Why virtual teams fail, and how to make them work (part 1)

Turning back?

In times where many companies push their employees to work from home and employees request this new freedom, YAHOO’s announcement surprised putting away with it all and returning to the old 9-to-5 office hours.  (WSJ, March 5, 2013)

Senior leaders like YAHOO’s new CEO, Marissa Meyer, have doubts if remote working models work – or they struggle how to make it work effectively.

Executive paragigm: Cutting cost vs. increasing productivity

When organizations move to remote work models such as “working-from-home” or variations of it, their primary objective is either

  • Saving fix cost by reducing their office space footprint or
  • Increasing the productivity of their workforce.

They cannot have both because once hard decisions have to be made, the other side falls short – and hard decision will have to be made on the way.

If the chosen approach is to increase productivity, the implementation focuses on how to enable employees to become significantly more productive in a sustainable way, even if it incurs cost lower than the productivity gains.

Open spaces for collaboration

Sadly, however, cost cutting tends to rank top on the list for large and mature organizations, which can ultimately sacrifice productivity. Reducing office space “footprint” aims to cut cost from entertaining the real-estate and work environment including everything from utilities, to furniture, to site security, to property taxes, etc.

In practice, individual (‘closed’) offices are replaced by open office environments with the goal to have more employees working in less, shared space.  Setting up colorful open office environments with cubicle clusters or zones for different work purposes is often sold as boosters for creativity and innovation, which somewhat obscures the true motives.

These office setups typically mimic the environment and agility of entrepreneurial start-up companies.  They suggest increased collaboration by enabling those spontaneous and valuable ‘water cooler’ talks that randomly bring together a diverse mix of employees to exchange their ideas and collaborate on a spur, which then leads to new products and creative solutions.  Some offices spaces even seem inspired by “Willy Wonka’s Chocolate Factory” (with less edible elements): nice to look at and tempting to get close but caution is advised before taking big bites…

Why not to focus on cutting cost

While architecture and interior design can very well affect creativity and collaboration, there are many reasons why this approach tends to fall short:

  • The goal of cost-cutting is to have more people sharing less space, so the open office environment works best when not all employees work there at the same time, which becomes the end-game of cutting cost.  The approach consequently requires some employees to work remotely, typically from home as ‘tele-commuters’, which effectively leads to creating virtual teams.
    Thus, not all employees are physically present at the same time to start off with, which defeats the idea of spontaneous meetings around the water-cooler or pulling teams together spontaneously as needed.
  • Size does matter:  start-ups take their energy and agility from everyone collaborating in the same space at the same time, which is the opposite scenario of large companies trying to reduce this footprint and, subsequently, ending up moving towards remote working models.
    The start-up model does not scale for large, mature companies.  This is one of the reasons why large companies often break the monolithic organization at some point to form more agile hence competitive entities.  A lesson learned perhaps from Charles Darwin’s “survival of the fittest.”
  • Since cost cutting has priority, typically, the workforce was trimmed down, so the remaining staff carries more work on less shoulders.  Not only does this leave less time for the remaining office staff to hang out next to the water-cooler for a random chat, but there is less staff to meet and hang out with in the first place.
    Little to no attention is given on how to make the remaining workforce more productive to manage the increased workload and invest accordingly, as here these ‘hard decisions’ come in and cost cutting is given priority.

Now, this does not mean there are no more water-cooler talks – they do happen and can be extremely valuable.  But they happen less frequent and with a smaller pool of people you could possible bump into randomly.  Since this “water-cooler innovation” model does not scale under the cost-saving paradigm, it effectively reduces the innovation potential resulting from random meetings overall.

What does your workplace look like, does this sound familiar at all?

Paying the price for cutting cost: Virtual Teams

Under a cost-cutting paradigm, the need for working remotely leads to the formation of more virtual teams throughout the organization.  We already find 66% of virtual teams in Global 500 Enterprises include members from at least three time zones and 48% including external business partners (Harvard Business Review study of Project Management Best Practices in Global 500 Enterprises).

When ‘cost-cutting’ has priority, the performance of virtual teams still comes second.  Faced with the increasing need to enable communication for a distributed workforce, for ‘cost-cutting’ organizations here comes the next challenge:  how to facilitate collaboration and information flow on a budget?
This is one of the hardest decisions management is confronted with.

With tight budgets in mind, the focus turns to ‘enabling technology’ and often leads to implementing a better phone or teleconferencing system.  However, cost-saving and -consequently- company-wide standards lead to compromises and mediocre features due to (what else could it be?) cost saving considerations.

What is the cost of ‘rich’ communication?

Face-to-face communication remains the ‘gold standard’ (more about the why follows in part 2 of this blog post.)
Typically, information-rich channels such as latest ‘tele-presence’ systems are disregarded for their ‘expensive’ price tag.  They allow communicating in the broadest possible (virtual) way peer-to-peer. 

If they are purchased at all, they often remain restricted for privileged use by executives; so there is an implied business case for rich communication channels.  

Unfortunately, these are far less frequently shared with their staff lower in the organizational hierarchy.  Regular employees and middle management are often enough left alone with more limiting conferencing systems and other technology to figure out how to make ‘virtual teams’ work.

Interestingly, I have never heard serious consideration given to quantify the opportunity cost, i.e. what the costs are of not implementing a tele-communication system that gets as close to face-to-face conversations as possible.  It would be interesting to find out if the actual cost to buy a more expensive system is offset by the gains for its users and businesses across the organization, don’t you think?

Though this would be coming from the less popular approach to increase productivity…

Composing effective teams

Also the mix of the team members should be considered and lots more can be said about this aspect alone, so let’s just pick a few that that tend to be less on people’s minds:

For example, generational differences translate into different work styles and preferences than can strengthen or weaken a team.  As an example: “Generation Y for managers – better than their reputation?

Another soft factor that remains stubbornly neglected is the team composition of introverts and extroverts complementing each other for better results.  Extroverts seem favored by hiring managers over introverts, but extroverts don’t necessarily make good team mates as recent UCLA studies show:

Introverts are often perceived anxious or neurotic, which feeds into the stigma of volatility and negativity that can drag on the team, when in fact they tend to work very hard so not to let their team mates down.

In contrast, extroverts appear to be the better team players yet in their core personality its all about being in the center of attention.  Extroverts are good at building relationships and getting themselves noticed; this self-presentation may leave a good first impression but the self-centric core proves rather disruptive in collaborative situations, so the researchers concluded.

Also little attention is given to whom needs to work together and should be closer connected or even collocated; this approach of looking at network and workflow is usually sacrificed by enforcing cost-control top-down.  Established departmental silos and cost-centers effectively become barriers for collaboration rather than by following the internal workflow and connections throughout the lower levels of the hierarchical pyramid that often remain hidden from the executive view down from the pyramid’s tip.

Why to Invest in communication and collaboration

A study on communications ROI by Towers Watson finds a 47% higher total returns to shareholders by companies that are highly effective communicators. (Capitalizing on Effective Communications, ROI Study, 2010)

Even more reason to focus on enabling collaboration and productivity – and to invest into enabling communication and relating technology accordingly.

Let’s leave the misery of why virtual teams fail here – check back soon for part 2 on How to make virtual teams work!

Author: Stephan Klaschka

Stephan Klaschka is an awarded innovation executive, C-level consultant, Intrapreneur, and serial entrepreneur with over 25 years of international work experience. He held various senior business operations, strategy, regulatory compliance and innovation roles with Boehringer Ingelheim, leaving as Director of Global Innovation Management and Strategy. In this first-of-its-kind position, Stephan's work was central to the new growth rejuvenation strategy as a catalyst to initiate and drive pivotal innovations, leadership development, and disruptive and digital transformation across the Boehringer Ingelheim group worldwide. He has recently served as CEO interim of the "German Institute for Telemedicine and Health Promotion" (DITG). Stephan holds Masters Degrees in Computer Science, Management, and Business Administration as well as advanced degrees in Strategy, Innovation, and Leadership from leading schools in Europe and the United States. PMP certified. He has published extensively and created award-winning workshops on topics including intrapreneurship, healthcare, pharma, and new technologies. Stephan currently consults independently out of New York.

4 thoughts on “Why virtual teams fail, and how to make them work (part 1)”

  1. Interesting perspective on virtual team fail / success factors. Looking forward to the next installment.
    Took the liberty of posting it to my Scoop.It stream on virtual teamworking.

    Arie

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