3 Tell-tale Signs It’s Time to Rethink Your Executive Team
wWhen a CEO first assumes their position or joins a new company, they are often quick to make changes to the executive team, creating a group of trusted advisors to push in their strategic agenda. But once the CEO has been in place for a few years, this dynamic changes. Replacing these chosen team members has become an unpleasant process, one that CEOs avoid at all costs—despite clear signs that it is necessary.
Our research on CEOs and their senior leadership teams reveals that regularly evaluating and adjusting the leadership team is critical for optimizing a company’s performance over time. To decide when “now is the time” for a change, CEOs should watch for three signs.
Sign 1: A change in the business environment
The clearest signal that it’s time for a change is a major change in the business environment.
In recent years, many industries have been disrupted by technological change. These changes require new capabilities and force even the most established players to make radical departures from their business models.
Take, for example, the automobile industry. The electrification of vehicles and increasing reliance on computer software, rather than mechanical parts, has increased the knowledge and capabilities needed by the industry. At the same time, the traditional automotive business model—built around individual car ownership—may soon be replaced by fleets of autonomous vehicles owned by service providers rather than individual people.
Companies also face high expectations about their role in society. Stakeholders and shareholders alike expect businesses to make a positive impact on major challenges facing our planet, such as climate change, wealth redistribution, and more equitable way of operating and doing.
Adding to the increased complexity of the business landscape, recent events such as the COVID-19 pandemic and the war in Ukraine have forced companies to rethink where and how they operate and how they can be resilient to change.
When an organization is facing fundamental changes like this, simply adding a chief digital officer or chief sustainability officer to the leadership is no longer enough. Instead, leaders need to reassess their leadership teams, from changing existing roles to creating new roles to changing how different roles interact. – others.
This is the challenge faced by Mary Barra, CEO of General Motors, when she took over as CEO. Barra found an organization that not only fell behind the competition but was also largely unresponsive to the market. To initiate the changes that would make GM relevant once again, Barra overhauled the composition, culture, ethics, and operating procedures of the leadership, creating the team from a group of lefties. ‘y connected individuals into a unified group empowered to deliver on GM’s objectives.
Sign 2: A new order from the CEO
After accomplishing their initial goals, successful CEOs often face a new challenge: defining a mandate around a new set of goals. Doing so requires CEOs to not only transform themselves and their organizations but also rethink their executive teams.
Bracken Darrell, CEO of Logitech, a Swiss-American computer peripheral and software manufacturer, faced this challenge.
Initially, Darrell gave Logitech’s leadership team a high degree of freedom, treating the company’s various businesses as individual startups. However, after many acquisitions in 2018 and 2019 and rapid growth during the pandemic, he defined a new set of goals that required a higher level of coordination and centralization of his team.
As Darrell explains:
I plan to focus on a few things. This will change the dynamic. If decisions have to be made centrally it means you can’t weigh how it affects each individual business as heavily. You have to put the company first in every business. So you have to rethink the team.
CEOs must assess whether leadership team members can transition to meet new mandates or whether they need to be replaced.
Sign 3: Withdrawal or deterioration of individuals or groups
While changes in the business environment or a new mandate are hard to ignore, the third sign is easier to overlook. In many organizations, individual team members—or the entire executive team—can stall their progress and gradually degrade their performance. Some senior leaders stop developing and, therefore, over time become more out of touch with the needs of the organization.
As one anonymous Fortune 500 CEO shared:
My CFO is off to a good start. During the first two years, he did a lot to put the company on a stronger financial footing. But he was never interested in learning about our business, and after the first results, he never took the organization to the next level.
Likewise, team leadership performance can deteriorate when members become too comfortable and stop challenging each other or when healthy competition turns to politics and backstabbing.
Take, for example, the leadership team of a European multinational corporation that we will call Frontal. The Frontal team has been working together for more than 10 years, and the roles of each member of the organization have been well developed.
As the CEO said in a conversation with confidence: “On every topic, I can almost predict what each member will say. Everyone is trying to be nice, and no one wants to step on the toes of others.”
If individual team members or the entire executive team begin to stagnate, it may be necessary to refresh the team by replacing at least some of its members to install new ones. idea and maintain enough creative tension.
Recognizing these signs, CEOs must prompt action. They should approach the situation as if they were new to the organization. Does the executive team reflect the CEO’s goals, mandate, and vision for the future? Should the CEO clean house? Or should new sets of team roles and responsibilities be defined?
Although this process can be uncomfortable, regularly evaluating and refreshing the leadership team is one of the most effective routes to long-term success.
Thomas Keil a partner at The Next Advisors and a professor at the University of Zurich, Switzerland, where he teaches strategy and international management. His new book (co-authored with Marianna Zangrillo) is The Next Leadership Team: How to Select, Build, and Optimize Your Top Team. Learn more at thenextadvisors.ch.
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