CHAPTER

7

TEAMS AT THE EXTREMES

Without Adventure, Teams Slowly Decay¹

It’s no accident that the companies profiled in this book were all founded by extraordinary entrepreneurs.² Their businesses were built on innovative ideas that overturned the existing order of things within their industries. Netflix is disrupting the media industry through its streaming service. Airbnb is disrupting the hospitality industry through its peer-to-peer model. Alibaba is disrupting the way business is done in China through its e-commerce sites. The leaders of these firms, however, realize that their long-term success requires more than groundbreaking products and services. They need their companies, as companies, to be equally innovative—workplaces that are challenging commonly accepted ways of operating. They understand that their legacies will be based not on the products they create but on their ability to build creative and agile organizations that endure over time. Steve Jobs will always be recognized for his innovative products but the true test of his leadership will be if Apple can continue to innovate and grow for the next 50 years. Does the company he created have the people, cultures, and processes needed to do so? At this point, the jury is still out.

There is another motive that drives many of these leaders to create new types of organizations—a motive more personal and self-centered. They need to work in companies that fit their values and personalities—places they want to go to after getting up each morning and stay at when working late into the night. Brian Chesky of Airbnb describes this as entrepreneurs wanting to live in a world of their own design. They do this, at least in part, because they don’t feel at home in more traditional corporations. If forced to work in a typical large company, most would either quit from frustration or be fired for insubordination. Imagine Ed Catmull of Pixar working at a studio such as Paramount. Yvon Chouinard working at L.L.Bean. John Mackey at Safeway. These scenarios seem almost absurd, which says a great deal about the idiosyncratic personalities of these leaders and how well they fit the firms they built. It also suggests the challenge that conventional firms have in attracting and retaining the talented and often quirky people they need to be successful.

Entrepreneurs, by definition, are adept at managing newness—pushing the boundaries of what exists today. The premise of this book is that cutting-edge leaders and their teams push both results and relationships further than traditional firms. But there are risks, and sometimes a price to pay, for doing so. Results, pushed too far, can produce a variety of unintended consequences, such as a harsh company culture or unethical business practices. Relationships, pushed too far, can create a soft environment that lacks the drive and toughness needed to achieve success. The paradox of building a cutting-edge firm is that an unrelenting focus on results and relationships is necessary to achieve something extraordinary but also destructive if not managed skillfully. The challenge, then, is to drive results and relationships to the breaking point while managing the very real downsides of doing so. For leaders like Reed Hastings of Netflix or Brian Chesky of Airbnb, pushing their organizations to the breaking point, pushing beyond what others believe is possible or even desirable, is not the problem. The risk they face, as does anyone who disrupts the common order of things, is that their reach exceeds their grasp.

Conventional firms face a different set of risks when it comes to results and relationships. The first is that they become all too comfortable with mediocrity. “Good enough” is the unspoken mantra in many of these groups.³ Average results, average relationships. Often, these firms take the easy path and simply replicate strategies and practices that were successful at an earlier point in their histories.⁴ Striving to profit from a firm’s past successes is natural and even savvy. But the CEO of Pixar argues that many become trapped in their success and, as a result, “creatively bankrupt.”⁵ He believes that vital companies deliberately strive to avoid replicating what worked in the past and, instead, experiment with new approaches that challenge, or at least go beyond, what they know to be true. This, of course, doesn’t mean that Pixar ignores the lessons of its past films or doesn’t fully leverage the best-in-class technology and work processes that it developed over several decades of experience. But in the area of greatest importance, which in Pixar’s case is telling a story that moves people, it works hard to avoid mimicking itself. Doing so is all the more difficult because organizations, in many ways, are built to standardize and reinforce what worked in the past (and, in so doing, minimize risk and maximize return). This is done through a range of mechanisms, including a group’s strategies, structures, processes, and culture. Each reinforces a way of operating that developed over time and drove the growth of a firm. The result is that companies often say they want their people to be innovative but then operate in a manner that works against anything that is new and different. In so doing, they avoid the risks that come with trying that which has not been done before—but, at the same time, risk becoming tired imitations of their successful past.

A second risk facing conventional groups is disproportionately valuing either results or relationships—that is, pursuing one to the exclusion of the other. In this situation, the pursuit of results and relationships becomes an “either/or” choice.⁶ Organizations and their teams believe they can focus either on results or relationships but not both at once. They do this in an attempt to simplify an overly complex world by acting as if only one side of the results/relationships dynamic truly matters. This approach fails for a number of reasons, with the most direct being the need for both to sustain a firm’s performance over the long term. Results and relationships are interdependent, each needing the other, even if some believe and act otherwise. Research by John Zenger and Joseph Folkman underscores this point. They examined people’s perceptions of great leadership. Two of the dimensions they probed were a leader’s drive for results and the ability to build positive relationships. Leaders who were seen as being very strong on either results or relationships were rated by their employees as great leaders just less than 15 percent of the time.⁷ In contrast, leaders who were viewed by those who work for them as being very strong on both results and relationships were rated as being great leaders 72 percent of the time. Zenger and Folkman, as you might expect, maintain that the combination of the two traits is the key to being an extraordinary leader. If we extrapolate from these findings regarding leadership, the implication for teams is clear—great teams combine results and relationships and don’t simply strive to maximize one or the other.⁸

One way to portray the interplay between results and relationships, drawing in part on the work of Professor Amy Edmondson, is to contrast four types of teams.⁹ Comfortable teams are those that value relationships over results. Stressed teams value results over relationships. Indifferent teams settle for mediocrity or worse in both areas. It is logical, then, to suggest that the best teams strive to maximize both results and relationships—to operate in the upper right quadrant of the following table. When managed well, this combination creates virtuous cycles within a team, where results and relationships work in a mutually reinforcing manner to produce increasingly higher levels of performance. However, simply recognizing that both are important, that they can be mutually beneficial, helps manage the tradeoffs and tensions that often exist between the two. Extreme teams take this one step further in pushing each to the breaking point—a goal that is easy to understand but difficult to manage.¹⁰

There are two common challenges facing leaders who want to build extreme teams. The first is creating a team where no team currently exists. This may be due to the initiation of a new project or a corporate restructuring that produces new team configurations within a company. Leaders who are responsible for a new team will benefit from considering the following practices of cutting-edge firms:

Right Purpose: The need to define a compelling purpose for one’s team is noted in almost every article or book on team performance. The difference in extreme teams is that they take purpose to a higher level of intensity and dedication—which is one reason they are able to attract people who are obsessed with the team’s work and its reason for being. People in cutting-edge firms view their work as a calling, and the leader’s responsibility is to provide them with a higher-level purpose—something beyond making money as their reason for working. The nature of a team’s purpose will, of course, depend on the nature and history of the firm in which the group operates. But it should be something that authentically taps into the values and passions of the group’s members—and allows them to have visible impact in those areas.

Right People: A second requirement of building a new team is hiring people who have the attributes needed for a group to be successful. But many team leaders make the mistake of focusing only on the technical or functional skills of potential hires. Extreme teams view superior capabilities as necessary but insufficient. Yes, they strive to hire smart and capable people. But they focus as much if not more on the cultural attributes that are important to their companies. A team of people who are a poor cultural fit is a problem even when the members are highly talented and motivated. The first few people hired onto a team are especially important because they set the tone for those who follow them in coming into the group. The initial hires are also responsible for building their teams and thus cast a shadow in regard to those they hire. Hiring for cultural fit in a new team means that a leader must have a clear view of the cultural attributes he or she wants and then develop an approach to effectively screen people for those attributes.

Right Priorities: Once the team’s purpose and membership are set, a leader needs to clarify its vital few priorities and success metrics. In most cases, less is more when it comes to priorities and metrics. These imperatives should be few in number and clearly communicated across a group or team, with everyone knowing the goal and the plan of how to achieve it.¹¹ This includes an explanation of the larger context in which the team operates and how the group will address specific opportunities and challenges in that environment. Airbnb is an example of a firm that is rigorous in clarifying what needs to be done each year to move the company forward. The firm’s annual goals are summarized on a single page of paper (The Sheet), which is communicated throughout the organization. Once a firm’s goals are clearly articulated, teams then set their own goals and responsibilities. An important element of setting priorities is determining how accountability will be assigned. Teams vary in how they do this, with some looking to individuals within a group to take the lead on a particular initiative (but working with other team members as needed to achieve the group’s goals). Other teams prefer that the team members in total take responsibility for the group’s goals, in order to create a greater sense of shared ownership. Each of these approaches can work, but the essential point is to clarify the team’s priorities, success measures, and accountabilities combined with local autonomy to determine how to best execute those priorities.

Right Practices: Leaders of new teams need to determine the desired culture of their teams. At the simplest level, this means identifying the few essential beliefs and behaviors that will define what is expected of group members. Some describe this as clarifying what team members must always do and what they must never do. Then, the leader, often with the members of the team, define the work and management practices that reinforce the desired cultural attributes. Netflix, for example, believes in a “freedom and responsibility” culture and has created a range of organizational practices that fully and consistently support it (such as placing no restrictions on vacation time because it views people as adults who are able to determine when and how much vacation time they need). The other lesson from extreme teams is that culture is most productively viewed through the lens of what people experience while working in a group. Airbnb, for example, looks at a wide range of factors that influence employee experiences, with a focus on creating a sense of community and belonging. This starts with the work itself and giving people a great deal of say in the projects of interest to them, as well as the management of their day-to-day work. But it also involves a wide range of company practices that impact how employees experience the company, such as the design of the corporate office or the ability to work remotely when needed. These factors at Airbnb are managed primarily at a company level, but the concept of focusing on and enhancing member experience holds true for teams as well.

Start-Up Questions for the Leaders of New Teams

What higher-level purpose will guide and motivate your new team members? Can you express this purpose in a succinct and impactful manner?

What are the values and traits that you need in team members to achieve your purpose? What process will you use to screen people for these attributes?

What are the vital few priorities and metrics that will define your team’s success? How will you ensure that all team members understand the reasons behind these priorities and how they are related to their goals?

What team work practices will you use to support the team’s work and ensure progress on the priorities? What are the value-added topics for the team’s meetings and how should they be managed?

What culture do you want within the team and the experience of working within it? What practices and norms will you use to reinforce the culture?

How will you ensure that key issues are surfaced within the team and conflicts are managed effectively?

New teams have the advantage of a clean slate and can design how they will operate without the burdens of the past. In particular, they can benefit from the innovative practices of other firms to develop approaches that fit their specific needs. The eyeglass firm Warby Parker is such an example. It is a mission-driven business that operates with a “buy a pair, give a pair” business model. Each time a customer buys a pair of the firm’s glasses, a second pair is donated to someone in a developing country. The company, from its founding, benchmarked other cutting-edge firms and incorporated the ideas it found most useful. For example, Warby Parker, like Zappos, wants to hire people whose beliefs and style match its cultural principles. It believes that technical skill doesn’t mean that someone can get things done with the firm, particularly in regard to gaining the support of others on one’s team. The firm has a set of cultural principles, such as “Set ambitious goals and measure results” and “Inject fun and quirkiness into everything we do.” It screens potential hires by asking for behavioral examples that assess each principle (in regard to quirkiness, it will ask, “What was the last costume you wore?” or “What do you like to do for fun?”). Warby Parker, like Patagonia, also strives to create a work environment designed to support its employees, including cross-group learning programs and a flexible work policy. A third example of taking what other firms have done is the use of ongoing peer feedback, similar to what is found at Netflix. At Warby Parker, this means that everyone in the company receives 360-degree feedback each quarter. The goal at Warby Parker is not to mimic others but to understand what is possible as it developed a culture that fit its unique personality.

An even more frequent and difficult challenge is turning around a stagnant or failing team. This need becomes particularly salient when a new leader, often with no history with a group, is tasked with its revitalization. The need to turn around a team also surfaces when a long-tenured leader feels that he or she is investing an inordinate amount of time and energy to get a team to perform at a high level or when a business has grown to a point that out-paces the ability of the current teams to meet the challenges ahead. The first step in revitalizing a stagnant team is to assess as objectively as possible the group’s performance. The leader knows that his or her team is underperforming, but the specifics need to be examined. There are two key questions to answer at this point in the turnaround process:

Does the team deliver results consistent with what is expected by its organization, leaders, and customers?

Does the team foster productive working relationships among its members as well as with those in other groups?

The measures of a team’s performance vary by team but often include both outcome measures (such as sales and revenue) and process measures (such as milestone achievements and budget performance). As noted earlier, however, the key is to look at metrics that are closely linked to the firm’s purpose. Pixar, for example, tracks a film’s progress against myriad hard measures, but it also assesses the creative depth of its storyline—which is harder to measure but even more essential to the success of a team. These metrics should be augmented by more informal input from a team’s customers, as well as its members. These perceptions may not always be on the mark but should be considered in the leader’s assessment of the group. The other factor to consider is the quality of the relationships among the members of the team. The leader will want to determine, through observations and interviews, how people are working together as a group and partnering with other groups within their organization. Pixar, for instance, views the quality of team member relationships as a key indicator in determining a team’s health and ability to eventually deliver an extraordinary film. Teams where people do not “gel,” where there is a low level of energy and trust, are seen as broken in the Pixar culture.

The next task is to identify the causes of the team’s poor performance, particularly in relation to the performance gaps uncovered in the above assessment. This root cause analysis is intended to identify the factors, often unrecognized, that are hindering the group’s performance. A leader needs to be leery of assuming that he or she knows what is causing the team to perform below expectations. That is, many leaders jump to the wrong conclusions in seeking to quickly identify what ails their groups. The leader may have a theory of what is wrong but can’t assume that it is the only or even the most important area that needs to change. In particular, a leader needs to beware of mistaking symptoms for causes. For example, he or she may assume that the people within the team lack motivation and drive (and, as a result, determine that changes are needed in the team’s composition). However, the deeper issue is that team members are getting unclear and even conflicting direction from the senior leadership within the firm. They have learned that being passive is the best option for them because the direction from those above them shifts on a regular basis. Leaders seeking to understand their underperforming teams need to look for the deeper issues that influence other, often more noticeable, behaviors or outcomes.

One of the most productive ways of uncovering the drivers of underperformance is to probe the differences between what people espouse as being important and how they act.¹² Every group has times when what it says is different from what it does—but these contradictions are typically more pronounced in a dysfunctional team. For instance, the animators at Disney at the time of the Pixar acquisition were highly talented and passionate about their craft. Yet their studio was turning out unimaginative films that were failing creatively (as well as commercially). The question, then, was, “Why do talented and committed people continue to produce films at odds with what they say is important?” A new leader will want to look for the most salient contradictions within a team and then pull them apart to see what they reveal. In many cases, the truths uncovered are those that people within a company or team don’t fully recognize or don’t want to face. The key, for those leading a turnaround, is to recognize the value of contradictions in understanding what is going on within a team—paying particular attention to aspects of the team that are surprising or puzzling. The goal, then, is to surface the group’s contradictions, understand why they exist, and analyze their impact on the group’s results.¹³

Teams, of course, also fail due to a variety of self-inflicted wounds.¹⁴ Some teams, for example, are unclear as to their purpose or have a purpose that is so mundane that it fails to motivate its members. Other teams don’t have the people needed to be successful. I find in my work that leaders often overestimate the quality of the talent on their teams and their ability to meet the challenges they face. Consider a team that is responsible for the sales of its firm’s products in markets outside the United States. The team is comprised, however, of people with no international experience, with all of the members having lived and worked only in the United States. This lack of experience will most likely result in a faulty understanding of how markets outside the United States operate and, as a result, poor decisions on how to best compete in those markets. A related type of failure occurs when a team is comprised of people who were successful in the past but lack the skills needed to be successful in the future, given the challenges and opportunities the team will face. A marketing team, for example, that was successful for years before the explosion of social media may lack the expertise needed to take advantage of the new technologies. In this situation, the talent on the team lags due to changes in technology and the marketplace—changes that require new ways of thinking and a new sets of skills.

Another common trait of failing teams is a lack of clarity regarding priorities. Failing teams are often distracted and pulled away from the critical few priorities that will determine their success. Often, these teams try to accomplish too many priorities or fail to sequence their priorities in an effective manner. Instead, they become distracted by more mundane or administrative concerns that take time and energy away from the truly important areas that require their attention. A related mistake occurs when the team focuses on the right priorities but defines them in such a vague manner that its people are unclear about what success looks like or what needs to be done to achieve success. The leader of a new team will also want to examine the group’s work practices. Failing groups often take too long to make decisions or make them in a flawed manner (for example, by not considering relevant data, failing to explore a necessary range of options, or allowing a few members to dominate group discussions and solutions). These groups, in particular, are less capable of surfacing and managing conflict. Some teams dislike contentious exchanges among team members and avoid discussions in which their members hold conflicting views. The “off limits” topics within a team can involve the most important issues that it needs to address (such as a strategy to address an emerging competitor or the reasons a key initiative is failing).

A final area to assess is the practices of the team and how they impact its culture. This is one of the most challenging aspects of a team’s turnaround because existing cultures are notoriously difficult to change. Many leaders know what they want in regard to culture but have no formal plan to make that desired state come about. To say, for example, that you want people to be more comfortable with conflict will have little impact unless specific actions are taken to make that intent a reality (for example, training people on their conflict management styles, developing robust practices to surface divergent points of view within a group, rewarding those who are skillful in surfacing and managing conflict, or providing feedback to those who avoid conflict or settle for easy compromises). The leader of a team turnaround effort needs to be bold in changing the mindset and behavior of his or her group. For instance, he or she may promote onto the team more junior members who have the traits that the leader wants to see in the other members of the team. These individuals may, for example, possess an entrepreneurial mindset that is needed if the team is to be successful. Or a new team member may be more willing than others to challenge the leader and other team members when needed to move the group and business forward. In so doing, the new members are modeling a more open style that the leader wants to see from all of the team members.

Starting a new team and turning around a stagnant team are challenges that most leaders will face at some point during their careers. Both situations underscore the importance to a leader of getting his or her team right in order to produce results. But few ideas in business are as embraced, and then undermined, as teamwork.¹⁵ Organizations and their leaders value what teams can achieve and are quick to talk about the benefits of collaboration. But many fail to provide the support that teams need to be successful. In some cases, this is due to a lack of understanding of what teams must have to be successful (such as the right purpose or right people). That said, the leaders of the firms in this book are notable in that they didn’t start out with deep knowledge of the psychology and sociology of team behavior. They knew what they wanted (and didn’t want) in their culture and teams, trusted their instincts in trying new things, and, to paraphrase John Mackey of Whole Foods, were willing to make it up as they went along.

The problem, in most cases, is not a lack of knowledge but an unwillingness to give up control. As firms grow, they necessarily develop processes to standardize and monitor their increasingly complex organizations. Coordinating the efforts of thousands of people, often spread across multiple groups and geographies, is no easy task. The answer, in many cases, is to develop formal mechanisms intended to control what occurs within the company. This response becomes even more likely when a group experiences mistakes or threats of various types, as leadership attempts to get things back on track and prevent future problems. Airbnb, for instance, initially had no real process to handle safety issues when they arose in one of its rental units. If you are a host, you want Airbnb to have the best process possible to deal with problems you encounter. Airbnb is not unique. Patagonia had no real process to train its new managers in how to manage a store team. Pixar had no real process to ensure that its employees did not work to the point of creating repetitive stress injuries. Processes, in the right form, are necessary and helpful to customers, employees, and companies.¹⁶ The problem is that good intentions can produce a negative outcome. Processes spread and, in the aggregate, can result in a stifling bureaucracy that is resistant to change. In short, organizations create processes that, by definition, are “hardwired” and not adaptive to changing conditions.

Companies that want the benefits of extreme teams need to give them autonomy to do what they believe is needed given the challenges they face. If process limits what they can do, the upside of having a team is also limited. That said, giving teams autonomy is not without risk, as a strong team will inevitably challenge the formal and informal control systems within a company. The result is that many organizations say they want strong teams, but in fact, they don’t. They want effective but compliant teams that don’t threaten the status quo, including existing company practices and processes. This is not to suggest that teams should be allowed to do whatever they want regardless of the consequences. Or that a firm should do away with hierarchical controls and necessary processes. The reality is that strong teams, even those that are successful, can create problems for a company.

Teams can also be a problem in being perceived as threats to their own leaders. Team dynamics always have some element of power underlying how they operate. Much is written about how power can inhibit people on a team from expressing their points of view because they fear alienating the team’s leader or other powerful group members. But equally important, and less discussed, is the ability of teams to threaten a leader’s security in regard to power. The reality is that some leaders view their teams with a degree of ambivalence.¹⁷ Teams can quit on a leader. Teams can provide negative feedback about a leader to those in more senior positions. They can also compete with the leader, with some members thinking they should be leading the group. Some leaders, seeking to protect themselves, will go as far as to undermine their own teams in an attempt to limit what they perceive to be threats. People who have worked in corporations for any length of time see peer groups competing or even undermining each other in the pursuit of power. Some will subvert other groups if such actions enhance their own standing with a company. But the point I am making here goes one step further, suggesting that leaders at times will undermine their own teams if it enhances their own positions within their companies. In particular, the most talented member of a team can be viewed as a threat to the leader if other team members are more inclined to follow that individual or even believe that current leader should be replaced by another within the group. The willingness of a leader to undermine his or her team is counterintuitive because a failing team is certainly career limiting for power-hungry individuals. But consider that some leaders want to avoid failure yet at the same keep control over their positions of power. Which becomes preeminent depends on the leader and the situation.

A recent study by social psychologists Charleen Chase and Jon Maner suggests how this can happen.¹⁸ The researchers first assessed their study’s participants on their power motivation using a survey designed to identify those for whom power is very important. They then placed the study participants into different experimental conditions in which they were led to believe that their power was either secure or potentially at risk. The researchers gave the participants a task in which they needed to create high-performing teams by assigning people to particular groups based on their skills and ability to work together—with the prospect of rewards for the teams that performed well. The research findings indicate that “power hungry” leaders whose positions of power are unsure will at times sabotage their own teams and, in particular, the most talented individuals within those teams to preserve their personal power. In one study, for example, leaders with a high power motive, when given the choice, separated the most talented individual in a group from others on the team (by having that individual work alone on a task). In another, they were more likely to limit the degree to which their team members could communicate with each other. These leaders did this even knowing that having team members interact and cooperate would improve their group’s results. One of the study’s authors noted, “It’s surprising to me just how willing leaders are to really undermine group success in favor of their own power.”¹⁹ This is not to suggest that all leaders act in such a Machiavellian manner—those without a dominant power motive in these studies did not demonstrate the destructive behavior noted here. In addition, the behavior was not evident when a leader believed his or her power base was secure. But the reality of corporate life is that people with a need for power often move up in a company and battle to gain or sustain their positions—and as a result, they will in some cases put protecting their own authority above the success of their teams.

Teams are seductive because they offer a clear advantage when designed and managed well—an advantage that is difficult for others to copy. But extraordinary teams are less common than we would think because they come with a steep price—notably the need for organizations and their leaders to give up control. Many organizations and leaders don’t want to take the risk of trying things that have not been done before. Many don’t want the angst and uncertainty that comes with giving teams the freedom to operate as they see fit. In turn, some team members don’t want the responsibility that comes with being given that power. They may say they want it but then realize the burden of being fully accountable that comes with it. We thus find people at all levels in a company who collectively support the idea of teams—but lack the commitment and creativity to make them work.²⁰

Almost all great achievements, in business and society, are the result of small groups of people working together to achieve ambitious goals.²¹ The leaders of these groups select who becomes members of their teams and then motivate them to achieve more than they thought possible. These leaders deserve the accolades that come their way when their teams perform well. It is the team, however, that delivers on the leader’s vision even though its members are typically unknown outside of the organization in which they work. Teams, not individuals, make the difference. The best teams provide another, equally important, benefit. They meet the need of most people to work with others to achieve something greater than themselves. This is evident in a story involving the father of a friend of mine. He fought in World War II as part of a bomber crew that flew missions over Germany to defeat the Nazis. I went to visit him many years later when he was in his 90s. As we sat talking, I noticed on the wall an aged black and white photograph of a group of young men standing in front of a plane. These were the men he served with over seventy years ago. All of the other crew members, ten in number, were dead as a result of the war or from old age. I asked about the photograph and my friend’s father said to me, “I look at it every day and say out loud the name of each crew member.” I don’t tell this story to glorify war or to suggest that working in a corporate team is the equivalent of going into battle with one’s life on the line. I am, however, suggesting that there is a deep human need to bond with others, often in a risky endeavor, in the pursuit of a larger or even heroic purpose. Extreme teams provide that opportunity.