The Effects of Teams’ Co-location on Project
Marina Mendonça Natalino Zenun
, Geilson Loureiro
and Claudiano Sales
Instituto Tecnológico de Aeronáutica – ITA, Brazil.
Instituto de Pesquisas Espaciais – INPE, Brazil.
Empresa Brasileira de Aeronáutica S. A. – Embraer, Brazil.
Abstract: This paper aims to present an analysis between teams’ co-location and project
performance. In order to achieve product development project success many decisions shall
be made before the project kick-off. One of these decisions is to whether co-locate or not the
project team. But, what are the effects of teams’ co-location on project performance? The
paper provides a literature review about teams’ co-location, its advantages and
disadvantages, virtual teams and project performance parameters. A table is then proposed
to be used as a guide to determine the degree of success of projects. This paper also presents
a case study where 3 pairs of similar New Product Development (NPD) projects were
analyzed. In each pair of cases, the first NPD occurred using a co-located team and, in the
second case, a virtual team (not co-located team) was adopted. The project performance
parameters for each case were identified using the proposed table from which we concluded
that co-located teams appears to deliver better performance at least in the “internal project
efficiency” parameters. Further research involving a larger sample of cases is still necessary
to confirm these conclusions.
Keywords: Co-location, Project Teams, Virtual Teams, Project Success
NPD project performance has been widely studied in the last 20 years by
researchers both from the Product Development and the Project Management
arenas. According to these authors [1, 2, 3], many factors may result in a project
failed. Within these reasons, it may be pointed a classic reason: the project is not
structured appropriately (see, for instance, ).
Within the broad topic “project structuring” we find the theme “project
organization approach”. Many authors [4, 5, 6] and practitioners believe that one
ideal situation for project organization is getting the team members on a physical
common area, which it is called team co-location. Some other authors, on the other
Corresponding Author e-mail: email@example.com
2 M. M. N. Zenun, G. Loureiro and C. S. Araujo
hand, believe that co-location is not always a must, and that in some cases it is
completely unnecessary and even counter-productive [7, 8]. For the companies, on
the other hand, co-location always means extra-costs in the expectation of better
In this context this paper aims to present and discuss the early results of a
study at a major aerospace company which tries to shed some light on the complex
relationship between teams’ co-location and project overall performance.
In order to achieve this goal we start by providing a literature review on
project teams, describing teams’ co-location, its advantages and disadvantages, and
virtual teams (Section 2). In the third section, we propose a table with project
performance parameters to be used as a guide to determine the degree of success of
a certain project after a number of dimensions. In the fourth section, we present a
case study performed in an aerospace company showing the project performance
parameters with teams co-located and not co-located. Finally, it concludes with
limitations and future research.
2 Literature Review on Project Teams
The concept of a “team” is described as a small number of people with
complementary skills who are equally committed to a common purpose, goals, and
working approach for which they hold themselves mutually accountable. It is
important to notice that getting a group of people to work together (physically) is
not enough to make this group of people into a “team”. Teams are different from
working groups. The first one promises greater performance than the last one .
In this paper, the word “team” means a real team not just a working group.
When the team members are co-located there is a common physical area
specifically allocated to the execution of the tasks related to the project. The team
members shall seat close together. By close, it is defined as close enough that they
can overhear each other’s telephone conversations .
In the other hand, the not co-located teams or virtual teams as consider in this
paper, is a team comprised of members in different locations and in same cases are
also culturally diverse.
2.2 The Advantages and Disadvantages of Co-location
The probability of communication is high with small physical separation distance
and falls off drastically when people are located more than 10 meters from one
another, as showed in the Figure 1 .
Relationship between Teams’ Co-location and Project Performance 3
Figure 1. Project Communication frequency versus separation distance 
The key point is that co-location enables the informal communication. The
water cooler metaphor is used to explain this phenomenon. The water cooler effect
represents a belief that conversations that develop in and around a water fountain,
or in a cafeteria, significantly enable knowledge transfer, which indirectly
contributes to positive work relationships .
When the team members are co-located, they can focus their collective energy
on creating the product. This situation can result in lasting camaraderie among
team members, resulting in a huge project challenge: The team spirit .
As advantages, besides communication and team spirit, the literature shows that
co-location provides an adequate environment condition for decision making,
collaboration, trust between team members, and effective interpersonal
relationships [11, 12, 13].
Co-location is regarded as one of the key ingredients in shortening development
cycles at many companies, such as Chrysler, Black & Decker, and Motorola .
However, team co-location means a representative project cost increase,
sometimes including the need for people re-location or even the requirement for
new infrastructure to allocate the complete team. During the development of its
ERJ 170/190 series, for instance, Embraer Aerospace had to build an entirely new
building in order to accommodate the entire product team of around 600 engineers
from various Countries. This collocation costs indeed increases drastically when
we consider that in some industries such as the aerospace; the needed specialists
are spread around the world. Some more concerns are summarized below:
• Lack of a permanent office home and as a consequence, the employee will
be distant from his functional area, loosing some technological up date ;
• Functional bosses worried about losing control of theirs employees .
Further, based on the authors’ experience, some more concerns would be included:
• The fact that moving very often represents an inconvenience and/or a
trouble for the involved people;
4 M. M. N. Zenun, G. Loureiro and C. S. Araujo
• Adaptation difficulties in another place, sometimes in other countries
(cultural differences and operational difficulties, e. g.: need to move the entire
2.3 Virtual Teams
Communication versus separation distance studies have been performed by authors
such as Allen . At the time of his studies (1977), modern electronic systems and
solutions were not widely available as today, such as e-mail, video conferencing,
internet, intranet, web, voice mail, faxes, etc. More recently various authors have
put forward the proposal that these electronic resources are able, to different
degrees, to supersede the physical co-location and make the virtual teams possible.
Smith & Reinertsen (1998) , for instance, believe that the virtual co-location
tools available today can supplement physical co-location but not supersede it.
Katzenbach & Smith (2003) , on the other hand, assert that “electronic”
interactions can work, especially if they are supplemented from time to time by
However, studies from the human communication point out the enormous
importance of the human aspects which can be observed in a conversation; as body
language, intonation, etc . According to these studies, face-to-face conversation
is still much richer than an electronic conversation due to the fact that available
media and technology is not able to capture and transmit these human behavior
characteristics [5, 6, 7]. It does appear that NPD projects that have more frequent
face-to-face meeting enjoy better success .
Many firms apply project teams spread around the world in their development
efforts. Management either believes that such spread is essential, or is not willing
to pay the high price of co-location. But, sometimes, management just is not aware
of how inefficient its dispersion makes its teams. These authors  mentioned an
example where there were three teams located in sites with the time differences of
about as high as 8 hours: When the first team finished its work, it was shipped
electronically to the next office, which then worked on the design for a shift. Then
the design was moved to the next office so that they actually get three times as
much effort per day as the design circles the globe. However, what really happens:
they saw firsthand how designs tend to get redesigned each time a new designer
takes over. It was three redesigns per day .
Literature in virtual teams states that this type of teamwork has still not
achieved the same performance as teams co-located [5, 6, 7].
3 Parameters of Project Performance
To evaluate the relationship between teams’ co-location and project performance,
this paper uses a parallel between project performance parameters proposed by
Clark et al.  and the key success indicators proposed by Shenhar et al. .
The project performance parameters proposed by Clark et al.  are: quality,
lead time and productivity.
Relationship between Teams’ Co-location and Project Performance 5
1 – Quality: The project affects quality at two levels: the level of the design;
design quality, and the organization’s ability to produce the design; conformance
2 – Lead time: To achieve a high performance considering the lead time is not
just meeting schedule. Lead time is a measure of how quickly an organization can
move from concept to market. It is important to development lead time because the
time to market is shorter than ever .
3 – Productivity: It is considered as the level of resources required to take the
project from concept to commercial product. This includes engineers hours
worked, materials used for prototype construction, and any equipment and services
the organization may use. Productivity has a direct though relatively small effect
on unit production cost, but is also affects the number of projects an organization
can complete for a given level of resources .
Figure 2 shows the interaction among these 3 dimensions of project
Figure 2. Project Performance 
In addition, the key success indicators proposed by Shenhar et al.  is a set
of measurable success criteria, divided in four:
1) Project efficiency: Internal project objectives such as meeting time and
2) Impact on the customer: Immediate and long-term benefit to the customer.
3) Direct and business success: Direct contribution to the organization.
4) Preparing the future: Future opportunity (e.g. competitiveness or technical
The Table showed on the Figure 3 is proposed as a guide to determine if the
analyzed projects achieve the success or not. It is applied in the case studies
discussed in the following section.
6 M. M. N. Zenun, G. Loureiro and C. S. Araujo
Figure 3: Primary success categories, key success indicator, and project performance
4 Case Study
What are the effects of teams’ co-location on project performance? What are the
relationship between co-location and lead time; co-location and productivity; co-
location and quality? In order to try to answer these questions a case study was
performed in a major aerospace company. Figure 4 illustrates the relationships to
be investigated empirically through this case study.
Relationship between Teams’ Co-location and Project Performance 7
Figure 4. A framework of the possible relationship between teams’ co-location and project
4.1 Case Study and Data Collection
3 pairs of similar NPD projects were chosen and analyzed. In this study we defined
“similar NPD projects” as those involving the development of systems with similar
design characteristics and identical or close number of technologies. It was also
used as selection criteria the following items: Minimum of seven different
technologies involved in the project (including manufacturing) and a minimum of
10 people involved in each project team. For each pair of projects, the first
occurred with a co-located team whereas the second was carried out by a non co-
The previous proposed table (Table 1) was used to evaluate the success project.
The project performance parameters were identified according to ranking below.
Values from 1 to 5 were attributed for each parameter.
Very low (1) About 20% do total
Low (2) About 40% do total
Medium (3) About 60% do total
High (4) About 80% do total
Very high (5) About 100% do total
The data used to attribute the values were: data from project planning, as
planned project duration and real project duration, time to market, planned budget
and real budget, data from commercial and marketing areas as customer daily
report, marketing perception, customers complains, and people interviews.
The case study results are presented in Figure 5.
8 M. M. N. Zenun, G. Loureiro and C. S. Araujo
Figure 5: Project performance parameters for the analysed projects
4.2 Data analysis and Results
In the 1st Case, the performance achieved with the co-located team is little higher
than the performance achieved with the not co-located team (4,2 and 4
respectively). The difference appears in the Internal Project Efficiency (Pre-
completion) in the parameters: how quickly is the project and completing within
budget which indicate lead time and productivity.
In the 2nd Case, the performance achieved with the co-located team is also
little higher than the performance achieved with the not co-located team (4,9 and 4
respectively). The difference appears in the Internal Project Efficiency (Pre-
completion) in the following parameters: how quickly is the project, meeting
schedule and completing within budget which indicate lead time and productivity.
In addition to this, a difference appears during the Impact of the customer phase
(Short term), when the NPD with a co-located team has achieved a performance
lower than the not co-located team, in the fulfilling customer’s needs parameter
which indicates quality.
In the 3rd case, the performance difference between the 2 projects is highest
(4,9 and 3,3). Besides the differences in the Internal Project Efficiency (Pre-
completion), there are also differences which appear in Impact of the customer
phase (Short term), Business and Direct Success (Medium term) and Preparing for
the future (Long term). These differences are showed in figure 6.
The common differences in the 3 cases, related to the NPD with co-located and
not co-located teams, are associated to the Internal Project Efficiency involving
parameters which highlight lead time and productivity, such as: project duration,
meeting schedule and completing within budget. Excepting the 3
performance in quality are most the same in the NPD with co-located and not co-
located teams, in parameters which represent Impact of the customer (Short term),
Business and Direct Success (Medium term) and Preparing for the future (Long
Relationship between Teams’ Co-location and Project Performance 9
Analyzing the collected data, it was also observed that the number of product’s
modifications in the NPD with not co-located teams was much higher than the
number of product’s modifications in the NPD with co-located teams. These
product’s modifications probably provoke a lead time increase, however, it seems
that they also contribute to the NPD with not co-located teams achieves the same
quality as the NPD with not co-located teams.
5 Conclusion, limitations and Future Work
This paper presents an analysis of 3 NPD-project performance, in terms of lead
time, productivity and quality. These 3 parameters were analyzed not only related
to project efficiency, but also related to the impact on the customer, direct and
business success and preparing the future, short term, medium term, and long term
respectively, according to key success indicators proposed by Shenhar et al. .
Study findings indicate that the NPD with co-located teams achieves a shorter
lead time and a higher productivity when compared to a NPD with not co-located
teams. There is no empirical evidence found in this study which indicates that co-
location impacts quality. However, besides co-location, others project’s factors, as
team manager, team experience among others could be influented these results.
The decision of co-location shall be made by the organizations before the
project kick-off. Besides effects of co-location on project performance, researches
should study the relationship between project contextual characteristics and their
impact on teams’ co-location. Based on effects of co-location on project
performance it should be traced a relationship between project contextual
characteristics and the decision of co-location.
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