Whether leaders or employees matter more

Dear Bob …

A comment on the question of which is more important, leaders or staff:

Nobody really doubts that both management and workers are both important to a successful enterprise, just as it is pretty clear that in most sports (perhaps not golf), both natural gifts and rigorous training are necessary.

The question, however, is which is “most” important.

Let’s say you could perform the following experiment: You have two groups of employees, one set exceptionally skilled, and the other mediocre, and you have two management teams, one very skilled, and the other inept. Now, let’s imagine you could try out the different possibilities in real life.

No one doubts that pairing excellent management and workers will blow away the inept versions of both, as well as outperforming the other two combinations. But what would happen in the marketplace if you could compare the combinations of excellent management with poor workers and vice-versa?

Although my tendency is to favor the excellent worker/poor management combination, I could foresee people arguing that you might get different answers in different industries and/or at different points in the maturation cycle of an industry.

Of course, we can’t perform these experiments for real. The best we can do is to look for similar companies, in similar industries, and compare results. This is one way to get a new business book published, e.g. Good to Great.

– Posing a challenge

Dear Posing …

Actually, you could perform the experiment, using what scientists call “statistical controls.” You’d find a bunch of companies, score each on employee and management ability, track results, and perform an analysis of variance to figure out the impact of each factor.

Here’s what I’d expect you’d find:

• Strong management/strong employees: As you say, they’d blow away the competition (and almost always do; the exceptions are companies whose business models have become invalid and have no obvious place to go; this situation is dicey even for the best managers and employees).

• Strong management/weak employees: Strong management will, over the course of a few years, strengthen the workforce through a combination of key hires, education, and effective leadership. It’s rare that the whole employee population is intrinsically incapable, after all. More usually the problem is a combination of a small number of poor performers who make the rest wonder why working hard matters, and weak leadership that proves them right.

• Weak management/strong employees: I’ve seen this many times. The strong employees keep things going, generating enough profit to pay the salaries of managers who play at running the company. This combination can create the illusion of success for as long as a decade, until the business model runs out of gas (see above) or new management comes in.

If the new management is strong, there will be a disruptive period as employees figure out how to follow someone else’s lead instead of figuring things out on their own, then things will usually settle down. If the new management is weak, it will likely also be greedy and drain the company. It’s akin to the situation with parasites — long-established ones allow the host organism to stay healthy. New ones cause fatal or debilitating diseases.

• Weak management/weak employees: Well this is predictable, isn’t it? Except for very large enterprises, these fail miserably, after a few years during which inept management plays stupid financial games to create the illusion of success.

Very large enterprises, on the other hand, will receive some form of government bailout to prevent them from going under and destroying the economy …- Bob