Teamwork: 6 Tips for Executives

Published: June 14, 2006 in Knowledge@Wharton

When it comes to athletics, sports teams have a specific number of team players: A basketball team needs five, baseball nine, and soccer 11. But when it comes to the workplace, where teamwork is increasingly widespread throughout complex and expanding organizations, there is no hard-and-fast rule to determine the optimal number to have on each team.

Should the most productive team have 4.6 team members, as suggested in a recent article on "How to Build a Great Team" in Fortune magazine? What about naming five or six individuals to each team, which is the number of MBA students chosen each year by Wharton for its 144 separate learning teams? Is it true that larger teams simply break down, reflecting a tendency towards "social loafing" and loss of coordination? Or is there simply no magic team number, a recognition of the fact that the best number of people is driven by the team's task and by the roles each person plays?

"The size question has been asked since the dawn of social psychology," says Wharton management professor Jennifer S. Mueller, recalling the early work of Maximilian Ringelmann, a French agricultural engineer born in 1861 who discovered that the more people who pulled on a rope, the less effort each individual contributed. Today, "teams are prolific in organizations. From a managerial perspective, there is this rising recognition that teams can function to monitor individuals more effectively than managers can control them. The teams function as a social unit; you don't need to hand-hold as much. And I think tasks are becoming more complex and global, which contributes to the need for perspective that teams provide."

While the study of team size is one of her areas of concentration, Mueller and other Wharton management experts acknowledge that size is not necessarily the first consideration when putting together an effective team.

"First, it's important to ask what type of task the team will engage in," Mueller says. Answering that question "will define whom you want to hire, what type of skills you are looking for. A sub-category to this is the degree of coordination required. If it's a sales team, the only real coordination comes at the end. It's all individual, and people are not interdependent. The interdependence matters, because it is one of the mechanisms that you use to determine if people are getting along."

Second, she says, "what is the team composition? What are the skills of the people needed to be translated into action? That would include everything from work style to personal style to knowledge base and making sure that they are appropriate to the task."

And third, "you want to consider size." The study of optimal team size seems to fascinate a lot of businesses and academics, primarily due to the fact that "in the past decade, research on team effectiveness has burgeoned as teams have become increasingly common in organizations of all kinds," writes Wharton management professor Katherine J. Klein, in a paper titled, "Team Mental Models and Team Performance." The paper, co-authored with Beng-Chong Lim, a professor at Nanyang Business School, Nanyang Technological University, Singapore, was published in January 2006 in the Journal of Organizational Behavior.

In an interview, Klein acknowledges that when it comes to team size, each person counts. "When you have two people, is that a team or a dyad? With three, you suddenly have the opportunity to have power battles, two to one. There is some notion that three is dramatically different from two, and there is some sense that even numbers may be different from odd numbers, for the same reason. My intuition is that by the time you are over eight or nine people, it is cumbersome and you will have a team that breaks down into sub-teams. Depending on the group's task, that could be a good thing or that could not be right. There is a sense that as a team gets larger, there is a tendency for social loafing, where someone gets to slide, to hide."

Ringelmann's famous study on pulling a rope -- often called the Ringelmann effect -- analyzed people alone and in groups as they pulled on a rope. Ringelmann then measured the pull force. As he added more and more people to the rope, Ringelmann discovered that the total force generated by the group rose, but the average force exerted by each group member declined, thereby discrediting the theory that a group team effort results in increased effort. Ringelmann attributed this to what was then called "social loafing" -- a condition where a group or team tends to "hide" the lack of individual effort.

"After about five people, there are diminishing returns on how much people will pull," says Mueller. "But people, unless they are not motivated or the task is arbitrary, will not want to show social loafing. If the task is boring and mundane, they are more likely to loaf. If you tell executives this, they say, 'One of the things I'm worried about is loafing and free riding.' Whereas social loafing is decreased effort in a group context relative to individual context, free riding is rational and self-interested. If a person is not going to be rewarded, they say, 'I'm going to free ride' and they don't participate as much. The two concepts are hard to distinguish, but they are just different ways to measure similar outcomes."

Evan Wittenberg, director of the Wharton Graduate Leadership Program, notes that team size is "not necessarily an issue people think about immediately, but it is important." According to Wittenberg, while the research on optimal team numbers is "not conclusive, it does tend to fall into the five to 12 range, though some say five to nine is best, and the number six has come up a few times."

But having a good team depends on more than optimal size, Wittenberg adds. For instance, when Wharton assigns five to six MBA students to individual teams, "we don't just assign those teams. We make sure they can be effective. We have a 'learning team retreat' where we take all 800 students out to a camp in the woods in upstate New York and spend two days doing team building and trust building exercises. I think this is what people forget to do when they create a team in a business -- spend a lot of time upfront to structure how they will work together. We get to know each other and share individual core values so we can come up with team values. But most importantly, we have the students work on their team goals, their team norms and their operating principles. Essentially, what are we going to do and how are we going to do it?"

In the work world, says Wittenberg, it has been "reinforced that five or six is the right number (on a team). At least for us, it gives everyone a real work out. But frankly, I think it depends on the task."

Recent research by Mueller would seem to support Wittenberg's notion that preparation for team success is vital. In a recent paper, "Why Individuals in Larger Teams Perform Worse," Mueller channeled Ringelmann's theories on large group efforts and tried to explain why the title of her paper is true. For decades, researchers have noted that mere changes in team size can change work-group processes and resulting performance. By studying 238 workers within 26 teams, ranging from three to 20 members in size, Mueller's research replicates the general assertion that individuals in larger teams do perform worse, but she also offers an explanation for this conclusion.

"Understanding the reasons why individuals in larger teams in real work settings perform worse may be one key to implementing successful team management tactics in organizations, since research shows that managers tend to bias their team size toward overstaffing," she writes. In addition, "individual performance losses are less about coordination activities and more about individuals on project teams developing quality relationships with one another as a means of increasing individual performance. Because research on teams in organizations has not examined team social support as an important intra-team process, future research should examine how team social support fits in with classic models of job design to buffer teams from negative influences and difficulties caused by larger team size."

But is there an optimal team size? Mueller has concluded, again, that it depends on the task. "If you have a group of janitors cleaning a stadium, there is no limit to that team; 30 will clean faster than five." But, says Mueller, if companies are dealing with coordination tasks and motivational issues, and you ask, 'What is your team size and what is optimal?' that correlates to a team of six. "Above and beyond five, and you begin to see diminishing motivation," says Mueller. "After the fifth person, you look for cliques. And the number of people who speak at any one time? That's harder to manage in a group of five or more."

Klein's recent research has looked at another confusing area when it comes to teams -- the value of diversity. Various theories suggest that diversity represented by gender, race and age leads to conflict and poor social integration -- while various other studies suggest just the opposite. "The general assumption is that people like people who are similar to themselves, so there is a theory to suggest that a lot of diversity is bad for cohesion," says Klein. "But there is also a theory that says diversity is great, that it creates more ideas, more perspectives and more creativity for better solutions."

In their own research, Klein and Lim find a distinct value in having some similarity between team members. The authors describe how "team mental models -- defined as team members' shared, organized understanding and mental representation of knowledge about key elements of the team's relevant environment -- may enhance coordination and effectiveness in performing tasks that are complex, unpredictable, urgent, and/or novel. Team members who share similar mental models can, theorists suggest, anticipate each other's responses and coordinate effectively when time is of the essence and opportunities for overt communication and debate are limited. Our findings suggest that team mental models do matter. Numerous questions remain, but the current findings advance understanding of shared cognition in teams, and suggest that continuing research on team mental models is likely to yield new theoretical insights as well as practical interventions to enhance team performance," the researchers write.

Wharton management professor Nancy P. Rothbard has a similar theory on what she calls "numerical minorities" -- including gender, race, age and ethnic groups. "Often times, a numerical minority can appear to be less threatening because it's not unexpected that someone who is different from you has different viewpoints. But if they are more similar to you and they disagree with you, some groups find that more upsetting. It can raise the level of conflict on a team. That's not necessarily a bad thing, if the conflict doesn't get in the way of being able to think through a problem and do what needs to be done."

Klein has also looked into what factors determine who becomes important to a team. The single most powerful predictor? Emotional stability. "And the flip side is neuroticism. If someone is neurotic, easily agitated, worries a lot, has a strong temper -- that is bad for the team."

Within a company, individual teams often begin to compete against each other, which Wittenberg finds can be troublesome. "One of the problems is the in-group, out-group problem," he says. "Depending on how we identify ourselves, we can be part of a group or separate from a group. At many companies, the engineering group and the marketing group are very much at odds. But at the same time, if you talked about that company vs. another company, the teams are together, they are more alike than the people at the other company. Teams are sometimes more siloed within a company and they think they are competing with each other instead of being incentivized to work together."

When it comes to creating a successful team, "teams that rely solely on electronic communication are less successful than those that understand why communication in person is important," says Wittenberg. "Email is a terrible medium... . It doesn't relate sarcasm or emotion very well, and misunderstandings can arise. There is something very important and very different about talking to someone face-to-face."

Few teams function as well as they could. But the stakes get higher with senior-executive teams: dysfunctional ones can slow down, derail, or even paralyze a whole company. In our work with top teams at more than 100 leading multinational companies, including surveys with 600 senior executives at 30 of them, we've identified three crucial priorities for constructing and managing effective top teams. Getting these priorities right can help drive better business outcomes in areas ranging from customer satisfaction to worker productivity and many more as well.

1. Get the right people on the team . . . and the wrong ones off

Determining the membership of a top team is the CEO's responsibility-and frequently the most powerful lever to shape a team's performance. Many CEOs regret not employing this lever early enough or thoroughly enough. Still others neglect it entirely, assuming instead that factors such as titles, pay grades, or an executive's position on the org chart are enough to warrant default membership. Little surprise, then, that more than one-third of the executives we surveyed said their top teams did not have the right people and capabilities.

The key to getting a top team's composition right is deciding what contributions the team as a whole, and its members as individuals, must make to achieve an organization's performance aspirations and then making the necessary changes in the team. This sounds straight-forward, but it typically requires conscious attention and courage from the CEO; otherwise, the top team can underdeliver for an extended period of time.

That was certainly the case at a technology services company that had a struggling top team: fewer than one in five of its members thought it was highly respected or shared a common vision for the future, and only one in three thought it made a valuable contribution to corporate performance. The company's customers were very dissatisfied-they rated its cost, quality, and service delivery at only 2.3 on a 7-point scale-and the team couldn't even agree on the root causes.

A new CEO reorganized the company, creating a new strategy group and moving from a geography-based structure to one based on two customer-focused business units-for wholesale and for retail. He adapted the composition of his top team, making the difficult decision to remove two influential regional executives who had strongly resisted cross-organizational collaboration and adding the executive leading the strategy group and the two executives leading the retail and the wholesale businesses, respectively. The CEO then used a series of workshops to build trust and a spirit of collaboration among the members of his new team and to eliminate the old regional silo mentality. The team also changed its own performance metrics, adding customer service and satisfaction performance indicators to the traditional short-term sales ones.

Customers rated the company's service at 4.3 a year later and at 5.4 two years later. Meanwhile, the top team, buoyed by these results, was now confident that it was better prepared to improve the company's performance. In the words of one team member, "I wouldn't have believed we could have come this far in just one year."

2. Make sure the top team does just the work only it can do

Many top teams struggle to find purpose and focus. Only 38 percent of the executives we surveyed said their teams focused on work that truly benefited from a top-team perspective. Only 35 percent said their top teams allocated the right amounts of time among the various topics they considered important, such as strategy and people.

What are they doing instead? Everything else. Too often, top teams fail to set or enforce priorities and instead try to cover the waterfront. In other cases, they fail to distinguish between topics they must act on collectively and those they should merely monitor. These shortcomings create jam-packed agendas that no top team can manage properly. Often, the result is energy-sapping meetings that drag on far too long and don't engage the team, leaving members wondering when they can get back to "real work." CEOs typically need to respond when such dysfunctions arise; it's unlikely that the senior team's members-who have their own business unit goals and personal career incentives-will be able to sort out a coherent set of collective top-team priorities without a concerted effort.

The CEO and the top team at a European consumer goods company rationalized their priorities by creating a long list of potential topics they could address. Then they asked which of these had a high value to the business, given where they wanted to take it, and would allow them, as a group, to add extraordinary value. While narrowing the list down to ten items, team members spent considerable time challenging each other about which topics individual team members could handle or delegate. They concluded, for example, that projects requiring no cross-functional or cross-regional work, such as addressing lagging performance in a single region, did not require the top team's collective attention even when these projects were the responsibility of an individual team member. For delegated responsibilities, they created a transparent and consistent set of performance indicators to help them monitor progress.

This change gave the top team breathing room to do more valuable work. For the first time, it could focus enough effort on setting and dynamically adapting cross-category and cross-geography priorities and resource allocations and on deploying the top 50 leaders across regional and functional boundaries, thus building a more effective extended leadership group for the company. This, in turn, proved crucial as the team led a turnaround that took the company from a declining to a growing market share. The team's tighter focus also helped boost morale and performance at the company's lower levels, where employees now had more delegated responsibility. Employee satisfaction scores improved to 79 percent, from 54 percent, in just one year.

3. Address team dynamics and processes

A final area demanding unrelenting attention from CEOs is effective team dynamics, whose absence is a frequent problem: among the top teams we studied, members reported that only about 30 percent of their time was spent in "productive collaboration"-a figure that dropped even more when teams dealt with high-stakes topics where members had differing, entrenched interests. Here are three examples of how poor dynamics depress performance:

The top team at a large mining company formed two camps with opposing views on how to address an important strategic challenge. The discussions on this topic hijacked the team's agenda for an extended period, yet no decisions were made.

The top team at a Latin American insurance company was completely demoralized when it began losing money after government reforms opened up the country to new competition. The team wandered, with little sense of direction or accountability, and blamed its situation on the government's actions. As unproductive discussions prevented the top team from taking meaningful action, other employees became dissatisfied and costs got out of control.

The top team at a North American financial-services firm was not aligned effectively for a critical company-wide operational-improvement effort. As a result, different departments were taking counterproductive and sometimes contradictory actions. One group, for example, tried to increase cross-selling, while another refused to share relevant information about customers because it wanted to "own" relationships with them.

CEOs can take several steps to remedy problems with team dynamics. The first is to work with the team to develop a common, objective understanding of why its members aren't collaborating effectively. There are several tools available for the purpose, including top-team surveys, interviews with team members, and 360-degree evaluations of individual leaders. The CEO of the Latin American insurance company used these methods to discover that the members of his top team needed to address building relationships and trust with one another and with the organization even before they agreed on a new corporate strategy and on the cultural changes necessary to meet its goals (for more on building trust, see " Dispatches from the front lines of management innovation "). One of the important cultural changes for this top team was that its members needed to take ownership of the changes in the company's performance and culture and to hold one another accountable for living up to this commitment.

Correcting dysfunctional dynamics requires focused attention and interventions, preferably as soon as an ineffective pattern shows up. At the mining company, the CEO learned, during a board meeting focused on the team's dynamics, that his approach-letting the unresolved discussion go on in hopes of gaining consensus and commitment from the team-wasn't working and that his team expected him to step in. Once this became clear, the CEO brokered a decision and had the team jump-start its implementation.

Often more than a single intervention is needed. Once the CEO at the financial-services firm understood how poorly his team was aligned, for example, he held a series of top-team off-site meetings aimed specifically at generating greater agreement on strategy. One result: the team made aligning the organization part of its collective agenda, and its members committed themselves to communicating and checking in regularly with leaders at lower levels of the organization to ensure that they too were working consistently and collaboratively on the new strategy. One year later, the top team was much more unified around the aims of the operational-improvement initiative-the proportion of executives who said the team had clarity of direction doubled, to 70 percent, and the team was no longer working at cross-purposes. Meanwhile, operational improvements were gaining steam: costs came down by 20 percent over the same period, and the proportion of work completed on time rose by 8 percent, to 96.3 percent.

Finally, most teams need to change their support systems or processes to catalyze and embed change. At the insurer, for example, the CEO saw to it that each top-team member's performance indicators in areas such as cost containment and employee satisfaction were aligned and pushed the team's members to share their divisional performance data. The new approach allowed these executives to hold each other accountable for performance and made it impossible to continue avoiding tough conversations about lagging performance and cross-organizational issues. Within two years, the team's dynamics had improved, along with the company's financials-to a return on invested capital (ROIC) of 16.6 percent, from -8.8 percent, largely because the team collectively executed its roles more effectively and ensured that the company met its cost control and growth goals.

Each top team is unique, and every CEO will need to address a unique combination of challenges. As the earlier examples show, developing a highly effective top team typically requires good diagnostics, followed by a series of workshops and field work to address the dynamics of the team while it attends to hard business issues. When a CEO gets serious about making sure that her top team's members are willing and able to help meet the company's strategic goals, about ensuring that the team always focuses on the right topics, and about managing dynamics, she's likely to get results. The best top teams will begin to take collective responsibility and to develop the ability to maintain and improve their own effectiveness, creating a lasting performance edge.

About the authors

Michiel Kruyt is an associate principal in McKinsey's Amsterdam office, Judy Malan is a principal in the Johannesburg office, and Rachel Tuffield is an alumnus of the Sydney office.

The authors wish to acknowledge the contributions of Carolyn Aiken, a principal in McKinsey's Toronto office, and Scott Keller, a director in the Chicago office.

The popular business press on both sides of the Atlantic is infatuated with chief executive officers who have drunk from the Holy Grail of heroic leadership. To be sure, a single person can make a difference at times, but even such heroic CEOs as General Electric's Jack Welch emphasize the power of team leadership in action. As Welch himself said, "We've developed an incredibly talented team of people running our major businesses, and, perhaps more important, there's a healthy sense of collegiality, mutual trust, and respect for performance that pervades this organization."

Increasingly, the top team is essential to the success of the enterprise. Indeed, Welch is celebrated not only for increasing GE's revenues nearly sevenfold in his 20-year tenure but also for building one of the world's strongest executive talent portfolios, which has provided new leadership for many Fortune 500 companies besides GE.

So despite the obsessions of the business press, senior executives, shareholders, and boards of directors question the myth of heroic leadership. Merely bringing in a new CEO to reshape an organization will tend to show mixed results; in the consumer goods companies analyzed in Exhibit 1, for example, they were always worse after the arrival of a new CEO. In reality, long-term success depends on the whole leadership team, for it has a broader and deeper reach into the organization than the CEO does, and its performance has a multiplier effect: a poorly performing team breeds competing agendas and turf politics; a high-performing one, organizational coherence and focus.

Exhibit 1

Often, however, the leadership team is at best a collection of strong individuals who sometimes work at cross-purposes. What does it take for senior managers to gel as a team? Our work with more than a score of top teams, involving upward of 500 executives in diverse private- and public-sector organizations, suggests a straightforward process for enhancing their performance.

The most effective teams, focusing initially on working together, get early results in their efforts to deal with important business issues and then reflect together on the manner in which they did so, thus discovering how to function as a team. Formal team-building retreats are rare; behavioral interventions and facilitated workshops, though sometimes helpful, are not central to the effort of team building. Top teams address business performance issues directly but behavioral issues only indirectly and after the event.

A second myth of leadership, as pervasive as the myth of the heroic CEO, is the idea that seasoned managers slotted into an organizational chart can easily function as a team. In reality, top teams face many problems: finding the right people, matching the available skills to the job, and learning to work together without taking the time to craft roles. Teams don't magically coalesce overnight. Their members have to be close in the professional rather than personal sense; they can thrive in an atmosphere of conflict if it is managed to increase creative output and to catalyze change. Becoming a top-performing top team must be one of the team's goals.

To meet that goal, teams have to master three dimensions of performance. First, they require a common direction: a shared understanding of goals and values. Second, skills of interaction are crucial if the team is to go beyond individual expertise to solve complex problems and, equally, if it is to withstand the scrutiny of the rest of the organization, for people usually take their cues from the top. Finally, top teams must always be able to renew themselves-to expand their capabilities in response to change.

One reason for the difficulty of improving a team's performance is that interaction, direction, and renewal are interdependent-teams need to go forward simultaneously on all three fronts to make real progress (Exhibit 2). It isn't surprising, for instance, that top teams interact poorly when they don't have a common direction. By contrast, enhanced performance in one dimension not only reinforces the improvement in others but also provides for the genuine personal development that builds success.

Exhibit 2

Suppose, for example, the team believes that it must build trust among its members. It rarely helps to have self-conscious discussions or "sharing" exercises about keeping or breaching trust, an approach that may actually be quite destructive. But by working together to sharpen the sense of strategic direction-and in this way experiencing successful interactions-the team can indirectly, but often dramatically, improve its effectiveness and thus the feeling of trust among its members. In effect, the team exploits its strong reasoning abilities to build trust.

Identifying real problems

Tolstoy wrote, "Happy families are all alike; every unhappy family is unhappy in its own way." The same can be said of underperforming teams. Nonetheless, there are typical warning signs in each of the three dimensions of team performance.

Confused direction

Many CEOs assume that they and their top teams share a common understanding of corporate goals and values. Formal descriptions of roles, expected conduct, and corporate strategies and plans all reinforce this assumption, but several realities undermine it.

Lack of alignment. Executives may nod their heads when the CEO propounds a vision, but the team often lacks a shared view of how to implement it. At one well-known energy company, the five executives of a top team were asked to list the company's 10 highest priorities. Alarmingly, they listed a total of 23 priorities; only 2 appeared on every executive's list and only 7 on the lists of more than three members; indeed 13 of the 23 priorities appeared on only one list. In other cases, the team doesn't agree about how performance should be assessed, who the company's top performers are, or how to motivate the organization to achieve its stated objectives.

Lack of deep understanding. In some cases, the top team agrees on plans, but subsequent actions are inconsistent with its decisions. This problem reflects the tendency of top teams to focus on making decisions without examining the assumptions, the criteria, and the rationales behind them.

Lack of strategic focus. Top teams without a common direction spend more time on business as usual and on "fire fighting" than on seeking out and doing the work only they can do-work that is important to the organization and gives the team as a whole an opportunity to add value. A focused team concentrates on developing talent within the organization and on driving major growth initiatives; an unfocused team second-guesses line-management decisions, reruns analyses, and immerses itself in detail. Half of the executives we interviewed believed that they failed to add value in much of their work.

Ineffective interaction

Many management teams pay lip service to the importance of interaction but foster a working style that inhibits candid communication and collaboration.

Poor dialogue. Although the members of a team may spend much time talking to one another, they can often fail to communicate, by withholding vital information, suppressing critical opinions, or accepting questionable strategies out of fear of retaliation. These games lead not only to frustration but also to hidden agendas-problems that may stem from mistrust if individual team members don't know one another or organizational units have a history of conflict. According to 65 percent of the respondents in our top-team database, trust was a real issue for their teams.

Dysfunctional behavior. Often the most serious result of poor dialogue is an inability to capitalize on diverse viewpoints and backgrounds, thus reducing the team's ability to work creatively and adapt to changes in the market. And like any group of people, top teams can fall into destructive practices-for instance, the public humiliation of team members. Such behavior understandably creates fear and defensiveness and can intensify problems by isolating and scapegoating individual team members. Because the top team's conduct is mimicked lower down in the organization, this kind of behavior can come to pervade it.

An inability to renew

Although many top teams recognize the importance of organizational renewal, few of them institute processes that revitalize effort and commitment. Three problems can make it hard for members of a team to step back and honestly assess their own performance. These problems often have their origin in the team members' experience as middle managers. Most executives have climbed functional silos and are accustomed to defending their organizational turf. It is often difficult for such people to make the leap to broad strategic issues that have a bottom-line impact. Frequently, executives also can't adapt their leadership style to life at the top, where interactions tend to be shorter, more frequent, less prepared, and aimed at a wider and more diverse audience.

Personal dissatisfaction. Many team members, despite their apparently successful careers and enviable positions, have become frustrated or insufficiently challenged by their work. A quarter of our respondents said that their jobs didn't stretch them. Collectively and individually, team members ignore new sources of insight, information, and experience that could push them out of their comfort zone. The teams we have observed engaging in destructive politics usually discourage their members from assuming new roles or taking risks. As a result, these executives ultimately become bored, and their performance declines; hence, the typical CEO complaint that once-solid team members no longer energize others or adapt to changing needs.

Insularity. Top teams rarely pay enough attention to information from outside their companies or industries-information that, digested quickly, could influence key strategic and organizational decisions. In addition, top teams seldom make the time to reflect on the information they do receive and to assess its future impact. Lacking structured processes to receive and reflect upon information from external sources, most teams don't find the time to generate a real strategic focus.

Deficient individual skills. Most companies give the members of their top teams little mentoring or coaching about how to effect change. Unlike middle managers, who frequently get broad training and coaching, senior managers usually work without a safety net and, frequently, without a second chance. Among the executives we surveyed, 80 percent believed that they had the necessary skills to fulfill their role, but only 30 percent believed that all of their colleagues did.

Becoming a top team

How can a company set about improving the performance of its top team? Our research points to some useful strategies for promoting effective action, reflection, and cohesion.

How it works

Many behavioral team-improvement efforts fail because they don't speak to the needs of top managers: programmed exercises, for instance, seem artificial. Our work with top teams suggests four ways to build their performance by replicating the way senior executives actually work together ( see sidebar, "A case study").

1. Address a number of initiatives concurrently. The top team must focus on the most pressing issues-work that only it can do. Achieving tangible outcomes in a variety of management challenges is essential. The activities most likely to foster team action and reflection include framing strategy, managing performance, managing stakeholders, and reviewing top talent. The team really needs to do these things whether or not its members are attempting to improve their own performance as a team. The action element of the cycle improves the direction of the organization and its ability to renew itself, while reflection makes it possible for teams to discover ways of improving their interaction.

2. Channel the team's discontent. Only 20 percent of the executives we surveyed thought their team was a high-performing one. Successful teams invite external challenges, focus on competitive threats, and judge themselves by best practice, since comparisons with industry leaders or key competitors raise the quality of debate by putting facts on the table.

3. Minimize outside intrusions. It is hard for a team to execute an improvement process by itself; some form of facilitation is usually required. Consultants or coaches should observe top teams at work rather than lead meetings or presentations. They should never try to direct the team's work. Finally, they should ensure that real work dominates the improvement process. Teams must discover what is effective for them. Merely telling a team the solution to its problems reinforces the poor quality of its alignment and interaction.

4. Encourage inquiry and reflection. More than 80 percent of the executives we surveyed said that they didn't set aside enough time for analyzing the root causes of problems. These executives believe that instead of developing rules of thumb slowly and subconsciously, they should use their business experience to draw lessons. Most senior business executives took a decade or more to develop their business judgment, but with the tenure of CEOs becoming shorter as investors' expectations rise, most top teams just cannot wait years to improve their performance. Facilitating team cycles of action and reflection-accelerating the pace of change and making the process of discovery explicit-can have a significant effect in as quickly as three months.

What it looks like

On the face of it, a top team going through the performance improvement process resembles any other top team at work. As usual, CEOs and senior executives address a number of strands of business, but they focus on major strategic issues and work together as colleagues rather than delegate tasks to staffers, consultants, or individual team members. At a minimum, the entire top team should spend one day each month together, without staffers, doing real work as a team. Subgroups of two or three members should work together a couple of times a week on every issue the team is addressing and should probably spend some time with a facilitator as well.

Teams rarely manage to improve their performance wholly outside their active working environment, so short-term workshops, no matter how attractive the setting or how heart-felt and candid the members' exchanges may be, aren't likely to change their mode of working. Structured self-discovery and reflection must be combined with decision making and action in the real world; the constant interplay among these elements over time is what creates lasting change.

Why it works

Teamwork is a pragmatic enterprise that grows from tangible achievements. The action-reflection cycle-supported by improved direction, interaction, and renewal-complements the work style of most senior teams. First, this approach pushes them to address their own performance just as directly and forcefully as they would address other business performance issues. By doing real work on important problems and applying business judgment to reflect on that work, top teams jump-start their performance and satisfy their need for visible progress.

Second, taking an oblique approach to sensitive performance issues allows top teams to address their behavior after the event, without personal confrontations. Team members discover that alternative points of view are valid, that the CEO doesn't have all the ideas the company needs for success, and that the team can be both challenging and supportive at the same time. This paradoxical combination-the indirect assessment of team behavior through direct work on critical issues-allows top teams to manage their own performance. Before investing time and resources in programs to build the top team, leaders should ensure that such efforts deal with its real work.

Teams must assess their own performance regularly and honestly. Every senior team should also dedicate several working sessions a year to issues-such as technology, changing demographics, political and environmental pressures, and emerging themes from management literature-that have little bearing on the next quarter but could reshape the enterprise and the team itself during the next five years. Teams should also explore unexpected successes and interesting failures inside and outside their organizations. They ought to travel, both physically and intellectually, outside their own regions and industries to companies that have tackled challenges similar to their own.

In doing all this, teams should pay attention to the consistency of their leadership, the quality of their interaction, and their opportunities for renewal. They must also build into their work processes ample time to reflect on the deeper causes of problems, on the areas where they can add the most value as a team, and on the quality of their past decisions. It is the process of discovering the best way for the members of the team to work together that ensures the absorption of basic behavioral lessons.

The prize for building effective top teams is clear: they develop better strategies, perform more consistently, and increase the confidence of stakeholders. They get positive results-and make the work itself a more positive experience both for the team's members and for the people they lead.

About the authors

Erika Herb is a consultant in McKinsey's London office, where Keith Leslie and Colin Price are principals.

In working with top teams, the authors have applied the direction-interaction-renewal framework originally developed in the trailblazing work of Michael Jung and other McKinsey colleagues in the leadership and organization practice. The authors gratefully acknowledge their contributions.

Published: January 12, 2005 in Knowledge@Wharton

Testifying in a Delaware court last month, Stanley P. Gold, a former Walt Disney Co. director, joined a long list of company executives who had dirty laundry to air regarding the 1995 hiring of Michael Ovitz as Disney's president and his subsequent firing in 1996. Gold and others detailed how Ovitz had clashed with Disney CEO Michael Eisner and other executives, how he had tried to cut deals the company didn't want and how he had failed to fit into the Disney culture. The situation eventually deteriorated to the point where the only way to refocus the company and end the disputes, said Gold, was to fire Ovitz.

"This was two big volatile egos banging against each other and they just didn't get along," Gold testified, referring to Eisner and Ovitz. Terminating Ovitz, the once-mighty talent agent, just 14months after hiring him cost the company a $140 million severance package, not to mention ensuing legal fees and distractions brought on by a shareholder suit against the company's board for failing to properly scrutinize Ovitz's contract.

"The severity of the clash at Disney is unique," says Michael Useem, head of Wharton's Center for Leadership and Change Management, which is planning a conference on leadership in San Francisco. "At that level, the executive search firms and internal company procedures are so exacting that it would be unlikely such different styles would enter a top executive suite. Having said that, executives do come in and sometimes they just don't work out with those who are already there."

The dysfunctional Disney team may have been an aberration -- both in scale and cost. Yet while the Eisner/Ovitz scenario presents an extreme case, it contains all the elements of what companies seeking to build successful management teams should avoid.

Other major companies over the past decade have had their share of dysfunctional executive teams, says Useem. He cites AT&T's hiring and firing in the mid-1990s of John Walters as CEO Robert Allen's heir apparent. Walters lasted just nine months on the job, most of which was spent butting heads with Allen and his closest allies.

When companies face the awkward situation of having two people on one team mired in bitter dispute, they normally chalk up the tension to a personality clash. There is a tendency, according to management experts, to think that personality is the cause of organizational discord rather than perhaps an effect of it.

For example, Ben Dattner, an associate at Dattner Consulting executive coaching firm, believes that personality conflict might be a symptom of a larger organizational issue. "When I work with my clients, I often try to get them to see how it is not just a conflict between two people. I try to get them to see that it is also potentially a conflict between two visions, two agendas, two constituencies or two visions for the future." Dattner adds, however, that there is a reciprocal relationship: If trust breaks down and people do not collaborate as conflicts begin to emerge, the tension can take on a life of its own and spill into the personal realm.

Peter Cappelli, director of Wharton's Center for Human Resources, believes that when such personal animosity stalls a company's performance, the leadership is usually to blame. "In many ways it is the failure of the leadership to get disparate people to work together. The leadership has not offered the right kind of incentives ... to [encourage] people to play along and get things done."

Cappelli maintains that team members don't need to like each other personally to be effective, but they do need to be working toward a common goal. Internal battles, he says, are linked to clashing priorities as each team member pushes his or her separate agenda. This is common in organizations where the leadership has failed to articulate its goals. "A common problem in an organization is that it is rewarding something different than it says it is. For example, the overall goal of this organization might be to maximize shareholder value. But then when you look at how people get promoted, they get promoted by meeting their own targets rather than contributing to the overall organization's targets."

Adding to the tensions caused by murky goals is an unclear leadership hierarchy, says Wharton management professor Katherine J. Klein. "When one person is clearly in power and the other is not, these matters can be solved relatively easily," says Klein referring to a boss and subordinate. "But when you have two people on the team who share power, it further complicates matters." In such cases, management needs to delineate the line of power even if it means the person who loses clout eventually leaves the organization.

A growing number of companies are hiring coaches to teach executives and management teams to overcome internal rivalries, conflicts and personality clashes. The phenomenon has been around since the 1950s but faded until the past decade. Previously, coaching was seen as a way of overcoming problems at work and receiving "acceptable" psychological counseling. Now coaching is common enough that it is almost expected -- especially as organizations have trimmed down or eliminated the divisions that offered such developmental programs. "Most companies don't have time or a systematic way of guiding their management teams in a sophisticated way," says Cappelli. "So they hire coaches to help people figure out what is going on in their job and what they ought to be doing."

Dattner, an executive coach based in New York City, says that when he is asked to intervene he first tries to find out the real causes of the conflict. To what extent is it different divisions, different strategies or different agendas? "Then you bring this to the attention of your clients so maybe they will stop taking things so personally or at least realize that their conflict is representative of larger organizational issues," says Dattner. "When people realize that such issues are at play, they can take things less personally."

Dattner tries to reestablish trust between the team members even if they continue to dislike each other. "It is important for them to trust and respect each other, but liking the other person is not a necessary ingredient for an effective team."

Maggie Craddock, president of Workplace Relationships, a New York-based executive coaching firm, notes that there are times when the management team might be better off shedding a few of its members to bring back a unified vision or goal. This includes situations where trust has broken down beyond repair or where some people with strong personalities have refused to acknowledge the need to change.

While coaching to repair or build relationships on management teams at an early stage is wise, Useem notes that executives such as Jack Welch and Louis Gerstner have said their only regrets as managers have been taking too long to drop someone from a team as opposed to doing it quickly. "This is not a damning of the individual, but a realization that there is a poor fit between the executive and the rest of the management team," says Useem. "Many people get fired and go on to do great things elsewhere."

Cappelli, however, believes that breaking up a team is rarely the solution, especially if you have a group of people who are competent and who have the right skills. "If you are effectively managing the team from above, then you shouldn't really have to rotate people out. And if you do rotate people out, there is absolutely no reason to think that the new group of people is going to be any different."

Teams in which people have worked together for a long time eventually face the reality of needing to bring a new person on board. Such teams, however, have developed specific cultural norms and values, according to Klein. These norms vary from how team members dress and how they communicate with each other to whether meetings start on time or as people trickle in. "Whenever you bring someone brand new onto a team," says Klein, "unless they come in resigned to just conform, or unless current management is truly seeking a change of culture, there is a tremendous potential for conflict." The potential for trouble is even stronger in smaller firms that might have only a dozen employees with just one or two personalities controlling the culture, she adds.

The first step is often the hardest in building an efficient team. Management experts believe that most executives simply do not have the judgment or insight to hire effectively. During the interview process, the hiring executives often latch on to particular qualities that they like in a person and are willing to overlook other telling traits that signal the candidate will simply not fit in. "Everyone thinks they can tell who is going to be good, but they tend to be biased toward people who are like them, who look like them, and who have similar experiences," says Cappelli. "The predictive validity of these kinds of interviews is pretty much zero."

Often, the hiring executives are busier making themselves look good during an interview then getting to know a candidate. They boast that their company has a particular culture, but often this is simply an aspiration. "My experience is that people at the top often have very little sense of what their company's culture really is," says Cappelli. "Culture is about the informal rules -- how things get done regardless of what the corporate credo says." In this respect, the top executives are often insulated from how things really work.

Executives frequently will talk about wanting to bring in fresh blood -- to change course dramatically. "'This will be great,' they think," says Klein, "but be careful what you wish for." In this case, the hiring executives may assume that they know what that new vision or course of action is, adds Klein. If they find that their assumptions were wrong, they are likely to become frustrated and even angry.

The more astute executive search firms are skilled at peeling away a hiring company's layers of wishful thinking. Management experts recommend that companies hire executive search firms that begin by uncovering the underlying company culture. The search firms should also clarify the exact role the hiring company wants a potential candidate to play and articulate the company's goals, vision and strategy. "Most candidates will have all the required technical strengths," says Joseph Griesedieck, vice chairman and head of global CEO practice at executive search firm Korn/Ferry International. "The difficult part is to assess whether the person truly fits a company's culture and whether they share a vision and philosophy." That does not mean looking for someone who is malleable, Griesedieck adds. "You want someone who has the strength to stand up and say, 'I think this is not right,' but in a constructive way."

Klein notes that the ideal candidate will bring both vision and an ability to work on a team, although finding such a prospective executive requires some digging. "It makes sense to look at people's past accomplishments and history to see if they have shown visionary leadership and if they have a similar vision for your business," says Klein. "The second part of the puzzle is to uncover their experience working on a team. Have they worked in a team setting with people who disagree with them? Has this person worked in a team setting where he or she didn't hire all the members of the team to be 'Yes men' and "Yes women'"?

Disney and Eisner blundered on almost all counts. After all, Eisner personally hired his good friend Ovitz, bypassing standard executive hiring procedures. In making the hire, Eisner had no clear goals for his new president. There was also a power struggle from the very beginning as other Disney executives refused to report to Ovitz. Finally, the former talent agent's extravagant spending clashed with Disney's more frugal culture. Each clash was a recipe for management disaster.

"Losing an executive is a very expensive proposition," says Griesedieck. "Not just in terms of the money spent on executive search firms, but the opportunity cost and the time spent" trying to make the relationship work.

Although creativity is often considered a trait of the privileged few, any individual or team can become more creative-better able to generate the breakthroughs that stimulate growth and performance. In fact, our experience with hundreds of corporate teams, ranging from experienced C-level executives to entry-level customer service reps, suggests that companies can use relatively simple techniques to boost the creative output of employees at any level.

The key is to focus on perception, which leading neuroscientists, such as Emory University's Gregory Berns, find is intrinsically linked to creativity in the human brain. To perceive things differently, Berns maintains, we must bombard our brains with things it has never encountered. This kind of novelty is vital because the brain has evolved for efficiency and routinely takes perceptual shortcuts to save energy; perceiving information in the usual way requires little of it. Only by forcing our brains to recategorize information and move beyond our habitual thinking patterns can we begin to imagine truly novel alternatives.

In this article, we'll explore four practical ways for executives to apply this thinking to shake up ingrained perceptions and enhance creativity-both personally and with their direct reports and broader work teams. While we don't claim to have invented the individual techniques, we have seen their collective power to help companies generate new ways of tackling perennial problems-a useful capability for any business on the prowl for potential game-changing growth opportunities.

Immerse yourself

Would-be innovators need to break free of preexisting views. Unfortunately, the human mind is surprisingly adroit at supporting its deep-seated ways of viewing the world while sifting out evidence to the contrary. Indeed, academic research suggests that even when presented with overwhelming facts, many people (including well-educated ones) simply won't abandon their deeply held opinions.

The antidote is personal experience: seeing and experiencing something firsthand can shake people up in ways that abstract discussions around conference room tables can't. It's therefore extremely valuable to start creativity-building exercises or idea generation efforts outside the office, by engineering personal experiences that directly confront the participants' implicit or explicit assumptions.

Consider the experience of a North American specialty retailer that sought to reinvent its store format while improving the experience of its customers. To jump-start creativity in its people, the company sent out several groups of three to four employees to experience retail concepts very different from its own. Some went to Sephora, a beauty product retailer that features more than 200 brands and a sales model that encourages associates to offer honest product advice, without a particular allegiance to any of them. Others went to the Blues Jean Bar, an intimate boutique retailer that aspires to turn the impersonal experience of digging through piles of jeans into a cozy occasion reminiscent of a night at a neighborhood pub. Still others visited a gourmet chocolate shop.

These experiences were transformative for the employees, who watched, shopped, chatted with sales associates, took pictures, and later shared observations with teammates in a more formal idea generation session. By visiting the other retailers and seeing firsthand how they operated, the retailer's employees were able to relax their strongly held views about their own company's operations. This transformation, in turn, led them to identify new retail concepts they hadn't thought of before, including organizing a key product by color (instead of by manufacturer) and changing the design of stores to center the shopping experience around advice from expert stylists.

Likewise, a team of senior executives from a global retail bank visited branches of two competitors and a local Apple retail store to kick off an innovation effort. After recording first impressions and paying particular attention to how consumers were behaving, the bankers soon found themselves challenging long-held views about their own business. "As a consumer, I saw bank branches, including our own, differently," said one of the executives. "Many of us in the industry are trying to put lipstick on a pig-making old banking look new and innovative with decorations but not really changing what's underneath it all, the things that matter most to consumers."

We've seen that by orchestrating personal encounters such as these, companies predispose their employees to greater creativity. For executives who want to start bolstering their own creative-thinking abilities-or those of a group-we suggest activities such as:

• Go through the process of purchasing your own product or service-as a real consumer would-and record the experience. Include photos if you can.

• Visit the stores or operations of other companies (including competitors) as a customer would and compare them with the same experiences at your own company.

• Conduct online research and gather information about one of your products or services (or those of a competitor) as any ordinary customer would. Try reaching out to your company with a specific product- or service-related question.

• Observe and talk to real consumers in the places where they purchase and use your products to see what offerings accompany yours, what alternatives consumers consider, and how long they take to decide.

Overcome orthodoxies

Exploring deep-rooted company (or even industry) orthodoxies is another way to jolt your brain out of the familiar in an idea generation session, a team meeting, or simply a contemplative moment alone at your desk. All organizations have conventional wisdom about "the way we do things," unchallenged assumptions about what customers want, or supposedly essential elements of strategy that are rarely if ever questioned.

By identifying and then systematically challenging such core beliefs, companies can not only improve their ability to embrace new ideas but also get a jump on the competition. (For more, see sidebar, "Challenging orthodoxies: Don't forget technology.") The rewards for success are big: Best Buy's $3 million acquisition of Geek Squad in 2002, for example, went against the conventional wisdom that consumers wouldn't pay extra to have products installed in their homes. Today, Geek Squad generates more than $1 billion in annual revenues.

A global credit card retailer looking for new-product ideas during the 2008 economic downturn turned to an orthodoxy-breaking exercise to stir up its thinking. Company leaders knew that consumer attitudes and behavior had changed-"credit" was now a dirty word-and that they needed to try something different. To see which deeply held beliefs might be holding the company back, a team of senior executives looked for orthodoxies in the traditional segmentation used across financial services: mass-market, mass-affluent, and affluent customers. Several long-held assumptions quickly emerged. The team came to realize, for example, that the company had always behaved as if only its affluent customers cared deeply about travel-related card programs, that only mass-market customers ever lived paycheck to paycheck (and that these customers didn't have enough money to be interested in financial-planning products), and that the more wealthy the customers were, the more likely they would be to understand complex financial offerings.

The process of challenging these beliefs helped the credit card retailer's executives identify intriguing opportunities to explore further. These included simplifying products, creating new reward programs, and working out novel attitudinal and behavioral segmentations to support new-product development (more about these later).

Executives looking to liberate their creative instincts by exploring company orthodoxies can begin by asking questions about customers, industry norms, and even business models-and then systematically challenging the answers. For example:

• What business are we in?

• What level of customer service do people expect?

• What would customers never be willing to pay for?

• What channel strategy is essential to us?

Use analogies

In testing and observing 3,000 executives over a six-year period, professors Clayton Christensen, Jeffrey Dyer, and Hal Gregersen, in a Harvard Business Review article, noted five important "discovery" skills for innovators: associating, questioning, observing, experimenting, and networking. The most powerful overall driver of innovation was associating-making connections across "seemingly unrelated questions, problems, or ideas."

Our own experience confirms the power of associations. We've found a straightforward, accessible way to begin harnessing it: using analogies. As we've seen, by forcing comparisons between one company and a second, seemingly unrelated one, teams make considerable creative progress, particularly in situations requiring greenfield ideas. We're not suggesting that you emulate other organizations-a recipe for disappointment. Rather, this approach is about using other companies to stir your imagination.

We recently used this technique in a brainstorming session involving the chief strategy officers (CSOs) of several North American companies, including a sporting-goods retailer. The rules were simple: we provided each executive, in turn, with a straightforward analogy the whole group would use to brainstorm new business model possibilities. When it was the turn of this retailer's CSO, we asked the group to consider how Apple would design the company's retail formats. The resulting conversation sparked some intriguing ideas, including one the retailer is considering for its stores: creating technology-assisted spaces, within its retail outlets, where customers can use Nintendo Wii-like technology to "try out" products.

Of course, most companies will use this tactic internally-say, in idea generation sessions or problem-solving meetings. Executives at the credit card retailer, for example, created analogies between their company and other leading brands to make further headway in the areas the team wanted to explore. By comparing the organization to Starwood Hotels, the executives imagined a new program that rewarded customers for paying early or on time (good behavior) instead of merely offering them bonus points for spending more (bad behavior). Similarly, by comparing the company's back-office systems to those of Amazon.com and Google, the credit card retailer learned to think differently about how to manage its data and information in ways that would benefit consumers as they made product-related decisions and would also give the company valuable proprietary data about their behavior. Together, these insights led to several ideas that the company implemented within two months while also giving it a portfolio of longer-term, higher-stakes ideas to develop.

Analogies such as those the credit card retailer used are quite straightforward-just draft a list of questions such as the ones below and use them as a starting point for discussion.

• How would Google manage our data?

• How might Disney engage with our consumers?

• How could Southwest Airlines cut our costs?

• How would Zara redesign our supply chain?

• How would Starwood Hotels design our customer loyalty program?

Create constraints

Another simple tactic you can use to encourage creativity is to impose artificial constraints on your business model. This move injects some much-needed "stark necessity" into an otherwise low-risk exercise.

Imposing constraints to spark innovation may seem counterintuitive-isn't the idea to explore "white spaces" and "blue oceans"? Yet without some old-fashioned forcing mechanisms, many would-be creative thinkers spin their wheels aimlessly or never leave their intellectual comfort zones.

The examples below highlight constraints we've used successfully in idea generation sessions. Most managers can easily imagine other, more tailored ones for their own circumstances. Start by asking participants to imagine a world where they must function with severe limits-for instance, these:

• You can interact with your customers only online.

• You can serve only one consumer segment.

• You have to move from B2C to B2B or vice versa.

• The price of your product is cut in half.

• Your largest channel disappears overnight.

• You must charge a fivefold price premium for your product.

• You have to offer your value proposition with a partner company.

The credit card retailer tried this approach, tailoring its constraints to include "We can't talk to customers on the phone," "We can't make money on interchange fees," and "We can't raise interest rates." In addition to helping company managers sharpen their thinking about possible new products and services, the exercise had an unexpected benefit-it better prepared them for subsequent regulatory legislation that, among other provisions, constrained the ability of industry players to raise interest rates on existing card members.

Creativity is not a trait reserved for the lucky few. By immersing your people in unexpected environments, confronting ingrained orthodoxies, using analogies, and challenging your organization to overcome difficult constraints, you can dramatically boost their creative output-and your own.

About the authors

Marla Capozzi is a senior expert in McKinsey's Boston office, Renée Dye is a senior expert in the Atlanta office, and Amy Howe is a principal in the Los Angeles office.