Playing To Win
The Work and Workings of Leadership Teams
The Three Distinct Modes
I often get asked questions about how to organize the work of executive leadership teams. There is often frustration with their effectiveness and efficiency, a feeling that they have become bureaucratic. Because of this pervasive vexation, I have decided to dedicate my 49th Year III Playing to Win/Practitioner Insights piece is on: The Work and Working of Leadership Teams: The Three Distinct Modes. You can find the previous 159 PTW/PI here.
Background
There is always an executive leadership team of some sort in any organization. It is commonly defined as the managers that report to CEO of the organization. It goes by many names — including no name in small companies — but it includes Executive Leadership Team, Executive Committee, Senior Management Team, Global Leadership Team, and others. For simplicity, I will refer to it LT for ‘leadership team.’
Often it is the object of frustration for its members, seen as slow and bureaucratic, a waste of time. Matters keep coming back to it and it is unclear who is doing what to whom.
I believe that the key to LT effectiveness and efficiency is segmentation of tasks. There need to be very different modes of working and the only way to do them well is to segment them into three chunks: LT Members as Individuals, LT Members as Colleagues, and LT as a Collective.
LT Members as Individuals
LT members operate as the senior executive of their own respective domains. In terms of the holistic effectiveness of an LT, this is the most important variable. Typically, companies are managed through their LT, the members of which typically control all (or nearly all) of the company’s operating and capital budgets. For any company to succeed, the individual LT members need to do their jobs well. Nothing can save the effectiveness of the LT from bad individual performance. I have never observed collective LT action be able to make up for substantial individual LT failure in their jobs.
In my experience, a key, if not the key, to individual LT member effectiveness is role clarity. The CEO needs to delegate certain decision rights — and not others — to each LT member. What decisions does the CEO make? What decisions does the LT member make alone? And what decisions does the LT member recommend for ratification of the CEO? Unless these decision rights are laid out clearly and sensibly, there is little chance for individual LT effectiveness. In fact, it wouldn’t be possible to evaluate effectiveness if the criteria aren’t clear.
When it comes to clarity in decision rights, I observe a consistent problem, and that is with what have come to be called “span breakers” — that is, an executive whose primarily (if not sole purpose) is to reduce the number of direct-reports to the CEO. That is, a CEO puts in place a direct-report whose sole job is to serve as a span breaker between the CEO and a number of other executives who would otherwise be direct-reports to the CEO. I have often seen span breakers who have no real decision rights other than a vague sense of coordinating the executives below them. The CEO typically tells the span breaker (in some form or another): “Just make sure those businesses are doing fine.” The business executives below the span breaker have the power, but the CEO holds the span breaker responsible for their performance. It just doesn’t end well.
The span breaker needs a real job or will become a useless bureaucrat. Everyone needs a challenging and fulfilling job and coordination is neither of those for a senior executive. Making decisions that drive performance is a real job. But that always begs the question, over what decisions does an LT member have jurisdiction?
Clarity of the decision rights of every LT member is the first task in LT effectiveness. Once those are assigned, the CEO needs to insist on performance in that job. And if there isn’t performance, the CEO’s duty is to replace the LT member — now, not later.
LT Members as Colleagues
A complicating factor for the clear assignment of decision rights to LT members is the fact that every large global company is a matrix. The minute a company becomes a multi-product and/or multi-geographic entity, it operates as a matrix, whether that is what it calls itself or not.
That creates a challenge in defining jobs. They aren’t as singular and independent as would be handy. Other than the CEO of the modern company, executives aren’t fully in charge of everything related to their domain. They have to coordinate with colleagues, and that means colleagues at the same authority level as themselves. Product executives have to coordinate with geographic executives and functional executives, and vice versa.
In every company, there will always be the need for each LT member to collaborate with other LT members in the matrix. And the quality of that collaboration will dramatically impact LT effectiveness. For the collaboration to be effective, two things must be present. First, LT members must want to collaborate and second, LT members must be good at it.
The matrix structure requires the resolution of tensions across executives. This is, of course, not unique to the matrix structure. All executives have to resolve tensions within their own domains — spend on this versus spend on that; go faster to outpace competition or go slower to protect quality. But in these decisions, they can optimize within their own domain, of which they are in charge.
It is far trickier when decisions span across executive domains. The optimal answer may be great for me within my domain of responsibility and bad for you in yours — or vice versa. If I am not committed to collaboration, in the latter case, I might just say no, I am not doing that. Or vice versa in the former case if the other isn’t committed to collaboration. ‘No’ tends to be the easy answer. Collaboration requires the creativity to resolve the tension in a productive fashion (about which I have written two books — The Opposable Mind and Creating Great Choices). That requires both the desire to work together and the skills in working together. For this to happen in any company, the CEO needs to encourage and, in fact, insist on it and help executives build their skills in collaboration.
LT Members as a Collective
The third component of LT effectiveness is the LT as a collective. CEOs are given their title because they are responsible for the executive decisions that span across the entire organization. It is in their purview to make those decisions entirely on their own or based on successive individual consultations with members of their LT. However, most CEOs utilize their LT to act as a collective in tackling certain decisions.
In my experience, this approach varies widely in effectiveness. At its best, it provides huge leverage to the CEO. At its worst, it is a stultifying time sink. The key variable is the degree to which the collective work of the LT is carefully defined to play to its strengths. When the definition is unnecessarily broad, the team does work at which it is not superior and takes the work from people or groups that are. That leads to (not unwarranted) charges of bureaucracy and slow decision making.
That is why I favor a tight definition of the role of the LT as a collective. I like to see most of the decisions made by individual LT members under the authority of the CEO or made jointly by the CEO and a single LT member or made jointly by the CEO and two or three relevant LT members.
I am also not keen on routine matters going through the LT — i.e., by routine, x must pass through the LT before it can be approved by the Board. Most such things don’t need the LT as a collective to weigh in before going for CEO and/or Board approval. For example, the financial statements don’t need to be reviewed by the LT — just the CEO and CFO. If we decided to build a new factory and its capital budget has been approved by the Board, we don’t need the LT to opine on the annual spending plan. That is just bureaucracy.
I am most keen on the LT identifying, working on, and resolving issues that are broadly important to the company and aren’t being tackled by anyone in the organization yet — which is why the identification task is really important. Novel, one-off issues are often the most challenging and those are the ones that I like to see the LT tackling as a collective — in part because it is often not clear at the outset, in whose responsibility area(s) does it primarily fall.
In this respect, I see the LT as much more project-based than routine-based. Projects are tricky and the LT can be a great aide to the CEO in chartering and completing projects with company-wide implications. Of course, while guiding these projects, the LT should utilize other members of the organization in the work. But the responsibility would be that of the LT as a collective.
To be a highly effective and non-bureaucratic aide to the CEO, the LT as a collective should spend approximately 90% of its time on unique projects and the remaining 10% on recurring matters. And the recurring matters should be evaluated regularly to determine whether they can be more efficiently or effectively done by the CEO and a single LT member or a subset of the LT.
Practitioner Insights
Many reading this won’t be an LT member of a company right now, but very many will at some point in their careers and almost everyone will have the moral equivalent — their team — working for them at their level. Everyone needs to understand how to help their team be more effective.
The overarching takeaway should be that LT effectiveness needs to be understood at three levels. With respect to LT as Individuals, the key imperative is role clarity that is understood and agreed upon by the CEO and the LT member. With respect to LT as Colleagues, the key imperative is collaboration skill, the development and utilization of which should be strongly encouraged by the CEO. With respect to LT as a Collective, the key imperative is focus and restraint. Of all the things the LT could do, it needs to focus relentlessly on what it should do — and that is complex company-wide projects.
