All right. So I think we're going to get started. Welcome to the Great Leaders Build Great Leadership Teams webinar series. Today is June 26, 2018, and today's topic is how to measure leadership team effectiveness. My name is Jack McGuinness and I will be today's presenter. Just a couple words on logistics, we will hold questions until the end, given that we have quite a few people on the webinar. If you have questions during the course of the webinar, please don't be shy and you can use the chat feature to ask the question, and I will compile those and address them at the end of today's discussion.
Another note on the slides that you're about to see. I break some rules here in terms of slide presentation. My slides are typically filled with a little bit more content than a typical presentation would be filled with just so that I can easily send them out to you after the webinar, and you don't have to take as many notes. You can have the substance of what I'm talking about on the slides. Obviously I don't have to read slide by slide. So, with that said, let's get started.
How to measure leadership team effectiveness. Obviously the work that we do at relationship impact is working with the executive teams or leadership teams of growing companies to help their leadership teams put their organizations in a good position to scale their organizations effectively. And so how do you measure whether a team is effective or not so that you can actually build a team that is going to enhance your opportunity for success? So, that's what we're going to talk about today.
Before we get started, I want to start with a very simple but important definition about what a leadership team is from our perspective. We stole this definition from a woman named Ruth Wegman who wrote a great book. She's written a number of books on teams, but the one I really sort of like our Bible is Senior Leadership Teams by Ruth Wegman, and this is the definition she uses that we certainly adhere to. A leadership team is a group of individuals each of whom has personal responsibility for leading some part of a system, right? Some part of a system that also have a strong level of interdependence for the purpose of providing overall leadership to the whole organization.
So, that's a pretty simple definition, but it does get at ... it will help us as we start to unpack how to do a good job of measuring the effectiveness of a team. So, that's kind of a foundation alone. So, let's just start about what makes a leadership team effective? Right? Start with the end in mind, right? We believe that great leadership teams oversee and contribute to the achievement of results, right? Obviously organizations are in business, whether you're a profit, for profit, or not for profit entity, your organization is designed to achieve results, and so the leadership team plays a strong role in helping the organization achieve those results.
Secondly, a great time, and we asked our clients to think about whatever great teams they've been on, whether it's a sports team or team at work or outside of work, what we typically get, they had impact above and beyond the contributions of any one team member. And so it's sort of that forced multiplier effect. When we're all working together or we're mitigating our weaknesses and acceleration our positive contributions. So, have impact way beyond the contributions of any one individual member.
Third, and this is really important, really, really important. We see this as we work with teams over time hopefully, is that the team grows in capacity to solve more challenging problems. As they work together and build their capabilities individually and collectively to work more effectively as a team. So, they're able to solve more complex, more significant challenges over time.
And perhaps the most important thing is, and again, think about the great teams you've worked with or work on, they when things go bad, and they always do, right? Nothing's perfect. So, they have a sense of resilience to them. They have an ability to get back on the horse when you fall off, right? And those are important parts.
So, that's from our perspective what makes a great leadership team effective. So, now how do you measure all that, right? As you'll see here, it's not necessarily a black and white scenario. So, let's start with a little context, like this slide says. In measuring anything, as business people we measure lots of things from processes to sales goals to corporate performance, and whenever we measure things, we have to look at the ultimate, right, the long term view of what are the outcomes we're trying to achieve, right? For a pocket business, that's some type of growth or productivity or ultimately value of an organization. But in order to get there, right, there's a series of milestones or short term or more predictive type metrics, measures that are important to along the way to measure whether the likelihood of us hitting particularly well.
And a good example of that might be if you look at a sales goal. Our goal is to hit $10 million in sales this year. Well, most good sales organizations have some pipeline metrics, right? And closing ratios or value of the pipeline at different stages of the pipeline. So that just gives you a sense of what I'm talking about in terms of short and long term.
Next, I want to give you a sense for our team effectiveness framework, our leadership team effectiveness framework, right? This is not mind blowing, right? There's three components to it, however, and we are going to talk in great length about number three, in some length about number two, and not as much about number one as you'll see as I start to describe these.
But the elements of our effectiveness framework are one, stewardship of the organization's strategic direction. And I'll get into that in a little bit more detail in a minute. Number two, achievement of a specific purpose at a particular point in time in organization's life cycle, right? And the purpose from our perspective is that leadership teams purpose evolves over time, right? It always has that stewardship role, but its specific purpose as an entity evolves over time, and we'll get into a little bit more detail on that, and I'm going to give you some examples of that as we go through.
And third, and very importantly, and harder to measure, but we'll give you an objective framework for measuring this fairly subjective topic as we go through the course and the discussion today. But continual refinement of the foundational structural and relational elements that make a team work effectively, right? So, let's start with stewardship.
Organizational stewardship, right? And so any leadership team, it's obvious. When we asked the question, what's the purpose of a leadership team? We always get, well, carry out creed and carry out the strategy. They're responsible for business results, strategic results, right? And that is absolutely the case. No question about it. However, if you think about the corporate performance of an organization, and tying that or correlating leadership team effectiveness with those results, it's not necessarily easy to tightly correlate those things. Let me give you just an example of that.
An organization where market conditions change dramatically, just think about a hurricane and a electric utility, right? While an organization like an electric utility has to be prepared for dealing with storms, right, those storms nonetheless impact their ability to achieve the financial results they're looking for, right? And so can the leadership be increased the likelihood of them being able to still maintain performance while dealing with unforeseen circumstances? Absolutely, and that's sort of our point, but it's really hard to just do a one to one correlation. We have a great leadership team, therefore we're going to get great results.
We believe that effective leadership teams enhance clearly enhance an organization's likelihood of achieving corporate level performance metrics. The purpose of our discussion today is not to help create a corporate dashboard or the metrics that an organization should put together to track whether it's meeting its performance or not. Our focus today is on what's the leadership's role in terms of how effective, how an effective leadership team should be measure so that it can enhance the organization's likelihood of achieving in corporate performance.
So, organizational stewardship is really important. Our premise is that by measuring the specific leadership team's purpose points two and point three, the foundational elements we believe ... So, I'll go back to my slide here. Number two and number three on here of our framework, we believe will enhance a leadership team's ability to achieve to help an organization achieve its stewardship role of results and strategic direction.
I hope that's clear. If not, just ask some questions at the end. Okay, so, our premise is that effective leadership teams enhance an organization's likelihood for overall success. So, let's talk a little bit abour purpose, and what do we mean by that, right? And so organizations go through different life cycles or growth cycles. They may be introducing a new product. They may have a new competitor that's introduced to the market. They have a whole bunch of different business cycles get in the way of ... or not get in the way, but are part of the natural journey of any organization. So, our point here in terms of leadership team purpose. Leadership teams need to come together, obviously on that stewardship role, but also very importantly on what is it that this group of people at this point in time, this group of leaders at this point in time, should be focused on to help the organization at this particular juncture get the results they're looking for?
So, a leadership team's purpose ... I'll just go through a couple of these points up here ... should serve as a guidepost for focusing the organization on what's most important at any given point in time. Our view and our experience is that without having that guidepost or that rallying sense of purpose, it's very difficult for leadership teams to really come together and have that force multiplying impact beyond just what their normal functional role is going to look like.
And as, again, back to Ruth Wegman, she captures this very well. And again, I graciously steal this from her, but it's ... the purpose should encapsulate what a CEO, what the team leader, the formal leader needs, this group of enterprise leaders to do that cannot be accomplished by any other set of people. So, let's take a look at what are the key elements around a leadership team purpose, and I'll give you a few examples that will help shed some light when we're talking specifically about here, leadership team purpose.
Okay, so, we believe there are three important elements of leadership team purpose. Number one is that the leadership team purpose should focus on what's most important based on the current environment at this current point in time. Two, it should be ... the purpose should be articulated. The tangible, measurable results that will be accomplished as a consequence of the team's collective efforts.
And three, it should capitalize on the unique capabilities and contributions of those team members, and should mitigate the known weaknesses of the team members. So, let's go walk through a couple of examples so what we're talking about in terms of team purpose.
First, focusing on what's most important. For example, we worked recently with a professional services organization that had grown very dramatically over a two year period of time by about $75 million in revenue, and about 90% of that concentration was really on one customer, and they recognized in order for them to be a going concern a viable entity that they had to grow and differentiate and diversify, I'm sorry diversify their customer base.
A launch of a highly differentiated product, right? Something that leveraging the organization's current capabilities, but potentially is taking the organization in a different direction, right? That's an area that you really want the collective wisdom of the leadership team laser focused on how we're going to do that successful.
Third, preparing for significant growth. In our work as relationship impacts work, working with small to mid sized companies primarily, and some big companies, but in our work with these small to mid sized companies, they're always preparing to scale. How do we get to the next level? Always pushing themselves a little bit, and we often get to a point where there's these pinnacles of growth where we're working with an organization, and the leadership team really needs to mobilize to figure out how are we going to get to the next hurdle and barrel through it and be successful?
So, those are a couple of examples on what I'm talking about, but leadership team purpose based on current environment at a particular point in time. So, and then, obviously, really important to articulate the tangible results that you want to achieve. So, for this customer concentration issue that I described above, the goal was how do we reduce customer concentration by a certain percentage, right?
So, we're not just relying on the one customer, and we're using the lines of business that we have to cross sell and to sell into multiple markets to increase our customer base. So, for launch of a highly differential product, this is a fairly simplistic view, but it's launched a new product on time and on budget, and hit six months sales target, right? That could be one particular metric around that.
For preparing for significant growth or scaling, big challenge we often see is we scale but we don't put the right focus on how we're scaling, and we start becoming less profitable as we scale. So, how do you maintain operating margins as you scale? For a contractor or a construction firm, that money look like, how do we make sure we're putting our labor to work well and we're putting our materials to work well, and we're keeping track of our materials, and we're not ... less leakage and all those kind of things. So, there's lots of metrics that go into that, but the leadership team, getting the leadership team to focus on what's most important, and then getting them to measure how they're doing against that is really important.
And obviously predictive metrics like we talked about before, the short and the long term. Maintain operating margins, and lots of predictive metrics we can put in place there. How are we keeping track of productivity? Have we been keeping track of productivity? If not, how do we do that? Because obviously labor productivity has a big impact on margin, right? So, getting a leadership team to focus on that and all facets of the leadership team to focus on that.
And then capitalizing on the new capabilities and the known weaknesses of the team members, right? So, for that customer concentration challenge we talked about with that professional services firm, there was a really experienced marketing VP that led the effort with that particular leadership team on how to reduce customer concentration. So, basically they put a go to market strategy for the three lines of business. Go to market strategy across those three lines of business, and they used every facet of the leadership team was involved in ... it was laser focused on concentration.
From the marketing perspective, how are we going to market in each one of those markets, and are there some things we can do that are consistent for how we're going to market in a particular industry segment. We wanted to have finance at the table to make sure that we're putting the right level of investment on the table. We're having the right discussions about investment in terms of the resources we're bringing to the table, also how we're measuring whether we're going to make money on those types of things.
So, and obviously having the lines of business leaders in ... all on the same page in terms of what are the unique nuances of marketing in a particular line of business and how we're going to market in terms of the brand that we're representing as a corporate entity.
And then third, you know, capitalizing the capabilities and known weakness of the team members. I'm working with an organization right now that's about to scale pretty dramatically, and so they just restructured their team to make sure that they had the right span of control and that they're putting the right accountability mechanisms in place to be able to scale, right? So, they didn't really feel like they had that. They had a couple people with way too broad a span of control, so they extended that. They opened up the leadership team and they have more the right people at the table talking about how do we manage our margins as we grow. Having the sales people at the table in terms of what is the forecast look like nine, 12 months from now so that we're preparing our resource forecast to support that, and doing that in a coordinated way?
So, what leadership team purpose is really all about is focusing a leadership team on what's most important, and taking advantage of the capabilities and mitigating the weaknesses so that whatever that focus is, customer concentration, scale, new product launch, we're able to put a laser focus on that at this point in time. And hey, nine 12 months from now as we've scaled, for example, there will be another challenge that we face.
Maybe we want to get into a new line of business, and maybe at that point the purpose won't so much be on how do we scale. It will be on how do we effectively in a coordinated way launch a new line of business? So that's what we're talking about in terms of leadership team purpose, right? And obviously in terms of measuring the effectiveness is when you have a purpose, you have to have tangible and measurable results that you're targeting, and so from an effectiveness perspective with the leadership team that has a good purpose can measure itself based on the results that it's leading and coordinating throughout the organization.
Okay. So, as I said earlier, we're going to spend a good bit of our time talking about this next piece in terms of building the foundation for a team to be effective, right? And so here we just talked about how is a leadership team, how do they get together? What do they got to focus on? What are the results they're looking for? And then now we're getting into the blocking and tackling of building the foundation so that a team can effectively work together to even position themselves to achieve the results they're looking for.
So, and this is a quote from my partner. "Great leadership teams never succeed by accident. Without nurturing, leadership teams can actually become organizational impediments." And it's amazing, sad but amazing is that we see this quite a bit, is that great organizations with great people and good products and good customer relationships, for example, can be impeded by a leadership team that is not work ... is working across purposes, for example, and unfortunately we see it time and time again.
So, building the foundation is huge for a leadership team to be as effective as they could be and to enhance their capability, their ability of the team to be good stewards and achieve their particular purpose at a particular point and juncture in the history of the organization. So, building foundation's huge. So, couple parts to building the foundation.
There are, we describe them as two sides of the same coin, right? And so if you look at a team, we look at a team in terms of the structure, how it's structured, and then the relational dynamics among the team members, and both of those things together give you a scenario or a ... what's the right word? It gives you a picture of how well this team is going to ... how effective this team is going to be in terms of addressing anything that it addresses, right?
So, there are some structural factors, and structural factors are simply those things that help a team focus on business outcomes like do we have the right people on the team? Do we have a good way of operating? I'm working with an organization right now the sales team of this organization where it's just stupid things. Like they had monthly meetings sometimes, and most of the time they were unorganized. People weren't prepared, and in fact, I just left one this morning, and the dramatic change from four or five months ago to today is remarkable.
Had an agenda. People were prepared. Focused on what's most important, and they're tracking quite well, and put an hour and a half aside for it. They finished in an hour. Simple stuff like that, that's a structural issue, we think, from a team perspective. That's really important. Seems kind of silly. Seems kind of basic in blocking and tackling, but if you don't have a good structure, you don't meet well, you don't manage your meeting, and there's not planning happening. Then you sort of sub optimize how well you can work together, right?
And then there's a set of relational factors. Those are the factors that help a team work as well as they can together to create a healthy work environment, right? And so do the team members trust each other? Do they encourage diverging viewpoints? Does the leader cut them off and not listen? Do they not really listen to each other? Does the team engage in productive debate? We've got away from the word "conflict", right? Do they confront each other well without defensiveness, without a bite to their feedback? Do they actually debate well? Because without debating well, really hard to hold each other accountable for example.
You can have leader accountability where the leader, former leader might hold you accountable, but can it ... ultimately, can a team hold itself accountable? Can team members hold themselves accountable to the individual and collective tasks and results they're looking to get? So there's a strong symbiotic relationship between structural and relational factors, and all this slide basically says is that you can have great structure in place. You can meet well. You can have good meeting rhythm with good agendas. You can have a set of operating principles. You can have the right incentives in place. But if you have bad relational dynamics, and you're not able to debate well and hold each other accountable and people get defensive, then it's really hard for those structural elements to really work well.
The other way goes, too. I mean, a bad structure can exacerbate relationship challenges, right? And so if we don't have good structure in place, don't have roles defined well for example, do people start tripping over each other and then making assumptions about why he or she is in my turf? That type of thing. I'm sure we've all seen things like that.
So, oops ... Okay, so in terms of measuring the structural and relational factors, we built early on ... we've been around almost 10 years now. We built an instrument to measure the team's effectiveness based on those structural and relational factors. And just about two years ago, we found a much better more robust tool with lots of data behind it that's been validated by an organization called Team Coaching International that has a great tool, online tool, that does a really good job of measuring these structural and relational factors.
They call them some different things, but basically we're talking a one to one relationship here in terms of our philosophy and their tool. So, the team diagnostic provides a baseline for improvement, and we're going to show you an example of a team that we just worked with over a course of a year, and how they and their stakeholders rated them last February to how they rated them this February ... or, sorry, May to May, based on structural and relational factors.
The team diagnostic enables performance to be assessed from the perspectives of the team leader, team members, and other stakeholders. We think that's really important. So, when we typically use this instrument, we'll get the leader to take a look at it first so that he or she has a good sense for what is it that we're actually looking at? So, the leader will just spend 20, 30 minutes and evaluate the team based on where he or she thinks the team is right now.
Most importantly, though, we have the team measure itself and how the team sees itself on these relational and structural factors, and then we typically have the direct reports of the team complete the assessment as well so that they have a sense for ... the team has a sense for how their direct reports see them functioning. And also sometimes we just did this recently where we had a board involved, and the board of directors ... actually it was a subset of the board of directors, did this same instrument. So you had three different perspectives or four different perspectives in that case, for how those various stakeholder groups saw the leadership team.
The tool is great, because it uses everyday common language, which is not a lot of buzzwords and stuff, so that's good. And as I said before, it's passed the standards for both reliability and validity. So, what does the team diagnostic look at? Most importantly, the team diagnostic looks at the team as a system that has characteristics that transcend any one member. What I mean by that is that it's not looking at it like the leader does this wrong or does this right, or the VP of Marketing does this well and does that. It's looking at it as the team as a system. What do we do well? Or what does it do well and not so well, and what are the areas that needs to focus on?
And then focus on assesses team performance from two perspectives. What results the team in achieving, and how is the team working to achieve those results? And so competencies that support the team's ability to be productive, that's things like resources, decision making, how well aligned they are, how well they are accountable to each other, how well they are led, and the leadership that they provide, their goals. Do they do a good job in terms of setting goals and strategy? And are they proactive?
So, those are things, those are the factors that contribute to whether a team ... the likelihood of a team achieving the results it's looking for. How is the team achieving these results? In those competencies ... These are the competencies that create an environment that supports good team dynamics. So, respect, valuing diversity of viewpoints, of different perspectives, a little camaraderie, how well they communicate with each other and outside the team. How this whole concept around constructive or productive dialog. How well their interaction. How constructive are they? How optimistic they are then? Do they actually trust each other?
So, the team diagnostic through a series of questions online, again it's an online instrument, that can be answered or taken in about 20 or 30 minutes. Ask a number of questions that give you a picture of how well you're doing with each of these 14 points. And they call them productivity factors, seven productivity factors, and seven positivity factors. From our perspective, those are closely linked to what we consider structural and relational components.
All right. So, what do you actually ... What are some of the results you look at, right? So, if you look at the high team positivity and high team productivity in the upper right hand quadrant, this blue quadrant. Obviously that's the nirvana. That's where every team wants to get to, and very few teams are there, right? It's focused on ... those are the types of teams that are saying, we're doing really well, but we've got to get better, you know? They're open. They're proactive. They challenge each other. It's just there's a good sense of humming. It's that whole force multiplier impact I talked about.
To the other side, the diagonal of that, right? Low team productivity, and low team positivity, and it's basically like I can't wait to get out of here. Unfortunately, I've consulted to a bunch of teams that where I hear that. I just next opportunity, I'm getting out of here, right? Sot here's criticism and blame games, resistance to new ideas, fear of failure, turf protecting, fire fighting, sense of fear they're going to get beat up for everything they do. So, this gives you a sense of the four dimensions here and what the results will wind up looking like.
So, this is a team we worked with. I'm sorry. I said it was May, but it was April of last year, right. So, in April they took this, and then in ... and this is just the view of the actual leadership team itself. They also had the board take it, and their direct reports take it, and there was definitely a strong sense of improvement here. So, you can see the dotted line on the quadrant to the left of my screen here showed where the team viewed itself, right? And so it was a tough picture, right? It was ... had some fairly productive, but lots of low positivity, right?
And in a year's time the team, the same group of five or six people, I think it was six people, maybe they lost one, when to another organization, really began to view itself in a much better light. Now, as it turned out when we looked at, and I probably should have put these other slides on here, as we looked at their stakeholders, primarily their direct reports, they saw progress, but not quite as much as the team saw itself. So, we had a good discussion about where the team saw itself, versus where others saw themselves, or their direct reports saw them. So, they still have some things to work on.
And this view to the right, right? And so you get a sense for on all 14 points, where does the team view itself, right? And so just look at the dotted line again. In terms of alignment, you can see that this team wasn't as aligned as it thought it should be, right? And it got more of a score of a five out of nine, right? Their level of constructive interaction wasn't so good. So, you can start to make ... when we discuss this with the team and walk them through it, you start to make some correlations, too, right? If we can't interact well, we don't productively debate and discuss the most important issues, we're likely not going to be aligned as we should be. So, it's probably a natural link between constructive direction and alignment, in this case.
Same thing with decision making. If we don't interact will, we're probably not necessarily ... we don't make decisions well, we're not going to be very well aligned either. So, you just start making some correlations, but you know, and then they ... the same view with their direct reports we would look at here. So this is, what we say is that this is the foundation of what a great team ... a good team that's more towards the upper right hand quadrant increases its likelihood that it's able to achieve its purpose as a leadership team and act as good stewards for the organization, increase the likelihood of organizational results as well.
And so we believe that this is an objective way of measuring a fairly subjective topic in terms of a leadership team effectiveness. So, let's recap, right? And so we've talked about leadership team, our leadership team effectiveness framework. A couple things we talked about is that the ... to put context around this, that there are short and longer term things that can be measured. Results, outcomes, or the long term view, and the shorter term view is how are our relational and structural dynamics, the things that the team diagnostic measures?
If we can start making some progress on those, perhaps we'll increase our likelihood that we're going to get the results were looking for. Looking at that short and long term view. The other thing we talked about was the fact that really important to create an environment ... nothing happens by mistake. So, the more practice you put into something, the more focus and energy you put on something, the likelihood of getting better results is important.
So, from our perspective nurturing and taking time to focus on structural and relational dynamics is really important. So, we believe that there's a relationship that starts with building a foundation for a great team, those four team factors that the team diagnostic measures. And the more we can focus on building good structure and good relational dynamics the higher likelihood we're going to be able to focus to achieve our specific purpose that we talked about earlier, and ultimately become great stewards for the organization.
So, one last slide before we get to questions. We offer a complimentary leadership team assessment, which is on our website. The URL's down there below. It's on the home page, if you just go to our home page. We're relationshipimpact.com. Limited to CEO's, presidents, and general managers, senior team leaders, but it gives the team leader an ability to take the assessment and play with the tool a little bit, and look at the outcomes from where they ... how they see the team.
So, we offer that to those of you who are CEO's, presidents, and general managers, and would love ... just click on the assessment link and it will send us an email, and we'll get you set up on the assessment.