Cross-Functional Teams

The most simple definition of cross-functional teams (or CFTs) is groups that are made up of people from different functional areas within a company—marketing, engineering, sales, and human resources, for example. These teams take many forms, but they are most often set up as working groups that are designed to make decisions at a lower level than is customary in a given company. They can be either a company's primary form of organizational structure, or they can exist in addition to the company's main hierarchical structure.

Cross-functional teams have become more popular in recent years for three primary reasons: they improve coordination and integration, span organizational boundaries, and reduce the production cycle time in new product development. Bringing people together from different disciplines can improve problem solving and lead to more thorough decision making. The teams foster a spirit of cooperation that can make it easier to achieve customer satisfaction and corporate goals at the same time.

Cross-functional teams are not new. Northwestern Mutual Life insurance company pioneered their use in the 1950s when the CEO of the company brought together people from the financial, investment, actuarial, and other departments to study the impact that computers would have on the business world. As a result of that first CFT, Northwestern was among the first companies in the country to create an information systems department that gave the company a large competitive advantage as computers gained in popularity. The company now relies on cross-functional teams in almost every facet of its organization. Based on success stories like this one, CFTs slowly grew in popularity throughout the 1960s and 1970s before exploding in popularity in the 1980s when faster production time and increased organizational performance became critical in almost every industry.

Cross-functional teams are similar to conventional work teams, but they differ in several important ways. First, they are usually composed of members who have competing loyalties and obligations to their primary subunit within the company (for example, a marketing person serving on a cross-functional team has strong ties to his or her home department that may conflict with the role he or she is being asked to play on the CFT). Second, in companies where CFTs are being used on a part-time basis as opposed to a permanent organizational structure, they are often temporary groups organized for one important purpose, which means group members are often under considerable pressure. On these temporary teams, the early development of stable and effective group interaction is imperative. Finally, CFTs are often held to higher performance standards than conventional teams. Not only are they expected to perform a task or produce a product, they are also expected to reduce cycle time, create knowledge about the CFT process, and disseminate that knowledge throughout the organization.

For cross-functional teams to succeed, several factors have been identified that are imperative:

• Team members must be open-minded and highly motivated.
• Team members must come from the correct functional areas.
• A strong team leader with excellent communication skills and a position of authority is needed.
• The team must have both the authority and the accountability to accomplish the mission it has been given.
• Management must provide adequate resources and support for the team, both moral and financial.
• Adequate communications must exist.

Without any one of these elements, any cross-functional team will be fighting an uphill battle to succeed.

CROSS-FUNCTIONAL TEAMS AND NEW PRODUCT DEVELOPMENT

Many businesses have been able to use cross-functional teams to reduce the cycle time in new product development. As a result, CFTs have become a common tool in new product development at many companies, especially those in industries in which rapid change and innovation is the norm. CFTs have shown the flexibility to adapt to changing market needs and the ability to more quickly develop innovative products.

In the past, new product development invariably meant gathering data sequentially from a number of departments before a new product was given the green light. First, the idea would be conceptualized. Then, it would be handed off to the marketing department, which would conduct market research to see if the product was viable. The product might then be passed on to the sales department, which would be asked to create a sales estimate. From there, the idea would move on to engineering or manufacturing, which would determine the costs to produce the product. Finally, with all those numbers gathered over the course of months, or even years, the product would move to an executive committee which would either approve or kill the project. By that time, market conditions sometimes had shifted sufficiently to render the product obsolete.

Cross-functional teams eliminate the "throw it over the wall" mentality that passes a product off from department to department. Instead, a member of each of the above functional areas would have a representative on the new product team. Team members would learn of the new product at the same time and would begin working on estimates together. If part of the product simply could not be manufactured cheaply enough, the team member from that area could immediately sit down with the engineering rep and come up with a new production method. The two of them could then meet with the marketing and sales team members and discuss new ways to position the product on the market. The result, say proponents, is a vastly improved product that is manufactured and released to the market in far less time than was achieved using traditional methods.

ESTABLISHING A CROSS-FUNCTIONAL TEAM

Set Goals

When CFTs are first convened, conflict may be the result. There is a good chance that some of the members of the new team have bumped heads in the past when their functional areas clashed over a project. Additionally, some CFT members may think that their area of specialty is the most important on the team and thus assume an inflated sense of value to the team. Finally, since CFTs often bring together people who have vastly different ranks in the organizational hierarchy, there can be power plays by members who are high-ranking employees off the team but are actually less important stakeholders on the team. Those high-ranking team members may try to assert authority over the team in a situation when they should be deferring to lower-ranking team members.

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