The Emperors new clothes Confronting the illusion of high-performance senior teams

Contents
A common tragedy .................................1 Address the problem like a Best Managed Company .........................4 Practical action steps ...............................8 Conclusion ............................................10

A common tragedy

In his classic childrens story, The Emperors new clothes, Hans Christian Andersen tells the tale of two weavers who promise an emperor a magnicent new suit of clothes that is invisible to those who are incompetent or intellectually inferior. Out of fear that he be judged unt for his own position, the emperor pretends to see the cloth even though he cant. His ministers share his fear and also pretend to see the cloth. The emperor dons his new clothes and parades naked through his kingdom. His subjects, afraid they will be judged incompetent or intellectually inferior, pretend they see magnicent cloth as well. Everyone in the kingdom is deluded until an innocent young boy cries out hes wearing nothing at all, and they are all confronted with the truth. Replace emperor with senior management team, and you have a tale for our time. Too many senior teams are blind to their performance and the impact they have on the organization. They may see themselves as a high-performing team but like the emperors new clothes, its an illusion. Every now and then, an exceptional leader can create a successful organization without the support of a truly high-performing senior team. But in todays complex and dynamic world, no organization should take the risks associated with a dysfunctional senior management team, regardless of how strong the leader. There is just too much at stake and too much evidence to show the performance of the senior management team is linked to organizational performance lowperforming senior teams create lower-performing organizations and high-performing organizations are led by high-performing senior teams.

Which raises the question, what is it about these exceptional senior teams that contributes to higher team and organizational performance? Its the ability to build and sustain core team competencies that lead to higher performance.

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Senior leadership performance has never been so important The parallel with the story of the emperor and his ministers is obvious. The subjects in this land or in this case the organization are watching carefully to see whats important and how they should act. Leadership at the top is the model that the rest of the organization adopts. It makes sense because the decisions made by the senior team represent the largest and most important matters in an organization. Decisions at this level have an exponential impact on the organization and the manner in which decisions are reached the values, attitudes and behaviours inuencing decisions shapes organizational practices1. Its why the development of high performing leaders has become a strategic imperative. Recent trends support that urgency. For the second year in a row, the second-highest challenge ranked by global CEOs is the consistent execution of strategy by top management2. Then add that 40%50% of senior business leaders are set to retire in the next ve years3, and it is no wonder that many executives believe their organizations performance will suffer in the near future due to a lack of qualied leaders4. The payoff for strong leader development practices is well-established. Organizations with strong leadership development practices have been shown to deliver higher shareholder returns5. And yet many executives report that current leadership development practices are inadequate6. In our experience, that is especially true in the area of team leadership competency.

Raising the bar on leadership: High-performing individual leaders are not enough Today, high-performing organizations need highperforming teams. The speed and complexity of business challenges demand that leaders are able to leverage the multiple skills, experiences and judgment offered by real teamwork. Because good teams tend to outperform good individuals, high-performing teams have become a key organizational asset and low-performing teams a serious liability. The emphasis on high-performing teams requires a shift in focus from individual leadership competency to team leadership competency. After all, at the end of the day the relevant measure of leadership is the results the team achieves. Now more than ever, organizations need to develop leaders with the mindset, skills and behaviours required to create and maintain high performance teams. That is especially true for the senior management team. Research shows that senior management team performance may be a better predictor of organizational outcomes than CEO performance7. It is clear that senior leaders simply must create and maintain a highperforming senior management team if they hope to create a high-performing organization. Ultimately, no matter how skilled the individual leaders are, unless the performance of the senior management team improves, it is not likely organizational performance will improve.

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Most teams underperform Despite the strong link between senior team performance and organizational results, our experience tells us the performance of most is low to medium. There are a number of reasons for this: Lack of measurement Few performance management systems measure team performance, and attention is seldom given to the key measures that indicate team performance. Without performance guidelines or measurement, most teams drift along. For teams, the old dictum, if its not measured its not managed is often true.

The traditional view of leadership The traditional and heroic view of leadership emphasizes the role of individuals over that of teams, so if the team members are high performing, there is an assumption that the team will be high performing as well. The assumption is based on the belief that the skills and behaviours linked to high individual performance will translate to teams, when in fact our experience shows that there are separate and critical skills and behaviours for team leadership effectiveness. Systemic nature of team dynamics The systemic nature of teams creates powerful and invisible dynamics that can support, but often undermine, team performance. We know from personal experience that team norms or expectations explicit and implicit mould our beliefs and create behaviours we may never exhibit in other circumstances. Often, team norms and expectations compel team members to do things that lower their performance and that of the team even though they want high performance.

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Address the problem like a Best Managed Company

High performance is very possible Some senior teams rise above these challenges and maintain high performance over the long term. Unlike low- and mediumperforming teams, they successfully manage the key competencies that contribute to high performance. We believe there is a causal link between the performance of the senior management team and the organization. To validate this thinking, in 2009, Deloitte undertook a study of the senior teams of highperforming organizations. We randomly selected 10 companies from Canadas 50 Best Managed Companies program (Best Managed Companies). Best Managed Companies are bona de highperforming organizations. To be recognized as a Best Managed Company, the organization must demonstrate sustained nancial success, sound business practices and superior competitive performance over time. Companies are independently assessed by senior judges selected from the professional services, banking and university sectors. Over 2,000 companies from across Canada enter the contest each year and only 50 earn the prestigious designation as a Best Managed Company.

To measure performance, Deloitte utilized a Team Diagnostic to assess and measure the strength of competencies that build team productivity and positivity. In this model productivity includes factors that support the teams ability to be productive. For example, the ability to manage resources, an effective decision-making process, clear goals, alignment, and accountability. The positivity dimension refers to the infrastructure and the conditions that create the climate of the team. For example, the level of trust and respect; clear, open communication; the teams ability to value different points of view and the ability to disagree openly for the sake of team results. Research shows that these productivity and positivity factors are interdependent and by maintaining high levels in both over time, teams attain higher performance. We used the Team Diagnostic tool to assess the overall performance of each senior management team and to identify specic strengths contributing to high performance. To understand how these high-performing teams differ from other teams, we compared the Best Managed results with those from 200 randomly selected teams.8

Established in 1993, Canadas 50 Best Managed Companies is the countrys leading business awards program, recognizing excellence in Canadian-owned and -managed companies with revenues over $10 million.

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Best Managed senior management teams outperform other teams The results of our study conrmed our observations. We found a very strong relationship between senior management team performance and organizational performance. One hundred percent of Best Managed senior teams were high performing compared to 12% of the 200 teams. The factors that contribute to a highly productive and positive team environment were 42% stronger on Best Managed senior management teams than they were for the 200 teams. In fact, Best Managed senior teams were signicantly stronger in every key competency linked to team performance. This is consistent with our experience that high-performing teams are relatively good at everything because they dont allow signicant weaknesses to linger and erode performance.

Figure 1: Competencies comparing Best Managed senior teams and 200 teams9
Trust Team leadership Resources
9 8 7 6 5 4 3 2 1

Respect Camaraderie

Decision making

Communication

Proactive

Constructive interaction

Accountability

Values diversity Optimism Alignment

Goals and strategies

50 Best Managed teams average

200 teams average

Figure 2: Sample of key differences between 50 Best Managed Companies and average teams
Average scores for Best Managed senior teams and 200 teams (9.0 is highest possible score) Best Managed Overall Productivity Positivity Accountability Communications 7.4 7.4 7.4 7.5 7.4 200 teams 5.2 5.3 5.0 4.4 4.3 42% higher 40% higher 48% higher 70% higher 72% higher Variance with average of 200 teams

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Other key factors that differentiate a high-performing senior management team from other teams were also evident.
Figure 3: Key factors differentiating a high performance senior management team from the 200 teams

Key element High performance culture

High-performance senior management team All elements contributing to team performance are strong they dont allow any signicant weaknesses to linger and constantly strive for better results. Purpose and goals clearly linked to broader organizational goals consistently link role and output to what organization needs from the team. Responsibility for team performance is shared among team members leader is not a dening force and team makes up for the leaders weaknesses. Balance the need for a positive tone or working environment with the need for productivity seek continuous improvement in both. Embed basic structures that facilitate group interaction, e.g., shared systems and processes for meetings, feedback, decision-making, conict resolution, etc. Communication marked by plaintalk and the ability to engage in effective dialogue even when in conict. Communication is typically highest positivity score. Effective structures for accountability are present; commitments are met and team members hold one another accountable for performance and behaviour. Accountability is typically highest productivity score.

200 teams Have strengths but weaknesses are not adequately addressed and erode strengths over time. Often can live with status quo. Unaware or unclear of what organization needs from team purpose and goals strongly inuenced by personal, departmental or operational demands. Leader is dening force team wont or cant overcome poor leadership and leader shoulders the blame for low performance. Dont balance tone or working environment with productivity will sacrice one for the other. Fear and lack of hope are prevalent. Lack basic structures that facilitate group interaction or dont use them regularly.

Understand organizational role

Share leadership

Positive tone and high output

Basic structures

Team communication

Communication marked by blame and defensiveness and inability to engage in effective dialogue or conict. Communication is typically lowest positivity score. Few structures for accountability are present; unmet commitments meet with little consequence and team members have low trust in competence of other team members. Accountability is typically lowest productivity score.

Team accountability

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We have identified three key factors differentiating these high-performing senior teams. As our work has evolved, these factors have become foundational and an initial focus of our work with most senior teams:

1 2 3

Acutely aware of inuence on organization A high-performing senior management team is very aware of the inuence their performance has on shaping organizational practices and performance, and team members take responsibility for maintaining team performance seriously. Over 95% of Best Managed executives who completed the assessment said performance of the senior team was extremely important to organizational performance. Aware of the organizational need they fulll High performing senior teams understand the distinct role the organization requires of them. For instance, only the senior team can create and maintain organizational focus on long-term goals. If they dont do it and there are many senior teams that allow operations and other concerns to take their focus off long-term, organization-wide goals and strategy the whole organization ies blind. Emphasis on communication and accountability Team communication and accountability are fundamental and highly interrelated competencies. The key distinction here is the difference between skills for individual communication and accountability, which may be well handled, and team communication and accountability that have little awareness or emphasis on many teams. Elements that contribute to effective team communication and accountability on the Best Managed senior teams score 70% higher than on the 200 teams.

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Practical action steps

Clearly, creating high senior management team performance is a priority for any organization concerned with organizational performance. This means:

Use team seniortomanagementleadership members build team skills in other leaders Our research shows that best practice leadership development programs utilize senior management team members to mentor and train developing leaders. Once they master the competencies necessary for high senior team performance, actively engage them in leader development programs to teach others. Dont tolerate a low-performing senior team anywhere The organizations senior management team is not the only senior team that impacts performance. The senior team of key project teams, functional teams, e.g., sales, nance, etc., have a similar impact on those they lead. Because projects have limited terms, it is tempting to overlook poor senior management team performance as long as results are OK. Dont. Best practice leadership development programs use real projects to develop leader skills and improve business results at the same time.

High performingrst step senior team is

The rst step to building a high-performing organization is to build a high-performing senior management team. Other initiatives aimed at improving organizational performance will be directly affected limited or enhanced depending on senior team performance. Utilize the Team Diagnostic assessment or another team assessment tool to nd out how your senior management team is performing and take steps to improve. Build leaders with team leadership skills Leadership development is a strategic imperative for modern organizations, and teams are a leaders most powerful organizational tool. Ensure team leadership skills are an important part of your organizations leadership development program.

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When you can improve two things only Time and resources are limited. Therefore, if you can only do a few things to improve team performance start with team communication and accountability. These two competencies are where the senior management teams of high-performing Best Managed Companies excel and where most low- to medium-performing teams dont. When we work with teams, we focus here rst.

Use teams to create culture a high performance Starting with the senior management team, many organizations nd teams are a powerful vehicle to create a high performance culture. Once the senior team is high performing, make members accountable for improving the performance of one or two key teams they lead or manage them. It is one of the most tangible ways leaders can use to improve organizational performance and develop new leaders.

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Conclusion
Recent trends have made effective leadership development a strategic imperative. High performance leaders are critical to organizational success, and most organizations dont have as many as they need to succeed.

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In modern organizations, because leadership is increasingly enabled through teams, there is a need to develop leaders with the skills necessary to create and maintain high performance teams. This is most true for the senior management team. Because the organization reects its performance like the emperor and his ministers, when it underperforms it can unwittingly generate organizational performance and results that are opposite to what it wants it is the organizations most important team. Even though most senior teams tend to underperform, the senior management team of high performance organizations like Canadas 50 Best Managed Companies remind us of the link between senior teams and organizational performance and provide insight into the key factors differentiating high performers from others.

We believe that senior management team development should be the rst place leaders look to improve organizational performance. For some senior teams, it represents a signicant and largely untapped opportunity because it is a rare chance for senior management to inuence powerful organizational factors that are completely under their control: their own behaviour. The organization reects the performance of the senior management team. When it improves, the organization does as well. And unlike the unfortunate emperor and his ministers, it creates the very impact and performance the organization is working so hard to achieve.

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Endnotes
1

Upper Echelons: The Organization as a Reection of Its Top Managers; Donald C. Hambrick and Phyllis A. Mason, 1984. Research Report CEO Challenges 2010: Top Ten Challenges; The Conference Board of Canada, 2010. Growing and Developing Leaders. Verity International, June 2008. Growing Executive Talent: High Priority, Limited Progress. Development Dimensions International (DDI) in cooperation with the Economist Intelligence Unit, 2007. Maximizing Your Returns on People. Laurie Bassi, Daniel McMurrer, Havard Business Review, March 2007. Major Issues Survey conducted by the Institute for Corporate Productivity (i4cp study) December 2009. Strategic Leadership, Theory and Research on Executives, Top Management Teams and Boards; Sydney Finkelstein, Donald C. Hambrick and Albert A Cannella Jr., 2009. Data from 200 teams provided by Team Coaching International from Team Diagnostic assessment history Base graphic from the Team Diagnostic assessment 2010 Team Coaching International. Used with permission.

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Contact
For additional information on these ndings or to learn more about how we can help you manage your leadership development programs, contact: Toronto Heather Stockton 416-601-6483 hstockton@deloitte.ca Halifax Vince Marsh 902-721-5535 vmarsh@deloitte.ca United States Neil Neveras 215-446-4442 nneveras@deloitte.com The Netherlands Rens Van Loon +31882886314 rvanloon@deloitte.nl

or visit www.deloitte.ca

www.deloitte.ca
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