The Difference Between Managing and Leading Understanding people will help you make the shift from managing to leading a business.

Q: I started my own business this year, making the transition from sales manager to business owner. What's the difference between leading and managing employees? And what does my role as a leader now encompass?

A: Leaders are the heart of a business. The essence of leadership means inspiring a group to come together for a common goal. Leaders motivate, console and work with people to keep them bonded and eager to move forward. That means setting a direction, communicating it to everyone who will listen (and probably many who won't) and keeping people psyched when times get tough.

Managers are the brains of a business. They establish systems, create rules and operating procedures, and put into place incentive programs and the like. Management, however, is about the business, not the people; the people are important as a way of getting the job done.

Most business executives and owners have a mix of management and leadership skills. Both skill sets are necessary to run a successful business (unless it's a very small business with people who naturally mesh very well). Leadership skills provide the direction, while management skills provide the systems that let a company grow with success.

Unless you have the luxury of hiring managers and concentrating solely on leadership, you'll still be managing. But now, you must also lead. And, in many ways, your leading--which produces no tangible results--is more important than your managing.

Only the top executives can set direction in a company. Setting direction is different from setting goals. A goal is concrete and measurable: "We must sell 10 widgets by next Tuesday." Direction is broader. Leaders set direction with a vision, a mission and operating principles that embody the company's direction and values.

For instance, a mission statementfor the imaginary Personal Assistants Inc. company might sound like this: "We free people from life's drudgery, freeing them to live a life of doing only the things they do best." This mission doesn't give measurable goals, but rather points to an overall direction--it gets people excited and moving in one direction. A Personal Assistants employee wouldn't suddenly decide to diversify into heavy farm machinery; it doesn't fit the mission. Yet the mission is broad enough that the company can create a rich set of offerings over many decades. Specific projects and products may come and go, but the mission gives the company an enduring direction.

As a business owner, you need to know your business's direction. It might be broad, sweeping and world-shattering. Or it might be smaller and local: "Smith Tailors make our customers look their best in their daily and business lives." But now your job is to set the direction for everyone around you and communicate it well.

People sometimes forget a company's direction in the heat of excitement over a new idea or market development. If it happens once or twice, it's not a problem. But too many diversions can cause a company to lose focus and end up serving many different customers, none of them well.

Your job is to bring people back to the company direction gently and consistently and always challenge them to evaluate ideas and decisions with respect to the decision. If Personal Assistants proposes asking clients to give 24-hour notice when they have a project, the leader simply asks: Does this help us free clients from drudgery or make more for them? The team can then decide (or even ask customers) whether the suggestion aligns with the mission.

Keep in mind that people easily lose sight of the big picture when they get caught up in life's daily details. As leader, you must know how to bring them back and make sure they know the way.

There's much more to a business leader's job, but you'll start off on the right foot by developing a direction, aligning your organization behind the common goal and bringing them back when they stray. Setting direction sounds easy, but it requires vigilance and work. And you're the only one who can do it. Pointing the way and rallying the troops forward are two primary responsibilities of a successful leader.

As an entrepreneur, technologist, advisor and coach, Stever Robbins seeks out and identifies high-potential start-ups to help them develop the skills, attitudes and capabilities they need to succeed. He has been involved with start-up companies since 1978 and is currently an investor or advisor to several technology and Internet companies including ZEFER Corp., University Access Inc., RenalTech, Crimson Soutions and PrimeSource. He has been using the Internet since 1977, was a co-founder of FTP Software in 1986, and worked on the design team of Harvard Business School's "Foundations" program. Stever holds an MBA from Harvard Business School and a computer science degree from MIT. His Web site is a http://www.venturecoach.com.

The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.