SOME CONSIDERATIONS ON BUILDING A HIGHLY EFFECTIVE TOP TEAM IN A MERGED COMPANY

Mergers are a great excuse for corporate voyeurism. There are lots of new things to talk about. Lots of opportunities to posit an opinion. Lots of things to complain about. All this reduces client focus. The cure is speed. Get the merged entity properly integrated as quickly as possible and get everyone focused on clients. Shift the energy away from integration tasks and back to the market. This must start at the top and be powerfully role modelled. If the new top team spends 75% of its time in the year after the merger closes on internal matters, then it’s in no position to require anything different lower down the structure.

But how do you quickly create a highly effective top team? That’s a tricky question in a steady state organisation but much more so in the context of a merger where there is no shared history. Outlined below are some considerations. Considerations, not answers. Not answers for two reasons;

• First, every organisation is different and there is no boiler plate model for a highly effective top team; and
• Second, and this is regrettable but true, the answer needs to emerge from conversations amongst leaders and, in particular, from the choices of the most senior leader.

Why regrettable? Because just when the organisation has a million things to do the top leader and the new leadership community must take time out to make the choices and trade-offs required to form a powerful team.

1. What is the Operating Model that this team sits above?

The team is in service to the organisation, not the other way round. Servant leadership has to win out. Command and control has had its day.

But there is no perfect operating model or organisation structure. Let’s look at the two extremes when it comes to cost management. On one extreme is a model where all costs are in the business units with only a tiny amount in the centre. This has definite advantages: the business units become very aware of the costs of the control and support functions; the businesses operate end to end and can be held accountable for performance; general management skills can be developed widely across the organisation in multiple mini businesses. But there’s a flip side: Finance, HR and Tech costs are replicated multiple times; a not invented here culture is likely to emerge; best practice sharing becomes scarce. So, after a few years of this model loud voices can be heard agitating for a change, “It’s ridiculous we have 14 Finance units, if we integrated, we could save 60% of the cost”

Then the pendulum swings to the other extreme and we organise around centres of competence in the support functions and liberate the businesses to focus only on the client. Some big advances occur, costs are reduced, and the businesses have renewed focus on the client, just as planned. But it doesn’t take long for the disadvantages to become all too apparent. The businesses get grumpy about ‘ivory tower’ support functions with no accountability to anyone.

And so, the pendulum swings again.

I led McKinsey’s Organisation Practice globally for seven years and I must have had some level of involvement in north of 50 significant reorganisation efforts. My takeaway? Reorganise at your peril. There is no perfect answer and the search for it destroys value.

Find the least worst structure and then make it work through behaviour. With the right behaviour any structure can work. With the wrong behaviour, particularly at the top, no structure will work, and you will end up swinging the pendulum. The real work of a leader is to shape behaviour in pursuit of client impact.

2. Are we over doing it with Dark Triad types?

Dark Triad is psychobabble and refers to a trio of negative personality traits – narcissism, Machiavellianism, and psychopathy – which tend to show up in senior leaders. To be clear, ?I am not suggesting most leaders are psychopaths. But what is empirically unarguable is that in order to get to the top, many leaders have rather more of these traits than other people. This is not all bad. It produces drive, positive aggression, and ambition. But a top team composed entirely of these types is a disaster. So, diversity in the team isn’t just the morally right thing to do or some pretty window dressing. Psychological diversity is an absolute must in an effective senior team. In particular, the senior leader needs to honestly understand their own strengths and weaknesses and build a team around them that complements and mitigates these characteristics rather than reinforcing them.

And, once the team is selected, they need to understand each other’s natural behavioural predispositions and consciously find ways to get the best from everyone. Sadly, this is a body contact sport and takes time.

3. How do we organise around value at stake rather than representation?

The failure mode in selecting a top team is to work out what the ten or so biggest bits of the business are and then select a leader from each. That’s a recipe for maintaining the status quo. The success mode is to imagine forward five years and look back at the path the business has been on. What were the biggest drivers of success? We need a leader on the top team for each of those drivers. In my book Mergers I call this the ‘French problem”.

In many firms France is a large market, with solid but not stellar growth. Should there be a member of the top team specifically chosen from France? It depends. If in five

years’ time France has grown well and the source of that growth is a focus on French clients, served by French Senior Managers, focused on French issues then it may well make sense to have a member of the top team very focused on that market. But if the growth in France has come about because the French Senior Managers have done a good job of landing initiatives arising elsewhere in the firm such as a growth in technology services or hyper growth in private equity clients then it’s the technology leader and the PE leader that should be on the top team. Put simply the top team should contain the people most responsible for driving growth. It should not be a forum of representatives from blocks of the business.

4. How big should the Leadership Team be?

The “Leadership Team” should be huge. It should incorporate every Senior Managger. But the Exco should be small, ideally small enough to have damn good arguments and get everyone’s voice heard. So, there’s an obvious dichotomy here. Excos that are above 12 people are unlikely to be high performing. But 12 people is a small group to lead a large organization, particularly in a merger context where both old companies need a voice. The answer usually lies in a leadership architecture that has two tiers and/or a committee structure. There are very obvious pitfalls with any approach. A two-tier structure with an Exco of say 10 people that meets regularly with an Opco that sits below it of say 25 people that meets quarterly can work. But it can also be seen as creeping managerialism and bureaucracy. It all comes down to behaviour. If the larger group is empowered with really meaty topics that they drive with purpose, it can work.

5. How should the Top Team operate?

A hobby horse of mine. I’ve been to way too many Exco meetings where most people are surreptitiously clearing their e-mail inbox, the quality of listening is woeful, action points aren’t followed up, cabinet responsibility is rare, and decisions made in the meeting serve only as the starting gun for the real debate to happen outside the room. These aren’t just irritants; these behaviours have a pernicious effect on the business. Again, a focus on behaviour is the answer. A new leader has the opportunity to start as they mean to go on. They can set some firm ground rules for top team behaviour and personally role model them.

There’s also the mechanics. How frequent are the meetings? Is every alternate meeting virtual? Do the meeting locations shift around the world? Is every meeting preceded by a dinner with local partners? These are all choices for the senior leader to make. None of them are earth shattering but taken together they will help set the tone.

6. What is the story the Team tells?

I've carefully avoided the word STRATEGY in the title of this consideration. That word has so many loaded connotations that I tend to avoid it. What is clear though is that the top team needs to have consistent and compelling answers to the top ten most pressing (but

reasonable) questions that a Senior Manager might ask. What is the shape of our investments over the next three years? How are we going to win the war for talent? What is our aspiration for technology services in five years’ time? These questions keep changing, it is a constantly evolving agenda. So, a strategy document that the team can stack hands on can be a good start, but the story needs to keep evolving and be powerfully communicated by each member of the team.

Very often as soon as the merger has closed there’s some kind of senior management conference. That is a perfect opportunity to work on the story. But here’s a great illustration of the type of choice the new leader will have to make. Do they want to turn up at that conference with a robust story? That has the benefits of clear leadership, pace, and energy. But it could also have the pitfalls of leaving Senior Managers feeling dictated to and a lack of ownership. An alternative is to use the conference to build the story and engage Senior Managers. Again, there are no right answers, just choices the new leader has to make.

7. How is performance managed?

It’s an old cliche but true that what gets measured gets done. The topics that are regularly reported on at the Exco will get attention and will likely improve. Consequently, it’s tempting for a top team to ask for data on everything that moves. That’s fine if you want to create a cottage industry around the top team constantly asking client-facing Senior Managers for data. The trick is to be minimalist. It sounds mundane but creating the standard reporting pack that drives performance conversations is a crucial task. Does that pack only cover financials? Does it include client satisfaction data? Does it highlight client penetration or only billing numbers? Is staff retention data included?

But the data is just the data. How the performance conversations happen is the key. What we need is a spirit of enquiry combined with personal ownership. If people feel belittled or embarrassed, good quality conversations can’t happen. Equally if no one calls out performance problems things won’t get better. There are so many choices here. Does the Exco look at total firm performance every month? Is there a deep dive into different parts of the business each meeting? Is performance handled outside the formal Exco with a much smaller group of only the senior leader, the CFO and the relevant business leader? No right answer, just choices.

8. How does the Top Team improve?

We can all improve as leaders. Some of that improvement will come naturally by osmosis and by being faced with challenging situations. But that improvement can be accelerated. The problems are ego and time. But both can be overcome. Coaching can be helpful and very time efficient. Individual development plans can help people find very specific learning support. Mutual feedback can at least help to identify the issues. Investing a few days per year in formal leadership development would likely be seen as a huge commitment but I’ve seen it pay off massively.

9. How do we use the Corporate Agenda to widen the Leadership community?

This one is a real grind. If we want every Senior Manager to be a leader but we also want every Senior Manager to be client focused, then we need a corporate agenda that allows this. By corporate agenda I mean the cadence of Exco, Opco (if there is one), committee meetings, towns halls, performance reviews, Senior Manager meetings both global and regional and any other big set piece events. It sounds very prosaic but if this agenda is not designed in a smart way and laid out sufficiently in advance the most client-oriented leaders will get frustrated and decide not to turn up. These leadership moments can quite easily slip into being seen as bureaucratic baggage and in the heat of battle for a busy client-facing Senior Manager there’s a real temptation to view them as ‘central overhead crap’. But if the hard thinking has been done in advance and a corporate agenda is established, stuck to and allows for religious holidays, time zones, local events etc., we can get client-facing Senior Managers to participate and strengthen the story I mentioned earlier.

10 .What will the senior leader actually do?

I’ve left this till last. It’s the most subtle but the most important. How the senior leader spends their time is crucial. Every action they take is, consciously or not, a role modelling opportunity. Do they continue to work with clients? Which thorny issues do they decide to grasp first? How do they decide to show up in the wider community? Are there set piece events such as Davos that they want to place their mark on? How do they carve out time to think?

The key here is to drive events not be driven by them. Events will by their nature intrude on the best laid plans but I’m arguing for determination not rigidity. Of course, some flexibility is needed to meet the demands of the day but a real determination to use time strategically is critical.

Have I mentioned, no right answers, just choices?