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Cross-functional Teams and their Role in Increasing Competitiveness of the Organizational Partnerships

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Abstract

In this paper we review the role of the cross-functional teams for increasing competitiveness of the various organizational partnerships. The present complexity of the international business environment, the high competition and the economic globalization push many organizations to seek for new organizational partnerships, in order to faster reach their goals. Such organizational partnerships may be the networks of enterprises and clusters. For both of them, the main factor to increase competitiveness is the cross-functional teams (CFT) and their effective team work. Through communication and mutual understanding, the CFT can overcome barriers between member entities and lead to better economic parameters. The main employed method was a survey of the management literature about CFT. The result is a clear presentation of the CFT and of their effective work manner to reach a competitive level for various organizational partnerships.
Performance and Risks in the European Economy
453
Cross-functional Teams and their
Role in Increasing Competitiveness of the Organizational Partnerships
Laura Dinca
1
, Carmen Voinescu
2
Abstract: In this paper we review the role of the cross-functional teams for increasing competitiveness of the various
organizational partnerships. The present complexity of the international business environment, the high competition
and the economic globalization push many organizations to seek for new organizational partnerships, in order to
faster reach their goals. Such organizational partnerships may be the networks of enterprises and clusters. For both of
them, the main factor to increase competitiveness is the cross-functional teams (CFT) and their effective team work.
Through communication and mutual understanding, the CFT can overcome barriers between member entities and lead
to better economic parameters. The main employed method was a survey of the management literature about CFT.
The result is a clear presentation of the CFT and of their effective work manner to reach a competitive level for
various organizational partnerships.
Keywords: cross-functional teams; competitiveness; effectiveness; network
JEL Classification: M21
1 Introduction
Generally speaking a company is being competitive when it manages to produce high quality goods
and services at a lower price than its competitors. Competitiveness may be also defined as the
possibility to get performances after being present on the market (Gavrila & Gavrila, 2008). But
giving the nowadays economic complexity, many organizations are moving to a new organizational
model, such as various partnerships, networks of enterprises or clusters in order to reach their purpose
faster by putting together their capital and skills. “In a globalizing economy, competitiveness means
information and know-how rather than capital and physical assets (Nedelea & Paun, 2009). The more
an organization develops the skills and knowledge of employees, the higher is its capability to face the
market.
When a knowledge based economy is being developed, a process of revision the internal organization
of the enterprises takes place, which is not any more based on Taylor pattern (Dan, 2007).
Factors that have promoted organizational partnerships can be divided into two categories: motivators
and facilitators (Baker, 2002). Among motivating factors, the most important are: pressure to access
know-how and promote new knowledge and learning, coping with greater competition, obtaining
complementary competencies, managing risk, improving flexibility and complex adaptation. As
facilitating factors, the following can be mentioned: organizational position and reputation, trust,
communication technology and the internet, government and regulatory context.
Networks of enterprises and clusters are created because they facilitate the common use of their
resources, but the dissemination and transferability of the final results too. They include various
1
PhD Candidate, University of Craiova, Faculty of Economics and Business Administration, Department of Management-
Marketing, Address: 13, AI Cuza Street, Craiova, Romania, +40 723 330961, Corresponding author:
laura2dinca@yahoo.com
2
PhD Candidate, University of Craiova, Address: 13, AI Cuza Street, Craiova, Romania, e-mail: carmen_clapan@yahoo.com
European Integration - Realities and Perspectives 2012
454
entities and geographical areas, companies with various objects of activity; their relations are at the
same time of competition and cooperation. For many decades, organizations have been giving higher
priority on managing the external environment by building stronger relationships with customers and
suppliers. These relationships can, but do not always reach the level of organizational partnerships.
Recently, organizations have moved beyond customer/supplier relationships to begin to establish
alliances with their competitors (Mariotti, 1996).
Both network of enterprises on the one hand and clusters on the other hand have a reticular structure,
they are pure networks after all. While network of enterprises is a homogenous concept, the concept of
cluster is a heterogeneous one. The difference is that clusters include, besides companies, universities
and research institutes in their structures.
It’s important to note that various names were used to designate a network organization, such as:
alliance capitalism, agile enterprise, cluster organization, joint venture, meta-corporation, modular
corporation, moebius strip organization, organic organization, small firm network, value-adding
partnership, virtual corporation (Alstyne, 1997).
The network is seen as a structure that answers in the best way to the exigency of a competitive
environment, it’s a manner to respond at the challenges created by the exponential rhythm of the
technological changes. “To form a business network with the purpose to obtain a global
competitiveness seems to be the basis of strategic decisions in many companies today” (Lakhal et al.,
1999).
Regardless of their names, the competitive working of networks implies the harmonious coexistence
of CFT.
2 Concept of CFT
A crossfunctional team is a team formed of at least three members that belong to different functional
entities that are working together to reach a common goal. These members have various functional
skills and experience, and they come from different sections within the organization. More concrete
“Cross-functional teams groups consists of members of different functional areas, (…) such as
engineering, manufacturing or marketing. The cross-functional makeup provides the advantages of
multiple sources of information and perspectives.” (Keller, 2001)
Another approach mentions CFT as a group of people with a clear purpose, representing a variety of
functions or disciplines in the organization whose combined efforts are necessary for achieving the
team’s purpose.
The need for CFT is more and more frequent. Today's companies or corporations have entered a new
business age with rapidly changing technologies and markets. Thus companies are obliged to work
respecting shorter and shorter dead-lines and error-free.
To be able to understand teamwork, it is important to make the distinction between a group and a
team. On the one hand, a group is only a collection of individuals who are brought together for some
specified purpose. A team, on the other hand, is a collection of individuals that have a common goal
and as a whole define, formulate, and agree upon their own purpose, and then works according to that
purpose. Groups are based on the sum of the individual efforts to accomplish tasks, where as, teams
collectively work together to fulfill common assignments. Teams are using collaboration and
communication as well as the constructive conflict. Members of one team also develop mutual
responsibility for the success or failure of the team's endeavor.
Within networks of enterprises or clusters, team member have different professions, so that all the
necessary knowledge and skills to produce a whole output are represented. They are frequently
responsible for producing key products or services. Their business directives, common goals, and joint
accountability tie them together into a cohesive unit. They usually sit together and report to the same
boss (Katzenbach & Smith, 1993).
Performance and Risks in the European Economy
455
People from a team must first share the same values and goals which determine them to agree upon the
teams’ purpose or mission. They must be dedicated to the team's purpose or mission and work to fulfill
it. Certain team members could be hired part time and might show an obvious commitment to their
initial departments where they exert their function. Other team members are being recognized as
experts and enjoy the prestige associated to them. Another part of the team members may consider
they have to keep their trade secrets just to preserve the security for their jobs. All of these
circumstances can adversely influence the integrity of a team.
When they work together as a team, the team members accepted the decisions, mission, goals and
possible problems within the team. Since the team members are coming from various functional
entities and have many interpretations or solutions for the deployment of joint work process, it’s
normal that conflicts appear within the team. Many discussions might take place in order to find the
best conflict resolution. But it is highly important that conflicts be solved in a constructive useful
manner. CFT may be considered bridges to success, because the whole is more effective than the
amount of parts. CFT make an exchange of ideas and for sure show an improved creativity.
For the CFT to be effective, some internal and external factors are required. As internal factors the
following can be mentioned: communication, leadership, conflict resolution, while as external factors
the most important are rewards, support and delegation of powers. To be able to reach their mission,
the CFT members need time to know each other and to work together, they need to understand their
tasks, they need a motivation to mobilize themselves to reach the common goal, and they need to
avoid conflicts, which is very often difficult to be achieved.
All partnerships that use CFT need to foreseen teamwork training in their organizations, so that to
enable CFT members to work together with the lowest conflict and no confusion of direction. For this,
CFT members must have a clear picture of their tasks and role within the team. By taking specialized
training, they have the possibility to very well understand all the rules for successful teams. Knowing
these, they can adjust their behavior in order to become a real productive CFT member. Training
sessions can also play a role of the ice breaking facilitating the mutual interaction and knowledge
between team members.
The duration of the CFT within a partnership may be temporary and permanent, depending on the
willingness to work together for more than one project, shown by the managers of the member entities.
Within the CFT, we assist to a change of the team leader traditional role. This leader does not give
orders or assign task, on the contrary he acts as a team member by asking the others to get involved in
the decision making process. The leader checks the evolution of tasks fulfilled by the team members,
encourage their performance and makes sure if the on going activity respect the initial plan. At the
same time, the leader is the key element in communication with suppliers, managers and other
stakeholders. Overall, he or she keeps a definite vision of how to reach the final goal and lead
activities to get it.
It is important to note that the role of the cross-functional team in using the expertise of many different
people is coupled with the task of enlisting support for the work of the team. This is critical for
successful cross-functional teamwork (Parker, 2003).
3 Competitive Advantage of the CFT
CFT and their existence within organizational partnerships signify the main factor to obtain a
competitive advantage in today world business, characterized by high technology and unstable
markets. But efforts for training are required in order to have effective CFT, they do not happen
without special preparation. An organizational partnership cannot just put together team members
from various professionals entities and ask them to work effectively. Effective teams are obtained
through a special commitment to the values and purposes of the organization and through a developed
skill to adjust one to each other. This kind of skill is only obtained by training. “CFT have to be well
informed and highly trained through involvement and education before they can work together
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effectively” (Mohamed et al., 2004). It’s important that CFT members to mobilize all their resources
and competences in order to contribute to the decision making process.
At the same time, it’s important that the effort of adjusting to the organization values to be done in a
rapid manner. Although almost all networks today use CFT, there is a difference between those that
have successful CFT and those that do not have. As Peter Senge (cited by Woodward, 2012) used to
say “The only significant competitive advantage is your organization’s ability to learn faster than the
competition”. The content of the training delivered to CFT includes the best practices consecrated in
that specific field.
Since we are living in this information age, it is more and more obvious that “the competitive
advantage can be purchased with the currency of knowledge” (Foss, 1996). All successful companies
give a high importance to learning activities and spread knowledge both at the general level, but at the
individual level too. They also invest in technical endowment and competitive employees, while
developing tools and methods to support them (Conner & Prahalad, 1996).
One of these methods is even CFT, whose existence changed the traditional organization and also the
working relationships within a network. In the cross-functional organisation, information circulate in a
different way comparing with the traditional organization. Thus it doesn’t pass through hierarchical
channels, but between departments and functions. The activities in the cross-functional organizations
are customer-oriented, and no task or skill-based logic, as traditionally (El Amrani et al., 2003).
The CFT bring six important competitive advantages to organizations that successfully implement and
manage them: speed, complexity, customer focus, creativity, organizational learning, and single point
of contact (Parker, 2003). Thus speed of action is important CFT with a clear mission and vision
must respect the schedule, involve the best specialists, use the whole team, so to reach their goal as
soon as possible. Complexity and creativity are well connected with the leader of the team – this has to
encourage new ideas, to have a free approach of solutions, beyond traditional borders, to be able to
take risks, to promote innovation, to possess the best communication skills, to be very open to
initiatives of the team. The role of leaders is crucial; it’s up to them to create and develop teams within
one organization. “Without leaders and teams, your organization is a dinosaur to go extinct”
(Woodward, 2012).
The new generation of leaders needs to possess the skills to work with groups, to ask questions that
stimulates production of new ideas, to encourage constructive discussions, rephrasing talks, to
communicate in the greatest manner. The new leaders “can obtain technical, scientific, flexible
resources, make conflict resolution, have good relations with stakeholders, business knowledge, can
set goals, exercise co-leadership, facilitation and support (Parker, 2003).
Any CFT must be customer focused, meaning to have a clear picture of what its needs are, to involve
it in satisfying its wishes. Organizational learning means both individual and general use of the best
practices and sharing work experience. Finally, any CFT must have a single point of contact within the
team and outside it.
We notice the importance of learning within networks or various organizational partnerships. It’s
important this learn faster, as market competition is very strong and all companies are tempted to use
the newest management methods and technologies. The difference is given by the manner in which
ideas are being implemented by the networks, and not only by the new ideas themselves. Without the
skill of learning very fast, the rapidly changing business environment will reduce the network’s
capacity to be competitive on the market. This is the main advantage of one organization over another.
Within an organization, the high learning atmosphere must be supported by its leaders, so thus
learning organizations are happy to be confronted with change; their usual manner of working is
struggling with improvement. On the contrary, within the non-learning organization, creativity is
restricted; barriers to new approaches are being built by the leaders, so that their potential to be
competitive on the market is being more and more reduced. This kind of organizations does not use
their most precious resource – employees and their ideas.
Performance and Risks in the European Economy
457
CFT learn by using various methods: some members make an accurate observation of their colleagues,
or are getting more and more involved in problem solving, others transfer knowledge from one to
another, or use intensively their previous experience and adjust is to the new reality.
Forming one CFT and getting its effective work-manner is quite difficult to be done and also rare. It is
difficult, because people are proud, but vulnerable, are suspicious, do not like working together, ask
for recognition especially in high competitive companies, where mistakes are generally very rare. But
when these barriers are overtaken, it’s great for that organization. In his book “The five dysfunctions
of a team”, Patrick Lencioni mentions the five functions of a great team: building trust, mastering
conflict, achieving commitment, embracing accountability, focusing on results (Lencioni, 2002). Out
of these, building trust is the most important. “Trust is the foundation of effective team collaboration.
If members do not feel safe in a group, they will watch for signs of betrayal or disrespect, overreact to
threats, become argumentative when they feel slighted, and take feedback too personally. They may
withdraw, or they may overcompensate by dominating the group or positioning for recognition”
(Lencioni, 2002).
Another way to form effective CFT is using the tacit knowledge. The word “knowledge” can be
explained by using “information”. Explicit and tacit knowledge coexist within a team. While explicit
knowledge means that information that can be easily decoded, tacit knowledge means information that
is not easily to be detected and conveyed. “An understanding of tacit knowledge by team leaders can
greatly enhance the effectiveness of individual interactions and improve the synergy of teams”
(Sherman & Lacey, 1999). In order to take advantage of the tacit knowledge, it has to be transformed
into new knowledge by using teambuilding techniques. Thus the new knowledge is being transformed
into a source of the competitive advantage for a company.
4 Limitations of CFT
Nowadays, giving the complexity of any organization manner in various companies, larger or smaller,
we attend a double manifestation of CFT. On the one hand, CFT are very effective and have already
been recognised as sources to obtain competitive advantages. On the other hand, CFT show certain
limitations of their work manner within a company. Some specialists say that the most CFT are
dysfunctional, but most companies aren’t aware of this problem. Stanford University achieved a study
of 95 teams in 25 organizations and found that near 75% of CFT are dysfunctional. It’s important to
mention that the teams have been studied by a panel formed of consultants, academics, and industry
experts. The irony is that CFT are the arteries of an organization.
The specialists’ panel identified 3 categories of dysfunctions: governance issues, cross-functional
functional issues, and cross-functional boundaries issues (Tabrizi, 2010). Governance issues refer at
issues exerted by the top management of the companies that may over control the CFT, by budgets,
bottlenecks, lack of accountability. Among cross-functional functional issues we mention the relation
of each team member with his/her function and functional conflicts. For instance when deciding to
form a CFT, the managers may not want to assign the most competent employees, and prefer to keep
them in the basic department. Instead of them, they assign people with lower competence as members
of the CFT. Cross-functional boundaries issues mean problems that happen when a CFT deals with
horizontal boundaries, such as interfaces with other departments or teams, clients, suppliers and
various other organizations.
Other specialists state that CFT may become isolated from the rest of organization, this affecting both
the CFT and the rest of the employees. “Team members naturally focus inward, concentrating on team
goals, and connecting with team mates” (McDermott, 1999). Isolation can lead to team myopia. That
means that CFT members, since working as an isolated group, show restriction to any idea coming
from outside, thus blocking their creativity.
European Integration - Realities and Perspectives 2012
458
5 Outputs
The outputs of this paper refer at applying CFT in various organizations. Being applied in many top
companies from the USA and Western Europe (i.e. PepsiCola, FranceTelecom) and being more and
more used, the concept of CFT proved its sustainability. First it is obvious that CFT are appropriate to
the new manner of organization of companies and they harmonize with a more and more complex
business environment. CFT are the source for obtaining the competitive advantages by the companies.
At the same time, the concept of CFT has some limitations, too! For instance the study made by the
Stanford University on 95 teams from 25 organizations, mentioned earlier, states that 75% of the CFT
are dysfunctional. The main way to show CFT as dysfunctional teams is the presence of a conflict.
The conflicts arise within the CFT and they need various methods to be worked out. Pretty often,
people are not satisfied within the CFT, since they feel frustration and they feel barriers in using their
full potential.
However, even if this contrast between team members’ dissatisfaction and the general efficiency of
CFT is obvious, the general specialists’opinion is that CFT are main factors for companies to obtain
long-term profitability.
6 Conclusions
The necessity of CFT within the various organizational partnerships is the normal consequence of the
evolution of business environment. The faster it evolves, the more imperative CFT are asked to be
founded.
The study of the CFT’s work manner is very important to be able to identify the most effective way of
people working together within the CFT. The correlation between the team harmony and the
profitability of a network is a direct one.
The approaches about CFT are very complex, starting with the projecting the team and going on with
training, leadership and its efficiency. The majority of specialists consider training and quality of the
leaders as the most important factors to achieve the competitive advantage by the networks using CFT,
since they influence the behaviour of people. Only when the cohesion within the CFT is obtained, the
competitiveness of a network is ensured.
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A model of cross-functional project groups was developed and hypotheses were tested in a study of 93 research and new product development groups from four companies. The results showed that functional diversity had indirect effects through external communication on one-year-later measures. Technical quality and schedule and budget performance improved, but group cohesiveness diminished. Functional diversity also had an indirect effect through job stress on group cohesiveness, which was again reduced. Implications for the development of conceptual models of cross-functional groups and their effective management are discussed.
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It is argued that Kogut and Zander (1992) and Conner (1991) erred in the specific way in which they claimed that a distinct theory of the multi-person firm can be constructed on the basis of a theory of organizational knowledge or from resource-based insights. It is not possible to tell very much of a story about why there should be firms in lieu of notions such as ''opportunism'' or ''moral hazard.'' However, properly interpreted, knowledge-based theories may help shed light on issues relating to the boundaries and internal organization of the firm.
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Business networking for the purpose of becoming globally more competitive seems to form the very basis of strategic decisions in many companies today. The concept of “network company” has recently been the subject of many studies in the literature, perhaps mostly due to its world wide practice among more successful companies. Yet, there is no model-based formal treatment of the concept per se leading to the development of frameworks that are instrumental in formulating networking strategies. This paper addresses itself to formalizing the concept of “network company” within the context of global competition. For this purpose, “network company” is positioned in the value chain of pertinent product–market chain systems and then its functioning is decomposed into a set of minimal and basic components, which are termed “elementary resources, methods, products, and activities”. The set thus defined at that detail level is used to analyze and evaluate “network companies” at any desired condensed level reflecting the needs of a project or a function for the purpose of competitive strategy formulation. The formal analytical framework developed is then discussed in association with three basic approaches to competitive strategy formulation: resource-based strategy, activity-based strategy, and strategy based on the economic theory of the firm. The usefulness of the proposed framework in connection with these approaches is expressed in terms of formal propositions.
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This paper develops a resource-based--knowledge-based-theory of the firm. Its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity. We focus on the polar cases of organization within a firm as compared to market contracting. There will be a difference in the knowledge that is brought to bear, and hence in joint productivity, under the two options. Thus, as compared to opportunism-based, transaction-cost theory, we advance a separate (yet complementary) answer to the question: why do firms exist? Our aim is to develop an empirically relevant and complementary theory of why firms are formed: a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information. We assume limited cognitive abilities on the part of individuals (bounded rationality), and assume that opportunistic behavior will not occur. The latter allows us to determine whether resource-based theory has independent force, as compared to the opportunism-based, transaction-cost approach. The paper predicts choice of organizational mode, identifying whether firm organization or market contracting will result in the more valuable knowledge being applied to business activity. The resource-based predictions of organizational mode are compared and contrasted with corresponding opportunism-based, transaction-cost ones. A principal point is that knowledge-based considerations can outweigh opportunism-related ones. The paper also establishes the relation of a theory of the firm to a theory of performance differences between competing firms.
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In a globalizing economy, competitiveness means information and know-how rather than capital and physical assets. The function of knowledge management is therefore to allow organizations to leverage their information resources and knowledge assets by remembering and applying experience. An organization’s ability to compete on the market is increasingly seen as depending on the skills and knowledge of its employees, regarded as intellectual capital, and on its capacity to preserve and use as much as possible of this knowledge in knowledge-bases and expert-systems. However, knowledge evolves rapidly, due to the continuous changes of the business environment, and the useful life span of the organizational skills is decreasing, which means the survival and competitiveness of an organization is linked to its ability to produce and use knowledge as well as to include the results of the learning process in organizational competences and virtual products.
The State of Network Organization
  • M V Alstyne
Alstyne, M. V. (1997). The State of Network Organization. Journal of Organizational Computing, Vol.7, No. 3, pp. 88-151.