What Do Senior Leadership Teams Actually Do?

Episode #390 What Do Senior Leadership Teams Actually Do?

WHETHER YOU’RE ON AN SLT… OR NOT!

This topic came in as a question from Jake who said, “Hi, Marty. I’ve just found your podcasts over the summer break and they’ve been brilliant.” [Thanks, Jake!] “Do you have one specifically on the purpose and function of a senior leadership team? I’d love to hear your insights on this topic.”

Well, Jake, ask and you shall receive. I’ve served on several senior leadership teams and as a CEO, I’ve tried to run an SLT. It’s harder than it looks, because like most things in leadership, it involves people and relationships… and in this case, some very healthy egos.

What should SLTs do? And what are the things that make them less than effective?

I start by exploring the basic functioning of senior leadership teams; I take a deep dive into the “two hats” principle; and I give you three suggestions for how to improve your SLT interactions, whether you’re a member of that team or not.

THE SIX KEY SLT OBJECTIVES

A lot of senior leadership teams focus on collaboration. They spend a huge amount of time trying to align the competing interests of the executives, many of whom are rugged individualists.

But the first instinct of executives is to protect their own patch. Almost all problems in SLTs arise from that one thing.

Any SLT that operates this way is unlikely to deliver any meaningful value, no matter how many hours they spend together in a meeting room.

I played around for years with different formulations of focus and tempo in my SLTs. I reckon I wasted a lot of hours of very expensive people’s time, on discussions that didn’t really belong in that room. But I eventually figured out the real reason the SLT was there, and how to maximise its potential as a valuable business performance mechanism.

An SLT should do the work that can’t be done anywhere else. I’ve broken this down into six key objectives:

1. Set clear direction for the business.

The strategy has to be understood uniformly by each executive. Every member of the SLT has an obligation to understand what the strategy entails and what that means for their individual portfolios.

2. Shape and deliver whole-of-company targets.

Each executive has to contribute to the achievement of company objectives. In this vein, each individual has to be prepared to make sacrifices for the greater good. The SLT is where this happens, and the CEO is the only one who can enforce it.

3. Ensure every effort is directed towards long-term value.

The SLT decides on the KPIs that are going to deliver the company strategy. Targets have to be ambitious but achievable, and they have to deliver the multi-year value that the strategy anticipates.

4. Agree on resource trade-offs.

By “resource trade-offs”, I mean capital and assets rather than people. People resourcing decisions tend to sit within executive portfolios, and they fall out of the higher level investment decisions. With limited funding and the need for prudent capital rationing, the SLT has to debate and action many trade-off decisions.

5. Be a conduit of tone, pace and standard.

As we know, the tone, pace, and standard for the company starts in the CEO’s office. But what happens below that is entirely unpredictable. I’m sure you’ve seen plenty of situations where the tone, pace and standard that’s set by individual executives is night and day different. Some execs demand a very high standard from their teams and others? Well, not so much.

6. Align messaging.

This is about cabinet solidarity. In a good SLT culture, robust debate and challenge is a given. There should be many passionate, well-reasoned conversations that bring natural tensions to the forefront. But once a decision is made, cabinet solidarity is not negotiable. Outside the SLT room, every individual executive has to align around that final decision.

Now, just pause for a minute and ask yourself. If you’re a member of your organisation’s SLT, does that describe how the team functions? If you are not on the SLT, can you see evidence of this culture above you? Or is the dysfunction of the SLT obvious even when you’re looking up at it from a few levels below?

CLASSIC SLT PROBLEMS

Perhaps not surprisingly, the biggest issues arise from a single persistent root cause: The executives in the SLT put self-interest and patch protection before the greater good of the company.

This problem manifests in a range of symptoms. You can feel it coming through in virtually every interaction with SLT executives. This is why I was adamant that my executives had to wear two hats:

1. The first hat as the executive accountable for their function or business unit; and
2. The second hat as an officer of the company, who’s bound to focus on company-wide performance and big picture outcomes.

I’m going to go into more detail on this shortly, so let’s just put a pin in that for the moment.

Before I do though, I want to cover some of the more mechanical failures that occur. If you’re a member of the SLT, you’ll recognise these immediately. If you’re not, it may help you to understand why some of the things that come out of the SLT seem illogical, at best.

For a start, too much time is spent on status updates. The SLT meeting can easily become a talkfest where lots of articulate executives wax lyrical about their team’s achievements. There’s little evidence presented, and no scrutiny on actual performance.

I’ve seen these meetings become real dog and pony shows. They just degenerate into information sessions that never get to the real issues. But it feels as though it’s productive to get everyone on the same page, which is why that behavior often persists.

If you want to avoid this, only allow reporting by exception (that is, the things that may be off-track or at-risk), and limit the discussion to one item per executive. Anything else can be moved into your one-on-one meetings.

The next problem is that important issues are often left unresolved. Perhaps the CEO doesn’t like conflict and shuts down discussions just as they’re getting a little bit interesting.

If I had a dollar for every time I saw this, well, I’d be writing this from my private island in the Caribbean.

The purpose of the SLT is to do the work of corporate leadership. So, if there’s any disagreement or contention about what the best course of action is, it needs to be debated and resolved in the SLT room.

If you don’t want unresolved issues, try to avoid the concept of taking something offline. And if you do have to take an issue outside the SLT room for any reason, set clear parameters for resolution, report back and approval. This includes who’s responsible for the issue, and the deadline by which it has to come back into the SLT.

Often, SLTs delegate work upwards to the CEO, which happens when the CEO wants to resolve an issue, but hasn’t been effective in pushing accountability for that issue down to the executive level. This is more common than you might think.

When the CEO says, “I want you to work on this together“, each executive tries to do the work at their own convenience. But single point accountability still has to be enforced, even when the work required to deliver a project spans multiple executive portfolios.

When there’s an impasse, it comes back to the CEO to break the logjam.

In Leadership Beyond the Theory, I dedicate a whole lesson to how you assign accountabilities in complex organisational structures. This is an essential skill if you want to avoid the problem of work being delegated upwards from the SLT to the CEO.

Finally, something that pretty much every SLT is plagued with, theatrics and politics. I’d almost go so far as to say that self-interest and ego come with the territory in an SLT.

The capability of your best executives will only be eclipsed by their confidence… and they’ll be clever enough to undermine their peers, if they have a mind to do so, as they position their own team’s performance in glowing terms.

This is harder to stop than you think, and only the CEO can do it by creating a culture that has zero tolerance for politics and deception. This only happens with strong one-on-one conversations, so if the CEO isn’t completely comfortable in conflict situations, there’s no chance of keeping the politics out of your SLT.

THE TWO HATS EXECUTIVES WEAR

Let’s talk about the two hats principle. The concept of executives wearing two hats isn’t new. In fact, it’s been around for over 100 years.

In the 1920s, Alfred P. Sloan was president of General Motors. Sloan is widely credited with inventing the concept of the Enterprise Leadership Team. He emphasised divisional P&L accountability and, at the same time, a shared corporate-level responsibility.

Sloan’s concepts were further refined and expanded by Peter Drucker, who separated operational responsibility from institutional responsibility.

And then JK Galbraith expanded the work with the concept of vertical versus horizontal accountabilities.

Just as a quick aside, I can never mention Galbraith without recounting one of his quotes, which is among my all-time favourites. He said, “The only purpose of economic forecasting is to make astrology look respectable.” How good is that?!

The first hat is pretty straightforward. If you’re on the SLT, you’ll be leading a business unit or a functional group; you have outcomes to deliver; you are resourced to deliver those outcomes; and you have control over all the moving parts.

It’s largely about execution. But don’t get me wrong: I said it’s straightforward, I didn’t say it’s easy.

A lot can go wrong, and execution is way harder than it sounds, especially if the targets are appropriately ambitious.

This naturally leads you to focus on team goals and personal KPIs, rather than whole-of-company performance.

But how about the second hat: the one you wear as an executive of the business? This one’s much harder. You have to overcome your self-interest, put your ego aside, and put the good of the company first.

For example, in every company, financial targets occasionally come under pressure. They require some form of cost-cutting or austerity.

The natural instinct is to protect your people, your budgets, and your work program. You’ll rush to find ways to justify why the cut should come from other people’s portfolios, rather than yours.

This is the time when you need to act like a CEO before you actually are one.

With your knowledge of the business, look at the things that are most critical in achieving sustainable, profitable growth and fight to protect those. They may not be part of your portfolio, but that doesn’t matter: company ahead of team… always.

Another example of wearing the second hat is safety. It doesn’t matter whether you have an operational portfolio or not: if you’re an executive of the company, you need to do everything in your power to improve safety performance, and reduce the number of incidents and injuries in the business.

Someone who understood this profoundly was my old CEO at Aurizon, Lance Hockridge. Even though I held a finance portfolio, I was part of Lance’s executive team, and he knew how critical it was for every executive to be competent in industrial safety.

He invested heavily in me and other functional executives. Lance put the whole executive team through immersion trips to the US with DuPont (which, at the time, was the world leader in industrial safety) so that we could learn from their safety culture and processes.

That was life-changing for me.

It gave me a perspective on behavioural safety that very few executives have the privilege of acquiring. I leaned on this for the duration of my executive career and, when I stepped into the CEO role at CS Energy, I had more knowledge, passion, and insight on safety than anyone in the business:

• I understood industrial safety better than my operational leaders;
• I understood it better than the labour unions who tried to use safety as a cudgel to beat management over the heads with;
• I understood it better than my safety professionals, who were so caught up in developing processes and systems, that they sometimes lost sight of the true drivers of safety performance; and
• I understood it better than any of the directors on the board.

That helped me to be a way better executive, because I was more capable of wearing my second hat.

THE GOOD AND THE BAD OF SLT CULTURE

To make any SLT work, you have to set up a culture that supports cross-team collaboration… within a strong, single-point accountability culture.

A strong culture would include characteristics like:

• Robust challenge and debate;
• Zero tolerance for political machinations and theatrical bullsh!t;
• An expectation for every executive to develop a sound working knowledge of the business;
• Extreme clarity on accountabilities;
• Consistent crafting of messaging; and
• Uniformity of standards between executives in the way they run their own portfolios.

This last one is critical. Too often I’ve seen poorly-performing people jump ship and leave a team where the performance standards are high, only to pop up in an adjacent team where the leader sets a lower standard.

You also have to be acutely aware of the potential derailers that face SLTs:

• Excessive politeness;
• Deferring decisions when they don’t manage to reach consensus;
• Lack of cabinet solidarity in support of SLT decisions;
• Not demanding that all the dead cats are put on the table; and
• Grin-f#*k (this is when an executive smiles and nods in the SLT room, and then goes away and does whatever the hell he pleases).

Corporate rogues have to be brought to heel. But I’ve seen too many CEOs let them go their own merry way, and the result is anarchy. When other execs see them getting away with it, they develop an every-man-for-himself mentality, and any aspirations you may have had for a high functioning SLT go down the drain with it.

TIPS IF YOU’RE ON THE SLT…

Unless you’re the CEO, many of these cultural issues are simply beyond your control. So, I want to give you some guidance that you can use to improve the success rate of the interactions that you have with your SLT.

What if you are actually a member of the SLT? What’s the one thing I’d suggest?

How you conduct yourself helps to set the tone for the whole team. More than anything else, you need to make sure you understand the business profoundly.

How does it make money… Really?! The nuts and bolts of the value drivers.

What are the most significant pressures: customer, environment, competition, market, and regulatory?

What’s the company’s true competitive advantage?

Which executives hold the biggest performance levers?

Having this knowledge is critical. Even so, when you process any information, you’ll instinctively look at it from the perspective of your team.

You’re naturally going to wear hat number one. But here’s the tip: somewhere between processing the information and opening your mouth, just ask yourself one simple question: “What’s the best thing for the company?”

When you do speak, you need to draw from Option B (only use your second hat). Talk exclusively from the company’s perspective. This is going to set you up as first amongst equals, and if the CEO rewards your selflessness, it will be a signal to the rest of the SLT that corporate behaviour is valued more than portfolio protection.

TIPS IF YOU’RE NOT ON THE SLT…

If you’re not a member of the SLT, I have two pieces of guidance, for two different scenarios. Both of these come down to how you approach your interactions with SLT executives.

The first scenario is: you’re meeting with an SLT executive who’s not in your management line. If so, try to speak to her from the perspective of her team and her deliverables. You want to try to couch the conversation in terms that recognise her first hat responsibilities, and have a focus on what it means for her portfolio.

If you demonstrate your ability to think things through from another person’s perspective, particularly a senior executive, you’ll invariably impress her. This is likely to win her support, which will flow through to any future conversations and decisions that she might be part of which involve you.

The second scenario is when you’re actually in an SLT meeting: Sometimes, if you’re leading a project (or otherwise seeking funding that requires executive approval), you may be asked to present to the SLT. If you are, make sure you do one critical thing: present at least one option that doesn’t result in you getting what you want.

For example, if you’re seeking project funding, you should at least paint the picture of a “do nothing” option, explaining what will happen if your proposal isn’t approved. And, just to be clear, “the world will end” is not an appropriate do-nothing option.

But you may also present an option for either a scaled back investment, or a completely different solution… which might even be developed in another executive’s portfolio.

In short, you should demonstrate your lack of self-interest. Your focus is on giving the SLT a comprehensive view of the information, so that they can make the best decision for the company.

This is a massive trust builder, and you’ll find yourself being asked to take on more and more challenges on behalf of the SLT.

CAN YOU INFLUENCE THE SLT FROM BELOW?

Obviously, the CEO has the most influence over the culture and performance of the SLT. But if you have any interactions with them at all, you are not helpless.

Hopefully, you’ll find the techniques I’ve just given you extremely useful for furthering your personal profile and demonstrating your executive credentials.

These approaches will speed your path to the executive level. And, who knows?! You might even end up influencing the culture of the SLT itself.