Organizations face an increasingly complex and unpredictable competitive landscape, and one that is filled with new, aggressive competitors. A few years ago, for example, who would have predicted that electronics manufacturer Samsung would offer stiff competition to GE in the appliance and lighting marketplaces?
In the years ahead volatility and uncertainty will tyrannize markets, and companies will need leaders who are highly adaptive, continuous learners, able to lead diverse groups across functional disciplines, regions and cultures. They will also need to accomplish the difficult feat of driving results even where they do not have formal direct control or authority over resources. Achieving more growth through greater innovation, searching for new business opportunities across customer segments and leveraging best business practices to improve operational efficiency demand that leaders know how to work across organizational boundaries. Whether it’s across national boundaries or across teams, leaders will need to collaborate. This article will focus on the skills that leaders will need to develop if they are to collaborate successfully in the years ahead. GETTING TO THE ROOT OF COLLABORATION CHALLENGES
The vast majority of participants in Hay Group’s recent global Best Companies for Leadership survey indicated that their organizations have become flatter and more matrixed. Individuals may be assigned to work on different project teams and report to multiple managers. The advantages can be huge — new innovations, increased sharing of information and better capacity to solve complex problems. And yet the more matrixed organizations become the greater the challenges in making lines of authority and accountability clear. Decisions can take longer and the costs for bringing people together can add to a company’s bottom line. In addition, the skills required for effective collaboration are not the same as knowing how to work effectively in a functional team. These same companies also reported that their people had trouble understanding how to relate to each other and in a more collaborative way, as their new organizational structures required.
These survey results are not surprising, given that another Hay Group study of over 300 organizations covering almost 4,500 leaders found that executives still need the most development in competencies such as influence, inspirational leadership, coaching, mentoring and emotional self-awareness – the competencies that are critical for collaboration. Leadership skills and capabilities have not kept pace with the rapid evolution of flatter, more matrixed organizational structures.
Why has the development of collaborative leadership skills lagged the evolution of organizational structures? Organizations usually get the kind of behaviour they reward, and they have historically rewarded achievement-oriented leaders who drive short-term results. As a result, companies have ended up with leaders who excel at the achievement orientation, teamwork and organizational awareness competencies that are associated with strong functional leadership.
The problem is that companies face a mismatch: They have developed a strong base of operational leaders who perform well when they have direct control over a specific set of resources that they can deploy to achieve accountable results. Unfortunately, the matrixed, global structure that is becoming the norm for many organizations requires leaders who can subordinate their agenda, yield power and give up resources for the greater good. These concepts are foreign to many leaders who attempt to lead collaborative efforts by applying their usual functional skill-set – and that predictably lead to poor results. Even leaders who possess some of the necessary competencies find themselves working at cross-purposes with an organizational structure and rewards system that discourages collaboration. COLLABORATING IN THE MATRIX
Despite popular belief, collaboration is not the same as teamwork. Traditional functional leaders in hierarchical organizations may excel at “teamwork” in the sense of motivating their business unit or division toward collective action and consensus around a common goal.
But matrixed organizations are different. Matrixed companies group employees by both function and product. Matrixed organizations typically have moved away from hierarchy toward a much flatter structure in which employees operate with less direct supervision from functional leaders. Leaders in the matrixed organization need to know how to promote collaboration across business units and functional areas, and to coordinate and motivate employees, over whom they may have no direct authority, to achieve a goal whose value may not be immediately apparent to all team members.
In a matrixed world, good collaboration can lead to the rapid launch of next-generation, market-changing products. Bad collaboration can end up wasting time and money on a slow, tortuous path toward a “me-too” flop. In his seminal book Collaboration, UC Berkeley professor Morten Hansen illustrates the value of collaboration by tracing the success of Apple’s iPod music player versus the belated launch of a similar product by Sony. Hansen notes that it took Apple just eight months starting from scratch to collaborate across its organization and find a way to create the iPod. Sony, on the other hand, spent three years engaged in internal infighting before launching a competing MP3 player that had little success.
Apple did not win because it had better technology. In fact, Apple actually sourced its iPod battery from Sony! The success of the iPod can be attributed more to Apple’s ability to manage rapid innovation through excellent internal and external collaborative networks. At Sony, where the culture encouraged internal competition over collaboration, a digital music player did not make as much sense from a P&L standpoint for any individual business unit. As a result, the project did not move forward, even though it held the potential to deliver large P&L benefits for the entire organization.
It turns out that collaborative leaders are able to see past their own P&L calculations to recognize and pursue initiatives that have the potential to add value for the entire corporation. But companies should not expect such collaborative behaviour to materialize spontaneously. As mentioned earlier, organizations tend to exhibit the kind of behaviour that they reward. It is difficult to generate much enthusiasm for collaboration initiatives if managers are only rewarded based on their own P&L. Best-in-class organizations have recognized this problem and begun looking for ways to measure the global P&L impact of collaborative projects and reward leaders accordingly, even if those projects result in lower P&L for the manager’s own business unit. BUILDING A COLLABORATIVE CULTURE
Senior executives have both the responsibility and the power to encourage and foster a culture of collaboration. Consider the impact that collaboration had on Procter & Gamble (P&G). In early 2000, P&G was in disarray. The company’s share price had fallen by nearly 50 percent, wiping out $85 billion in market capital. Despite spending heavily on research & development (R&D), productivity had plateaued and the company’s innovation success rate (the percentage of new products that reached financial objectives) was stuck around an unsatisfactory 35 percent.
The company’s new CEO, A.G. Lafley, recognized that collaboration would be key to helping P&G recover its value and improve its innovation performance. He proclaimed that he was determined to make P&G known as the company that “collaborates, inside and out, better than any other company in the world.” Lafley and his team conducted an analysis showing that most of P&G’s most profitable innovations came either from internal collaboration across business units or from external collaboration with outside researchers. Determined to encourage both kinds of collaboration, Lafley established 20 cross-functional “communities of practice” within P&G and declared that 50 percent of P&G’s products, ideas and technologies would be developed by external sources.
These collaboration initiatives paid off handsomely. By 2008, P&G had improved its R&D productivity by nearly 60 percent, more than doubled its innovation success rate, and lowered its cost of innovation. From 2000 to 2008, R&D investment as a percentage of sales fell from 4.8 percent to 3.4 percent.[i] KEY COLLABORATIVE COMPETENCIES
Leadership and organizational structure matter in building a collaborative culture, but organizations still need the right people with the right skills to lead collaboration initiatives toward the desired outcomes. Hay Group research findings on matrixed organizations show that the best collaborative leaders have a strong understanding of both the organization and its people. They distinguish themselves on six key capabilities: 1. Enterprise perspective – they have a comprehensive understanding of the company’s overall business strategy and how the joint work they are leading aligns with that strategy. They use this understanding to resolve any conflicts that may arise. 2. Cross-functional perspective – they understand the needs, metrics, incentives and deliverables of different functions and business units. They can align these competing priorities within the operating model. 3. Customer perspective – they not only understand the customers’ interests and needs, they also know how to keep the team focused on making the decisions that enhance the overall customer experience. 4. Self-management – they exhibit self-control when challenged. They have patience when dealing with colleagues who may have trouble understanding the shared purpose of the collaboration initiative. They do not take disagreements personally. 5. Listen with respect – they listen objectively and respectfully to multiple opinions. They empathize with colleagues whose position, situation or perspective may differ from their own. They start with the assumption that collaborators are capable and will do their best. 6. Matrix influencing – they excel at communicating with different stakeholders and influencing them to support collaborative projects. CULTIVATING COLLABORATIVE LEADERS
How can organizations identify candidates that will succeed in matrixed leadership positions that require strong collaborative skills? Hay Group’s Role-Profile Matrix shows that the best collaborative leaders excel at interpersonal understanding, relationship building and commitment to the enterprise. This makes sense because collaborative leaders have to be able to understand the motives and fears of potential collaborative partners throughout the organization. Collaborative leaders have to be able to build relationships that will enable them to persuade their partners to join in a collaborative effort that may entail short-term risks or costs for certain partners. And collaborative leaders need to be committed to enterprise-wide goals since collaborative projects are typically bigger than any one department or business unit.
Given the need for collaborative leaders in matrixed organizations, companies should plan to start trying to develop collaborative behaviours as early as possible in a junior executive’s career. Giving young executives a variety of experiences and ensuring that they have exposure to managing diverse groups can help them to develop a collaborative skill set. Companies like P&G and GE plan 5-10 years into the future when considering the development of their leadership corps. If they see that a certain junior executive has growth potential, they consider which experiences will give the executive the opportunity to develop the broad collaborative leadership capabilities that will be essential in the future. IBM pairs promising young talent with the best possible bosses so that the next generation of leaders will be able to see what strong collaborative leadership looks like in action.
That is not to say that training can mold any leadership candidate into a capable collaborative leader. Broadly speaking, leaders are motivated by a combination of three needs: achievement, affiliation and power. Every collaborative leader has these motives, though in different proportions. Hay Group’s research has shown that the most effective collaborative matrixed leaders tend to have flat profiles that show a relatively equal distribution of the 3 motives.
This makes sense. Matrixed leadership roles are complex precisely because they demand so many different skills. Leaders who are motivated primarily by personal achievement will often become frustrated by the time it takes to align agendas or the need to rely on collaborators to get things done. Conversely, leaders who enjoy the harmony of building relationships for their own sake will be more likely to enjoy and thrive in a collaborative leadership position with a heavy relationship-building component. COLLABORATING MORE, COLLABORATING BETTER
Collaboration is not a universal solution. As mentioned earlier, collaboration has costs – direct investment costs and opportunity costs associated with the time spent pursuing collaborative initiatives. Companies should assess and qualify collaboration opportunities just as they qualify sales leads to decide whether a particular collaboration effort makes sense. In most cases, organizations should only pursue those collaboration initiatives where the potential benefits clearly exceed the potential costs.
But if choosing collaboration opportunities wisely depends on calculating costs and benefits (as Hansen emphasizes in his perspective), then one way to enlarge the universe of attractive collaboration initiatives is to lower the costs of collaborating across the board. That was part of the approach taken by Cisco Systems when the company decided to prioritize internal collaboration to meet its customers’ demand for integrated solutions. Cisco drove down the direct costs of collaboration by leveraging wikis (websites built and edited by communities of users) and pioneering telepresence technologies (enhanced videoconferencing) that enabled affordable long-distance collaboration among employees around the world, thereby reducing the hard costs and opportunity costs of collaboration. By innovating on collaboration technologies and cultivating collaborative behaviour and management practices, Cisco saved $691 million and increased productivity by 4.9 percent in fiscal year 2008.[ii]
Reducing the costs of collaboration improves the chance that a collaboration initiative will have a positive ROI. However, companies can improve their odds even further by following five guidelines for successful collaboration: 1. Be clear about the destination – define the goalposts and communicate those definitions to collaboration partners. Know when to start the collaboration and when the collaboration has achieved maximum benefits and can be dissolved. Hay Group research has shown that nearly 70 percent of best-practice collaboration initiatives are based from the start on a clear purpose, whereas only 40 percent of less successful matrixed collaboration teams had that clear purpose from the beginning. 2. Develop mutual understanding – collaborative success depends on trust, and trust depends on good communication. Collaborative leaders must not only be clear about their own goals, they must also understand and respect their collaborative partners’ goals in order to find ways to bring these diverse goals into alignment. Achieving this alignment is a requisite for motivating all collaboration partners to achieve the best possible results. According to Hay Group research, more than 60 percent of best-practice collaboration initiatives get early buy-in on shared goals from collaboration partners. The same can be said for less than 10 percent of the less successful collaboration teams. 3. Know when to lead and when to follow – it sounds paradoxical, but the best collaborative leaders are those who are comfortable occasionally letting their partners take a leadership role. At certain times, partners may be the only ones with the resources necessary to push a project forward. Partners who play leadership roles are also more likely to feel a sense of ownership in the project, which can increase their motivation and performance. Nearly 70 percent of best-practice collaborators clarify roles from the start in order to find out which collaboration partners excel in certain areas or have the best customer insights. Again, less than 10 percent of less successful collaborators take the time to clarify roles in this way early on. 4. Set schedules and stick to them – many collaborative efforts are undertaken to accelerate innovation in fast-moving markets. Sticking to a realistic timetable avoids conflicts and prevents disappointment. Collaborative tools such as the wikis and telepresence technologies discussed above, or information-sharing forums like SharePoint, can help speed up the process and keep everyone on schedule. 5. Encourage information sharing – for functional leaders used to managing and controlling their own resources, collaborative leadership roles can be challenging and even a little mystifying. Experienced mentors who have already led profitable collaboration projects can help teach new collaborative leaders what it takes to succeed. Once they know the ropes, collaborative leaders can pass along their knowledge by guiding others, codifying their knowledge in wikis or other information sharing forums, and establishing guidelines to encourage useful collaborative activity. Done hastily or sloppily, collaboration can be a time-consuming exercise. Done right, collaboration can unleash latent creativity and help companies spur innovation and growth while fulfilling unmet customer needs.

[i] For more details on how P&G created a collaborative culture and the benefits it reaped from that culture, see “Connect and Develop: Inside Procter & Gamble’s New Model for Innovation,” Harvard Business Review, Vol. 84, No. 3, March 2006.
[ii] McBrearty, Rachael, Brian Suckow and Joel Barbier, “The Economics of Collaboration at Cisco,” Cisco Point of View document, 2009. http://www.cisco.com/web/about/ac79/docs/pov/Economics_Collaboration_POV_FINAL_041009.pdf