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Leadership Ensembles: Turning the Key for a More Effective Operating ModelRobert J. Thomas, Joshua Bellin, Claudy Jules and Nandani Lynton Research ReportJune 2013

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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. (See “The elements of an operating model”) To lead effectively, ensembles have to understand how they fit into—and shape—an operating model.

Leadership Ensembles: Keys to Developing the Next Generation

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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.1

These approaches frame the context for decision making at the top.2 While leadership ensembles can certainly shift their operating model blueprints to better match their environment 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 organization, 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.3

Figure 1: Global leadership ensembles can take on different decision making blueprints

Focus on talent and organizational culture

Focus on processes and organizational structure

Leadership ensembles can focus on different modes of authority and control…

And can also differ in the extent of integration they hope to achieve.

Seeking global integration

Maintaining local autonomy

Incubators Integrates globally through shared values and culture

Diplomats Empowers locally while encouraging global conversations around best practice

Directors Identifies processes that must be locally unique and devolves local decisions to operational teams

Engineers Gains global efficiency through process standards and flat structure

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, emphasizing 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

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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 optimize the organizational 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,” Chehsire 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 prioritize consolidation of operations ahead of understanding local innovations or enhancing local autonomy.

The elements of an operating model

A global operating model is the vehicle through which a company executes its business model and international growth strategy.

Five organizational elements—individually and as a collective configuration directly influence how a company drives its performance.

Two elements (leadership and talent) are more intangible—or “soft.” The other two elements (organizational structure and processes and technologies) are more formal—or “hard.” Performance measures tie all aspects of the operating model together and drive organizational behaviors.

Taken together, the content and the relative importance given to each organizational element characterize the operating model configuration. Each element can be thought of as a dial that can be set at different levels; the configuration is the unique combination of these dial settings. To achieve high performance, the organizational elements need to work in synergy with one another and must also be aligned with the company’s international strategy to ensure a good internal fit. (For a detailed look at operating models and their attributes, see: Are Emerging-Market Multinationals Creating The Global Operating Models of the Future? www.accenture.com).

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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 realize 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 organization, 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.

Kingfisher is focused on driving a more common product mix across the company’s stores. To do so, the company restructured the way that regional functional heads interact. “In our effort to have a common product range,” CEO Ian Chehsire explains, “we decided to get the commercial directors running the local businesses to create a global network and decide which categories to carry.”

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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 (See the diagnostic, “Global operating model design and process checklist.”)

Step 2: Continually assess how your preferred blueprint helps or hinders your organization’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.)

Designing a better model

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.

For many companies, the approach they take is often based on an unspoken agreement among top leaders rather than an informed conversation of benefits and drawbacks.

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Which operating model blueprint do you prefer?

Section One: Please place a check next to the description that best reflects the degree to which your team prefers one mode of authority and control over another in defining its operating model. Please select one option.

Talent and Culture Process and Structure

1. We are disciplined in focusing our efforts on where we can…

Create a cohesive corporate culture Clearly define procedures and levels of decision-making authority

2. When making acquisitions, we place more emphasis on...

Shared values and cultural due diligence

Proactively aligning the organization’s or workgroup’s culture to support its strategy and core values

Speed and efficiency

Identifying inefficiencies and recurring problems and restructuring the organization to maximize effectiveness

3. We look for leaders who are motivated more by...

4. We promote ways of working that enable senior leaders to…

Consult with employees before making decisions

Set standards of excellence to maintain operational efficiency

5. Leaders in our company are more… Focused on tying employees’ day-to-day actions to a higher meaning and to the organization’s strategic priorities

Designing and establishing structures, systems, and processes to achieve organizational objectives

6. The ability to deliver on performance commitments is more influenced by…

Creating a distinctive culture of improvisation that gives us a competitive advantage

Adapting existing ways of doing business to enter new markets and customers

7. Our talent management strategy relies heavily on…

Recruiting practices based on a strong company brand, employee value proposition, and candidate fit with company values and pride

Hiring decisions based on mechanical weighting of resume highlights, structured interview results, and other standard processes and methods

TOTAL: Talent and Culture Overall

Process and Structure Overall

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Section Two: Please place a check next to the description that best reflects the degree to which your company’s growth agenda, strategy, operating model and culture are globally- or locally-driven. Please select one option.

Global Integration Local Autonomy

1. Our growth agenda is focused on… Growth in the core business Growth from emerging or non-core markets

2. Our strategic decisions are typically… Globally visible and coordinated

Routinely decide on local matters from global headquarters or global business units

Local, derived from being close to the market

Routinely devolve local decisions to countries3. The most senior leaders in our company…

4. Our company is structured such that… Autonomous business units and countries are organized to operate quite linked

Autonomous countries are organized to operate quite independently except in cases of decisions with major cross-functional impact

5. To harness global talent, business units will most typically rely on…

Global mobility and expatriate sourcing Local sourcing channels to identify and deploy talent

6. Our enterprise processes are managed… Centrally At the local level

7. Our IT is best described as… Flowing from a central headquarters to business units and countries to ensure systems are uniform and standardized management systems

Customized and tailored for different autonomous countries

8. Our key performance indicators are... Defined and monitored at the corporate center or global business unit

Defined and monitored at the country level

9. The values and behaviors of our workforce…

TOTAL:

Are fully integrated and shared enterprise-wide

Are based around local customers or geography

Local Autonomy Overall

Global Integration Overall

For each section, add up the total number of items checked in each column. Identify those items on the checklist for which you scored relatively high and relatively low. For each of those items, turn to the “Guiding Prescriptions” to assess each of the possible actions to strengthen your ensemble’s ability to flex and design an operating model that is fit for purpose.

Your highest scores are those in which you are strongest and can make your best contribution to the design of a new operating model. However, if any one score is especially high, it can mean you have a tendency to overuse that approach and possibly display some blind spots where other blueprints are concerned.

Your lowest scores are your least preferred blueprint modes. It will be important to look for ways to complement your ensemble’s strengths by investing in less preferred blueprint.

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Picking the right guiding prescription

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 multi-directional 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 a globally integrated processes and structure 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 centralization 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.

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 changing to a different blueprint when required.

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.

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1. For a detailed look at leadership ensembles and their attributes, see Leadership Ensembles: Orchestrating the Global Company, www.accenture.com.

2. Consulting firms and business academics have devised many frameworks to describe the operating models of global firms. See for instance A.K. Gupta and V. Govindarajan (1991): “Knowledge flows and the structures of control within multinational organizations,” Academy of Management Review, Vol. 16 No. 4, 769-792. Gupta and Govindarajan outline a typology of headquarters-subsidiary relationships based on knowledge inflows and outflows. Our framework is complementary to these but rather than categorizing structure it describes the general tendency of top leaders for taking certain types of governance decisions over others.

3. A fifth blueprint, which we call Portfolio Investors, manages a portfolio of independent local businesses around the world. These holding companies lie outside our framework because, at the group level, they are less exposed to the day-to-day pressures of international management. Global subsidiaries within the group will likely take one of the four approaches.

Notes

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About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with approximately 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

About the Accenture Institute for High Performance

The Accenture Institute for High Performance creates strategic insights into key management issues and macroeconomic and political trends through original research and analysis. Its management researchers combine world-class reputations with Accenture’s extensive consulting, technology and outsourcing experience to conduct innovative research and analysis into how organizations become and remain high-performance businesses. Please visit us at www.accenture.com/institute.

About the Authors

Robert J. Thomas ([email protected]), the managing director of the Accenture Institute for High Performance, 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 ([email protected]) is a research fellow with the Accenture Institute for High Performance.

Claudy Jules ([email protected]) is a senior principal in Accenture’s Management Consulting practice.

Nandani Lynton is a director of leadership at Moller-Maersk in Copenhagen.

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