Trouble at the Top
Neal Kissel and Patrick Foley interviewed 20 current and former CEOs of large public companies and published their findings in Harvard Business Review online in January 2019.
They found out almost 50% of CEOs said the role was not what they expected beforehand.
They identified three underestimated challenges:
- Newly appointed CEOs stagger under the demands of direct reports. They state they are spending too much energy and time managing their direct reports.
- Relationship management across the company, modulating or solving conflicts, and making decisions around conflicts pose a challenge. There are too many silos in the company; teams are fragmented; people don’t think systemically, and a lot of that is about relationship management.
- The third challenge that a new CEO faces on the job is information flow. They wonder, “Am I getting the information I need for my people? Is the information I’m giving, the strategy, or the vision, getting to the lower levels of the organization?” This top-down and bottom-up flow of information taxes them.
These are the issues: energy drain, relationship management, and information flow management. CEOs join the position thinking they are going to focus on managing the business. They end up spending most of their energy with executives, direct reports, and their teams and wasting time with the fragmentation of the top team, internal politics, relationship repairing, and information management. They spend less time than they need and want on managing the whole company, business, and overall strategy.
Usually, when I share these insights with CEOs, they highlight one of the things I just said and object by saying, “Yeah, yeah, but those are rookies, recently appointed to the role, so of course, they are inexperienced. They don’t know how things work.”
They usually think, “This doesn’t apply to me, a seasoned CEO.” However, in 2010, researcher Fred Adair found out that usually, CEOs believe their teams are better than the teams themselves think they are. Adair asked CEOs to use criteria to rate the performance of their teams. When the CEOs rated the team performance as a team, they gave a higher rating than when the team answered the same questions. The CEO might say, “On a scale from 0 to 5, with 5 being highest, I’d say my team is a 4.6”. But the team members would say, “No, we are a lousy team. We are a 3.5 at best or more realistically a 3.2.”Usually, the CEO is the last one to know about the problems going on in his or her team. And this is unrelated to how seasoned the CEO is on the job. When you are the alpha animal, others carefully manage the information they give you. After all, they want to influence your decisions to favor their projects, people, and interests. It’s only human to do that. They will not tell you about the realities of conflicts, politics, incompetence, or problems. It’s for the CEO to find out when problems become so bad that results suffer. By then, it is, of course, a bit late.
CEOs tend to live in an information bubble that creates a distorted view of who they are, what they can achieve, and how much they are backed up by their teams. They think that they lead a team, whereas most often they manage a loose group of individuals.
Do companies need executive teams?
Any intelligent and efficiency mindful CEO might ask right now, “I get it; executive teams can be a beautiful thing to have, but do I need to develop one? Can’t I get the same results if I just bring together a group of competent people to get the job done and get on with it? Is it worth the investment of energy, time, resources, mine, and of everybody else to go that way? As you said, CEOs already spend more time and energy to manage relationships than expected. Isn’t this going to drain me even more? What if the conditions are not right? We are under great pressure of time and results; there is a crisis going on, in case you haven’t been around for the last year. How can we afford to do this?
“What about the risks? What if some team members boycott the initiative and I lose face? What if I lose control of the group because I empower them? What if the Board does not agree with this movement? I would lose my credibility just by trying.
“This is micromanagement. I don’t want to go into the team’s areas of responsibility to tell them what to do and not. This action will dilute individual responsibility and get everybody frustrated by my interference. How will I hold the individuals accountable then?
“We don’t need to be friends; we just need to be productive together. Teams are unnecessary at this level; my people are too competent to need them. This is not the way we do things in this company. You will need to convince me to go this way.”
As an organizational consultant, I have heard it all. I could write one full chapter about objections to executive teams and the specific answers to them all. Some of the next chapters go into more detail on how the beliefs and behavior modes of the CEO sometimes prevent the executive group from becoming an effective team and the impact these beliefs and behaviors have on the CEO’s leadership, credibility, and influence. I will also explain in the last chapter why some of the objections of CEOs are groundless.
A chief executive team is not about being friends or diluting responsibility. Nor it is about filling gaps of competence or weakening the CEO position. It’s about getting the company to a different level. It’s a transformation of leadership.
CEOs know this instinctively. We have been implementing teams all over the organizational structure for decades.
- Self-managed teams are the basis for continuous improvement in manufacturing;
- project teams are the building block of technical execution;
- research and development teams are pushing innovation forward;
- process teams are streamlining the functioning of our companies;
- customer service teams are redesigning our organizational charts putting clients at the center; and
- agile teams are doing their stuff all over the place.
Do executives think they can continue to do business with executive teams organized in silos? This is not going to work.
Not only are results are weak when compared with what can be obtained with a fully functioning executive team, but also having a working group at the top sets the worse possible example for a performance-enhancing company culture. Everybody can see it except the executives. It’s the invisible elephant, remember?
Very often, in crises, when risk, resources, and individual competence don’t add up to a solution, CEOs get their direct reports to work as a team to find a way out of the pit. But as soon as the sun shines again, they revert to the standard approach of silo management. It’s a pity that so much potential to produce outstanding results is wasted in regular business situations. These hold the key to business excellence because they allow the time and resources to maximize efficiency while preparing meaningful transformation.
Becoming a team only to help the company out of a crisis is better than nothing. But it leaves most of the money and happiness on the table.
I will not dwell in this line of reasoning for developing executive teams. Instead, I will just give one answer to the question in this chapter and back it up with research. You need to establish a chief executive team because you can’t afford not to do it. Business as usual is draining money, ideas, engagement, and creating the wrong performance culture in your company. To understand this, we just need to look at how the executive team dynamics impact business results.
What’s on a CEO’s mind?
I shared above that, according to Gartner’s CEO and Senior Business Executive Survey of 2019, there are three main concerns in the minds of top executives: growth, digital transformation, and structural development of companies.
To foster growth, you need cash. Investment is essential to have a return on it. You require innovation skills and processes to be able to transform the business digitally. You can’t keep the same business model and expect results to increase, or even to remain the same, under the significant market transformation we are going through. Your company must have engaged people to develop and redesign the company structure and prepare the next generation of leaders. You also need engagement to get your strategy executed and produce the right results.
We will look at the impact of having a real executive team instead of a working group. How does this affect the company’s financial results, innovation, and engagement (the critical dimensions of strategy by CEOs)?
In my book Chief Executive Team, I dive into each of those dimensions, citing only a handful of studies that show the breadth of research done on each topic. You can find a list of references at the end of the book to start reading more.