June 29, 2021
And how developing self and team awareness is a key lever of consistent high performance and value creation.
Over the years, I have partnered with numerous leadership teams across elite sport, the foreign office, listed businesses and private equity-backed companies. What I’ve observed while working in these high performing environments is that successful outcomes are largely determined by how agile, aligned, resilient, and trusting of each other the leadership group are.
But optimising in this direction is not always straightforward. In this article, I want to review the factors that typically hold back leadership teams the most – and how they can be overcome.
1. An overbearing chief
The first and most common factor is having an all-too-dominant voice at the helm. This leader archetype fails to sufficiently involve the wider group and in turn this causes a lack of buy in, a lack of consensus and ultimately a lack of contribution from the team due to a lack of psychological safety – the belief that one will be punished or humiliated for speaking up with ideas, questions, concerns, or mistakes. Dysfunctionality is therefore baked into the leadership group and the wider business.
A case in point: in 1986, the Chernobyl power plant suffered a major disaster that directly killed 31 people and is estimated to have indirectly killed over 4000. Whilst the plant itself possessed an inherently unsafe design, the culture in Russia at the time did not encourage the raising of concerns or speaking up about mistakes.
What’s more, a fear of authority and the need to please political masters resulted in a fear-driven culture. During a simulated power shutdown, operators who were not fully equipped to deal with the situation made a series of protocol mistakes which resulted in a steam explosion, followed by a nuclear explosion. The cause of the disaster was in large part because operators did not speak up about their concerns.
In all cases, a psychologically safe environment can help to overcome the false harmony of muted disagreement.
Benefits of psychological safety:
1. Increased likelihood of successful innovation, resulting in quicker time-to-market.
2. An increased ability to learn from mistakes resulting in fewer problems, high quality, and improved performance.
3. Increased employee engagement, resulting in lower churn rates and decreased costs relating to recruitment and absenteeism.
4. Improved reputation resulting in an increased ability to recruit the best people.
5. Increased profitability because of the above.
2. Lack of diversity and inclusion
A second leadership blocker is a lack of diversity and inclusion. In terms of diversity, white males make up 62% of boards and occupy 83.8% of executive directorships. White females make up just 28.2% of boards, male BAMEs 6% and female BAMEs 3.8%, according to The DiversityQ FTSE 100 Board Diversity Report 2020. There are now lots of studies reviewing the impact of diversity on executive boards and the performance impact it can bring.
CEOs will perhaps favour a compliant board that is easy to manage and that does not push back too much. Those are also the kinds of boards that do just enough to get by. A diverse board can be amicable and still take part in robust discussions where active listening, multiple perspectives, challenging ideas and asking the hard questions rule the day.
You need a leadership group that mines for this and understands the difference it can bring. Chairman of the Board at Deloitte, Mike Fucci, along with Harvard Business School concluded that “board diversity matters but concentrating on only one form of diversity isn’t enough. Our interviewees suggested that social diversity (e.g., gender, race/ethnicity, and age) and professional diversity are both important for increasing the diversity of perspectives represented on the board.”
Matthew Syed in his book ‘Rebel Ideas: The Power of Diverse Thinking’ deepens this thought and explains that the diversity you want is not just racial or gender diversity: it is what he calls cognitive diversity, i.e., diversity in the way a problem is looked at, the usefulness of any pre-existing knowledge of the problem and the thought processes that could be used to solve the problem.
Mike Fucci also makes the crucial point that “diversity does not matter as much on boards where members’ perspectives are not regularly elicited or valued. To make diverse boards more effective, boards need to have a more egalitarian culture — one that elevates different voices, integrates contrasting insights, and welcomes conversations about diversity.” With the above considered, some firms have rolled out new diversity initiatives this year, one of which requires that 30% of its portfolio companies’ boards are ethnically diverse.
3. A vision and process disconnect
This applies when strategy and implementation are unbalanced. Either a leader indexes too highly on vision, storytelling and generating motivation but they do not have the processes and systems in place to hit that vision. Or, you have everyone working like a well-oiled machine and focusing on process – but they do not actually know their companies ‘why’. Thus, motivation can be threatened, and a general malaise ensues.
A successful c-suite team uses stories to bring the why to life; to set measurable and statistical performance goals that hold people accountable; and to set out clear process goals that employees focus on day-to-day. It is about creating understanding and alignment across the organisation so that the system works for everyone.
Building for resilience
There are some foundational measures that can be built into a leadership unit so that these blockers are avoided.
Understanding the power of capacity is one of these. It is a common idea that high performing teams prioritise efficiency and marginal gains, but performance is also about capacity because you need to have the available resource to be resilient. There’s little point being efficient and cutting back on resource if, when things go awry, you do not have any capacity to deal with business opportunities, challenges, or market threats. The art, of course, is knowing how much capacity to put in so you are not fat and wasteful.
However, perhaps the most important high-performance measure is the dual ability to increase each board member’s awareness of the team dynamic as much as their own skill set and interpersonal profile.
Self-awareness is the first necessity. What is my style of communication? What is my behaviour under pressure? How do I give and receive trust? Leadership thoughts, feelings and behaviours are infectious: the self-aware leader increases self-awareness in individuals and teams, with beneficial results.
Self-regulation is equally vital. There are different coping mechanisms for different situations. The stereotype of the dominant, extrovert leader is an outdated concept. The world is not black and white but grey; and adaptability, flexibility and agility are needed to negotiate this nuanced challenge.
The two qualities act and react together. Without awareness, regulation is impossible. When both work together the leader feels in control and confident which leads to an increased consistency of behaviours – especially under pressure. This composure that a leader holds is then reflected in the behaviour of their team.
At Drax we use a proprietary psychometric tool called PACETM. Most psychometric assessments apply an abstract theory to people unrelated to what they can achieve. We wanted a method of quantifying leaders’ behaviours that focussed on the behaviours that really mattered to successful value creation. The PACE framework is the result of years of research, identifying those specific behavioural traits that differentiate successful teams in private equity.
This helps us understand the strengths and areas of development of a leadership team. It is a comprehensive assessment of the team’s progress against known indicators of high-performing teams. We aim to make this an industry standard that drives the assessment and understanding of high-performance behaviours in a private equity environment. Our research tells us that team complementarity is a key driver of successful value creation and achieving this requires a balance of functional expertise and behavioural experience.
To complement the psychometric process, individual and team executive coaching, mentoring, journaling, line manager 1-1’s, all support the development of self and team awareness. To focus on one of these a bit more, team coaching is a relatively nascent discipline, but it will absolutely be a growing feature of the landscape because we do not work as islands. This type of coaching is about working on the processes that sit underneath team-wide tasks.
For example, how we speak to each other; how we work with each other under conflict; how we can work to understand insecurities related to many factors such as personality, communication styles, assertiveness levels, confidence, experience, biases etc. All these methods aim to increase the teams’ relationships and ultimately drive high performance behaviours and value creation.
Fortifying capacity. Connecting to a vision. Engineering credible balance throughout your leadership group. These are key leadership factors that start with self-awareness and then flex through intentionality which creates consistency. Building these into the team dynamic will not guarantee success, but they will certainly load the dice and create a sound footing for personal, team and company value creation.
Partner and Head of Leadership