A second myth of leadership, as pervasive as the myth of the heroic CEO, is the idea that seasoned managers slotted into an organizational chart can easily function as a team. In reality, top teams face many problems: finding the right people, matching the available skills to the job, and learning to work together without taking the time to craft roles. Teams don’t magically coalesce overnight. Their members have to be close in the professional rather than personal sense; they can thrive in an atmosphere of conflict if it is managed to increase creative output and to catalyze change. Becoming a top-performing top team must be one of the team’s goals.

To meet that goal, teams have to master three dimensions of performance. First, they require a common direction: a shared understanding of goals and values. Second, skills of interaction are crucial if the team is to go beyond individual expertise to solve complex problems and, equally, if it is to withstand the scrutiny of the rest of the organization, for people usually take their cues from the top. Finally, top teams must always be able to renew themselves—to expand their capabilities in response to change.

One reason for the difficulty of improving a team’s performance is that interaction, direction, and renewal are interdependent—teams need to go forward simultaneously on all three fronts to make real progress (Exhibit 2). It isn’t surprising, for instance, that top teams interact poorly when they don’t have a common direction. By contrast, enhanced performance in one dimension not only reinforces the improvement in others but also provides for the genuine personal development that builds success.

Suppose, for example, the team believes that it must build trust among its members. It rarely helps to have self-conscious discussions or “sharing” exercises about keeping or breaching trust, an approach that may actually be quite destructive. But by working together to sharpen the sense of strategic direction—and in this way experiencing successful interactions—the team can indirectly, but often dramatically, improve its effectiveness and thus the feeling of trust among its members. In effect, the team exploits its strong reasoning abilities to build trust.

Identifying real problems

[Here are three of the usual suspects.]

Tolstoy wrote, “Happy families are all alike; every unhappy family is unhappy in its own way.” The same can be said of underperforming teams. Nonetheless, there are typical warning signs in each of the three dimensions of team performance.

Confused direction

Many CEOs assume that they and their top teams share a common understanding of corporate goals and values. Formal descriptions of roles, expected conduct, and corporate strategies and plans all reinforce this assumption, but several realities undermine it.

Lack of alignment. Executives may nod their heads when the CEO propounds a vision, but the team often lacks a shared view of how to implement it. At one well-known energy company, the five executives of a top team were asked to list the company’s 10 highest priorities. Alarmingly, they listed a total of 23 priorities; only 2 appeared on every executive’s list and only 7 on the lists of more than three members; indeed 13 of the 23 priorities appeared on only one list. In other cases, the team doesn’t agree about how performance should be assessed, who the company’s top performers are, or how to motivate the organization to achieve its stated objectives.

Lack of deep understanding. In some cases, the top team agrees on plans, but subsequent actions are inconsistent with its decisions. This problem reflects the tendency of top teams to focus on making decisions without examining the assumptions, the criteria, and the rationales behind them.

Lack of strategic focus. Top teams without a common direction spend more time on business as usual and on “fire fighting” than on seeking out and doing the work only they can do—work that is important to the organization and gives the team as a whole an opportunity to add value. A focused team concentrates on developing talent within the organization and on driving major growth initiatives; an unfocused team second-guesses line-management decisions, reruns analyses, and immerses itself in detail. Half of the executives we interviewed believed that they failed to add value in much of their work.