Management vs Leadership
Management Vs. Leadership – Working In Sync
Distinction
Although the terms Manager and Leader are often used interchangeably in business settings to describe someone who oversees a function, area, or organization, they have very distinct and separate skill sets that take on different meanings. Some Managers fail when it comes to leading, while some Leaders fail when it comes to managing.
Management Characteristics
In most organizations, a Manager is primarily responsible for a group of employees and their performance. Managers are given their authority based on their role and ensure necessary work gets done, oversee day to day tasks, and manage their subordinates’ activities. Given the nature of their role and authority, Managers are often more directive, controlling, and tactical in an effort to organize their employees to accomplish tasks and complete deliverables.
Leadership Characteristics
Leaders are often more strategic in their approach and rather than directing and controlling, they place special emphasis on motivating and inspiring employees to drive for exceptional performance. Leaders have outstanding soft skills and are able to empower, energize, coach, and create enthusiastic work environments to get the best out of their employees. Good leadership skills are behavioral in nature and subsequently much more difficult to learn than management skills. Additionally, Leaders, unlike Managers, promote and concentrate on idea generation and change. Employees represent the ideal opportunity to generate and implement change for continuous improvement and Leaders utilize them to achieve this.
Management & Leadership – Working In Sync
A commonly used phrase, ‘Managers are people who do things right and leaders are people who do the right thing’ shows the dependence each have on one another for a boss to be fully rounded. It is imperative to deliver results and complete the day to day activities while inspiring employees and understanding the big picture. Being a good Manager while failing to motivate, inspire, and drive employees will result in problems obtaining desired results. Similarly, being an effective Leader without the management skills to support it will result in ideas and results not materializing.
Leadership and Management roles, when utilized in balance, can create synergies that result in optimal employee engagement and business results. A well rounded and effective Leader and Manager can draw on each skill set in varying work environments or situations to achieve their desired results.
Every organization structures its goals and corporate agendas in anticipation of changes in the economy, industry, or competitive environment. When an organization achieves these goals, Managers and employees continue sustaining the current system with little emphasis on change. However, as consumer preferences change, industries evolve, and economies shift on a continuous basis, it is important for every organization’s Leaders to constantly challenge the status quo and current system in an effort to remain ahead of the competition.
Conclusion
Management and Leadership both play integral roles into the success of an organization and directly impact its ability to remain competitive. Managing employees on a daily basis and ensuring necessary work and deliverables are completed on time are critical to an organizations day to day operations. Leading and motivating employees for exceptional performance while cultivating an environment that promotes continuous improvement and idea generation will ensure organizations stay in tune with changes in the competitive landscape. Utilizing both skills sets will create synergies across the function, area, or organization that will play a critical role in the organizations continued success.
Linking Executive Performance & Pay
Compensation based on the short term, rear-view mirror is getting outdated.
Executive Performance Overview
Many organizations have tried and failed in their attempt to close the gap between Executive performance and compensation. In most organizations, Executives’ greatest concerns are top line growth and profitability as these are directly linked to overall compensation packages. Although shareholders tend to look favorably on these factors as share prices appreciate, this type of compensation package promotes negative short term behavior often resulting in questionable activities or long term organizational capability destruction. Therefore, it is extremely important to ensure the correct indicators are being measured to accurately reflect the overall value of the organization and performance of the Executives.
Executive Performance – KPI’s & Compensation
Key performance indicators play a crucial role in ensuring a business is strategically aligned with the business goals and achieving desired results. However, most organizations evaluate Executive performance based heavily on financial key performance indicators such as EBITDA, gross profit, and net income and fail to capture other, but equally important non-financial related aspects of the business.
Many organizations utilize lagging financial indicators such as profit and revenue growth while failing to incorporate forward looking leading indicators into Executive performance evaluation. Although lagging indicators are a very important aspect of any business and show an Executive’s recent performance, they alone show past results and fail to capture what is required to improve or sustain desired goals & results. Therefore, it is equally important to include leading KPI indicators to ensure Executives are successfully managing the day to day operations of the business while simultaneously focusing on both future long term growth initiatives and profitability. To achieve this, indicators must address all areas of the business including financial, customer, internal business processes, and learning and growth to ensure the enterprise if performing in all areas and is strategically positioned for long term sustainably growth.
Executive compensation packages that include reasonable incentives for short term performance and higher incentives for long term performance and sustainable growth truly manifest the characteristics required to promote positive behavior and represent the greatest value creation for shareholders.
Performance should be evaluated on achieving financial and non-financial objectives to ensure all facets of the business are performing. Other factors, such as retention, cost reduction and control, overall productivity, and strategic alignment with corporate goals are important characteristics that also need to be considered.
With stock options representing the fastest growing segment and accounting for over half of Executive compensation at some of the world’s largest companies, it is imperative that corporate boards of directors determine the most important indicator’s and levels of performance on which to evaluate, rather than following traditional, or outdated models.
Otherwise, any increase in the company’s stock price represents positive performance and rewards the Executive (option owner) without distinguishing between positive or negative performance.
Conclusions
Although Executive performance and compensation are areas that will continue to evolve and be the center of great debate, corporate boards who are able install meaningful key performance indicators, structure Executive compensation to promote long term strategic thinking, and reward above average market performance will create lasting value for shareholders.
Operational Risk Management for Banks
New frontiers have created new and important risks that can lead to severe losses.
The Need for Risk Management
The international banking system has experienced significant structural changes over the last thirty years. Major banks have merged, many institutions have become global and alliances with insurance companies and other financial service partners are increasingly common. Over the same period, the use of financial engineering and technology has been rising in popularity allowing banks to offer new products and enter into new business activities to satisfy customer needs. The changing structure combined with increased product offerings has been increasing risk exposures for the banking industry that have not traditionally existed particularly in the operational areas.
Operational Risk
There are sophisticated models developed to quantify and hedge market and credit risk, however, operational risk has been a newer occurrence and concern for the industry. These usually include day to day errors that have traditionally been viewed as a fixed cost of operating and were too small to have an impact on the business. The complexity of products is creating an increased likelihood of errors in business operations which can contribute significantly to the risk profile when viewed in aggregation.
Examples of Transaction Risks:
- Mark to model error
- Execution error
- Booking error
- Settlement error
- Volume risk
- Exceeding limits
- Information Risk
Conclusion
The banking industry has been facing changes in organizational structure and expanding product lines leading to new risk exposures that are difficult to quantify since they have not existed in the past. However, failure to identify or neutralize risks in a timely manner can lead to severe financial losses or interruptions in activities that actually add value to corporate goals. A thorough risk management methodology that is regularly reviewed must be implemented to ensure operational stability and organizational health so that further growth can be sustained.
Staffing Optimization
Determining and maintaining optimal staffing levels is critical to efficiency.
Optimizing Staffing
When it comes to human capital, many organizations struggle with the simple question – are we understaffed or overstaffed? Determining and maintaining optimal staffing levels is critical to an organization’s efficiency. Optimal staffing depends on several factors including industry, function, sales expectations, customer service, and operations. The concept of being understaffed or overstaffed also plays a critical role in employees’ behaviors, attitudes, and directly affects individual productivity.
Understaffing – Employee Concerns
When an organization becomes understaffed, they typically encounter excess overtime, morale issues, absenteeism, employee burnout, and have a difficulty with relief coverage and training requirements. Most organizations can operate in an understaffed environment in the short term. Employees, when tasked with assisting the organization in increased workload while new hires are recruited, tend to elevate their performance in the short term. However, if sustained for an extensive length of time, employees become frustrated and de-motivated resulting in decreased productivity and morale issues.
Overstaffing – A Costly Venture
Overstaffing is costly and organizations strive to avoid being in this situation but many fail. Not only is overstaffing costly in terms of payroll and benefits, but it promotes a monotonous culture for employees who are not being utilized through the organizations continuous operations. Organizations typically get this aspect wrong; when an operational problem arises, they throw additional resources at it in an attempt to alleviate the issue. The key to avoiding this is to think creatively about how to accomplish the work without adding additional staff and determine whether or not hiring additional staff is feasible.
Techniques to Obtain Optimal Staffing
One of the most effective techniques for a Manager to utilize in determining the optimal staffing level is to complete an area workload assessment (AWA) in each area they oversee. An AWA breaks down each process into independent activities and tells the Manager the monthly hours, or full time employees, that are required to complete the necessary tasks based on a predefined volume. With that completed, a Manager or Executive will know the exact number of full time employees required and when an area or function is over or understaffed.
Another tool that Managers can utilize to reduce lost time due to non-value added steps in the process and install measurable workload completions for employees is process observations. When a Manager or Supervisor observes an employee for a shift, the employee typically performs at their best. The Manager, after observing the best repeatable steps, can define a target for all employees in that area and measure productivity for each employee based on that goal. Additionally, the Manager or Supervisor, while observing, can eliminate any redundant or unnecessary tasks and transfer any best practices or learning’s to the employee to help them become more efficient.
Method or process changes can help an organization complete more tasks with fewer resources. This becomes particularly important when an organization is understaffed, resources are scarce, and work that needs to be completed becomes backlogged. Idea generation and implementation are critical to an organizations ability to remain competitive. Small, implementable ideas from employees who complete the tasks on a daily basis can multiply and represent drastic improvements for an organization.
If an area or function is overstaffed, Managers can shift resources to other areas to increase employee productivity and utilize available resources. Cross training employees in multiple areas helps with employee turnover, seasonality, and backlogs in an organization and having the ability to adapt and shift resources is an extremely important tool to opetimizing staffing.
Conclusion
Whether an organization is large or small, optimizing staffing levels is a critical component in remaining competitive. Although employee turnover and attrition cause staffing levels to fluctuate, Managers and Senior Leaders have tools available to them from Trindent Consulting in obtaining the optimal staffing level for any organization.