What Makes Companies Do the Right Thing?

https://img.particlenews.com/image.php?url=3aQdgi_0vR0Z1TX00 — Anuj Shrestha

CEOs almost never go it alone: They rely on a strong senior management team to succeed. Yet new CEOs frequently contend with top leadership teams that are poorly aligned and consume energy rather than propel the organization forward. This makes building a well-functioning team one of their first and most important tasks.

Our research and experience suggest that the secret to establishing a good team lies in understanding and addressing a fundamental paradox of leadership. That is, the people who make it to the top are highly competitive and personally ambitious; but to be effective, they must also be able to collaborate for the good of the whole.

Examples abound of leadership teams where executives were unable to put their egos aside when necessary. Before Satya Nadella took the helm at Microsoft, the company was infamous for infighting; Nadella himself described the previous leadership as “groups of warring gangs.”1 General Electric executives used top management meetings to spin positive stories about their achievements for years, rather than working together on emerging problems.2 Results at both companies suffered as their leaders pursued primacy.

The stakes are high, as is the cost of failure from missed opportunities and poor decisions. CEOs need teams that can strike the right balance between competition and collaboration as appropriate for their business and the challenges it faces. In this article, we’ll look at the approaches that CEOs have taken in a variety of contexts and offer a four-step framework for building effective top leadership teams.

The Paradox That Undermines Performance

Few executives reach the C-suite without competing against internal rivals. Meanwhile, their ambition enables them to drive their areas of responsibility forward as they rise to the top.

Paradoxically, a single-minded focus on competition that serves aspiring leaders so well often gets in the way once they reach the top team. As executive team members, leaders have responsibility for the whole corporation, not only their specific area. To be a productive member of the team, leaders may have to prioritize the corporate agenda over that of their unit or function and collaborate to execute it. Such a change in perspective is often at odds with their deep-seated inclinations developed over years of individual achievement. They find it difficult to be both competitive and collaborative.

This can derail leadership teams in myriad ways. It can lead to fragmented and slow decision-making, promote a pervasive culture of internal competition, erode the collective focus of the team, and dilute its strategic intent. Instead of aligning its energy and actions around a common vision or purpose, the top team remains a group of disconnected individuals who each pursue their individual agendas. The rest of the organization follows their lead.

At worst, such teams expend more energy fighting one another than they do when combating external threats. The resulting factions can immobilize the corporation. Without an aligned team, no CEO can execute a new strategy, let alone improve performance.

When the Swiss cement producer Holcim and its French counterpart Lafarge merged in 2015 to become the world’s largest cement manufacturer, top leaders of the new LafargeHolcim (now Holcim Group) were picked in equal numbers from the two organizations.

However, the team never galvanized around a common set of goals, and it broke into political factions according to whether the leaders came from the French or the Swiss side. Decision-making was centralized to establish control over the many business units. As a result, even small decisions had to work their way up the hierarchy, required extensive analysis and documentation, and often faced resistance from some factions. The company became slow to adjust to market developments and was unable to leverage its new size advantages in areas like procurement or technology development. It underperformed, both in profitability and on the stock market.

A bias toward collaboration can be equally problematic if cooperating makes leaders so comfortable that they don’t challenge one another. However, when well managed, the tension between collaboration and competition can be a foundation for high-performing leadership teams.

In our interviews, we met successful CEOs who have taken different approaches to balancing the two principles. The key lies in identifying the right balance for the company and its situation, then choosing and aligning the leadership team with that approach.

Our research suggests that new CEOs who succeed at creating strong leadership teams typically prioritize a similar set of important activities. They define a strategic vision, decide whether the context warrants an emphasis on a competitive or a collaborative team dynamic, select team members, and motivate the team to work together by setting norms and expectations.3 Below, we will look at each of these in detail.

1. Establish a strategic vision. The board of directors may give a new CEO a mandate but with little guidance; top executives are typically expected to set their own agenda for executing on that mandate.4

Turning around an underperforming company through restructuring and cost-cutting requires leaders with a different set of competencies on the top team than does building a platform for growth through internationalization or establishing a new set of businesses. When the new CEO first sets a clear direction and priorities, it is easier to define the type of leaders they need.

Clarity from the top helps create cohesion. It can validate the CEO’s choice of leaders and ensures that in the early days of the executive’s tenure, there is a sense of direction that might otherwise be loaded with team members’ individual agendas. The CEO is not merely setting goals but also crafting a narrative that can be used to align leaders’ aspirations and efforts with the organizational mandate.

When Jan Jenisch was appointed as the new CEO of LafargeHolcim in 2017, he was charged with transforming the struggling giant — and doing so quickly. In the three months between the announcement of his appointment and his start date, he developed a vision for the company. From his first day on the job, he left no doubt as to his mandate from the board. And he made clear how he planned to achieve it: by making the company more decentralized and agile. He then used this vision to define the roles and responsibilities of his leadership team and align leaders around a simple set of objectives. Within a year, Jenisch had replaced 80% of the previous team.

2. Choose a team leadership approach and apply it consistently. Before Jenisch chose anyone for his team, he decided on an approach that would guide how it operated. His leaders would be people he trusted to define an agenda for their division or function, make decisions independently, and accept that they were accountable to the team for their results. Internal competition would be the key to their — and LafargeHolcim’s — success, with collaboration in a limited number of areas. Such an emphasis on competition over collaboration may be called for in situations where different geographies pose challenges and it makes the most sense to give senior executives individual targets for their area of responsibility and the freedom to pursue them.

Every new CEO needs to decide how best to balance competition versus collaboration. What they emphasize will become central to their approach.5

Some, like Juhani Hintikka, CEO of WithSecure, choose collaboration. WithSecure was created when F-Secure, a global cybersecurity company based in Finland, split its consumer and corporate businesses. To focus the new company on its corporate customer market, Hintikka needed executives to drive deep integration across business functions. They needed to collaborate, so he structured their compensation to encourage joint problem-solving and collective decision-making.

Others, like Jacques Sanche, CEO of Bucher Industries, a Swiss diversified manufacturer of specialty machinery, want their team members to focus on individual rather than corporate goals. Sanche set independent goals and strategies with each leader and partly tied their compensation to their unit’s financial performance. He chose this approach because the five divisions of the company have relatively little in common in terms of products, underlying technology, or customers.

The CEO’s personal leadership style also comes into play when choosing a focus and may tilt the balance in one direction or the other. For example, Greg Poux-Guillaume, then CEO of Swiss fluid engineering company Sulzer, has instituted a high level of collaboration despite limited synergies among the company’s divisions and functions. While responsibility for decisions remains with individual leaders, he believes they will reach better solutions when they debate how to solve problems together.

3. Select leaders who fit the focus and leadership approach. Having defined a vision and a leadership and management approach, new CEOs then need to select team members whose profile and style fit with both. When choosing leaders for a team driven by competition, members’ individual track records and ambitions are among the most important criteria. Such a team may best be described as a team of stars. In contrast, low ego, complementary strengths, and overall fit with the team may be as important as personal achievement for a team focused on collaboration. Here the team is the star and not the individual. And when CEOs choose an approach that aims to balance competition and collaboration equally, they will find it important to select leaders who are confident enough to fight for their ideas, have enough humility to put organizational goals ahead of their own, and can switch between these two modes as the situation requires.

When choosing leaders for a team driven by competition, members’ individual track records and ambitions are among the most important criteria.

The composition of any leadership team is a delicate balance between continuity and change, between preserving institutional memory and infusing fresh perspectives. Selecting new leaders is an enjoyable part of building a leadership team. However, new CEOs also need to remove leaders who aren’t the right fit to execute the current strategy. They should move quickly to make those changes, since those who are not aligned with the new vision and approach can poison the whole executive team.

As with any personnel decision, top leaders must put aside feelings about personal chemistry or shared history. Instead, they should create a profile of capabilities for each role in the leadership team based on their strategic focus and desired approach. For example, a company that is restructuring might want a CFO who is an aggressive, competitive cost-cutter. One that is growing through mergers and acquisitions may prefer an entrepreneurial finance leader who can collaborate to support the smooth integration of other companies.

The latitude that a new CEO has to compose their leadership team is also an opportunity to include more diverse perspectives. When Thierry Delaporte became CEO of Wipro, the India-based global information technology, consulting, and business process services company, the top leadership team was in India. Delaporte had to reorient the company toward its international markets. To execute this mandate, he needed a more diverse team. New leaders he appointed to key roles included women and executives from outside of India.

4. Shape team behavior. Once new CEOs choose a team, they need to establish behavioral norms to support the kind of culture — competitive, collaborative, or a mix — called for by their strategic vision, and encourage leaders to engage in the right balance of debate, decision-making, and execution.

Leadership teams are always places of intense debate and discussion, not only because the forces of collaboration and competition are simultaneously at work but also because the decisions and problems that make it to the executive level tend to be complex, without easy or obvious solutions. Behavioral norms ensure that competition does not escalate into political infighting and personal conflict and that collaboration does not deteriorate into camaraderie, where leaders no longer challenge one another.

Effective behavioral norms will differ according to the strategic focus and the chosen leadership team approach. A transformation or turnaround will require fast and decisive decisions, for example, while the gradual evolution of an existing business strategy will require a decision process that focuses more on building consensus.

Likewise, when the leadership approach is competition-focused, the biggest threat often comes from politics and personal conflict. Behavioral norms will need to make discussion and decision-making transparent and create psychological safety so that team members can challenge one another without negative consequences.6

As the new CEO of Germany-based engineering group Freudenberg, Mohsen Sohi noticed that executives often tried to influence his decisions outside the meeting room. They would approach him before or after the leadership team meeting and share information or opinions they did not share with the group. To create transparency and discourage team members from undermining their colleagues, he instituted a rule that topics relating to leadership team decisions would be discussed only during the formal meeting.

When the leadership approach is based on collaboration, the biggest threat often comes from becoming so comfortable that leaders stop taking responsibility for group decisions and become complacent. They stop challenging one another’s ideas.

That is what Thomas P. Meier found when he became the CEO of Ricola, a Swiss manufacturer of cough drops and breath mints. The management team had been comfortably working together for years. To encourage more constructive criticism within the group, he required that leadership team members present detailed financial data on the part of the business for which they were responsible. Any underlying issues thus became visible to everyone, providing the opportunity to compare results, ask probing questions, and critique one another.

But Meier had to carefully model how to have a constructive discussion. While some team members were immediately comfortable with the new approach, others were concerned they would offend their colleagues and needed encouragement to speak up. Still others had to be coached to slow down their delivery of feedback to avoid the impression that they were attacking, which could potentially escalate to a conflict. It took Meier several months of both individual and team coaching to shift the behavioral norms to enable healthy discussion.

Beyond forcing behavioral change, shaping the leadership team requires communicating and instilling a set of shared values. This can be challenging when balancing collaboration and competition, which might be seen as calling upon contradictory values.

For example, when coauthor Benedetto Vigna took on the CEO role at Ferrari, his mandate was to transform the company, which was known for its prowess in luxury sports cars built on combustion engines, into one embracing fully electric vehicles — while at the same time extending the company’s presence into adjacent luxury sectors. As this would require deep integration and coordination among all functions, he chose to emphasize a collaborative approach.

To introduce collaboration into what was an intensely competitive environment, Vigna had to instill both confidence and humility as organizational values. Confidence was based on the belief that the prestigious brand could achieve bold goals and withstand public scrutiny; humility was required to accept that to change. Ferrari had to take risks and would succeed only as a team. In his communications inside and outside of the organization, and in interactions with the leadership team, Vigna consistently reinforced this combination. As these values took root in the leadership team, collaborative behaviors and joint problem-solving became the norm rather than the exception.

Adapt to the Team’s Needs

Building a high-performance leadership team is not a one-off task. It requires continuous monitoring, adaptation, and steering. After setting the direction, new CEOs need to consider how quickly team members can absorb the new approach and take steps to ensure it remains effective.

There are limits to how quickly people, teams, and organizations can change without burning out or disengaging. Indications of an overstretched team will be visible through their behavior: Members may become more negative and contribute less, or they may show signs of physical or mental health problems.

One way to avoid pushing the team past its limit is to proceed in stages. For instance, when Christophe Catoir became president of the Adecco business within the Adecco Group, he was tasked with moving from a decentralized, country-based business model to a more integrated global one. He decided the leadership team needed to be more collaborative. Mindful of the magnitude of these changes for the leaders on his team and for the organization at large, he chose to execute them in distinct stages to allow individuals to adapt.

Rather than forcing the leaders on his team to completely change how they worked together, he started by adding some leaders with global responsibilities and changing the reporting structure from country-based to business-based. He then let the team become familiar with operating in the new structure.

He waited several months before introducing further changes, such as harmonizing service offerings and developing regional or global solutions. Meanwhile, he provided constant feedback on the behavioral changes he expected from his leaders, monitored how team members were adapting, and assessed whether changes to the team would be needed.

New CEOs must monitor the risk that they will overshoot — that their team becomes too competitive or too comfortable and its performance deteriorates. When the intensity of discussion declines on a collaborative team, or when political maneuvering increases in a competition-based one, CEOs need to act quickly to correct the course, either through behavioral interventions or, if necessary, by appointing new leaders.

When Fabrizio Petrillo became CEO of the Swiss unit of the French insurance group Axa, he introduced collaboration as the key principle of his leadership team. Yet, as the team evolved, he became increasingly concerned that members would stop challenging each other. They had been working together for a long time and tended to make decisions by consensus.

He made a point to question the team himself: During leadership meetings, he would often take the devil’s advocate role in a discussion. After some time, he decided to put team members in different roles, where they were not seen by peers as undisputed experts.

For example, he put the head of marketing in charge of operations and assigned the CFO to run a business area. By switching their roles, team members were forced to keep learning, and they could bring fresh ideas to the table. But they were also subject to scrutiny from their more experienced colleagues and were forced to defend those ideas — creating a healthy tension.

Harnessing the tension between competition and collaboration is the key to creating a high-performance leadership team. In doing so, new CEOs need to resolve a fundamental paradox of leadership: The people who are ambitious and driven to reach the top can find it difficult to put the goals of the whole organization ahead of their own.

Armed with a sound strategic vision on Day 1 and a sense of the kinds of relational dynamics that will make the top leadership team most effective, new CEOs will be well positioned to move quickly to surround themselves with senior executives who are most fit for the needs of the business. Then they need to encourage the desired behavior by both modeling it and providing team members with incentives to perform. With these four steps, they can build teams that work together effectively and take their company to new heights.

References (6)

1. S. Nadella, G. Shaw, and J. T. Nichols, “Hit Refresh” updated edition (New York: Harper Business, 2019).

2. T. Gryta and T. Mann, “Lights Out: Pride, Delusion, and the Fall of General Electric” (Boston: Mariner Books, 2020).