Collaboration has become a hot buzzword. Tear down silos. Get employees to talk to each other from separate cubicles, separate countries. Partner with suppliers and customers to bolster innovation. The mandate for CEOs and senior executives seems clear: You should get your employees to collaborate more.
Guess what? This conventional wisdom is dead wrong: Collaboration is not necessarily a good thing, and more of it is not always better. As a leader, you must distinguish between the right and the wrong way to collaborate in your company. Collaboration can have a tremendous positive impact on sales and profits, provided you can do it right.
After 15 years of research with companies in various industries, I have developed a simple yet powerful approach. It is called “disciplined collaboration,” and its purpose is to help you avoid the traps of collaboration and reap big results for your company.
The Over-Collaborating Trap
Imagine this horror scenario. You start promoting more collaboration among your employees. They listen to you. They start a bunch of new cross-company committees, task forces, communities of practice and projects. As a result, they now go to many more team meetings, many of them involving travel. You begin to discover that much of this activity amounts to a colossal waste. Expenses balloon without any revenue gains to offset them. People start performing less well because they’re spending their valuable time in all those extra meetings. Cynicism about ineffective teamwork sets in. One morning you wake up to realize that you have unleashed an avalanche of bad collaboration.
You have just fallen into the trap of over-collaborating-a well intentioned effort that leads to lots of cross-company activities without a clear focus on results. Remember: The goal of collaboration is not collaboration, but far better results. This disease has befallen many companies. Take the oil giant BP. When CEO John Browne began to promote collaboration, employees started to form an unforeseen number of cross-unit networks around shared interests (the “helicopter utilization network” was one). An audit within the exploration business alone revealed several hundred of these cross-company efforts.
“People always had a good reason for meeting,” recalled John Leggate, a senior executive. “You’re sharing best practices. You’re having good conversations with likeminded people. But increasingly, we found that people were flying around the world and simply sharing ideas without always having a strong focus on the bottom line.” When leaders start promoting collaboration, people start collaborating for the sake of collaborating. Only when BP’s leaders pared down this proliferation did the company start to reap real benefits.
Another pitfall is to start cross unit initiatives in an organizational culture that is unreceptive, even hostile, to collaboration. In 2003, Howard Stringer, then U.S. head of Sony (and now CEO), launched a project called Sony Connect to develop a product to compete against Apple’s iPod. From his office in Manhattan, Stringer could see that he had all the resources in Sony to mount an attack: Sony had its own music division, as well as the Sony Walkman line, the VAIO computer business, online music stores and even miniature batteries. The problem was, five units needed to collaborate to put these pieces together. But Sony’s culture was based on inter-unit rivalry and not cooperation across units.
“It’s impossible to communicate with everybody when you have that many silos,” complained Stringer. It was a mess. When Sony Connect debuted in 2004, it became a market disaster and was eventually terminated in 2007. The trap Sony fell into was hoping that a collaboration project somehow could work in an organization that was not set up to collaborate. But hope is not a sound plan.
Finally, you can overshoot the potential of collaboration. It’s easy to be carried away, believing that there are huge synergies to be had by collaborating across units in a company. When Daimler bought Chrysler in 1998, the $36 billion price tag was based on anticipated benefits from collaboration on engineering between Mercedes and Chrysler engineers. These never materialized. When Daimler’s boss, Dieter Zetsche, sold Chrysler in 2007 for a pitiful $1 billion, he confessed that “we obviously overestimated the potential for synergies.” Well, that’s a $35 billion mistake.
These traps lead to bad collaboration- collaboration characterized by high friction among employees and a poor focus on results. Bad collaboration is worse than none at all because of its waste and lack of results.
The Right Way to Collaborate
How do you avoid the collaboration trap and get the potential upside from collaboration in your company? You need to follow the three steps of “disciplined collaboration.” (Below are the steps for intra company collaboration; a similar process can work for external collaboration.)
Step 1. Make a real business case
Look for real potential before you make collaboration a priority in your company. For the business overall, perform the I.C.E test, which asks you to establish the potential upside of collaboration in three areas: Innovation, Customers and Efficiency (see sidebar). Procter & Gamble provides an example of a great business case for innovation. For many years, product developers at P&G have combined technologies from different units to come up with new products. Given its breadth of products-soap, detergent, toothpaste, potato chips, lotions, diapers-the company has an enormous potential to recombine technologies to make new products.
Take Crest White strips, a $25 teeth-whitening product introduced in 2001. Product developers from three different units got together, each sharing their distinct technological expertise with the others: People at the oral-care division provided teeth-whitening expertise; experts from the fabric and homecare division supplied bleach expertise; and scientists in corporate R&D provided novel film technology. By combining these pieces, the cross unit team did not have to start from scratch; they quickly developed and introduced a new successful product. For P&G, this way of innovating is as habitual as getting up in the morning. For example, by 2008, P&Ghad 13 brands generating revenues of at least $1 billion each based on such recombinations.
Wells Fargo exemplifies the business case for customers. The bank encourages its more than 80 business units to collaborate internally, then present “one Wells Fargo” to its customers. In 1998, it sold an average of 3.2 products to its retail customer. Then-CEO and now- Chairman Richard Kovacevich kept pushing cross-selling, and this number crept up every year since. The bank now sells a whopping 5.7 products per customer. This is a big deal. “The cost of us selling a product to an existing customer is only about 10 percent of selling the same product to a new customer,” explains Kovacevich.
Then there is the business case for efficiency. Sharing best practices and expertise across the company can cut costs and improve productivity. At the oil giant BP, numerous best practice transfers across hundreds of oil wells and thousands of gas stations has led to significant cost savings. In one seemingly mundane example, managers from the U.K. and the Netherlands shared with managers in Atlanta their methods of minimizing inventory in the convenience stores section of gas stations. As a result, gas stations in Atlanta were able to carry 26 percent fewer stock-keeping units; that translated into a 20 percent decrease in working capital while sales went up 10 percent. Repeat such sharing thousands of times over a year, and the savings become enormous. Why reinvent the wheel when you can copy and use what has already been learned?
Your business case for collaboration needs to show a high potential in at least one of the areas of innovation, customers and efficiency. If not, you should stop right away. To master collaboration is to know when not to do it.
Increasingly, we found that people were flying around the world and simply sharing ideas without always having a strong focus on the bottom line.
Step 2. Spot the barriers
If your company passed the I.C.E test, the next step is to determine why your employees are not getting the results-what is preventing them from executing on the promise? You need to be disciplined in the analysis and not just assume you know the answer. Four different barriers often plague companies. The first is the “not-invented-here” barrier: Employees do not want to open up to others’ ideas. They believe they know best or can fix the problems themselves.
The second is the “hoarding” barrier: People do not want to share what they know when asked. This may happen because employees from different units in a company compete (the Sony story) or because people are too busy to help out.
The third barrier is “search”- employees cannot easily find what they need, when they need it. Search is more difficult when employees work in different locations, different businesses and in large companies.
The fourth barrier is “transfer,” which happens when people on a cross-unit team find it difficult to work together. They may not know each other, or they use different technical terminologies, have different expertise or work in different locations.
The first two barriers-not-invented- here and hoarding-happen because people are not willing to collaborate. They are motivational barriers. In contrast, the last two- search and transfer-are ability barriers. People want to collaborate but they cannot do so effectively.
Which barriers arise in your company? (You can go to the Web site www.TheCollaborationBook.com to take a brief assessment). You cannot implement management solutions if you don’t know what collaboration problem you’re tackling. Not knowing this is like throwing darts in the dark: You don’t know what you will hit.
Step 3. Surgically remove the barriers
One you have determined which barriers are present in your situation, you can tailor solutions to tearing them down. Different barriers require different solutions.
Motivational Barriers: If you’re facing the motivational barriers, a couple of changes can be very effective. First, you can develop a compelling goal that unites people from different parts of the business. If all that people have are individual goals, then it is no surprise that they won’t collaborate. Craft compelling, unifying goals that make people set aside parochial agendas. In the 1990s, when Airbus, the European aircraft manufacturer, tried to surpass Boeing in the number of orders received in a year, the unofficial unifying goal was “Beat Boeing!” These so energized employees that they set aside their internal squabbles. By 1999, they passed Boeing, with 476 orders to Boeing’s 355 (a position they held through 2005). At Nissan, CEO Carlos Ghosn set forth a new unifying goal in 2002, simply put as “Nissan 180,” to be achieved in three years (1million more cars sold, 8 percent operating profit, zero automotive debt). It united employees in focusing on a single, common goal.
Do you have such unifying goals for your business, and does every collaboration project have one? When you craft a goal, pay attention to whether it meets these criteria: Is it simple and concrete, such as “Nissan 180”? Is it measurable and finite, so that employees know when they have reached it? And does it stir passion among employees? If not, you don’t have a compelling unifying goal.
The second way to tear down motivational barriers is to change incentives. For example, CEO John Mack of Morgan Stanley started to demand that bankers demonstrate teamwork contributions to be promoted to managing director. Likewise, CEO Steve Bennett of Intuit incorporated collaborative behaviors in the evaluation process. The basic approach here is simple: You can’t expect people to collaborate across units if criteria for pay raises, bonuses and promotions are based on individual performance only. When you change the incentives to include demonstrated collaborative contributions in addition to individual performance, people will change their attitude about collaboration. Some employees might leave because they don’t like, or cannot perform, in the new system. And that’s a good thing.
This brings up a crucial point. You need to cultivate a new kind of talent- T-shaped stars. These managers and employees deliver two kinds of performances, individual output (metaphorically, the vertical part of the T) and contributions across the company (the horizontal part).What makes a T-shaped star? They have the right attitude: They see their responsibilities as doing their own job extremely well and contributing more widely. They also have the right skills: a high level of expertise in their own area, coupled with sufficient knowledge of other people’s work so that they can meaningfully work with and understand others. Their expertise is deep and broad.
Now contrast T-shaped stars with “lone stars”-people who only worry about their own agendas and individual goals. T-shaped people can do two things well, while lone stars can only deliver their own output. No wonder T-shaped people are more valuable. Leaders who want Tshaped stars need to articulate these competencies and change the recruiting and promotion criteria to foster T-shaped stars and discourage lone stars. (See “T-Shaped People,” p. 44)
Ability Barriers: Now, what can you do to tear down the search and transfer barriers? The solutions are different from those required for the motivational barriers. One powerful lever is to get employees to build bridging networks across the company. Far too often, employees only talk to colleagues in the same office, in the same department, in the same physical location and in the same business unit. They develop siloed networks. You can prompt them to create bridges across units by establishing companywide communities of practices.
For example, at P&G, product developers participate in more than 20 communities of practice, centered around expertise areas such as fragrance, polymer chemistry, skin science and so on. Communities of practice are far more effective than aimless get-together events like annual retreats, because they focus on work and not social interactions. But be careful: The operative word here is “nimble”-people need to build small and nimble networks, not bloated ones full of contacts for the sake of having contacts (recall the trap that BP fell into of having too many of these networks).
The other powerful lever in tearing down the search and transfer barriers is implementing information technology tools. Social-media (Web 2.0) tools, such as blogs, ask-me-lists, Twitter and in-company “Facebooks,” greatly help search. Employees can send out a message-“I am looking for help on X”-and someone, somewhere in the company can quickly respond, provided the IT tools are implemented to facilitate such exchanges.
Other technology tools help reduce the transfer barrier. Videoconferencing systems, such as Cisco’s TelePresence, bring people from different locations together virtually. It is far easier to work together informally if you can see each other and engage in rapid, fluid back-and-forth exchanges on difficult- to-grasp subjects. But these videoconferencing tools need to be almost as good as the real experience of sitting together in a conference room. Current systems approach that: When I recently polled a group of 30 executives on how much they thought virtual meetings via TelePresence resembled a real face-to-face meeting, their average answer was 90 percent, a very good score.
Notice a vital point: IT tools help tear down ability barriers, but they do not really break down motivational barriers. If people really don’t want to collaborate with one another across the company, then no system is going to make them do it. Applying expensive IT tools in an organization where people don’t want to collaborate is like taking cough medicine for a broken leg- it’s the wrong medicine.
That is equally true for the ability barriers. Crafting a compelling, unifying goal and changing the incentives systems are not going to help people search better, if that’s the real problem. The upshot: Different barriers call for different solutions. That’s a disciplined, surgical approach to getting collaboration right.
The legendary management guru Peter Drucker once observed, “The most important, and indeed the truly unique, contribution of management in the 20th century was the 50-fold increase in the productivity of the manual worker in manufacturing. The most important contribution management needs to make in the 21st century is similarly to increase the productivity of knowledge work and knowledge workers.”
As most knowledge work requires people to team up, collaboration becomes essential to that mission. We’re seeing the emergence of collaboration as a force everywhere in business: across units in a company, across companies, across countries, across industries. It’s the future of work. The question is, will you harness the power of collaboration in the right way to reap great results for your company?
Morten T. Hansen is the author of Collaboration: How Leaders Avoid the Traps, Create Unity, and Reap Big. He is a professor of management at University of California, Berkeley (School of Information) and at INSEAD, France.