What does a managing director do? Who do they report to?
Multi-company managers, also known as managing directors, are high-ranking corporate executives who oversee multiple company managers. They report directly to a conglomerate’s CEO, meaning they’re one of the highest-ranking leaders in a company.
Discover more about the responsibilities of a managing director.
1. Managing Directors Must Become Hands-Off Mentors
What does a managing director do? To succeed, managing directors must learn to be completely hands-off mentors to the company managers below them. The authors of The Leadership Pipeline explain that this is often a major struggle. Because they’ve progressed this far in the Leadership Pipeline, managing directors are all very proficient business leaders—but the managing director role doesn’t involve using these skills. Coaching and supervising company managers as they make all the strategic decisions typically feels much less exciting.
(Shortform note: What can a managing director do if they realize that they’re unhappy as a hands-off mentor and vastly prefer working as a company manager? One option is to simply ask for their old job back. This may be difficult for people who see moving backward as a sign of failure; but if their previous job was a better fit for their strengths and values, it might be for the best. If a managing director’s previous job as company manager has already been filled, another option is to work with higher-ups to decide on a new position for them that’s a better fit. If they’ve been promoted to managing director, it’s clear that the organization values them and will likely work to find a way to retain them as an employee.)
The authors warn that managing directors should never force their strategies on their subordinate company managers. Taking over a company manager’s job by telling them exactly what strategies to execute deprives them of the leadership experience they need to become a dependable higher-ranking executive in the future. This can be disastrous, as weak executives in influential positions can do tremendous damage to an organization.
(Shortform note: If a managing director wants to force their subordinate company managers to accept their exact strategies, it’s arguably indicative of a greater flaw in their coaching mindset: They’re trying to fundamentally change the company manager’s leadership style rather than expand and build upon their existing skill set. If someone has been promoted to company manager, they’ve likely found a successful way to manage their people, even if it seems unorthodox. Forcing them to accept strategies that don’t fit into their existing leadership style might counteract their existing strengths and hurt their performance in future executive roles.)
Instead of handing down specific strategies, managing directors must guide company managers to improve their own strategies, argue the authors. How? When a company manager proposes any major strategy, ideal managing directors work with them to examine that strategy for any signs of weakness. They ask critical questions to gather any information they need to judge whether the strategy will be successful. If the managing director finds that the strategy doesn’t hold water, they tell the company manager to fix its flaws or develop a new one. This way, they ensure the organization is only following reliable strategies while simultaneously teaching company managers to develop better ones.
| How to Effectively Critique Subordinates In The One-Minute Manager, Ken Blanchard and Spencer Johnson offer advice relevant for any manager looking to critique their subordinates’ work, including managing directors. When critiquing a strategy, managing directors should detail its flaws as precisely as possible rather than passing down their judgments as unquestionable commands. For company managers to learn, they need to understand what specific negative consequences their boss is trying to avoid by rejecting their plan. Additionally, after detailing the logic behind their conclusions, managing directors should apply the same logic to their own conclusions. If it becomes clear that they were wrong to reject a strategy, managing directors should openly admit to their misjudgments. This helps them appear reasonable and objective, making their company managers more likely to take their opinions seriously. |
2. Managing Directors Must Manage a Portfolio of Businesses
While coaching company managers, managing directors also have to know how to realistically predict how successful each company will be, explain the authors. This is because they’re also in charge of managing the corporation’s portfolio of businesses: They move resources from across the conglomerate to the companies that can most successfully utilize them to accomplish the organization’s ultimate mission (as defined by the conglomerate CEO).
(Shortform note: Generally, investors lack faith that managing directors can productively allocate resources across a portfolio of subsidiaries. They usually value conglomerates as worth less than the sum of their subsidiaries, indicating that they believe each subsidiary could turn a greater profit as an entirely independent business. This is known as a conglomerate discount. But if conglomerates lower their subsidiaries’ market value, why are they so common? One reason is that conglomerates are generally more stable investments because their holdings are so diverse. If a subsidiary in one industry suffers a downturn, those losses can be balanced out by increased profits from a subsidiary in a different industry.)
