Steering committees are responsible for defining a company’s strategy, but do they have their own strategies for guaranteeing strong performance? José Luis Álvarez, a professor of corporate policy at the ESADE business school in Spain and author of the new book, Strategic Decisions, spoke with Universia Knowledge at Wharton about the problems facing these committees. He also identified ways that senior managers who participate on them can maximize their efforts while shaping the future of the company.
Universia Knowledge at Wharton: What are the typical problems faced by teams of senior managers?
José Luis Álvarez: Teams of senior managers leave much to be desired when it comes to quality. Their most important and recurrent operational problems are:
1. At least until the current generation, a significant portion of managers have established their success by using an individualistic style. So their skills are often inappropriate for the collective efforts of a senior management team.
2. Members of the steering team lack professional skills. Most of them join the committee at the end of their careers, which developed in an environment that is now outdated; the future requires different sorts of skills.
3. Possible rivalries to succeed the chief executive often pit candidates who are members of the steering committee against each other, and this can damage the collaborative spirit of the committee.
4. Too much politicized behavior, which can be rooted as much in succession rivalries as in the natural professional differences among managers. Since senior executives are often experienced and effective political animals (if they weren’t, they wouldn’t be where they are), these natural, professional differences are often played out in a very aggressive and sophisticated way.
5. “Group think,” which is to say the search for consensus and unanimity in the decision-making of the group, even at the cost of rationality. This leads to a lack of debate, and the suppression of divergent opinions.
UKnowledge at Wharton: How has the functioning of steering committees evolved in recent years?
J.L.A.: While there have always been frequent changes in steering committees, some very interesting committees have emerged in outstanding companies in Spain in recent years. These reflect [a wider] recognition of committees as a key to setting the strategy of the corporation.
The typical process involves the chief executive developing a new strategy based on whether or not to take control [of growth, or to foster greater discipline in a strategic focus]. Along with the new strategy, there is a new horizontal structure that is more or less centralized. And then, in line with that structure, the chief executive designs a new vertical structure [principally, a new executive committee]. Normally, this committee has few members, and a larger number of young people, and it inspires more trust.
UKnowledge at Wharton: Are there any differences in the way committees are structured in good times, compared with periods of crisis?
J.L.A.: The design of a steering committee must have more to do with the specifics of each sector than with current conditions. However, periods of crisis open up opportunities for the reorganization of managerial leadership.
In reality, redesigning these committees is more complex than the theoretical procedure I just mentioned. What is the strategic role of establishing the general structure of the company? It involves designing the hierarchy and drawing up an executive committee with distinctive departments and roles, and then looking for the right people for each position. In reality, the opposite often occurs: The redesign takes place just at the moment when there is a crisis and a senior executive has abandoned the organization; when someone retires or loses a power struggle; or under similar circumstances that open windows of opportunities for modifications in the composition of the steering committee and in the vertical structure. This enables the company, in turn, to change the composition of the horizontal structure that, once it is defined, enables it to pursue a well-focused, new strategy. So, reality often unfolds in a way that is the opposite of the theory and the logic of the design. It starts out with focusing on the people who count; not focusing on the ideals [that should count]. Starting from that point, a steering committee is put together, and then vertical and horizontal structures and possible strategies all emerge.
UKnowledge at Wharton: What recommendations can you offer for making meetings of steering committees more effective?
J.L.A.: There are lots of them, and here are some of the most important:
1) Not all of the members of the committee have to attend all of the meetings, nor do all of the people who attend the meetings of the committee have to be members of it.
2) There should never be more than 13 members in the committee, and the ideal size should be between five and seven.
3) The agenda must always be written out and must be distributed two or three days in advance, along with reading materials from the previous meeting.
4) Each item on the agenda must specify how the group intends to tackle it: through information, debate, decisions and implementation planning.
5) During meetings, no more than 30% of total available time should be devoted to presentations or to providing information. The focus of the meetings must be debate.
6) The most relevant matters must be dealt with at the top of the agenda.
7) On the agenda of the meeting, you must list the number of minutes allocated to deal with each point, so you can set the pace of the meeting.
8) Reserve time on the agenda for “divergent” positions (in order to find new alternatives or criticize existing ones.)
9) Eliminate from the agenda the usual final point of “other subjects,” or “any other business.”
UKnowledge at Wharton: How can you set up a decision-making process in which those who are in the minority have the opportunity to influence decisions, and they don’t become subjugated by the majority view?
J.L.A.: Here is my list of practical suggestions for managing meetings of steering committees:
1) Look for debate and confrontation within the team when dealing with decisions that are difficult, but for consensus when dealing with ordinary decisions that are easy to make.
2) Given the special difficulties of making strategic decisions, divide them up into two meetings. For example, an initial two-day meeting for analyzing the various alternatives and, later on, a one-day meeting for taking definitive decisions.
3) Lay out three or four options for each important decision.
4) Especially when the decision has not been reached by consensus, always ask one member of the committee to make a presentation of the potentially negative implications of the decision.
5) Postpone unanimous decisions until there are divergent views, and you then have to discuss the topic in depth.
6) Let the least influential members express themselves without any limitations, and then give the final word to managers who have more experience or status.
7) The leader of the committee must invite those participants who have been more silent about their views to express their opinions; admit when that happens, and protect those people in cases where some comments are excessively critical or hostile toward the more powerful managers.
8) The senior leader must avoid closing off debate too early, or expressing his own position, or closing discussions that would appear to be deadlocked, too controversial or ”stalemated.” Participants must get used to moving this process forward as much as possible and managing their differences and conflicts on their own.
9) The following comment is attributed to Cyrus the Great, who founded the Persian Empire: “Diversity in advice; unity in command.” In other words, a range of alternatives is debated by numerous people, but the final decision is taken by one person.
10) The evaluation of a steering committee must be systematic:
a. All the members of the committee evaluate themselves on their own.
b. Each member evaluates the committee as a whole.
c. Each member evaluates each of the other members of the committee, including the executive leader.