Effective Management: Know-How vs. Leadership

During the dot-com bubble of the 1990s, companies skyrocketed their valuations simply by adding “dot-com” to their stock tickers. The trend is not just a cautionary tale for investors: It highlights how in the age of digital disruption every company, from automaker Jaguar Land Rover to investment bank Goldman Sachs, is becoming a technology business. 

That poses a challenge for managers with limited technical competence — subject-matter expertise and technical knowledge — who often find themselves leading armies of knowledge workers who are seen as the backbone of their business. At the same time, leaders who are promoted because of their technical competence often struggle to excel in their new leadership roles, as they lack the managerial competence — the ability to manage people, processes and resources — that is vital to the job. 

These issues may bear particular consideration for business students, who have a high degree of managerial competence and increasingly see their futures with dynamic technology businesses. 

Expertise vs. Leadership

So which type of leader — technically or managerially competent — is the most effective? In which situations would each excel or falter? The answer, as with most questions, is “It depends.” Darden Professor Roshni Raveendhran and USC Marshall Professor Kyle Mayer examined when leaders with strong technical competence or excellent managerial ability are effective and not so effective. 

They found that this largely depends upon matching the right job with the right leader. If the job is highly tacit — or difficult to communicate to another person and is often implied — they need a manager who is highly technically competent, because it is hard for the workers to convey the challenges that might arise from their work to someone with little technical competence. Managers who can engage with knowledge workers in a technical capacity by sharing knowledge, offering work-related tools and co-creating solutions to technical problems are critical for success in these situations. 

On the other hand, if the job that knowledge workers do is characterized by low learnability — is difficult to learn and leads to discouragement and frustration — it is more important that a leader has managerial competence, to motivate employees and enable learning. Leaders’ managerial competence is also particularly beneficial for teams of younger knowledge workers who may not know how to work effectively together in teams — for example in a startup. In such instances, managerially competent leaders such as MBAs will likely excel, even though many do not have prior technical expertise. 

The Right Type of Leader

In essence, problems stemming from tacitness or learnability can be addressed by organizations via matching managers’ and employees’ competencies with the job. If they get it right, there will be positive outcomes. Yet if a company assigns the wrong type of leader to a team, they risk internal friction that will delay progress. In this instance, it is important to provide training opportunities to improve either their technical or managerial competence, or reassign the leader to a more suitable workgroup. The onus to improve workgroups is, after all, on the company. 

The same principle can be applied to industries and organizations outside the technology domain as well. In all fields, there’s some level of technical competence required — in public relations, for example, that means knowing how to manage the public image of the organization or writing a press release. In the same instance, managerial competence is required to lead all of the stakeholders involved in the operation. 

And as the dot-com boom proved, technical competence is increasingly required of managers as the boundaries between industries are eroded by technology. The bottom line: the right mixture of abilities in workgroups will become increasingly important as technology takes over every aspect of business. Unlike the dot-com bubble, that trend seems unlikely to burst.