Using a “Third Team” for Organizational Effectiveness

By Virgil Carter

Non-profit organizational achievement is traditionally thought of as volunteer leaders, on the one hand, and staff executives, on the other, with the Executive Director playing the role of moderator and facilitator between the two disparate and often conflicting groups.  In a recent article “The ‘Third Team’ Approach to Board Effectiveness”, by Denis Mowbray and Coral Ingley from the Auckland University of Technology, appearing in Strategy + Business’s January 27, 2012 publication, gains are seen when a subset of volunteer directors and senior executives share knowledge and ideas.

Mowbray and Ingley note “…most…research has focused on the board as one team and the executive ranks as another, with the CEO or managing director seen as playing the role of moderator between the two disparate and often conflicting groups. This study — part of a larger project examining how boards affect performance — challenges that approach, with evidence that the highest-performing firms use a third team composed of a mixed subset of directors and executives who share and enhance knowledge and ideas.”

The authors studied 64 organizations (43 corporate and 21 not for profit) in New Zealand and Australia, including several in the top 50 on the stock exchange indices of those countries.

The study revealed that in both types of organization, corporate and not-for-profit, high levels of leader–member exchange within a third team, showing evidence of trust, loyalty, and respect, were a sign of high-performing organizations but not of lower-performing organizations (which had either ignored the concept or failed to implement it effectively).

However, “to simply say that having high levels of [staff-volunteer exchange] is sufficient for high performance would be misleading,” the authors write. Their broader study is examining a number of other factors — team effectiveness, knowledge gathering, and the use of intellectual capital — that also seem to play a role in how boards affect organizational performance through the third-team approach.  “The results show that across sectors, NFP and corporate, [and across] all individuals…the elements of confidence, trust, respect, loyalty and obligation…are consistent within the [third teams] of high-performing organizations” and are inconsistent at lesser-performing companies that either don’t utilize third teams or employ them ineffectively.

Bottom Line of the study:  A so-called “third team”, comprising both board members and executives at the top of an organization’s structure, can facilitate the kind of information flow and interpersonal respect that results in better firm performance.  Could your organization benefit from a “third team”?