Issue:May 2016

EXTERNAL DELIVERY – Lead Your Company, Don’t Over Manage It

For many years, I have witnessed a continuing discussion on the question of, “what’s the difference between leadership and management?” Or is there one? I believe that while there are crossover points between the two, there is a difference. Let me focus on management to explain.

There are five functions of management: controlling, planning, organizing, staffing, and directing. These are hands-on management responsibilities. Yes, leadership is responsible for ensuring these functions take place, but the direct responsibility for each function lies with the management team.

Here is an example of an actual situation that a company faced. We’ll call it the ABC Company. The ABC Company won a bid to install various energy-saving systems on school buildings in San Diego. The projected revenue was just under $8 million with an operating profit of $750,000. Goals and benchmarks were established with timelines, problems were identified, and solutions agreed upon with the entire plan detailed on Microsoft Project. The project budget was established, and the necessary headcount was identified with requisite skill sets.

Training sessions for the install team were scheduled, an incentive bonus was introduced, and a per-diem expense plan was set for employees who would be working away from home for an extended period. Action plans were developed and distributed, the requisite lines of communications were established, and a weekly review meeting schedule was established.

The installation project was completed in slightly less than 1 year, which was on schedule. All segments of the project passed inspections, and the lead contractor was pleased with ABC’s performance. Following the completion of the project, the finance group ran an income statement on the project, which showed the revenue as projected at nearly $8 million, but the operating income showed a $1.2-million loss versus a pro forma profit of $750,000. A negative swing of almost $2 million!

The Board became involved in the examination of why this happened due to the surprise loss of what should have been a nice profit. Apparently, because of the internal and external publicity of this project, the CEO became directly involved in managing the project hands-on rather than leading. He made all of the decisions over and around the managers on the project, all of whom were highly competent in their functional areas. When they disagreed with decisions made by the CEO, they were ignored. No matter how much they tried to manage the project, they were overrun by the CEO.

It was strongly believed throughout the company, as well as by the Board, that had the CEO led rather than try to directly manage the project, the outcome would have been very different. So it is important you understand that leaders lead, not manage. When a CEO takes the position that he or she has to directly manage a project or other situation because they cannot delegate it, what they are really saying is that they do not have the right manager(s) in place. Not leading because you are managing is a path to a potential disaster.

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John A. Bermingham is former Executive Vice President & COO of 1st Light Energy& Conservation Lighting, Inc. and former Co-President and COO of AgraTech, a biotech enterprise. He was also President & CEO of Cord Crafts, LLC; President & CEO of Alco Consumer Products, Inc., Lang Holdings, Inc., and President, Chairman, and CEO of Ampad, all of which he turned around and successfully sold. With more than 20 years of turnaround experience, he also held the positions of Chairman, President, and CEO of Centis, Inc., Smith Corona Corporation, and Rolodex Corporation as well as turning around several business units of AT&T Consumer Products Group and served as the EVP of the Electronics Group, and President of the Magnetic Products Group, Sony Corporation of America.