Building a leadership team with people you know can introduce a hidden risk: the formation of inner circles that unde…

When building a leadership team with people you know, there’s a hidden risk that can undermine the team’s effectiveness: the formation of inner circles. This can lead to a lack of diversity in perspectives and ideas, causing the team to become less effective in making decisions and driving results. According to a CEO who brought three former colleagues into a 10-person executive team, critical decisions were being pre-discussed among a small group, leaving the other leaders feeling passive and unable to contribute.

The issue arises when relationships that were formed in a different context are not recalibrated for the new reality. This can cause leaders to default to optimizing their own function, leading to silos and a lack of collaboration. To prevent this, executive teams can apply four practices: connection, clarify contributions, intentional relationship recalibration, and accountability over loyalty. For example, high-performing teams invest time getting to know one another, not just familiar faces, before diving into business results. This can be done through simple exercises, such as sharing career paths, pivotal decisions, and what energizes and frustrates them. Additionally, each executive should understand how their contribution creates value for the enterprise, and leaders with shared history should explicitly reset their relationships for the new context.

By applying these practices, executive teams can prevent individual excellence from turning into organizational friction. This can lead to a more cohesive and effective team, where leaders hold peers to shared standards and decisions are made with a clear understanding of how they will impact the enterprise. In the strongest executive teams, side conversations are surfaced in the room, misalignment is named before decisions are finalized, and decision rights are referenced rather than assumed. The CEO’s role is not to rely on trust, but to reengineer it, creating a deliberately designed team that can execute faster in a crisis. By doing so, the CEO can harness the individuality of team members and create a team that is greater than the sum of its parts.