This requires a complete change or 'new deal' in the way in which executives at the top relate to each other. The best model is a collectivist one in which they find ways to work together and build "interdependencies" rather than try to work in "splendid isolation".
The conventional wisdom for improving organisational performance is to change the people at the top, switch power from one function to another - such as manufacturing to marketing - or to look at measurement and reward.
All this remains as important as it ever was. But this study by Professor Yves L. Doz of INSEAD and Mikko Kosonen, a special advisor to Nokia, found that companies which pulled out of trouble and stayed ahead also changed top executives' behaviour. The old baseball model would have it that each member of the team has a specialisation and is responsible for performance in his or her business division or function. The new model looks for all-rounders at the top who feel responsible for the whole business and can collaborate with other executives to reach the desired end goal.
In the past, the typical approach was for executives to carve out their own fiefdoms, in which they built a team of people who report directly to them, maintaining a private channel of communication with the CEO. This lone approach needs to be changed to a more open and collectivist one, in which the executive feels responsible for other parts of the business too. It is very hard to change this mentality, which is why many companies fail to get past a stated intention to change. However, a good first place to start is with the CEO himself who needs to learn to accept challenges from others.
There are several different ways in which an organisation can shift its behaviour from the individualistic to collectivist:
1) Get rid of the stand-alone unit as the organising principle of the top team. Instead of being in charge of a business unit, executives can be put in charge of different stages or links in the company's value chain (the parts of the business that add most value such as logistics, operations, marketing and sales and services). For example, SAP used to make each executive reponsible for one step in the value chain; now the whole team has to work together to develop and implement overall strategy. They cannot stand alone at meetings responsible for their business unit. They must consider the whole.
2) Make sure you find a way to link up executives when they have to be organised vertically. For example, Nokia's four division heads - mobiles, multimedia, enterprise solutions and networks - are probed and challenged by two horizontal groups: customer and market operations and technology platforms.
3) Recognise that your group may have diverse businesses within it but it could have one business model; for example, Stelios Haji-Ioannou's Easy Group set of companies share the same pricing and internet sales model. Use this common factor to share information and ideas.
It is important to compensate executives for any loss of autonomy by giving them corporate-wide responsibility. Also, to ensure the executive team functions well post-change, the CEO needs to keep the top executives focused on key corporate issues, make the dialogue informal, provide time for reflection, help them keep a fresh perspective, encourage debate perhaps by taking a subordinate role in meetings and establish transparent accounting and performance measurement.
The new deal at the top
By Yves L. Doz and Mikko Kosonen
Harvard Business Review, June 2007
Review by Morice Mendoza