February 9, 2012

The Right Role for Top Teams

Think of the top teams you’ve known that have had the greatest impact. Did their value come from the meetings they conducted and the decisions they made together? Or did it derive from something else? In most companies, the phrase top team is a misnomer. Senior executives throughout the company may clamor for a seat on the leadership committee because that is where the key strategic decisions are supposedly made. 

But in actuality, the group rarely conducts its work in unison, as a deliberative body or a source of command. Instead, its power comes from its members’ informal and social networks, their determination to make the most of those connections, and their ability to work well in subgroups formed to address specific issues. The most effective top teams are those that recognize this reality and explicitly set themselves up to function as the senior hub of the enterprise.

“If I consider what our top team needs to do well,” said the president of an investment bank in the wake of the financial crisis, “it is not so much about senior team building or planning for 10 years out. These are overly romanticized notions of what it means to be a good executive team. It’s more important to have different networks that execute quickly on crises or opportunities — combining our expertise and that of other groups in the company. 

Building this ability to solve big problems quickly is a big deal, because the pace of business keeps ramping up. Yet we don’t focus enough on this, in contrast to internal team building and individual coaching.”

Organizations that want to improve the effectiveness of their top team — and therefore the performance of the full organization — need to start by recognizing the true source of the top team’s value. They need to develop the kind of team in which each member is a recognized informal representative of larger networks of alliances; in which the top team knits together the collective expertise and accountability of a much broader group of people than the executives in the room; and in which subgroups can resolve issues and make rapid, incisive decisions that gain the commitment of the full senior leadership group, and the organization as a whole.

One source of this insight is social network analysis, the mapping and mathematical study of informal links in an organization, gathered through surveys and logs of meetings, phone calls, and e-mails over time. These analyses consistently show that as much as 90 percent of the information that the most senior executives of a company receive and take action on comes through their informal networks, and not from formal reports or databases. 

A typical senior executive committee or council functions formally as a central meeting point, a place where the most senior executives check in with one another, present performance results and other recent information, and ratify decisions that have already been made. 

Its value stems less from these formal activities and more from its informal role, as a collection of some of the most influential and experienced individuals in the company — and from its capacity to mobilize coordinated efforts through subgroups and network influence.

For example, in one global health sciences organization with a reasonably well-functioning “senior leadership committee,” that top team — made up of 14 people — represented only 2 percent of more than 500 senior executives in the company. But they accounted for almost 15 percent of the collaborative and informal ties in the organization.

The robust ways in which these executives maintained working relationships through the company had a substantial impact on execution and performance.

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