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MONDAY MORNING MANAGER

A perfect circle: rethinking your top team Add to ...

We usually talk of top management as a team. That suggests a cohesive group, with common goals, working together in the best interest of everyone else in the organization. But often CEOs discover those teams are really cauldrons of competing interests, constantly squabbling to represent their slice of the organization. And it is getting worse, as the size of executive committees grow, and more representatives of various activities in the company are added to the mixture.

“They have roles as representatives, which is fundamentally different from the project teams we’re familiar with,” says Jacques Neatby, a Montreal-based consultant with mediation experience who is often called to help CEOs who find themselves referees in tense executive discussions.

“It’s not a natural setting for people to let go of their own interests. Some say that makes them bad people. But representing those interests is their responsibility.”

Originally, he says, executive committees brought together heads of divisions so they could explain their operations and divide up the budget. In the 1970s, companies started adding functions, first the chief financial officer, who often came into conflict with those divisional leaders when they wanted more money. Chief marketing officers, chief human-resources officers, chief technology officers, chief supply-chain officers, chief knowledge officers and others followed, resulting in a ballooning and squabbling committee.

“Every time you add someone with a mandate to do something you are adding conflict to your committee,” he says. The human-resources chief, for example, wants to develop people but that can mean taking them out of operations for long periods, raising objections from operational managers determined to meet the numbers.

Indeed, executive committees are often dysfunctional but the CEO may not know that because the extent of the problems are shielded from him. Subordinates a level down in the organization are reluctant to reveal the truth for fear a chief-something-or-other will make them pay.

Top teams used to be about five people. Now they average 10 people and often reach higher. “It’s out of balance at 12 or 14. You should start asking questions at seven,” Mr. Neatby says.

With size comes disconnection. Few topics interest everyone. And the committee is too big for decision-making, so that actually gets shuffled elsewhere. “Those executives who end up relatively uninvolved in key decision-making become disengaged, as they come to realize they’ve been handed a rubber stamp rather than the brass ring,” he writes in a recent Harvard Business Review article.

Committees may be formed for recurring topics. An inner circle will make decisions or at least finesse them before coming to the full team. Inner circles have always existed, but with executive committee size, they are more vital. He notes that many CEOs won’t admit to having one because, surprisingly enough, some actually don’t realize they have one – although direct reports always know who members of the inner circle are. Another reason for not acknowledging them is that the CEOs don’t want to demotivate non-members or have them clamouring to get in.

As well as providing ease of decision-making, an inner circle solves the CEO’s need for trust. CEO decision-making is about making trade-offs and CEOs need to trust they are getting advice from someone acting for the good of the firm and the good of the CEO. He outlines three common inner-circle configurations:

  • Dynamic duo: The CEO plus one other high-trusted member of the executive committee. Typically that’s someone the CEO has known for years and who has followed him from organization to organization.
  • CEO plus external adviser: This is rare because the CEO must have quick access to the inner circle. But it happens, with a consultant or other adviser as the buddy. Mr. Neatby feels it’s important for CEOs to get external advice but worries when that’s the CEO’s closest adviser because the outsider doesn’t have enough skin in the game to pay the price for a bad decision.
  • CEO and two or three executive committee members: They huddle often and make the key decisions.

The executive committee members are watched so as the group’s size grows and tensions become marked those squabbles may be echoed at lower levels, as people defend their boss and interests.

Mr. Neatby urges CEOs to rethink their executive committee’s purpose to examine what role it is actually playing – not what you think it’s doing. Remove people if you can; that’s not easy but in a crisis downsizing can occur. And pay attention to the role subcommittees or an inner cabinet can play. Finally, of course, resist the temptation to add another chief to the simmering broth.

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