Why do some companies consistently grow profits and revenues every year and others, seemly in the same type of business, crash and burn? Certainly, there are many factors, including many that are not within our control (luck).

However, there is one very important predicate to success, and it is completely within our control: A Functional Team.

Business is complex and rapidly changing. It is not reasonable to assume that one person could have the knowledge, skill, and experience to be an expert in everything. Most business decisions require world-class expertise in many different areas at the same time.

There are plenty of studies that show teams, especially functional ones, make better decisions than individuals. This is the reason that most successful companies have a management team that runs the company.

A group of smart people that talk to each other does not necessarily make a functional team—even if everyone on the team is a superstar. Anyone familiar with sports teams can relate to the team filled with superstars that just can’t seem to win. Although it is necessary to have talent on your team, it is just as important for the team to be functional.

So what does it mean to be functional? Here are the four critical aspects of functionality:

Trust

Team members need to trust each other. Without trust, team members will not be vulnerable. Without openness about their mistakes and weakness, it will become impossible to accept help.

Some years back, I was on a team with another engineer. For whatever reason, this engineer did not trust me, or any of the other team members for that matter. No matter how hard I tried, he simply refused to admit any weakness or mistake. In his mind, it was a sign of weakness to be vulnerable.

We were a great complement to each other. He was a mechanical engineer, and I am an electronics engineer. He had predominantly worked for a large company, and I mostly startups and small niche companies. We both had a long history of successful product development. On paper, we should have been the dream team. The reality was very different.

Regardless how I (anyone for that matter) tried to frame a suggestion, he would go into “defensive” mode. It was more important for him to be seen as perfect than to make the right decisions for the team. No doubt he was a smart and talented person, but his lack of ability to trust his team members ultimately caused the team to break up when it became clear that his behavior was not going to be “tolerated” by the CEO.

Functional teams trust that each member is solely and completely focused on making the company successful. Egos need to be checked at the door, and everyone must be secure enough to admit when they made a mistake without fear that this admission will be used against them.

Conflict is unavoidable if we are going to make a good decision. We must have enough trust to know that the inevitable conflict that occurs with smart people with strong opinions will not divide us. We can accept a strong difference of opinion if we believe that it comes from a place of sincerity and that we both share a common goal of making the company successful.

Clear Roles and Responsibilities

Everyone is familiar with “design by committee,” or “analysis paralysis.” Being a team does not mean everyone is responsible for making every decision. If everyone is responsible, then no one is responsible.

Being a functional team does not mean that the team agrees on everything. In fact, too much agreement is a sign of dysfunction—we call it groupthink (see diversity topic below). The consensus is unnecessary and a big waste of time—the one thing no business can get more of.

If roles are clearly defined and everyone takes responsibility for their role, then the consensus is unnecessary (assuming we also have trust). There are some decisions that will need a consensus—these are exceptions, not the rule.

Decision making is hard. Cognitive bias is everywhere. Teams work because it is really hard to see your own bias. If you have team members, you trust who are also trying to avoid their own bias, the likelihood of being aware of these biases greatly increases.

Numerous studies have shown that true consensus is a myth. However, acceptance of a decision you do not agree with is not—especially of you believe the processes of the making the decision was fair, and you had an opportunity to influence the decision. Teams do not need consensus to be functional; teams need the acceptance of decision—regardless of agreement.

Clear roles and responsibilities are a necessary component of any functional team. In a functional team, it is clear whose decision it is made, and it is clear that everyone else on the team is responsible for helping that person make that decision.

Diversity

You do not need to know much about football to know that a team composed of all quarterbacks is not going to win very many games—even if these quarterbacks are better than all the rest. A management team of people all from the same industry, type of education, talents, and skill will also not win. Functional teams are diverse—it’s one of the reasons they are so hard to make functional.

Early in my career, I was fortunate enough to be the only member of a team that did not come from the industry. I almost did not get the job—everyone on the team voted no except the CEO, all pointing to my lack of industry experience.

I am sure you can anticipate the rest of this story. Within a very short period of time I was a hero for doing nothing more than pointing out solutions that existed as common knowledge in other industries but were “revolutionary” in this industry. The company grew very rapidly as we introduced one revolutionary product after another. The competition, who also would not hire people outside the industry, never figured out our “secret.”

The functional team is purposely managed to be diverse. People who have the same backgrounds do not complement each other—they create groupthink. Functional teams rarely agree because they each see the world through a different lens. The functional team is always in a state of constructive conflict.

A great coach

All great teams have one thing in common—they have a great coach. They have someone who has the natural talent of bringing the best out of a bunch of very different (diverse) individuals and making them play to the sum of their strengths while making their weaknesses seems inconsequential.

I was once a member of a “self-managed team.” Boy, were we dysfunctional. To this day I believe we were the poster child that inspired the Dilbert cartoons. The smallest of decisions took meeting after meeting to make. We would spend $1,000 deciding how to spend $100. Urgent decisions were never made on time—we lost many times for simply not meeting deadlines.

After a year or so of miserable performance, we got a new member; let’s call him Rick. Rick was a natural coach. Rick first worked to establish trust within the group, then moved to help us all see what we were each best at which naturally lead to clearer roles and responsibility (although unofficial ones in keeping with management edict of “self-managed”). Performance slowly improved as we learned how to be a functional team.

An interesting side note of this story is that Rick was officially the lowest man on the totem pole. He had no formal education and little experience—he was just a natural at coaching. Great coaching can come from anyone; it does not have to be the “person in charge.” However, a team that tries to get a consensus on every issue is dysfunctional.

So if a functional team has a high level of trust, clear roles and responsibilities, is diverse, and has a great coach, then how do you create such a team?

Step 1 – Hire the Coach First

Identifying superstar players is not all that difficult. If you cannot turn them into a functional team, then what’s the use of hiring them? The coach is the person who understands which player will fit and which will not. Some players are simply not compatible, regardless of how much talent they have.

Some conflict simply cannot be functional with certain player combinations. One of the most important roles of a coach is selecting a team that has the right balance of diversity, but not so much diversity that it becomes dysfunctional.

Good coaches are easy to select. They will naturally talk about people. They talk about how they establish and maintain trust within the team. They do not try to fix people; they arrange people so their strengths are highlighted and their weakest, although still there, do not matter.

They talk about how to define clear roles and responsibilities. They talk about how they get everyone’s opinion on the table before decisions are made. They talk as if the team were not a bunch of individual people, but a machine that is designed to function as a single integrated machine purposely managed to outperform all other teams.

Step 2 – Hire Diversity

It should be clear at this point that a management team needs to be diverse; however, diversity for diversity’s sake is not the point. Diversity needs to be purposely managed. We need skills that complement each other. Some diversity is simply the same thing with a different name, and some diversity will cause too much conflict.

When choosing for diversity, select for experience, skill, and talents that compliment. Although you are selecting for the difference, you are also selecting for similarity. Does the “different industry” (diverse) have similar problems to our industry (similarity). Is their talent different than others AND offsets others weakness. Is their skills different than others, but still relative to problems we need to solve.

Step 3 – Establish Trust

Without trust, a team cannot be functional. Without trust, everyone is holding back, trying first to determine how what they are going to say will affect how they are perceived. There is no sense in doing anything until each person trust that they can be open without fear of consequences.

I am not going to suggest you send everyone on a wilderness survival course for a week or have each team member fall backward into the arms of their teammate. How your team establishes trust is going to be unique to your team—there is no one-size-fits-all solution, and even if there were some gimmick, it would be only short-lived.

However, there are a lot of studies that suggest that the more we know about each other, the more we trust each other. So having opportunities to get to know each other does work—but you don’t need a survival course to do this.

In order for trust to last, leaders must model trust. Without continuous reinforcement, the trust will fade. This means leaders must demonstrate vulnerable behavior continuously, and they must reward others for being vulnerable, while still demanding performance (performance does not equal perfection).

As a leader, you must look for opportunities to share your mistakes, and talk about how it affects you (makes you feel). As a leader, you should find opportunities to reward those on your team who also share mistakes, listen and understand others points of view, and accept decisions that they do not agree with.

Step 4 – Establish Roles and Responsibilities

Make it clear who makes which decision, and which decisions will only be made by consensus while at the same time making it clear that everyone is responsible for “helping” make decisions.

You must always give your opinion during the decision making phase, but during the execution phase, the only opinion you can give is the one in alignment with the decision maker. This is very easy to say, and very hard to do.

If a team member is new to this concept of one minute telling everyone how wrong they are, and 5 seconds later agree with everything they say, it will take them a while to learn this behavior. Be patient and consistent.

Ideally, for most of the team members, this is SOP (selection), and only a few “newbies” struggle to see the light. A team where no one has mastered this skill will be virtually impossible to manage. This ability is a skill; it is not a talent that can be taught and learned by most people. Your coach plays a key role here—he needs to have the talent to teach this skill.

Building a functional management team is not complicated, but it is hard work. It takes years to become even remotely competent. It is much simpler and quicker just to have a single person make all the important decisions, and everyone else follow.

In days past, when business was simpler and did not change quickly, many organizations were able to effectively compete with the “one man team” leadership. However, in today’s world, that is quickly changing. Organizations are learning the power of teams. If you’re not competing against a management team now, you will be shortly, and they will out-compete the one-man team regardless of how smart and talented this one man is.

Note for Small Companies and Startups

If you’re a small company or startup you may be thinking, I can’t afford a team. I barely have enough money for one manager, let alone a whole team of them. If this is you, consider these tips:

  • Outsourcing not only brings in a manager, but it can also bring in whole management team – often for a lot less than trying to hire your own people. One of the biggest benefits of outsourcing if the likelihood of getting access to a team member who you could never acquire on your own.
  • There are many business coaches out there. They spend a few hours a month focused on helping with key decisions. Because they charge by the hour and can come and go as cash flow dictates, they are great way to add to your team for a lot less than a full-time employee.
  • You would be surprised how much a vendor is willing to help their customers. I once had a key vendor who spent an hour a week helping us make key decisions. She saw the time as business development – and she was right, we learned a lot about why her organization was our best choice as a result.
  • There are many “groups of peers” organization out there. These are groups of non-competitive business leaders that agree to act as each other’s management team. They generally meet once a month, and the good ones have a professional facilitator (coach) who runs the groups.

Being small is not a valid excuse for not having a management team.

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Steve Owens
Steve Owens, Founder and CTO of Finish Line Product Development Services, has over 30 years of successful product development experience in many different industries and is a sought after adviser and speaker on the subject. Steve has founded four successful start-ups and holds over twenty five patents. Steve has worked for companies such as Halliburton and Baker Hughes. He has experience in Internet of Things, M2M, Oil and Gas, and Industrial Controls. Steve's insight into the product development process has generated millions of dollars in revenue for start-ups and small businesses.

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