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Published: January 1, 1996

 
 

Managing the Team at the Top

The team at the top may be the most difficult to manage and lead. Rivalries, strong personalities and different notions of the future make it a tough job indeed. But if the teams are structured right, they can be of immense value to the company.

More often than not, today’s C.E.O.’s are not only leaders of their companies, they direct a small team of ambitious top executives - their fellow members of the Office of the Chief Executive. For many of them, schooled perhaps in the traditional authoritarian mold, eyeballing with their near-peers is by far the tougher assignment.

David Nadler, a consultant who has worked closely with nearly 50 C.E.O.’s who lead executive teams, elaborates upon the classic problem: the C.E.O. who confuses participation with a lack of leadership. As executive teams emerge to cope with the increasing complexities of running a major enterprise, the C.E.O. will need to be an effective team leader without giving up his effectiveness as an individual leader. In other words, he must wear “two hats.” But how does he reconcile these dual roles?

One answer suggested by Mr. Nadler is for a C.E.O. to be very explicit about his two roles. He should make it transparently clear to his team members when he wants decisions reached by consensus and when he wants to make them alone. This way, everyone knows where they stand, the C.E.O. included.

The C.E.O. will also benefit, Mr. Nadler adds, by putting himself in the position of team builder. He can retain outside help to assist, but the C.E.O. himself will be ultimately responsible for selecting team members, determining their roles and setting out each team’s charter. The role of the C.E.O. is not just that of leader or even team leader, therefore, but also of team builder and developer over time. Carried out effectively, the rewards are significant for the C.E.O. and of immense value to the team members and the company as a whole.

Leadership is becoming a team sport. In major enterprises and institutions throughout the United States, senior executives are finding that the demands of leadership necessitate the creation, building and management of executive teams.

Nowhere is this trend more pronounced than at the very pinnacle of corporate leadership--the office of the chief executive. As their jobs have become more complex and demanding, many C.E.O.'s have found it useful, if not necessary, to establish corporate-level leadership teams to assist them in running the enterprise.

This movement toward executive teams raises a major question about the role and management style of the C.E.O. How does a chairman of the board or a president need to function differently in a team environment? What are some of the unique problems facing C.E.O.'s who lead teams, compared with those facing the multitude of other team leaders throughout the organization? How have some C.E.O.'s made the transition to successful team leadership?

During the past 15 years, my team at the Delta Consulting Group has been working closely with nearly 50 C.E.O.'s who have opted to develop and lead team structures at the top of their enterprises. We participated in and facilitated the development of teams that were clear successes, as well as some that were frustrating, time consuming and ultimately not productive. From this experience, we have culled some observations about the nature of executive teams and the specific requirements for C.E.O. team leadership.

We will begin by discussing the definition of executive teams, why they have emerged and how they are different from other teams. Then we will focus on the role of the C.E.O. as team leader, explaining the unique qualities of that role and the key requirements for filling it.

THE EXECUTIVE TEAM

What is an executive team?

During the 1960's, an approach to structuring executive roles and work emerged in the United States that can be called the C.E.O./C.O.O. model. This structure typically includes a board chairman serving as the chief executive officer and a president serving as chief operating officer who reports to the C.E.O. It also includes a number of executives who report to the C.O.O. and are each responsible for the operations of a particular unit.

Work is allocated so that the C.E.O. is responsible for strategic issues, external relations and overall corporate governance, while the C.O.O. has primary responsibility for running internal operations. The C.O.O. might meet regularly with those who directly report to him, but the role of each of the individual executives is to manage his own piece of the organization consistent with the strategies and direction from the top. Although the specific roles and assignments varied from company to company, by the 1960's this "two-person" structure became the dominant form of organizing major United States corporations at the executive level.

But during the past decade and a half, a different type of structure has emerged at the top. Under this arrangement, a team of executives reports to the C.E.O. This group collectively assumes the role of the C.O.O. in managing internal operations, and may even take on some of the C.E.O.'s duties of formulating strategy and managing external relations.

If set up effectively, such a group is more than a set of individuals who work together; it is a truly interdependent interacting team. That is, the members have a sense of identity--they perceive themselves as a unit; they are interdependent--they depend upon each other to produce their output; and they have joint outcomes--their rewards and penalties are affected by each other. The core defining characteristic is that there is a set of people who collectively take on the role of providing strategic, operational and institutional leadership for the organization. Thus, each member is not only responsible for his own unit or function, but also explicitly wears another "hat," that of corporate leadership.

Why the emergence of the executive team?

The fundamental rationale for establishing any team, including an executive team, is the creation of an "assembly bonus"--the essence of which is increasing effective coordination, or coupling, across functions and activities so that the performance of the "whole" is greater than the sum of its parts. Why has the shift to the executive team--with its special promise of an assembly bonus--seemed to accelerate recently? Three factors appear to account for the new activity: external demands, organizational complexity and concerns about succession.

At the broadest cultural level, teams have come to be viewed as a more acceptable form of organizing, particularly because of the effective use of team structures by the Japanese and other foreign competitors. Thus, in contrast to the bias toward "rugged individualism" that prevailed for many years in United States-based organizations, the idea of managing through teams at the executive level is seen as a more legitimate concept today. One company even talks about "rugged groupism."

External business pressures have also played a role in intensifying the demands on corporate leadership and on the C.E.O. in particular. Increasing global competition, technology-based change, government intervention and turbulence in financial markets have all added to the chief executive's burdens. The need to spend more time on strategies to meet environmental instability has had to be balanced with a focus on shorter-term performance, driven by shareholder demands and the emergence of boards of directors as potent forces. As a consequence, C.E.O.'s have found themselves looking for help in both strategic and operational tasks.

C.E.O. succession-related issues lend themselves to the team approach.

Executive teams emerge as well because of the internal requirements of managing diverse yet interdependent organizational units or because of the need of the C.E.O. to handle succession-related issues. One way of thinking about these various elements is to describe the three distinct "scenarios" that we have observed in relation to the formation of an executive team. The first is related to the internal management challenges, while the other two are related to succession.

1. The business diversity scenario. This scenario is driven by the diversity and complexity of the pieces of the organization. In those companies where diversification has created multi-business or multi-industry activities in the context of a more unstable and demanding environment, the C.E.O. feels that it would be difficult for one individual to provide the needed direction and integration. So he forms an executive-level team to collectively perform the C.O.O. function.

The C.E.O. believes that such a team will provide him with "many heads" applied to a problem and thus the company will benefit from the collective wisdom and intellect of the team. Examples of this scenario are the Corporate Office that Paul A. Allaire has created at the Xerox Corporation and the Management Committee that James R. Houghton created and led for many years at Corning Inc.

2. The new C.E.O. scenario. Executive teams also emerge through a second scenario, occurring when a C.E.O. is designated and first takes office. Particularly in situations where that individual was not the C.O.O. prior to succession, the new C.E.O. is often hesitant to immediately designate a chief operating officer.

There are several reasons. First, he may want to have direct contact with those parts of the business with which he is less familiar. Second, he may not want to put a layer of management between himself and the major business units during the initial stage of his term, when he is creating his leadership agenda and putting his stamp on the organization. Third, he may not want to implicitly designate a successor through the appointment of a C.O.O., which could narrow his ultimate choices or create a perception of reduced opportunity for other executives.

Therefore, the new C.E.O. creates a team to work directly with him in leading the organization. Examples of this approach can be seen in Robert E. Allen's structuring of senior management at the AT&T Corporation after he succeeded James Olsen in 1988, or Walter V. Shipley's creation of the "three president" structure at the Chemical Banking Corporation in the mid-80's.

3. The executive-selection scenario. The third scenario occurs at the end of a C.E.O.'s term. As the C.E.O. contemplates the choice of a successor, he modifies the structure, frequently by the retirement or removal of the current C.O.O., to create an executive team that includes a number of succession candidates. The team then becomes an arena for assessing, selecting and preparing successors. It provides an opportunity for the C.E.O. and the board of directors to observe the candidates as they interact around common business problems, or, as one said, "on a level playing field." The C.E.O. is able to test the quality of the candidates' thinking, their leadership skills and the nature of their relationships with others in senior management. Thus, the executive team is created to provide an environment for a "horse race." Notable examples of this can be seen in the structures created by Reginald Jones at the General Electric Company and Walter Wriston at Citicorp during the early 80's as part of their executive-selection processes.

These scenarios develop and change over time. C.E.O.'s may manage and create teams through different scenarios, and they may move in and out of using team approaches.

    How are executive teams different from other teams?

    One might reasonably ask whether executive teams are any different from other management teams that might be encountered in an organization. Our work indicates that there are some very significant differences. This is important because managers are often unprepared by their previous experiences for the dynamics they encounter in executive teams. The differences also pose unique challenges for the shaping, structuring and managing of these teams. Some of the notable differences are:

    • Salience of the external environment.

      While participants in many types of teams find that they need to deal with the environment beyond the group's boundaries, the executive team is uniquely influenced by external forces. Several elements of that environment have a major impact on the functioning of the team--particularly customers, competitors, financial markets, the board of directors and shareholders. The understanding and managing of that environment therefore becomes a central and critical task of the team, much more so than in other team settings.

    • Complexity of the task.

      As noted above, the executive team faces tasks or work requirements that are potentially more complex--and offer more uncertainties--than those confronting most other teams.

    • Intensified political behavior.

      The essence of the executive team is power, or the exercise of influence over the behavior of others. In fact, a major job of the executive team is to effectively exercise power. In that environment, therefore, the presence of politics is much more pronounced, and explicit political behavior appears to be more frequent than in other teams.

    • Fixed pie reward contingencies.

      While there are many rewards for executive team members, the ultimate reward is succession--who ends up as the C.E.O., or team leader. By definition, succession creates a zero-sum game, and thus a perception of a "fixed pie" of rewards. If one person wins, others have to lose.

    • Increased visibility.

      The executive team has symbolic value as a source of institutional leadership, and therefore the actions, interactions and dynamics of the team are carefully watched by many others in the organization. The team becomes a stage upon which dramas are acted out. What might otherwise be small and inconsequential interactions become major events.

    • Composition.

      Individuals become members of the executive team through a multiyear process of selection. While it is dangerous to generalize, those selected for executive teams in the companies we have observed tend to be high achievers and aggressive seekers of power. They also have histories of distinguishing themselves through individual achievement, rather than for their work with or through teams. Thus, in many United States-based companies, the executive team ends up composed of people who have been brought up and rewarded for their successes in the "rugged individualism" model of management, and they may be less prepared to either lead or participate in effective teams than would be the case for colleagues at lower levels.

    • Special meaning of team membership.

      While membership and inclusion is an important issue in many teams, it has special meaning for the executive team. Because it is the ultimate team in the organization, being a member has special status and symbolism. Managers frequently talk about the importance of "sitting at the big table" as shorthand for team membership. As a result, the questions of who becomes a member, how members are initiated, what it means to lose membership and so forth become of much more concern than in other teams.

    • Unique role of the C.E.O. as team leader.

      A key difference in the executive team is that the leader is the C.E.O. As a consequence, there may be more social distance between the leader and team members than in other settings.

      In light of these factors, the dynamics of the executive team are significantly different from other teams. Both the work of the team and the relationships among members are more complex.

      THE C.E.O. AS TEAM LEADER

      The uniqueness of the C.E.O. role

      As mentioned above, one of the unique properties of the executive team is that of the role of its leader, the C.E.O. There are a number of elements that contribute to the social distance between the C.E.O. and team members--a distance that is greater than what is normally experienced between leader and member.

      First, the C.E.O. is not only the team leader, but the ultimate determiner of rewards, particularly succession. Unlike other teams, there usually is no recourse beyond the leader; if relationship or performance problems arise between individual members and the C.E.O., there is no place else to go. Second, the C.E.O.'s tenure is also more defined than in other teams. It is more finite (because of customary retirement ages) but also of potentially longer term. Therefore, the C.E.O. is both more permanent in the role and more certain about when the role will end. Third, the C.E.O. plays several roles in addition to that of team leader. In particular, the role as institutional leader is important. As representative of the enterprise in the outside world, as symbolic icon of the organization, as focal point for employees, shareholders and sometimes customers, he has the potential for a larger-than-life presence. As institutional leader, he is also the individual whom the world--including the board, the shareholders, the financial community and the public--see as responsible for the success or failure of the enterprise.

      The problem then is how this holder of ultimate power and larger-than-life symbolic leader can also function as the builder, facilitator and coach of a team of individuals. Complicating matters, these individuals are often, in turn, institutional leaders for their own segments of the organization.

    Team leadership

    Understanding the C.E.O.'s role requires a brief review of some basic concepts of group dynamics and leadership. When we observe and seek to understand a team in action, there are two perspectives that we can take. One is called content, and focuses on what the team is doing, or in particular the nature of the work or tasks that the team is undertaking. When we watch an executive team, we might see content related to corporate strategy, resource allocation, management succession, etc. A second perspective is called process. Here we are looking at how the work is being performed by the team. We are examining the patterns of interaction, the relationships and the dynamics of the team as it goes about its work.

    Understanding a team involves the observation of content and process at the same time. Content influences process and process influences content. For example, how the team works at making decisions, solving problems and committing the action will influence the outcome of its work together. At the same time, different content topics (management succession, for example) will elicit different process dynamics in the team. We should also point out that while we will be talking about the observable behavior of the leader and the team when they are physically in proximity (in team meetings and work sessions), the concepts apply to the day-to-day work of the team and the interactions of its members, even when they are not all assembled at the same time in the same room.

    The effective leader manages both the content and process of the team.

    Using these terms, the role of the effective team leader, at the most basic level, is to shape and manage both the content and process of the team. He (or she) participates in the choosing of content for the team to consider and often takes a position on content--a strategic decision, for example. At the same time, the team leader shapes the process. He does that through formal structuring of the team's activities, but also by his day-to-day activities, both in formal team sessions and in other interactions with team members.

    Using this framework, there are three issues to consider with regard to the C.E.O. as team leader. The first is the "participative leadership" issue, or how the C.E.O. can foster participation without abrogating leadership. The second is the "two-hat issue," which relates to how the C.E.O. can participate in work on the content of the team while also being the ultimate decision-maker. The third is the "team builder" issue, or how the C.E.O. needs to lead the design and development of his team.

    The participative leadership issue

    C.E.O.'s frequently find themselves in a quandary about how they should lead a team. This is a process question. They realize that teamwork at the top will require changes in how they lead, and they also recognize that they will need to become more participative.

    A classic problem occurs, however, when the C.E.O. confuses participation with a lack of leadership. In discussions with many C.E.O.'s, it appears that they think of their leadership choice in the following terms:

    EXHIBIT I
    THE C.E.O.'s PERCEIVED LEADERSHIP CHOICE



    They confuse and confound what are really two dimensions of leadership. They desire to move from being non-participative (leading alone) to being participative (leading together with a team). They conclude that this means that they must therefore move from being directive in the team setting toward being non-directive, and letting the team manage and decide for itself. This frequently leads to ill-structured and non-productive work sessions and a drift toward not very effective management by consensus.

    In reality, two different dimensions of leadership behavior are at play here. The actual choices that the C.E.O. faces are best described in Exhibit II.

    EXHIBIT II
    THE C.E.O.'S PROCESS CHOICES



    What typically happens is that the C.E.O. starts in quadrant 4 prior to establishing a team. Because he confuses the two dimensions, he then moves to quadrant 1 (participative and non-directive) with the resulting frustrations associated with that approach. In some cases, he then does away with the team and returns to quadrant 4, while in other cases, he recognizes that he has a role in directing the process of the team, and moves to quadrant 2.

    In that quadrant, the leader is participative--he involves the team in the content of making decisions, discussing issues, raising concerns, solving problems and learning. At the same time, he is quite directive about the process of the team, shaping and structuring how the team works. Some of the jobs the effective C.E.O. team leader does are the following:

    1. Defining the agenda topics

    2. Clarifying meeting objectives

    3. Questioning and testing for understanding

    4. Managing the time allocated to each topic

    5. "Calling the question"--clarifying when it is time for a decision

    6. Summarizing discussions and the results of work sessions

    7. Identifying next steps and accountabilities

    This is an illustrative list, rather than an exhaustive one. In short, the C.E.O. is shaping how the team works by managing its work process. In that manner, he is very directive and is pushing the team toward high performance, but he is doing that through management of the process, rather than by taking a position on all of the elements of the content of the team's work.

    The two-hat issue

    There are times, however, when the C.E.O. does need to take a position on the content of the work. Some decisions that the team faces can be delegated to individuals or sub teams. Some decisions can and should be made by consensus (although the C.E.O. needs to be part of that consensus). Many decisions, however, do not yield to consensus, or do not allow the time that consensus would require. In those cases, someone has to make a decision and that someone is the C.E.O. The team, after all, is serving as a consultative body for the C.E.O., providing input, guidance and a sounding board, but it is still the chief executive who is the ultimate decision-maker.

    This, however, creates a problem. How does the C.E.O. reconcile his two roles, that of participant in discussions and deliberations, and that of ultimate decision-maker?

    A device that some C.E.O.'s have used is to become very explicit about those roles. For example, Jamie Houghton, leader of a very successful executive team at Corning for more than 10 years, talks about the "two hats" that he wears.

    In his terms, there are times when he wants to be a member of the team, to argue, to test ideas, to have people push him, to get into the rough and tumble of the team's work. In those cases, he sees himself as "one of the boys," and talks about himself wearing a "cowboy hat." Other times, he is in the position of C.E.O., making a decision. In those cases, he is not looking for testing, push back or argument. It is then, he says, that it is time to wear a "bowler."

    The two-hat concept helped his team members to understand what he wanted from them and when they should consider him just another member rather than the institutional leader. It created a language system that all could use to talk about a difficult subject--the C.E.O.'s role. For example, Mr. Houghton would get to the end of a discussion and announce that "I'm going to put on the bowler," or during a heated discussion, someone might ask, "Is that a cowboy hat comment or a bowler comment?"

    The team-builder issue

    The final issue is that the C.E.O. needs to see himself as a builder of teams. Teams do not just come into existence and automatically function well. Effective teamwork requires an investment in building. Specifically, this involves time devoted to answer some of the following questions:

    1. Who should be members of the team?

    2. What is the charter or mandate of the team?

    3. What is the appropriate "value-added work" of the team?

    4. What are the roles and expectations of different members?

    5. What procedures will be used to manage work, to build an agenda, to solve problems, to make decisions, etc.?

    6. What types of interactions will be required among members, and what will be acceptable and unacceptable behavior?

    In addition to this initial work, the team needs to engage in its own quality assurance, through periodic quality checks and performance reviews and the use of methods to insure continuous improvement. This team building and maintenance can be done by the C.E.O. or can involve some form of outside help or facilitation, but it must be performed to insure effectiveness.

    The C.E.O. participates in the team while also being the ultimate decision-maker.

    This means the role of the C.E.O. is not just that of leader or even team leader, but also of team builder and developer over time. The C.E.O. needs to put in time with the team and also make the investment needed to develop his own skills in these areas.

    SUMMARY

    The era of the executive team is upon us. The complexities and demands associated with running an enterprise in today's environment require more resources than one person alone can typically bring to the task. As a consequence, executive teams have emerged as a major fixture of corporate governance, creating a new set of requirements for the C.E.O. as a leader.

    We should also note that the C.E.O. is frequently the leader of several teams. He participates and sometimes leads teams outside of the enterprise, in business and community activities. Of course, the C.E.O. of any public company also has to shape, lead and develop the team known as the board of directors. The skills that the C.E.O. develops to manage his own executive team will be transferable to managing the board, an increasingly important benefit now that boards are becoming both more active and assertive.

    In this new era of executive teams, the C.E.O. will need to be an effective team leader without giving up his effectiveness as an individual leader and as an institutional leader. It is a difficult challenge, but when done well, the rewards are significant for the individual, for the team members and for the enterprise as a whole.

    HOW EXECUTIVE TEAMS WORK: THE CASE OF AT&T NETWORK SYSTEMS

    Even before the recent announcement of the planned breakup of its parent company, AT&T Network Systems was a relatively autonomous operating unit. Its experience with an executive team, which was created in 1991, offers lessons for others thinking of setting up such a structure.

    With annual revenues of approximately $12 billion and more than 60,000 employees, Network Systems has long been a sizable company, charged with developing, producing and selling equipment and software to information service providers, including phone companies, cable companies and other network operators. Its products range from simple cable and connectors up through large electronic switching systems and full network installations of multibillion-dollar scope.

    In late 1991, William Marx, then the C.E.O. of Network Systems, was facing a demanding business environment that was becoming increasingly complex. While he considered naming a president and chief operating officer, he decided instead to create a Management Committee to work with him to provide leadership. The committee included the presidents of each of the five business units that made up Network Systems, a senior vice president for marketing and customer operations, the chief strategy officer and the chief financial officer. The senior public relations officer and human resources officer met with the group regularly.

    The committee began work on its charter, which included both strategy and operations issues. At an off-site meeting, the group spent three days together to develop the strategic vision of the company and put in place some major initiatives to move toward that vision.

    In the last quarter of 1991, major industry discontinuities occurred, creating a surprisingly poor performance for the year for Network Systems. The operation basically made no money for the year, a result that energized Mr. Marx and his team. In a series of meetings, they worked together to determine what went wrong, to understand the issues that faced them as a business and to find new ways of managing.

    This resulted in a number of understandings about how the team would work in 1992. It would divide its time, meeting twice a month for a full day, with one day devoted to strategy and the other to operations. On days devoted to operations, the chief financial officer would review the year-to-date performance of the total organization and each unit, but each unit president or executive would also be responsible for presenting to the group a review and analysis of the results. The team would work as a whole to identify and solve problems, as they related both to individual units and to the overall business.

    During this period, the team had to work out how it would make decisions and solve conflicts. Most decisions were to be reached by "modified consensus." In such instances, the group would talk through an issue until it reached a sense of agreement. Since Mr. Marx was part of the discussion, he had to be part of the consensus, and he also had to be careful to clarify when he was participating in the discussion as opposed to ending it with a decision. Mr. Marx found that he frequently needed to "call the question," asking for final points of view, or the discussion would continue for a long time. That became one of his most critical tasks as team leader. When major conflicts occurred, Mr. Marx would usually listen to all sides and then make a decision, although in some cases, he would send off the individuals to work in a sub team to try to come up with a solution.

    As a result of the increased team effectiveness, operations at Network Systems came under much more effective control, despite continued industry turbulence. 1992 turned out to be a banner year, with the penetration of new markets, significant advancements in product quality and earnings of more than $800 million. The team had come together and effectively worked as an operating unit to fix and redirect the activities of the business.

    The team continued through 1994, when Mr. Marx was promoted to take on other responsibilities at the parent AT&T Corporation. Richard McGinn, who had been the senior vice president for marketing and customer operations at Network Systems, succeeded Mr. Marx. Mr. McGinn created a slightly different configuration of teams to continue the successful team-based management structure at the top of the organization.

    Now, Network Systems is the core of the new systems and technology company that is emerging as one of the three surviving entities of the breakup of AT&T. Mr. McGinn has been named president and chief operating officer of the new systems company.

    Illustrations by David Smith

    Reprint No. 96106

     
     
     
     
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