Decisions at the top of global companies are increasingly made through leadership ensembles. Below, Robert J. Thomas, Joshua Bellin, Claudy Jules and Nandani Lynton argue that to lead effectively, ensembles have to understand how they fit into—and shape—a company’s operating model.
How do decisions get made at the top of global companies? Increasingly, the answer is through leadership ensembles, groups of leaders that flexibly configure themselves according to the type of decision that is needed. Just as a cellist takes on different roles depending on whether he or she is playing with a quartet, a chamber orchestra, or a full orchestra, so too with today’s leaders.
For example, a group of leaders may need to debate a controversial change in company direction, or draw on close relationships to quickly ratify a decision, or discuss a range of possible solutions to a problem. Each activity requires a different ensemble configuration.
An important guide to effective ensemble leadership is a company’s broadly defined operating model—the vehicle through which a company executes its business model and growth strategy. To lead effectively, ensembles have to understand how they fit into—and shape—an operating model.
Four operating model blueprints
In our leadership ensembles research, we interviewed more than 50 top-level executives. This helped us identify four operating model approaches that successful ensembles can take. These approaches frame the context for decision making at the top. While leadership ensembles can certainly shift their operating model blueprints to better match their enviroment and growth strategy, we found that many top leaders often fall back on a default blueprint that influences how they work together.
The global leadership ensembles we studied varied on two dimensions:
First, leaders generally either place greater emphasis on issues of talent and culture or structure and process.
Second, they generally either seek to create a highly integrated organisation, with standards that apply everywhere, or they prefer to allow local operations to maintain a high degree of autonomy.
While these dimensions represent a continuum rather than binary choices, they suggest four relatively distinct blueprints to designing operating models at the top.
INCUBATORS. Ensembles that apply this blueprint value a cohesive corporate culture and see themselves as stewards of the values and behaviors that will generate future success. They make acquisitions with care, emphasising cultural fit with any new addition.
Ajay Piramal, executive chairman of India-based Piramal Group, explained that as his top leadership group contemplates expansion into new areas such as financial services and real estate, ‘it’s very important for us to think through what we should do, what in our experience generally has succeeded in the past, and what we need to avoid. [We now] spend much more time thinking about the key values our new businesses should have and the principles for those businesses’. The leadership at Piramal follows through on this concern. ‘We have a half-day session with newly acquired businesses to lay out what will be the guiding principles and the rules we want to follow. This is so new people who joined us understand clearly where we stand and the sorts of boundaries in which they will be working’.
An incubator blueprint is often taken by ensembles whose companies are growth-oriented and branching into new markets, but aren’t looking for rapid entry or first-mover advantage.
DIPLOMATS. Ensembles that apply this blueprint pursue outcomes through a process of give-and-take among local businesses, and also between local businesses and headquarters.
‘We’re working to establish more global practices’, explained John Mahoney, chief financial officer at the office supply retailer Staples. But rather than dictate change, his leadership’s role is ‘to challenge: when things are going well, what is it that’s driving that? Is it something that works because it’s tailored to the local markets? Or is it something that the management team should adopt as one of our common, more global practices?’ Mahoney notes that the global leadership at Staples ‘may be fairly certain about the right way to do things, but we may go back and forth between being directive and being cooperative. We’re working to make sure the strategic decisions in the local markets get made properly and get executed properly and with the full support and cooperation of the local market operators’.
Ensembles may often operate as diplomats when expanding globally not just to access new markets, but also to integrate new talent and new ideas. They are more concerned with the quality of management and less concerned with speed and efficiency in the short term.
ENGINEERS. This type of blueprint wants above all to optimise the organisational structures and processes that tie their firms together. Here, ensemble leaders do not disregard corporate culture, but they view changes to processes and structure as the most immediately useful tools at their disposal – tools that will ultimately build and foster a single culture across the firm.
Ian Cheshire, group chief executive of the world’s third-largest home improvement retailer, Kingfisher, is focused on driving a more common product mix across the company’s stores. To do so, Kingfisher restructured the way that regional functional heads interact. ‘In our effort to have a common product range’, Cheshire explains, ‘we decided to get the commercial directors running the local businesses to create a global network and decide which categories to carry’. Ensembles that apply an engineering blueprint often prioritise consolidation of operations ahead of understanding local innovations or enhancing local autonomy.
DIRECTORS. Ensembles taking this approach want decisions to be made by those who are closest to the operations involved. They therefore see great value in keeping many decisions local and, like engineers, they focus on using processes and structures to delegate responsibilities.
Toronto-based hotel chain Four Seasons has had to learn faster than most other companies what kinds of decisions need to be ‘contracted out’ to local managers. According to former CEO Katie Taylor, ‘We came to realise that you couldn’t take a North American focus and transplant it elsewhere. In our business it’s very important to understand the cultural nuances of all the different locales’. This ethos is carried all the way to the top of the organisation, where Taylor, who in late 2010 took over her role from the company’s original founder, was focused on building a clear separation of labor when it comes to decision making. ‘My role as CEO has by definition got to become less tactical’, she explained. ‘It’s going to free me up to spend time thinking about and doing things that are longer ranging and more important for Four Seasons’ future success’. Ensembles that take this approach prefer to keep decisions quick and, if possible, keep decisions local.
Designing a better model
Global leadership ensembles can significantly improve their blueprint options for operating model design by following these steps:
Step 1: Understand what operating model blueprint leaders currently prefer.
A useful starting point is for top leaders to explicitly articulate a preferred operating model approach. For many of the companies we interviewed, the approach they were taking was often based on an unspoken agreement among top leaders rather than an informed conversation of benefits and drawbacks. For insight into whether your top leadership – the two percent of most senior managers, generally – prefers one blueprint over another when designing a global operating model, we offer a mini-diagnostic.
Step 2: Continually assess how your preferred blueprint helps or hinders your organisation’s goals for global expansion.
Operating models can – and probably should – shift and change as firms evolve and new global and local market pressures emerge. In other words, this is not a one-time decision but an ongoing calibration. (Section 2 of the diagnostic will help with this step.)
Step 3: Understand the connection between the blueprint and the way the ensemble operates.
When deciding how to work together, top leaders should make an explicit link between their operating model blueprints – that is, how the ensemble relates to the firm – and the way that leaders themselves come together as an ensemble at the top. This link not only ensures that the leadership ensemble is most usefully aligned with the imperatives of the global enterprise, but also helps clarify and resolve some of the inherent contradictions when an ensemble of leaders take the helm together.
Picking the right guiding prescription
Our work shows that all four blueprints are important. However, ensembles that fail or are less effective than expected in designing global operating models have a hard time flexing to one or more of the other four blueprints.
If you find your ensemble has a natural strength in only one particular blueprint, you will need to find ways of bridging the gap. To bridge this gap, we offer different guiding prescriptions for each of the four blueprint alternatives ensembles can activate to drive better design choices:
If you chose high talent, culture; high global integration, your ensemble’s default mode is an Incubator blueprint.
This mode is helpful for ensembles looking for growth and branching into new markets. Incubators are strong in speaking with one voice and take a razor-sharp focus to defining company values. They also exercise the ability to invest in building a long-term enterprise orientation and take a conservative approach to short-term risk. However, you may want to reassess your preferred blueprint if your preference is to consolidate into existing/local markets or focus on systems and processes to build greater capabilities.
If you chose high talent, culture; high local autonomy, your ensemble’s default mode is a Diplomat blueprint.
This blueprint is helpful for ensembles looking to expand globally not just to access new markets, but also to integrate new talent and new ideas. Diplomats are strong in being open to new local innovations, but do so in a way that allows their management team to define a core set of non-negotiables. They also exercise the ability to take a long-term and thoughtful approach through multidirectional learning and conversation in planning for the future. However, you may want to reassess your preferred blueprint if your near-term goals focus on global supply and efficiency or globally integrated processes and structures to build greater capabilities.
If you chose high process, structure; high global integration, your ensemble’s default mode is an Engineer blueprint.
This blueprint is helpful for ensembles looking to consolidate their operations ahead of understanding local innovations or enhancing local autonomy. Engineers are strong in agreeing on activities that require centralisation and commonality across the firm. They also demonstrate the ability to communicate their decisions with one voice, and are adept at conducting thorough reviews of their company’s processes and structures to create near-term efficiencies and reduce redundancy. However, you may want to reassess your preferred blueprint if your goals are to exercise a globally distributed leadership model or boundary-less corporate center to be as responsive as possible when the situation requires.
If you chose high process, structure; high local autonomy, your ensemble’s default mode is a Director blueprint.
This blueprint is helpful for ensembles looking to make decisions fast and by those who are closest to the operations involved. Directors are strong in seeking consensus about which responsibilities belong to top management and which belong elsewhere. They also aim for near-term local responsiveness through greater local or functional empowerment. However, you may reassess your preferred blueprint if your goal is to reduce complexity and redundancy or to establish a shared corporate identity when the situation requires new ways of working.
About the Authors
Robert J. Thomas is Managing Director of the Accenture Institute for High Performance. He is the author of Crucibles of Leadership: How to Learn from Experience to Be a Great Leader (Harvard Business Press, 2008) and The Organizational Networks Fieldbook (Jossey-Bass, 2010).
Joshua Bellin is a research fellow with the Accenture Institute for High Performance.
Claudy Jules is a senior principal in Accenture’s Management Consulting practice.
Nandani Lynton is a professor at China Europe International Business School (CEIBS) in Shanghai.