Managing Change Blog
Senior leadership teams frequently fall into a pattern of focusing on the day’s urgent business problems. Board requests, routine meetings, vendor issues, compliance deviations and unexpected HR problems are all routine for the C-suite.
The way that an executive team interacts, collaborates and solves problems together is critical. Yet most teams spend the majority of their time focusing on the it (namely, the issues themselves) and not enough time on the we (that is, becoming more aligned and effective at solving those issues).
When it comes to achieving a company’s financial and operational goals, how a team relates to one another is just as important as what the team works on.
Bain & Company conducted research on more than 1,000 companies and found that when C-suite leaders rate their teams highly across four specific traits, their companies are up to six times more likely to be business performance leaders (with leadership defined as revenue and profit growth and total shareholder returns all above those of peers).
Those four traits:
Commitment. The words and actions of the executive team show a commitment to results and demonstrate alignment and unity with the agreed-upon mission and strategy. In other words, actions are consistent with what was said in the meeting room.
Greater good. Leaders take an enterprise-wide view, thinking beyond their own responsibilities, and are accountable to make and execute decisions with an eye toward the greater good.
Trust. The executive team presumes a posture grounded in trust (vs. control) and believes that their teams have the motivation and capability to solve problems and deliver results.
Inclusion. The executive team constructively discusses challenging topics and practices a mindset of inclusion that seeks to help all members feel important, capable and understood.
Many teams perform well on some of those traits, but few perform strongly on all four. Executive teams that make time to talk about previously undiscussable topics, including ideas seen as above criticism as well as strained relationships, can bring attention to their shortcomings and accelerate overall results.
A multibillion-dollar retailer had long operated with two types of executives: those responsible for functions centralized at headquarters, including HR, finance, IT and strategy, and those running operations in the stores.
The executive team adopted a set of ambitious margin-improvement goals that were reliant on cutting costs, but it wasn’t easy and soon revealed tensions between operations and the central functions. The center designed multiyear initiatives to save money, and the operations team rejected them as impractical. The result was a stalemate and insufficient progress toward financial objectives.
To evaluate and improve leadership alignment and effectiveness, the group launched a series of workshops. Through discussion, they came to accept that their primary issues were commitment (doing what they said in the room) and greater good (acting with the company’s success in mind, not just that of their division). One pivotal insight from these meetings was that while everyone poured their efforts into discrete cost-reduction initiatives, executives secretly but unanimously yearned to do something different. They wanted to pursue growth in order to become more competitive and break the cycle of hunting for savings to meet performance goals each quarter.
Leadership embraced the idea, and, energized and united behind this (new) shared ambition, the team started working together more effectively. They agreed to kill specific initiatives that were not adding value, and recommitted to a holistic cost-cutting effort using zero-based budgeting. This gave them confidence that they could collectively reduce costs and use those savings to fund growth initiatives, eventually making a significant acquisition. The resulting transformation has contributed to a double-digit climb in the company’s share price.
Effecting Cultural Change through Zero-based Budgeting
Zero-based budgeting can counteract common misperceptions and lead to positive changes in the organizational mindset.
Other studies back up the finding that a team’s working style is critical. Recently Google’s People Analytics group looked at the characteristics of successful teams in their company. They concluded that it was less important who was on the team and more important how the team worked together. The single most important contributor to team effectiveness in the Google study was psychological safety—that is, the confidence that no teammate would embarrass another member for making a mistake, asking a question or offering a new idea. This is a key component of inclusion.
Executive teams can easily get bogged down with the everyday problems of running a business, but great teams move beyond that by dedicating time to ensuring clear agreement on their future direction, performing an honest self-assessment of their performance and calling attention to the behaviors that threaten to undermine their progress.
When the focus of these efforts are the four traits—commitment, the greater good, trust and inclusion—teams reap the rewards, becoming less contentious and better able to produce results that meaningfully outperform the competition.
Phil Kleweno is a partner with Bain & Company’s Results Delivery and Retail practices; he is also the head of the firm’s Washington, DC, office. Imeyen Ebong is a partner with Bain’s Organization and Telecommunications practices, and he is based in the Munich office. Paul Stansik is a manager with Bain’s Results Delivery practice, and he is based in Chicago.
Phil Kleweno: Cultivating the Traits of Effective Leadership Teams
Bain Partner Phil Kleweno outlines the four key traits that can help leadership teams outperform the competition.
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