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Step two in the transition from functional to business leader

By IMD Professor Michael D. Watkins - October 2014

The first responsibility of functional leaders is to ensure that staff has sufficient in-depth analytical knowledge of their business area. Business leaders, in contrast, manage cross-functional teams and must apply these teams' collective knowledge to solve important organizational problems. They have to learn how to manage integrative decision-making and problem solving and, critically, how to make appropriate trade-offs.

This transition from analyst to integrator is the second of the seismic shifts executives experience moving from functional to business roles. (For information on the first seismic shift see: From specialist to generalist.)  

Let's start by clarifying the difference between "analyst" and "integrator." A functional leader in marketing, for example, will be responsible for answering questions about customer needs, competitor positioning and so forth. Business leaders, however, are less concerned about the details of any functional analysis than they are about its implications for the overall business. Analysis remains important, but business leaders use it differently to functional managers. Business leadership is about integrating the functional pieces.  

Consider, for example, a sales vice-president with a great idea for a new promotion campaign. He says the timing is perfect and the market ready. The business leader is delighted. But then the vice-president of operations raises objections. He says that the plants are already running near capacity and cannot meet a surge of new demand. If the promotion goes ahead, he says, the result could be backlogs and customer frustration.  

For the business leader, this is a classic problem of balancing the supply and demand sides of the business. Each function leader is acting correctly, but the leader must ensure that the pieces fit together. He or she has to be an integrator. Integration requires making the right trade-offs. It involves helping functional managers understand what is best for the business as a whole. In the example of the new promotion, the leader would probably tell the sales vice-president that his idea was great but that the timing was not quite right. He would say that it would be better to wait until the plants could meet the additional demand.  

Making the call  

Sometimes a business leader has to make a call based on what is right for the business. To do so, he or she needs to understand what the core trade-offs are in the business. The supply/demand issue is one example of a trade-off. Another could be innovation versus execution: how far should a business focus on innovation rather than on executing brilliantly what it is currently doing? Current financial results versus investment for the future would be another example.  

Business leaders must be wary of bias creeping in to the calls they make. Unconsciously, a general manager may give too much weight to his or her former functional area, whether it is operations, R&D, sales or marketing. Ensuring that decisions are data-driven can help overcome this problem. Leaders should always push their people to ask themselves, "How do we get better? What is the learning curve so that we can do things more effectively?" 

But decisions involve such complexity, uncertainty and ambiguity that the data are never going to give the full answer. There may even be multiple right answers. In the end, judgment is needed and, by definition, that is subjective. The key thing is to be aware of this, and of the potential biases that can affect any discussion.  

Finally, first-time business leaders can be risk-averse because they are learning about complex domains and making decisions with important consequences. Typically, wise companies do not put a new general manager in a situation where he or she needs to make very high-risk decisions quickly.  

Michael D. Watkins is Professor of Leadership and Organizational Change at IMD. He co-directs Transition to Business Leadership, a program designed for experienced functional managers who either have recently transitioned or will soon transition into a business leadership position.

SEVEN SEISMIC SHIFTS is a trademark of IMD – International Institute for Management Development.



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