How Aligned Teams Get a 2x Multiplier on Financial Performance
Our research shows how bringing everyone into alignment is the hidden key to success.
This article was originally published on Inc.
Leadership teams that sustain alignment on vision, purpose, and strategy enjoy a 2x multiplier effect on financial performance, according to new research. They are more likely to beat the "growth paradox," the realization that what worked for a company in the past will not be sufficient for the future. Our research with more than 200 leaders also showed that organizations that scored highly on a range of nontraditional business indicators were more likely to meet or exceed financial targets, retain key employees, and build an enduring company.
There is a strong link between clarity, alignment, and conviction among both the senior team and the extended leadership team that drives financial performance, in most cases doubling a company's financial success. This was true across industries and company types, from hyperscaling businesses to established corporations, from Series A companies to publicly traded ones.
But we discovered that more often than not, leadership teams lacked this cohesion that is so critical to business performance. This was more pronounced with rapidly growing companies, where often the top teams operate in silos, find themselves disconnected from one another, and sometimes exhibit tribal behavior.
Leadership Team Cohesion
The most critical indicators of leadership team cohesion are connection, trust, collaboration, direct conversations, and accountability. Our research found that when senior leaders evaluate their teams as highly collaborative and trusting, they are three times more likely than other teams to inspire confidence in their organizations and achieve their financial goals. As a result, high-performing teams devote resources to building and maintaining trust. Experience shows that trust tends to be situational, and that there are three key components of trust--competence, reliability, and motive. When trust becomes discussable, it becomes addressable.
Extended Leadership Capacity
Our research showed that when both senior leaders and extended leaders have a strong sense of connection and trust, the sense of financial potential for the company is tripled. Enduring businesses prioritize next-level leadership development. Proactively investing in next-level leaders--who are generally the carriers of culture--is the best way to release pressure from executives. This enables the company to make high-quality decisions at high velocity--and is essential for succession planning.
The Misaligned Unicorn
We recently worked with a unicorn technology company whose CEO was surprised to find his leadership team was aligned on vision and purpose, but not on strategy--specifically on what actions they would need to take to win in the marketplace. The CEO misread signals, mistaking alignment in one area for broader alignment in other areas. It became clear that the product and demand generation teams had different strategies for customer acquisition--and were unwittingly working at odds with each other. The revelation led to a three-month exercise during which the leadership team examined, redefined, and ultimately aligned around a strategic flywheel that clarified their approach to customer acquisition. When the leadership team understood where they were not aligned, they quickly reorganized and redirected their strategy.
The Most Important Things to Get Right
What our research reveals is good news for leadership teams that are overwhelmed with the thought of designing (and redesigning) special structures, intricate processes, and even business model changes.
We discovered that instead, high-performing companies have an outsize focus on clarity, conviction, and alignment--something that requires leadership discipline and focus, not expensive implementations. Senior leadership team cohesion is the most important category to get right--connection, trust, collaboration, directness, and accountability start from the very top and make every aspect of running a business more effective.
It all starts with the senior leadership team and cascades from there. Once this group is clear and aligned on the vision, strategy, and road map, they develop the conviction to inspire the extended leadership team to realize their vision, grow and develop as leaders, and achieve their greatest potential.
For the most part, alignment is a hidden key to success. In a world where a third of new businesses don't survive their first two years, and only half endure beyond five, this is what differentiates the survivors that thrive from those that don't.