Senior Leadership: The Difference between Well Managed and Well Led
It makes sense that part of the reason we’re seeing so much interest in our industry on the part of venture capital and private equity is the fact that so many of our traditional businesses have been well managed and well-led for long periods of time. That stability—as an alternative investment—is attractive on its own.
One challenge among many others for hospitality business executives is not only to manage well but to lead well. Are you a senior staff manager or a leader—and what’s the difference between the two? It makes sense that how the senior group defines themselves reflects the priorities of the senior executive. Here’s a simple clue to what I think will lead us to larger areas of focus: if a person is a manager, he or she is focused on day-to-day and operational challenges. This is a great thing. A relentless focus on fundamentals is a business foundation. If someone is a senior leader, he or she will be focused on future problems, growth opportunities, risk, and people. The difference between the two is important both in terms of time horizon focus and business challenge. The simple analogy here is of an airplane cockpit: The view from the cockpit doesn’t show what is below the aircraft because you’re there already. The view from the cockpit looks out on both what’s around you and where you’re going.
I’d argue that leadership—good, solid, predictable leadership—is a long-term advantage for companies both in the face of well-funded venture capital and private equity (VC/PE) firms and for attaining the best possible long-term results. It’s fair to say that like most investors, the VC/PE teams will be looking for short-term returns on investment. The best way to achieve those kinds of things in the short term are through new access channels on the revenue side with operational efficiencies, functional symmetries, and workforce optimization on the efficiency side. Those are properly management functions. However, a well-led company may choose to focus on long-term growth over short-term investor return. As a differentiator, that means investment in staff with training or quality-of-life improvements. It may mean a deliberate focus on customer relations that will prove costly up front but return handsome dividends on a longer timeline. It may mean infrastructure that in a digital age becomes more and more controversial.
As we search for antidotes to the perceived digital restructuring of our industry, I believe a focus on good leadership is a great place to start if you’re thinking long term. By leadership, I mean an ability to deeply think about future opportunities, the importance of surrounding your business with bright, well-trained, and potential-reaching staff members, the energy it takes to believe in your company’s vision, and ultimately the selflessness to sacrifice short-term gains for long-term results. As an example of questions you should be asking yourself is: is it in your power to make sure that your company is the best employer in your area?
Leadership, since the days of Alexander the Great, means taking care of your team. Great leadership—pick whomever you choose as an example here—usually means sharing opportunities and challenges with and alongside your team. It means setting an example—are you out front greeting your guests? Walking through your properties with your cleaners? Talking on the phone with your homeowners?
Interestingly these kinds of behaviors are what become irreplaceable in a digital age. There is simply no app for that. Good leadership will translate well—something digital can manage, to a degree, but digital will never lead. There’s the advantage right there. It might be worth thinking about great leadership in addition to great management as we collectively seek to differentiate ourselves in the digital landscape.
Developing Mid-Level Managers as a Competitive Advantage
What’s your value as a company? When we think of value, we usually think in specific and measurable dollar amounts, but price and value are distinctly different things. While pricing reflects a temporary present condition, value, I believe, includes some of those things that are tough to measure on a day-to-day basis: management strength, brand promise, industry credibility, level of risk, long-term viability, and so on.
In North Carolina, we’ve seen a large number of mergers and acquisitions in the banking industry lately that in many ways parallels the unprecedented level of outside investment activity in the vacation rental sector. When we consider value, here’s a great facet to include in that conversation: management-in-place. As for the banking comparison, I think it’s useful on occasion to look at other industries to compare acquisition valuation with our own industry, and it’s clear in banking that strong management-in-place is a top challenge when change becomes rapid.
To start with a definition, management is the function of deciding priorities, driving implementation, measuring results, and regularly assessing feedback. If you’ve been successful in growing your business, you know that this function can be a critical growth driver or growth dragger, depending on circumstances and the approach taken.
From an acquisition perspective, management-in-place is a question of several factors: management development within an organization, talent retention, unique operations experience, in-depth local relationships, and future leadership potential, to list a few. Those areas operationally reside in mid-level management; members of that key group translate vision into execution and form the front lines of your guest and owner experiences. Mid-level managers are also the ones who can truly drive (or stall) innovation. These individuals carry with them not only a commitment to the company but also a good deal of future capability for the company. In other words, they’re a key to the future.
Members of that group are also the key to a major growth challenge: the dread of a bureaucracy. Few business owners would describe their own organizations as bureaucracies unless reminded of the old Lyndon Johnson definition: “If the person who answers the phone can’t answer the question, it’s a bureaucracy.” To a great many people, bureaucracy has become a synonym for something slow or devoid of humanity, and that’s the last thing that a company wants if it aims to achieve success.
We all interact with bureaucracies on a daily basis, yet few of their employees come to work each day excited to make other people’s lives miserable. Again, it’s those mid-level managers who can make or break an organization, and they’re the first group to address when changing a culture that has become stifled or slow.
To wrap up, as our industry wrestles with valuing monetarily what we do as independent organizations, it’s important to remember that although price might reflect a moment in time, value carries with it the likelihood of long-term success—and with that comes financial strength, stability, less risk, and a solid future foundation. It’s these kinds of things that attract outside investors. People place money only where it feels safe to do so, and a strong team of mid-level decision makers goes a long way toward investor confidence.