Managing Leadership^®

Let’s say you own and operate a business. It is large enough that you must hire some managers to help you run it. But there is no question in your mind or theirs as to who is in charge, is there?

Now suppose you decide to enter into some new activities, which will require you to leave the daily operation of the business to your managers. Nevertheless, you hold periodic meetings to review affairs, issue or adjust strategic guidance (or, indeed, guidance at any level that suits you), and you further expect to continuously receive specified data on progress and performance. There is still no doubt as to who works for who, right?

Your new ventures come to demand more of your attention, so you next decide to turn supervision of your company’s managers over to a group of trusted associates you have selected for this purpose. You specifically commission them to, in accordance with your guidance, direct your hired management team in the performance of the latter’s contracted duties. It remains quite clear whose authority is paramount, and who serves at the pleasure of whom.

Things have been going well both at your company and your new activities. You want to redirect your attention altogether to the latter, and also to build a financial structure that is more liquid. You decide to take your company public, selling all of your equity to anonymous shareholders.

There are still owners, directors, and managers. But, based on your knowledge of how publicly-owned companies in the United States operate, what do you suppose happened to the chain of command? Is answering the “who’s calling the shots?” question as easy as before? Where does authority - real, meaningful authority over the strategic identity and direction of the company - reside? Where does responsibility terminate?

There are decided benefits - tested and proven, obviously, under the most extraordinary conditions - to the military concept of the chain of command. Violate it, and you risk losing the very meaning - never mind effective expression - of strategy and execution.

A board must examine this issue and determine how it will incorporate this vital precept into the governance structure of the organization. And as it does that, there is a related matter its directors need to consider. We’ll cover that tomorrow. See you then!

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This post is a part of a series. You can learn about and link to the other articles here: Corporate Governance and Capitalism

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Today’s tip: The study of sleep is one of those areas of brain science that continues largely to stumble around in a forest of hypotheses. But some progress is being made which has implications for us at work - both as individuals and managers. Please see this WSJ piece for more.

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Similar Posts:

• Unity of command
• The owner
• Boards: Setting the agenda
• The man behind the curtain
• What are you going to the board meeting as?

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