WHEN A TEAM’S WORK
appears to be a model of
collaboration, it may be
easy to overlook the fact
that it generates little
value for the company.
collaboration. Individuals may resent taking on extra work if
they don’t get additional recognition or financial incentives.
Even when collaboration delivers obvious and immediate
benefits to those involved (for example, one unit’s software
package solves another’s current problem), blending the
work of two units that usually operate independently creates
impediments.
These costs, which should be assessed before committing
to a cross-unit project, can be tough to identify and quantify.
And they will vary depending on the collaboration culture of
an organization. But although they can be reduced over time
through companywide efforts to foster collaboration, it’s a
mistake to underestimate them in the hope that collaboration
can be mandated or will naturally improve during the course
of a project.
As DNV decided whether to move forward with its food initiative, the project managers failed to consider the substantial
collaboration costs the company would incur because it wasn’t
set up to collaborate. Mistrust between the consulting and
certification units escalated as they tried – unsuccessfully, and
with much quarreling – to build a common customer database.
“All the team members tried to protect their own customers,”
one manager in the certification group admitted. Because of
the reluctance to share customer relationships, the team had
to significantly reduce its estimates of the revenue to be generated by cross-selling.
Individual members of the cross-unit team were also pulled
by conflicting goals and incentives. Only one team member
was dedicated to the initiative full-time; most people had to
meet individual targets within their respective units while also
working on the joint project. Some people got a dressing down
from their managers if their cross-unit work didn’t maximize
their own unit’s revenue.
Even those who saw the benefits of the initiative found it
hard to balance their two roles. “We all had personal agendas,”
said one senior manager in the certification group. “It was difficult to prioritize the food initiative and to pull people out of
their daily work to do the cross-area work.”
Although assigning a financial number to collaboration
costs is difficult, I estimate that the cash flow sacrificed as a
result of tension between the two groups, which scotched
probably one in two cross-selling opportunities, was roughly
$20 million.
Had the likely opportunity and collaboration costs of
DNV’s food-safety project been estimated, the project would
have looked decidedly less attractive. In fact, managers would
have seen that, rather than a collaboration premium, it was
likely to yield a collaboration penalty of something like
$5 million – that is, the projected return of $40 million less
an opportunity cost of $25 million and collaboration costs of
$20 million.
How Collaboration Can Go Right
That’s not the end of DNV’s story, however. Several months after the firm abandoned the food-safety initiative, Henrik Madsen was named CEO. He had seen firsthand the poor business
results, wasted management effort, and ill will spawned by the
initiative, having been head of the certification unit at the time.
But he also believed that performance could be enhanced by
collaboration at the traditionally decentralized DNV.
Madsen quickly reorganized the firm into four market-oriented business units and began looking for collaboration
opportunities. His executive committee systematically evaluated all the possible pairings of units and identified a number
of promising opportunities for cross-selling. The unit-by-unit
analysis also revealed something else important: pairings that
