Management Perspectives

In 2019, Sara Mella ascended to the position of head of personal banking at Nordea, the largest Nordic bank in terms of assets. With a career deeply rooted in banking and punctuated by a brief stint in publishing, Mella found herself tasked with spearheading a team of professionals across Nordea’s markets. The challenge was not just about enhancing the private banking business performance but also shifting the organisation toward an integrated approach.

The backdrop for Mella’s appointment was an industry known for its fierce competition. Banking often celebrates individual triumphs, with the emphasis on solitary success stories often eclipsing the importance of teamwork—except when absolutely indispensable. Against this competitive landscape, Mella was tasked with steering a preexisting team that was far from a cohesive unit. In an interview she noted: “When I came to this position, there was an existing team. There were very strong individuals and experts, but there were also many strong egos. And the team was not optimally coherent in how it worked. There were some individuals that were often colliding and hitting heads against each other. There was also some competition among the individuals. So, the key question for me was what approach would help me to leverage the individual performance and counter the conflicts?”

The need for a balance between competition and collaboration is not restricted to the banking industry. When designing their leadership teams, CEOs and executives often find themselves caught between the power of two contrasting principles: competition and collaboration. Rising through the ranks to secure a place in the leadership team demands individuals to be ambitious, highly confident, and top performers in their field. These professionals must demonstrate an intense competitive spirit, which serves them well as they take charge of significant functions or businesses. But paradoxically, as these individuals climb the hierarchical ladder, their individual successes start to matter less compared to the overall performance of the organisation and they need to learn to shift from a competitive stance to one of collaboration.

Competition and collaboration are often in direct conflict. An executive’s decision that benefits their unit could potentially hinder the performance of others and the organization. On the other hand, a choice beneficial for the organisation may have detrimental effects on the executive’s unit. It’s this tightrope walking that puts CEOs and executives in a seemingly paradoxical situation when deciding the guiding principles of their leadership.

The idea of Stretch Teams

Our research suggests that while many leaders predominantly lean towards either competition or collaboration, some leaders manage to balance the two in what we call a Stretch Team approach—an innovative blend of competition and collaboration, enabling simultaneous execution of their conflicting demands. By refusing to side exclusively with either intra-team collaboration or individual competitiveness, these leaders have created dynamic team structures that have propelled top-performing companies to new heights.

This type of leadership team consists of members that are highly competitive but also willing and able to selectively collaborate, engage in selective joint problem solving, and do so through intense debate and constructive conflict. They are also able to balance competition with collaboration and focus on common goals.

A brilliant example of this balance is John Hinshaw at HSBC. His leadership team is a melting pot of individuals with diverse backgrounds and career stages. In his words: “My team is very diverse…I find these are the best teams—diverse teams that bring different perspectives and try to balance competition and collaboration. Balance is key.”

Challenges of Stretch Teams

Although it sounds appealing, the Stretch Team approach is not foolproof. Our research indicates that it doesn’t always outperform other management styles, and there is an even higher failure rate associated with it. The main reason lies in the inherent trade-off between competition and collaboration. It is like walking a tightrope: if you lean too much towards competition, collaboration becomes difficult, and the reverse is also true. The process of selecting individuals who can skillfully balance both aspects is challenging, which could potentially lead to compatibility issues within the team.

However, when successful, the Stretch Team approach beautifully integrates individual initiative, competitiveness, and entrepreneurial spirit with coordination, teamwork, and collaboration. It strikes a balance between extreme competition and extreme collaboration, effectively reducing ego clashes while maintaining the team’s dynamism.

When are Stretch Teams the right solution It is crucial to remember that the Stretch Team model is not a one-size-fits-all solution. Rather, it needs to be matched to a company type and situation that leverages its strength. It is often the ideal leadership approach in large multinational organisations that need to pursue seemingly conflicting goals. Companies such as UK-based Unilever, US-based Procter & Gamble, or Japan-based KAO produce a large variety of consumer goods, but have introduced interdependencies in terms of shared upstream technology, or downstream channels to customers to create the potential for synergies. Similarly, large service companies such as India-based Wipro, or UK-based HSBC operate across very different markets that each require a distinct approach yet try to capture synergies across these markets. The Stretch Team approach is at its best in these situations, where companies are operating across multiple product markets, geographies, or even businesses while trying to share technologies or capture synergies which create the interdependencies that require simultaneously a high degree of coordination across units and rapid decision-making within individual units.

How to implement Stretch Teams

To build a Stretch Team, leaders need to consider three critical steps:

• Team selection: Identify individuals who can thrive in an environment demanding both competition and collaboration. This involves picking a mix of high-achieving performers and team players, ensuring that each individual is capable of working in a stretch team environment so that the mix does not disturb the team dynamics. Vital selection criteria include a balanced ego, complementarity skills, and the ability to switch between competitive and collaborative behaviours.
• Team building: After selecting the right individuals, the next step is to forge them into a cohesive team. This requires setting up a clear and compelling purpose, creating an environment that enables collaboration and competition, and devising decision-making processes that accommodate the diverse personalities within the team. It also involves setting firm behavioural norms that instil a sense of psychological safety among team members.
• Team optimisation: Building a Stretch Team is an ongoing process. CEOs and executives need to consistently align their team’s understanding of industry challenges and the strategic direction of the organization. Performance management becomes crucial in this journey, with a focus on clearly defined goals and fair rewards. As market dynamics evolve, the team should also be prepared for change while maintaining its core orientation.

In conclusion, while the Stretch Team approach may not always be the right answer and might even be more challenging to implement, it offers an innovative balance between competition and collaboration. It’s a novel approach that promises high rewards if executed correctly and in the right environment.