Leaders make a vital impact on the economic value of a company. They substantially influence everything from customer satisfaction and loyalty to employee engagement and retention, culture, innovation and—of course—profitability. While managers also impact these areas of an organization, true leaders, in most cases, can take things to a higher level.

Gallup's 2021 engagement meta-analysis shows an effective leader’s impact on employee engagement drives business improvement with:

• 81% lower absenteeism;
• 18% turnover (in high-turnover organizations);
• 43% lower turnover (in low-turnover organizations);
• 28% less shrinkage;
• 64% fewer employee safety incidents;
• 41% fewer quality incidents (defects);
• 10% higher customer loyalty/engagement;
• 18% higher productivity;
• 23% higher profitability;
• 66% higher employee wellbeing; and
• 13% higher organizational citizenship.

Leaders versus Managers

Matt Gavin explains in his article “Leadership vs. Management: What is the Difference?” (published in Harvard Business School Online Insights) that effective leadership is centered on a vision to guide change. Leaders are more intent on thinking ahead and capitalizing on opportunities. Managers are more focused on achieving organizational goals through implementing processes, such as budgeting, organizational structuring and staffing.

In his book, “On Becoming a Leader,” Warren Bennis lists the key differences between managers and leaders as:

• The manager administers and the leader innovates;
• The manager maintains and the leader develops; and
• The manager focuses on systems and structure and the leader focuses on people.

Bennis says that leaders are less focused on organizing people to get work done and more on finding ways to align and influence them. Conversely, managers pursue goals through coordinated actions and tactical processes, or tasks and activities that unfold over stages to reach a specific outcome. For example, they may implement a decision-making process when leading a critical meeting or devising a plan to communicate organizational change.

Forbes Coaches Council member Doc Norton states, “Manager is a title. It is a role and set of responsibilities. The best managers are leaders, but the two are not synonymous. Leadership is the result of action. If you act in a way that inspires, encourages, or engages others, you are a leader. It doesn't matter your title or position.”

Other members of the Forbes Coaches Council say:

• Leaders want you to win;
• Leaders are visionary while managers are tactical;
• Managers micromanage, leaders inspire;
• Leaders ask "Why?" instead of “How?";
• Leaders guide others toward an outcome;
• Managers train, leaders develop;
• Leaders focus on long-term results;
• Leaders lead; managers follow;
• Leaders have the courage to face what others fear;
• Leaders challenge the status quo;
• Leaders know how to listen;
• Leaders grow people; and
• Leaders give their ‘power' away.

Council member Erin Urban maintains, “One must shift out of the ‘me’ focus derived from the traditional power-hoarding mindset. True leaders realize their sole existence is to add value to others. The difference between a leader and a manager is determined through demonstrated action to develop trust, credibility and support others in their success.”

Leadership Competencies

Leadership skills can be developed in professionals who have the core competencies needed to become a leader. Dr. Sunnie Giles, president of Quantum Leadership Group, points out in her article, “The Most Important Leadership Competencies According to Leaders Around the World” published in the Harvard Business Review, that the most important leadership qualities are centered around soft skills and emotional intelligence. A survey of 195 leaders from more than 30 global organizations suggests that there are five major themes of competencies that strong leaders exhibit, including:

• High ethical standards and providing a safe environment;
• Empowering individuals to self-organize;
• Promoting connection and belonging among employees;
• Open to innovative ideas and experimentation; and
• Commitment to the professional and intellectual growth of employees.

While these competencies may be obvious, Giles asserts they are difficult for professionals to master. It requires them to act against human nature. Individuals are not hardwired to relinquish control or be open to minor failures.

By understanding the characteristics of effective leaders and how leadership differs from management, professionals can develop the skills to inspire and encourage people to make their highest and best contribution to the organization.