- You have to learn that you make better decisions through collaboration." These words of Cisco chief executive John Chambers, featured in Morten T Hanson's book, Collaboration: How Leaders Avoid the Traps, Create Unity, and Reap Big Results, will have most company directors and business owners nodding in agreement. It's something they've had to learn, they'll say, to lead their organisations through the economic challenges of a recession.
But the real test of a leader's collaborative skills is how they deal with business change on a huge scale – for example, following a merger or buy-out, when the entire senior management team is taken apart and rebuilt, or with the acquisition of a business, where different cultures are prone to clash.
In these difficult situations a successful outcome depends as much as anything on a smooth integration of systems, processes, culture and people, and effective collaboration between decision-makers.
Andrew Campbell, director of Ashridge Business School's Strategic Management Centre, says: "In the wider market economy people, customers and suppliers collaborate all the time. It's kind of the norm. Inside organisations, however, the way people are managed and led tends to discourage collaboration. When the team can't agree on something, power is delegated to the leader to make a decision."
Collaboration may not come easily or naturally to business leaders, but "it is reliant on some basic human traits", says Campbell.
These include the ability to understand and empathise with another person's position or point of view, anticipating how someone else might react to certain events and, crucially, building trust. And, because of this, it is a skill that can be learnt.
When specialist digital marketing agency Jellyfish acquired two smaller companies last year to fulfil its expansion plans, the numbers stacked up but the integration of their different cultures and management styles was rather more challenging.
Managing director Rob Pierre says: "Initially, we outsourced projects to the two boutique agencies, enabling us to build case study materials to win new business against our own brand. When it became clear that this was impacting on our profits and the tightness of our brand identity, we made the decision to buy both agencies."
A broker handled the deal, and because a working relationship was already in place, the process was straightforward. Pierre knew it was a good business fit, but culturally, it was less so.
He says: "One of the companies, Creative Uncle, had a team of eight staff who had worked hard to build their boutique agency, and they felt that joining Jellyfish, a bigger agency with 60 employees, took away that identity.
"We worked closely with their management team to explain how the merger would work, and once they were here they realised that working with our brand gave everyone more scope for flexing their creative muscle. Since then we've secured several blue-chip contracts, and notably, all the staff are still with us."
Different dress codes – Jellyfish's business suits and Creative Uncle's jeans and T-shirts – was another unexpected area of conflict that was resolved collaboratively. Pierre explains: "The managing director of Creative Uncle became our creative director, and from the start was influencing our culture, insisting that we didn't need to wear suits. There was some resistance from our staff, but we had to reach an agreement, and in the end we gave ground and accepted that regardless of what you wear, you can still be professional."
Small is beautiful
In smaller companies, run by two business partners, collaboration is just as important. In many ways, it can be more challenging, but the teamwork happens in a different way.
Ally Maughan, principal at HR consultancy People Puzzles, says: "In large organisations, job roles are clearly defined with title and responsibilities falling into specific areas, such as HR and finance. But in a small business, the partners' roles are rarely well defined and they are often expected to understand all areas of the business in which they have had no training or experience."
In these situations, she says, collaboration means spending regular, quality time with the other partners, discussing the business and focusing on the vision, splitting tasks effectively between the parties, allowing them to gain knowledge, and remaining passionate about the business and what it does.
Buying an existing business may seem less risky than starting a new one, but when an inflexible team of six staff come as part of the package, the collaborative skills of the new owners are tested to the full, as dentists David and Rashmi Hickey discovered when they bought Southport Road Dental, a private practice in Chorley, Lancashire, two and a half years ago.
With no formal business training or experience, the husband and wife team admit they were unprepared for the challenges of transforming the traditional surgery into a modern dental practice. But what they did recognise was the need to have clearly defined areas of business responsibility and complete trust in each other's decision-making.
David Hickey explains: "We have different strengths; Rashmi's are her people skills, mine are in finance and marketing. When we bought the practice we needed to make changes, but some of the staff were very set in their ways, which made it difficult to implement anything new, so it fell to Rashmi to handle the trickier people issues." Practice investment decisions, on the whole, are left to him.
Rashmi, who admits to being more impulsive, says: "If he buys new equipment he will know what the return on the investment will be, and how it will improve the quality of treatment for our patients. I trust his judgement and leave it to him."
Disputes between the two partners are minor and short-lived; the most significant conflict – sparked by a proposal to extend practice hours to evenings and weekends – was resolved by seeking outside opinion.
"We were already putting in long hours to grow the business so I was completely against the idea," says Rashmi. "But after speaking to other dentists who'd done the same I realised it made good business sense; it was what the patients wanted." For the practice's bigger plans for future growth the decision-making is shared; one advantage of being married business partners is that some of the best ideas emerge away from the pressures of work.
David adds: "It's been a steep learning curve, but the staff are on board, the practice is well established and growing, and ultimately my plan is to do some teaching here as well. We've managed to find the right balance of structuring the business to play to our strengths, and sharing the big decisions."
Their strategy of allocating areas for each partner to manage, and providing mutual trust and support, is clearly key to the overall running of the business and engaging change-resistant staff. But not all business partnerships can resolve conflicts quite so easily.
Failing to discuss and agree business processes ahead of an event is the surest route to disagreements between partners that can lead to deadlock.
Andrew Morris, chief executive of the Academy for Chief Executives, says: "It is for situations like this that a company needs to have a robust shareholders' agreement. However, if you reach the point in a dispute where you have to refer to it, you have broken the trust and potentially damaged the business partnership. Appointing a chairman or non-executive director who can arbitrate and do what they think is best for the business is one way of avoiding a position of deadlock."
Consensus not collusion
What all this suggests is that contrary to what many people believe, collaborating doesn't mean that everyone gets to decide.
"Consensual leadership is a more accurate way to describe the process, because ultimately, having consulted widely and taken the views of others on the team into account, the leader still has to make the decision," says Morris.
This was the stance that Rob Cotton took when he led a management buy-out of the global information assurance firm, NCC Group, in 2003, after becoming disillusioned with the deep-seated internal politicking and management squabbling.
He promoted people power, fostered a culture where every employee had the opportunity to excel, and the effect was immediate, with turnover jumping from £11.8m to £14.5m in 12 months.
As chief executive, his first task was to assemble an upper management team of eight people who he knew would be pulling in the same direction. He says: "As the leader you have to be sure that you have selected people with staying power and the stomach for a fight. In a growth situation they need to be clear about their individual roles and on the same wavelength. However, when you first start out as the leader I think it is a mistake to be too collusive.
"Just a year after the MBO we made the decision to float the company on the stockmarket. It was a massive gamble and some of the team had their doubts, and needed persuading that it was the right move.
"In the early stages of an MBO there is also the risk that someone wants your job, so as the leader you have to adopt a position of strength and avoid being overly collaborative.
"But once you are confident that the management team is communicating correctly, the business is performing in the way that it should be, and you've made your short-term achievements, a more cohesive working pattern starts to emerge and as the leader you then become more collaborative."
It may be the leadership style for challenging economic times, but as Ashridge Business School's Campbell warns, there are risks in taking collaboration too far. He says: "A classic example is in the case of a merger where, typically, you establish joint project teams, made up of people in HR, marketing, IT, led by one person from each side, with the aim of creating a sense of fairness to the process. But building teams that simply make the management from each side feel equal might not be the best thing for the newly formed organisation; in fact, it can damage the business.
"Making too many concessions or compromises in the name of collaboration can mean that business decisions and results are less than optimal. Fairness doesn't equal best performance, and if overall business performance is your key objective, that is something which needs to be carefully considered."