Management and Leadership (Similarities and Key Differences)

A growing contractor requires both great leadership (right direction) and great management (right actions). The creativity required to attract, motivate, develop, and retain people are where management and leadership intersect.

D. Brown Management Profile Picture

There is a wide range of definitions and interpretations out there. Our focus on the differences and similarities is intentional because this is where we see contractors having the most difficulty when navigating the different stages of growth

Management copes with the complexity of building projects and running the business. They are primarily focused on the inner three components of the Contractor Business Model - Primary Value Stream (Projects), Critical Supporting Operations, and Talent Value Stream. 

Management must cope with thousands of problems that come up every day including inconsistencies from suppliers, customers, equipment, and team members. The pace is high with most issues being both high importance and high urgency. This is quadrant 1 of the matrix Stephen Covey talks about in The 7 Habits of Highly Effective People.

Management designs, develops, implements, then manages and continuously improves the systems that ensure consistent outcomes given inconsistent inputs.

Example: How consistent are your project outcomes as compared to your estimates? If they are consistent to within a few percent plus or minus then you likely have good management systems including people in this area of the business. 


Leadership copes with the complexity of change in the external environment over the longer term. This involves the outer rings of the Contractor Business Model integrated by Strategic Decisions. These decisions must change as both the external market changes AND as the contractor navigates different stages of growth

Example: If you have very consistent project outcomes but are working in a market that is shrinking and driving both margins and revenue down that is likely due to a leadership decision (or indecision) made years ago.

The Intersection (People)

Management (right actions) and Leadership (right direction) must be aligned to support one another. In a simple analogy, everyone must be rowing in the right direction.

The area where both managers and leaders must have deep expertise is in knowing how to motivate and work with others. This is where Emotional Intelligence in the context of the workplace comes in. Daniel Goleman is one of the leading thinkers in this area and breaks it down into 12 elements (HBR article link). 

Goleman summarizes these into four major domains of Emotional Intelligence:

  1. Self-Awareness
  2. Self-Management: Emotional self-control, adaptability, achievement orientation, and positive outlook.
  3. Social Awareness: Empathy and organizational awareness
  4. Relationship Management: Influence, coaching and mentoring, conflict management, teamwork, and inspirational leadership.

Managers and Leaders must be great at the technical aspects of their work, whether that is knowing how to build a project, knowing the financials of a construction business, or knowing the markets. This is how they make good decisions, develop people, and handle escalated problems. As a contractor grows, these areas of technical knowledge become both more specialized and deeper.  

Managers and Leaders must also be great with people - the four domains above starting with a foundation of self.

Example: Bad morale, high turnover, and difficulty attracting the right people is an issue of both leadership and management. 

Perspectives on Leadership and Management

John P. Kotter who is the author of Leading Change and What Leaders Really Do describes it like this:

“Leadership is the creation of positive, non-incremental change, including the creation of a vision to guide that change (a strategy) and the empowerment of people to make the vision happen despite obstacles, and the creation of a coalition of energy and momentum that can move that change forward.”

Joseph P. Fuller has been working with and studying leadership and management since the 1980s. He describes the differences and similarities elegantly:

"Management is getting the confused, misguided, unmotivated, and misdirected to accomplish a common purpose on a regular, recurring basis. I think the ultimate intersection between leadership and management is an appreciation for what motivates and causes individuals to behave the way they do, and the ability to draw out the best of them with a purpose in mind."

W. Edwards Deming is known as the father of the quality movement and is most well-known for his theories of management. He was hugely influential in post-WWII Japan in helping them adopt management principles such as what was in the Job Instruction (JI) program. Deming summed up the layer of management that bridges the gap between strategic direction decisions and the operational processes required to support those decisions:

"Eighty-five percent of the reasons for failure are deficiencies in the systems and process rather than the employee. The role of management is to change the process rather than badgering individuals to do better.”

Whatever you settle on for definitions, please just make sure that you don't frame it as Leadership vs. Management.

  • There are good leaders and bad leaders.
  • There are good managers and bad managers.
  • Some bad managers and leaders achieve good outcomes, but they are rarely sustainable.
  • Some great managers and leaders achieve poor outcomes, even catastrophic outcomes.
  • Luck always plays a factor in both directions.
  • Both technical and people competencies are major factors in the outcomes.

All contractors need competent leadership (right direction) and competent management (right actions). 

Leadership and management teams go through three distinct phases of development within each stage of growth for the contractor

  • Evaluating a contractor and the management team is always a challenge.
  • Developing a realistic growth plan is 10X harder because it must take into account the competencies, aptitudes, and desires of the individuals and the collective team.
  • The discipline to work through that development plan for the team in alignment with the growth strategies for the company is another 10X harder. This requires years of grinding through the ups and downs of leading change without ever losing focus or optimism. This is where the "Positive Outlook" element of "Self-Management" (above) really comes into play.  


Some Valuable Resources

  1. The 360 Degree Leader (Book and video of John Maxwell talking through the 7 Myths of Leading from the Middle)  
  2. The Effective Executive (Peter Drucker). Timeless principles for effectively leading an organization.
  3. Stratified Systems Theory (SST) / Time Span 101 (Elliot Jaques / Tom Foster)
  4. The Culture Code (Plus Companion Playbook of 60 Actions to Help Your Group Succeed)

Please keep in mind that there are not hard lines between leadership, management, or the levels defined in SST. Contractors and management teams are simply always working toward these models including more clarity on roles and responsibilities. This continually changes with the market, growth, and people.

An experienced but unbiased 3rd party can be invaluable in helping you evaluate and develop your entire team if leveraged correctly. 

All relationships begin with a simple conversation. Let's schedule time to talk confidentially about your company, vision, and team. We will share freely anything we know that might help you.


Related Training

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Accountability + Compensation: The Myths and Realities
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