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75% of Cross-Functional Teams Are Dysfunctional

July 3, 2015
Borderless Leadership

When I was in the midst of researching what caused cross-functional teams to succeed — and finding that many of them failed — I discovered a deeply dysfunctional development project in a huge multinational IT company. The company had invested $100 million in the project, which involved three divisions. Most of the team, and even some executives, knew the project was a dead-end two years before the company finally pulled the plug. As one middle manager told me, “No one was willing to go to management and say, ‘Let’s redeploy everyone, including myself, and do something else because this project isn’t working.’”

This is just one example of the dysfunction that exists in cross-functional teams. In a detailed study of 95 teams in 25 leading corporations, chosen by an independent panel of academics and experts, I found that nearly 75% of cross-functional teams are dysfunctional. They fail on at least three of five criteria: 1.) meeting a planned budget; 2.) staying on schedule; 3.) adhering to specifications; 4.) meeting customer expectations; and/or 5.) maintaining alignment with the company’s corporate goals.

Cross-functional teams often fail because the organization lacks a systemic approach. Teams are hurt by unclear governance, by a lack of accountability, by goals that lack specificity, and by organizations’ failure to prioritize the success of cross-functional projects.

I studied cross-functional teams in industries including communications, software, pharmaceuticals, semiconductors, agricultural, chemical, manufacturers, retail, utility, consulting, internet software, government, insurance, and banking. We found a strong correlation between the minority of successful projects and their oversight by a high-level team that was itself cross-functional. A few successful projects didn’t have cross-functional oversight — but we found in those cases that they benefitted from support by a single high-level executive champion. Projects that had strong governance support — either by a higher-level cross-functional or by a single high-level executive champion — had a 76% success rate, according to our research. Those with moderate governance support had a 19% success rate.

Our research showed that the reason why most cross-functional teams fail is because siloes tend to perpetuate themselves: for example, engineers don’t work well with designers, and so on. The solution is to establish a “Portfolio Governance Team (PGT),” where high-level leaders make complex decisions on the various projects in their portfolio together. As they learn to work as a team, that attitude perpetuates itself in the teams under their purview.

In the mid-2000s, for example, Cisco created a cross-functional team, including representatives from marketing, software engineering, manufacturing, quality assurance, and customer service, to heighten security for router lines. The team had a three-layer structure. About 100 people could attend the meetings, but there was a core group of 20 that communicated back to their functions. And, there was a small governance team at the top, made up of two vice presidents, the company’s chief development officer and the leader of the core team of 20 people.

This implementation of cross-functional governance worked. Cisco is now the number one router security vendor, with business growing at about 80%
per year for 5 year followings its introduction, based on a case study that I wrote.

Through our research, we’ve identified some golden rules of governance for PGTs:

1. Every project should have an end-to-end accountable leader. At large companies, where the hierarchy can be multi-layered, cross-functional teams can benefit from a mirroring structure. For example, if the PGT includes vice presidents of engineering, design, marketing and product, a project team could include managers and directors from those functions. But there should be one end-to-end accountable leader overseeing each function, and one end-to-end accountable leader overseeing it all.

However, one of the common breakdowns in cross-functional teams is people missing meetings. That’s why the personal accountable leader for each function also needs to appoint and empower a decision-making substitute. At IBM Global Services, for instance, there are occasions when mid-level managers step in with the authority to make decisions. At IBM, mid-level managers also serve as the first line of defense for cross-functional escalation issues.

 2. Every project should have clearly established goals, resources, and deadlines. Before the beginning of any project, there should be an approved budget, and a charter defining priorities, desired outcomes, and timeframes. Establishing those early on is one of the key roles of the PGT.

3. Teams should have the project’s success as their main objective. Different functions may have their own priorities, and sometimes those conflict with the goals of the project. That’s why it’s crucial to include the success — or failure — of cross-functional projects in compensation and performance reviews of the people who work on or lead teams.

4. Every project should be constantly re-evaluated. PGTs should keep a list of projects and priorities and routinely cut those that aren’t working or that don’t align with business goals. In fact, one of the key roles of the PGT is to follow William Faulker’s advice to kill your darlings. Winnow constantly. Rapidly changing market conditions and customer demands force all companies to recalibrate their high-level corporate strategy. A PGT that is not routinely canceling some projects simply isn’t doing its job.

Cross-functional teams have become ubiquitous because companies need to speed innovations to market. The teams are like arteries, connecting parts of the body, enabling the whole organism to renew itself. That’s why it’s so important for leaders to pay attention to the way cross-functional teams are set up and how well they work: when they don’t function, the organization’s arteries harden. When they do, goals are met and the organization is ultimately more successful.

By Behnam Tabrizi


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