Book Extract: Building a balanced team

Making everyone good at everything is a fool's errand. Concentrate on competencies in which your people stand the best chance of getting better and align it with your business strategy

IT'S NOT THE HOW OR THE WHAT BUT THE WHO: SUCCEED BY SURROUNDING YOURSELF WITH THE BEST
Authors: Claudio Fernandez-Aráoz
Publisher: Harvard Business Review Press
Price: Rs 995
ISBN: 9781625271525

A joint analysis from Egon Zehnder and McKinsey concluded that high-growth companies had executives with higher ratings in all eight key leadership competencies we analysed, on an average - strategic orientation, market insight, results orientation, customer impact, collaboration and influencing, developing organisational capability, team leadership and change leadership. However, there were some interesting subtleties in the findings: First, there was one skill that seemed more important than the rest in driving performance: customer impact. In companies that ranked in the top quartile for revenue growth, at least 40 percent of the senior executives scored 5 or above in this competency.

At the same time, my colleagues noticed that some of the most effective leaders had 'spiky' ratings - extremely high in just two or three areas but barely average or even below average in others. Rather than trying to be the best at everything, they had focused on becoming truly brilliant in some competencies instead of trying to overcome their deficiencies in others.

Third, collective competency mattered more than individual stars. A small group of high-scoring executives - or a knock-it-out-of-the-park CEO - didn't drive business success. In fact, those exceptional people were quite rare: as I mentioned before, only 1 per cent of the more than 5,500 executives in the sample had an average competency score of 6 or 7 out of 7 and only 11 percent had an average score of 5 or higher. Instead, the best-performing companies had a critical mass of strong (if not outstanding) leaders.

Fourth, companies with different strategies excelled with different types of executives at different levels. Organic growth required a strong cadre of senior managers (i.e., not the top team) who shone at not only customer impact but also developing organizational capability, team leadership, and change leadership. Inorganic growth was, by contrast, driven primarily just by top teams who excelled at market insight, results orientation, and strategic orientation, in addition to customer impact.

What lessons should you take from all this? To be extremely focused in your development efforts. Surrounding yourself with the best involves (1) understanding and building on each person's spiky strengths (giving some additional weight to customer impact), (2) ensuring that team members have skills that complement each other, making the whole greater than the sum of its parts, and (3) training your leaders in competencies that match their career stage and your team, unit or organization's broader goals.

It might be tempting to try to make everyone good at everything once you've brought them in. But that's a fool's errand because it requires a huge amount of time and investment to help even one smart, hardworking person improve in just one area. In our firm's experience, high-potential executives who receive intensive coaching and development support from their employers can boost their appraisal scores (on a scale from 1 to 7) by no more than +2 in one competency, or +1 in two, in one year. And no one can repeat this kind of improvement year after year. So it's much more effective to concentrate on the competencies in which your people stand the best chance of getting better, and those that offer the greatest benefits to your team, depending on your strategy.

Consider these case studies of companies that carefully matched their executive training programs to their respective situations: a turnaround, organic growth, and M&A.

• After a near-bankruptcy in 2002, Swiss engineering firm ABB realized that its state-of-the-art products were not enough. To achieve profitable growth, the company would need to better understand customers' needs. So in 2004 it created a leadership development plan for thousands of senior managers that emphasized three competencies: customer impact,people development, and change leadership. Participants were assessed by supervisors, peers, and reports; given improvement goals; reviewed on their progress; and compensated accordingly. A similar program was then rolled out to middle managers. The company has since seen impressive growth,and its people pipeline is stronger than ever. Instead of having only 30 percent of vacancies in its top two hundred roles filled by internal candidates, the figure is now 85 percent.
• Confronted with heavy competition and global expansion goals, a major pharmaceutical company invited cohorts of forty managers at a time to participate in skill-building workshops and field projects focused on customer impact, team leadership, developing organizational capability, and change leadership. The work included a plan to relaunch a key product in emerging markets; proposals for diversifying into new services; and a recommendation to reshape the company's customer interaction model by cutting the sales force by 25 percent and reinvesting the savings in other marketing channels. This practical, focused leadership development had a big impact: within eighteen months, more than 90 percent of the participants had been promoted and the profits are on the rise.

Reprinted by permission of Harvard Business Review Press. Excerpted from It's Not the How or the What but the Who: Succeed by Surrounding Yourself with the Best. Copyright 2014 Claudio Fernández-Aráoz. All rights reserved.