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. The five factors that critically impact team performance were:
1. The availability of certain organizational resources
2. The participation and involvement of suppliers when required
3. Higher levels of internal and external decision-making authority
4. Effective team leadership
5. 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.s
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.
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.
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.
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 Readliness 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.
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)