When a company delivers exceptional results, its CEO quickly becomes part of the success story. When profits fall, attention turns to that same office in search of someone to hold responsible.

But company performance is rarely that simple to explain.

Management may make good decisions while the economy slows, costs rise, and customer behavior shifts. Conversely, a company may post strong growth by benefiting from a booming market whose conditions it did not create.

How much of a company’s success is due to its leadership, and how much is shaped by the environment around it?

This question leads to two perspectives explored in the strategic management course taught by Dr. @Mahran Hafizullah at Al Yamamah University to understand leadership’s impact on company performance: the Romantic View of Leadership and the External Control Perspective.

Do We Give Leaders Too Much Credit?

The Romantic View of Leadership sees the leader as a key factor in explaining an organization’s success or failure. The course uses Steve Jobs as an example of this perspective: people often associate a company’s success story with its leader’s decisions and vision.

This narrative is appealing because it gives success a clear face: a leader makes a bold decision, changes the company’s direction, or launches a new product—and then the results follow.

But the narrative can be incomplete if we ignore the environment in which those decisions were made.

By contrast, the External Control Perspective gives greater weight to factors surrounding the organization, such as an economic slowdown and other variables that management cannot fully control.

This makes interpreting company performance more complicated: management may make a good decision and still see weak results because of market conditions, while another company’s profits may rise because the entire industry is experiencing a period of strong growth.

So results alone are not enough to judge the quality of a decision.

Leaders Don’t Control the Market—but They Decide How to Respond

Recognizing the impact of the external environment does not mean leadership becomes irrelevant.

One idea presented in the strategic management course is that leaders can anticipate change, monitor external opportunities and threats, understand the company’s internal resources and capabilities, and then develop strategies accordingly.

This is where the real role of strategic management emerges through three interconnected elements: analysis, decisions, and actions.

A company assesses what is happening inside and around it, decides where and how to compete, and then turns that decision into action through its resources, organization, and management.

In this sense, leadership’s value does not lie in its ability to control the economy or competitors, but in its ability to understand what it cannot control and prepare for it.

The Numbers Don’t Tell the Whole Story

If a company’s profits fall this year, does that mean its leadership has failed?

Not necessarily.

The entire industry may be under pressure, or the company may have taken on current costs to build capabilities it will need in the future. The reverse is also true: a company’s profits may rise in a booming market, but that increase alone is not enough to prove its management is superior.

That is why context is essential when interpreting company results.

Leadership does not operate in a vacuum, and the market does not make decisions on its behalf. Conditions shape part of the environment in which a company operates, while management determines how to read those conditions, use its resources, and respond to them.

So the next time a company announces exceptional—or disappointing—results, perhaps a more useful question than immediately looking for a hero or someone to blame is:

What did leadership actually make happen—and what was dictated by market conditions?