontaneity in many aspects of relationships with other companies or within the team. Culture and CSR are unique mechanisms that help to influence indirect aspects of efficiency through maintaining the level of trust and creating real two-factor motivation, as well as directly through the involvement and satisfaction of employees. Basically, the qualitative indicators of success are listed, while the quantitative ones are controlled by management. Most of the factors and aspects are closely intertwined with each other and proportional mutual influence: in the absence of motivation, trust suffers, and without a transparent culture and values, the formation of CSR is impossible. Finally, leadership sets many essential aspects of the organization, but it needs management for the balanced growth of any company.

How does Management affect Organizational Effectiveness?

Management, in turn, to a greater extent, reflects the official relations of the group as some social organization. However, the efficiency success determinants are still employee involvement and satisfaction in the workplace. At the same time, management in these cases is used as a tool to achieve satisfaction; a positive effect, in turn, affects the performance of employees with high statistical significance (Awan et al., 2020, p. 10; Neher and Maley, 2020, p. 1140; Islami, Mulolli and Mustafa, 2018, p. 95). Only the ways to achieve these goals differ. Management is more stable; with a particular system of sanctions and rewards, the decision-making process is mediated not only by the microenvironment of the group but also by external factors (Swanwick, 2019, p. 4). On the other hand, leadership is directed inward and, as a rule, does not have a strict deterministic framework in behavior.

In fact, the main difference is the formality of achieving goals. A critical analysis shows that organizational effectiveness is achieved through the involvement and satisfaction of employees; however, in the case of management, there is another criterion for organizational structure. This indicator is measured as the ability to create a structure within the company and organize business processes in such a way as to maximize profits and optimize the use of resources. Research in this area usually focuses on specific business industries due to the specificity of the processes: aviation, manufacturing, and healthcare (Karim, Nawawi, and Salin, 2018, p. 1168; Grynko et al., 2020, p. 10). It can be argued that the organizations themselves always have at least a minimal structure of order within the company, already having a basis for leadership. Better management can optimize an even more comprehensive range of determinants of a company’s success, such as financial performance and resource allocation. Through the impact on employees, leadership can only indirectly affect these indicators through satisfaction and involvement.

Empirical Evidence to Explain: Leadership or Management. Which one is more Significant for Organizational Effectiveness?

After briefly introducing key theoretical underpinnings of management and leadership studies, there is a sense to compare these phenomena meaningfully. Starting with similarities, there are different fields where these studies intersect. Firstly, management and leadership require human skills, that is, abilities to build working relations with peers, subordinates, and other colleagues. In the Northhouse (2016, p. 46) handbook, such skill was related to management, while from the British Airway case below, the argument will be different. Secondly, goal accomplishment is also integral to managers’ and leaders’ performance. In other words, their work aims to increase company profits, accumulate more customers, reach key numerical indexes and many more.

Remembering the review of arguments from the literature, there is a sense to critically evaluate them in the scope of management and leadership debate. The main observed peculiarity is that scholars do not devote much attention to comparing leadership and management. Some of them theorize leadership, and some of them talk about management, but these notions rarely are set in antagonism. Therefore, the only way to judge the difference is to summarise these arguments and view them analytically. The main milestone in the intersection of management and leadership was that the skills of communication were emphasized from both sides. The critical difference is the presence of transformational leadership in the theory, which explains the change in management by the leadership. Thus, leadership, to this argument, always presupposes efficient management.

The described similarities create sophisticated questions for the research community, which wants to find a balance between management and leadership skills. In theory, a leader can be effective and contributional without being a manager (e.g., informal leader). At the same time, it is possible to imagine managers with no responsibilities to lead or encourage somebody. The difference lies in the fact that the overlapping nature of the two research branches results from the abstraction of cases and examples about which theorists argue (Yukl and Gardner, 2020, p. 101). The balance between leadership and management can be devised only in a concrete company or at least an industry situation. Thus, there are no ideal forms and patterns that may be easily transferred to any kind of enterprise.

An essential link between leadership and management is an innovative approach. Awakening and encouraging creativity in employees is difficult enough to make a measurable value, and besides, it is associated with creative thinking, which generally gravitates toward leadership functions (Mahmood, Uddin, and Fan, 2019, p. 749). Innovation policy is often enshrined in documents, missions, or visions of companies, which reflects the internal structure of the management side. Research also proves the correlation between competitiveness and the overall performance of an organization with an innovative approach, which can be formed as a result of transformational leadership or as an organizational learning capability (Arif and Akram, 2018, p. 66; Migdadi, 2021, p. 154). Therefore, an organization’s performance in this respect may be dictated by differentiated success in either management policies or leadership approaches.

However, for the most part, both components are essential for demonstrating continued organizational competitiveness and development. Management is the foundation of any company; without it, there can be no structure or order based on which relationships with employees and customers will be built. The entire order that the management structure brings to the company sets the stage for implementing various leadership approaches. There are methods of informal leadership when they can manifest themselves spontaneously in the team without being tied to the company’s structure.

However, the most significant effect is achieved only in the combined use of the benefits of management and leadership. The involvement of employees and their satisfaction with the work process are variables that affect the organization’s success and, in turn, depend on the quality of the concepts under consideration. More distinct quantitative characteristics of firms’ financial performance and the brand’s reputational strength are made up of competent formal management and talented leadership that regulates processes using targeted and spontaneous processes, respectively. The broader influence of external factors on management makes it more functionally loaded up to a change in the company’s organizational structure. However, it is always worth considering the influence of external factors that can significantly worsen or improve the position of the company, regardless of the implementation of an integrated approach in leadership and management. It is necessary to strictly distinguish between the success of the company, achieved through internal processes and chance. Otherwise, it is possible to erroneously interpret the performance of the organization and come to the wrong managerial decisions that can cause negative consequences for the company.

The underlying assumption was that different situations require different combinations of management and leadership. Initially, it seemed that in some companies, only managers could participate, while in others, it was impossible to imagine effective work without a leader. An analysis of empirical literature and case studies has shown that all companies require leaders. Not a single article was found that talked about the possibility of excluding leaders and focusing only on managers. On the contrary, all works have paid attention to situations of crises, external shocks, and the need for reforms as conditions that require leaders, not managers. This difference, drawn from empirical cases, seems to be the main difference between management and leadership in achieving organizational effectiveness. In future research, it would be useful to conduct an empirical case study of leaders and managers in Australia. At this point in time, such literature seems to be rather sparse, so a single case analysis can say a lot about the need to combine management and leadership in an effective company.

Conclusion and Discussion

This work provided the most important theoretical information about management and leadership to find similarities and differences between these approaches. Leadership is a person’s ability to influence, inspire and encourage a certain team to work effectively, change the working rhythm, and/or adjust to unforeseen circumstances. Scholars pay attention to various options for determining the quality and importance of a leader. For example, you can study the relative power in the hands of a leader and determine the level of communicative functions. Finally, in modern companies, quite different types of leadership can be found, such as democratic, authoritarian, laissez-faire, and transformative.

Concerning management, the main difference lies in the tasks that can be expressed in the verbs used in the definition of the concept. Here it is planning, organization, and recruitment that are more technical and systemic tasks. The main conclusion from the literature was based on the fact that different levels of management require different skills in action. While top managers are focused on conceptual skills, managers closer to the field should have more technical skills with operating systems and analytical tools.

Reference List

Ahern, S., and Loh, E. (2020) ‘Leadership during the COVID-19 pandemic: building and sustaining trust in times of uncertainty’, BMJ Leader. Web.

Antonakis, J. and Day, D. (2018) ‘Leadership: past, present, and future’, in Antonakis, J. and Day, D. (eds.) The nature of leadership (3rd ed.). Thousand Oaks, CA: Sage, pp. 3–26.

Arif, S., and Akram, A. (2018) ‘Transformational leadership and organizational performance: the mediating role of organizational innovation’, SEISENSE Journal of Management, 1(3), pp. 59-75. Web.

Awan, S. H., et al. (2020) ‘Effectiveness of performance management system for employee performance through engagement’, SAGE Open, 10(4), pp. 1-12. Web.

Furumo, K. (2018) ‘Leadership, Trust, and Participation in Virtual’, Journal of Organizational Psychology, 18(3). Web.

Garg, K., Dar, I. A., and Mishra, M. (2018) ‘Job satisfaction and work engagement: A study using private sector bank managers’, Advances in Developing Human Resources, 20(1), pp. 58-71. Web.

Grynko, T., et al. (2020) ‘The impact of collaboration strategy in the field of innovation on the effectiveness of organizational structure of healthcare institutions’, Knowledge and Performance Management, 4(1).

Islami, X., Mulolli, E., and Mustafa, N. (2018) ‘Using Management by Objectives as a performance appraisal tool for employee satisfaction’, Future Business Journal, 4(1), 94-108. Web.

Javed, B., et al. (2018) ‘Ethical leadership, trust in leader and creativity: The mediated mechanism and an interacting effect’, Journal of Management & Organization, 24(3), pp. 388-405. Web.

Karim, N.A., Nawawi, A. and Salin, A.S.A.P. (2018) ‘Inventory management effectiveness of a manufacturing company – Malaysian evidence’, International Journal of Law and Management, 60(5), pp. 1163-1178. Web.

Kim, M. S., and Thapa, B. (2018) ‘Relationship of ethical leadership, corporate social responsibility and organizational performance’, Sustainability, 10(2), p. 447. Web.

Mahmood, M., Uddin, M.A. and Fan, L. (2019) ‘The influence of transformational leadership on employees’ creative process engagement: A multi-level analysis’, Management Decision, 57(3), pp. 741-764. Web.

Meraku, A. (2017) ‘Role of leadership in organizational effectiveness’, Journal of Economics, Business and Management, 5(11), pp. 336-340.

Migdadi, M.M. (2021), ‘Organizational learning capability, innovation and organizational performance’, European Journal of Innovation Management, 24(1), pp. 151-172. Web.

Milhem, M., Muda, H., and Ahmed, K. (2019) ‘The effect of perceived transformational leadership style on employee engagement: The mediating effect of leader’s emotional intelligence’, Foundations of Management, 11(1), pp. 33-42. Web.

Neher, A. and Maley, J. (2020) ‘Improving the effectiveness of the employee performance management process: A managerial values approach’, International Journal of Productivity and Performance Management, 69(6), pp. 1129-1152. Web.

Northhouse, P. G. (2016) Leadership: theory and practice. Western Michigan: Sage.

Paais, M., and Pattiruhu, J. R. (2020) ‘Effect of motivation, leadership, and organizational culture on satisfaction and employee performance’, The Journal of Asian Finance, Economics and Business, 7(8), pp. 577-588. Web.

Sharafizad, J., Redmond, J. and Morris, R. (2020) ‘Leadership/management factors impact on employee engagement and discretionary effort’, International Journal of Organization Theory & Behavior, 23(1), pp. 43-64. Web.

Swanwick, T. (2019).’Leadership and management: what’s the difference?’, BMJ Leader. Web.

Swedberg, R. (2018) Max Weber and the idea of economic sociology. Princeton University Press.

van der Hoek, M., Beerkens, M., and Groeneveld, S. (2021) ‘Matching leadership to circumstances? A vignette study of leadership behavior adaptation in an ambiguous context’, International Public Management Journal, 24(3), pp. 394-417. Web.

Watts, L. L., Steele, L. M., and Den Hartog, D. N. (2020) ‘Uncertainty avoidance moderate the relationship between transformational leadership and innovation: A meta-analysis’, Journal of International Business Studies, 51(1), pp. 138-145. Web.

Yukl, G. and Gardner, W. L. (2020) Leadership in organizations. Essex: Pearson Education.

Zheng, J., et al. (2019) ‘Leadership, organizational culture, and innovative behavior in construction projects: The perspective of behavior-value congruence’, International Journal of Managing Projects in Business, 12(4), pp. 888-918. Web.