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MANAGING COLLABORATION
How to Manage Virtual Teams Dispersed teams can actually outperform groups that are colocated. To succeed, however, virtual collaboration must be managed in specific ways. BY FRANK SIEBDRAT, MARTIN HOEGL AND HOLGER ERNST
TEAMS ARE THE typical building blocks of an organization: They provide companies with the means to combine the various skills, talents and perspectives of a group of individuals to achieve corporate goals. In the past, managers used to colocate team members because of the high levels of interdependencies that are inherent in group work. Recently, though, more and more companies are beginning to organize projects over distance, with teams increasingly consisting of people who are based in dispersed geographical locations, come from different cultural backgrounds, speak different languages and were raised in different countries with different value systems.
Over the past 10 years, various studies have investigated the differences in performance of colo- cated and dispersed teams, quietly assuming that members of the latter never meet in person and members of the former work together in the same office throughout a project. But dispersion is not
COURTESY OF SAP SUMMER 200
THE LEADING QUESTION What do managers need to know about virtual teams? FINDINGS 10The overall effect
of dispersion (people working at different sites) is not necessarily detrimental but rather depends on a team's task- related processes, including those that help coordi- nate work and ensure that each member is contrib- uting fully.
1,Even small levels of dispersion can substantially affect team performance.
01-When assembling a virtual team, managers should carefully consider the social skills and self-sufficiency of the potential members.
9 MIT SLOAN MANAGEMENT REVIEW 63
MANAGING COLLABORATION
only a matter of degree; it is also a matter of kind.
Most teams are dispersed on some level. They can be
spatially separated (from "across the hall" to "scat-
tered worldwide"), temporally separated (spanning
different time zones), configurationally uneven (for
example, five members in one location and two in
another) and culturally diverse. And as past research
has repeatedly shown, even the smallest degrees of
dispersion, such as working on different floors in
the same building, can greatly affect the quality of
collaboration.' In our own study, we have investi-
gated the performance of 80 software development
teams with varying levels of dispersion, including
those with members in different cities, countries or
continents. (See "About the Research.") Such geo-
graphically distributed teams have commonly been
referred to as "virtual" teams, 2 but that label is some-
ABOUT THE RESEARCH We studied 80 software development teams from 28 labs worldwide (including labs
in Brazil, China, Denmark, France, Germany, India and the United States). The labs
varied in size (employing between 20 and 5,500 software developers), and each
team contained up to nine members. Our research included those software devel-
opment projects that were completed within 12 months prior to data collection. A
total of 392 managers, team leaders and team members participated in the study,
and data from multiple respondents were used to ensure the validity of results and
to overcome common method bias. To measure geographic distribution, we used the descriptions provided by team
leaders to identify each member's office location. We then calculated a dispersion
index taking into account the following factors: (1) miles between team members,
(2) time zone difference, (3) number of locations per team, (4) percentage of isolated
team members and (5) unevenness of membership across sites. To assess team
performance, managers were asked to evaluate the teams with respect to effective-
ness (in terms of product quality, reliability, usability, customer satisfaction and so on)
and efficiency (in terms of adherence to preset budget and schedule constraints).
thing of a misnomer, because these groups are very
real with respect to the work they can accomplish.
We found that virtual teams offer tremendous op-
portunities despite their greater managerial
challenges. In fact, with the appropriate processes in
place, dispersed teams can significantly outperform
their colocated counterparts.
The Bright and Dark Sides of Dispersion A team's level of dispersion is neither preordained
nor fixed; rather, it is an organizational design pa-
rameter that companies can set and adjust. When
making such decisions, managers should take into
64 MIT SLOAN MANAGEMENT REVIEW SUMMER 2009
consideration the various pluses and minuses of sep- aration. (See "The Pros and Cons of Dispersion.")
Not surprisingly, several studies have found that
collaboration across distance is more difficult than
in a colocated environment. Potential issues include
difficulties in communication and coordination,
reduced trust, and an increased inability to estab-
lish a common ground. In contrast, proximity tends
to promote more frequent communication and the
development of closer and more positive interper-
sonal relationships. Indeed, the regular physical
presence of coworkers improves people's feelings of
familiarity and fondness, and frequent informal in-
teractions serve to strengthen social ties. Conversely,
physical distance decreases closeness and affinity,
which then leads to a greater potential for conflict.
Distance also brings with it other issues, such as
team members having to negotiate multiple time
zones and requiring them to reorganize their work-
days to accommodate others' schedules. In such
situations, frustration and confusion can ensue, es-
pecially if coworkers are regularly unavailable for
discussion or clarification of task-related issues.
On the other hand, dispersion potentially has
substantial advantages. First, in order to accom-
plish increasingly complex activities such as
research and development, companies (particu-
larly larger ones like IBM, General Electric or SAP)
tend to cluster their competencies in different cen-
ters of excellence, which are often scattered
geographically although part of an international
corporate network of operations. SAP Aktienge-
sellschaft, for instance, has its global headquarters
in Walldorf, Germany, but has built up large R&D
centers in India, China, Israel and the United States
in order to reduce costs and leverage their global
know-how in software engineering. Within each of
these competence centers, the depth of expertise
tends to be very strong, while the diversity of func-
tional backgrounds is relatively weak because of
specialization. Managers can take advantage of this
organizational structure by assembling employees
from different locations in such networks to create
a team that can optimally integrate the different
pools of expertise to perform a particular task. 3
Second, companies can take advantage of the
increased heterogeneity that is inherent in the na-
ture of dispersed teams. Virtual teams tend to
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incorporate higher levels of structural and demo- graphic diversity than do colocated teams, and both types of diversity can be highly beneficial. 4
Structural diversity is a direct consequence of hav- ing team members from multiple locations associated with different business units and re- porting to different managers. Such diversity can be highly valuable for teams, because it exposes members to heterogeneous sources of work expe- rience, feedback and networking opportunities.5
In addition, virtual team members are often di- verse in nationality. Although such diversity may complicate team dynamics, it can also enhance the overall problem-solving capacity of the group by bringing more vantage points to bear on a particu- lar project.
6
Performance of Dispersed vs. ColocatedTeams Most past studies have found that dispersion hurts performance. 7 Often, dispersed teams fail to per- form important processes effectively and are therefore unable to realize their potential. But given the fact that virtual teams have become an increasing reality for many companies, it behooves managers to understand how to maximize the benefits of dispersion while minimizing its disad- vantages. Thus, our research investigated two fundamental questions: (1) When do virtual teams outperform colocated ones? and (2) how should companies manage dispersed teams? To answer these questions, we studied software development teams from 28 different labs in countries includ- ing Brazil, China, Denmark, France, Germany, India and the United States. From that broad sur- vey, we found that the key drivers of performance are certain crucial team processes that, for exam- ple, help coordinate work and facilitate communication among members. In fact, we found that virtual teams with such processes can outperform their colocated counterparts, and that was true even for colocated teams with the same high levels of those processes.
In general, team processes can be classified into two categories: task-related - including those that help ensure each member is contributing fully; and socio-emotional - including those that increase the cohesion of the group. Our study found that
SLOANREVIEW.MIT.EDU
THE PROS AND CONS OF DISPERSION Virtual teams provide a number of benefits but incur certain costs. Companies need to manage them in specific ways that take ad- vantage of the opportunities while minimizing the liabilities.
"* Heterogeneous knowledge resources
"* Utilization of cost advantages
"* Access to diverse skills and experience
"* Knowledge about diverse markets
"* "Follow the sun" working
* Language differencesA• . Cultural incompatibilities
•Difficulties establishing"common ground" "* Fewer synchronous
face-to-face interactions
"* Good teamwork more difficult to achieve
those processes that are directly task-related are the most critical for the performance of dispersed teams. Specifically, virtual teams that had processes that increased the levels of mutual support, mem- ber effort, work coordination, balance of member contributions and task-related communications consistently outperformed other teams with lower levels. (See "The Importance of Task-Related Pro- cesses;' p. 67.) Moreover, dispersed teams that had high levels of task-related processes were notably able to outperform colocated teams with similar levels of those same processes despite the physical separation of their members. In other words, the overall effect of dispersion is not necessarily detri- mental but rather depends on the quality of a team's task-related processes. That said, dispersion carries significant risks: Those teams with poor task-related processes suffered heavily with in- creased dispersion. The bottom line is that the quality of task-related processes appears to be a sig- nificant factor in deciding whether dispersion becomes a liability or an opportunity.
Beyond task-related processes, organizations must also ensure that team members commit to the overall group goals, identify with the team and ac- tively support a team spirit. In other words, social-emotional processes are important too. Espe- cially in teams with physically dispersed members, interpersonal differences are a greater threat to the team's social stability because of the greater difficulty in resolving conflicts across geographic boundaries. Such difficulties can, in turn, demotivate members from contributing fully, thus jeopardizing team
SUMMER 2009 MITSLOAN MANAGEMENT REVIEW 65
MANAGING COLLABORATION
performance. Social processes that increase team
cohesion, identification and informal communica-
tion can prevent that by helping to establish and
maintain interpersonal bonds that enable a group
to better cope with conflicts. In our study, we found
that social processes were able to boost the perfor-
mance of virtual as well as colocated teams. We had
no indication, however, that virtual teams with
favorable socio-emotional processes outperformed
colocated teams with similar levels of the same pro-
cesses. Our belief is that, although socio-emotional
processes were not a differentiating factor, they likely
facilitated more task-related processes (and hence
indirectly enhanced the performance of virtual
teams) through, for instance, increased knowledge
transfer and better resolution of team conflicts.
The Dos and Don'ts of Managing Dispersion To boost the performance of its teams, a company
needs to implement the appropriate mechanisms
for boosting both socio-emotional and task-related
processes. Particularly for virtual teams, managers
need to pay special attention to task-related pro-
cesses that will capitalize on the specialized
knowledge and expertise of such groups. The fol-
lowing key lessons can help companies maximize
the performance of their virtual teams:
SMALL DISTANCES MATTER In general, team performance tends to drop with increasing member dispersion. But
sometimes even a low level of dispersion (namely, members working on different
floors in the same building) can have a surprisingly large effect, especially with respect
to a team's efficiency.
High
Effectiveness
Team Performance Efficiencv
Low
Same Same Same Same Same Same Different Floor Building Site City Country Continent Continent
Dispersion
Don't underestimate the significance of small
distances. Our research shows that performance is
noticeably lower for teams with people located in
the same building but on different floors when
compared with teams where all members are on the
same floor. (See "Small Distances Matter.") This
was true regarding both effectiveness (that is, the
quality of team output) and efficiency (in terms of
time and cost). Interestingly, teams with members
in the same building but on different floors also
performed worse than teams with greater degrees
of dispersion, including those that had members
spread across a city, country or even continent. In
fact, the only teams that fared worse were the inter-
continental teams, with a significantly higher level
of intercultural diversity and temporal dispersion
(spanning many time zones).
At first glance, those results might seem odd, but
consider. Teams with members in the same building,
albeit on different floors, do not usually consider
themselves as being dispersed and, hence, may easily
underestimate the barriers to collaboration deriving
from, for instance, having to climb a flight of stairs to
meet a teammate face to face. In contrast, groups that
are dispersed across a country or continent are more
aware of their situation and may make extra efforts to
improve such vital processes as task-related com-
munication and coordination. One manager of a
leading worldwide software company in our study
stated that team leaders regularly underestimate
the significance of small distances. They tend to
treat team members located on different floors or in
an adjacent building as being in direct proximity,
failing to acknowledge the negative effects of even
such comparatively small distances. A team leader
from the same company commented that some-
times "colocated" teams spread across his laboratory
use electronic communication technologies such as
e-mail, telephone and voicemail just as much as
globally dispersed teams do - a sign that people
might be allowing short physical distances to become
larger obstacles than they should. To prevent that
from happening, companies such as Cisco Systems,
BMW and Corning have designed their office lay-
outs to maximize interpersonal interactions. At
Cisco Systems Inc:s sites in Germany, for example,
only three people have their own individual offices.
All of the other 850 employees work in an open-space
SLOANREVIEW.MIT.EDU 66 MIT SLOAN MANAGEMENT REVIEW SUMMER2009
environment that provides ample opportunities for "hall talks" and other informal interactions.
Emphasize teamwork skills. Clearly, one of the key reasons for organizing a dispersed team is to draw on the superior knowledge that resides in remote lo- cations. But many companies make the mistake of staffing such teams primarily (if not solely) on the basis of people's expertise and availability. Instead, managers must also consider social skills - a major prerequisite for good teamwork - as a much more pivotal part of the catalog of requirements. In other words, it's unrealistic to bring together individuals from different locations with the expectation that they will automatically know how to collaborate in a virtual environment. Groups with increasing levels of dispersion are also progressively more dependent on their level of teamwork, specifically, their ability to perform key processes such as mutual support, com- munication and coordination. In order for virtual teams to achieve their greater potential (and take ad- vantage of their functional and structural diversity), members must first and foremost be able to establish a basis for the effective exchange of their varying ca- pabilities - all of which requires teamwork-related skills as a critical ingredient. Otherwise, the virtual team could very likely perform worse than a colo- cated group. Thus, managers need to consider teamwork skills as a necessary attribute when select- ing the members of a virtual team.
Promote self-leadership across the team. Be- yond social skills, managers need to ensure that dispersed teams have broad-based leadership capa- bilities. When a group is closely colocated, an individual leader can more easily detect any defi- ciencies in teamwork and address them with a hands-on managerial style. An interpersonal con- flict, for example, might be resolved by talking in person with the different parties in an informal set- ting. Such an approach is largely nonexistent in virtual teams. Geographic dispersion and cultural diversity make it difficult for any individual leader to ensure that the team is functioning effectively. Even though the advanced use of the latest informa- tion and communications technologies can help, they are no magical panacea for managing people across countries and time zones. "We are often not
SLOAN RE VIEW.MIT. EDU
THE IMPORTANCE OF TASK-RELATED PROCESSES Teams with a high level of task-related processes (such as those that help ensure each member is contributing fully) outperform teams with a low level. The difference becomes particularly acute the more dispersed the team is. Moreover, virtual teams with high levels of task processes are able to outperform colocated teams with similar levels of those same processes despite the physical separation of their members. That is, the overall effect of dispersion can be beneficial, de- pending on the quality of a team's task-related processes.
Task Processes High A Hg
Team Performance
Task Processes Low
Low
Low (e.g., Same Floor)
Dispersion High (e.g., Different
Continent)
able to overcome the cultural problems,' admits one team leader in the study. "And onlyvery experienced team leaders can handle these challenges and lead these teams to success." For a virtual team to suc- ceed, members generally need to be aware of the difficulties of dispersed collaboration and find ef- fective ways to overcome those obstacles on their own. This highlights the need for people to be more self-sufficient in how they manage their own work because the team leader is less in a position to help. Consequently, companies that are serious about vir- tual collaboration must target their HR efforts not only at designated team leaders but also at team members so that those individuals can develop the skills necessary to work in a virtual setting.
Provide for face-to-face meetings. Periodic face- to-face meetings of dispersed team members can be particularly effective for initiating and main- taining key social processes that will encourage informal communication, team identification and cohesion. A project kick-off meeting, for example, can be used to bring everyone together in one loca- tion for several days so that people can develop a shared understanding of the task at hand and begin to identify with the team. These processes, in turn,
SUMMER 2009 MIT SLOAN MANAGEMENT REVIEW 67
MANAGING COLLABORATION
will support task collaboration during the project.
The time and expense necessary to provide such
opportunities for face-to-face interactions then be-
come an investment that can lead to large returns if
the virtual team is able to take full advantage of its
diverse expertise and heterogeneity. Companies
should also remember that informal interactions
can be just as important as formal ones - if not
more so. One experienced team leader in the study,
for instance, asserted that projects should include
one essential initial step: "to go out for a beer with
all team members in order to establish a common
ground before starting the collaboration."
Foster a "global culture." Our research suggests
that a global mind-set, in which people see themselves
as part of an international network, helps provide an
environment that is conducive to dispersed teams.
Accordingly, managers and team members need to
recognize and frame their company as such, commu-
nicating the international nature of the organization's
operations and markets. Various human resource
strategies can help foster that mind-set, including
temporary staff assignments at foreign locations and
inter-cultural training. Nestl6, General Electric, IBM
and SAP - all known for the global reach of their
business activities - provide good examples of how
to actively foster a global employee mind-set. Manag-
ers at Nestl S.A., for instance, are expected to move
to another country every three or four years so that
they can learn about the specifics of each of those
markets and develop a global mind-set from their
experiences. Such practices advance the develop-
ment of diversity-friendly attitudes and the ability
to work in different contexts, which in turn help
employees cope with the challenges of distance
when working on virtual teams. At General Electric
Co., a steering committee oversees the company's
global R&D efforts, and employees are assigned to
different locations worldwide in order to facilitate
the development of an informal network across all
four main R&D sites in the United States, China,
Germany and India.
CONVENTIONAL WISDOM SUGGESTS that the per-
formance of teams suffers with increasing levels of
dispersion. Because of that, managers have typi-
cally viewed dispersion as a liability rather than an
68 MIT SLOAN MANAGEMENT REVIEW SUMMER 2009
opportunity. But dispersion can provide substan- tial benefits if companies can take advantage of the
diversity and varied expertise of team members at
different locations. In fact, our research shows that
virtual teams can outperform their colocated coun-
terparts when they are set up and managed in the
right way. In other words, a company can't just as-
semble a dispersed team of top-notch talent and
hope for the best; it also needs to ensure that the
group has the necessary socio-emotional and task-
related processes in place. Only then can virtual
teams effectively integrate dispersed knowledge to
take advantage of their cultural and structural di-
versity, thereby avoiding some of the drawbacks of
dispersion while reaping its benefits.
Frank Siebdrat is a consultant at the Boston Consult- ing Group in Munich, Germany. Martin Hoegl is a
professor and holds the Chair of Leadership and Human Resource Management at the WHU-Otto Beisheim School of Management in Vallendar, Ger- many. Holger Ernst is a professor and holds the
Chair of Technology and Innovation Management at the WHU-Otto Beisheim School of Management. Comment on this article or contact the authors at [email protected].
REFERENCES
1. See, for example, T.J. Allen, "Managing the Flow of Technology" (Cambridge, Massachusetts: MIT Press, 1977).
2. J. Santos, Y. Doz and P. Williamson, "Is Your Innovation Process Global?" MIT Sloan Management Review, 45 (summer 2004): 31-37.
3. S.D. Eppinger and A.R. Chitkara, "The New Practice of Global Product Development," MIT Sloan Management Review 47 (summer 2006): 22-30.
4. J.N. Cummings, "Work Groups, Structural Diversity and Knowledge Sharing in a Global Organization," Man- agement Science 50, issue 3 (2004): 352-364; and D. van Knippenberg and M.C. Schippers, "Work Group Diver- sity," Annual Review of Psychology 58 (2007): 515-541.
5. J.N. Cummings, "Work Groups," Management Sci- ence 50, no. 3 (2004): 352-364.
6. D.C. Hambrick, S.C. Davison, S.A. Snell and C.C. Snow, "When Groups Consist of Multiple Nationalities: Towards a New Understanding of the Implications," Organization Studies 19, no. 2 (1998): 181-205.
7. M. Hoegl and L. Proserpio, "Team Member Proximity and Teamwork in Innovative Projects," Research Policy 33, no. 8 (2004 ): 1153-1165.
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TITLE: How to Manage Virtual Teams SOURCE: MIT Sloan Manage Rev 50 no4 Summ 2009
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