Are You a Leader or Manager?

To many advisory firm owners spend to much time managing people, focus on leading instead. Here are the differences.


Despite popular beliefs, running a successful small business isn’t easy.

For one thing, you face many of the same challenges as larger businesses — but with fewer resources. Even worse, most firm owners don’t work on their businesses full time and have to spend much of their time and energy working on a full client load.

At some point in the growth curve of an independent advisory firm, owners need to decide whether they want to become CEOs and run their businesses or become full-time advisors and promote or hire someone to fill the CEO slot.

For owners of firms who haven’t embraced this reality, I offer the following advice, which is based on the differences between leadership and management.

Time to Choose

In my experience, most firm owners don’t understand the difference between being a manager and being a leader. Whether you choose the role of one rather than the other can have a major impact on both your time and energy, and the motivation, performance and learning curve of your staff.

These are two different ways to approach business management. “Management” involves directing and controlling one’s employees; it is a focus on employees’ activities: what they do and how they do it.

This approach happens usually with advisors who are new to business ownership or are growing very rapidly, owners without formal business school training, and/or advisory owners who are drowning in their growth.

Here’s an example of this management approach: An owner advisor needs something done, such as a report on the number of clients each advisor of the firm works with. The owner tells a junior advisor what he wants in the report and the deadline.

There are three basic problems with this approach. The first is the impact on employee’s sense of control.

When people feel out of control, it adversely affects their state of mind. It creates uncertainty and undermines their self-confidence. Therefore, you end up with staff who are waiting around for your directions.

For the ones who are impatient and get bored, they will create problems, i.e. drama, to get your attention. This creates a whole myriad of culture problems, which creates anger and anger creates turnover.

Employees want to feel that they are in control and feel certain about what they are doing. There are arguments about whether either of these actually exist.

But to run a successful business, it’s probably best to leave those existential considerations alone: Accept the fact that this is who your employees are, otherwise, they wouldn’t need you and soon would leave.

The second problem in this scenario is that the owner has ignored a good potential source of information that he/she may not have. The report you’re asking for may already exist or you can easily compile it yourself. Also, perhaps the data you’re asking for won’t really answer your core question.

The third problem with the “management” approach is that it takes up a lot of a manager’s time in dealing with all the drama that it creates on the back end. Ask yourself: Would you rather have your employees waiting around for your direction? Or have employees who feel in control, know their jobs, and express their ideas and suggestions?

To Be a Leader

Becoming a leader rather than a manager solves all three problems. In contrast to management, leadership is asking questions and influencing employees to perform their jobs at a high level and be the best they are capable of. The key word here is “capable.”

I believe the above example might things go differently with a leader rather than with a manager: “Are you busy? I would like your help. Are you willing to help me? I’m trying to determine how efficient our advisors are and would like a report. Do you have suggestions on how I can create it? Are you capable of creating it? And if so, when do you think you can have it to me? Great! I’m so glad you can get it to me by 10. I was expecting noon. You can have some extra time if you have other priorities.”

When firm owners move away from management and toward leadership, it changes the working lives of both the owners and their employees — and greatly increases the prospects for successfully growing their business.

You have a choice: Do you want to lead or manage?

Employees need choices too. Otherwise, they are going to leave. That problem is called turnover.

You can either start to turn over a new leadership leaf or continue to bang your head against the management wall. That’s your choice too.