Insights into organization
How do I drive effective
collaboration to deliver
real business impact?
Carolyn Dewar
Scott Keller
Johanne Lavoie
Leigh M. Weiss
How do I drive effective collaboration to deliver real business impact?
Why is this important?
Collaboration is at the heart of why organizations exist. Corporations came into being
because they were more efficient than markets at deploying a set of resources to
produce specific goods and services. But the bigger and more complex a corporation
becomes, the more likely it is that silos will start to emerge around business units,
functions, or locations. When that happens, people start to work for the benefit of
their immediate group, not the organization as a whole – preventing it from tapping
into the many sources of value created by collaboration across businesses:

Improved customer experience such as seamless access to multiple products
and services from across the corporation.

More effective execution that saves time (through faster decision making) and
money (from resource sharing, knowledge transfer, and lower interaction costs).

Greater innovation and bolder strategic moves thanks to the cross-pollination
of ideas and the abolition of impenetrable boundaries between businesses.
 B
etter development and retention of talent such as nurturing leaders who can
see the big picture, spot opportunities, and build internal links to capture them.
 H
igher motivation and morale deriving from the greater trust between individuals
and the sense of belonging to a community that is working toward shared goals.
Our research indicates that companies with better collaborative management capabilities
achieve superior financial performance. Moreover, academic research shows that the
ability to collaborate in networks is more important than raw individual talent to
innovativeness; it also boosts employees’ overall performance and loyalty.1 Yet a 2005
McKinsey survey revealed that only 25 percent of senior executives would describe their
organizations as effective at sharing knowledge across boundaries, even though nearly
80 percent acknowledged such coordination was crucial to growth.2
When internal cooperation is lacking, management teams often fall back on the
same few strategies to improve it: organization restructuring, business-process
reengineering, cross-unit incentives, teamwork training. Some yield the occasional
success, but few manage to dismantle organizational silos or make a real impact on
business results. Indeed, many fail outright because they create unintended
consequences or overlook the underlying issues that stop people changing their
behavior. Here, we aim to provide a pragmatic approach to help executives dramatically
improve cross-business collaboration.
1 Mohan Subramaniam and Mark A. Youndt, “The influence of intellectual capital on the types of innovative
capabilities,” Academy of Management Journal, 2005, volume 48, number 3, pp. 450–63; Ronald S. Burt and
Don Ronchi, “Teaching executives to see social capital,” Social Science Research, 36, 2007, pp. 1156–83.
2 “The McKinsey Global Survey of Business Executives, July 2005,” The McKinsey Quarterly, web exclusive, at
www.mckinseyquarterly.com/links/22581.
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What do I need to know?
A leader seeking to promote value-creating collaboration in an organization should be
aware of four key insights.
1. Collaboration is the means, not the end
Too often, collaboration is seen as a panacea: “There’s a problem, so we need people
to collaborate more.” However, more collaboration is not necessarily better.
Collaboration delivers substantial business value only when it is applied in the right
situations and when the approach is appropriate to the challenge.
So how can you tell when collaboration is not serving your business? There are three
main reasons why collaboration goes wrong:
Wasting time. At one highly respected company, nearly half of the interactions in
several decision-making processes added no value. The culture was overly inclusive,
roles and accountabilities were unclear, and too many people wasted too much time
in meetings that reduced productivity and slowed decision making. In our experience,
as much as 30 to 45 percent of interactions are not effective.
Targeting the wrong areas. At one high-profile financial institution organized by
country, executives believed that collaboration was needed between different product
areas within each country to improve cross-selling. The biggest opportunity, however,
lay with the multinational accounts for which collaboration across countries was key.
Although the national sales teams became more connected, collaboration between
product areas in different countries remained ineffective – sending mixed messages to
customers and driving up complexity costs.
Destroying value. Executives need to be aware that collaboration incurs the
opportunity costs of forgoing other initiatives. It can also create high interaction costs
that can slow decision making and have knock-on effects like poorer quality,
interpersonal conflict, and loss of motivation. At one organization, asking leaders of
two different business units to work together was a recipe for disaster. The leaders got
distracted from running their own businesses and their bickering affected employee
morale in both business units.
2. People matter more than lines and boxes
When leaders want to encourage their people to work across silos, their first response
is often to adjust the structure of the organization to try to hard-wire the desired
connections between employees. But the results of restructuring can be disappointing
at best. At worst, they can destroy value through the upheaval, confusion, and
cynicism that come from regular bouts of reorganization. That’s because the lines and
boxes on the organization chart are not an accurate depiction of how work actually
gets done.
How do I drive effective collaboration to deliver real business impact?
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Modern companies operate through a complex network of informal working
relationships that influence the way people behave. Within this network there are
two groups that deserve special attention:
Brokers. Most companies have a few “brokers”: people who keep alive informal
connections in the organization and serve as bridges between subgroups, sometimes
knitting entire networks together (Exhibit 1). These unsung heroes can be easy to
miss because they tend to operate in the “white spaces” in an organization chart,
but you need to know who they are, manage their involvement, and keep them on
board. One pharmaceutical company seeking to relocate 80 percent of its scientists
believed that it could compensate for attrition by redistributing tasks among other
employees or hiring new personnel. But it overlooked the importance of the
relationships a few key scientists had with outside academics. When two of the
scientists left, the relationships deteriorated and the company’s innovation rate per
scientist dropped sharply.
Exhibit 1
How brokers integrate a network
Example: sales networks at a consumer company
Three regions in a salesforce network
Without brokers, the network falls apart
Broker
Broker
Europe sales
Europe sales
North America
sales
North America
sales
Broker
Asia sales
Asia sales
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Bottlenecks. Just as some individuals promote collaboration, others hold it back. A
leading provider of outsourcing and IT consultancy services found that growth had
made it inflexible. Redundant expertise, solutions, and technology were rife and costs
were ballooning. Analysis revealed that ten key executives – all but one a vice-president
or a director – had become bottlenecks. More than 50 employees regularly came to
each of them for information, resources, or decisions; many more could not get
access. If the company had changed its structure without removing these bottlenecks
the results would almost certainly have been disappointing.
Identifying who your brokers and bottlenecks are may not be as easy as it seems.
When a retail company applied a structured approach to this challenge, senior leaders
found that their initial guesses were wrong in three out of five cases.
3. True collaboration embraces accountability and conflict
Collaboration does not mean letting people off the hook for the consequences of their
actions. Nor is it about always being in harmony with co-workers. People can
collaborate with others but still be accountable for their results – and they can (and
should) disagree amongst themselves without losing faith in their ability to work
together toward a common goal.
Accountability can be maintained. Executives often fear that pushing for more
collaboration will undermine the clear, single points of accountability they need to
drive results. But accountability and collaboration need not be opposites to be traded
off; instead, they can reinforce one another. One company divided itself into more than
80 individual P&Ls as a mechanism to hold senior leaders firmly accountable for their
own results, but balanced this structure with a relentless focus on achieving a
company-wide growth metric. Incentives were similarly balanced: executives didn’t
receive their maximum bonus if the company as a whole didn’t reach its goal, however
well their individual business units had done.
Conflict is healthy and necessary. True collaboration can’t exist without personal
commitment, and commitment can’t exist without the possibility of engaging in healthy
conflict and debate. If I go to a meeting but don’t have the chance to test my views
against contrary opinions, I may leave the room saying “yes” to initiatives without
feeling any personal commitment to them. Before you can have healthy debate, you
need to establish a baseline of trust that makes it safe to voice dissenting views. You
may also need to develop people’s skills in areas such as how to de-personalize
ideas, how to ensure that everyone’s views get heard, and how to make it clear that
once the debate is done, the decision is binding on everyone taking part, even if their
view wasn’t adopted.
How do I drive effective collaboration to deliver real business impact?
4. Collaboration works only when it’s personal
To get beyond just talking about collaboration, companies need to make it personal
for leaders by:
Incorporating collaboration measurements into individual 360-degree
feedback and personal development. It’s easy for hard-working and well-meaning
leaders to imagine that they are already collaborative and that the barriers to
collaboration lie elsewhere until they are faced with concrete examples of their personal
behavior that prove the contrary. To improve collaboration, companies should ensure
that the behaviors that support it are incorporated into their leadership standards and
their processes for measuring and developing personal effectiveness.
Building questions about collaboration into individual performance ratings,
with meaningful rewards and consequences. These questions might include:
how many “assists” have you given other business units? How many best practices
from other areas have you brought into your business unit? What value have you
created by collaborating? While CEO of General Electric, Jack Welch created a “GE
Theft Award” that he would personally hand out to leaders who had imported the
most ideas from other businesses. Some organizations have gone so far as to use
survey-based approaches to quantify the time saved by collaboration across business
units or other boundaries, tying the gain back to the individuals involved.
Sharing stories of what good collaboration looks like throughout the
organization. Companies can use channels such as intranet sites, in-house
newsletters, town halls, and talent forums to tell stories illustrating the customer
impact, efficiency gains, and strategic wins that can be derived from working together
across silos. A transportation manufacturer profiled stories of effective teamwork
across boundaries in its employee newsletter, via its intranet, and in quarterly CEO
reviews that were broadcast live across the company.
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Contacts
Americas
Scott Keller
Principal
Chicago office
+ 1 (312) 795 7082
scott_keller@mckinsey.com
Europe, Middle East, and Africa
Pierre Gurdjian
Director
Brussels office
+32 (2) 645 4340
pierre_gurdjian@mckinsey.com
Asia Pacific
Gautam Kumra
Director
Delhi office
+91 (124) 661 1025
gautam_kumra@mckinsey.com
Organization Practice
September 2009
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