Think Horizontal

Larry Allgaier and Grant Reid

Think Horizontal

The case for organizing your company into teams.

The Conference Board ReviewNovember/December 2008

No, Top executives aren’t omnipotent—not even you. Having authority, a dedicated assistant, and a lovely window view don’t make you an expert on everything on which you need to make decisions. You can rely on your managers, but even you can’t peer inside their hearts to see if their counsel is impartial and comprehensive.

One answer: teams. In Great Business Teams: Cracking the Code for Standout Performance (Wiley), management consultant Howard Guttman lays out guidelines for bringing together small groups, with members holding each other accountable for results and best using their recommendations. The ultimate goal is what Guttman calls a horizontal organization, one whose key decisions are made by layers of teams, most of which come together to solve particular problems or answer questions—and then dissolve.

“This is all about speed, moving things quickly,” he says. “It’s not about creating bureaucracy—ground rules, secret decoder rings. It’s not about creating teams for the sake of creating teams. I don’t want to be the Johnny Appleseed of teams.”

In working with companies over the years, Guttman has turned a number of executives into advocates for team-based decision-making. Two of them—Larry Allgaier, CEO of Novartis Global OTC, and Grant Reid, president of Mars Drinks—accompanied him to The Conference Board’s New York offices to speak with TCB Review editor-in-chief Matthew Budman.

Leadership Crisis: Where Do Teams Come In?

Howard Guttman: Leadership is no longer about one-person rule. Today’s organizations are too complex and far-flung for the “leader” to make all the decisions. That doesn’t mean that organizations should be ruled by consensus—that’s dysfunctional because it’s virtually impossible to get everyone to agree on every issue. Effective leaders balance the need for speed and a quality outcome with the need to involve members of their team.

Grant Reid: My thought process around leadership used to be that I would make decisions, everyone would come in, I would give them the charter for the day, and they would all run off. Now I recognize that it’s not about me—it’s about getting the right team together, with the right expertise in that particular area, and getting the best out of that team. No one is as smart as everyone.

Do Teams Mean More Meetings?

Reid: Strangely enough, I actually spend less time.

Larry Allgaier: It’s definitely less.

Reid: There are lots of meetings I no longer need to go to. If you’re command-and-control, you have to be there to command and control; no major decision or recommendation can move forward without you there. When you have teams capable of making decisions, there are a lot of things you can let go.

When I took over Mars Drinks, we were meeting globally as a management team every month. People were flying in from America and different parts of Europe; it was very time-consuming. Now we meet four times a year. We have scheduled telephone conversations with the whole team once a month so everybody’s clear on what they’re doing, and then we get on with it.

Allgaier: High performance definitely goes with fewer and shorter meetings because people are accountable—they know what they need to do, they come to the meeting, and they’re in and out.

Guttman: But remember that this is not Pleasantville. We’re not all sitting around a table agreeing on things. That’s not the way it works. I was with my own core group of consultants this Saturday in my office discussing some contentious issues we had to deal with as a firm. In the end, we assigned a subteam to handle the issue—and I’m not on it. That tells me it’s working; that’s what’s supposed to happen. In an old-fashioned model, where people believe that because I’m the leader I’ve got to be “in the game,” no doubt I would be part of that subteam.

From Leadership to Team Dynamics

Reid: When I was fairly new as head of sales and customer care for Mars Snackfood US, I went to a planning session, and I figured there’d be six or seven people there. I walked in, and there had to be thirty-five people in the room. I thought, “Well, OK, it’s a big meeting, but at least all the key people are here, so we’ll get to a decision.” The customer asked about a very small thing—maybe about, say, changing a package size from four ounces to four and a half ounces—and I thought, “Well, we’ll answer that and move on.” You’ve never seen thirty-five people look at their shoes so quickly. Nobody was clear on who decides what the size should be.

That’s what this is all about: “Who’s the point person on that? Joe, it’s you—when can you get back to the customer?” “Well, I’ll need to do a bit of work—I’ll need some help from Fred from marketing. We can get back to you in two days; the three of us can meet; we’ll set it up offline.” The issue’s handled, and we move on, instead of us all sitting around.

Setting Up Teams from Scratch

Allgaier: When you set up these teams, you strive for the minimum number of people involved.

Guttman: And while this makes sense intellectually, if your organization prides itself on inclusion, it can feel off-putting and exclusive to make one’s ability to contribute the new standard for meeting attendance. So you’re really trying to change people’s belief that their value to the organization is tied to the number of messages they’re copied on or how many meetings they are asked to attend.

Which is why, if you’re going to start from scratch, ideally you have to work with the highest-level team so they get that point. And then it makes it easier to get traction down below.

Allgaier: I think more people find it a faster, more fulfilling way to operate, and they make the transition fairly quickly. It’s just a better way to get more things done. And if you do have a player who’s not going to get there, they self-select out of the team model. You end up by default getting the right kind of players around you over time.

Guttman: The first challenge, though, is around people being willing to put it out there on the table.

Institutional Teams and Their Challenges

Guttman: Many times we will go into a company and look at brand teams or category teams, and we’ll ask how many people are on the team, and they’ll say, “Well, we’re not sure, maybe twenty-five or thirty”—and right off the bat, you know it’s dysfunctional. They don’t have any ground rules; they want to think of everybody who matters; they don’t want people to feel left out.

Reid: I’m part of the Mars Inc. global management team. There’s my own management team at Mars Drinks, which I’m the leader of. And then there are multiple subteams that I’m on, depending on what the issue of the day is and whether I have particular expertise in those areas.

Allgaier: Similar for me: My boss has a leadership team for three business units, so I’m part of his team. Then there are various small councils.

Risks of Too Many Teams

Guttman: The goal is to have the fewest number of teams. Some teams are a permanent part of the organization—freestanding teams that must remain intact by virtue of their charter. Then there are project teams that come and go, based on needs that arise. What would be dysfunctional is an organization that created team after team after team. People would drown in the confusion.

Reid: You can’t keep setting up teams that do nothing because the first thing that happens is that teams sit down and say, “OK, what are we trying to achieve here?” And if there’s no real goal, then each of the team members will want out. It’s a self-governing process. Back in the ’80s, when I was working in Europe, you’d have all these teams that were more like bagel clubs—everybody would come in, have a nice chat.

Guttman: Teams in search of an agenda.

Reid: Everybody was pleasant to each other; nobody really called anybody out. If somebody said something that didn’t make any sense, it would be noted sagely. The difference now—certainly in my organization—is that people ask, “What are we trying to achieve here?” And if you can’t answer that question, then chances are that team doesn’t have a purpose.

Allgaier: I agree with Grant: If there’s no need for a team, it should quickly go away. The lifetime of a team can be very specific: You set up a workstream, they meet, they’re clear, they knock it out, and then it dissipates.

Key Characteristics of Horizontal Organizations

Guttman: The only time it’s different is when they’re institutionalized, intact teams—the leadership team or the top team of an individual function. And a company should have the fewest institutionalized teams possible. Other than that, based on particular needs, you should continually be pulling together the right players, determining their agenda, reaching closure, and moving on.

Reid: For me, it’s not about your organizational structure. It’s about being mentally horizontal. You can have a traditional management structure, but the majority of major things will involve multiple players and multiple teams.

Guttman: If you run a company and have one person at the top operating like a king or queen, there is no enduring organization. When that person leaves, the thing falls apart like a house of cards. If you’re trying to create an enduring organization over the long haul, your only real option is to create these high-performing teams and have distributed decision-making—putting power and authority in the hands of teams and their members, provided the conditions are right, the ground rules are in place, and the players sufficiently evolved to deliver maximum payoff.

Decision-Making in Teams

Guttman: Teams are not appropriate when you are dealing with everyday, unilateral, technical, or functional calls. You don’t need to have the marketing people getting input from the finance people; there’s typically no value added there.

Allgaier: You want to set up an environment in which people provide expertise and bring certain things to the table. It shouldn’t go by level.

Handling Hierarchy Within Teams

Allgaier: We mix it up so that not everyone is at the same level. Sometimes it adds value to have a more junior person on the team. When you have a high-performance team, people recognize value no matter what level in the organization it comes from.

Guttman: There’s no question that instinctively, people think hierarchically. When a person starts a new job, the first thing they’re thinking is, “To whom am I reporting, and what are the expectations for me?” When you put people from various levels on a team, as Larry said, the people on the team should be there because they add value. And the reality is that the people higher up on the ladder often know less about a given issue than the people on the ground. So the question of being deferential is antithetical to the whole notion of working as a high-performing team.

Allgaier: If a CEO doesn’t let a younger, more junior person add value, it ultimately sabotages the leader.

Encouraging Feedback and Accountability

Guttman: In one organization, we worked with a person who had taken over a division. He frequently held brainstorming sessions with his team, in which he was always grabbing the marker and writing on the flipchart. When people expressed their points of view, he would always one-up them. He was trying to give the impression he was playing an egalitarian, high-performing team game, but it was his game. He was operating like a king.

Reid: And of course, typically, that same person holding the marker then says, “Give me some feedback!” I don’t think it’s natural to think in an egalitarian way—you grow up going to school and taking a job, and there’s always a leader who’s responsible for creating the environment.

When I took over Mars Drinks, it felt more command-and-control there. I came in and said to people, “OK, what do you think?” “Wonderful, Grant, wonderful.” And even I know I’m not that good! You have to create an environment in which it truly is comfortable to give your boss real feedback.

Creating a Feedback-Driven Culture

Guttman: In the research I did for Great Business Teams, many leaders said one of the more difficult things was to be able to be that receptive, that vulnerable.

Reid: It’s not something you can turn around overnight, because, again, it’s just not natural to give and get all that feedback, especially when you’re the boss. I like to say that the truth shall set you free, but the process shall make you miserable. I spend more time with my direct reports than with my boss, so who’s going to make me better? My direct reports.

Allgaier: If leaders want to improve and learn and adapt, they learn to invite pointed feedback. As Grant said, you’re going to get better feedback from your direct reports and your team than you will from your boss. They see how you operate; you’re in touch with them all the time. So you have to invite it.

Building a Feedback Loop

Allgaier: What I try to do with people is to proactively give them something I don’t think I’m doing very well. So I’ll call someone in Germany and say, “Listen, I feel like I still don’t understand some fundamentals in your markets; I feel like I should get to your market more often; what do you think?” That gives him license to give me three or four things that he really wants to see from me.

Otherwise, there’s natural resistance to giving the boss feedback. You have to go out of your way to enable it.

Reid: Now, people I have frequent contact with, in a team environment, are used to speaking up. Last week, the team was pushing me out of certain things, which was really encouraging, and we were talking about how I should spend my time and how they should spend their time. It was all on the table; it wasn’t personal. That’s how we get more done and get things done faster. It’s not personal to say, “Grant would maximize his effectiveness more if he did blank.”

Guttman: The team members need to put their concerns on the table, no matter where the discussion goes.

Allgaier: If it gets a little dirty, that’s good: “Hey, this function is not working; it’s broken; what do we do about it? The function head is in the room—let’s talk.” If it needs to go there, it goes there. That’s the sign of a team that’s on the journey toward high performance.

Decision-Making and Closure

Reid: Without a high-performance plan, I would say that’s the norm. Issues are never truly resolved. Or you think they’re resolved, and then there’s a hand from the grave.

Allgaier: The more you get through, the more there is still to do. Businesses are complex. The list is always long. That’s the nature of business: fast-changing, with different issues—you’ve got to love that.

Guttman: You just can’t put it in cruise control, unfortunately.

Allgaier: You never reach autopilot.

Guttman: Nirvana.

Allgaier: It never happens that you get through six or seven issues, and you have two left, and there’s nothing else to do. The goal isn’t having nothing to do.

Guttman: It’s about adding shareholder value. You always want to go to a deeper level. It’s never a done deal.