How To Measure Leadership Team Effectiveness

The board of directors, investors, employees rely on leadership teams to set direction, allocate resources, monitor progress and overcome roadblocks. Most would agree that a great leadership team can and should be a powerful competitive advantage for any organization. Unfortunately, great leadership teams are scarce – just ask employees in a lunch room or lobby about ‘the leadership team’ and responses are similar – ‘what team?’; ‘I wouldn’t really call them a team’; ‘they’re more like a dysfunctional group’. And most senior executives agree with these sentiments. In fact, a recent Center for Creative Leadership study revealed that only 18% of senior executives rated their teams as ‘very effective’ while 97% ‘agreed’ that increased effectiveness would have a positive impact on their organizations.

What Does a Great Leadership Team Do?

So, what can be done to ensure that leadership teams have this desired positive impact? In our opinion it all starts with what it means to be a ‘team’ and there is no better definition than from team guru Jon Katzenbach — ‘a team is a small number of people with complimentary skills who are committed to a common purpose, performance goals, and an approach for which they hold themselves mutually accountable.’ For the purpose of this article we will focus on three parts of this definition. Performance goals, common purpose, and mutual accountability provide the foundation upon which a leadership team can measure its effectiveness. Specifically, a great leadership team has three primary roles that require them to hold each other accountable to a set performance goals and a common purpose. One role is to serve as the steward for their organization’s strategic direction. Another important role is to leverage the skills and experience of team members to focus on the most pressing issues facing the organization. A leadership team is also responsible for modeling and cascading desired behavioral expectations or culture throughout their organizations.

Challenges

For a number of reasons, many leadership teams struggle to put these roles into practice. First, CEOs often inadvertently structure their teams as senior staff groups where the most meaningful business interactions are between the CEO and his departmental direct reports. Next, shaping a leadership team purpose and related goals is difficult and requires a team to go beyond simply assuming that their purpose is to execute the organization’s strategy. This assumption is insufficient for clarifying what a team must work on together and how it will do so. Another challenge is that CEO’s sometimes assume that talented senior executives know how to function as a team. In many cases, by the time executives have risen to the ranks of the senior team they have mastered individual accountability and frequently struggle to embrace their new enterprise roles and the concept of mutual accountability.

When leadership teams fail to play these important roles the rest of the organization eventually feels the impact. The bullet points below highlight some of these impacts.

• Repeatedly missing big numbers – sales, margins, customer satisfaction, new product launches.

• Departments working at cross purposes or duplicating efforts which negatively impacts productivity and collaboration and frustrates customers.

• Continually shifting (and often unstated) priorities and a reactive operating rhythm.

• Declining employee engagement and increasing turnover of the employees the organization wants to retain.

Measurement Framework

Google’s seminal study to determine what makes a ‘perfect team’ revealed that ‘to build a successful team, you must find the right balance between results and culture.’ This balanced approach is critical for addressing the types of challenges listed above. Specifically, too much emphasis on results at the expense of healthy team dynamics will eventually jeopardize the team’s ability to sustain results. The opposite is also true – a team that is hyper focused on building a great culture and takes its eye off of why the team exists will also hinder results. To ensure that this balance is maintained, leadership teams must build it into how they measure their performance.

Measuring Stewardship

Comprised of senior leaders of diverse functions leadership teams must work together to solve shared problems and ensure aligned action and collective responsibility for the organization’s performance. Stewardship success depends on the ability and willingness of each team member to address not just their individual functional or business unit responsibilities but also their collective responsibility for the company as a whole. Senior executives are uniquely positioned to take a global perspective on the business, recognize patterns, evaluate and assess risks and direct the organization to take necessary action. They don’t need to agree on everything, but they do need to be aligned and stand behind collective decisions.

Given the strategic nature of a leadership team’s stewardship role, measuring effectiveness requires a long-term perspective and can be challenging. From a business results perspective, great leadership teams take on mutual accountability for achievement of the strategic direction. Even in those cases where a functional leader might have limited input or influence, on great leadership teams the team wins only when key long-term targets are met such as market share, growth, earnings, etc. Great leadership teams also recognize that at times their ability to subordinate functional roles to enterprise roles, engage productively with each other on difficult challenges, and treat each other with integrity and respect will facilitate their ability to effectively play their stewardship role and help cascade a positive culture throughout their organizations. The table below provides a framework for measuring a leadership teams stewardship role.