Our results suggest that effective leadership is at the heart of how management matters in local governments. While an independent positive effect of overall capacity on performance was revealed for two important measures of government performance, the interacted effects of leadership and management systems were associated with a relatively higher rate of improvement. All other things being equal, then, effective leaders who seek to mobilize management capacity are likely to deliver high government performance. The principal policy implication of our evidence is that proposals for building management capacity would do well to pay attention to exploring the ways in which leaders can make better use of management systems.