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For centuries, leadership skill has been measured by your ability to make things happen inside “built to last” organizations. Success depended on your ability to build trust, cultivate long-term relationships, and manage stakeholders. But we are now entering a world defined by temporary, cross-functional teams, frequently formed to work on specific issues or goals, rather than more traditional fixed structures. Excelling will require a fundamentally different skill set.

Senior decision-makers are taking notice: an EY (formerly Ernst & Young) study of global business executives showed an overwhelming majority (84%) of business executives say that their organization’s ability to develop and manage teams will be essential for future competitiveness. Similarly, Deloitte’s Global Human Capital Trends 2016 report surveyed 7,000+ business and HR leaders from 130 countries. The results below demonstrate that organizational structure is now a prominent concern:

DeloitteTrends

For years, the idea of organizational structure was a topic many companies didn’t pay much attention to; they tended to employ a vertical hierarchy, and information was filtered up – then decisions were made and filtered back down.

Two forces – easier digital access and collaboration, and disruptive business models – changed this traditional vertical hierarchy.

Now, executives are getting nervous about vertical hierarchy. By the time information reaches them, decisions are made, and information is disseminated back down the chain, it may be too late.

How do you shift toward a team-based model for more effective decision-making and growth alignment, though?

Mario Moussa, a lecturer in Wharton’s Executive Education program and co-author of Committed Teams: Three Steps to Inspiring Passion and Performance, recently had a unique opportunity to observe the formation and success – or failure – of teams. He and his co-authors ran Wharton students through a week-long, intensive business simulation, where teams of people with no previous context or knowledge of each other must work together to achieve a goal.

Research shows that the highest-performing teams will focus on the following three factors right from the beginning:

  1. Goals: the team discusses and agrees on its goals or mission
  2. Roles: the team agrees on who will play what roles on the team
  3. Norms: the team establishes a set of norms that define the culture of the team

Moussa points to the example of Pat Pacious, the executive vice president and chief operating officer of Choice Hotels (CHH). Pacious left a career at a large consulting firm to join Choice, one the fastest-growing and most innovative lodging companies, and now the second-largest hotel chain in the world. Choice’s 75-year history of industry firsts includes a telephone in every room, 24-hour desk service, guaranteed reservations and brand segmentation. The company has continued this legacy of innovation, developing the first global hotel iPhone application, the first Internet-based property management system, a widely copied soft-brand concept, and a unique new model for vacation rental.

Although Choice is one of the largest chains, they are small relative to Pacious’ past consulting clients because they franchise their branded properties and do not operate the hotels themselves. With Choice in this sweet spot­ – small enough to implement faster-paced, innovative change and large enough to do so at scale – Pacious decided to establish a team model that would drive faster innovation.

He began by establishing a strategy review team that would meet every month – a faster rhythm than other companies who do this quarterly – and instilled hyper-efficiency to make sure this did not eat up too much time from his leadership team, focusing on the three-factor framework above.

Goals: First, Pacious had the strategy team define a shared goal – together. Once defined, every meeting opens with repeating that goal to make sure they’re not losing sight of what’s important. Many companies use a framework where meetings open with a discussion of that meeting’s goals, but Pacious avoids this, since he feels that focuses too narrowly on tasks and the meeting itself, and removes people from the bigger picture.

Roles: Pacious took a drastic approach here – and smashed down silos. Pacious ended the practice of individual departmental meetings, choosing instead to integrate representatives from each group or department in the broader strategy meeting and establishing interdependence among stakeholders. In terms of an aspect like customer journey, for example, decision-makers could see how each department had to consider that – and the bigger picture as a whole. Previously, they had only understood their roles, as they were only meeting with their teams.

Norms: He reinforces three key norms at each meeting:

  • Ask dumb questions (this is OK)
  • Stick to the agenda at hand (no tangents)
  • It’s fine to say “I have nothing new to report” (this doesn’t get you branded as a slacker)

Pacious said it took about six months of repetition to establish consistency around goals, roles, and norms, but in slightly over half a year (two fiscal quarters), his team is operating more effectively than long before he arrived. Revenue is ticking up. Goals are being met, and people understand the work of others, reducing friction among decision-makers.

It’s hard to turn around an oil tanker; so many organizations put off a change in structure as long as possible. But with a simple three-pronged focus – goals, roles, and norms – you can begin to see results in less than a year. And after that? Well, it’s probably on to the next team.

About Kaihan Krippendorff

Dr. Kaihan Krippendorff is a former McKinsey & Co. consultant, the author of Outthink the Competition and CEO of Outthinker LLC (www.outthinker.com). Through his firm, Outthinker, he has helped a wide range of companies from start-ups to mid-marketing growth firms to large corporations including Microsoft, GE, Disney/ ESPN, Nestle Purina, L'Oreal, TIAA-CREF, Aetna, Johnson & Johnson, and BNY Mellon design bold strategies to shape the future. Nobel Peace Prize winner Mohammad Yunus has said, "Kaihan shows that with a compelling idea anyone can change the world" and that message has made Kaihan one of the most sought-after public speakers on the topics of business, strategy, and innovation. He is a consultant with Wharton Executive Education, a faculty member of Florida International University, and a popular blogger. He graduated from Management & Technology program at the University of Pennsylvania with degrees from the Wharton School, U-Penn’s School of Engineering, holds an MBA from Columbia Business School, and a doctorate from Finland’s Abo Akademie. He lives in Greenwich, CT with his wife and three children.  

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