Most CEOs agree that the complexities of running an organization, even a small growing one, have increased. Continuing technological innovation and an abundance of real-time information have intensified already increasing pressures from customers, competitors, regulators and other stakeholders. Leading any organization today is clearly a challenging endeavor and way beyond the capacity of any one individual. Reid Hoffman, LinkedIn cofounder, sums it up as follows – “No matter how brilliant your mind or strategy, if you’re playing a solo game, you’ll always lose out to a team.”
To address this challenge many organizations have created executive or leadership teams comprised of the CEO and their direct reports. Unfortunately, experience and data suggest that leadership teams often fail to live up to their potential. For example, in a recent Center for Creative Leadership survey of senior executives, 65% indicated that their leadership teams were experiencing a clash between functional and enterprise accountabilities and only 18% rated their team as “very effective” with respect to their executive team responsibilities.
A few faulty assumptions contribute to the challenge of building a great leadership team. First, CEOs assume that bringing together a group of talented senior managers will be sufficient to build a great team. Senior executives often struggle to balance the need to run individual departments with their enterprise accountabilities. Next, executives assume that their current skills and previous experience will be adequate for becoming good leadership team members. Prior experience doesn’t typically prepare executives for the unusual dynamics they will encounter on a leadership team – external demands are greater, evolving from functional only to enterprise focus can be challenging, and visibility is heightened internally and externally. Finally, leadership teams are often constructed by default as vehicles for sharing information, reporting out on departmental progress, and receiving updates from the CEO.
We have seen the manifestation of these assumptions lead to great frustration as characterized by the statements below from a few CEO clients:
• “Each team member is extremely talented, but they just don’t seem to be on the same page without me inserting myself.”
• “Our leadership team meetings are stale – we report out functionally, but we don’t challenge each other or push for innovation or to continually get better.”
• “While we all seem to like each other, it is very rare that the team or subsets of the team get together to address important enterprise-wide issues without me in the room.”
• “There is a clear ‘elephant in the room’ but everyone just seems to avoid the potentially controversial topic.”
Great leadership teams never succeed by accident. Without nurturing, leadership teams can slow down, derail, or even paralyze a whole organization. The good news is that the payoff of stepping back and deploying a diligent approach to addressing these faulty assumptions and ultimately to building a great leadership team can be dramatic.
Great Leadership Teams are Game Changers
Research by global consulting firm McKinsey suggests that executives are five times more productive when working as part of a high-performing leadership team than they are when working as part of an average one. The research also indicates that aligned leadership teams have a 1.9 times increased likelihood of having above-median financial performance. Gallup and other employee engagement research firms continually point to effective leadership teams as key contributors to employee engagement. Despite this revealing data there is no avoiding the time and energy required to build a great leadership team. A concerted effort must be devoted to building the structural and relational foundation required for leadership teams to thrive. The CEO plays a pivotal role in building this important foundation.
Conditions for Success
The primary responsibility for building and leading an effective leadership team rests with the CEO. Ultimately, when leadership teams have done the heavy lifting and become high performing accelerators for their organizations, the CEO’s role will evolve. On the best leadership teams, the environment shifts to one where the team holds itself accountable and the CEO becomes a contributor, a coach to other team members and the final arbiter of significant decisions. However, before this best-case scenario can be fulfilled CEOs have some challenging work in front of them.
Role #1 – Move from Staff to Team
Very simply put most leadership teams we encounter are structured as senior staff groups; they are teams in name only. Most formal business interactions are between the CEO and his departmental direct reports. Executives gain an understanding of the strategic direction and negotiate departmental priorities with the CEO. Incentives are primarily tied to departmental goals and objectives; perhaps with an overall company financial goal. The senior staff structure is most visible in how a CEO and his direct reports meet. Monthly or bi-weekly meetings are structured as progress reporting and information sharing venues with minimal challenge and debate other than with the CEO. Most importantly, while there might be a clear understanding of the organizations mission and strategic direction, there is limited to no focus on the important work that a leadership team should be working on together.
While the senior staff model can and does work in many organizations big and small, experience and research suggest that evolving to a leadership team model can serve as a force multiplier in many regards. First, the ability to leverage the experience, talent and wisdom of senior colleagues is squandered and opportunities for greater innovation are lost with a senior staff model. When smart people challenge, debate and problem solve with a focus on what’s most important for the organization great things happen. Next, efficiencies are missed when priorities are established at a departmental rather than a cross-organization level. When team members integrate and address the organization’s most pressing issues together, opportunities to coordinate and deploy resources more efficiently are increased. Finally, when an organization’s most senior leaders collaborate on important priorities and hold each other accountable for collective and individual actions and behaviors there is a tremendous downstream impact. In fact, an Aon Global Best Employer Research Report suggests that ‘managers and staff are watching how the leadership team interacts with each other (not how nice they are to each other), holds each other accountable and leads with a common purpose.