BY FAISAL HOQUE

Leaders who are detached from the messy process of managing fail. They need to recruit board members, executives, and managers who are doers, not just joiners.

The headlines scream about leadership failure after failure around the globe every day–at the world’s biggest companies, in government agencies, at venture-backed startups, and even in organizations such as the Vatican. So why does leadership fail?

Henry Mintzberg in BusinessWeek writes:

It became fashionable some years ago to separate “leaders” from “managers”–you know, distinguishing those who “do the right things” from those who “do things right.”

In practice, leaders who are detached from the messy process of managing fail. They don’t know what’s going on in their organizations. Stanford University Professor Emeritus James G. March has said “Leadership involves plumbing as well as poetry.” And I couldn’t agree more having experienced this throughout my career. The devil is in the details. Great leaders fail without good management.

There are a host of definitions of what constitutes leadership and what is management, including the idea that leaders envision and inspire, while management creates systemic processes for planning and execution. I would argue that among other things, one of the key elements is having transparent and repeatable management processes from the boardroom to the project teams.

Why Boards and Management Fail

Consider the following examples:

• At JPMorgan Chase, Ina Drew, the senior banker who has taken the fall for massive trading losses, was reportedly already faltering in 2010, two years after navigating the banking behemoth through the worst of 2008’s financial storm.
• High-flying Chesapeake Energy CEO Aubrey McClendon borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells without anyone raising a hand before facing the ire of shareholders.
• The U.K. Culture Minister Jeremy Hunt said he became worried about “a massive failure of corporate governance” at News Corp. in July 2011 after the media giant’s News of the World hacked the voice mail of a teenage girl who was later found to have been murdered. It then became apparent that the still-ongoing debacle had been of “growing concern to News Corp.” for months, according to Hunt.

Without the board of directors, senior management, and line managers all working together to execute strategy and ensure strict adherence to ethical practices and operating standards at a detailed level, it’s too easy for aberrations to go unnoticed.

The key is focusing on operational governance. Companies like to have marquee names on their boards–VIPs like former governors, senators and university presidents–as directors. Unfortunately, such celebrities often lack expertise in the businesses they’re overseeing, or have no time (or sometimes even the inclination) to roll up their sleeves and really do the work. To be able to do the work, one must understand the complex sets of decisions that are required in today’s interconnected environment.

Dimensions of Management Decisions

What distinguishes today’s successful enterprise is knowledge–such as knowledge of the customer, the suppliers, and new business ideas that could emerge from anywhere. The challenge for leaders is managing such extended enterprises which requires breaking many of the management rules we grew up with. Rather than top-down hierarchical processes and approaches, they need to manage and govern cross-collaboratively. In order to do this, the organizational structure must be adapted to nourish true coordination inside and beyond the extended enterprise.

In my last book, The Power of Convergence, we defined four decision dimensions to lead these extended, ever-evolving, knowledge-based enterprises:

Process: Is someone responsible for each process from beginning to end as it crosses divisions and bridges to outside entities? Where are the strengths and weaknesses in the process? How does it mesh with others? How many bridges are there to the outside? Are they coordinated? Are these processes and bridges maximized for the benefit of the customer, or for internal benefit? By what metrics do you know?

Organization: Which people or groups make which decisions? Do they have enterprise-wide information if they need it? Do they have an enterprise-wide perspective? Are incentives in place to encourage this? Do the incentives actually discourage this? Do they have proper authority? Who is empowered to step outside of traditional roles and boundaries to make a stand for the customer? Or to make a stand for the supplier?

Information: What information do the various players need to perform the preceding actions? What should you know about suppliers and customers, and how can you get this information? At what level should it be collected? When collected, how is it processed? Does it go to people who can make decisions to change how the organization operates? What incentives discourage the “not invented here” syndrome?

The really critical information will appear on the outer periphery of the extended enterprise: with your customers’ customers; their markets and new technologies they may be considering. It will appear in the commodities markets and technological innovations that fuel your suppliers. It may appear in think tanks or universities or in someone’s garage. Is your radar picking up these signals?

Technology: Not only must the technology be managed as one with the business internally, it must be planned for, purchased, and managed with the outside world in mind, as well. Look to standards, to web-based applications, to open architectures, and to the new social networking technologies for the appropriate tools. Closed, proprietary technologies do not fit an organization seeking to be part of a larger community. Look also to component-based architectures and cloud computing for the agility needed to sense and respond. All is in flux today; you can’t be tied down.

Strategic Business Risks

Leaders must provide active oversight over how business risks impact the business, and ensure the effectiveness of the governance models in mitigating these risks. Strategic risk refers to the risks facing the firm due to poorly envisioned or executed business strategies. Some of these risks include the following:

• Business model risk: This refers to the robustness of the business model and how well it is being executed.
• Competitive risk: This refers to the ability to sustain itself against competitive action and retaliation.
• Integration risk: This refers to the risks of inadequate integration between business strategies, execution processes, and supporting technology infrastructures.
• Misalignment risk:This refers to inadequate alignment between spending and business priorities.
• Governance models risk:This refers to inadequate participation and involvement of executives on key decisions and lack of understanding of inter-dependencies.

Leaders need to recruit board members, executives, and managers who are “doers,” not just “joiners.” Management governance requires the accountability of everyone within the enterprise, along with partners, distributors, suppliers, and anyone who plays a role in carrying out a business plan.