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Evaluating
Team Effectiveness
During 1992, researchers at the Eli Broad Graduate School of Management
at Michigan State University conducted a study that evaluated the
factors affecting cross-functional sourcing team effectiveness.
The study, titled the "Cross-Functional Sourcing Team Effectiveness
Research Project," collected data from 107 cross-functional
sourcing teams at 18 U.S.-based firms over a period of seven months.
Responses were received from more than 700 team members, team leaders,
and external raters.
The study was
undertaken because of the increasing importance of cross-functional
sourcing teams within U.S. industry. As defined in the study, a
cross-functional sourcing team consists of personnel from at least
three functions brought together to achieve a purchasing or material-related
task in which the team must consider purchasing/sourcing goals or
decisions involving supply base management. The task could be a
specified project or consist of a continuous assignment.
Previous research
at Michigan State University has revealed that almost 80 percent
of US firms surveyed plan to emphasize the use of cross-functional
teams to support procurement and sourcing decisions over the next
three years. The primary objective of this research was to expand
the knowledge and understanding of sourcing team interaction and
effectiveness.
This project
examined factors that impact cross-functional sourcing team performance.
Factors that critically impact team performance include
* The availability
of certain organizational resources
* The participation
and involvement of suppliers when required
* Higher levels
of internal and external decision-making authority
* Effective
team leadership
* Greater effort
put forth on team assignments.
The researchers
also gained additional information and insight concerning key topics
and issues related to the sourcing team process. This executive
summary discusses the key findings of the "Cross-Functional
Sourcing Team Effectiveness Research Project." Data collected
during the project support the findings presented in the executive
summary while our experience and data interpretation support the
development of an integrated implementation model.
Cross-functional
sourcing team benefits and limitations
A number
of organizational benefits can result from the successful use of
sourcing teams. The highest perceived benefit from cross-functional
sourcing team interaction, according to team members and leaders,
is the ability to bring greater knowledge and skill together at
one time. Creating a team whose members have heterogeneous skills,
backgrounds, and experiences increases the probability that each
member can contribute the knowledge and skill required to support
sourcing team assignments. Unique contributions by individual members,
in turn, increase the likelihood that a team will benefit from dynamic
cross-functional interaction.
The lowest-rated
benefit from sourcing team interaction is a reduction in the time
required to solve a problem or complete an assigned task. This finding
revealed that team interaction may not be the most efficient approach
to decision making. For the cross-functional sourcing team process
to be successful, however, a trade-off must occur between the additional
time often required for team decision making (efficiency) and the
ability to reach higher quality and executable decisions (effectiveness)
through team interaction and consensus decision making.
Respondents
also associated certain limitations with cross-functional sourcing
teams at their firms. Almost 4O percent of team members and leaders
indicated some level of agreement with the statement the team has
no real power or authority to make major decisions. More than a
third of the respondents indicated the team has little insight into
how it is performing over time, and managers outside the team attempt
to control activities or influence team decisions. Finally, more
than 30 percent of respondents indicated certain members dominate
team meetings or control team activities and the commitment of resources
does not meet the team's requirements.
The least
cited limitations to sourcing team interaction, detailed in the
final project report, relate directly to internal team issues while
the most often cited limitations generally relate to external issues.
We have concluded that team members in this study are basically
satisfied with internal team processes and interaction (which the
team controls) but less satisfied with externally related issues
(which others external to the team generally control).
Summary
of key research findings
Evaluation
of study data revealed that a set of factors exist that consistently
relate to cross-functional sourcing team effectiveness. An awareness
and understanding of these critical factors provide executive management
with an opportunity to create an environment that promotes greater
cross-functional sourcing team effectiveness.
Organizational
Resource Availability
A
team's access to key organizational resources relates directly to
team effectiveness. The availability of organizational resources
can also play an important role in affecting a team's belief that
it can be effective. This research evaluated in detail the presence
or absence of 10 organizational resources categories. These resources
include (1) job-related information, (2) tools and equipment, (3)
materials and supplies, (4) budgetary support, (5) required services
and help from others, (6) team member task preparation, (7) time
availability, (8) work environment, (9) executive management commitment,
and (10) supplier participation.
This study
found that not all resources are available to teams at equal levels.
Across the study, team members, leaders, and external raters rated
the time to pursue team task assignments, required services and
help from others, and budgetary support as the least available organizational
resources. These resources are also some of the most critical to
sourcing team effectiveness.
Certain organizational
resources relate systematically to sourcing team effectiveness.
The teams most effective in the area of supply base management performance,
for example, indicated that certain resources are clearly more critical
to team performance than others. The most critical resources, in
order of importance, include (1) supplier participation, (2) the
availability of required services and help from others, (3) time
availability, (4) budgetary support, and (5) adequate team member
task preparation. Sourcing teams with access to these critical resources
demonstrated higher levels of team performance. Management commitment
of the necessary resources has the potential, therefore, to separate
marginally from exceptionally performing sourcing teams.
A lack of
time available to pursue team assignments is a serious barrier to
team performance. This issue must concern executive management because
the availability of time for team activities affects directly a
team's effort and effectiveness. The final project report details
the steps that executive management can take to minimize the negative
impact of time constraints on sourcing team performance potential.
Supplier
Participation and Involvement
Supplier
participation, either through formal team membership or through
less formal support and involvement, also relates directly to greater
team effectiveness. Teams with supplier participation (both formally
and informally) also indicated a higher quality of information exchange
between the team and key suppliers. Formal supplier membership on
teams supports directly a number of positive cross-functional sourcing
team outcomes. Teams that included suppliers as formal team members
were, on average, more effective compared to teams that did not
include suppliers as formal members, particularly in the areas of
time reduction performance goals and supply base management performance.
Furthermore, teams that included suppliers as formal members (1)
reported the highest satisfaction with the quality of information
exchange between the team and its key suppliers, (2) relied more
on suppliers to provide support for achieving the team's goals and
objectives, and (3) received greater supplier contribution in the
areas of performance and new product support.
A number of
beneficial outcomes also result when suppliers provide support at
team meetings, either as formal members or through informal participation.
These performance outcomes include
* Greater effort
put forth by the team
* Overall
greater team effectiveness
* Higher
satisfaction concerning the quality of information exchange between
the team and key suppliers
* Fewer
problems coordinating work activity between the team and key suppliers
* Particularly
higher supplier performance improvement contribution.
Supplier involvement
at team meetings is one way to begin to realize the performance
benefits sought from closer buyer-supplier interaction.
Cross-functional
sourcing teams that rely on and receive supplier involvement and
performance contribution are more effective than teams that do not
rely on supplier involvement. As a result, organizations should
consider suppliers for formal team membership at an appropriate
time in the sourcing process when a team's task can benefit from
closer supplier-team interaction and greater supplier involvement.
Furthermore, including suppliers as formal team members can promote
even greater positive interaction and relationships between buyers
and sellers leading to unanticipated future performance results.
This assumes firms involve suppliers that have demonstrated a willingness
and capability to support the team's goals and objectives. It also
assumes that the sourcing team is pursuing an assignment that is
likely to benefit from supplier participation.
Team Authority
The critical
relationship between cross-functional sourcing team authority and
increased team effectiveness is an important research finding. Team
authority refers to the degree to which a team has the ability to
(1) schedule team meetings, (2) select new members as required and/or
the team leader, (3) control internal team processes, and (4) make
decisions that bind an organization and affect others external to
the team.
No significant
relationship existed between scheduling authority and team effectiveness.
Because each team in this study generally had the authority to control
team meeting schedules, this aspect of team authority demonstrated
no systematic relationship between formal supplier involvement and
enhanced team effectiveness.
Teams granted
the authority to control internal processes and operations demonstrated
a higher level of performance compared to teams with lower levels
of internal authority. Teams with greater internal process authority
also realized other performance benefits as a result of team interaction.
These include
* Greater accuracy
of within-team communication
* Greater
team effort
* Greater
satisfaction with the methods of information exchange between team
members
* Greater
satisfaction with the usefulness of formal team meetings.
These findings
suggest that teams granted a higher level of internal process authority
are more likely to realize many of the positive team process and
performance outcomes sought by firms.
Teams with
greater external decision authority received, on average, slightly
higher effectiveness ratings for the performance dimensions of time
reduction and supply base management performance. This suggests
that teams empowered to make external sourcing decisions are able
to channel this empowerment into greater results.
The relationship
between team authority and sourcing team effectiveness means that
executive management should empower teams at higher levels. This
requires providing the team with the authority to control internal
team processes along with the authority to make external sourcing
and apply base decisions. If the reason to use a team is to improve
the quality of organizational decision making and goal achievement,
then a group of competent professionals should have internal and
external decision-making authority.
Team Effort
The finding
that team effort relates directly to sourcing team performance is
not surprising. The formation of a cross-functional sourcing team,
however, does not guarantee that members will exert the effort required
to complete team assignments. An understanding of what drives team
effort is critical because firms can take action to promote greater
effort and member commitment.
Assigning a
meaningful task provides a built-in motivation for a team to work
hard and perform well. A meaningful task, however, is only a necessary
but not sufficient condition for encouraging team effort and commitment
Certain factors work against team members putting forth the effort
required to complete successfully a cross-functional sourcing team's
task. These factors include (1) treating sourcing teams as add-on
assignments with minimal or no recognition for individual participation
or team performance; (2) limited time available for team participation;
and (3) the use of nonpurchasing functional personnel to support
tasks traditionally associated with the purchasing function. Additionally,
sourcing team assignments are rarely the primary job assignment
of team members.
There are
additional steps, each supported by data collected during this project,
that organizations can take to encourage member effort and commitment:
* Provide the
authority to control a team's internal processes. Teams with internal
process authority demonstrated greater effort compared to teams
without internal process authority.
* Include suppliers
on team activities whenever possible. A direct relationship exists
between higher team effort and suppliers who met with the team and
provided support during team meetings.
* Select, train,
and promote effective team leaders. A direct relationship existed
between highly rated team leaders and team effort. Indeed, a key
role of a leader includes securing the involvement of individual
members.
* Use the performance
evaluation and reward system to promote greater member effort and
commitment. A member whose performance appraisal includes a component
for individual participation and/or the team's performance will
commit relatively greater time to team assignments as compared to
members who do not receive an evaluation.
* Provide key
organizational resources. Critical resources relating directly to
team effort include (1) adequate time availability, (2) selecting
team members with the proper skills and abilities related to the
team's task, (3) overall executive management commitment to the
cross-functional team process, and (4) budgetary support.
Team Leadership
Cross-functional
sourcing team leadership is particularly important to team interaction
and success. This study found that a strong relationship exists
between effective leadership and sourcing team performance. A critical
relationship also exists between effective leadership and (1) team
effort and (2) organizational resource availability. Leadership
is a critical factor impacting a sourcing team's ability to complete
successfully its assignment. Furthermore, there is an important
connection between task-oriented leadership behavior and sourcing
team effort and performance. This assumes a task-oriented leader
also maintains positive relations with team members and external
others.
Effective leadership
does not appear to be contributing to the achievement of the highest
potential level of team performance. Almost 70 percent of the team
leaders evaluated by team members received an average score of less
than five on a seven-point scale of leadership effectiveness. No
leader received a "totally effective" rating. Although
leadership is critical to team effort and sourcing team success,
the positive impact of team leadership on performance has probably
not been as strong as it potentially could be.
An important
issue concerns what organizational function(s) should lead a cross-functional
sourcing team. While the teams in this study included members from
at least 15 separate functions, more than 55 percent of the team
leaders were from purchasing. The results of this study indicated,
however, that no loss of performance occurred in any effectiveness
area when the team leader was from a nonpurchasing function. A key
factor separating marginal from highly effective teams is the commitment
and effort put forth by individual team members. Motivated team
members may be found in functions that do not typically drive sourcing
decisions. This suggests that executive management should assign,
promote, or rotate team leadership responsibilities among different
functions to encourage greater and broader team member effort and
commitment to cross-functional sourcing teams throughout the firm.
Team leaders
committed a significantly greater amount of time, on average, to
team activities compared to team members. The selection of the team
leader is critical given that the leadership role often requires
an increased time commitment. The time commitment required of the
leadership position highlights the importance of selecting a competent
individual(s), with executive support, capable of committing the
time and effort necessary to support the sourcing team.
The full project
report addresses critical issues related to team leadership in greater
detail, including the use of shared leadership as well as the use
of no formal team leader.
Performance
Evaluation and Rewards
No major
findings resulted that linked performance evaluation and reward
systems to cross-functional sourcing team effectiveness. This resulted
from the majority of team members within the study not receiving
an evaluation for contributing to the sourcing team, thereby limiting
comparisons between teams. This finding is a result of a lack of
formal cross-functional sourcing team evaluation and reward systems
and does not indicate that such systems are unimportant or ineffective.
The firms participating
in this study generally (1) provided no formal performance evaluations
or rewards for participating on a sourcing team or (2) relied on
a member's immediate manager to evaluate each individual's contribution
to a team. Neither of these options will necessarily promote greater
team effort and performance. Previous research has found that a
continued emphasis on individual performance merit ratings (versus
team evaluation ratings) promotes short-term performance, does not
support teamwork, and nourishes potentially destructive rivalries
between team members and functional groups.
There does
exist a positive relationship between performance evaluation and
team effort. This occurred between the performance evaluation and
reward system and the amount of time a team member committed, on
average, to team assignments. The amount of time committed to team
activities related directly to (1) the degree to which organizational
rewards were dependent upon the member's individual contribution
to team activities and/or overall team performance; (2) the percent
of the members' total performance appraisal or evaluation based
on team participation and/or the team's overall performance; and
(3) the degree to which a member's performance actually affected
the member's overall performance evaluation. In other words, team
members whose performance evaluation includes a larger component
for team participation will commit more time, on average, to sourcing
team activities. In turn, the amount of time a team commits to team
activities relates directly to team effort, which is a major predictor
of sourcing team success.
Findings from
this study indicated that an employee's formal job evaluation should
include a component for team participation. Managers can use an
organization's performance evaluation and reward system to motivate
team member contribution and collective performance. Put simply,
team members will exert effort if they expect it to produce rewards.
Furthermore, firms must review their performance appraisal, salary,
and promotion policies to make sure they recognize and promote performance
and cooperation within and between teams. Executive management must
change policies that promote, encourage, or reward noncooperation
and nonparticipation by team members.
Cross-Functional
Sourcing Team Implementation Plan
The results
of this project support the development of a cross-functional sourcing
team implementation plan that incorporates key research findings.
We present an implementation plan that involves a sequence of decision
activities and issues that revolve around four recognizable phases--Plan,
Do, Check, and Act. Figures 10 and 11, presented in the body of
the paper, illustrate the phases and issues involved in the implementation
of cross-functional sourcing teams. (See the section "Cross-Functional
Sourcing Team Effectiveness," subsection "Creating Effective
Cross-Functional Sourcing Teams," which discusses sourcing
team implementation in detail.)
Phase 1:
Plan
Executive
management must evaluate sequentially four major activities when
planning the use of cross-functional sourcing teams. These included
(1) an assessment of an organization's readiness to use cross-functional
sourcing teams, (2) the selection of sourcing team tasks, (3) actual
team formation and member role clarification, and (4) the establishment
of team performance goals.
Organizational
Readiness Assessment
Before
introducing the use of cross-functional sourcing teams, a firm must
assess a number of issues and questions related to its organizational
readiness to pursue the cross-functional sourcing team concept.
A critical
issue involves evaluating executive management's commitment to the
cross-functional sourcing team concept. An organization whose executive
management does not demonstrate commitment to the sourcing team
process faces significant hurdles if it attempts the broad use of
cross-functional sourcing teams. Secondly, a firm must determine
if it has a team-oriented culture. The introduction and use of formal
sourcing teams should meet less resistance from team members and
functional managers if a firm is already accustomed to the use of
cross-functional teams. Thirdly, an organization must evaluate its
current level of cross-functional orientation. A firm with a higher
level of cooperation between functions is in a better position to
implement the use of cross-functional sourcing teams than one operating
within traditional functional chimneys or rigid silos.
Firms must
consider other important issues during this part of the planning
process. These include whether to pursue broad or selective use
of cross-functional sourcing teams and how many people to commit
to the sourcing team process. An organization's readiness or ability
to implement the team approach will affect how broadly the use of
cross-functional teams will be.
The end result
of an organizational assessment should be a decision about a firm's
ability, readiness, and willingness to use cross-functional sourcing
teams. In addition, if a firm commits to the use of sourcing teams,
executive management must decide how broadly the use of teams will
be along with providing the personnel resources required to support
the process.
Task Selection
Assuming
that a firm is ready to introduce and use cross-functional sourcing
teams, the next major planning activity involves selecting team
assignments. Sourcing team assignments should satisfy one or more
of the following conditions:
* Business
unit faces a complex or large scale sourcing decision
* Assignment
directly affects a firm's competitive position
* No
single function has the resources or expertise to accomplish the
assignment adequately
* An
organization must make a sourcing decision that requires or can
benefit from the "buy-in" of different functional groups
* Cross-functional
sourcing team interaction will likely yield a better solution or
decision than individual decision making.
Firms should
prioritize potential team assignments and select those offering
the greatest opportunity for creating performance benefits.
Team Formation
and Member Role Clarification
Team
formation involves a number of critical decisions. These include
selecting the right team members, identifying the functions required
to support a team's assignment, and determining the team's size.
Individuals
selected for team membership must have the proper skills and the
ability to support a team's assignment. Each member must also bring
something unique to the team--this is what helps make the team process
powerful. A member's skill, personal chemistry between members,
willingness to participate on the sourcing team, and relevant organizational
representation should all be factors during the member selection
process.
Identifying
which functions will participate on a sourcing team is also critical.
It is not unusual for sourcing teams to have members from at least
four functional areas. A team should include only those functions,
however, critical to the continuous support of a team's assignment.
Determining
the proper team size is as important as selecting the right functions.
Most sourcing teams average between five and seven members. Team
size, however, is a function of a team's assignment. Firms must
recognize, however, that larger teams are generally more difficult
to manage and coordinate and can create role confusion among members.
This is true even when the team's assignment warrants a large team.
A team should include only those members and functions required
to support directly a team's assignment.
Other important
team formation issues concern the level and type of authority to
grant the team, the use of full versus part-time members, decisions
about co-locating team personnel, and linking the organizational
compensation system to individual member contribution and team effectiveness.
Because these issues are unique to each organization, there is no
single recommendation to the questions that they raise.
Before a team
begins formal work on its assignment, it is critical that executive
management clarify the reason for the team's existence. Furthermore,
team members must understand how management expects them to support
the team and why they were selected as members.
Management
also needs to define the team leadership role. Although members
can share or rotate leadership responsibility, the individual(s)
assuming formal leadership must understand the requirements of that
position.
An effective
leader must maintain a team's focus on its assignment while establishing
positive relations with team members.
Firms must
also address organizational reporting relationships during this
part of the implementation process. It is not uncommon for executive
management to form a steering committee responsible for overseeing
and supporting team activities prior to the actual use of cross-functional
sourcing teams.
Establish
Team Performance Goals
Another
planning phase activity is the establishment of cross-functional
sourcing team performance goals. While it is not unusual for executive
management to establish broad goals when forming a cross-functional
sourcing teams, we recommend allowing team members to work together
to establish performance objectives that support the broader executive
performance goals. Working together as a team to establish specific
performance objectives helps transform a team from a group of individuals
into a committed group. Furthermore, previous research indicates
that team members usually develop more aggressive performance objectives
compared to those established by external others.
Phase II:
Do
The second
phase of the implementation process involves the active interaction
between team members. It is during this phase that team members
develop the communication and interaction patterns that influence
how well the team works together. Assessing and planning now give
way to team interaction and participation. Within the "do"
phase, successful interaction depends largely on an organization's
ability to promote member effort and a team's ability to develop
appropriate team performance strategies.
Promote
Team Member Effort and Commitment
Successful
sourcing team performance requires that members exert an adequate
effort towards team assignments. The challenge for executive management
is to create proactively an environment that promotes continuous
member commitment and effort on team assignments. There are actions,
supported by the results of this research, that an organization
can take to promote a higher level of team effort.
* Make the
team responsible for a challenging assignment
* Challenge
team leaders to promote individual and team effort
* Allow
teams to develop specific performance goals and objectives
* Demonstrate
executive commitment and support, particularly when providing critical
organizational resources
* Select
team members with the right skills and professional preparation
* Promote
external supplier team participation
* Use
the performance evaluation and reward system to encourage member
effort and commitment
* Provide
the sourcing team with internal and external decision making authority.
The subsection
titled "Team Effort" details fully the relationship between
the above actions and team effort. It is not enough to form a team
and then expect it to somehow put forth the effort required to support
team performance. Taking action to encourage the necessary effort
increases the likelihood that a sourcing team will meet its performance
objectives. Promoting team effort and commitment requires, however,
proactive responses from an organization.
Develop
Team Strategies and Processes
It is
important for a sourcing team to develop appropriate task performance
strategies to accomplish its assignment. The strategies most appropriate
for a given team depend largely on the team's specific assignment.
While no single best sourcing team performance strategy exists,
effective teams will have developed at least an implicit understanding
between members about how to proceed on team tasks.
A team that
can develop a set of shared beliefs and behaviors about the team
process and its assignment has a greater likelihood of developing
and executing appropriate performance strategies. A team's ability
to internally control individual members will also increase the
likelihood that a team can agree upon and execute a strategy.
Phase III:
Check
This
phase requires the monitoring or "checking" of team results
to verify that a sourcing team is achieving its stated objectives.
Measure
Performance and Provide Individual and Team Feedback
This
activity recognizes that team interaction is a process requiring
formal performance measurement and feedback. It is a "check"
of the performance results produced by team formation and interaction.
Without measuring team performance, neither team members or executive
management has a clear understanding of the effectiveness of the
team process. Firms must quantify team performance objectives whenever
possible and hold teams (and individual members) accountable to
those objectives. Firms will need to develop formalized team measurement
and evaluation systems beyond those currently in place.
Developing
a system that measures team performance against quantified objectives
increases the likelihood that a team will meet or exceed its objectives.
Firms must establish systems capable of tracking, at the least,
overall team performance. Ideally, the system will also have the
capability to evaluate objectively individual team member contribution.
This helps ensure that each member contributes to the team's performance.
Phase IV:
Act
This
phase involves acting upon information to improve team interaction
and performance. A key point during this phase is that an organization
actively recognizes that team interaction is a dynamic process potentially
subject to change.
Team-Focused
Performance Maintenance
The most
successful sourcing teams will be those capable of continuous performance
effectiveness over extended periods of time. The challenge is to
create teams that are able to maintain a high level of intensity
and commitment. There are a number of ways teams and organizations
can act to promote continued sourcing team performance:
* Use the performance
evaluation and reward system to promote continued member commitment
and team effectiveness
* Rotate
team membership and leadership responsibilities over time
* Shift
team goals to match changing assignments
* Migrate
upward team goals and objectives to reflect the need for continuous
performance improvement
* Take
corrective action as required based on team performance results.
Teams usually
begin assignments with a high level of intensity and enthusiasm.
The best performing teams will be those that can maintain that initial
intensity indefinitely. Cross-functional sourcing team interaction
is a process requiring continuous support and commitment from members
and management. Just as there are ways to create effective teams,
there are also ways to sustain member commitment and team performance
over time.
By Robert M.
Monczka, Ph.D., C.P.M. and Robert J. Trent, Ph.D.
Center for Advanced Purchasing
Studies, 1993--Focus Study
(Executive Summary only)
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