The CEO s most important asset: The executive team.

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1 Thought Leadership The CEO s most important asset: The executive team. A research-based blueprint for getting a firm s most important leaders to help solve an organization s most critical challenges. If you want to go fast, go alone. If you want to go far, go together. African proverb Introduction We live in an increasingly complex, rapidly evolving, and interconnected world. Digitalization, increased globalization, and demographic shifts are radically reshaping the world of business. To survive, organizations are being forced to fundamentally change their business models, evolve their products and services, redefine the customer experience, and work more efficiently and effectively. The question on every CEO s mind is, How can I make this transformation happen? But the days of being the heroic CEO are over. No one person, no matter how talented, visionary, and inspiring, can single-handedly plan and implement a new business model and align the entire enterprise. On top of that, CEOs aren t being given much time to pull off these critical course corrections: The median tenurefor CEOs of S&P 500 companies is slightly longer than five years. It s why, more than ever, today s top chiefs need a focused, committed, and effective leadership team. 1 That s different from having a company full of successful individual leaders. The corporate world has many successful individuals, but, surprisingly, the corporate world is filled with underperforming leadership teams. CEOs can devise and articulate a smart strategy, but not all of those individual leaders may buy in. Even if there is complete buy-in, a surprising number of senior executives willingly or otherwise just can t work well with one another. In a Korn Ferry study, only 24% of leadership teams examined could be classified as outstanding. These huge corporate transformations are already difficult to achieve, and they can t be done alone. CEOs cannot let a sputtering leadership team get in the way of needed changes. CEOs need a highperforming top team of executives who can utilize their combined expertise and experience to resolve complex dilemmas, manage paradox, and explore multiple alternatives, ultimately building a commitment to new strategic initiatives across the organization and increasing its adaptability to the constantly changing business environment.

2 How to make this transformation happen. When working effectively, fully aligned leadership teams push organizations to new heights. They own and implement the company s strategy. They anticipate and adapt quickly to changes in the business environment. They maintain a high sense of urgency and capitalize on windows of opportunity. They lead high-performing companies. The good news is that more attention is being paid to the workings of top leadership teams, offering leaders insights into what really gets these teams to excel. Korn Ferry has pulled from our research working with several hundred senior leadership teams in organizations around the globe to offer leaders deeper insight into how to manage and promote team performance. Drawing on this research, Korn Ferry has formulated a new Top Team Performance model that addresses the needs of current leadership teams. The Korn Ferry Top Team Performance model identifies six essential factors that lead to highperforming leadership teams. The model starts with an accurate assessment of an organization s business strategy that serves as the input to inform the formation, management, and evolution of the team. After understanding the business challenges, the leader then needs to ensure the team has a welldefined purpose and team accountabilities; is comprised of the right people with the right skills to deliver that purpose; has disciplined processes that aid team members in their work; has an agreed set of norms that guide members behaviors in and out of meetings, while promoting trusting and collaborative relationships among them; and continuously develops their collective capabilities to meet evolving business requirements. Finally, there needs to be strong team leadership, a sixth factor, that brings it all together. Together, the six factors will determine how well teams respond to their business challenges and achieve their strategic objectives. The final output will be strong team performance that results from team coordination and synergy and produces engagement, ultimately driving the business transformation the organization needs to undergo. The six factors needed for a top-performing team. In the following section we will discuss each of the six conditions in more detail and what a CEO should think about in order to achieve a top-performing team. 1. A clear compelling purpose for the executive team. CEOs often spend considerable time and money conceptualizing the purpose of the firm. But Korn Ferry has found they spend almost no time determining what the purpose of the top executive team is. CEOs must ask, What is the unique added value of this team in executing the company s strategy? Otherwise, CEOs risk seeing these executive teams wind up becoming highly compensated operating managers. For example, an energy company could have two strategic mandates, produce energy profitably now and becoming a clean energy firm in the future. But that s not enough of a purpose for the executive team. An unaligned team may wind up focusing solely on current operations when its insights are sorely needed on the divestitures and investments necessary to become a clean energy firm in the nottoo-distant future. An aligned team will have been tasked to look at and debate decisions holistically, balancing current operations with an eye on the future. This executive team deals with mission-critical issues, including tactical ones, that impact the enterprise as a whole. This purpose should be something that each individual executive can clearly envision and understand. The purpose also must be a stretch, tough to achieve but not impossible. Finally, this purpose must be consequential; it must have an important impact on the success of the organization and on the lives and work of others. 2

3 Additionally, CEOs must remember it is their responsibility, as leaders, to set the parameters of their team s purpose. From our experience, we have not seen a leadership team that collectively sets its purpose to be outstanding. The buck, ultimately, stops with the CEO. 2. The right people. It is understood that effective teams have the right people with the fit-for-purpose skills capabilities and expertise. Unfortunately, there are often some basic assumptions that CEOs make that do not serve them well. Sometimes a CEO might say that the members of the executive team are all of my direct reports. Or a CEO wants the team to have a working knowledge of the entire organization. While this is well intentioned, it translates into one seat at the table for each part of the organization, as opposed to an assurance that there is broad understanding of the company s purpose. Often that winds up being too many people. Each team member must be able to contribute to the team s overall purpose and have the skills to work collaboratively with everyone else on the team. Simply put, the larger the team, the harder it is to manage. Decision-making teams benefit from being smaller in number typically having no more than nine people on the team. CEOs need to ensure they get the right people on their team and leave the wrong ones off of it. This means choosing people who can take an enterprise perspective and who are willing and able to put things on the table that impact the entire business people who can hear others concerns and have the integrity to stand by decisions that the team makes. Additionally, CEOs need to ensure that derailers those who bring out the worst in others are left off (or dropped from) the team. If these individuals aren t removed, they can simply kill a top-performing team. Also, CEOs shouldn t expect a top-performing team to always be a smooth, harmonious, and friendly place. At times, discussion will be robust, passionate, and even heated on the important issues affecting an organizational transformation. Worthy of note, however, for high-performing teams, these discussions are not laced with personal attacks. In the end, a CEO must identify the key skills and collaborative capabilities needed for this team purpose, then on-board members with those skills. As importantly, the CEO must have hard conversations with those people who will not be invited on the team. 3. A disciplined process. CEOs often underestimate how much having a disciplined process can help or hinder the executive team. Installing and refining a laid-out procedure will significantly improve the team s ability to deliver on its purpose. Answers to questions such as how decisions are made and how team members should work together need to be expressly spelled out. The CEO must provide the tools and frameworks that a team can immediately put into action. Importantly, this process also makes explicit how the team engages both as a total group and when working one-on-one. For instance, take agenda management. CEOs need to remember that they own the agenda for their leadership team meetings. But, despite that being a rather straightforward assignment, it s often something CEOs don t do well. They either don t tie the agenda to the purpose of the team or they delegate the agendasetting to someone else. This often happens because CEOs ask their administrative assistant or another member of the executive team to connect with each team member and find out what each wants to discuss during the meeting. Delegating this simple task may seem like effective time management, but CEOs forget that by doing so, they are delegating their leadership agenda. Another common mistake is getting meeting pre-reads out too late. If the CEO shares materials that need to be reviewed before a meeting at 11 p.m. the night before, not all of the team members may be able to read the materials. Such a practice undermines the ability of team members to be prepared to have a robust discussion on agenda topics. While this may seem obvious, by not paying attention to it, a CEO can hinder and undermine his or her team s performance. CEOs should also think about how ill-considered reward schemes can impact their team by fostering feelings of unfairness or lack of trust. Rewards cannot bring a team together and get them to collaborate, but they can break teams apart. For example, consider a company that bases the annual bonuses for its heads of strategic business units on sales and profits of the products in their portfolio, while the bonuses of functional heads are based on the successful implementation of division-wide initiatives. Clearly, the way these executives are being compensated is in conflict. CEOs need to pay attention to the entire reward package of their top team. 3

4 4. Norms for productive relationships. Installing the first three factors may create friction among team members, and that s OK. Teams can be perfectly aligned without the members all wanting to spend their social time together. The onus is on the CEO to work with the team to set norms for behavior and expressly explain how the team should engage when not only working as a whole group but when individual members meet with one another in between sessions. By instilling disciplined processes and productive norms for the top team, CEOs can ensure meetings are focused, purposeful, and effective. Establishing norms of conduct allows members of the leadership team to understand what must always be done and what must never be done. Our research shows that norms are the second biggest differentiator for top team performance; outstanding teams have clear rules of engagement for how the members deal with each other inside and outside of meetings. The problem is, CEOs often don t pay attention to norms or explicitly express them to the team. And while a CEO may not have articulated norms, they still exist. They are comprised of the patterns of behavior a CEO accepts. It is important to realize that not all of these behaviors may be in support of the purpose of the team and the CEO s agenda. Additionally, CEOs often do not realize the full impact that norms can have. This is the case when they don t take the time to describe what it means to be a senior executive at the highest level of the company and the behavior expected from those in that role, regardless of with whom they are interacting, both within and outside the company. In other words, norms can play a part in clarifying the enterprise role that each member on the leadership team plays. When it comes to norms, CEOs must remember: If they do not address issues, they will get the behavior they are willing to accept. 5. Continuous development. High-performance teams do not simply happen. People learn to work together, and teams take time to evolve and mature. And even good teams can get stuck. But by taking a stance of facilitating continuous development, CEOs can accelerate the performance of their team. The problem is, when an executive team is seeing little or no progress or signs of wheel-spinning, CEOs often turn to executive coaching for team members. Unfortunately, Korn Ferry knows from our research that providing each individual executive with his or her own coach can improve an individual team member s leadership skills but will do nothing for the group. For a team to improve, it has to be coached as an entity and in real time. The focus of the coaching needs to be on the dynamics and patterns of interaction within the team that help or hinder the team from doing its work, as well as on the six factors. By focusing on these patterns and the factors that are holding the team back, a CEO can accelerate the performance of the team. CEOs also need to remember that it is not realistic to think their top team will never fall off the rails; it will happen to the best of teams. But CEOs will know they have a high-performing team when the team members recognize that the team has gone off the rails and can put it back on course. Team members will recognize they have and share the accountability to call out other members when they have gone off the topic at hand and bring them back to what was being discussed. CEOs cannot expect that their top team will never go off topic, but a high-performing team will not let that derail them. CEOs always say they are looking to accelerate the performance of their team. Well, it s closer than they think. They simply need their top team coached and coached as one unit. 6. Team leadership. The previous five factors are essential to creating an effective leadership team, but high-quality leadership from the CEO is perhaps the most critical factor in managing a high-performing top team. For example, while CEOs are normally immensely prepared for their analyst calls, board meetings, investor roadshows, key customer meetings, and company town halls, often times, CEOs give little forethought or attention to their team interactions. But by ignoring his or her team, what is at risk is no less than the speedy execution of the CEO s strategy. The good news for CEOs is that this can change today. It is totally in the CEO s control. By making a change and taking command, a CEO can see results starting today. 4

5 Conclusion In the face of rapid digitization, political upheavals, aging demographics, and other megatrends, CEOs need to make radical changes to their organizations. No longer are brand extensions, staff reductions, geographic expansions, or bolt-on acquisitions enough. The world s savviest corporate leaders are looking at today s societal trends and overhauling their firms business models in an effort to compete. But they cannot succeed alone they need a cohesive, aligned team. The challenges a CEO will face leading a team of leaders can be daunting. The key success factors that a CEO needs to keep in mind are to have a well-defined team purpose and accountabilities to keep the team members on track. CEOs need to ensure they have the right people with the right skills to deliver that purpose. They should put in place disciplined processes that aid the team in its work. They must articulate an agreed set of norms that guide the team s behaviors in and out of meetings, while promoting trusting and collaborative relationships among team members. CEOs have to provide continuous development of the team s collective capabilities to meet evolving business requirements. And most importantly, they need to take accountability and lead their team effectively. By focusing on developing these six factors of a topperforming team, a CEO can accelerate performance and drive the business transformation that his or her organization needs to undergo. About Korn Ferry Korn Ferry is a global organizational consulting firm. We help clients synchronize strategy and talent to drive superior performance. We work with organizations to design their structures, roles, and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop, and motivate their people. 5 Korn Ferry All Rights Reserved.