October 2 2001 - The most powerful CEOs often fail to create and manage the right environment in which top executive teams can be effective. This is the conclusion of research by Hay Group, the global professional services firm, published in the Hay Group Working Paper, "Top Teams - Why Some Work and Some Don't: Five Things the Best CEOs Do to Create Outstanding Executive Teams."
The research was based on a 4-year study of executive-level teams at leading global corporations in the telecommunications, airlines, beverages, computer software and manufacturing sectors. In each case, the team was led by a CEO or other executive decision-maker and was made up of top business unit or geographic-area leaders.
CEOs are under a new pressure to make teams deliver - quickly
The study was begun in 1998 and coordinated by Hay Group Senior Vice President, Debra Nunes in conjunction with researchers from Harvard University and Dartmouth College. She said, "Average tenures of CEOs today are only about 18 months. As a result, they're under tremendous pressure to deliver results quickly. Assembling, managing and leading a top executive team is increasingly seen as critical to both the CEO's success, and the organization's. Given the increasingly important role of top teams, it's striking how many fall short of being truly effective."
"In our study, two-thirds of the teams failed to excel according to our criteria, and we discovered this was substantially tied to the team leader, usually the CEO, who often lacked an understanding of the dynamics of top teams," added Debra Nunes.
"Because executive teams are generally charged with issues central to the company's future, the cost of an underperforming team is great -- both in terms of unrealized opportunity and in the loss of executives' commitment to the strategic agenda of the organization. On the other hand, truly effective teams can have a tremendously positive influence on the performance of the organization, and can be a critical driver of shareholder value," said Ms Nunes.
Corporate success is dependent on Top Teams
The Hay Group study suggests that:
- effective top teams can help advance the CEO's strategy and agenda more quickly;
- make the organization more nimble and responsive to market changes;
- lead to higher perceived valuations from institutional investors.According to Debra Nunes: "Institutional investors are increasingly aware of the importance of top teams in executing a company's 'big picture' strategy. In fact, a recent study of institutional portfolio managers suggests that 35% of an investment decision is driven by non-financial data, primarily 'execution of corporate strategy' and 'management credibility.' Since top teams exist primarily for these reasons, they are fast becoming a key component of a company's shareholder value proposition. And over time, we believe the role of top teams will only increase in importance."
She added: "In fact, Gillette's bond rating was recently upgraded by agencies which cited the top executive team created by the new CEO."
What constitutes a 'real team'?
It seems that many CEOs hold the (mistaken) belief that their 12-15 key "reports" are the top team. Probably this is not the case. These people exist in order to share information from each "silo" of the business - they are not there to address the organization's biggest challenges and opportunities. And, significantly, they do not have a team dynamic.
Conversely, a real top team has "collective tasks and challenges that demand a high level of interdependency among its members." Also they have clear and stable boundaries so that membership is not constantly changing. The most effective top teams were found to have only 6-8 members, handpicked by the CEO. Larger teams are likely to lack interdependence, have an un-focused agenda and unclear boundaries. And there is no need for a representative from every business unit so long as someone represents their interests.
The most effective teams tend to focus on the most consequential issues facing the business. They tend to stay away from operational matters and concentrate on big-picture mandates, including:
- mergers
- expansion into new markets
- sweeping reorganizations
- e-business strategy.Debra Nunes argues that: "Top executive teams have the potential to become entities that are smarter, more effective and more productive than the sum of their parts. In fact, resilient companies depend on top teams. But for those that are falling short, and risk becoming also-rans, there are steps that can maximize top team performance."
CEOs need to be democratic but retain control
CEOs and other top executives have a variety of leadership styles, for example:
- coercion, expecting employees to comply with orders without question
- or pacesetting, demonstrating performance standards by personally modeling the way.But the Hay Group research suggests that these styles are often ineffective, serving to alienate team members and retard the collaborative process.
"One of the most interesting anecdotal findings of our research is that the most charismatic CEOs make some of the worst team leaders. In a sense, their mythologies precede them, and their strong, forceful presences simply suck the air out of the room, creating an environment of worship rather than teamwork," said Ms. Nunes. "The challenge for these types of leaders, and others, is to turn off some of the skills and behaviors that have served them so well in their rise to the top, and turn on the listening and social skills that are not always reinforced in a hierarchical corporate culture."
Strong leaders were authoritative, gave strong direction, communicated the big picture and clearly articulated goals and behaviors expected of the team. But they were also democratic, allowing the team be a team and encouraging members to believe their voice would be heard, and that what they say matters.
Debra Nunes added: "The most successful team leaders have a spectrum of managerial styles that they deploy based on the situation. In general, they create the right conditions for teamwork and then step into the background to act as moderator and guide."
CEOs should provide more direction - even to the most insightful members of their team
There is an assumption that team members are powerful and committed and have the same core agenda. Not necessarily so. Team leaders need to be forceful and provide direction.
According to Debra Nunes: "One leader of an oil refining business gave his team a quick quiz asking each member to write down the team's number-one priority. When the 10 team members listed several different priorities related to safety, cost cutting, environmental compliance and new markets, the leader was shocked. 'Don't you guys realize that if we can't cut our refining costs by three cents a gallon, they're going to shut us down?' The team members were equally stunned by the simplicity of the mission. In fact, over the following year, the team took steps that reduced costs by five cents per gallon. The lesson here: You can never be too clear, or overstate the team's primary goal."
Top teams need members with empathy and integrity
The members of the most successful top teams are neither brighter, more driven nor more committed than people in less successful teams. But the members of the most successful teams excelled at working with others, bringing a high degree of emotional intelligence to the 'team dynamic'. Emotionally intelligent team members:
- have self-control
- are adaptable
- exude self-confidence and self-awareness.
- display high levels of empathy and integrity.In fact, empathy and integrity are particularly significant. Hay Group research shows members of outstanding teams to be far more empathetic, having an understanding of the emotional makeup of others, than team members of less successful teams. In fact, on high-performing teams, the research showed that 71% of participants said their team peers were sensitive to the unspoken emotions of their fellow members. On average-performing teams, only 44% showed this characteristic.
According to Ms. Nunes: "Empathy is incredibly important to the successful team's dynamic. This is because members of a team will only 'buy in' to the team process if they feel they are being heard and understood. Resentment and withdrawal are the inevitable result if people feel their ideas and input are not being fairly evaluated."
The research also identified perception of integrity among and between team members as being essential for team success. A team member with 'integrity' was defined as one who "behaves consistently with the organization's or the team's values - even when it is personally risky to do so." The researchers justified the importance of integrity through the trust it fosters among team members.
Just 3% of team members in average-performing teams had taken the personal risk of challenging the team to live up to its values - compared to 44% of the members of high-performing teams.
"No one wants to commit professional suicide by challenging his or her peers, especially the CEO. But if the team dynamic is healthy enough, members should feel comfortable about raising an opposing point of view," said Ms. Nunes. "In fact, productive conflict is desired as long as it's about ideas, not personalities. Top teams must be comprised of people who not only have the courage to identify, even create, conflict over ideas, but also the social skills to resolve friction constructively."
Necessary Support and Development
The research identifies strong operational support as a necessity if a top team is to be successful. This support must including:
- sound data and forecasts
- teamwork training
- appropriate compensation tied to its ability to meet its goals.Ms. Nunes concluded that: "Outstanding team leaders also periodically review the team's performance, providing helpful feedback, encouragement and continuous reinforcement and refinement of the team's goals. Some effective team leaders even provide individual coaching, taking aside a team member who's not contributing enough, or speaking privately with someone who's personality may be getting in the way. Again, the team leader must learn to wear several hats to make the team function as smoothly and effectively as possible."
The Hay Group website is at: http://www.haygroup.com
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