Annual financial reports. Quarterly analyst statements. Acquisition and expansion plans. Such information is closely associated with a company’s performance and growth.
As investors cast a wider net to gain a more accurate view of a company’s prospects, most realize they should also look closely at the management team. Leaders can make or break a company transformation. In fact, 33 percent of failed transformations occur because the leadership team’s behaviors did not support the desired changes.
Consider one large insurance company. Discord among senior leaders led to low trust among team members, misaligned priorities, ineffective meetings, and struggles to make or adhere to decisions. The result was significant churn and rework. Employee engagement and accountability dropped, and the transformation slowed.
With so much riding on the leadership team’s performance, what can be done to improve its effectiveness?
Our experience, combined with scientific literature on organizational psychology, revealed 22 behaviors that contribute to effectiveness. These behaviors can be broadly condensed into four characteristics of effective teams:
- They configure the team around a clear mandate and precise roles, understanding which roles drive the most value and securing the right talent for those positions.
- They align on a value agenda, set of priorities, and way of working together, which helps forge a distinct identity.
- They execute under a governance system that allows them to make decisions quickly and effectively, collaborate, and challenge one another.
- They take time to renew—evolving, innovating, learning from the broader context, and investing in individual and team-wide development.
Bringing leadership together around critical behaviors
We studied 37 organizations to understand how frequently each behavior occurs in their leadership teams and which ones they believe are most important to their success. The results suggest that significant opportunity exists to improve behaviors associated with team effectiveness.
For instance, while leadership teams generally agree that aligning on their purpose is critical, only 60 percent of organizations’ team members reported that they were actually aligned. Similarly, while consistent communication is ranked as a priority, less than 40 percent of teams report practicing it. This failure to enact important behaviors is a missed opportunity: when leadership teams have a shared, meaningful, and engaging vision, the company is nearly two times more likely to achieve above-median financial performance.*
To design a leadership team journey, teams should align on their value agenda and vision; be thoughtful about which profiles are represented in the leadership team; structure the right cadence of interactions, focus on the most important decisions and areas where the team needs to collaborate; and identify and develop three to five behaviors that are most critical to delivering the organization’s value agenda. The initiatives taken to address these behaviors should be simple and results oriented.
It is easy for senior leadership teams to fall into a pattern of addressing all escalated decisions. Therefore, some leadership teams have improved their effectiveness by focusing their time and attention on the work only they can do and delegate the rest. Relatedly, some teams schedule fewer meetings with the core team and instead use committees to meet on topics for which the full team is not required.
Having effective leadership teams can yield significant results across the entire organization. The insurance company reduced its spending by $20 million within nine months of its interventions while also improving decision making, team bonding, and collaboration.
All leadership teams should strive for such results by addressing key opportunity areas and the behaviors most important to their success.
For more on leading successful large-scale change programs see our book, Beyond Performance 2.0.
*Framework developed based on studies of books, articles, and organizations across industries with stringent reliability and validity tests; interviews with functional experts; and a survey of 37 teams, in which approximately 430 respondents gave directional insights on trends across teams.