Team success in large organizations

Teams staffed by members who represent different functions and business units have become a popular form of organization in contemporary companies. The activities of such teams, which are installed for accomplishing complex tasks,cross departmental and business borders. However, after a promising start these teams often appear to quickly lose momentum. What conditions should be in place in order to make such teams successful? And how to secure that these teams actually contribute to company performance?

Eindhoven University of Technology has studied the success of teams extensively.In his PhD research, Boudewijn Driedonks investigated over 100 sourcing teams from 20 large companies. Sourcing teams are exemplar for modern-day organizational teams, making this best practice issue relevant for any field and profession where teams are installed to achieve objectives that span multiple functions and business units. Many of the problems these teams face are related to their cross-functional and cross-business nature, and their strong dependence on stakeholders in multiple organizational units. Based on his study’s outcomes, this eSCF review provides practical insight into effective managerial actions for 1) composing a team, 2) stimulating effective collaboration among team members, and 3) managing teams’ external contacts.

The future of teams: cross-functional and cross-business integration

Many companies have started to install cross-functional, cross-business unit teams. The members of such teams come from different functional departments, and represent multiple units in a firm. In theory, teams foster improved communication, awareness and integration among functional and divisional groups in the firm and allow for a more strategic orientation. This approach is thought to be beneficial for all sorts of teams, including new product development teams, S&OP teams, key account teams, and sourcing teams. For example, consider a firm’s procurement activities. The potential savings of bundling volumes across business units is a key incentive for organizing the purchasing function on a corporate level through sourcing teams.

At the same time, as more and more activities are being outsourced to suppliers, suppliers’ impact on companies’ competitive advantage increases significantly, not only in terms of costs, but also in terms of innovation, quality and flexibility, putting high demands on these teams.

Companies that don’t move beyond functional silos towards cross-functional operations risk falling behind in today’s competitive game. Moreover, multi-divisional corporations must achieve synergy among their subsidiaries, global efficiency and local responsiveness at the same time. Does installing teams with members from various backgrounds secure that objectives which span multiple functions and departments are achieved?

Team performance lags behind expectations

In a 2005 survey, McKinsey (2006) found that while nearly 80% of the senior executives surveyed said that cooperation across departments and units is crucial for growth, only 25% of the respondents described their organizations as effective in these tasks.

Cross-functional teams are often installed with high expectations, but within few months after start-up, ambition levels decrease as motivation and cohesiveness among team members flag. We highlight three key causes of tension. First, the most important advantage of cross-functional teams also forms their stumbling block: diverse team members are likely to differ in opinion and perspectives, speak different languages, occupy different hierarchical levels, and have different objectives. A team’s ability to successfully integrate these diverse perspectives and skills is an important driver for moving towards a team approach. However, when not managed properly, these diverse backgrounds will cause misunderstanding, a lack of cohesion and team stress.