Why effective leaders must manage up, down, and sideways

Strong team leadership isn’t enough. New research shows the importance—for business impact and career success—of also mobilizing your boss and colleagues (from Patrick’s my McKinsey Quarterly article).

Most of the leadership advice aimed at senior functional managers is how to build, align, energize, and guide a world-class team. This is a challenging task in its own right, but we all know it isn’t the whole story. Leaders, even those in the C-suite, must also extend their influence upward and horizontally.

Organization theory suggests that managing upward and sideways is good for both the company and the individual leader’s career: CEOs need the insights and pushback of trusted executives to help sharpen strategy. And complex modern organizations benefit when people engage with their peers across functional and business-unit boundaries to bring a range of perspectives and drive change and innovation.

Our research confirms this theory, and then some. In a wide-ranging study of the leadership actions of chief marketing officers (CMOs)—a good proxy, we believe, for the skills and behaviors of functional leaders in general—we’ve shown how “managing” the CEO and mobilizing colleagues increases business impact and career success. (For leadership research on another C-suite proxy, the CFO, see “How functional leaders become CEOs.”) To test our hypothesis, we asked more than 1,200 senior marketing executives from 71 countries about their perceived business impact (contribution to revenue and profit growth), their career success, and their characteristics against 96 variables. Using statistical techniques (explained below1 ), we were able to relate to these outcomes the 96 variables (which included leadership behaviors, functional skills, personality traits, sociodemographic variables, and external factors, such as peoples’ fit with the company). We supplemented this research by analyzing existing 360-degree data on 7,429 marketing and nonmarketing leaders—a total of 67,278 individual evaluations by these leaders’ bosses, peers, subordinates, and themselves.

Our findings lend support to the notion that senior executives should pay more attention to mobilizing their bosses (managing upward) and functional colleagues (managing horizontally) (exhibit). Taken together, these upward and horizontal actions were about 50 percent more important than managing subordinates for business success (45 percent versus 30 percent)—and well over twice as important for career success (47 percent versus 19 percent).

Why effective leaders must manage up, down, and sideways

Managing upward and horizontally can improve your business impact and career success.

Clearly, there’s more to success than managing up and sideways: leading a high-performance functional team accounted for 30 percent of the explained variation in our CMOs’ business impact, and 19 percent for career success, and managing yourself accounted for the remaining variation. Mobilizing subordinates, in particular, is the base executives need to build from if they want to establish credibility with the CEO and with colleagues. The best executives build strong teams, relentlessly enhance team members’ skills, keep subordinates focused with objective performance measures, and establish an environment conducive to trust and loyalty.

But they also do much more. Our model helped us identify the most important specific actions associated with managing upward and horizontally, and our 360-degree survey data confirmed that some of those actions receive less emphasis than they should.2

Mobilizing your boss: Focus on strategic issues and demonstrate financial results

When we asked CMOs about their primary role, some responded that they “ran the marketing organization” or “led their companies’ advertising and brand campaigns.” We believe many other functional leaders would provide similar departmentally focused responses. By contrast, the most effective and successful leaders in our study were more likely to describe their primary role as increasing company growth or better outreach to customers to improve performance. We found that a key determinant of success was taking on the big issues, those in sync with the CEO’s agenda and contributing to the company’s overall performance. Aligning with the CEO’s strategy explained 10 percent of CMO business impact and 10 percent of career success.

But are functional leaders well aligned with the CEO’s agenda? Seventy-six percent of our CMOs said yes—but just 46 percent of the bosses in our 360-degree database believed their marketers knew where the organization was going. Many functional leaders, it seems, could and should better align with the top.

Building a reputation as an effective user of resources also increases standing with the CEO. In our study, the ability to demonstrate returns explained 12 percent of CMO business impact and 3 percent of career success. Here, we again found a gap: while 67 percent of our CMOs said they had a strong returns orientation, only 39 percent of C-suite executives in another study reported that marketing executives were delivering measurable return on investment for their expenditure.

Mobilizing your colleagues: Forge strong ties with peers to build momentum

If you want to build a “movement” within the company, lead from the front with an inspiring story to win the hearts and minds of colleagues, including those who don’t report to you, and with a clear action plan to deliver tangible results. That can initiate a virtuous circle of internal recognition by energizing a cadre of early followers among colleagues. Our research suggests that leading from the front and having a strong narrative together explained nearly 10 percent of business impact and about 20 percent of career success. The ability to reach beyond the marketing silo to executives in areas such as IT and finance explained an additional 13 percent of the variation in both business impact and career success.

Only 56 percent of CEOs, however, described their marketing leaders as role models who lead from the front, and only 61 percent of CMOs said they use their storytelling skills. Tellingly, while marketers are adept at telling stories that mobilize customers to buy their products, we find they are less likely to ply that strength internally, despite the importance of effective engagement with colleagues.

Mobilizing horizontally means walking the halls, getting out of the office to share ideas with peers, listening to their concerns, and working jointly to attack strategic issues. In theory, leaders could do many of their interactions on video these days. But that’s rarely inspiring. Instead, the best leaders connect directly with as many people as possible through town halls when they travel to local markets, and hunker down to help teams solve their biggest problems.

Fortunately, the actions needed to mobilize the CEO and colleagues are often mutually reinforcing. For instance, moves by functional leaders to build support horizontally are often related to their simultaneous efforts to show tangible results and advance the organization’s strategy.

While CEOs rely on functional leaders’ ability to build high-performance teams, much more needs to be done to help these leaders extend their influence upward into the C-suite and horizontally across the organization. Happily, our work suggests that not only business impact but also career success redounds to those CMOs (and, we believe, functional leaders of all stripes) who can increase their span of leadership influence upward and across functions.

About the author(s)
Thomas Barta is a McKinsey alumnus and was a partner in the firm’s Cologne office; Patrick Barwise is emeritus professor of management and marketing at London Business School. They are coauthors of the new leadership book The 12 Powers of a Marketing Leader: How to Succeed by Building Customer and Company Value (McGraw-Hill Education, September 2016).

Is there a payoff from top-team diversity?

Between 2008 and 2010, companies with more diverse top teams were also top financial performers. That’s probably no coincidence.

There are many reasons companies with more diverse executive teams should outperform their peers: fielding a team of top executives with varied cultural backgrounds and life experiences can broaden a company’s strategic perspective, for example. And relentless competition for the best people should reward organizations that cast their nets beyond traditional talent pools for leadership.

To understand whether reality is consistent with theory, we looked at the executive board composition,1 returns on equity (ROE), and margins on earnings before interest and taxes (EBIT) of 180 publicly traded companies in France, Germany, the United Kingdom, and the United States over the period from 2008 to 2010. To score a company’s diversity, we focused on two groups that can be measured objectively from company data: women and foreign nationals on senior teams (the latter being a proxy for cultural diversity).

Diversity and performance

The findings were startlingly consistent: for companies ranking in the top quartile of executive-board diversity, ROEs were 53 percent higher, on average, than they were for those in the bottom quartile. At the same time, EBIT margins at the most diverse companies were 14 percent higher, on average, than those of the least diverse companies (exhibit). The results were similar across all but one of the countries we studied; an exception was ROE performance in France; but even there, EBIT was 50 percent higher for diverse companies.

The broad range of companies in our sample makes us confident that industry-specific distortions—those arising, for instance, when a particularly profitable industry has high numbers of foreign executives—are negligible. We did another stress test as well, looking at a subset of German companies for the independent (as opposed to combined) effects of gender and international diversity. Here, too, the performance relationships were strong. Research by our colleagues that focuses on senior women alone (and was conducted over time frames different from ours) also produces similar results.2

Diversity in action

We acknowledge that these findings, though consistent, aren’t proof of a direct relationship between diversity and financial success. At high-performing companies, the board or CEO may simply have greater latitude to pursue diversity initiatives, and other management innovations may contribute more directly to superior results. We will continue to explore these issues in further research.

As a starting point, and to get a reality check on the aggregate data, we looked for evidence of diversity’s influence on the actions of individual companies during the volatile 2008–10 time frame our analysis covered. In a number of cases, diversity appeared to play a critical role. At adidas, one of the companies that ranked in our top quartile in diversity and performance, senior leaders have designated diversity as a strategic goal and started building it into the guts of the organization. To deepen the talent base, for instance, the company has set hard targets for increasing the number of women in management ranks. Today, women account for 30 percent of all managers, up from 21 percent three years ago. The company’s goal for 2015 is 35 percent. The effort is supported by numerous policies, including gender-balanced recruiting, child care assistance, and flex- and part-time work opportunities. To spur innovation across global markets, adidas is also ensuring diversity in its design centers— and has won a number of awards for product creativity.

Among other top-ranking companies in our research, senior-team diversity appeared to support strategies with a cross-cultural dimension. One global food company that ranked in the top quartile for diversity completed a series of successful international joint ventures between 2008 and 2010. These actions advanced a strategic goal of geographic decentralization and risk diversification, while ensuring that its products fit the varying preferences of local cultures and markets. The more diverse footprint paid operational dividends as well: at some of these joint ventures’ plants, the company discovered highly efficient manufacturing processes, which it absorbed and then disseminated across its own manufacturing base. Similarly, a leading telecommunications company whose top team hailed from a number of different nations significantly expanded its global network infrastructure and was able to meet ambitious growth targets in emerging markets.

While we can’t quantify the exact relationship between diversity and performance in such cases, we offer them as part of a growing body of best practices. These successful companies are simultaneously pursuing top-team diversity, ambitious global strategies, and strong financial performance.

Markus Kleiner and Tilo Neumann have contributed to this article.

(This is a version of my McKinsey Quarterly article on the topic)