Yet many CEOs fumble in creating and directing a leadership team. In fact, less than 25 percent of senior teams actually realize their potential, according to a recent study by the Hay Group that examined more than 120 senior teams in 11 countries. “Most of the really important decisions get made in other forums,” Ruth Wage-man, director of research for Hay Group, told CEOs gathered for a recent roundtable discussion cosponsored by Hay Group and Chief Executive magazine. “In fact, rather than creating synergy, what most leadership teams are doing is trading reports. And members, including CEOs, typically find the teams to be sources of frustration and alienation rather than a place where real leadership happens.”
In other cases, egos clash, noted Ronald Naples, CEO of Quaker Chemical. “Following isn’t easy when you’re in the C-suite,” he points out. “People tend to think of themselves as leaders rather than followers.”
Hay Group’s researchers actually looked into the common denominators of “derailers,” by asking experts to look at the individuals most likely to crater a team and identify what those people had in common. “Most typically it was, ï¿½ï¿½Will not support the strategic direction of the CEO and is actively undermining it in some way,”‘ reports Wageman. “Second was an inability to take an enterprise perspective.” In many cases, however, the latter issue can be remedied through coaching the employee on embracing his or her enterprise leadership role, she adds.
Lack of clarity as to what, exactly, the team is charged with doing is another stumbling point. “Is it a decision- making team, a consultative team, an information team?” asks Wageman. “What do you want them to do on behalf of the organization? The team cannot decide that. The CEO must.”
Fixing the Focus
What can CEOs do to create and sustain a leadership team whose members learn from one another while collaborating effectively on a shared mission? One clear prerequisite for success is to create a clear and compelling purpose for the team. The CEO must be crystal clear about a team’s purpose and boundaries. CEOs, for example, should be clear about which decisions they want the team to resolve versus which decisions they reserve for themselves.
When a Team Fails
To illustrate some of the common failings companies fall prey to in assembling senior teams, Hay Group’s Ruth Wageman describes a real-world scenario about a CEO in office for a year whose company is embarking on a new strategic direction after a merger. “He’s creating more interdependence among the [various] offices, saying, ï¿½ï¿½There’s really no justification for separate practices, services and functions within each country,'” she explains. “ï¿½ï¿½We want to create the focus, clarity and independence needed to do what’s right for a particular set of customers and free up costs that don’t add value.'”
The CEO assembles a team of 14 leaders and spends a week with them clarifying the new operating model and the roles and responsibilities of the leaders in implementing the strategy, then charges them with helping to chart the company’s future. Within a few months, however, it’s clear something is amiss. Each team member is continuing to operate pretty much as they always have. Members are repeatedly returning to the same issues, energy levels at group meetings are very low and when asked to make a joint decision, the team can’t come to consensus. “Where,” asks Wageman, “did this CEO go wrong?”
“First, he’s got too many direct reports,” suggests Eran Broshy, executive chairman of InVentiv Health. “Second, after being locked up together for a week they probably all hate each other. Third, rather than bring a lot of people together at the same time, you should start at the other end, talking to people individually about the road map and where they see themselves fitting in.”
For Andy Taylor, CEO of Enterprise Rent-A-Car, the transition from independence to interdependence is one that must be handled with greater delicacy. “Expecting people to make that shift without laying the groundwork for the two acquisitions to come together could be a recipe for a lot of friction and under-the-surface tension,” he points out.
Transitions can be particularly trying following an acquisition, adds Donnelly, who points out that often there will be those among a CEO’s senior talent who will resist the new entity’s structure or direction. “In an [acquisition scenario], there are always going to be some people who maybe for ego or other reasons won’t play ball,” he notes. “When that happens, you end up having to make changes. Replacing people sends a signal but so does not replacing people. The lesson there is not to wait too long to replace the underperformers.”
How to fix the issue? Create a common destiny, suggests Al Ehrbar, president of EVA Advisers. “When you have a frank discussion about the need for collaboration and a common destiny, these problems tend to go away,” he says. Once you get the message of what it is you want to achieve and why that will be good for the company, people sign up and begin behaving differently.”
Ultimately, says Wageman, CEOs must also define a compelling purpose for the team. “It’s really about defining the work of the team and what [each person’s role is] in accomplishing that work,” she says.
The next hurdle is to choose leaders who will be effective contributors to the team.
Other business leaders steer clear of strong personalities. But while potentially combative team members may jeopardize team cohesiveness, letting the desire for harmonious collaboration dictate your choices is equally dangerous, warns Robert Donnelly, CEO of Compact, who shuns compliant personalities in favor of “troublemakers with passion.”
Six Steps to Effective Team Leadership
In a study of 120 senior teams in 11 countries, the Hay Group found that CEOs themselves aren’t always clear on the decisions they want a leadership team to resolve versus those they reserve for themselves. The research findings identified six steps that increase the likelihood of a senior team evolving into an efficient and effective unit capable of leveraging its collective expertise to address an enterprise’s most important challenges and opportunities.
“Indifferent teams are made up of indifferent people,” he asserts. “Building a team is not about getting people who can work together. It’s about getting strong people who may have strong differences and finding a way to get the most out of them.”
As the primary motivator of any senior team, CEOs must also “walk the talk,” demonstrating the same kind of commitment they expect of the team members. CEOs should check in regularly with individual team members for feedback on the team’s progress and, when charging a team with strategic decisions, be prepared to accept its findings. “If a team comes back with an unexpected recommendation, a lot of CEOs have a tendency to either reject it or try to sway the team,” says Al Ehrbar, president of EVA Advisers. “I think that’s a big mistake. If you trust the people on your team, and they’re doing what you tasked them to do, then trust their judgment.”Finally, the respect or lack there of a CEO evidences for a team can be a huge influence on team members’ commitment to that team. “Pay the same exquisite attention to detail in your preparation for your leadership team meeting that you would put into your preparation for an analyst call, a board meeting or a meeting with a key client,” advises Wageman. “And don’t over-challenge the individual team members and under-challenge the team. Raise the level of expectation for the team as a whole.”
Hassan Ahmed is chairman of Sonus Networks, an IP-voice telecommunications equipment provider based in Westford, Mass.
Gene Bauer is managing director, U.S. consulting operations at Hay Group, a global management consulting firm based in Philadelphia.
Gloria Bohan is president, CEO and founder of Omega World Travel, a provider of travel services based in Fairfax, Va.
Howard Brodsky is chairman and CEO of CCA Global Partners, a cooperative of independent retailers based in Manchester, R.I.
Eran Broshy is executive chairman at InVentiv Health, a provider of commercial and clinical pharmaceutical services based in North Somerset, N.J.
Ron Cohen is president and CEO of Acorda Therapeutics, a biotech company based in Hawthorne, N.Y.
J. P. Donlon is editor-in-chief of Chief Executive Magazine.
Robert Donnelly is CEO of Compact, a process controls solutions provider based in Paramus, N.J.
Ann Drake is CEO of DSC Logistics, a supply chain management solutions provider based in Des Plaines, Ill.
Al Ehrbar is president of EVA Advisers, a hedge fund manager based in Locust Valley, N.Y.
Farooq Kathwari is chairman, president and CEO of Ethan Allen, a home furnishings retailer based in Danbury, Conn.
Jane Landon is chief information officer, City of New York.
John Larrere is general manager of Hay Group’s New York office.
Ronald Naples is chairman & CEO of Quaker Chemical, a specialty chemical company based in Conshohocken, Pa.
Andy Taylor is CEO of Enterprise Rent-A-Car, a rental car company based in St. Louis, Mo.
MG Keith Thurgood is commander and CEO of the Army and Air Force Exchange Service, a provider of products to military families.
Ruth Wageman is director of research at Hay Group.