Chris Unwin There is no more pivotal or emotional management change than transitioning a founder-owner CEO. They are by definition, the heartbeat of a business, central to its culture, success and identity. At the time that external investment comes from Private Equity the question always arises: “how long do we back them for?” There is […]
There is no more pivotal or emotional management change than transitioning a founder-owner CEO. They are by definition, the heartbeat of a business, central to its culture, success and identity. At the time that external investment comes from Private Equity the question always arises: “how long do we back them for?”
There is undoubtedly a conflict at the point of deal between winning a founder over and being truthful about how the new investor sees the management team evolving. Turkeys tend not to vote for Christmas – even in the current political climate – so assuming the owner is not cashing out at the point of investment, reassuring noises are often made towards management, even if behind the scenes there are misgivings.
The usual cause for concern among investors is that the Founder-Owner is too entrepreneurial (read, hard to manage and not accustomed to challenge), too one-dimensional (strong on sales, technology / product development, operations but only one of the three) or too small company (has reached the point where their capability is commensurate with that of the business). In all cases they have a disproportionately high influence on the businesses versus those leaders brought in externally. The business evolves around them.
Having worked on numerous and very different founder replacements, succession planning is always the best option and one that PE does not always do well. The balance between involving the incumbent in the process and allowing them to direct the types of profile, personality and eventually even choose their successor is hard to get right. The founder should be involved but only have an equal voice in decision making among stakeholders.
We have learned that direct sector experience is only relevant in the most technical of industries and the net should be cast wide. It can be a common misconception (perhaps in an attempt to de-risk the hire) that the search is kept within sector. It is much more important to bring in someone with rounded leadership skills, strong emotional intelligence and capabilities in the key areas for the business over the longer term (building a sales engine, internationalisation, operational expertise) than someone who is “well known in the industry” or brings a black book, as this inevitably expires.
For best results, change among the broader management team should be staggered rather than wholesale (though in turnaround situations a brand new team with a great deal of impact can be successful). The business becomes accustomed to change and will learn that, done right, it is nothing to fear and this will help keep churn rate down.
It may now be that more structure at the point of deal should be put in place. Timings can often be vague (“the CEO will transition out in 12-36 months”) and lead to a lack of direction and stagnation. In the same way that earn-outs are mechanical, it may be that milestones are put in place to ensure that change is structured and ensures it is delivered. This forces investors to be honest with founders on how they envisage transition and whilst it will not win them every deal, it is better for both parties that they align themselves with the right partner, rather than there being the need for forced rather than voluntary change which is the most damaging possible outcome for the business and investor.
Good management assessment and due diligence can help bring data to intuitive feelings about the team investors are backing and lead to conversations about assessment more rooted in logic rather than instinct. It may be that investors need to let deals pass by if they do not have the right management team in place now and have not built the relationship with the founder during the process to agree on a shared strategy. If they can, however, the process to find a successor can be a hugely positive one. Time becomes a luxury, candidates are more attracted as they are joining a forward-thinking, aligned business rather than coming to repair the inevitable damage caused by a difficult parting of ways: a demotivated or fragmented team, a lack of focus on the core business and typically performance issues as a result.
Good succession planning for founders is not easy and takes time, but businesses and investors benefit from it.
Picture the scenario: the technical expert is appointed to lead the technical team and expectations are high on both sides. However, six months later and the appointment has turned sour; the team feel they are being micromanaged in every direction; the new manager is struggling with the transition from manager of projects to leader of […]
Picture the scenario: the technical expert is appointed to lead the technical team and expectations are high on both sides. However, six months later and the appointment has turned sour; the team feel they are being micromanaged in every direction; the new manager is struggling with the transition from manager of projects to leader of people. Furthermore, the manager feels loss of status accorded to the previous role and the talent management issues are now overwhelming. Team performance suffers.
As the western world moves from manufacturing economies towards knowledge economies, organisations now require their technical experts to develop a range of leadership skills such as strategic thinking, people development and change management abilities. Technical experts come with both an internal and external credibility so importing leaders to run technical teams is less of a satisfactory option than developing technical experts to become effective leaders.
This short paper addresses two issues: firstly, how to ensure that technical experts are fully aware of both the personal and career implications of such a job move; and secondly, how best to support them on the transition between roles to ensure that the scenario described above does not occur.
Motivations to change
From an organisational perspective, such development is both an expensive investment and a commercial risk and it is critical that the technical expert has the required motivations to execute a leadership role.
One way of addressing this issue is through a career counselling session to unpack the motivations to want to move to a leadership role and the expectations of how that role will be delivered. Thus, how realistic is the proposed move to a leadership role in relation to own knowledge, skills and abilities? Leadership is not for everyone and to what extent has the technical expert considered other career options? Finally, to what degree has the technical expert thought through the practical steps towards this new career goal?
The quality of motivations to move role are a key predictor of eventual success. These need to be unpacked and understood by both the technical expert and the organisation. For example, is (s)he fleeing from an unsatisfactory state of affairs in current role or is (s)he genuinely flying to a senior leader role as an output of a well-thought-through career transition? Positive indicators include the beliefs that the new role will involve greater variety; responsibility for a task or project from start to finish and a notion that undertaking the new role will lead to making a significant contribution to the organisation thus fostering a real sense of purpose and meaning. In short, the technical expert has high level motivations. Weaker motivations to move include access to higher compensation or the notion that the role offers elevated personal status without any due consideration of the key behaviours required to be effective in executing it.
Expectations of behavioural change
The technical expert will certainly benefit from a candid reality check of the behavioural expectations of the new role. Put simply, what behaviours does the new leader need to shed, retain or acquire to execute the new role effectively? This is an important dialogue. The leader may be regarded very highly within the organisation for technical ability and will thus face a likely loss of status should (s)he move to a more generalist leadership role. To what extent has this been thought through? Furthermore, the role of technical expert, that has been so much a part of their personal identity, is no longer appropriate. Indeed, (s)he should make a conscious decision to stay away from technical work. This is because effective leaders facilitate team development through encouraging team members to problem solve for themselves. Furthermore, constant recourse to giving technical advice and problem solving is the first warning sign that the technical leader is struggling with transitioning into role. In short, the leader is retreating towards a comfort zone of technical expertise rather than the stretch of acquiring a new set of leadership skills. Such a stretch usually involves the acquisition of key elements of effective talent management – becoming both responsible and accountable for the attraction, selection, development and retention of great people.
Learning and development interventions
There is no single unifying theory about leadership. Furthermore, the world of learning and development is replete with examples of managers who have been unable to transfer their learnings to their roles. Research is clear that those leaders following the 70:20:10 model (70 per cent of learning acquired on the job, 20 per cent comes from observing others, and only 10 per cent comes from formal training classes) were four times more likely to demonstrate a faster response to business change. The pedagogy of this model is much less about using it in a formulaic manner and more about weighting the balance of learning styles to the perceived learning needs of both the leader and business. Coaching underpins this model and exists to support the expert leader as (s)he experiments with new and different behaviours outside of their existing comfort zone. Coaching is not a panacea for all development initiatives but it does add substantial value for those who are undertaking soft skills development and who need to think in more strategic terms than they might have done in prior roles.
To develop this further, the move to a senior leader role sets out a requirement to see the business world from a wider perspective. Here, conceptual rather than technical skills are paramount with the accompanying requirement to view the organisation from a macro rather than micro level. Attempting to do technical and managerial tasks simultaneously, with the inherent incompatibility between the two roles, is a recipe for failure.
Within a wider developmental context, first base is to recognise that development is the joint responsibility of both the technical expert, the new line manager and the human resources team. The expert takes ownership for his/her development but time to do this is facilitated by the line manager who sets out expectations for the development, makes time to ensure it is accessed and then monitors transfer of skills to the role. This three-way technique, known as ‘expectation, application and inspection’, allows managers to guarantee that what they receive is what they are expecting to see. Reward and recognition are key here. Some skills will be outside of the technical expert’s comfort zone and thus well-deserved and appropriate affirmation for the display of new and different behaviours will enhance the probability that these will be repeated.
Some technical experts inhabit ordered and structured work environments with a reassuring certainty in fact and formulae. However, this is not the currency of senior leaders’ work environments some of whom struggle with the fast paced nature of product development and technological change and the requirement to work with data and scenarios that are ambiguous or chaotic in some way.
For the technical manager, this presents a number of conflicting requirements. (S)he must provide exact answers from incomplete or inexact data; elevate self from a natural attention to detail to look across data to inform on a way ahead; and maintain competence in the operational and tactical but also develop a strategic and external focus. (S)he may feel the need to adhere to process but not to the extent that (s)he becomes mired in it at the expense of action. All this is within compass for the technical expert to achieve. The new leader needs, however, to receive timely and relevant development to scaffold him/her through the process predicated on high levels of intrinsic motivation and a thorough debriefing on the behavioural expectations of the future role. To ignore these issues is an invitation to fail. To address these issues is to give technical experts the best chance of success to the ultimate benefit of themselves, their team members and the organisation.
Ten top tips for developing a technical expert to an effective leader:
- Ensure that the behavioural expectations of the new role are clearly understood
- Ensure that the technical expert is intrinsically motivated (e.g. internally driven for job satisfaction or personal fulfilment) rather than extrinsically motivated (by payment or reward)
- Keep an eye out for distress in role (e.g. resorting to old behaviours rather than engaging with the new)
- Scaffold the technical expert with appropriate development (e.g. coaching) to ensure the best outcomes for the transfer of learning
- Ensure that line managers use the techniques of ‘expectation, application and inspection’ to measure performance standards
- Encourage technical experts to connect team contributions to business outcomes
- Ensure that development is the joint responsibility of line manager, the technical manager and HR team member
- Recognise that individual developmental action will falter without an enabling and sustaining organisational environment
- Focus development on wider, strategic and more conceptual subjects (e.g. empowerment) that are the province of senior leader responsibility
- Recognise and reward appropriately when the desired new and different behaviours are shown
Badawy, M. (1995). Developing Managerial Skills in Engineers and Scientists. New York: John Wiley & Sons.
Gifford, J and Finney, E. (2011). The Expert as Leader. Roffey Park Research.
Leading Technical People Research report (2013) retrieved from http://blessingwhite.com/research-report/leading-technical-people-research-report/
Schein, E (1987) Process Consultation: Lessons for Managers and Consultants. Vol. 2 Reading, MA: Addison-Wesley Publishing Company.
Woodruff, D. (2010) Numbers to People: Making the Leap from Technical Expert to Successful Leader. Management Methods.
The recent report by the International Monetary Fund’s (IMF) Independent Evaluation Office suggests that the IMF’s top team made a number of serious misjudgements during the Greek financial crisis resulting from poor governance and a lack of accountability and transparency. Following closely on the heels of the publication of Sir John Chilcot’s Iraq Inquiry report, […]
The recent report by the International Monetary Fund’s (IMF) Independent Evaluation Office suggests that the IMF’s top team made a number of serious misjudgements during the Greek financial crisis resulting from poor governance and a lack of accountability and transparency. Following closely on the heels of the publication of Sir John Chilcot’s Iraq Inquiry report, this suggests that even august institutions like the IMF, supposedly run by intelligent and technically respected people, rode roughshod over due process; showed a lack of analytical depth in addressing complex problems and indulged in poor decision-making practices (e.g. there was no open discussion on the pros and cons of available options for the restructuring of Greek debt).
Most board members would like to believe that their governance and board dynamics enable them to make rational and logical decisions. This is not, however, always the case: like most teams, boards are subject to social processes that undermine their effectiveness as a decision-making body. So what are the social psychological processes that contribute to this and how can they be ameliorated? This short paper identifies three such processes and proposes ways in which their pervasive influence can be counteracted.
It is a scientific fact that, under most circumstances, team members will reduce their performance as a function of an increase in group size. Thus, team productivity does not equate to potential productivity and the reasons for this are twofold. Firstly, team members will reduce their effort where their own contribution is not specifically identifiable and thus freeride on the efforts of others (motivation loss); and second, that team members may not all pull in the same direction or synchronise their efforts at the right time (co-ordination losses). This is termed ‘social loafing’ and has clear implications for the size of boards with research suggesting that the optimal number of board members is between seven and nine. In short, enough board members to ensure that the board’s tasks are achieved but not large enough to impact performance negatively by enabling social loafing.
For Chairmen, the antidote to this is to ensure that board members have a clear sense of individual as well as collective responsibility and role; that their work is viewed as indispensable to the board; and that their outputs are visible enough to be subject to evaluation by other board members. Furthermore, the establishment of clear goals that both encourage and reward effective decision-making and execution must be established and supported by the Chair.
There is a widely held belief that groups will make more cautious and moderate judgements than individuals. This is only partly true; in reality teams will tend to polarise towards the more prevailing or favoured view. Thus, board members who are initially disposed towards risk-taking will favour a more risky approach than the average might imply. Similarly, board members who are initially disposed towards caution will favour more cautious decision-making. This is important because it suggests that shifts in board decision-making are frequently steered more by faulty group processes rather than the output of logical and rational decision-making. One cause of this behaviour is that team members overly care about both social comparison and reputational effect and adjust their views to the dominant position of the group, thus skewing the board towards more extreme decisions than might be predicted from the average of board members’ individual judgements.
One antidote to this is to encourage board members to write down their own thoughts and arguments independently in advance of group discussion, identifying in each case the arguments both ‘for’ and ‘against’ rather than indulge in less structured discussions that provide a fertile ground for the conditions of group polarisation to flourish.
‘Gentlemen, I take it we are all in complete agreement on the decision here… then I propose that we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about’.
This statement attributed to Alfred Sloan, a former Chairman of General Motors, was in response to a consensus of his board that had been achieved too rapidly and is one of the symptoms of Groupthink. This is an extreme form of group polarisation and is a psychological drive for conformity where a reliance on consensual validation replaces individual board member’s critical thinking. Thus, the Chair and fellow board members play up to each other re-enforcing consensus at the expense of critical and divergent thinking that might undermine the unanimity of the group. The ultimate outcome is a decision agreed by all board members but some way removed from the rational data gathering, analysis, challenge and debate that characterises more effective decision-making processes. Even a cursory look at the decision making for many around the Brexit vote will reveal many of these phenomena at play.
The primary symptoms of Groupthink are threefold. Firstly, a collective overestimation of the board’s abilities founded on illusions of invulnerability and an irrational belief in the inherent morality of the group; second, closed-mindedness that delivers inaccurate collective rationalisations and stereotypes of out-groups (e.g. competitors); and finally, pressures toward conformity that result in self-censorship; an illusion of unanimity; direct pressure on dissenters and self-appointed mind-guards whose role it is to ensure no disruption to the consensus of the group.
Boards are particularly susceptible to Groupthink if their members come from the same background. This places a premium on diversity of board members. How much more effective might the decision-making have been at the Royal Bank of Scotland during the banking crisis had it contained a more diverse team than the seventeen men (and most of those middle-aged dyed-in-the-wool bankers) and single woman that comprised the main board?
Antidotes to Groupthink include encouraging the Chair to assign the role of critical evaluator to each board member and exhorting them to give a full airing to objections and doubts. The Chairman should remain impartial rather than state preferences at the outset of debate and should set up independent evaluation groups to work on the same policy question working under a different leader. The members of the policy groups should meet occasionally to compare progress and debate and agree on differences. One or more impartial experts should be invited to each meeting to challenge the views of the members. At least one board member should be assigned the role of devil’s advocate (to question assumptions and plans prior to decision-making) and finally, the Chairman should ensure that a sizeable chunk of board time is assigned to assess warning signs from competitors and work with the board to model alternative scenarios of their intentions.
Group cohesiveness does not necessarily lead to faulty social processes. The optimal functioning in decision-making tasks is likely at moderate levels of cohesiveness. It must be part of the Chair’s role to create a climate that encourages enough cohesiveness to ensure the true benefits of team working are realised, but not so cohesive that it provides a fertile ground for the more unhelpful social processes to take root.
A critical first step is to evaluate how the Board is functioning at the moment and where the pitfalls or snafus lie. This is best done independently lest it replicate any issues in its own construction! A board that over indulges in Groupthink for example is likely to reach conformed conclusions about its own efficacy. An independent assessment of the specific competencies of the individual board members and of how the board communicates and makes decisions as individuals and as a group will ensure alignment with the strategic objectives of the Board and help ensure due consideration is given to diversity and complementarity.
Hewstone, M. Stroebe, W. Codol, J-P and Stephenson, G. (2008). Introduction to Social Psychology, Oxford: Basic Blackwell
IEO report (2016) The IMF and the crises in Greece, Ireland and Portugal. Retrieved from http://www.ieo-imf.org/ieo/pages/CompletedEvaluation267.aspx
Janis, I. (1982). Groupthink. Boston: Houghton Mifflin
West, M (2004). Effective teamwork. Leicester: BPS Blackwell