Rules of innovation (9): Chandler on why it is a major mistake for leaders to focus too much on their operational level
At the recommendation of the estimable Michael Lind, I’ve been churning through the works of Alfred Chandler, the business historian.
9. At the recommendation of the estimable Michael Lind, I’ve been churning through the works of Alfred Chandler, the business historian. I know we must be careful not to equate business with war, because war is a far more lethal enterprise. If you lose you can’t just file for bankruptcy. At the same time, what happens in business is much clearer, because it isn’t cloaked in the fog of war.
In Strategy and Structure, Chandler begins with this useful distinction: “Strategic decisions are concerned with the long-term health of the enterprise. Tactical decisions deal more with the day-to-day activities necessary for smooth and efficient operations.”
In examining how and why organizations change, he warns against leaders focussing overmuch below the strategic level. “The failure to develop a new internal structure, like the failure to respond to new external opportunities and needs, was a consequence of overconcentration on operational activities by the executives responsible for the destiny of their enterprises, or from their inability, because of past training and education and present position, to develop an entrepreneurial outlook.”
This may be the true danger of micro-managing, besides killing the morale and stunting the growth of subordinates. That is, when leaders do the jobs of below them, they are not doing their own jobs, sometimes because they don’t know how.
The problem, he adds, is that organizations need many managers but, most of the time, few entrepreneurs. Yet on the occasion when the entrepreneurial spirit is needed, it cannot be provided by managers. An entrepreneur takes risks, makes bets, and points the enterprise. A manager tries to support those decisions.
In times of certainty, the managers can run the organization. But in times of uncertainty, is it better to be led by entrepreneurs.
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